Document:

<PAGE>
                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

================================================================================

                          CREDIT AND SECURITY AGREEMENT

                          Dated as of February 7, 2005

                                  by and among

                               PMC CONDUIT, L.P.,
                                   as Borrower

                                PMC CONDUIT, LLC,

                              PMC COMMERCIAL TRUST,
                                   as Servicer

                       JUPITER SECURITIZATION CORPORATION,
                              as the Conduit Lender

              THE ALTERNATE LENDERS FROM TIME TO TIME PARTY HERETO

                                       and

                    JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
                                    as Agent

================================================================================

<PAGE>

<TABLE>
<S>                                                                                                                 <C>
ARTICLE I    THE ADVANCES........................................................................................    2

Section 1.1       Credit Facility................................................................................    2
Section 1.2       Increases......................................................................................    2
Section 1.3       Aggregate Reductions...........................................................................    3
Section 1.4       Final Repayment................................................................................    3
Section 1.5       Borrowing Limit................................................................................    3
Section 1.6       Payment Requirements...........................................................................    3
Section 1.7       Ratable Advances; Funding Mechanics; Liquidity Fundings........................................    4
Section 1.8       Extension of Scheduled Termination Date........................................................    4

ARTICLE II   PAYMENTS AND AVAILABLE COLLECTIONS..................................................................    5

Section 2.1       Payments.......................................................................................    5
Section 2.2       Collection Account; Settlement Procedures......................................................    5
Section 2.3       Payment Recission..............................................................................    7
Section 2.4       Reserve Account................................................................................    7
Section 2.5       Terminating Alternate Lenders..................................................................    9

ARTICLE III  CONDUIT LENDER FUNDING..............................................................................    9

Section 3.1       CP Costs.......................................................................................    9
Section 3.2       Calculation of CP Costs........................................................................    9
Section 3.3       Payments of CP Costs...........................................................................    9
Section 3.4       Default Rate...................................................................................    9

ARTICLE IV   ALTERNATE LENDER FUNDING............................................................................    9

Section 4.1       Alternate Lender Funding.......................................................................    9
Section 4.2       Interest Payments..............................................................................   10
Section 4.3       Selection and Continuation of Interest Periods.................................................   10
Section 4.4       Alternate Lender Interest Rates................................................................   10
Section 4.5       Suspension of the LIBO Rate....................................................................   11
Section 4.6       Default Rate...................................................................................   11

ARTICLE V    REPRESENTATIONS AND WARRANTIES......................................................................   11

Section 5.1       Representations and Warranties of the Transaction Parties......................................   11
Section 5.2       Alternate Lender Representations and Warranties................................................   15

ARTICLE VI   CONDITIONS OF ADVANCES..............................................................................   16

Section 6.1       Conditions Precedent to Initial Advance........................................................   16
Section 6.2       Conditions Precedent to All Advances...........................................................   16

ARTICLE VII  COVENANTS...........................................................................................   17

Section 7.1       Affirmative Covenants of the Transaction Parties...............................................   17
Section 7.2       Negative Covenants of the Transaction Parties..................................................   24

ARTICLE VIII THE POOL Loans......................................................................................   26

Section 8.1       Loan Documents.................................................................................   26
Section 8.2       Document Defects...............................................................................   28
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                 <C>
Section 8.3       Repurchase of Pool Loans.......................................................................   28
Section 8.4       Representations and Warranties Regarding the Loans.............................................   29
Section 8.5       Substitution of Loans..........................................................................   29
Section 8.6       Addition of Loans..............................................................................   31
Section 8.7       Term Securitizations...........................................................................   31

ARTICLE IX   AMORTIZATION EVENTS.................................................................................   32

Section 9.1       Amortization Events............................................................................   32
Section 9.2       Remedies.......................................................................................   34
Section 9.3       Responsibilities of Borrower...................................................................   34

ARTICLE X    INDEMNIFICATION.....................................................................................   35

Section 10.1      Indemnities by the Borrower....................................................................   35
Section 10.2      Indemnities by the Servicer....................................................................   37
Section 10.3      Increased Cost and Reduced Return..............................................................   37
Section 10.4      Other Costs and Expenses.......................................................................   38

ARTICLE XI   THE AGENT...........................................................................................   39

Section 11.1      Authorization and Action.......................................................................   39
Section 11.2      Delegation of Duties...........................................................................   39
Section 11.3      Exculpatory Provisions.........................................................................   39
Section 11.4      Reliance by Agent..............................................................................   40
Section 11.5      Non-Reliance on Agent and Other Lenders........................................................   40
Section 11.6      Reimbursement and Indemnification..............................................................   40
Section 11.7      Agent in its Individual Capacity...............................................................   40
Section 11.8      Successor Agent................................................................................   41

ARTICLE XII  ASSIGNMENTS; PARTICIPATIONS.........................................................................   41

Section 12.1      Assignments....................................................................................   41
Section 12.2      Participations.................................................................................   42

ARTICLE XIII SECURITY INTEREST...................................................................................   43

Section 13.1      Grant of Security Interest.....................................................................   43
Section 13.2      Assignment of Purchase Agreement...............................................................   44
Section 13.3      Termination after Final Payout Date............................................................   44

ARTICLE XIV  MISCELLANEOUS.......................................................................................   44

Section 14.1      Waivers and Amendments.........................................................................   44
Section 14.2      Notices........................................................................................   45
Section 14.3      Ratable Payments...............................................................................   45
Section 14.4      Protection of Agent's Security Interest........................................................   46
Section 14.5      Confidentiality................................................................................   46
Section 14.6      Bankruptcy Petition............................................................................   47
Section 14.7      Limitation of Liability........................................................................   47
Section 14.8      CHOICE OF LAW..................................................................................   48
Section 14.9      CONSENT TO JURISDICTION........................................................................   48
Section 14.10     WAIVER OF JURY TRIAL...........................................................................   48
Section 14.11     Integration; Binding Effect; Survival of Terms.................................................   48
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                                 <C>
Section 14.12     Counterparts; Severability; Section References.................................................   49
Section 14.13     JPMorgan Chase Roles...........................................................................   49
</TABLE>

EXHIBITS AND SCHEDULES

<TABLE>
<S>               <C>
Exhibit I         Definitions
Exhibit II        Form of Borrowing Notice
Exhibit III       Places of Business of the Transaction Parties; Locations of Records; Federal
                  Employer Identification Number(s)
Exhibit IV        Form of Compliance Certificate
Exhibit V         Form of Assignment Agreement
Exhibit VI        Credit and Collection Policy

Schedule A        Commitments
Schedule B        Closing Documents
Schedule C        Loan Schedule
Schedule D        Eligibility Criteria
Schedule E        Approved Franchisees
Schedule F        Financial Covenants
</TABLE>

                                      iii

<PAGE>

                          CREDIT AND SECURITY AGREEMENT

            THIS CREDIT AND SECURITY AGREEMENT, dated as of February 7, 2005 is
entered into by and among:

            (a) PMC CONDUIT, L.P., a Delaware limited partnership (the
      "Borrower");

            (b) PMC CONDUIT, LLC, a Delaware limited liability company (the
      "General Partner");

            (c) PMC COMMERCIAL TRUST, a Texas real estate investment trust
      ("PMC"), as initial servicer (in such capacity, the "Servicer" and
      together with the Borrower and the General Partner, the "Transaction
      Parties" and each, a "Transaction Party");

            (d) JUPITER SECURITIZATION CORPORATION, a Delaware corporation (the
      "Conduit Lender");

            (e) The FINANCIAL INSTITUTIONS LISTED ON SCHEDULE A TO THIS
      AGREEMENT (together with any of their respective successors and assigns
      hereunder, the "Alternate Lenders"); and

            (f) JPMORGAN CHASE BANK, NATIONAL ASSOCIATION ("JPMorgan Chase"), as
      agent for the Lenders hereunder or any successor agent hereunder (together
      with its successors and assigns hereunder, the "Agent").

Unless defined elsewhere herein, capitalized terms used in this Agreement shall
have the meanings assigned to such terms in Exhibit I hereto and in the
Servicing Agreement.

                             PRELIMINARY STATEMENTS

            The Borrower may from time to time purchase Loans from PMC pursuant
to the Purchase Agreement.

            To fund its purchases under the Purchase Agreement, the Borrower may
from time to time request Advances from the Lenders upon the terms and subject
to the conditions set forth in this Agreement.

            The Conduit Lender may, in its absolute and sole discretion, make
Advances to the Borrower from time to time.

            In the event that the Conduit Lender declines to make any Advance,
the Alternate Lenders shall, at the request of the Borrower, make Advances from
time to time.

            JPMorgan Chase has been requested and is willing to act as Agent on
behalf of the Conduit Lender and the Alternate Lenders in accordance with the
terms hereof.

<PAGE>

                                   ARTICLE I
                                  THE ADVANCES

      Section 1.1 Credit Facility.

            (a) Upon the terms and subject to the conditions hereof, from time
to time during the period commencing on the Closing Date and ending on the
Amortization Date:

                  (i) The Borrower may, at its option, request Advances from the
      Lenders in an aggregate principal amount at any one time outstanding not
      to exceed the lesser of the Aggregate Commitment and the Borrowing Base
      (such lesser amount, the "Borrowing Limit"); and

                  (ii) The Conduit Lender may, at its option, make the requested
      Advance, or if the Conduit Lender shall decline to make any Advance,
      except as otherwise provided in Section 1.2, the Alternate Lenders
      severally agree to fund their respective Pro Rata Shares of the requested
      Advance.

Each of the Advances, and all other Obligations, shall be secured by the
Collateral as provided in Article XIII.

            (b) The Borrower may, upon at least three Business Days' notice to
the Agent, terminate in whole or reduce in part, ratably among the Alternate
Lenders, the unused portion of the Aggregate Commitment; provided, that each
partial reduction of the Aggregate Commitment shall be in an amount equal to
$10,000,000 (or a larger integral multiple of $1,000,000 if in excess thereof)
and shall reduce the Commitments of the Alternate Lenders ratably in accordance
with their respective Pro Rata Shares.

      Section 1.2 Increases. Except as otherwise agreed to by the Agent, the
Borrower shall provide the Agent with at least two (2) Business Days' prior
notice in a form set forth as Exhibit II hereto of each Advance (each, a
"Borrowing Notice"). Each Borrowing Notice shall be subject to Section 6.2
hereof and, except as set forth below, shall be irrevocable and shall specify
the requested increase in Aggregate Principal (which shall not be less than
$1,000,000 or a larger integral multiple of $100,000) and the requested
Borrowing Date (it being understood and agreed that there shall be no more than
five Borrowing Dates in any calendar month) and, in the case of an Advance to be
funded by the Alternate Lenders, the requested Interest Rate and Interest
Period. Following receipt of a Borrowing Notice, the Agent will determine
whether the Conduit Lender agrees to make the requested Advance. If the Conduit
Lender declines to make a proposed Advance, the Borrower may cancel the
Borrowing Notice or, in the absence of such a cancellation, the Advance will be
made by the Alternate Lenders. On the date of each Advance, upon satisfaction of
the applicable conditions precedent set forth in Article VI (except as provided
below), the Conduit Lender or the Alternate Lenders, as applicable, shall wire
to the account of the Borrower specified in the Borrowing Notice, in immediately
available funds, no later than 2:00 p.m. (Chicago time), an amount equal to (i)
in the case of the Conduit Lender, the principal amount of the requested Advance
or (ii) in the case of an Alternate Lender, such Alternate Lender's Pro Rata
Share of the principal amount of the requested Advance; provided, however, that
if, after giving effect to such Advance, the Reserve Account Balance would be
less

                                       2

<PAGE>

than the Reserve Account Requirement on such date, the applicable Lender(s)
shall transfer a portion of the principal amount of the requested Advance to the
Reserve Account in an amount sufficient to cause the resulting Reserve Account
Balance to equal the Reserve Account Requirement and the remainder of the
principal amount of such Advance to the Borrower in accordance herewith.

      Section 1.3 Aggregate Reductions. The Borrower may repay the Aggregate
Principal in part at any time in accordance with the provisions of this Section
1.3. Except as provided in Section 1.5, the Borrower shall provide the Agent
with at least two (2) Business Days' prior written notice (a "Reduction Notice")
of any proposed partial reduction of Aggregate Principal. Such Reduction Notice
shall designate (i) the date (the "Proposed Reduction Date") upon which any such
reduction of Aggregate Principal shall occur, and (ii) the amount of Aggregate
Principal to be reduced which shall be applied ratably to the Advances of the
Conduit Lender and the Alternate Lenders in accordance with the amount of
principal (if any) owing to the Conduit Lender, on the one hand, and the amount
of principal (if any) owing to the Alternate Lenders (ratably, based on their
respective Pro Rata Shares), on the other hand (the "Aggregate Reduction"). Only
one (1) Reduction Notice shall be outstanding at any time.

      Section 1.4 Final Repayment. The Borrower may repay the Aggregate
Principal in whole and terminate the Commitments of the Alternate Lenders at any
time in accordance with the provisions of this Section 1.4. The Borrower shall
provide the Agent with at least two (2) Business Days' prior written notice (a
"Final Repayment Notice") of any such proposed repayment of Aggregate Principal.
Such Final Repayment Notice shall designate the date (the "Proposed Final
Repayment Date") upon which any such repayment of Aggregate Principal shall
occur and shall be irrevocable. On the Proposed Final Repayment Date, the
Commitments of the Alternate Lender shall terminate and the Borrower shall pay
to the Agent for the benefit of the Secured Parties the Aggregate Principal, all
accrued and unpaid fees, CP Costs and Interest and all other Obligations owing
hereunder. If, at any time, during the period commencing on the Closing Date and
ending on the Amortization Date, the Borrower shall elect for any reason other
than a CP Cost Event to repay the Aggregate Principal and terminate the
Commitments of the Alternate Lenders pursuant hereto, the Borrower shall pay the
Exit Fee to the Agent on the Proposed Final Repayment Date, together with all
other amounts required to be paid by the Borrower on such date pursuant to this
Section 1.4.

      Section 1.5 Borrowing Limit. The Borrower shall ensure that the Aggregate
Principal at no time exceeds the Borrowing Limit. If, at any time, the Aggregate
Principal exceeds the Borrowing Limit at such time, the Borrower shall pay to
the Agent within one (1) Business Day an amount to be applied to reduce the
Aggregate Principal (as allocated by the Agent), such that after giving effect
to such payment, the Aggregate Principal is less than or equal to the Borrowing
Limit at such time.

      Section 1.6 Payment Requirements. All amounts to be paid or deposited by
any Transaction Party pursuant to any provision of this Agreement or any other
Transaction Document shall be paid or deposited in accordance with the terms
hereof no later than 12:00 p.m. (Chicago time) on the day when due in
immediately available funds, and if not received before 12:00 p.m. (Chicago
time) shall be deemed to be received on the next succeeding Business Day. If
such amounts are payable to a Lender they shall be paid to the Agent's Account,
for the

                                       3

<PAGE>

account of such Lender, at 1 Bank One Plaza, Chicago, Illinois 60670 until
otherwise notified by the Agent. All computations of CP Costs, Interest, per
annum fees calculated as part of any CP Costs, per annum fees hereunder and per
annum fees under the Fee Letter shall be made on the basis of a year of 360 days
for the actual number of days elapsed. If any amount hereunder shall be payable
on a day which is not a Business Day, such amount shall be payable on the next
succeeding Business Day.

      Section 1.7 Ratable Advances; Funding Mechanics; Liquidity Fundings.

            (a) Each Borrowing hereunder shall consist of one or more Advances
made by the Conduit Lender and/or the Alternate Lenders.

            (b) Each Lender funding any Advance shall wire transfer the
principal amount of its Advance to the Agent in immediately available funds not
later than 12:00 noon (Chicago time) on the applicable Borrowing Date and,
subject to its receipt of such Advance proceeds, the Agent shall wire transfer
such funds to the account specified by the Borrower in its Borrowing Notice not
later than 2:00 p.m. (Chicago time) on such Borrowing Date.

            (c) The parties acknowledge that the Conduit Lender may put all or
any portion of its Advances to the Alternate Lenders at any time pursuant to the
Liquidity Agreement to finance or refinance the necessary portion of its
Advances through a Liquidity Funding to the extent available. The Agent shall
give the Borrower immediate notice of any Advance put to the Alternate Lenders
by the Conduit Lender. The Liquidity Fundings may be Alternate Base Rate
Advances or LIBO Rate Advances, or a combination thereof, selected by the
Borrower in accordance with Article IV. Regardless of whether a Liquidity
Funding constitutes the direct funding of an Advance, an assignment of an
Advance made by the Conduit Lender or the sale of one or more participations in
an Advance made by the Conduit Lender, each Alternate Lender participating in a
Liquidity Funding shall have the rights and obligations of a "Lender" hereunder
with the same force and effect as if it had directly made an Advance to the
Borrower in the amount of its Liquidity Funding.

            (d) Nothing herein shall be deemed to commit the Conduit Lender to
make Advances.

      Section 1.8 Extension of Scheduled Termination Date. The Borrower may, no
more frequently than once each year (commencing in the year 2006) by delivering
written notice to the Agent, request the Alternate Lenders to extend the
Scheduled Termination Date for an additional 364 days past the then current
Scheduled Termination Date. Any such request shall be subject to the following
conditions: (i) at no time will any Commitment have a term of more than 364 days
and, if any such request would result in a term of more than 364 days, such
request shall be deemed to have been made for such number of days so that, after
giving effect to such extension on the date requested, such term will not exceed
364 days, (ii) none of the Alternate Lenders will have any obligation to extend
any Commitment, (iii) any such extension of the Scheduled Termination Date will
be effective only upon the written agreement of the Alternate Lenders and the
Borrower and (iv) any request for such extension shall be made not more than
ninety (90) nor less than sixty (60) days prior to the then current Scheduled
Termination Date. Each Alternate Lender will respond to any such request no
earlier than forty-five (45) days prior to the

                                       4

<PAGE>

then current Scheduled Termination Date, provided, that any Alternate Lender's
failure to respond within such period shall be deemed to be a rejection of the
requested extension. In the event that at least one Alternate Lender agrees to
extend the Scheduled Termination Date, the Transaction Parties, the Agent and
such extending Alternate Lenders shall enter into such documents as such
extending Alternate Lenders may deem necessary or appropriate to reflect such
extension, and all reasonable costs and expenses incurred by such Alternate
Lenders and the Agent (including reasonable attorney's fees) shall be paid by
the Borrower. In the event that any Alternate Lender declines the request to
extend the Scheduled Termination Date (each such Alternate Lender being referred
to herein as a "Non-Renewing Alternate Lender"), and the Commitment of such
Non-Renewing Alternate Lender is not assigned to another Person in accordance
with the terms of Article XII prior to the then current Scheduled Termination
Date, the Borrowing Limit shall be reduced by an amount equal to each such
Non-Renewing Alternate Lender's Commitment on the then current Scheduled
Termination Date.

                                   ARTICLE II
                       PAYMENTS AND AVAILABLE COLLECTIONS

      Section 2.1 Payments. The Borrower hereby promises to pay:

            (a) the Aggregate Principal on each date and in such amounts
required to be distributed out of Available Collections pursuant to Section 4.01
of the Servicing Agreement and any Aggregate Principal required to be repaid
pursuant to Section 1.5;

            (b) the fees set forth in the Fee Letter on the dates specified
therein;

            (c) all accrued and unpaid Interest on the Alternate Base Rate
Advances and the LIBO Rate Advances on each Settlement Date applicable thereto;

            (d) all accrued and unpaid CP Costs on the CP Rate Advances on each
Settlement Date; and

            (e) all Broken Funding Costs and Indemnified Amounts upon demand.

The Borrower agrees to pay Interest at the Default Rate on all amounts which are
past due through the date of payment, provided, that in no event shall such rate
exceed the maximum rate permitted by applicable law.

      Section 2.2 Collection Account; Settlement Procedures.

            (a) On or prior to the Closing Date, the Agent shall establish and
shall thereafter maintain with JPMorgan Chase a segregated trust account in the
name of the Agent for the benefit of the Lenders (the "Collection Account"). Any
funds on deposit from time to time in the Collection Account shall be deemed
held in trust for the benefit of the Lenders. The Collection Account shall be
under the sole dominion and control of the Agent for the benefit of the Lenders.
The Borrower, the Agent and JPMorgan Chase (in its capacity as the holder of the
Collection Account) agree that the Agent shall have exclusive dominion and
control over the Collection Account and that JPMorgan Chase will comply with
instructions originated by the Agent directing disposition of the funds in the
Collection Account without further consent by the

                                       5

<PAGE>

Borrower or the Servicer; provided, that until the Agent provides such
instructions to JPMorgan Chase, JPMorgan Chase shall be entitled to comply with
instructions originated by the Servicer directing disposition of the funds in
the Collection Account without further consent by the Borrower. The taxpayer
identification number associated with the Collection Account shall be that of
the Borrower and the Borrower will report for Federal, state and local income
taxes, the income, if any, represented by the Collection Account. This agreement
shall constitute an "authenticated record" for purposes of Section 9-104 (and
similar related provisions) of the UCC.

            (b) Funds on deposit in the Collection Account shall be invested in
Eligible Investments in the name of the Agent for the benefit of the Lenders, as
directed in writing by the Servicer (which may be a standing direction), that
will mature or otherwise be available for withdrawal without penalty on each
Settlement Date, with all realized interest and other investment earnings (net
of losses and investment expenses) to remain a part of the Collection Account.
In the event that the Agent has not received written directions from the
Servicer, the Agent shall invest any cash amounts in the Collection Account in
Eligible Investments set forth in clause (iv) of the definition thereof. Any
funds in the Collection Account not so invested must be deposited with an
Eligible Institution and insured by the FDIC to the limits established by the
FDIC. The Agent shall not be liable for any loss incurred in connection with any
investment in the Collection Account, except for losses in respect of
investments issued or guaranteed by the Agent.

            (c) On each Settlement Date, the Servicer (or from and after the
occurrence of an Amortization Event, the Agent or its designee) shall apply all
funds on deposit in the Collection Account that have not been previously applied
hereunder (including, without limitation, any investment earnings received with
respect to such funds) in the following order of priority:

                  (i) first, on a pro rata basis, to the Agent and the Lenders
      an amount equal to the accrued and unpaid CP Costs, Interest and Fees due
      and payable on such Settlement Date, together with any accrued and unpaid
      CP Costs, Interest and Fees from prior Monthly Periods, such amount to be
      allocated among the Agent and the Lenders ratably in accordance with the
      proportion of such amounts owing to each such Person;

                  (ii) second, to the Servicer in payment of the accrued and
      unpaid Servicing Fee due and payable on such Settlement Date, together
      with any accrued and unpaid Servicing Fee from prior Monthly Periods;

                  (iii) third, so long as the Amortization Date has not
      occurred, to reduce the aggregate outstanding Advances of all Terminating
      Alternate Lenders to zero, applied ratably to each Terminating Alternate
      Lender according to its respective Termination Percentage;

                  (iv) fourth, on a pro rata basis, to each Lender, the
      following amounts:

                                       6

<PAGE>

                        (A) if the Amortization Date shall not have occurred, an
            amount equal to the excess (if any) existing on such Settlement Date
            of the Aggregate Principal over the Borrowing Limit; and

                        (B) if the Amortization Date shall have occurred, to the
            Aggregate Principal until the Aggregate Principal is reduced to
            zero;

                  (v) fifth, if the Amortization Date shall not have occurred,
      to the Reserve Account, an amount such that after giving effect to such
      deposit, the Reserve Account Balance equals the Reserve Account
      Requirement;

                  (vi) sixth, if any Obligations (other than amounts already
      paid pursuant to clauses (i) through (iv) inclusive above) are then due
      and payable by the Borrower to any Person entitled thereto, pay to each
      such Person (ratably in accordance with the amounts owing to each) the
      Obligations so due and payable;

                  (vii) seventh, to make any voluntary prepayments of the
      Aggregate Principal pursuant to Section 1.3 or Section 1.4 at the
      direction of the Borrower; and

                  (viii) eighth, after giving effect to the application of the
      amounts described in clauses (i) through (vii) above, any remaining
      Collections on deposit in the Collection Account shall be remitted to the
      Borrower.

      Section 2.3 Payment Recission. No payment of any of the Obligations shall
be considered paid or applied hereunder to the extent that, at any time, all or
any portion of such payment or application is rescinded by application of law or
judicial authority, or must otherwise be returned or refunded for any reason.
The Borrower shall remain obligated for the amount of any payment or application
so rescinded, returned or refunded, and shall promptly pay to the Agent (for
application to the Person or Persons who suffered such recission, return or
refund) the full amount thereof, plus Interest on such amount at the Default
Rate from the date of any such recission, return or refunding.

      Section 2.4 Reserve Account.

            (a) On or prior to the Closing Date, the Borrower shall establish
the Reserve Account (the "Reserve Account") which shall be funded with the
proceeds of the initial Borrowing as described in Section 1.2. in an amount
equal to the Reserve Account Requirement. Thereafter, the Reserve Account shall
be funded pursuant to the collection allocation provisions of Section
2.2(c)(iv). The Reserve Account will be in the name of the Agent and under the
sole dominion and control of the Agent, as agent for the benefit of the Lenders.
The Agent, as agent for the benefit of the Lenders, shall possess all right,
title and interest in and to all funds from time to time on deposit in the
Reserve Account. Notwithstanding the foregoing, the Agent shall not withdraw any
funds from, or otherwise deal with or exercise control over, any funds on
deposit in the Reserve Account except as provided in this Agreement. The
taxpayer identification number associated with the Reserve Account shall be that
of the Borrower and the Borrower will report for Federal, state and local income
tax purposes the income, if any, represented by the Reserve Account. The
Borrower may not assign, transfer or otherwise convey its rights to receive any
amounts from the Reserve Account. Funds on deposit in the Reserve

                                       7

<PAGE>

Account shall be invested in Eligible Investments, as shall be specified by the
Servicer in writing to the Agent, and which shall mature not later than the
Business Day preceding the next Settlement Date and shall be held to maturity.
Each investment instruction by the Servicer, which may be a standing
instruction, shall designate specific types of Eligible Investments (and the
terms thereof) and shall certify or require that the investments so specified
constitute Eligible Investments, will mature at the time required and are
otherwise permitted hereby. The Agent shall not be liable for any loss incurred
in connection with any investment in the Reserve Account, except for losses in
respect of investments in any investment issued or guaranteed by the Agent.

            (b) Except as provided in the clause (i) or (ii) below, all
investments of funds in the Reserve Account shall be made in the name of the
Agent, as agent for the Lenders and held in the possession of the Agent or its
nominee for the benefit of the Lenders.

                  (i) With respect to each investment of funds in the Reserve
      Account that constitutes investment property (other than as described in
      clause (ii) below), the Agent may hold such investment through a
      securities intermediary, which securities intermediary shall agree with
      the Agent that (A) such investment property shall at all times be credited
      to a securities account of the Agent, (B) such securities intermediary
      shall comply with entitlement orders originated by the Agent without the
      further consent of any other person or entity, (C) all property credited
      to such securities account shall be treated as a financial asset, (D) such
      securities intermediary shall waive any lien on, security interest in, or
      right of set-off with respect to any property credited to such securities
      account, and (E) such agreement shall be governed by the laws of the State
      of New York; and

                  (ii) With respect to each investment of funds in the Reserve
      Account that constitutes an uncertificated security, such investment shall
      be registered in the name of the Agent by the issuer thereof and
      identified by the Agent as held for the benefit of the Secured Parties.

            (c) The parties hereto agree that the Reserve Account shall be a
securities account of the Agent, and hereby further agree that each item of
property (including without limitation investment property, securities,
instruments and money) credited to the Reserve Account or to any other
securities account of the Agent or its nominee held as a part of the Reserve
Account shall be treated as a "financial asset" within the meaning of Section
8-102 of the New York UCC, to the fullest extent permitted thereunder. Any
out-of-pocket costs and expenses of the Agent incurred in connection with the
Reserve Account shall be paid by the Borrower pursuant to Section 2.2(c)(v).

            (d) On each Settlement Date prior to the Amortization Date, if any
amounts set forth in Section 2.2(c)(i) remain unpaid after allocation of all
Collections, (i) the funds in the Reserve Account shall be allocated in
accordance with Section 2.2(c)(i) to the extent of such unpaid amounts and (ii)
if, after giving effect to all transactions occurring on a Settlement Date, the
Reserve Account Balance exceeds the Reserve Account Requirement, such excess
shall be remitted from the Reserve Account to the Collection Account. On each
Settlement Date after the Amortization Date, the funds on deposit in the Reserve
Account shall be allocated by the Agent

                                       8

<PAGE>

to one or more of the items described in Section 2.2(c) in its sole discretion.
On the Final Payout Date, the Servicer shall direct the Agent to, and the Agent
shall, withdraw all funds then on deposit in the Reserve Account and distribute
such funds to the Borrower.

      Section 2.5 Terminating Alternate Lenders. Each Terminating Alternate
Lender shall be allocated a ratable portion of Collections from the date of its
becoming a Terminating Alternate Lender (the "Termination Date") until such
Terminating Alternate Lender's aggregate outstanding Advances shall be paid in
full. This ratable portion shall be calculated on the Termination Date of each
Terminating Alternate Lender as a percentage equal to (i) the aggregate
outstanding Advances of such Terminating Alternate Lender on its Termination
Date, divided by (ii) the Aggregate Principal on such Termination Date (the
"Termination Percentage"). Each Terminating Alternate Lender's Termination
Percentage shall remain constant prior to the Amortization Date. On and after
the Amortization Date, each Termination Percentage shall be disregarded and each
Terminating Alternate Lender's outstanding Advances shall be reduced ratably
with all Lenders in accordance with Section 2.2.

                                  ARTICLE III
                             CONDUIT LENDER FUNDING

      Section 3.1 CP Costs. The Borrower shall pay CP Costs with respect to the
principal balance of the Conduit Lender's Advances from time to time
outstanding. Each Advance of the Conduit Lender that is funded substantially
with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis,
based upon the percentage share that the principal in respect of such Advance
represents in relation to all assets held by the Conduit Lender and funded
substantially with related Pooled Commercial Paper.

      Section 3.2 Calculation of CP Costs. Not later than the Business Day
immediately preceding each Settlement Date, the Conduit Lender shall calculate
the aggregate amount of CP Costs applicable to its CP Rate Loans for the Monthly
Period preceding the Monthly Period during which such Settlement Date occurs and
shall notify the Borrower and the Servicer of such aggregate amount.

      Section 3.3 Payments of CP Costs. On each Settlement Date, the Borrower
shall pay to the Agent (for the benefit of the Conduit Lender) an aggregate
amount equal to all accrued and unpaid CP Costs in respect of the principal
associated with all CP Rate Advances for the Monthly Period preceding the
Monthly Period during which such Settlement Date occurs in accordance with
Article II.

      Section 3.4 Default Rate. From and after the occurrence of an Amortization
Event, at the Agent's option upon three Business Days' prior written notice to
the Borrower, and at all times after the Amortization Date, all Loans of the
Conduit Lender shall cease to be CP Rate Advances and shall accrue Interest at
the Default Rate.

                                   ARTICLE IV
                            ALTERNATE LENDER FUNDING

      Section 4.1 Alternate Lender Funding. Prior to the occurrence of an
Amortization Event, the outstanding principal balance of each Liquidity Funding
shall accrue interest for each

                                       9

<PAGE>

day during its Interest Period at either the LIBO Rate or the Alternate Base
Rate in accordance with the terms and conditions hereof. Until the Borrower
gives notice to the Agent of another Interest Rate in accordance with Section
4.4, the initial Interest Rate for any Advance transferred to the Alternate
Lenders by the Conduit Lender pursuant to the Liquidity Agreement shall be the
Alternate Base Rate (unless the Default Rate is then applicable, in which case,
the Interest Rate shall be the Default Rate). If the Alternate Lenders acquire
by assignment from the Conduit Lender any Advance pursuant to the Liquidity
Agreement, each Loan so assigned shall each be deemed to have an Interest Period
commencing on the date of any such assignment.

      Section 4.2 Interest Payments. On the Settlement Date for each Liquidity
Funding, the Borrower shall pay to the Agent (for the benefit of the Alternate
Lenders) an aggregate amount equal to the accrued and unpaid Interest for the
entire Interest Period of each such Liquidity Funding in accordance with Article
II.

      Section 4.3 Selection and Continuation of Interest Periods.

            (a) Prior to the occurrence and during the continuance of an
Amortization Event, the Borrower shall from time to time select Interest Periods
for the Liquidity Fundings, provided, that (i) all Interest Periods shall end on
a Settlement Date and (ii) following the occurrence and during the continuance
of an Amortization Event, all Interest Periods for Liquidity Fundings shall be
selected by the Borrower with consultation from (and approval by) the Agent.

            (b) The Borrower or the Agent, upon notice to and consent by the
other received at least three (3) Business Days prior to the end of an Interest
Period (the "Terminating Tranche") for any Liquidity Funding, may, effective on
the last day of the Terminating Tranche: (i) divide any such Liquidity Funding
into multiple Liquidity Fundings, (ii) combine any such Liquidity Funding with
one or more other Liquidity Fundings that have a Terminating Tranche ending on
the same day as such Terminating Tranche or (iii) combine any such Liquidity
Funding with a new Liquidity Funding to be made by the Alternate Lenders on the
day such Terminating Tranche ends.

      Section 4.4 Alternate Lender Interest Rates. The Borrower may select the
LIBO Rate or the Alternate Base Rate for each Liquidity Funding. The Borrower
shall by 12:00 p.m. (Chicago time): (i) at least three (3) Business Days prior
to the expiration of any Terminating Tranche with respect to which the LIBO Rate
is being requested as a new Interest Rate and (ii) at least one (1) Business Day
prior to the expiration of any Terminating Tranche with respect to which the
Alternate Base Rate is being requested as a new Interest Rate, give the Agent
irrevocable notice of the new Interest Rate for the Liquidity Funding associated
with such Terminating Tranche. Until the Borrower gives notice to the Agent of
another Interest Rate, the initial Interest Rate for any Advance transferred to
the Alternate Lenders pursuant to the Liquidity Agreement shall be the Alternate
Base Rate (unless the Default Rate is then applicable, in which case the
Interest Rate shall be the Default Rate).

                                       10

<PAGE>

      Section 4.5 Suspension of the LIBO Rate.

            (a) If any Alternate Lender notifies the Agent that it has
determined that funding its Pro Rata Share of the Liquidity Fundings at the LIBO
Rate would violate any applicable law, rule, regulation, or directive of any
governmental or regulatory authority, whether or not having the force of law, or
that (i) deposits of a type and maturity appropriate to match fund its Liquidity
Funding at such LIBO Rate are not available or (ii) such LIBO Rate does not
accurately reflect the cost of acquiring or maintaining a Liquidity Funding at
such LIBO Rate, then the Agent shall suspend the availability of such LIBO Rate
and require the Borrower to select the Alternate Base Rate for any Liquidity
Funding accruing Interest at such LIBO Rate.

            (b) If less than all of the Alternate Lenders give a notice to the
Agent pursuant to Section 4.5(a), each Alternate Lender which gave such a notice
shall be obliged, at the request of the Borrower, the Conduit Lender or the
Agent, to assign all of its rights and obligations hereunder to (i) another
Alternate Lender or (ii) another funding entity nominated by the Borrower or the
Agent that is acceptable to the Conduit Lender and the Borrower (such acceptance
not to be unreasonably withheld, delayed or conditioned) and willing to
participate in this Agreement through the Scheduled Termination Date in the
place of such notifying Alternate Lender; provided, that (i) the notifying
Alternate Lender receives payment in full, pursuant to an Assignment Agreement,
of all Obligations owing to it (whether due or accrued), and (ii) the
replacement Alternate Lender otherwise satisfies the requirements of Section
12.1(b).

      Section 4.6 Default Rate. From and after the occurrence of an Amortization
Event, at the Agent's option upon three Business Days' prior written notice to
the Borrower, and at all times after the Amortization Date, all Liquidity
Fundings shall accrue Interest at the Default Rate.

                                   ARTICLE V
                          PRESENTATIONS AND WARRANTIES

      Section 5.1 Representations and Warranties of the Transaction Parties.
Each Transaction Party hereby represents and warrants to the Agent and the
Lenders, as to itself, as of the Closing Date, as of the date of each Advance,
as of each Transfer Date and as of each Settlement Date that:

            (a) Existence and Power. Such Transaction Party's jurisdiction of
organization is correctly set forth in the preamble to this Agreement. Such
Transaction Party is duly organized under the laws of that jurisdiction and no
other state or jurisdiction. Such Transaction Party is validly existing and in
good standing under the laws of its state of organization. Such Transaction
Party is duly qualified to do business and is in good standing as a foreign
entity, and has and holds all organizational power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted except where
the failure to so qualify or so hold could not reasonably be expected to have a
Material Adverse Effect.

            (b) Power and Authority; Due Authorization, Execution and Delivery.
The execution and delivery by such Transaction Party of this Agreement and each
other Transaction

                                       11

<PAGE>

Document to which it is a party, and the performance of its
obligations hereunder and thereunder and, in the case of the Borrower, the
Borrower's use of the proceeds of Advances made hereunder, are within its
corporate or partnership powers, as applicable, and authority and have been duly
authorized by all necessary corporate or partnership action, as applicable, on
its part. This Agreement and each other Transaction Document to which such
Transaction Party is a party has been duly executed and delivered by such
Transaction Party.

            (c) No Conflict. The execution and delivery by such Transaction
Party of this Agreement and each other Transaction Document to which it is a
party, and the performance of its obligations hereunder and thereunder do not
contravene or violate (i) its certificate or articles of incorporation or
by-laws or certificate or articles of limited partnership or limited partnership
agreement (or equivalent organizational documents), as applicable, (ii) any law,
rule or regulation applicable to it, (iii) any restrictions under any agreement,
contract or instrument to which it is a party or by which it or any of its
property is bound, or (iv) any order, writ, judgment, award, injunction or
decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Lien on assets of such Transaction Party or its
Subsidiaries (except as created hereunder); and no transaction contemplated
hereby requires compliance with any bulk sales act or similar law.

            (d) Governmental Authorization. Other than the filing of the
financing statements required hereunder, no authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by such
Transaction Party of this Agreement and each other Transaction Document to which
it is a party and the performance of its obligations hereunder and thereunder.

            (e) Actions, Suits. There are no actions, suits or proceedings
pending, or to the best of such Transaction Party's knowledge, threatened,
against or affecting such Transaction Party, or any of its properties, in or
before any court, arbitrator or other body, which, solely in the case of
actions, suits or proceedings with respect to PMC, if adversely determined
against PMC could reasonably be expected to have a Material Adverse Effect; it
being understood that an Obligor's assertion of a defense against a Transaction
Party in a proceeding initiated by a Transaction Party to enforce such Pool Loan
to which the Borrower is a party shall not be deemed a breach of this
representation unless such proceeding could reasonably be expected to have a
Material Adverse Effect. Such Transaction Party is not in default with respect
to any order of any court, arbitrator or governmental body.

            (f) Binding Effect. This Agreement and each other Transaction
Document to which such Transaction Party is a party constitute the legal, valid
and binding obligations of such Transaction Party enforceable against such
Transaction Party in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).

            (g) Accuracy of Information. All information heretofore furnished by
such Transaction Party or any of its Affiliates to the Agent or the Lenders for
purposes of or in connection with this Agreement, any of the other Transaction
Documents or any transaction

                                       12

<PAGE>

contemplated hereby or thereby is, and all such information (including any
Monthly Report, certificate or other report) hereafter furnished by such
Transaction Party or any of its Affiliates to the Agent or the Lenders will be,
true and accurate in every material respect on the date such information is
stated or certified and does not and will not contain any material misstatement
of fact or be otherwise misleading in light of the circumstances under which
such information was furnished.

            (h) Use of Proceeds. The Borrower represents and warrants that no
proceeds of any Advance hereunder will be used (i) for a purpose that violates,
or would be inconsistent with, (A) Section 7.2(d) of this Agreement or (B)
Regulation T, U or X promulgated by the Board of Governors of the Federal
Reserve System from time to time or (ii) to acquire any security in any
transaction which is subject to Section 12, 13 or 14 of the Securities Exchange
Act of 1934, as amended.

            (i) Good Title. The Borrower is the legal and beneficial owner of
the Pool Loans and other Collateral, free and clear of any Lien, except as
created by the Transaction Documents. There have been duly filed all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect the Borrower's
ownership interest in each Pool Loan and the other Collateral.

            (j) Perfection. This Agreement is effective to create in favor of
the Agent for the benefit of the Secured Parties, and on the date of the initial
Advance the Agent shall have, a valid security interest in the Collateral to
secure payment of the Obligations, free and clear of any Lien except as created
by the Transactions Documents. There have been duly filed all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect the Agent's (on
behalf of the Secured Parties) security interest in the Collateral.

            (k) Places of Business and Locations of Records. The principal
places of business and chief executive office of such Transaction Party and the
offices where it keeps all of its Records are located at the address(es) listed
on Exhibit III or such other locations of which the Agent has been notified in
accordance with Section 7.2(a) in jurisdictions where all action required by
Section 14.4(a) has been taken and completed. The Borrower's Federal Employer
Identification Number and state organizational identification number are
correctly set forth on Exhibit III.

            (l) Financial Statements. The consolidated balance sheet of the
Servicer and its consolidated subsidiaries as of December 31, 2003 and the
related consolidated statements of income and cash flows for the fiscal year
then ended reported on by PricewaterhouseCoopers L.L.P., a copy of which the
Servicer has delivered on or before the Closing Date, fairly present, in
conformity with GAAP, the consolidated financial position of the Servicer and
its consolidated subsidiaries of such date and their consolidated results of
operations and cash flows for such fiscal year.

            (m) Material Adverse Effect. The initial Servicer represents and
warrants that since December 31, 2003, no event has occurred that would have a
Material Adverse Effect. The

                                       13

<PAGE>

Borrower represents and warrants that since the date of this Agreement, no event
has occurred that would have a Material Adverse Effect.

            (n) Names. The name in which the Borrower has executed this
Agreement is identical to the name of the Borrower as indicated on the public
record of its state of organization which shows the Borrower to have been
organized. Since the date of its organization, the Borrower has not used any
names, trade names or assumed names other than the name in which it has executed
this Agreement.

            (o) Ownership of Borrower. The General Partner owns 100% of the
issued and outstanding general partnership interests of the Borrower, free and
clear of any Lien and PMC owns 100% of the issued and outstanding limited
partnership interest of the Borrower. All such general partnership interests are
validly issued, fully paid and nonassessable, and there are no options, warrants
or other rights to acquire any equity interests of the Borrower.

            (p) Not a Holding Company or an Investment Company. The Borrower is
not a "holding company" or a "subsidiary holding company" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or any successor statute. The Borrower is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or any
successor statute.

            (q) Compliance with Law. Such Transaction Party has complied in all
respects with all applicable laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject, except, in the case
of the Servicer, where the failure to so comply could not reasonably be expected
to have a Material Adverse Effect.

            (r) Compliance with Credit and Collection Policy. Such Transaction
Party has complied in all material respects with the Credit and Collection
Policy with regard to each Loan and the related Loan Documents, and has not made
any change to such Credit and Collection Policy other than as permitted under
Section 7.2(b) and in compliance with the notification requirements in Section
7.1(a)(vii).

            (s) Payments to PMC. The Purchase Agreement is the only agreement
pursuant to which the Borrower has acquired Loans. With respect to each Pool
Loan transferred to the Borrower under the Purchase Agreement, the Borrower has
given reasonably equivalent value to PMC in consideration therefor and such
transfer was not made for or on account of an antecedent debt. No transfer by
PMC of any Pool Loan under the Purchase Agreement is or may be voidable under
any section of the Federal Bankruptcy Code.

            (t) Borrowing Limit. Immediately after giving effect to each Advance
and each settlement on any Settlement Date hereunder, the Aggregate Principal is
less than or equal to the Borrowing Limit as of such date.

            (u) Collection Information. The Borrower or the Servicer on its
behalf has instructed all Obligors with respect to each Pool Loan, not later
than one Business Day after the Borrower has acquired such Loan pursuant to the
Purchase Agreement, to remit all Collections with respect to such Pool Loans to
the Lockbox Account. The Lockbox Account is the only account to which Obligors
have been instructed to remit Collections with respect to the Pool

                                       14

<PAGE>

Loans. The Borrower has not granted any Person, other than the Agent, "control"
(within the meaning of Section 9-102 of any applicable enactment of the UCC) of
the Lockbox Account or the right to take control of the Lockbox Account at a
future time or upon the occurrence of a future event. The conditions and
requirements set forth in Article III of the Servicing Agreement have at all
times been satisfied and duly performed.

            (v) Accounting. Such Transaction Party accounts for the transactions
contemplated by the Purchase Agreement as a sale from PMC to the Borrower except
to the extent that such sales are not recognized under GAAP due to consolidated
financial reporting.

            (w) Solvency. The Borrower: (i) is not "insolvent" (as such term is
defined in Section 101(32)(A) of the Federal Bankruptcy Code), (ii) is able to
pay its debts as they come due; and (iii) does not have unreasonably small
capital for the business in which it is engaged or for any business or
transactions in which it is about to engage.

            (x) Limited Business. The Borrower has not conducted any business
and engages in no transaction except as expressly contemplated herein.

            (y) No Withholding. The Borrower is not subject to backup
withholding, either because (i) it has not been notified that it is subject to
backup withholding, or (ii) the Internal Revenue Service has notified the
Borrower that it is no longer subject to backup withholding.

      Section 5.2 Alternate Lender Representations and Warranties. Each
Alternate Lender hereby represents and warrants to the Agent and the Conduit
Lender that:

            (a) Existence and Power. Such Alternate Lender is a banking
association duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and has all organizational power to perform
its obligations hereunder and under the Liquidity Agreement.

            (b) No Conflict. The execution and delivery by such Alternate Lender
of this Agreement and the Liquidity Agreement and the performance of its
obligations hereunder and thereunder are within its corporate powers, have been
duly authorized by all necessary corporate action, do not contravene or violate
(i) its certificate or articles of incorporation or association or by-laws, (ii)
any law, rule or regulation applicable to it, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or any of its property
is bound, or (iv) any order, writ, judgment, award, injunction or decree binding
on or affecting it or its property, and do not result in the creation or
imposition of any Lien on its assets. This Agreement and the Liquidity Agreement
have been duly authorized, executed and delivered by such Alternate Lender.

            (c) Governmental Authorization. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by such Alternate
Lender of this Agreement or the Liquidity Agreement and the performance of its
obligations hereunder or thereunder.

                                       15

<PAGE>

            (d) Binding Effect. Each of this Agreement and the Liquidity
Agreement constitutes the legal, valid and binding obligation of such Alternate
Lender enforceable against such Alternate Lender in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors' rights
generally and by general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law).

                                   ARTICLE VI
                             CONDITIONS OF ADVANCES

      Section 6.1 Conditions Precedent to Initial Advance. The initial Advance
under this Agreement is subject to the conditions precedent that (a) the Agent
shall have received on or before the date of such Advance those documents listed
on Schedule B to this Agreement and (b) the Agent shall have received all fees
and expenses required to be paid on such date pursuant to the terms of this
Agreement and the Fee Letter.

      Section 6.2 Conditions Precedent to All Advances. Each Advance (including
the initial Advance) and each rollover or continuation of any Advance shall be
subject to the further conditions precedent that

            (a) (i) the Borrower or the Servicer on its behalf shall have
delivered to the Agent on or prior to the date thereof, in form and substance
satisfactory to the Agent, a Borrowing Notice, together with a schedule of Loans
to be pledged hereunder and a calculation of the Borrowing Base after giving
effect to the related Borrowing and (ii) the Servicer shall have delivered to
the Agent on or prior to the date thereof, in form and substance satisfactory to
the Agent, all Monthly Reports as and when due under the Servicing Agreement;

            (b) the Amortization Date shall not have occurred;

            (c) PMC shall, as custodian and bailee for the benefit of the Agent,
be in possession of the Loan Files relating to all Pool Loans (including,
without limitation, Loan Files relating to Loans that will become Pool Loans
after giving effect to such Advance);

            (d) the Reserve Account Balance shall be equal to or greater than
the Reserve Account Requirement;

            (e) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request; and

            (f) on the date thereof, the following statements shall be true (and
acceptance of the proceeds of such Advance shall be deemed a representation and
warranty by the Borrower that such statements are then true):

                  (i) the representations and warranties set forth in Section
      5.1 are true and correct on and as of the date of such Advance as though
      made on and as of such date;

                  (ii) no event has occurred and is continuing, or would result
      from such Advance (or the continuation thereof), that will constitute an
      Amortization Event, and no

                                       16

<PAGE>

      event has occurred and is continuing, or would result from such Advance
      (or the continuation thereof), that would constitute an Unmatured
      Amortization Event; and

                  (iii) after giving effect to such Advance (or the continuation
      thereof), the Aggregate Principal will not exceed the Borrowing Limit as
      of such date.

                                  ARTICLE VII
                                   COVENANTS

      Section 7.1 Affirmative Covenants of the Transaction Parties. Until the
Final Payout date, each Transaction Party hereby covenants, as to itself, as set
forth below:

            (a) Reporting. Such Transaction Party will maintain, for itself and
each of its Subsidiaries, a system of accounting established and administered in
accordance with GAAP, and furnish or cause to be furnished to the Agent:

                  (i) Annual Reporting. Within 90 days after the close of each
      of its respective fiscal years, audited, unqualified financial statements
      (which shall include balance sheets, statements of income and retained
      earnings and a statement of cash flows) of PMC for such fiscal year
      certified in a manner acceptable to the Agent by independent public
      accountants of recognized national standing;

                  (ii) Quarterly Reporting. Within 45 days after the close of
      the first three (3) quarterly periods of each of its respective fiscal
      years, balance sheets of PMC as at the close of each such period and
      statements of income and a statement of cash flows for each such Person
      for the period from the beginning of such fiscal year to the end of such
      quarter, all certified by its Chief Financial Officer;

                  (iii) Compliance Certificate. Together with the financial
      statements required hereunder, a compliance certificate in substantially
      the form of Exhibit IV signed by PMC's Authorized Officer and dated the
      date of such annual financial statement or such quarterly financial
      statement, as the case may be;

                  (iv) Statements and Reports. Promptly upon the furnishing
      thereof to the shareholders or partners of PMC, copies of all financial
      statements, reports and proxy statements so furnished;

                  (v) S.E.C. Filings. Promptly upon the filing thereof, copies
      of all registration statements and annual, quarterly, monthly or other
      regular reports and reports on Forms 10-K, 10-Q or 8-K which any
      Transaction Party files with the Securities and Exchange Commission;

                  (vi) Copies of Notices. Promptly upon its receipt of any
      notice, request for consent, financial statements, certification, report
      or other communication under or in connection with any Transaction
      Document from any Person other than the Agent or any Lender, copies of the
      same;

                                       17

<PAGE>

                  (vii) Change in Credit and Collection Policy. At least thirty
      (30) days prior to the effectiveness of any material change in or material
      amendment to the Credit and Collection Policy, a copy of the Credit and
      Collection Policy then in effect and a notice (A) indicating such change
      or amendment, and (B) if such proposed change or amendment would be
      reasonably likely to materially and adversely affect the collectibility of
      the Pool Loans or materially decrease the credit quality of any newly
      created Pool Loans, requesting the Agent's consent thereto;

                  (viii) Other Information. Promptly, from time to time, such
      other information, documents, records or reports relating to the Pool
      Loans, the Records or the condition or operations, financial or otherwise,
      of such Transaction Party as the Agent may from time to time reasonably
      request in order to protect the interests of the Agent and the Lenders
      under or as contemplated by this Agreement; and

                  (ix) Locations of Records. At least thirty (30) days prior to
      the relocation of any of its Records, such Transaction Party shall deliver
      to the Agent an updated Schedule III which shall list the addresses of all
      offices where Records will be kept as of such date.

            (b) Notices. Such Transaction Party will notify the Agent in writing
of any of the following promptly upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken with respect
thereto:

                  (i) Amortization Events or Unmatured Amortization Events. The
      occurrence of each Amortization Event and each Unmatured Amortization
      Event, by a statement of an Authorized Officer of such Transaction Party;

                  (ii) Judgments and Proceedings. (A) (1) The entry of any
      judgment or decree against the Servicer or any of its Subsidiaries if the
      aggregate amount of all judgments and decrees then outstanding against the
      Servicer and its Subsidiaries could reasonably be expected to have a
      Material Adverse Effect, and (2) the institution of any litigation,
      arbitration proceeding or governmental proceeding against the Servicer
      which, individually or in the aggregate, could reasonably be expected to
      have a Material Adverse Effect; and (B) the entry of any judgment or
      decree or the institution of any litigation, arbitration proceeding or
      governmental proceeding against Borrower;

                  (iii) Material Adverse Effect. The occurrence of any event or
      condition that has had, or could reasonably be expected to have, a
      Material Adverse Effect;

                  (iv) Defaults Under Other Agreements. The occurrence of a
      default or an event of default under any other financing arrangement for
      borrowed money pursuant to which such Transaction Party or any Subsidiary
      thereof is a debtor or an obligor that could reasonably be expected to
      have a Material Adverse Effect;

                  (v) Notices under Purchase Agreement. Copies of all notices
      delivered under the Purchase Agreement; and

                                       18

<PAGE>

                  (vi) Downgrade. Any downgrade in the rating of any
      Indebtedness of PMC or any Subsidiary thereof by Moody's or S&P, setting
      forth the Indebtedness affected and the nature of such change.

            (c) Compliance with Laws and Preservation of Existence. Such
Transaction Party will comply in all respects with all applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect. Such Transaction Party will preserve
and maintain its corporate or partnership existence, rights, franchises and
privileges in the jurisdiction of its incorporation or organization, and qualify
and remain qualified in good standing as a foreign entity in each jurisdiction
where its business is conducted, except where the failure to so preserve and
maintain or qualify could not reasonably be expected to have a Material Adverse
Effect.

            (d) Audits. Such Transaction Party will furnish to the Agent from
time to time such information with respect to it and the Pool Loans as the Agent
may reasonably request. Such Transaction Party will, from time to time during
regular business hours as requested by the Agent upon reasonable notice and at
the sole cost of such Transaction Party, permit the Agent, or its agents or
representatives (and shall cause each Originator to permit the Agent or its
agents or representatives): (i) to examine and make copies of and abstracts from
all Records in the possession or under the control of such Person relating to
the Pool Loans and the other Collateral, including, without limitation, the
related Loan Documents, and (ii) to visit the offices and properties of such
Transaction Party for the purpose of examining the materials described in clause
(i) above, and to discuss matters relating to such Transaction Party's financial
condition or the Collateral or any Transaction Party's performance under any of
the Transaction Documents or any Transaction Party's performance under the Loan
Documents and, in each case, with any of the officers or employees of such
Transaction Party having knowledge of such matters; provided, that prior to the
occurrence of an Amortization Event, the Transaction Parties shall be obligated
to pay the cost of only one audit of the Transaction Parties during any 12-month
period beginning on the date hereof or any anniversary of the date hereof.

            (e) Keeping and Marking of Records and Books.

                  (i) Such Transaction Party will (and will cause each
      Originator to) maintain and implement administrative and operating
      procedures (including, without limitation, an ability to recreate records
      evidencing the Pool Loans in the event of the destruction of the originals
      thereof), and keep and maintain all documents, books, records and other
      information reasonably necessary or advisable for the collection of all
      Pool Loans (including, without limitation, records adequate to permit the
      immediate identification of all Available Collections of and adjustments
      to each Pool Loan). The Servicer will (and will cause each Originator to)
      give the Agent notice of any material change in the administrative and
      operating procedures referred to in the previous sentence.

                  (ii) Such Transaction Party will (and will cause each
      Originator to) within two (2) Business Days after the Closing Date, mark
      its master data processing

                                       19

<PAGE>

      records and other books and records relating to the Pool Loans with a
      legend, acceptable to the Agent, describing the Agent's security interest
      in the Collateral.

            (f) Compliance with Loan Documents and Credit and Collection Policy.
Such Transaction Party will (and will cause each Originator to) timely and fully
(i) perform and comply with all provisions, covenants and other promises
required to be observed by it under the Loan Documents related to the Pool
Loans, and (ii) comply in all respects with the Credit and Collection Policy in
regard to each Pool Loan and the related Loan Documents.

            (g) Rights Under Purchase Agreement. From and after the Termination
Date, the Borrower will direct, instruct, or request any lawful action under the
Purchase Agreement, including without limitation, in connection with enforcement
of its rights thereunder, as instructed by the Agent; provided, however, that
both before and after the Amortization Date, the Borrower shall deliver any
lawful notice as directed by the Agent, the delivery of which is a condition
precedent to any "Purchase Termination Event" under (and as defined in) the
Purchase Agreement.

            (h) Performance and Enforcement of Purchase Agreement. The Borrower
will, and will require PMC to, perform each of their respective obligations and
undertakings under and pursuant to the Purchase Agreement, will purchase the
Pool Loans thereunder in strict compliance with the terms thereof and will
vigorously enforce the rights and remedies accorded to the Borrower under the
Purchase Agreement. The Borrower will take all actions to perfect and enforce
its rights and interests (and the rights and interests of the Agent and the
Lenders as assignees of Borrower) under the Purchase Agreement as the Agent may
from time to time reasonably request, including, without limitation, making
claims to which it may be entitled under any indemnity, reimbursement or similar
provision contained in the Purchase Agreement.

            (i) Location of Records. Such Transaction Party will keep its chief
place of business and chief executive office and the offices where it keeps the
Records at (i) the address(es) of the Borrower referred to on Exhibit III or
(ii) upon 30 days' prior written notice to the Agent, at any other location in
the United States where all actions reasonably requested by the Agent to protect
and perfect the interests of the Agent and the Lenders in the Pool Loans and the
other Collateral have been taken and completed.

            (j) Ownership. The Borrower will (or will cause PMC to) take all
necessary action to (i) vest legal and equitable title to the Collateral
purchased under the Purchase Agreement irrevocably in the Borrower, free and
clear of any Liens (other than Liens in favor of the Agent, for the benefit of
the Secured Parties) including, without limitation, the filing of all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect the Borrower's
interest in such Collateral and such other action to perfect, protect or more
fully evidence the interest of the Borrower therein as the Agent may reasonably
request), and (ii) establish and maintain, in favor of the Agent, for the
benefit of the Secured Parties, a valid and perfected first priority security
interest in all Collateral, free and clear of any Liens, including, without
limitation, the filing of all financing statements or other similar instruments
or documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect the Agent's (for the benefit of the Secured Parties)
security interest in the Collateral and such other action to perfect, protect or

                                       20

<PAGE>

more fully evidence the interest of the Agent for the benefit of the Secured
Parties as the Agent may reasonably request. The Borrower authorizes the Agent
to file UCC financing or continuation statements, and amendments thereto and
assignments thereof, relating to the Pool Loans and the other Collateral without
the signature of the Borrower. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement where permitted by law.

            (k) Lenders' Reliance. The Borrower acknowledges that the Lenders
are entering into the transactions contemplated by this Agreement in reliance
upon the Borrower's identity as a legal entity that is separate from PMC and the
Servicer. Therefore, from and after the date of execution and delivery of this
Agreement, each Transaction Party shall take all reasonable steps, including,
without limitation, all steps that the Agent or any Lender may from time to time
reasonably request, to maintain the Borrower's identity as a separate legal
entity and to make it manifest to third parties that each of the Borrower and
the General Partner is an entity with assets and liabilities distinct from those
of PMC , the Servicer or any other Affiliates thereof (other than the Borrower
and the General Partner, collectively, the "PMC Entities") and not just a
division of any PMC Entity. Without limiting the generality of the foregoing and
in addition to the other covenants set forth herein, each of the Borrower and
the General Partner will:

                        (A) conduct its own business in its own name and require
            that all of its full-time employees, if any, identify themselves as
            such and not as employees of any PMC Entity (including, without
            limitation, by means of providing appropriate employees with
            business or identification cards identifying such employees as the
            Borrower's employees);

                        (B) compensate all employees, consultants and agents
            from its own funds, for services provided to it by such employees,
            consultants and agents and, to the extent any such employee,
            consultant or agent is also an employee, consultant or agent of any
            PMC Entity, allocate the compensation of such employee, consultant
            or agent between it and such PMC Entity, on a basis that reflects
            the services rendered to it and such PMC Entity;

                        (C) if its office is located in the offices of any PMC
            Entity, the Borrower and/or the General Partner, if applicable,
            shall lease such office at a fair market rent;

                        (D) have separate stationery and any checks in its own
            name;

                        (E) conduct all transactions with each PMC Entity
            (including, without limitation, any delegation of its obligations
            hereunder as Servicer) strictly on an arm's-length basis, allocate
            all overhead expenses (including, without limitation, telephone and
            other utility charges) for items shared between it and such PMC
            Entity on the basis of actual use to the extent practicable and, to
            the extent such allocation is not practicable, on a basis reasonably
            related to actual use;

                                       21

<PAGE>

                        (F) cause the General Partner to at all times have a
            Board of Managers consisting of three members, at least one member
            of which is an Independent Manager;

                        (G) observe all partnership or limited liability company
            formalities as a distinct entity, and ensure that all actions of the
            General Partner relating to (A) the selection, maintenance or
            replacement of the Independent Manager, (B) the dissolution or
            liquidation of the Borrower or (C) the initiation of, participation
            in, acquiescence in or consent to any bankruptcy, insolvency,
            reorganization or similar proceeding involving the Borrower, are
            duly authorized by unanimous vote of the Board of Managers
            (including the Independent Manager) of the General Partner;

                        (H) maintain its books and records separate from those
            of each PMC Entity and otherwise readily identifiable as its own
            assets rather than assets of any PMC Entity;

                        (I) except as herein specifically otherwise provided,
            maintain its funds or other assets separate from, and not commingled
            with, those of any PMC Entity and only maintain bank accounts or
            other depository accounts to which it alone is the account party,
            into which it alone makes deposits and from which it alone (or the
            Agent hereunder) has the power to make withdrawals;

                        (J) pay all of its operating expenses from its own
            assets (except for certain payments by any PMC Entity or other
            Persons pursuant to allocation arrangements that comply with the
            requirements of this Section 7.1(i));

                        (K) operate its business and activities such that: it
            does not engage in any business or activity of any kind, or enter
            into any transaction or indenture, mortgage, instrument, agreement,
            contract, lease or other undertaking, other than the transactions
            contemplated and authorized by this Agreement, the Servicing
            Agreement and the Purchase Agreement as in effect on the Closing
            Date (a copy of which has been furnished to the Agent); and does not
            create, incur, guarantee, assume or suffer to exist any indebtedness
            or other liabilities, whether direct or contingent, other than (1)
            as a result of the endorsement of negotiable instruments for deposit
            or collection or similar transactions in the ordinary course of
            business, (2) the incurrence of obligations under this Agreement,
            (3) the incurrence of obligations, as expressly contemplated in the
            Purchase Agreement, to make payment to PMC thereunder for the
            purchase of Loans from PMC under the Purchase Agreement, and (4) the
            incurrence of operating expenses in the ordinary course of business
            of the type otherwise contemplated by this Agreement;

                        (L) maintain its limited partnership or limited
            liability company existence in conformity with this Agreement, such
            that it does not amend, restate, supplement or otherwise modify its
            limited partnership agreement or limited liability company
            agreement, as applicable, in any respect that would impair its

                                       22

<PAGE>

            ability to comply with the terms or provisions of any of the
            Transaction Documents, including, without limitation, Section 7.1(i)
            of this Agreement;

                        (M) maintain the effectiveness of, and continue to
            perform under the Purchase Agreement, such that it does not amend,
            restate, supplement, cancel, terminate or otherwise modify the
            Purchase Agreement, or give any consent, waiver, directive or
            approval thereunder or waive any default, action, omission or breach
            under the Purchase Agreement or otherwise grant any indulgence
            thereunder, without (in each case) the prior written consent of the
            Agent;

                        (N) maintain its separate existence such that it does
            not merge or consolidate with or into, or convey, transfer, lease or
            otherwise dispose of (whether in one transaction or in a series of
            transactions, and except as otherwise contemplated and/or permitted
            herein) all or substantially all of its assets (whether now owned or
            hereafter acquired) to, or acquire all or substantially all of the
            assets of, any Person, nor at any time create, have, acquire,
            maintain or hold any interest in any Subsidiary; and

                        (O) take such other actions as are necessary on its part
            to ensure that the facts and assumptions set forth in the opinion
            issued by Locke Liddell & Sapp LLP, as counsel for the Borrower, in
            connection with the closing or initial Advance under this Agreement
            and relating to substantive consolidation issues, and in the
            certificates accompanying such opinion, remain true and correct in
            all material respects at all times.

            (l) Collections. Such Transaction Party will cause all Obligors to
remit all Collections in respect of the Pool Loans by check, wire transfer or
electronic funds transfer to the Lockbox Account. In the event that any
Transaction Party shall receive any Collections relating to a Pool Loan, such
Transaction Party shall receive such funds in trust for the Agent and shall
deposit such funds in the Lockbox Account no later than the second Business Day
following the date such Transaction Party obtains knowledge of such receipt.
Such Transaction Party will take all steps necessary to comply with the
requirements of Section 3.3 of the Servicing Agreement such Transaction Party
shall cause the Lockbox Account to be subject to the Lockbox Agreement at all
times.

            (m) Taxes. The Borrower will file all tax returns and reports
required by law to be filed by it and will promptly pay all taxes and
governmental charges at any time owing, except any such taxes which are not yet
delinquent or are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books. The Servicer will file all material tax returns and
reports required by law to be filed by it and will promptly pay all material
taxes and governmental charges at any time owing, except any such taxes which
are not yet delinquent or are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books. The Borrower will pay when due any taxes
payable in connection with the Pool Loans, exclusive of taxes on or measured by
income or gross receipts of the Agent or any Lender. Neither the Borrower nor
the General

                                       23

<PAGE>

Partner will make any election to be taxed as a "taxable REIT subsidiary" under
the Tax Code. The Borrower will be a "qualified REIT subsidiary" within the
meaning of Section 856(i)(2) of the Tax Code or an entity that is disregarded as
an entity separate from its beneficial owner for federal income tax purposes.

            (n) Payment to PMC. With respect to any Loan purchased by the
Borrower from PMC, such sale shall be effected under, and in strict compliance
with the terms of, the Purchase Agreement, including, without limitation, the
terms relating to the amount and timing of payments to be made to PMC in respect
of the purchase price for such Loan.

      Section 7.2 Negative Covenants of the Transaction Parties. Until the Final
Payout Date, each Transaction Party hereby covenants, as to itself, that:

            (a) Name Change, Offices and Records. Such Transaction Party will
not change its name, identity, jurisdiction or form of organization or relocate
its chief executive office at any time while the location of its chief executive
office is relevant to perfection of the Agent's security interest, for the
benefit of the Secured Parties, in the Collateral unless it shall have: (i)
given the Agent at least thirty (30) days' prior written notice thereof and (ii)
delivered to the Agent all financing statements, instruments and other documents
requested by the Agent in connection with such change or relocation.

            (b) Modifications to Loan Documents and Credit and Collection
Policy. Such Transaction Party will not, and will not permit any Originator to,
make any change to the Credit and Collection Policy that could materially and
adversely affect the collectibility of the Pool Loans or materially decrease the
credit quality of any newly created Pool Loans. Except as provided in the
Servicing Agreement, the Servicer will not, and will not permit any Originator
to, extend, amend or otherwise modify the terms of any Pool Loan or any Loan
Documents related thereto other than in accordance with the Credit and Credit
and Collection Policy.

            (c) Change in Business. Neither the Borrower nor the General Partner
will make any change in the character of its business.

            (d) Sales, Liens. Except as otherwise provided in Section 8.7, the
Borrower will not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, or create or suffer to exist
any Lien upon (including, without limitation, the filing of any financing
statement) or with respect to, any of the Collateral, or assign any right to
receive income with respect thereto (other than, in each case, the creation of a
security interest therein in favor of the Agent as provided for herein), and the
Borrower will defend the right, title and interest of the Secured Parties in, to
and under any of the foregoing property, against all claims of third parties
claiming through or under Borrower or any Originator. The General Partner will
not create or suffer to exist any Lien upon its assets or properties.

            (e) Use of Proceeds. The Borrower will not use the proceeds of the
Advances for any purpose other than (i) paying for Loans and the other
Collateral under and in accordance with the Purchase Agreement, (ii) paying its
ordinary and necessary operating expenses when and as due, and (iii) making
Restricted Junior Payments to the extent permitted under this Agreement.

                                       24

<PAGE>

            (f) Restricted Junior Payments. The Borrower will not make any
Restricted Junior Payment; provided, that prior to the Amortization Date, the
Borrower may make Restricted Junior Payments out of Collections released
pursuant to Section 2.2(c)(vii) hereof so long as (i) no Amortization Event or
Unmatured Amortization Event shall then exist or would result therefrom and (ii)
such Restricted Junior Payments have been approved by all necessary action on
the part of the General Partner and in compliance with all applicable laws.

            (g) Indebtedness. Neither the Borrower nor the General Partner will
incur or permit to exist any Indebtedness or liability on account of deposits
except: (i) the Obligations and (ii) other current accounts payable arising in
the ordinary course of business and not overdue.

            (h) Guarantees. Neither the Borrower nor the General Partner will
guarantee, endorse or otherwise be or become contingently liable (including by
agreement to maintain balance sheet tests) in connection with the obligations of
any other Person, except endorsements of negotiable instruments for collection
in the ordinary course of business and reimbursement and indemnification
obligations in favor of the Agent, any Lender or any Indemnified Party as
provided for under this Agreement.

            (i) Merger, Consolidation. Neither the Borrower nor the General
Partner will sell any equity interest to any Person (other than the Persons
holding such equity interests on the Closing Date) or consolidate with or merge
into or with any Person, or purchase or otherwise acquire all or substantially
all of the assets or capital stock, or other ownership interest of, any Person
or from any Subsidiary, or sell, transfer, lease or otherwise dispose of all or
substantially all of its assets to any Person, except as expressly provided or
permitted under the terms of this Agreement or as consented to by the Agent.

            (j) Limitations on Transactions with Affiliates. Neither the
Borrower nor the General Partner will enter into, or be a party to any
transaction with any Affiliate of the Borrower, except for:

                  (i) the transactions contemplated hereby, by the Purchase
      Agreement and by the other Transaction Documents; and

                  (ii) to the extent not otherwise prohibited under this
      Agreement, other transactions in the nature of employment contracts and
      directors' or manager's fees, upon fair and reasonable terms materially no
      less favorable to the Borrower than would be obtained in a comparable
      arm's-length transaction with a Person not an Affiliate.

            (k) Limitation on Investments. The Borrower will not make or suffer
to exist any loans or advances to, or extend any credit to, or make any
investments (by way of transfer of property, contributions to capital, purchase
of stock or securities or evidences of indebtedness, acquisition of the business
or assets, or otherwise) in, any Affiliate or any other Person except for
Eligible Investments and the purchase and receipt of capital contributions of
Loans and related assets pursuant to the terms of the Purchase Agreement.

            (l) Prohibition on Additional Negative Pledges. The Borrower will
not enter into or assume any agreement (other than this Agreement and the other
Transaction Documents)

                                       25
<PAGE>

prohibiting the creation or assumption of any Lien upon the Collateral except as
contemplated by the Transaction Documents, or otherwise prohibiting or
restricting any transaction contemplated hereby or by the other Transaction
Documents.

            (m) Transaction Documents. The Borrower will not terminate, amend or
otherwise modify the Purchase Agreement or any other Transaction Document, or
grant any waiver or consent thereunder.

            (n) Organizational Documents. Neither the Borrower nor the General
Partner will change, amend, alter or otherwise modify its certificate of limited
partnership or limited partnership agreement or its certificate of formation or
limited liability company agreement, as applicable, except for amendments of its
limited partnership agreement or limited liability company agreement, as the
case may be, permitted by Section 7.1(k)(L) hereof and with respect to which the
Agent has been given prior written notice.

            (o) Change in Payment Instructions to Obligors. Such Transaction
Party will not make any change in its instructions to Obligors regarding making
Collections in respect of the Pool Loans by check, wire transfer or electronic
funds transfer to the Lockbox Account.

            (p) Treatment as Sales. The Borrower will not account for or treat
(whether in financial statements or otherwise) the transactions contemplated by
the Purchase Agreement in any manner other than as the sale and/or absolute
conveyance of the Pool Loans by PMC to the Borrower.

                                  ARTICLE VIII
                                 THE POOL LOANS

      Section 8.1 Loan Documents.

            (a) On or prior to each Transfer Date, and at all times thereafter
(except as provided herein) the Borrower shall cause PMC to prepare and hold in
trust, as custodian and bailee for the Agent, each of the following documents
and instruments with respect to each Loan to be purchased by the Borrower on
such date:

                  (i) the original Underlying Note, endorsed in blank, with all
      intervening endorsements showing a complete chain of title from the
      Originator of such Pool Loan to the Borrower, or a copy of such original
      Underlying Note with an accompanying Lost Note Affidavit;

                  (ii) the original Mortgage (or to the extent the original
      Mortgage is not available, a certified copy or duplicate original), with
      evidence of recording thereon; provided that if the original Mortgage has
      been delivered for recording to the appropriate public recording office of
      the jurisdiction in which the Mortgaged Property is located but has not
      yet been returned to the Originator by such recording office, the Borrower
      shall cause the Originator to prepare and hold in trust as custodian and
      bailee for the Agent (or, if an Amortization Event has occurred, deliver
      to the Agent) a true copy of such original Mortgage certified by PMC,
      together (if an Amortization Event has occurred) with a certificate of PMC
      certifying that such original Mortgage has been so delivered to such

                                       26
<PAGE>

      recording office; in all such instances, the Borrower shall cause PMC to
      set aside and hold in trust as custodian and bailee for the Agent (or, if
      an Amortization Event has occurred, deliver to the Agent) the original
      recorded mortgage promptly upon receipt thereof;

                  (iii) the original attorney's opinion of title or the original
      policy of title insurance (or to the extent not available, a certified
      copy thereof); provided that if any such original policy of title
      insurance has not yet been received by the Originator, the Borrower shall
      cause PMC to set aside and hold in trust as custodian and bailee for the
      Agent (or, if an Amortization Event has occurred and is continuing,
      deliver to the Agent) a copy of such policy or a title insurance binder or
      commitment for the issuance of such policy;

                  (iv) an original Assignment of Mortgage, with evidence of
      recording thereon, evidencing a complete chain of title of the applicable
      Mortgage from the Originator to the Borrower, provided that if such
      original Assignment of Mortgage has been delivered for recording to the
      appropriate public recording office of the jurisdiction in which the
      Mortgaged Property is located but has not yet been returned to the
      Originator by such recording office, the Borrower shall cause PMC to
      deliver to the Agent a true copy of such original Assignment of Mortgage
      certified by PMC, together with a certificate of PMC certifying that such
      original Assignment of Mortgage has been so delivered to such recording
      office; in all such instances, the Borrower shall cause PMC deliver to the
      Agent any such original Assignments of Mortgage promptly upon receipt
      thereof; and

                  (v) originals of all assumption and modification agreements,
      if any.

            (b) The Borrower hereby represents and warrants that PMC is in
possession of all Loan Documents with respect to the Pool Loans and all such
Loan Documents are included in the related Loan File. Prior to the occurrence of
an Amortization Event, PMC shall, as custodian and bailee for the benefit of the
Agent, be entitled to maintain possession of the Loan Files relating to the Pool
Loans. In the event, however, that possession of any such Loan Files is required
by any Person (including the Agent) acting as Servicer pursuant to this
Agreement in order to carry out the duties of the Servicer hereunder, then such
successor Servicer shall be entitled to request delivery, at the expense of PMC,
of such Loan Files and to retain such Loan Files for servicing purposes.

            (c) The Borrower hereby represents and warrants to the Agent that
PMC has made the appropriate entries in its general accounting records, to
indicate that the Pool Loans have been transferred to the Borrower and
constitute part of the Collateral in accordance with the terms of this
Agreement.

            (d) Not later than ten (10) Business Days after the occurrence and
during the continuance of an Amortization Event, the Borrower shall cause PMC to
deliver to the Agent with respect to each Pool Loan, all Loan Files (including
the documents referred to in Section 8.2(a) above) in such manner as the Agent
may reasonably request.

                                       27
<PAGE>

In the event any such Loan File relating to one or more Pool Loans is not so
delivered to the Agent within such ten (10) Business Day period, the Borrower
shall cause PMC to repurchase such Pool Loan at the related Purchase Price in
accordance with Section 8.3.

            (e) If at any time Servicer or the Agent finds any document
constituting a part of the Loan File not to have been executed or received or to
be unrelated to the Pool Loans identified in the Loan Schedule or, if in the
course of its review, the Servicer or the Agent determines that such Loan File
does not include any of the documents required to be included therein pursuant
to this Section 8.01 or is otherwise defective in any material respect, the
Servicer or the Agent, as the case may be, shall notify the other parties
hereto, and the Borrower shall have a period of fifteen (15) Business Days after
such notice (subject to Section 8.2) within which to cause PMC to either (i)
correct or cure any such defect or (ii) to purchase such Pool Loan at the
related Purchase Price in accordance with Section 8.3 or substitute an Eligible
Substitute Loan therefor in accordance with Section 8.5; provided, that if the
Borrower is diligently attempting to cure such defect and such defect is
reasonably capable of being cured, then Borrower shall have an additional five
(5) Business Days to effect such cure or purchase. Notwithstanding anything
herein to the contrary, it is understood and agreed that the Agent shall have no
responsibility for reviewing any Loan File.

            (f) Not later than fifteen (15) Business Days after the occurrence
and during the continuance of an Amortization Event, the Borrower shall, with
respect to each Pool Loan, at its expense, prepare and record an Assignment of
Mortgage in favor of the Agent (which may be a blanket assignment if permitted
by applicable law) in the appropriate real property or other records. The Agent
is hereby appointed as the attorney-in-fact of the Borrower with the power to
prepare, execute and record Assignments of Mortgages and endorsements to the
Underlying Notes in the event that the Borrower fails to do so on a timely basis
as provided in this paragraph.

      Section 8.2 Document Defects. If the Borrower is given notice of an
omission or defect under Section 8.1 and if PMC or the Borrower does not correct
or cure such omission or defect within the fifteen (15) or twenty (20) Business
Day period provided by Section 8.1(e), whichever is applicable, the Borrower
shall cause the Originator to either (i) purchase the related Pool Loan from the
Borrower at the Purchase Price in accordance with Section 8.3 and the Purchase
Agreement or (ii) substitute an Eligible Substitute Loan for such Pool Loan in
accordance with Section 8.5 and the Purchase Agreement.

      Section 8.3 Repurchase of Pool Loans. The Purchase Price for any Pool Loan
which is purchased by PMC pursuant to this Article VIII shall be deposited in
the Collection Account no later than the earlier of (x) the Business Day prior
to the Settlement Date immediately following the date such obligation arises and
(y) the Business Day prior to the Borrowing Date immediately following the date
such obligation arises. Upon receipt by the Agent of an Officer's Certificate of
the Servicer confirming that such Purchase Price has been so remitted or
deposited, the related Loan File shall be released to PMC and the Agent shall
execute and deliver such instruments of release, prepared by and at the expense
of the Borrower, in each case without recourse, representation or warranty, as
shall be necessary to release the Agent's security interest therein. The
Servicer, promptly following the transfer of (i) a Defective Loan from the
Borrower in accordance with this Section 8.3 or of a Defaulted Loan in
accordance with Section 8.5 of this

                                       28
<PAGE>

Agreement or (ii) a Substitute Loan or Additional Loan to the Borrower pursuant
to Section 8.5 or Section 8.6, as the case may be, shall amend the Loan Schedule
in accordance with such Section and deliver a copy of such amended Schedule to
the Agent and make (and cause PMC to make) appropriate entries in its general
account records to reflect such transfer and the addition of any Substitute Loan
or Additional Loan, if applicable.

      Section 8.4 Representations and Warranties Regarding the Loans.

            (a) The Borrower hereby represents and warrants to the Agent and the
Lenders as of the Closing Date, each Borrowing Date, each Settlement Date and
each Transfer Date that each of the representations and warranties set forth in
the Eligibility Criteria are true and correct (i) with respect to each Pool Loan
included in the Borrowing Base as an Eligible Loan on such date and (ii) in the
case of any Transfer Date, with respect to each Loan being transferred to the
Borrower on such date.

            (b) With respect to the representations and warranties set forth in
the Eligibility Criteria that are made to the best of any Transaction Party's
knowledge or as to which the Transaction Parties have no knowledge, if it is
discovered by any Transaction Party, any Lender or the Agent that the substance
of such representation and warranty is inaccurate then, notwithstanding the lack
of knowledge by any Transaction Party with respect to the substance of such
representation and warranty being inaccurate at the time the representation or
warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty for purposes of this Section 8.4.

            (c) It is understood and agreed that the representations and
warranties set forth in the Eligibility Criteria shall survive the contribution
of the Pool Loans to the Borrower, the grant of a security interest in the Pool
Loans to the Agent and the delivery of the respective Loan Files pursuant to
Section 8.1.

            (d) Upon discovery by any Transaction Party, any Lender or the Agent
of a breach of any of the representations and warranties set forth in the
Eligibility Criteria, without regard to any limitation set forth therein
concerning the knowledge of any Transaction Party as to the facts stated
therein, the party discovering such breach shall give prompt written notice to
the other parties. Not later than fifteen (15) Business Days after its discovery
or its receipt of notice of any material breach, the Borrower shall cause PMC to
either (i) cure such breach or (ii) purchase such Pool Loan from the Borrower at
the applicable Purchase Price in accordance with Section 8.3 and the Purchase
Agreement or substitute an Eligible Substitute Loan for such Loan in accordance
with Section 8.5 and the Purchase Agreement; provided, that if the Borrower is
diligently attempting to cure such defect and such defect is reasonably capable
of being cured, then Borrower shall have an additional five (5) Business Days to
effect such cure or purchase.

      Section 8.5 Substitution of Loans.

            (a) On or before the date on which the Borrower would otherwise be
required to cause PMC to repurchase a Defective Loan under Section 8.2 or 8.4,
so long as no Amortization Event has occurred and is continuing, the Borrower
may cause PMC to transfer and assign to the Borrower, in accordance with the
Purchase Agreement and this Section 8.5, one

                                       29
<PAGE>

or more Eligible Substitute Loans in substitution for any one or more of such
Defective Loans. In addition, so long as no Amortization Event has occurred and
is continuing, subject to the limitation set forth in Section 8.5(c) below, the
Borrower may in its sole discretion cause PMC to transfer and assign to the
Borrower, in accordance with the Purchase Agreement and this Section 8.5, one or
more Eligible Substitute Loans in substitution for any one or more Defaulted
Loans. In connection with any such substitution for a Defective Loan or
Defaulted Loan, the Servicer shall calculate the Substitution Adjustment, if
any, and shall cause PMC to deposit such amount to the Collection Account on or
before the applicable Substitution Date. Notwithstanding anything herein to the
contrary, no substitution may be made pursuant to this Section 8.5 or the
Purchase Agreement at any time on or after the Amortization Date.

            (b) The Borrower shall provide the Servicer and the Agent with not
less than five Business Days' prior written notice of its intention to effect a
substitution under this Section 8.5. On the date such substitution is to occur
(the "Substitution Date"), the Servicer shall (i) cause PMC to transfer and
assign to the Borrower in accordance with the Purchase Agreement the Eligible
Substitute Loans to be substituted for the Deleted Loans, (ii) deliver to the
Agent a list of the Deleted Loans to be substituted for by such Eligible
Substitute Loans, (iii) deliver to the Agent an Officer's Certificate of the
Servicer (A) stating that no Amortization Event shall have occurred and be
continuing, (B) stating that the aggregate Principal Balance (determined as of
the applicable Substitution Date) of all Eligible Substitute Loans that have
been substituted for Defaulted Loans since the date of the most recent Term
Securitization, or, if no Term Securitization has occurred, since the Closing
Date (including the Eligible Substitute Loans being substituted on such
Substitution Date but excluding Eligible Substitute Loans substituted for
Defective Loans pursuant to Section 8.5(a) above), does not exceed an amount
equal to 15% of the highest Pool Principal Balance since the date of the most
recent Term Securitization, or, if no Term Securitization has occurred, since
the Closing Date, (C) stating that each Loan being substituted on that
Substitution Date is an Eligible Substitute Loan and that all conditions
precedent to such substitution specified in this Section 8.5 and in the Purchase
Agreement have been satisfied and attaching as an exhibit a supplemental Loan
Schedule (a "Supplemental Loan Schedule") setting forth for each Substitute Loan
the same type of information as appears on the Loan Schedule and representing
and warranting that such information is true and correct and (D) stating that
the representations and warranties contained in the Eligibility Criteria are
true and correct with respect to the Substitute Loans on and as of such
Substitution Date, and (iv) deliver to the Agent a certificate stating that cash
in the amount of the related Substitution Adjustment, if any, has been remitted
to the Servicer or deposited to the Collection Account, as applicable. Upon
receipt of the foregoing and confirmation of the contents thereof, the Agent
shall, at the expense of the Borrower, release its security interest in such
Deleted Loans without recourse, representation or warranty.

            (c) Concurrently with the satisfaction of the conditions set forth
in Sections 8.5(a) and (b) above and the transfer of such Substitute Loans to
the Borrower in accordance with this Section 8.5, Schedule C to this Agreement
shall be deemed to be amended to exclude all Deleted Loans being replaced by
such Substitute Loans and to include the information set forth on the
Supplemental Loan Schedule with respect to such Substitute Loans, and all
references in this Agreement and the other Transaction Documents to Loans shall
include such Substitute Loans.

                                       30
<PAGE>

      Section 8.6 Addition of Loans.

            (a) So long as no Amortization Event has occurred and is continuing,
Borrower may purchase additional Eligible Loans from PMC pursuant to and in
accordance with the terms of the Purchase Agreement and this Section 8.6.
Notwithstanding anything herein to the contrary, no such purchase may be made by
the Borrower at any time on or after the Amortization Date.

            (b) In the event the Borrower elects to purchase a Loan under the
Purchase Agreement at any time after the Closing Date, the Borrower shall
provide the Servicer and the Agent with not less than two Business Days' prior
written notice of such purchase. On the date such purchase is to occur (the
"Addition Date"), the Borrower shall deliver to the Agent an Officer's
Certificate of the Borrower (i) stating that no Amortization Event shall have
occurred and be continuing, (ii) stating that each Loan being purchased by the
Borrower on that Addition Date is an Eligible Loan, that all conditions
precedent to such purchase specified in the Purchase Agreement and this Section
8.6 have been satisfied and that the purchase price for such Loan has been (or
will be by the close of business on the applicable Addition Date) paid in full
in accordance with the terms of the Purchase Agreement out of funds of the
Borrower available for such purpose on such date, (iii) attaching as an exhibit
a Supplemental Loan Schedule setting forth for each Additional Loan the same
type of information as appears on the Loan Schedule and representing and
warranting that such information is true and correct and (iv) stating that the
representations and warranties contained in the Eligibility Criteria are true
and correct with respect to the Loans to be purchased by the Borrower on and as
of such Addition Date.

            (c) Concurrently with the transfer of any Additional Loans to the
Borrower pursuant to the Purchase Agreement, Schedule C to this Agreement shall
be deemed to be amended to include the information set forth on the Supplemental
Loan Schedule with respect to such Additional Loans, and all references in this
Agreement and the other Transaction Documents to Loans shall include such
Additional Loans.

      Section 8.7 Term Securitizations. The Borrower may from time to time enter
into one or more transactions (each a, "Term Securitization") pursuant to which
the Borrower sells some or all of the Pool Loans as of a specified cut-off date
if (i) the net proceeds payable to the Borrower in connection with any Term
Securitization are equal to or greater than the Required Takeout Price on the
date of such sale and (ii) the Borrower has directed the buyer of the Pool Loans
subject to such Term Securitization in writing (with a copy to the Agent) to
remit such net proceeds of the Pool Loans directly to the Collection Account.
Upon receipt by the Agent of confirmation that the net proceeds of the purchase
price for the Pool Loans that are subject to a Term Securitization have been
credited to the Collection Account, (x) the Agent shall apply such net proceeds
to reduce the Aggregate Principal ratably among all Lenders and to pay any other
Obligations included in the calculation of the Required Takeout Price and (y)
the related Loan Files shall be released to the buyer thereof and the Agent
shall execute and deliver such instruments of release, prepared by and at the
expense of the Borrower, in each case without recourse, representation or
warranty, as shall be necessary to release the Agent's security interest
therein. Promptly following a sale of Pool Loans by the Borrower in connection
with any Term Securitization, the Servicer shall amend the Loan Schedule and
deliver a copy of such amended

                                       31
<PAGE>

Schedule to the Agent and make appropriate entries in its general accounting
records to reflect such sale.

                                   ARTICLE IX
                               AMORTIZATION EVENTS

      Section 9.1 Amortization Events. The occurrence of any one or more of the
following events shall constitute an Amortization Event:

            (a) Any Transaction Party or PMC shall fail (i) to make any payment
or deposit of any amount consisting of Aggregate Principal, Interest or CP Costs
required hereunder when due and such failure shall continue unremedied for one
(1) Business Day or (ii) to make any payment or deposit of any other amount
required to be made by it under the Transaction Documents when due and such
failure shall continue unremedied for two (2) Business Days; or

            (b) Any representation, warranty, certification or statement made by
any Transaction Party or PMC in any Transaction Document to which it is a party
or in any other document delivered pursuant thereto shall prove to have been
incorrect when made or deemed made; provided, that a breach of any
representation or warranty made by the Borrower with respect to one or more
Loans pursuant to Section 8.4 shall not constitute an Amortization Event
hereunder if the Borrower causes PMC to comply with Section 8.4 by either (i)
curing such breach, (ii) purchasing such Pool Loan from the Borrower at the
applicable Purchase Price in accordance with Section 8.3 or (iii) substituting
an Eligible Substitute Loan for such Loan in accordance with Section 8.5; or

            (c) Any Transaction Party or PMC shall fail to perform or observe
any covenant or agreement (i) set forth in Section 7.1(a)(iv), 7.1(a)(vi),
7.1(a)(viii), 7.1(c), 7.1(e) or 7.1(m) and such failure shall continue for
thirty (30) consecutive days or (ii) under any Transaction Document (other than
as referred to in clause (i) of this paragraph (c) or Section 9.1(a)) and such
failure shall continue unremedied for five (5) Business Days; or

            (d) Failure of the Borrower to pay any Indebtedness (other than the
Obligations) when due or the default by the Borrower in the performance of any
term, provision or condition contained in any agreement under which any such
Indebtedness was created or is governed, the effect of which is to cause, or to
permit the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity; or any such Indebtedness of Borrower
shall be declared to be due and payable or required to be prepaid (other than by
a regularly scheduled payment) prior to the date of maturity thereof; or

            (e) (i) PMC fails to make any payment in respect of any Indebtedness
of PMC when due, (ii) any default or other event or condition occurs or exists
beyond the applicable grace or cure period, the effect of which is to permit any
holder of Indebtedness of PMC to cause (whether or not it elects to cause) any
of such Indebtedness to become due before its stated maturity or regularly
scheduled payment dates, or (iii) any of such Indebtedness is declared to be due
and payable or required to be prepaid by PMC before its stated maturity; or

            (f) An Event of Bankruptcy shall occur with respect to any
Transaction Party or PMC; or

                                       32
<PAGE>

            (g) A Change of Control shall occur with respect to any Transaction
Party or PMC; or

            (h) (i) One or more final judgments for the payment of money shall
be entered against Borrower or (ii) PMC fails, within 10 days after entry, to
pay, bond, or otherwise discharge any one or more judgments or orders for the
payment of money (not paid or fully covered by insurance) in excess of
$1,000,000 (individually or collectively) or the equivalent thereof in another
currency or currencies, or any warrant of attachment, sequestration, or similar
proceeding against PMC's assets having a value (individually or collectively) of
$1,000,000 or the equivalent thereof in another currency or currencies, which is
not either (a) stayed on appeals; (b) being diligently contested in good faith
by appropriate proceedings with adequate reserves having been set aside on the
books of PMC in accordance with GAAP, or (c) dismissed by a court of competent
jurisdiction; or

            (i) This Agreement or any other Transaction Document shall terminate
in whole or in part (except in accordance with its terms), or shall cease to be
effective or to be the legally valid, binding and enforceable obligation of the
Borrower, the Servicer or PMC, or any of the Borrower, the Servicer or PMC shall
directly or indirectly contest in any manner such effectiveness, validity,
binding nature or enforceability thereof; or

            (j) The Agent for the benefit of the Lenders shall cease to have a
valid and perfected first priority security interest in the Collateral; or

            (k) A "Purchase Termination Event" shall occur under the Purchase
Agreement; or

            (l) The Borrower shall fail to comply with Section 1.5; or

            (m) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Tax Code with regard to any of the Collateral
and such lien shall not have been released within fifteen (15) Business Days
after the Borrower obtains notice thereof, or the PBGC shall file notice of a
lien pursuant to Section 4068 of ERISA with regard to any of the Collateral; or

            (n) Any event shall occur which has, or could be reasonably expected
to have a Material Adverse Effect; or

            (o) As of any Reporting Date, (i) the average of the Serviced Pool
Delinquency Ratios as of the end of the Monthly Period that is two Monthly
Periods preceding the Monthly Period in which such Reporting Date occurs and the
two preceding Monthly Periods shall exceed 2.00% or (ii) if the average of the
Serviced Pool Delinquency Ratios as of the end of the Monthly Period that is two
Monthly Periods preceding the Monthly Period in which such Reporting Date occurs
and the preceding Monthly Period shall exceed 2.00%, the average of the Serviced
Pool Delinquency Ratios as of the end of the Monthly Period that is one Monthly
Period preceding the Monthly Period in which such Reporting Date occurs and the
two preceding Monthly Periods shall exceed 2.00%; or

                                       33
<PAGE>

            (p) As of the end of any Monthly Period, (i) the average of the
Delinquency Ratios as of the end of such Monthly Period and the two preceding
Monthly Periods shall exceed 5.00% and (ii) the average of the aggregate
Principal Balances of all Pool Loans that are Delinquent Loans as of the end of
such Monthly Period and the two preceding Monthly Periods shall exceed
$4,000,000; or

            (q) As of the end of any Monthly Period, the average of the
Non-Performing Pool Loan Balances as of the end of such Monthly Period and the
two preceding Monthly Periods shall exceed $5,000,000; or

            (r) As of the close of business on any Settlement Date, the Reserve
Account Balance is less than the Reserve Account Requirement (determined after
giving effect to all deposits, distributions and Advances pursuant to this
Agreement) and the Reserve Account Balance shall remain less than the Reserve
Account Requirement as of the close of business on the next succeeding
Settlement Date (determined after giving effect to all deposits, distributions
and Advances pursuant to this Agreement); or

            (s) The Borrower shall fail to consummate at least one Term
Securitization during the eighteen (18) month period following the Closing Date;
or

            (t) the Excess Spread Percentage for any Settlement Date is less
than 2.00%; or

            (u) PMC shall fail to comply with any of the covenants set forth on
Schedule F hereto.

      Section 9.2 Remedies. Upon the occurrence and during the continuation of
an Amortization Event, the Agent may, or upon the direction of the Required
Alternate Lenders shall, take any of the following actions: (i) replace the
Person then acting as Servicer if the Agent has not already done so, (ii)
exercise its right to take exclusive control of the Lockbox and Lockbox Account
and (iii) declare the Amortization Date to have occurred, whereupon the
Aggregate Commitment shall immediately terminate and the Amortization Date shall
forthwith occur, all without demand, protest or further notice of any kind, all
of which are hereby expressly waived by each Transaction Party; provided,
however, that upon the occurrence of an Event of Bankruptcy with respect to any
Transaction Party or PMC, the Amortization Date shall automatically occur,
without demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Transaction Party, (iii) sell the Pool Loans, (iv)
exercise all rights and remedies of a secured party upon default under the UCC
and other applicable laws, and (v) notify the related Obligors of the Agent's
security interest in the Pool Loans and other Collateral. The aforementioned
rights and remedies shall be without limitation, and shall be in addition to all
other rights and remedies of the Agent and the Lenders otherwise available under
any other provision of this Agreement, by operation of law, at equity or
otherwise, all of which are hereby expressly preserved, including, without
limitation, all rights and remedies provided under the UCC, all of which rights
shall be cumulative.

      Section 9.3 Responsibilities of Borrower. Anything herein to the contrary
notwithstanding, the exercise by the Agent and the Lenders of their rights
hereunder shall not

                                       34
<PAGE>

release the Servicer, PMC or the Borrower from any of their duties or
obligations with respect to any Pool Loans or under the related Loan Documents.
The Lenders shall have no obligation or liability with respect to any Pool Loans
or related Loan Documents, nor shall any of them be obligated to perform the
obligations of the Borrower.

                                    ARTICLE X
                                INDEMNIFICATION

      Section 10.1 Indemnities by the Borrower. Without limiting any other
rights that the Agent or any Lender may have hereunder or under applicable law,
the Borrower hereby agrees to indemnify (and pay upon demand to) the Agent, the
Conduit Lender, each of the Alternate Lenders and each of the respective
assigns, officers, directors, agents and employees of the foregoing (each, an
"Indemnified Party") from and against any and all damages, losses, claims,
taxes, liabilities, costs, expenses and for all other amounts payable, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of or as a result of this Agreement or any other
Transaction Document or the acquisition, either directly or indirectly, by a
Lender of an interest in the Loans, excluding, however, in all of the foregoing
instances:

            (a) Indemnified Amounts to the extent such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;

            (b) Indemnified Amounts to the extent the same includes losses in
respect of Pool Loans that are uncollectible on account of the insolvency,
bankruptcy or lack of creditworthiness of the related Obligor; or

            (c) franchise taxes and taxes imposed by the jurisdiction in which
such Indemnified Party's principal executive office is located, on or measured
by the overall net income of such Indemnified Party to the extent that the
computation of such taxes is consistent with the characterization for income tax
purposes of the acquisition by the Lenders of Loans as a loan or loans by the
Lenders to Borrower secured by the Collateral;

provided, however, that nothing contained in this sentence shall limit the
liability of the Borrower or limit the recourse of the Lenders to the Borrower
for amounts otherwise specifically provided to be paid by such Transaction Party
under the terms of this Agreement or the Servicing Agreement. Without limiting
the generality of the foregoing indemnification, Borrower shall indemnify the
Agent and the Lenders for Indemnified Amounts (including, without limitation,
losses in respect of uncollectible Pool Loans, regardless of whether
reimbursement therefor would constitute recourse to Borrower) relating to or
resulting from:

                  (i) any representation or warranty made by any Transaction
      Party or PMC (or any officers of any such Person) under or in connection
      with this Agreement, any other Transaction Document or any other
      information or report delivered by any such Person pursuant hereto or
      thereto, which shall have been false or incorrect when made or deemed
      made;

                                       35
<PAGE>

                  (ii) the failure by the Borrower, the Servicer or PMC to
      comply with any applicable law, rule or regulation with respect to any
      Pool Loan or Loan Document related thereto, or the nonconformity of any
      Pool Loan or Loan Document included therein with any such applicable law,
      rule or regulation or any failure of the Borrower, the Servicer or PMC to
      keep or perform any of its obligations, express or implied, with respect
      to any Loan Document;

                  (iii) any failure of the Borrower, the Servicer or PMC to
      perform its duties, covenants or other obligations in accordance with the
      provisions of this Agreement or any other Transaction Document;

                  (iv) any dispute, claim, offset or defense (other than
      discharge in bankruptcy of the Obligor) of the Obligor to the payment of
      any Pool Loan (including, without limitation, a defense based on such Pool
      Loan or the related Loan Document not being a legal, valid and binding
      obligation of such Obligor enforceable against it in accordance with its
      terms);

                  (v) the commingling of any collections of Pool Loans at any
      time with other funds;

                  (vi) any investigation, litigation or proceeding related to or
      arising from this Agreement or any other Transaction Document, the
      transactions contemplated hereby, the use of the proceeds of any Advance,
      the Collateral or any other investigation, litigation or proceeding
      relating to the Borrower, the Servicer or PMC in which any Indemnified
      Party becomes involved as a result of any of the transactions contemplated
      hereby;

                  (vii) any inability to litigate any claim against any Obligor
      in respect of any Pool Loan as a result of such Obligor being immune from
      civil and commercial law and suit on the grounds of sovereignty or
      otherwise from any legal action, suit or proceeding;

                  (viii) any Amortization Event;

                  (ix) any failure of the Borrower to acquire and maintain legal
      and equitable title to, and ownership of any of the Collateral from PMC,
      free and clear of any Lien (other than as created hereunder); or any
      failure of the Borrower to give reasonably equivalent value to PMC under
      the Purchase Agreement in consideration of the transfer by PMC of any Pool
      Loan, or any attempt by any Person to void such transfer under statutory
      provisions or common law or equitable action;

                  (x) any failure to vest and maintain vested in the Agent for
      the benefit of the Lenders, or to transfer to the Agent for the benefit of
      the Secured Parties, a valid first priority perfected security interests
      in the Collateral, free and clear of any Lien (except as created by the
      Transaction Documents);

                  (xi) the failure to have filed, or any delay in filing,
      financing statements or other similar instruments or documents under the
      UCC of any applicable jurisdiction

                                       36
<PAGE>

      or other applicable laws with respect to any Collateral, and the proceeds
      thereof, whether at the time of any Advance or at any subsequent time;

                  (xii) any action or omission by any Transaction Party which
      reduces or impairs the rights of the Agent or the Lenders with respect to
      any Collateral or the value of any Collateral;

                  (xiii) any attempt by any Person to void any Advance or the
      Agent's security interest in the Collateral under statutory provisions or
      common law or equitable action;

                  (xiv) the failure of any Pool Loan included in the calculation
      of the Borrowing Base as an Eligible Loan to be an Eligible Loan at the
      time so included; and

                  (xv) any environmental claim or liability relating to or
      arising out of any Mortgaged Property or REO Property.

      Section 10.2 Indemnities by the Servicer. Without limiting any other
rights that an Indemnified Party may have hereunder or under applicable law, the
Servicer hereby agrees to indemnify each Indemnified Party from and against any
and all Indemnified Amounts that may be imposed on, incurred by or asserted
against an Indemnified Party in any way arising out of or relating to:

            (a) any representation or warranty made by the Servicer (or any
officers of Servicer) under or in connection with this Agreement, any other
Transaction Document or any other information or report delivered by the
Servicer pursuant hereto or thereto, which shall have been false or incorrect
when made or deemed made;

            (b) the failure by the Servicer to comply with any applicable law,
rule or regulation with respect to any Pool Loan or Loan Document related
thereto;

            (c) any failure of Servicer to perform its duties, covenants or
other obligations in accordance with the provisions of this Agreement or any
other Transaction Document;

            (d) the commingling of any collections of the Pool Loans at any time
with other funds;

            (e) any action or omission by Servicer which reduces or impairs the
rights of the Agent or the Lenders with respect to any Collateral or the value
of any Collateral; and

            (f) any inaccuracy in any report delivered by the Servicer.

      Section 10.3 Increased Cost and Reduced Return. If after the Closing Date,
any Funding Source shall be charged any fee, expense or increased cost on
account of the adoption of any applicable law, rule or regulation (including any
applicable law, rule or regulation regarding capital adequacy), any accounting
principles or any change in any of the foregoing, or any change in the
interpretation or administration thereof by any governmental authority, the
Financial Accounting Standards Board ("FASB"), any central bank or any
comparable agency

                                       37
<PAGE>

charged with the interpretation or administration thereof, or compliance with
any request or directive (whether or not having the force of law) of any such
authority or agency (a "Regulatory Change"): (i) that subjects any Funding
Source to any charge or withholding on or with respect to any Funding Agreement
or a Funding Source's obligations under a Funding Agreement, or on or with
respect to the Loans, or changes the basis of taxation of payments to any
Funding Source of any amounts payable under any Funding Agreement (except for
changes in the rate of tax on the overall net income of a Funding Source or
taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems
applicable any reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of a Funding
Source, or credit extended by a Funding Source pursuant to a Funding Agreement
or (iii) that imposes any other condition the result of which is to increase the
cost to a Funding Source of performing its obligations under a Funding
Agreement, or to reduce the rate of return on a Funding Source's capital as a
consequence of its obligations under a Funding Agreement, or to reduce the
amount of any sum received or receivable by a Funding Source under a Funding
Agreement or to require any payment calculated by reference to the amount of
interests or loans held or interest received by it, then, within fifteen (15)
days after demand by the Agent (which demand shall be accompanied by a
certificate setting forth, in reasonable detail, the basis of such demand and
the methodology for calculating, and the calculation of, the amounts claimed by
the Funding Source), the Borrower shall pay to the Agent, for the benefit of the
relevant Funding Source, such amounts charged to such Funding Source or such
amounts to otherwise compensate such Funding Source for such increased cost or
such reduction. If less than all of the Funding Sources claim reimbursement from
the Seller under this Section 10.3, each Funding Source claiming reimbursement
shall be obligated, at the request of the Borrower, to assign all of its rights
and obligations hereunder to (a) an Alternate Lender if such Alternate Lender
accepts such assignment or (b) another financial institution nominated by the
Borrower that is acceptable to the Agent and the Conduit Lender and is willing
to participate in this Agreement through the then current Scheduled Termination
Date in place of such Funding Source; provided, that (i) the Funding Source that
is being replaced receive payment in full, pursuant to an assignment agreement,
of an amount equal to all accrued and unpaid amounts owing to such Funding
Source in connection with the transactions contemplated by this Agreement,
including, without limitation, all principal, interest, fees, costs and expenses
and (ii) the replacement Funding Source proposed by the Borrower otherwise
satisfies the requirements of Section 12.1(b).

      Section 10.4 Other Costs and Expenses. The Borrower shall pay to the Agent
and the Conduit Lender on demand all reasonable costs and out-of-pocket expenses
in connection with the preparation, execution, delivery and administration of
this Agreement, the transactions contemplated hereby and the other documents to
be delivered hereunder, including without limitation, the cost of the Conduit
Lender's auditors auditing the books, records and procedures of Borrower,
reasonable fees and out-of-pocket expenses of legal counsel for the Conduit
Lender and the Agent with respect thereto and with respect to advising the
Conduit Lender and the Agent as to their respective rights and remedies under
this Agreement. The Borrower shall pay to the Agent on demand any and all costs
and expenses of the Agent and the Lenders, if any, including reasonable counsel
fees and expenses in connection with any amendment to this Agreement or any
other Transaction Document, the enforcement of this Agreement and the other
documents delivered hereunder and in connection with any restructuring or
workout of this Agreement or such documents, or the administration of this
Agreement following an Amortization Event.

                                       38
<PAGE>

                                   ARTICLE XI
                                    THE AGENT

      Section 11.1 Authorization and Action. Each Lender hereby designates and
appoints JPMorgan Chase to act as its agent under the Transaction Documents and
under the Liquidity Agreement, and authorizes the Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Agent by
the terms of the Liquidity Agreement or the Transaction Documents, together with
such powers as are reasonably incidental thereto. The Agent shall not have any
duties or responsibilities, except those expressly set forth in the Liquidity
Agreement or in any Transaction Document, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the Agent shall be read into the
Liquidity Agreement or any Transaction Document or otherwise exist for the
Agent. In performing its functions and duties under the Liquidity Agreement and
the Transaction Documents, the Agent shall act solely as agent for the Lenders
and does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for any Transaction Party or any of such
Transaction Party's successors or assigns. The Agent shall not be required to
take any action that exposes the Agent to personal liability or that is contrary
to the Liquidity Agreement or any Transaction Document or applicable law. The
appointment and authority of the Agent hereunder shall terminate upon the
indefeasible payment in full of all Obligations.

      Section 11.2 Delegation of Duties. The Agent may execute any of its duties
under the Liquidity Agreement and each Transaction Document by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.

      Section 11.3 Exculpatory Provisions. Neither the Agent nor any of its
directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
the Liquidity Agreement or any Transaction Document (except for its, their or
such Person's own gross negligence or willful misconduct), or (ii) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Transaction Party contained in the
Liquidity Agreement, any Transaction Document or any certificate, report,
statement or other document referred to or provided for in, or received under or
in connection with, any Transaction Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the Liquidity
Agreement or any Transaction Document or any other document furnished in
connection therewith, or for any failure of any Transaction Party to perform its
obligations under any Transaction Document, or for the satisfaction of any
condition specified in Article VI, or for the perfection, priority, condition,
value or sufficiency of any collateral pledged in connection herewith. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements or covenants contained
in, or conditions of, any Transaction Document, or to inspect the properties,
books or records of the Transaction Parties. The Agent shall not be deemed to
have knowledge of any Amortization Event or Unmatured Amortization Event unless
the Agent has received notice from a Transaction Party or a Lender.

                                       39
<PAGE>

      Section 11.4 Reliance by Agent. The Agent shall in all cases be entitled
to rely, and shall be fully protected in relying, upon any document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Agent. The Agent shall
in all cases be fully justified in failing or refusing to take any action under
the Liquidity Agreement or any Transaction Document unless it shall first
receive such advice or concurrence of the Conduit Lender or the Required
Alternate Lenders or all of the Lenders, as applicable, as it deems appropriate
and it shall first be indemnified to its satisfaction by the Lenders, provided,
that unless and until the Agent shall have received such advice, the Agent may
take or refrain from taking any action, as the Agent shall deem advisable and in
the best interests of the Lenders. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, in accordance with a request
of the Conduit Lender or the Required Alternate Lenders or all of the Lenders,
as applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders.

      Section 11.5 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any
Transaction Party, shall be deemed to constitute any representation or warranty
by the Agent. Each Lender represents and warrants to the Agent that it has and
will, independently and without reliance upon the 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,
prospects, financial and other conditions and creditworthiness of the Borrower
and made its own decision to enter into the Liquidity Agreement, the Transaction
Documents and all other documents related thereto.

      Section 11.6 Reimbursement and Indemnification. The Alternate Lenders
agree to reimburse and indemnify the Agent and its officers, directors,
employees, representatives and agents ratably according to their Pro Rata
Shares, to the extent not paid or reimbursed by the Transaction Parties (i) for
any amounts for which the Agent, acting in its capacity as Agent, is entitled to
reimbursement by the Transaction Parties hereunder and (ii) for any other
expenses incurred by the Agent, in its capacity as Agent and acting on behalf of
the Lenders, in connection with the administration and enforcement of the
Liquidity Agreement and the Transaction Documents.

      Section 11.7 Agent in its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower or any Affiliate of the Borrower as though
the Agent were not the Agent hereunder. With respect to the making of Loans
pursuant to this Agreement, the Agent shall have the same rights and powers
under the Liquidity Agreement and this Agreement in its individual capacity as
any Lender and may exercise the same as though it were not the Agent, and the
terms "Alternate Lender," "Lender," "Alternate Lenders" and "Lenders" shall
include the Agent in its individual capacity.

                                       40
<PAGE>

      Section 11.8 Successor Agent. The Agent may, upon five (5) days' notice to
the Transaction Parties and the Lenders, and the Agent will upon the direction
of all the Lenders (other than the Agent, in its individual capacity), resign as
Agent . If the Agent shall resign, then the Required Alternate Lenders during
such five-day period shall appoint, from among the remaining Alternate Lenders,
a successor Agent, whereupon such successor Agent shall succeed to the rights,
powers and duties of the Agent and the term "Agent" shall mean such successor
agent, effective upon its appointment, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or further act or deed on
the part of such former Agent or any of the parties to this Agreement. If for
any reason no successor Agent is appointed by the Required Alternate Lenders
during such five-day period, then effective upon the termination of such five
day period, the Lenders shall perform all of the duties of the Agent hereunder
and under the other Transaction Documents and the Borrower and the Servicer (as
applicable) shall make all payments in respect of the Obligations directly to
the applicable Lenders and for all purposes shall deal directly with the
Lenders. Upon resignation or replacement of any Agent in accordance with this
Section 11.8, the retiring Agent shall execute such UCC-3 assignments and
amendments, and assignments and amendments of the Liquidity Agreement and the
Transaction Documents, as may be necessary to give effect to its replacement by
a successor Agent. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Article XI and Article X shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement.

                                  ARTICLE XII
                           ASSIGNMENTS; PARTICIPATIONS

      Section 12.1 Assignments.

            (a) Each of the Agent, the Transaction Parties and the Alternate
Lenders hereby agrees and consents to the complete or partial assignment by the
Conduit Lender of all or any portion of its rights under, interest in, title to
and obligations under this Agreement to the Alternate Lenders pursuant to the
Liquidity Agreement.

            (b) Any Alternate Lender may at any time and from time to time
assign to one or more Persons (each, a "Purchasing Alternate Lender") all or any
part of its rights and obligations under this Agreement pursuant to an
assignment agreement substantially in the form set forth in Exhibit V hereto (an
"Assignment Agreement") executed by such Purchasing Alternate Lender and such
selling Alternate Lender; provided, however, that any assignment of an Alternate
Lender's rights and obligations hereunder shall include a pro rata assignment of
its rights and obligations under the Liquidity Agreement. The consent of the
Conduit Lender and of the Borrower (such consent not to be unreasonably withheld
or delayed) shall be required prior to the effectiveness of any such assignment.
Each assignee of an Alternate Lender must (i) have a short-term debt rating of
P-1 by Moody's and A-1 or better by S&P and (ii) agree to deliver to the Agent,
promptly following any request therefor by the Agent or the Conduit Lender, an
enforceability opinion in form and substance satisfactory to the Agent and
Conduit Lender. Upon delivery of an executed Assignment Agreement to the Agent,
such selling Alternate Lender shall be released from its obligations hereunder
and under the Liquidity Agreement to the extent of such assignment. Thereafter
the Purchasing Alternate Lender shall for all purposes be an Alternate Lender
party to this Agreement and the Liquidity Agreement and shall have all the

                                       41
<PAGE>

rights and obligations of an Alternate Lender hereunder and thereunder to the
same extent as if it were an original party hereto and thereto and no further
consent or action by the Borrower, the Lenders or the Agent shall be required.

            (c) Each of the Alternate Lenders agrees that in the event that it
shall suffer a Downgrading Event, such Downgraded Alternate Lender shall be
obliged, at the request of the Conduit Lender or the Agent, to assign all of its
rights and obligations hereunder and under the Liquidity Agreement to (x)
another Alternate Lender or (y) another funding entity nominated by the Agent or
a Transaction Party and acceptable to the Conduit Lender and willing to
participate in this Agreement and the Liquidity Agreement through the Scheduled
Termination Date in the place of such Downgraded Alternate Lender; provided,
that the Downgraded Alternate Lender receives payment in full, pursuant to an
Assignment Agreement, of an amount equal to such Alternate Lender's Pro Rata
Share of the Obligations owing to the Alternate Lenders.

            (d) No Transaction Party may assign any of its rights or obligations
under this Agreement without the prior written consent of the Agent and each of
the Lenders.

            (e) Any Downgraded Alternate Lender or Non-Renewing Alternate Lender
which has not assigned its rights and obligations hereunder if requested
pursuant to this Article XII shall be a "Terminating Alternate Lender" for
purposes of this Agreement as of the then current Scheduled Termination Date
(or, in the case of any Downgraded Alternate Lender, such earlier date as
declared by the Agent. The Commitment of any Alternate Lender shall terminate on
the date it becomes a Terminating Alternate Lender. Upon reduction to zero of
all Obligations owing to a Terminating Alternate Lender (after application of
Collections thereto pursuant to Section 2.2) all rights and obligations of such
Termination Alternate Lender shall be terminated and such Terminating Alternate
Lender shall no longer be an "Alternate Lender" hereunder; provided, however,
that the provisions of Article X shall continue in effect for its benefit with
respect to Advances or the Commitment held by such Terminating Alternate Lender
prior to its termination as an Alternate Lender.

      Section 12.2 Participations. Any Alternate Lender may, in the ordinary
course of its business at any time sell to one or more Persons (each, a
"Participant") participating interests in its Pro Rata Share of the Aggregate
Commitment, its Advances, its Liquidity Commitment or any other interest of such
Alternate Lender hereunder or under the Liquidity Agreement. Notwithstanding any
such sale by an Alternate Lender of a participating interest to a Participant,
such Alternate Lender's rights and obligations under this Agreement and the
Liquidity Agreement shall remain unchanged, such Alternate Lender shall remain
solely responsible for the performance of its obligations hereunder and under
the Liquidity Agreement, and the Transaction Parties, the Conduit Lender and the
Agent shall continue to deal solely and directly with such Alternate Lender in
connection with such Alternate Lender's rights and obligations under this
Agreement and the Liquidity Agreement. Each Alternate Lender agrees that any
agreement between such Alternate Lender and any such Participant in respect of
such participating interest shall not restrict such Alternate Lender's right to
agree to any amendment, supplement, waiver or modification to this Agreement,
except for any amendment, supplement, waiver or modification described in
Section 14.1(b)(i).

                                       42
<PAGE>

                                  ARTICLE XIII
                                SECURITY INTEREST

      Section 13.1 Grant of Security Interest. To secure the due and punctual
payment of the Obligations, whether now or hereafter existing, due or to become
due, direct or indirect, or absolute or contingent, including, without
limitation, all Indemnified Amounts, in each case pro rata according to the
respective amounts thereof, the Borrower hereby grants to the Agent, for the
benefit of the Secured Parties, a security interest in, all of the Borrower's
right, title and interest, whether now owned and existing or hereafter arising
in and to the following (collectively, the "Collateral"):

                  (i) all Pool Loans;

                  (ii) all payments in respect of interest and principal
      received, collected or otherwise recovered on or after the Cut-Off Date
      (or, in the case of a Pool Loan in which the Borrower acquires an interest
      after the Closing Date, on or after the applicable Transfer Date) and all
      other proceeds received (including Insurance Proceeds) with respect to
      each Pool Loan on or after the Cut-Off Date (or, in the case of a Pool
      Loan in which the Borrower acquires an interest after the Closing Date, on
      or after the applicable Transfer Date);

                  (iii) all Loan Documents and other Records;

                  (iv) any REO Property, including all escrow, deposits, income,
      interest, profit or other payments paid or payable with respect thereto
      and any and all insurance policies relating thereto;

                  (v) all guaranties, letters of credit, letter-of-credit
      rights, supporting obligations and other agreements or arrangements of
      whatever character from time to time supporting or securing payment of
      such Pool Loan whether pursuant to the Loan Documents related to such Pool
      Loan or otherwise;

                  (vi) any insurance policies that relate to any Pool Loan or
      Mortgaged Property related thereto;

                  (vii) the Purchase Agreement (including, without limitation,
      (a) all rights to indemnification arising thereunder and (b) all UCC
      financing statements filed pursuant thereto);

                  (viii) all other rights and payments relating to the Pool
      Loans;

                  (ix) the Collection Account and the Reserve Account and all
      cash, instruments, investment property, financial assets or other property
      that are held or required to be deposited in such accounts; and

                  (x) all proceeds (including, without limitation, "proceeds" as
      defined in Article 9 of the UCC as in effect in the State of New York) of
      any of the foregoing.

                                       43
<PAGE>

      Section 13.2 Assignment of Purchase Agreement. The Borrower hereby assigns
to the Agent, for the benefit of the Secured Parties hereunder, all of the
Borrower's right, title and interest in, to and under the Purchase Agreement.
Such assignment shall include, without limitation, (a) all monies due and to
become due to the Borrower from PMC under or in connection with the Purchase
Agreement, whether as Pool Loans or fees, expenses, costs, indemnities, damages
for the breach of either Purchase Agreement or otherwise and (b) all rights,
remedies, powers, privileges and claims against PMC under or with respect to the
Purchase Agreement or otherwise available at law or in equity. The Agent shall
have the sole right to enforce the Borrower's rights and remedies under the
Purchase Agreement for the benefit of the Secured Parties (including, without
limitation (x) the right at any time to enforce the Purchase Agreement and the
obligations of PMC thereunder and (y) the right, at any time, to give or
withhold any and all consents, requests, notices, directions, approvals,
demands, extensions, amendments, modifications or waivers under or with respect
to the Purchase Agreement). All amounts paid by PMC under the Purchase Agreement
shall constitute Collections hereunder, and shall be applied pursuant to the
terms of Section 4.01 of the Servicing Agreement.

      Section 13.3 Termination after Final Payout Date. Each of the Secured
Parties hereby authorizes the Agent, and the Agent hereby agrees, promptly after
the Final Payout Date to deliver to the Borrower such UCC termination statements
as may be necessary to terminate the Agent's security interest in and Lien upon
the Collateral, all at the Borrower's expense. Upon the Final Payout Date, all
right, title and interest of the Agent and the other Secured Parties in and to
the Collateral shall terminate.

                                  ARTICLE XIV
                                 MISCELLANEOUS

      Section 14.1 Waivers and Amendments.

            (a) No failure or delay on the part of the Agent or any Lender in
exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other further exercise thereof or the exercise of
any other power, right or remedy. The rights and remedies herein provided shall
be cumulative and nonexclusive of any rights or remedies provided by law. Any
waiver of this Agreement shall be effective only in the specific instance and
for the specific purpose for which given.

            (b) No provision of this Agreement may be amended, supplemented,
modified or waived except in writing in accordance with the provisions of this
Section 14.1(b). The Conduit Lender, the Borrower, the Servicer and the Agent,
at the direction of the Required Alternate Lenders, may enter into written
modifications or waivers of any provisions of this Agreement; provided, however,
that no such modification or waiver shall:

                  (i) without the consent of each affected Lender, (A) extend
      the Scheduled Termination Date or the date of any payment or deposit of
      Available Collections by the Borrower or the Servicer, (B) reduce the rate
      or extend the time of payment of Interest or any CP Costs (or any
      component of Interest or CP Costs), (C) reduce any fee payable to the
      Agent for the benefit of the Lenders, (D) except pursuant to

                                       44
<PAGE>

      Article XII hereof, change the amount of the principal of any Lender, any
      Alternate Lender's Pro Rata Share or any Alternate Lender's Commitment,
      (E) amend, modify or waive any provision of the definition of Required
      Alternate Lenders or this Section 14.1(b), (F) consent to or permit the
      assignment or transfer by the Borrower of any of its rights and
      obligations under this Agreement, (G) change the definition of "Eligible
      Loan," or (H) amend or modify any defined term (or any defined term used
      directly or indirectly in such defined term) used in clauses (A) through
      (G) above in a manner that would circumvent the intention of the
      restrictions set forth in such clauses; or

                  (ii) without the written consent of the then Agent, amend,
      modify or waive any provision of this Agreement if the effect thereof is
      to affect the rights or duties of such Agent.

Notwithstanding the foregoing, (i) without the consent of the Alternate Lenders,
but with the consent of the Borrower, the Agent may amend this Agreement solely
to add additional Persons as Alternate Lenders hereunder and (ii) the Agent, the
Required Alternate Lenders and Conduit Lender may enter into amendments to
modify any of the terms or provisions of Article XI, Article XII, Section 14.13
or any other provision of this Agreement without the consent of Borrower,
provided, that such amendment has no negative impact upon the Borrower or any
other Transaction Party. Any modification or waiver made in accordance with this
Section 14.1 shall apply to each of the Lenders equally and shall be binding
upon the Borrower, the Lenders and the Agent.

      Section 14.2 Notices. Except as provided in this Section 14.2, all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages hereof or at such other
address or telecopy number as such Person may hereafter specify for the purpose
of notice to each of the other parties hereto. Each such notice or other
communication shall be effective (i) if given by telecopy, upon the receipt
thereof, or (ii) if given by any other means, when received at the address
specified in this Section 14.2. The Borrower hereby authorizes the Agent to
effect Advances and Interest Period and Interest Rate selections based on
telephonic notices made by any Person whom the Agent in good faith believes to
be acting on behalf of the Borrower. The Borrower agrees to deliver promptly to
the Agent a written confirmation of each telephonic notice signed by an
authorized officer of the Borrower; provided, however, the absence of such
confirmation shall not affect the validity of such notice. If the written
confirmation differs from the action taken by the Agent, the records of the
Agent shall govern absent manifest error.

      Section 14.3 Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it with respect to any portion of the Obligations
owing to such Lender (other than payments received pursuant to Section 10.2 or
10.3) in a greater proportion than that received by any other Lender entitled to
receive a ratable share of such Obligations, such Lender agrees, promptly upon
demand, to purchase for cash without recourse or warranty a portion of such
Obligations held by the other Lenders so that after such purchase each Lender
will hold its ratable proportion of such Obligations; provided, that if all or
any portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.

                                       45
<PAGE>

      Section 14.4 Protection of Agent's Security Interest.

            (a) The Borrower agrees that from time to time, at its expense, it
will promptly execute and deliver all instruments and documents, and take all
actions, that may be necessary or desirable, or that the Agent may reasonably
request, to perfect, protect, defend or more fully evidence the Agent's security
interest in the Collateral, or to enable the Agent or the Lenders to exercise
and enforce their rights and remedies hereunder or under the Servicing Agreement
(including, without limitation, to enforce any of the Pool Loans or the Purchase
Agreement). At any time after the occurrence and during the continuance of an
Amortization Event, the Agent may, or the Agent may direct the Borrower or the
Servicer to, notify the Obligors of Pool Loans, at the Borrower's expense, of
the ownership or security interests of the Lenders under this Agreement and may
also direct that payments of all amounts due or that become due under any or all
Loans be made directly to the Agent or its designee. The Borrower or the
Servicer (as applicable) shall, at any Lender's request, withhold the identity
of such Lender in any such notification.

            (b) If any Transaction Party fails to perform any of its obligations
hereunder, the Agent or any Lender may (but shall not be required to) perform,
or cause performance of, such obligations, and the Agent's or such Lender's
costs and expenses incurred in connection therewith shall be payable by the
Borrower as provided in Section 10.3. Each Transaction Party irrevocably
authorizes the Agent at any time and from time to time in the sole discretion of
the Agent, and appoints the Agent as its attorney-in-fact, to act on behalf of
such Transaction Party (i) to file financing statements necessary or desirable
in the Agent's sole reasonable discretion to perfect and to maintain the
perfection and priority of the interest of the Lenders in the Pool Loans and
other Collateral and (ii) to file a carbon, photographic or other reproduction
of this Agreement or any financing statement with respect to the Pool Loans as a
financing statement in such offices as the Agent in its sole reasonable
discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the Agent's security interest in the Collateral, for
the benefit of the Secured Parties. This appointment is coupled with an interest
and is irrevocable. Each of the Transaction Parties hereby authorizes the Agent
to file financing statements and other filing or recording documents with
respect to the Pool Loans and other Collateral (including any amendments
thereto, or continuation or termination statements thereof), without the
signature or other authorization of such Transaction Party, in such form and in
such offices as the Agent reasonably determines appropriate to perfect or
maintain the perfection of the security interest of the Agent hereunder. Each of
the Transaction Parties acknowledges and agrees that it is not authorized to,
and will not, file financing statements or other filing or recording documents
with respect to the Pool Loans or other Collateral (including any amendments
thereto, or continuation or termination statements thereof), without the express
prior written approval by the Agent, consenting to the form and substance of
such filing or recording document. Each of the Transaction Parties approves,
authorizes and ratifies any filings or recordings made by or on behalf of the
Agent in connection with the perfection of the security interests in favor of
the Borrower or the Agent.

      Section 14.5 Confidentiality.

            (a) Each Transaction Party and each Lender shall maintain and shall
cause each of its employees and officers to maintain the confidentiality of this
Agreement and the other

                                       46
<PAGE>

confidential or proprietary information with respect to the Agent and the
Conduit Lender and their respective businesses obtained by it or them in
connection with the structuring, negotiating and execution of the transactions
contemplated herein, except that such Transaction Party and such Lender and its
officers and employees may disclose such information to such Transaction Party's
and such Lender's external accountants and attorneys (it being understood that
such parties to whom such disclosure is made will be informed of the
confidential nature of such information and instructed to keep such information
confidential) and as required by any applicable law or order of any judicial or
administrative proceeding. Anything herein to the contrary notwithstanding, each
Transaction Party and any successor or assign of any of the foregoing (and each
employee, representative or other agent of any of the foregoing) may disclose to
any and all Persons, without limitation of any kind, the "tax treatment" and
"tax structure" (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the transactions contemplated herein and all materials of any kind
(including opinions or other tax analyses) that are or have been provided to any
of the foregoing relating to such tax treatment or tax structure, and it is
hereby confirmed that each of the foregoing have been so authorized since the
commencement of discussions regarding the transactions.

            (b) Anything herein to the contrary notwithstanding, each
Transaction Party hereby consents to the disclosure of any nonpublic information
with respect to it (i) to the Agent, the Alternate Lenders or the Conduit Lender
by each other, (ii) by the Agent or the Lenders to any prospective or actual
assignee or participant of any of them (it being understood that such parties to
whom such disclosure is made will be informed of the confidential nature of such
information and instructed to keep such information confidential) and (iii) by
the Agent to any rating agency, Commercial Paper dealer or provider of a surety,
guaranty or credit or liquidity enhancement to the Conduit Lender or any entity
organized for the purpose of purchasing, or making loans secured by, financial
assets for which JPMorgan Chase acts as the administrative agent and to any
officers, directors, employees, outside accountants and attorneys of any of the
foregoing. In addition, the Lenders and the Agent may disclose any such
nonpublic information pursuant to any law, rule, regulation, direction, request
or order of any judicial, administrative or regulatory authority or proceedings
(whether or not having the force or effect of law).

      Section 14.6 Bankruptcy Petition. The Borrower, the Servicer, the Agent
and each Alternate Lender hereby covenants and agrees that, prior to the date
that is one year and one day after the payment in full of all outstanding
unsubordinated indebtedness of the Conduit Lender, it will not institute
against, or join any other Person in instituting against, the Conduit Lender any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States.

      Section 14.7 Limitation of Liability. Except with respect to any claim
arising out of the willful misconduct or gross negligence of the Conduit Lender,
the Agent or any Alternate Lender, no claim may be made by any Transaction Party
or any other Person against the Conduit Lender, the Agent or any Alternate
Lender or their respective Affiliates, directors, officers, employees, attorneys
or agents for any special, indirect, consequential or punitive damages in
respect of any claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by this Agreement, or
any act, omission or event occurring in connection therewith; and each
Transaction Party hereby waives, releases, and agrees not to sue

                                       47
<PAGE>

upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.

      Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW (EXCEPT IN THE CASE OF THE OTHER TRANSACTION DOCUMENTS, TO THE
EXTENT OTHERWISE EXPRESSLY STATED THEREIN) AND EXCEPT TO THE EXTENT THAT THE
PERFECTION OF THE OWNERSHIP INTEREST OF THE BORROWER OR THE SECURITY INTEREST OF
THE AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, IN ANY OF THE COLLATERAL IS
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

      Section 14.9 CONSENT TO JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED
BY SUCH PERSON PURSUANT TO THIS AGREEMENT, AND EACH SUCH PARTY HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST ANY TRANSACTION PARTY IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY TRANSACTION PARTY AGAINST THE AGENT
OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH TRANSACTION PARTY PURSUANT TO
THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

      Section 14.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY
TRANSACTION PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER OR THEREUNDER.

      Section 14.11 Integration; Binding Effect; Survival of Terms.

            (a) This Agreement and each other Transaction Document contain the
final and complete integration of all prior expressions by the parties hereto
with respect to the subject

                                       48
<PAGE>

matter hereof and shall constitute the entire agreement among the parties hereto
with respect to the subject matter hereof superseding all prior oral or written
understandings.

            (b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns
(including any trustee in bankruptcy). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until terminated in
accordance with its terms; provided, however, that the rights and remedies with
respect to (i) any breach of any representation and warranty made by any
Transaction Party pursuant to Article V, (ii) the indemnification and payment
provisions of Article X, and Sections 14.5 and 14.6 shall be continuing and
shall survive any termination of this Agreement.

      Section 14.12 Counterparts; Severability; Section References. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Delivery of an executed counterpart of a signature page to
this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of a signature page to this Agreement. Any provisions of
this Agreement which are 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. Unless otherwise
expressly indicated, all references herein to "Article," "Section," "Schedule"
or "Exhibit" shall mean articles and sections of, and schedules and exhibits to,
this Agreement.

      Section 14.13 JPMorgan Chase Roles. Each of the Alternate Lenders
acknowledges that JPMorgan Chase acts, or may in the future act: (i) as
administrative agent for the Conduit Lender or any Alternate Lender, (ii) as an
issuing and paying agent for the Commercial Paper, (iii) to provide credit or
liquidity enhancement for the timely payment for the Commercial Paper, and/or
(iv) to provide other services from time to time for the Conduit Lender or any
Alternate Lender (collectively, the "JPMorgan Chase Roles"). Without limiting
the generality of this Section 14.13, each Alternate Lender hereby acknowledges
and consents to any and all JPMorgan Chase Roles and agrees that in connection
with any JPMorgan Chase Role, JPMorgan Chase may take, or refrain from taking,
any action that it, in its discretion, deems appropriate, including, without
limitation, in its role as administrative agent for the Conduit Lender, and the
giving of notice of a mandatory purchase pursuant to the Liquidity Agreement.

                                       49
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
hereof.

                                          PMC CONDUIT, L.P.,
                                          as Borrower

                                          By: PMC Conduit, LLC,
                                              its General Partner

                                          By: /s/ JAN F. SALIT
                                              ---------------------------
                                          Name:   Jan F. Salit
                                          Title:  Executive Vice President

                                          Address:

                                          17950 Preston Road, Suite 600
                                          Dallas, Texas 75252
                                          Attention: General Counsel
                                          Fax:  (972) 349-3265

                                 Signature Page to Credit and Security Agreement

<PAGE>

                                          PMC CONDUIT, LLC

                                          By: /s/ JAN F. SALIT
                                              --------------------------------
                                          Name:   Jan F. Salit
                                          Title:  Executive Vice President

                                          Address:

                                          17950 Preston Road, Suite 600
                                          Dallas, Texas 75252
                                          Attention: General Counsel
                                          Fax:  (972) 349-3265

                                          PMC COMMERCIAL TRUST,
                                          as Servicer

                                          By: /s/ JAN F. SALIT
                                              --------------------------------
                                          Name:   Jan F. Salit
                                          Title:  Executive Vice President

                                          Address:

                                          17950 Preston Road, Suite 600
                                          Dallas, Texas 75252
                                          Attention: General Counsel
                                          Fax:  (972) 349-3265

                                 Signature Page to Credit and Security Agreement

<PAGE>

                                          JUPITER SECURITIZATION CORPORATION,
                                          as Conduit Lender

                                          By: /s/ MAUREEN E. MARCON
                                             -----------------------------------
                                          Name: Maureen E. Marcon
                                          Title: Authorized signatory

                                          Address:
                                          c/o JPMorgan Chase Bank,
                                          as Agent
                                          Asset Backed Finance
                                          Suite IL1-0612
                                          1 Bank One Plaza
                                          Chicago, Illinois  60670-0079
                                          Fax: (312) 732-1844

                                          JPMORGAN CHASE BANK, NATIONAL
                                          ASSOCIATION
                                          as an Alternate Lender and as Agent

                                          By: /s/ MAUREEN E. MARCON
                                             -----------------------------------
                                          Name: Maureen E. Marcon
                                          Title: Vice President

                                          Address:
                                          c/o JPMorgan Chase Bank,
                                          as Agent
                                          Asset Backed Finance
                                          Suite IL1-0612
                                          1 Bank One Plaza
                                          Chicago, Illinois  60670-0079
                                          Fax: (312) 732-1844

                                 Signature Page to Credit and Security Agreement

<PAGE>

                                                                       EXHIBIT I

                                  DEFINITIONS

            As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

            "Addition Date" has the meaning specified in Section 8.6.

            "Additional Loan" means any Loan purchased by the Borrower from PMC
after the Closing Date (excluding any Substitute Loan).

            "Advance" means any advance made by a Lender to the Borrower
pursuant to this Agreement (including, without limitation, any Liquidity
Funding). Each Advance shall either be a CP Rate Advance, an Alternate Base Rate
Advance or a LIBO Rate Advance, selected in accordance with the terms of this
Agreement.

            "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person or any Subsidiary of such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock, by contract or otherwise.

            "Agent" has the meaning set forth in the preamble to this Agreement.

            "Aggregate Commitment" means, on any date of determination, the
aggregate amount of the Alternate Lenders' Commitments to make Loans hereunder.
As of the Closing Date, the Aggregate Commitment is $100,000,000.

            "Aggregate Principal" means, on any date of determination, the
aggregate outstanding principal amount of all Advances outstanding on such date.

            "Aggregate Reduction" has the meaning specified in Section 1.3.

            "Agreement" means this Credit and Security Agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms hereof.

            "Alternate Base Rate" means for any day, the rate per annum equal to
the corporate base rate, prime rate or base rate of interest, as applicable,
announced by JPMorgan Chase from time to time changing when and as such rate
changes.

            "Alternate Base Rate Advance" means an Advance which bears interest
at the Alternate Base Rate or the Default Rate.

<PAGE>

            "Alternate Lenders" has the meaning set forth in the preamble in
this Agreement.

            "Amortization Date" means the earliest to occur of (i) February 7,
2008, (ii) the Scheduled Termination Date, (iii) the date the Aggregate
Principal is repaid in whole pursuant to Section 1.4, (iv) the Business Day
immediately prior to the occurrence of an Event of Bankruptcy with respect to
any Transaction Party, (v) the date on which the Agent declares the Amortization
Date to have occurred pursuant to Section 9.2, and (vi) the date which is three
(3) Business Days after the Agent's receipt of written notice from Borrower that
it wishes to terminate the facility evidenced by this Agreement.

            "Amortization Event" has the meaning specified in Article IX.

            "Appraised Value" means, with respect to any Mortgaged Property, the
appraisal made by or for the Originator at the origination date of the related
Loan.

            "Approved Franchisee" means any Obligor which is operating a
Mortgaged Property under a franchise agreement with one of the Persons
identified on Schedule E, as such schedule may be modified from time to time
with the prior written consent of the Agent.

            "Assignment Agreement" has the meaning set forth in Section 12.1(b).

            "Authorized Officer" means, with respect to any Person, its
president, executive vice president, general counsel, corporate controller,
treasurer or chief financial officer.

            "Base Rate" means, with respect to a Settlement Date, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the sum
of the amounts due and payable pursuant to Section 2.2(c)(i) and (ii) hereof on
such Settlement Date and the denominator of which is equal to the average daily
Aggregate Principal outstanding during the period commencing on the close of
business on the prior Settlement Date (or in the case of the initial Settlement
Date, the Closing Date) and ending on such Settlement Date.

            "Borrower" has the meaning set forth in the preamble to this
Agreement.

            "Borrowing" means a borrowing hereunder consisting of the aggregate
amount of the several Advances made on the same Borrowing Date.

            "Borrowing Base" means, on any date, an amount equal to:

            (a) the aggregate Principal Balance of all Pool Loans that are
      Eligible Loans on such date; plus

            (b) the sum of the Purchase Prices then on deposit in the Collection
      Account with respect to any Pool Loans repurchased by PMC in accordance
      with Section 8.3; minus

            (c) the greater of (i) the product of (A) 10% and (B) the amount
      described in clause (a) and (ii) the lesser of (A) the product of (x) 3
      and (y) the largest Principal

                                       2
<PAGE>

      Balance of any Pool Loan on such date and (B) the sum of the Principal
      Balances of the Pool Loans with the four largest Principal Balances on
      such date; minus

            (d) the Excess Concentration Amount.

            "Borrowing Date" means a Business Day on which an Advance is made
hereunder.

            "Borrowing Limit" has the meaning set forth in Section 1.1.

            "Borrowing Notice" has the meaning set forth in Section 1.2.

            "Broken Funding Costs" means for any Advance which: (a) has its
principal reduced without compliance by Borrower with the notice requirements
hereunder, (b) does not become subject to an Aggregate Reduction or repayment
following the delivery of any Reduction Notice or Final Repayment Notice, or (c)
is assigned under the Liquidity Agreement or terminated or reduced prior to the
last day of its Interest Period or tranche period for Commercial Paper
determined by the Agent to relate to such Advance, an amount equal to the
excess, if any, of (i) the CP Costs or Interest (as applicable) that would have
accrued during the remainder of the Interest Periods or the tranche periods for
Commercial Paper determined by the Agent to relate to such Advance (as
applicable) subsequent to the date of such reduction, repayment, assignment or
termination (or in respect of clause (b) above, the date such Aggregate
Reduction or repayment was designated to occur pursuant to the Reduction Notice
or Final Repayment Notice) of the principal of such Advance if such reduction,
assignment or termination had not occurred or such Reduction Notice or Final
Repayment Notice had not been delivered, over (ii) the sum of (x) to the extent
all or a portion of such principal is allocated to another Advance, the amount
of CP Costs or Interest actually accrued during the remainder of such period on
such principal for the new Advance, and (y) to the extent such principal is not
allocated to another Advance, the income, if any, actually received during the
remainder of such period by the holder of such Advance from investing the
portion of such principal not so allocated. In the event that the amount
referred to in clause (ii) exceeds the amount referred to in clause (i), the
relevant Lender or Lenders agree to pay to Borrower the amount of such excess.

            "Business Day" means any day on which banks are not authorized or
required to close in New York, New York, Dallas, Texas or Chicago, Illinois, and
The Depository Trust Company of New York is open for business, and, if the
applicable Business Day relates to any computation or payment to be made with
respect to the LIBO Rate, any day on which dealings in dollar deposits are
carried on in the London interbank market.

            "Change of Control" means (i) the acquisition by any Person, or two
or more Persons acting in concert, of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock
of PMC, (ii) PMC's failure to own, directly or indirectly, 100% of the issued
and outstanding membership interests of the General Partner or (iii) the General
Partner's failure to own, directly or indirectly, 100% of the issued and
outstanding general partnership interests of the Borrower.

            "Closing Date" means February 7, 2005.

                                       3
<PAGE>

            "Collateral" has the meaning set forth in Section 13.1.

            "Collection Account" has the meaning set forth in Section 2.2.

            "Commercial Paper" means promissory notes of the Conduit Lender
issued by the Conduit Lender in the commercial paper market.

            "Commitment" means, for each Alternate Lender, the commitment of
such Alternate Lender to make Advances to Borrower hereunder in the event the
Conduit Lender elects not to fund any Advance in an aggregate principal amount
at any one time outstanding not to exceed the amount set forth opposite such
Alternate Lender's name on Schedule A to this Agreement.

            "Conduit Lender" has the meaning set forth in the preamble to this
Agreement.

            "Contingent Obligation" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit.

            "Conveyance Papers" has the meaning set forth in the Purchase
Agreement.

            "CP Cost Event" means the Borrower shall have been notified by the
Agent that the Usage Fee Percentage will be increased from the then current
percentage by 20% or more in connection with an extension of the Scheduled
Termination Date.

            "CP Costs" means, for each day, the sum of (i) discount or interest
accrued on Pooled Commercial Paper on such day, plus (ii) any and all accrued
commissions in respect of placement agents and Commercial Paper dealers, and
issuing and paying agent fees incurred, in respect of such Pooled Commercial
Paper for such day, plus (iii) other costs associated with funding small or
odd-lot amounts with respect to all receivable purchase facilities which are
funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income
net of expenses received on such day from investment of collections received
under all receivable purchase or financing facilities funded substantially with
Pooled Commercial Paper, minus (v) any payment received on such day net of
expenses in respect of Broken Funding Costs (or similar costs) related to the
prepayment of any investment of the Conduit Lender pursuant to the terms of any
receivable purchase or financing facilities funded substantially with Pooled
Commercial Paper. In addition to the foregoing costs, if the Borrower shall
request any Advance during any period of time determined by the Agent in its
sole discretion to result in incrementally higher CP Costs applicable to such
Advance, the principal associated with any such Advance shall, during such
period, be deemed to be funded by the Conduit Lender in a special pool (which
may include capital associated with other receivable purchase or financing
facilities) for purposes of determining such additional CP Costs applicable only
to such special pool and charged each day during such period against such
principal.

                                       4
<PAGE>

            "CP Rate Advance" means, each Advance of the Conduit Lender prior to
the time, if any, when (i) it is refinanced with a Liquidity Funding pursuant to
the Liquidity Agreement, or (ii) the occurrence of an Amortization Event and the
commencement of the accrual of Interest thereon at the Default Rate.

            "Credit and Collection Policy" means PMC's origination,
underwriting, lending and collection policies and practices relating to Loans
existing on the Closing Date, a copy of which is attached hereto as Exhibit VI,
as amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.

            "Cut-Off Date" means February 4, 2005.

            "Debt Service Coverage Ratio" means, with respect to any Obligor at
the time the related Loan becomes a Pool Loan, the ratio of (i) such Obligor's
earnings before interest, taxes, depreciation and other applicable non-cash
adjustments to income to (ii) the required principal and interest due on the
related Loan and is calculated using the most current financial information
provided to the Originator by the Obligor, which for recently-originated Loans,
may include actual, projections, pro forma or interim financial information.

            "Default Rate" means a rate per annum equal to the sum of (i) the
Alternate Base Rate (changing when and as the Alternate Base Rate changes) plus
(ii) 3.00%.

            "Defaulted Loan" means any Pool Loan: (i) as to which any Obligor
thereunder has suffered an Event of Bankruptcy; (ii) which, consistent with the
Credit and Collection Policy, would be written off PMC's or the Borrower's books
as uncollectible; or (iii) as to which any payment, or part thereof, remains
unpaid for 91 days or more from the original due date for such payment.

            "Defective Loan" means any Pool Loan subject to repurchase or
substitution by PMC pursuant to Article VIII.

            "Deleted Loan" means either of the following: (i) a Defective Loan
or (ii) a Defaulted Loan which is to be replaced by an Eligible Substitute Loan
pursuant to Section 8.5.

            "Delinquent Loan" means a Loan as to which a default has occurred as
to the payment of any installment of principal or interest or another monetary
default has occurred under any Loan Document related thereto and such default
has not been cured for more than thirty but less than sixty-one (61) days.

            "Delinquency Ratio" means, at any time, a percentage equal to (i)
the aggregate Principal Balances of all Pool Loans that are Delinquent Loans at
such time divided by (ii) the Pool Principal Balance at such time.

            "Downgraded Alternate Lender" means an Alternate Lender which has
been the subject of a Downgrading Event.

                                       5
<PAGE>

            "Downgrading Event" with respect to any Person means the lowering of
the rating with regard to the short-term securities of such Person to below (i)
P-1 by Moody's or (ii) A-1 by S&P .

            "Due Period" means, with respect to any Settlement Date, the
calendar month preceding the month in which such Settlement Date occurs.

            "Eligibility Criteria" means the criteria set forth on Schedule D.

            "Eligible Institution" shall mean a depository institution (which
may be the Administration Agent) organized under the laws of the United States
or any one of the states thereof, including, the District of Columbia (or any
U.S. branch of a foreign depository institution), which is a member of the FDIC,
and which either (i) at all times has a short-term unsecured debt rating of at
least "P-1" by Moody's and at least "A-1" by S&P or (ii) has corporate trust
powers with accounts subject to regulations regarding fiduciary funds on deposit
substantially similar to 12 C.F.R. Section 9.10(b) and which maintains any
Account provided hereunder as a fully segregated trust account with the trust
department of such institution.

            "Eligible Investments" shall mean:

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

            (ii) federal funds, certificates of deposit, time deposits and
      bankers' acceptances (which shall each have an original maturity of not
      more than 90 days and, in the case of bankers' acceptances, shall in no
      event have an original maturity of more than 365 days) of any United
      States depository institution or trust company organized under the laws of
      the United States or any state and subject to examination and supervision
      by federal or state financial institutions regulatory authorities;
      provided, however, that the short-term obligations of such depository
      institution or trust company are rated "P-1" by Moody's and "A-1+" by S&P;

            (iii) commercial paper (having original maturities of not more than
      30 days) of any corporation incorporated under the laws of the United
      States or any state thereof which on the date of the acquisition are rated
      "P-1" by Moody's and "A-1+" by S&P;

            (iv) securities of money market funds rated "Aa" or better by
      Moody's and "Aam" or better by S&P; and

            (v) any other investment approved in writing by the Agent.

            Any such Eligible Investment may be purchased by or through the
Agent or any of its Affiliates.

            "Eligible Loan" means as of any date, a Loan that (i) satisfied the
Eligibility Criteria as of the Closing Date (or, in the case of a Loan added to
the Collateral after the Closing

                                       6
<PAGE>

Date, as of the applicable Transfer Date) and (ii) continues to satisfy the
Eligibility Criteria as of the date of determination.

            "Eligible Substitute Loan" means a Loan substituted by PMC for a
Deleted Loan in accordance with the Purchase Agreement and Section 8.5, which
Loan must, on the date of such substitution, (i) unless a Substitution
Adjustment is being paid on such date, have an outstanding Principal Balance (or
in the case of a substitution of more than one Loan for a Deleted Loan, an
aggregate Principal Balance), not less than the Principal Balance of the Deleted
Loan; (ii) have a Loan Rate not less than the Loan Rate of the Deleted Loan and
not more than 1% in excess of the Loan Rate of such Deleted Loan; (iii) have a
Mortgage of the same or higher level of priority as the Mortgage relating to the
Deleted Loan; (iv) comply with each of the representations and warranties set
forth in the Eligibility Criteria (which representations and warranties shall be
deemed to be made as of the date of substitution); (v) have an original
Loan-to-Value Ratio not greater than that of the Deleted Loan; and (vi) have
Mortgaged Property which is of the same type as the Deleted Loan. More than one
Eligible Substitute Loan may be substituted for a Deleted Loan if such Eligible
Substitute Loans meet the foregoing attributes in the aggregate.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any rule or regulation issued thereunder.

            "Event of Bankruptcy" shall be deemed to have occurred with respect
to a Person if either:

            (a) a case or other proceeding shall be commenced, without the
      application or consent of such Person, in any court, seeking the
      liquidation, reorganization, debt arrangement, dissolution, winding up, or
      composition or readjustment of debts of such Person, the appointment of a
      trustee, receiver, custodian, liquidator, assignee, sequestrator or the
      like for such Person or all or substantially all of its assets, or any
      similar action with respect to such Person under any law relating to
      bankruptcy, insolvency, reorganization, winding up or composition or
      adjustment of debts, and such case or proceeding shall continue
      undismissed, or unstayed and in effect, for a period of 60 consecutive
      days; or an order for relief in respect of such Person shall be entered in
      an involuntary case under the federal bankruptcy laws or other similar
      laws now or hereafter in effect; or

            (b) such Person shall generally not pay its debts as such debts
      become due or shall admit in writing its inability to pay its debts
      generally or such Person shall commence a voluntary case or other
      proceeding under any applicable bankruptcy, insolvency, reorganization,
      debt arrangement, dissolution or other similar law now or hereafter in
      effect, or shall consent to the appointment of or taking possession by a
      receiver, liquidator, assignee, trustee (other than a trustee under a deed
      of trust, indenture or similar instrument), custodian, sequestrator (or
      other similar official) for, such Person or for any substantial part of
      its property, or shall make any general assignment for the benefit of
      creditors, or shall be adjudicated insolvent, or admit in writing its
      inability to pay its debts generally as they become due, or, if a
      corporation or similar entity, its board of directors shall vote to
      implement any of the foregoing.

                                       7
<PAGE>

            "Excess Concentration Amount" means, at any time, the sum of (a) the
amount by which the aggregate Principal Balance of the Pool Loans made to
Obligors who are not Approved Franchisees exceeds 25% of the Pool Principal
Balance and (b) the amount by which the aggregate Principal Balance of all Pool
Loans with Obligors having Debt Service Coverage Ratios of less than 1.0 to 1.0
exceeds the lesser of (i) 10% of the Pool Principal Balance and (ii) $6,000,000.

            "Excess Spread Percentage" means, for any Settlement Date, the
amount, if any, by which the Pool Yield with respect to the immediately
preceding Monthly Period exceeds the Base Rate for such Settlement Date.

            "Exit Fee" means a one-time nonrefundable fully earned fee payable
by the Borrower to the Agent on the Proposed Final Repayment Date pursuant to
Section 1.4 in an amount equal to (a) the product of (i) 0.45% per annum and
(ii) the highest Aggregate Principal during the nine month period ending on such
Proposed Final Repayment Date minus (b) the amount, if any, by which accrued
Interest for all periods from and after the Amortization Date exceeds the amount
of Interest which would have accrued during such periods at the Alternate Base
Rate.

            "FDIC" shall mean the Federal Deposit Insurance Corporation, or its
successors and assigns.

            "Federal Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy," as amended and any successor statute thereto.

            "Fee Letter" means that certain letter agreement dated as of the
Closing Date among the Borrower, the Conduit Lender and the Agent, as it may be
amended or modified and in effect from time to time.

            "Fees" has the meaning set forth in the Fee Letter.

            "Final Payout Date" means the date on which all Obligations have
been paid in full and the Aggregate Commitment has been terminated.

            "Final Repayment Notice" has the meaning set forth in Section 1.4.

            "Finance Charge Collections" means, for any Monthly Period, the
aggregate amount of Collections (other than Principal Collections) received
during such Monthly Period, including, without limitation, all amounts paid by
or on behalf of Obligors with respect to interest, finance charges, late fees
and any other amounts due under the Underlying Notes and Mortgages relating to
the Pool Loans (other than with respect to the unpaid Principal Balances
thereof).

            "Funding Agreement" means (i) this Agreement, (ii) the Liquidity
Agreement and (iii) any other agreement or instrument executed by any Funding
Source with or for the benefit of Conduit Lender.

                                       8
<PAGE>

            "Funding Source" means (i) any Alternate Lender or (ii) any
insurance company, bank or other funding entity providing liquidity, credit
enhancement or back-up purchase support or facilities to the Conduit Lender.

            "GAAP" means generally accepted accounting principles in effect in
the United States of America as of the date of this Agreement.

            "General Partner" is defined in the preamble.

            "Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) capitalized lease obligations, (vi) net liabilities under
interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and
(viii) liabilities in respect of unfunded vested benefits under plans covered by
Title IV of ERISA.

            "Independent Manager" shall mean (i) a natural person and (ii) a
Person who (A) shall not have been at the time of such Person's appointment, and
may not have been at any time during the preceding five years and shall not be
as long as such Person is an Independent Manager of the General Partner (1) a
director, member, officer, manager, partner, shareholder or employee of PMC or
any of its directors, members, partners, subsidiaries, shareholders or
Affiliates other than the General Partner (collectively, the "Independent
Parties"), (2) a supplier to any of the Independent Parties, (3) a person
controlling or under common control with any directors, members, partners,
shareholder or supplier of any of the Independent Parties or (4) a member of the
immediate family of any director, member, partner, shareholder, officer,
manager, employee or supplier of the Independent Parties, (B) has prior
experience as an independent director for a corporation or limited liability
company whose charter documents required the unanimous consent of all
independent directors thereof before such corporation or limited liability
company could consent to the institution of bankruptcy or insolvency proceedings
against it or could file a petition seeking relief under any applicable federal
or state law relating to bankruptcy and (C) has at least three years of
employment experience with one or more entities that provide, in the ordinary
course of their respective businesses, advisory, management or placement
services to issuers of securitization or structured finance instruments,
agreements or securities; provided, that the indirect or beneficial ownership of
stock of PMC through a mutual fund or similar diversified investment vehicle
with respect to which the owner does not have discretion or control over the
investments held by such diversified investment vehicle shall not preclude such
owner from being an Independent Manager.

            "Interest" means for each respective Interest Period relating to the
Advances of the Alternate Lenders, an amount equal to the product of the
applicable Interest Rate for each Advance multiplied by the principal of such
Advance for each day elapsed during such Interest Period, annualized on a 360
day basis.

                                       9
<PAGE>

            "Interest Period" means, with respect to any Advance held by an
Alternate Lender:

            (a) if Interest for such Advance is calculated on the basis of the
      LIBO Rate, a period of one, two or three months, or such other period as
      may be mutually agreeable to the Agent and the Borrower, commencing on a
      Business Day selected by the Borrower or the Agent pursuant to this
      Agreement and ending on a Settlement Date; or

            (b) if Interest for such Advance is calculated on the basis of the
      Alternate Base Rate, a period commencing on a Business Day selected by
      Borrower and agreed to by the Agent and ending on a Settlement Date,
      provided that no such period shall exceed one month.

In the case of any Interest Period for any Advance which commences before the
Amortization Date and would otherwise end on a date occurring after the
Amortization Date, such Interest Period shall end on the Amortization Date. The
duration of each Interest Period which commences after the Amortization Date
shall be of such duration as selected by the Agent.

            "Interest Rate" means, with respect to each Loan of the Alternate
Lenders and any Advance of the Conduit Lender on and after the occurrence of an
Amortization Event, the LIBO Rate, the Alternate Base Rate or the Default Rate,
as applicable.

            "JPMorgan Chase" has the meaning set forth in the preamble.

            "Lender" means the Conduit Lender and each Alternate Lender.

            "LIBO Rate" means the rate per annum equal to the sum of (i) (a) the
rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor
or substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of the relevant Interest Period, as the
rate for dollar deposits with a maturity comparable to such Interest Period;
provided, that in the event that such rate is not available at such time for any
reason, then the "LIBO Rate" with respect to such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, divided by (b) one minus the maximum aggregate reserve
requirement (including all basic, supplemental, marginal or other reserves)
which is imposed against the Agent in respect of Eurocurrency liabilities, as
defined in Regulation D of the Board of Governors of the Federal Reserve System
as in effect from time to time (expressed as a decimal), applicable to such
Interest Period plus (ii) 2.00% per annum. The LIBO Rate shall be rounded, if
necessary, to the next higher 1/16 of 1%.

            "LIBO Rate Advance" means an Advance which bears interest at the
LIBO Rate.

                                       10
<PAGE>

            "Lien" means a lien, security interest, financing statement, charge
or encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.

            "Liquidity Agreement" means that certain Asset Purchase Agreement,
of even date herewith by and among the Conduit Lender, the Agent, as funding
agent and the several financial institutions from time to time party thereto, as
the same may be amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof.

            "Liquidity Commitment" means, as to each Alternate Lender, its
commitment under the Liquidity Agreement (which shall equal 102% of its
Commitment hereunder).

            "Liquidity Funding" means (a) a purchase made by any Alternate
Lender pursuant to its Liquidity Commitment of all or any portion of, or any
undivided interest in, an Advance originally funded by the Conduit Lender, or
(b) any Advance made by an Alternate Lender in lieu of the Conduit Lender
pursuant to Section 1.1.

            "Loan" means a loan originated by an Originator or PMC Capital, Inc.
to a Person to finance or refinance the acquisition, construction, development
or renovation of real or personal property by such Person, which loan is
evidenced by an Underlying Note and a Mortgage.

            "Loan Documents" means the instruments and documents listed in
Section 8.1 pertaining to a particular Loan and any additional instruments or
documents required to be added to the Loan File pursuant to this Agreement or
the Servicing Agreement.

            "Loan File" means the Loan Documents either (i) set aside and held
in trust by PMC as custodian and bailee for the Agent or (ii) delivered to the
Agent, in either case pursuant to Section 8.1.

            "Loan Rate" means, with respect to any Loan as of any date of
determination, the per annum rate of interest applicable under the related
Underlying Note to the calculation of interest for such date on the Principal
Balance thereof.

            "Loan Schedule" means, as of any date, the schedule of Pool Loans
set forth herein as Schedule C (as amended from time to time in accordance with
the terms hereof), which schedule shall set forth for each Pool Loan: (i) the
Principal Balance as of the Cut-Off Date or, for any Loans in which the Borrower
acquires an interest after the Closing Date, as of the applicable Transfer Date,
(ii) the account number, (iii) the original principal amount, (iv) the name of
each Obligor, (v) the Loan Rate, (vi) lien position, (vii) property state,
(viii) property zip code, (ix) property type and (x) Loan-to-Value Ratio. The
Loan Schedule may be amended from time to time pursuant to Article VIII to
reflect (a) the purchase by PMC or the Servicer of, or the substitution of one
or more Eligible Substitute Loans for, a Deleted Loan and (b) the addition of
one or more Additional Loans.

            "Loan-to-Value" or "LTV" means, with respect to a Loan, the original
principal balance of such Loan as of the date of origination divided by the
lesser of (i) the Appraised Value of the related Mortgaged Property plus the
value of any other collateral securing such

                                       11
<PAGE>

Loan and (ii) the purchase price for the related Mortgaged Property plus the
value of any other collateral securing such Loan.

            "Lockbox" has the meaning assigned to the term "Lock-Box" in the
Lockbox Agreement.

            "Material Adverse Effect" means a material adverse effect on (i) the
financial condition or operations of any Transaction Party and its Subsidiaries
taken as a whole, (ii) the ability of any Transaction Party to perform its
obligations under this Agreement or the Servicing Agreement, (iii) the legality,
validity or enforceability of this Agreement or any other Transaction Document,
(iv) the Agent's security interest, for the benefit of the Secured Parties, in
the Pool Loans or any other material Collateral, or (v) the collectibility of
the Pool Loans generally or of any material portion of the Pool Loans.

            "Monthly Period" means with respect to any Settlement Date, the
period from and including the first day of the preceding calendar month to and
including the last day of such calendar month.

            "Moody's" means Moody's Investors Service, Inc.

            "Mortgage" means a mortgage, deed of trust, security agreement,
assignment of leases and rents or other instruments given as security for an
Underlying Note, together with any and all riders, addenda, amendments,
supplements or other modifications thereto.

            "Mortgaged Property" means the real property and improvements
thereon securing a Loan.

            "Non-Performing Pool Loan Balance" means, as of close of business on
the last day of any Monthly Period, the sum of (a) the Principal Balances of all
Pool Loans at such time with respect to which a default has occurred as to the
payment of any installment of principal or interest or another monetary default
has occurred under any Loan Document related thereto and such default has not
been cured for more than sixty (60) days, (b) the Principal Balances of all Pool
Loans in Litigation at such time, (c) the Principal Balances of all Pool Loans
in Liquidation at such time, and (d) the aggregate Principal Balances of all
Pool Loans which were written off during such Monthly Period as uncollectible.

            "Obligations" means, at any time, any and all obligations of the
Borrower to any of the Secured Parties arising under or in connection with the
Transaction Documents, whether now existing or hereafter arising, due or
accrued, absolute or contingent, including, without limitation, obligations in
respect of Aggregate Principal, CP Costs, Interest, fees under the Fee Letter,
Broken Funding Costs and Indemnified Amounts and all fees, costs and expenses
arising in connection with the Collection Account and the Reserve Account.

            "Obligor" means the obligor or obligors under an Underlying Note.

            "Originator" means PMC and each other Subsidiary of PMC as to which
the Originator Addition Criteria has been satisfied.

                                       12
<PAGE>

            "Originator Addition Criteria" means, with respect to any Subsidiary
of PMC, (i) such Subsidiary has been approved by the Agent in its sole and
absolute discretion, (ii) such Subsidiary has become party to the Transfer
Agreement by executing a joinder agreement in form and substance acceptable to
the Agent, (iii) such Subsidiary has obtained all necessary authorizations and
approvals from, and has made all necessary notifications and filings with, each
governmental authority or regulatory body that is required in order for such
Subsidiary to execute the Transfer Agreement and consummate the transactions
contemplated thereby, (iii) such Subsidiary has delivered to the Agent, each
agreement, document, lien search report, financing statement, opinion and
certificate requested by the Agent, in each case, in form and substance
acceptable to the Agent, including, without limitation, opinions of counsel as
to general corporate matters, UCC matters and "true sale" and substantive
consolidation matters. As of the Closing Date, for purposes of clause (i) above,
PMC Investment Corporation and Western Financial Capital Corporation have been
approved by the Agent.

            "Participant" has the meaning set forth in Section 12.2.

            "PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.

            "Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.

            "PMC" has the meaning set forth in the preamble to this Agreement.

            "PMC Entities" has the meaning set forth in Section 7.1(i).

            "Pool Loan" means, as of any date, the Loans that have been (or are
to be) transferred and assigned to the Borrower pursuant to the Purchase
Agreement and the other Conveyance Papers (whether by way of substitution or
otherwise), together with the related Loan Documents, exclusive of Loans that
have been repurchased by PMC or the Servicer on or prior to such date in
accordance with the terms of this Agreement, the Servicing Agreement and the
Purchase Agreement. The Pool Loans included in the Collateral at any time shall
be identified on the Loan Schedule.

            "Pool Loan in Liquidation" means a Pool Loan with respect to which
the related Obligor has failed to respond to the Servicer's demand and
acceleration letters and as to which the Servicer has determined that the best
course of action is to liquidate such Pool Loan in order to foreclose on the
collateral securing the same and has commenced such foreclosure action and such
foreclosure action is then continuing.

            "Pool Loan in Litigation" means a Pool Loan with respect to which
the related Obligor has ceased making regularly scheduled payments and is not
responding to the Servicer's collection efforts, thereby requiring legal action
to collect such Pool Loan, which legal action has been commenced and is then
continuing.

            "Pool Principal Balance" means, at any time, the aggregate Principal
Balances of all Pool Loans at such time.

                                       13
<PAGE>

            "Pool Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to (a) the amount of Finance Charge Collections for the Settlement Date with
respect to such Monthly Period minus the aggregate principal balances of all
Pool Loans which became Defaulted Loans during such Monthly Period and the
denominator of which is the Pool Principal Balance as of the last day of the
preceding Monthly Period; provided, that with respect to the initial Settlement
Date the annualized percentage shall be adjusted based on the actual number of
days from the Closing Date to the last day of the Monthly Period preceding the
initial Settlement Date.

            "Pooled Commercial Paper" means Commercial Paper notes of the
Conduit Lender subject to any particular pooling arrangement by the Conduit
Lender, but excluding Commercial Paper issued by the Conduit Lender for a tenor
and in an amount specifically requested by any Person in connection with any
agreement effected by the Conduit Lender.

            "Principal Balance" means, with respect to any Loan and any day, the
related Principal Balance as of the Cut-Off Date (or, in the case of a Loan in
which the Borrower acquires an interest after the Closing Date, as of the
applicable Transfer Date), minus all collections or other proceeds applied to
reduce the principal balance of such Loan in accordance with the terms of the
Servicing Agreement.

            "Principal Collections" means, for any Monthly Period, the aggregate
amount of Collections with respect to the Principal Balances due under the Pool
Loans received during such Monthly Period.

            "Proposed Reduction Date" has the meaning set forth in Section 1.3.

            "Proposed Final Repayment Date" has the meaning set forth in Section
1.4.

            "Pro Rata Share" means, for each Alternate Lender at any time, a
percentage equal to the Commitment of such Alternate Lender at such time,
divided by the Aggregate Commitment at such time.

            "Purchase Agreement" means that certain Purchase and Contribution
Agreement, dated as of even date herewith between PMC, as seller, and the
Borrower, as purchaser, as amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms.

            "Purchase Price" means, as to any Pool Loan to be purchased from the
Borrower by any Person on any date pursuant to Article VIII of this Agreement or
Section 2.4 of the Purchase Agreement, an amount equal to the sum of (i) the
unpaid Principal Balance thereof as of the date of purchase, (ii) the greater of
(a) all unpaid accrued interest thereon to the end of the Due Period preceding
the Settlement Date on which such Purchase Price is included in Available
Collections and (b) 30 days' interest thereon, computed at the applicable Loan
Rate and (iii) expenses reasonably incurred or to be incurred by the Servicer or
the Agent in respect of any breach or defect giving rise to such purchase.

            "Purchasing Alternate Lender" has the meaning set forth in Section
12.1(b).

                                       14
<PAGE>

            "Records" means, with respect to any Loan, all Loan Documents and
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Loan, any other
Collateral and the related Obligor.

            "Reduction Notice" has the meaning set forth in Section 1.3.

            "Regulatory Change" has the meaning set forth in Section 10.3.

            "Required Alternate Lenders" means, at any time, Alternate Lenders
with Commitments in excess of 66-2/3% of the Aggregate Commitment.

            "Required Takeout Price" means, with respect to any Term
Securitization, an amount equal to the sum of (i) the portion of the Aggregate
Principal required to be reduced at the time of such Term Securitization such
that after giving effect to the sale of the related Pool Loans, the Aggregate
Principal will not exceed the Borrowing Base, plus (ii) all accrued and unpaid
CP Costs, Interest and Fees at the time of such Term Securitization, plus (ii)
if any other Obligations are then due and payable at the time of such Term
Securitizations, the aggregate amount of such other Obligations.

            "Reserve Account" has the meaning set forth in Section 2.4.

            "Reserve Account Balance" means, on any Settlement Date, an amount
equal to the balance in the Reserve Account on such date after giving effect to
any withdrawals from or deposits to the Reserve Account on such date, including
any income from investment of funds in the Reserve Account (including accrued
discount realized on liquidation of any Eligible Investment purchased at a
discount).

            "Reserve Account Requirement" means, as of any date of
determination, an amount equal to the product of (i) 2.00% and (ii) the
Aggregate Principal, each determined on such date (after giving effect to any
Advance on such date or any reduction in the Aggregate Principal on such date).

            "Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of the general or limited
partnership interests of the Borrower now or hereafter outstanding, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any general or limited partnership
interests of the Borrower now or hereafter outstanding, (iii) any payment made
to redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire any general or limited
partnership interests of the Borrower now or hereafter outstanding, and (iv) any
payment of management fees by the Borrower (except for reasonable management
fees to the General Partner or PMC or its Affiliates in reimbursement of actual
management services performed).

            "S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.

                                       15
<PAGE>

            "Scheduled Termination Date" means February 6, 2006, as such date is
extended pursuant to Section 1.8 from time to time.

            "Secured Parties" means the Indemnified Parties.

            "Serviced Pool Delinquency Ratio" means, at any time, a percentage
equal to (i) the aggregate Principal Balances of all Loans serviced by PMC at
such time that are Delinquent Loans at such time divided by (ii) the aggregate
Principal Balances of all Loans serviced by PMC at such time.

            "Servicer" means, initially, PMC, or at any time such other Person
(which may be the Agent) then authorized pursuant to the Servicing Agreement to
service, administer and collect the Pool Loans.

            "Servicing Agreement" means that certain Servicing Agreement of even
date herewith among the Borrower, PMC and the Agent, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms.

            "Settlement Date" means the 10th day of each month, or if such day
is not a Business Day, the next succeeding Business Day; provided, that the
first Settlement Date shall not occur until March 10, 2005.

            "Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, association, limited liability company, joint venture
or similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.

            "Substitute Loan" means a Loan substituted by PMC for a Defective
Loan or a Defaulted Loan.

            "Substitution Adjustment" means, as to any date on which a
substitution occurs pursuant to Section 8.5, the sum of (a) the excess, if any,
of (i) the aggregate Principal Balances of all Deleted Loans to be replaced by
Eligible Substitute Loans (after application of principal payments received on
or before the date of substitution of any Eligible Substitute Loans as of the
date of substitution) over (ii) the Principal Balance of such Eligible
Substitute Loans and (b) the accrued and unpaid interest (accruing at the Loan
Rate for such Deleted Loan) on such excess through the Due Period relating to
the Settlement Date for which such Substitution Adjustment will be included as
part of Available Collections.

            "Substitution Date" has the meaning specified in Section 8.5(b).

            "Supplemental Loan Schedule" has the meaning specified in Section
8.5(b).

            "Tax Code" means the Internal Revenue Code of 1986, as the same may
be amended from time to time.

                                       16
<PAGE>

            "Term Securitization" has the meaning set forth in Section 8.7.

            "Terminating Alternate Lender" has the meaning set forth in Section
12.1(e).

            "Terminating Tranche" has the meaning set forth in Section 4.3(b).

            "Termination Date" has the meaning set forth in Section 2.5.

            "Termination Percentage" has the meaning set forth in Section 2.5.

            "Transaction Documents" means, collectively, this Agreement, each
Borrowing Notice, the Purchase Agreement, the Servicing Agreement, the Fee
Letter, the Lockbox Agreement, the Transfer Agreement and all other instruments,
documents and agreements executed and delivered in connection herewith.

            "Transaction Parties" has the meaning set forth in the preamble to
this Agreement.

            "Transfer Agreement" means a transfer agreement among one or more
Subsidiaries of PMC, as sellers and PMC, as buyer pursuant to which PMC
purchases Loans from such sellers, in form and substance acceptable to the
Agent.

            "Transfer Date" means, with respect to any Loan, the date such Loan
is sold to the Borrower under the Purchase Agreement or substituted for a
Deleted Loan under Article VIII hereof.

            "UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.

            "Underlying Note" means, with respect to a Loan, the note or other
evidence of indebtedness of the related Obligor in respect of such Loan.

            "Unmatured Amortization Event" means an event which, with the
passage of time or the giving of notice, or both, would constitute an
Amortization Event.

            "Usage Fee Percentage" has the meaning set forth in the Fee Letter.

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

                                       17
<PAGE>

                                                                      EXHIBIT II

                            FORM OF BORROWING NOTICE

                                       ---

                                PMC CONDUIT, L.P.

                                BORROWING NOTICE
                           dated ______________, 20__
                     for Borrowing on ________________, 20__

JPMorgan Chase Bank
National Association, as Agent
1 Bank One Plaza, 21st Floor
Asset-Backed Finance
Chicago, Illinois  60670-0596

Attention:  [____]

Ladies and Gentlemen:

            Reference is made to the Credit and Security Agreement dated as of
February 7, 2005 by and among PMC Conduit, L.P., as Borrower, PMC Conduit, LLC,
PMC Commercial Trust, as Servicer, Jupiter Securitization Corporation, JPMorgan
Chase Bank, National Association, as Agent, and the Alternate Lenders party
thereto (as amended, restated, supplemented or otherwise modified, the "Credit
Agreement"). Capitalized terms defined in the Credit Agreement are used herein
with the same meanings.

            1. The Borrower hereby certifies, represents and warrants to the
Agent and the Lenders that on and as of the Borrowing Date (as hereinafter
defined):

            (a) all applicable conditions precedent set forth in Article VI of
the Credit Agreement have been satisfied;

            (b) each of its representations and warranties contained in Section
5.1 of the Credit Agreement will be true and correct, in all material respects,
as if made on and as of the Borrowing Date;

            (c) no event will have occurred and is continuing, or would result

from the requested Advance, that constitutes an Amortization Event or Unmatured
Amortization Event;

            (d) the Amortization Date has not occurred; and

            (e) after giving effect to the Advance requested below, the
Aggregate Principal will not exceed the Borrowing Limit.

            2. The Borrower hereby requests that the Conduit Lender (or its

respective Alternate Lenders) make an Advance on ___________, 20__ (the
"Borrowing Date") as follows:

            (a) Aggregate Amount of Advance: $_____________

<PAGE>

            (b) If the Advance is not funded by the Conduit Lender, the Borrower
      requests that the Alternate Lenders make an Alternate Base Rate Advance
      that converts into LIBO Rate Advance with an Interest Period of _____
      months on the [__] Business Day after the Borrowing Date).

            3. Please disburse the proceeds of the Advance as follows:

            [Apply $________ to payment of principal and interest of existing
      Loans due on the Borrowing Date]. [Apply $______ to payment of fees due on
      the Borrowing Date]. [Wire transfer $________ to account no. ________ at
      ___________ Bank, in [city, state], ABA No. __________, Reference:
      ________].

            4. The Borrower hereby represents and warrants that the foregoing
      information and the information contained in the Loan Schedule attached
      hereto as Schedule I and the calculation of the Borrowing Base attached
      hereto as Schedule II, is true and accurate in accordance with Section
      5.1(g) of the Credit Agreement.

            IN WITNESS WHEREOF, the Borrower has caused this Borrowing Notice to
be executed and delivered as of this ___ day of ___________, ______.

                               PMC CONDUIT, L.P., as Borrower

                               By:  _________________________________
                               Name:
                               Title:

<PAGE>

                                                                      EXHIBIT IV

                         FORM OF COMPLIANCE CERTIFICATE

To: JPMorgan Chase Bank, National Association, as Agent

            This Compliance Certificate is furnished pursuant to that certain
Credit and Security Agreement dated as of February 7, 2005 among PMC Conduit,
L.P. (the "Borrower"), PMC Conduit, LLC, PMC Commercial Trust (the "Servicer"),
JPMorgan Chase Bank, National Association as agent and the "Alternate Lenders"
from time to time party thereto (the "Agreement").

THE UNDERSIGNED HEREBY CERTIFIES THAT:

            1. I am the duly elected _________________ of the Servicer.

            2. I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Servicer and its Subsidiaries during the
accounting period covered by the attached financial statements.

            3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
an Amortization Event or Unmatured Amortization Event, as each such term is
defined under the Agreement, during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate [, except as set forth in paragraph 4 below].

            [4. Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Servicer has taken, is taking, or
proposes to take with respect to each such condition or event:
____________________]

The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered as of ______________, 20__.

            PMC COMMERCIAL TRUST

            By:___________________________
            Name:
            Title:
<PAGE>

                                                                       EXHIBIT V

                          FORM OF ASSIGNMENT AGREEMENT

            THIS ASSIGNMENT AGREEMENT (this "Assignment Agreement") is entered
into as of the ___ day of ____________, ____, by and between
_____________________ ("Assignor") and __________________ ("Assignee").

                             PRELIMINARY STATEMENTS

            A. This Assignment Agreement is being executed and delivered in
accordance with Section 12.1(b) of that certain Credit and Security Agreement
dated as of February 7, 2005 by and among PMC Conduit, L.P., as Borrower, PMC
Conduit, LLC, PMC Commercial Trust, as Servicer, Jupiter Securitization
Corporation, JPMorgan Chase Bank, National Association as Agent, and the
Alternate Lenders party thereto (as amended, modified or restated from time to
time, the "Credit and Security Agreement") and that certain Asset Purchase
Agreement dated as of February 7, 2005 by and among Jupiter Securitization
Corporation, the Alternate Lenders from time to time party thereto and JPMorgan
Chase Bank, National Association, as Agent (as amended, modified or restated
from time to time, the "Liquidity Agreement"). Capitalized terms used and not
otherwise defined herein are used with the meanings set forth or incorporated by
reference in the Credit and Security Agreement.

            B. Assignor is an Alternate Lender party to the Credit and Security
Agreement and the Liquidity Agreement, and Assignee wishes to become an
Alternate Lender thereunder; and

            C. Assignor is selling and assigning to Assignee an undivided
____________% (the "Transferred Percentage") interest in all of Assignor's
rights and obligations under the Transaction Documents and the Liquidity
Agreement, including, without limitation, Assignor's Commitment, Assignor's
Liquidity Commitment and (if applicable) Assignor's Loans as set forth herein.

                                    AGREEMENT

            The parties hereto hereby agree as follows:

            1. The sale, transfer and assignment effected by this Assignment
Agreement shall become effective (the "Effective Date") two (2) Business Days
(or such other date selected by the Agent in its sole discretion) following the
date on which a notice substantially in the form of Schedule II to this
Assignment Agreement ("Effective Notice") is delivered by the Agent to Conduit
Lender, Assignor and Assignee. From and after the Effective Date, Assignee shall
be an Alternate Lender party to the Credit and Security Agreement for all
purposes thereof as if Assignee were an original party thereto and Assignee
agrees to be bound by all of the terms and provisions contained therein.

            2. If Assignor has no outstanding principal under the Credit and
Security Agreement or the Liquidity Agreement, on the Effective Date, Assignor
shall be deemed to have hereby transferred and assigned to Assignee, without
recourse, representation or warranty (except as provided in paragraph 6 below),
and the Assignee shall be deemed to have hereby irrevocably taken, received and
assumed from Assignor, the Transferred Percentage of Assignor's Commitment and
Liquidity Commitment and all rights and obligations associated therewith under
the terms of the Credit and Security Agreement and the Liquidity Agreement,
including, without limitation, the Transferred Percentage of Assignor's future
funding obligations under the Credit and Security Agreement and the Liquidity
Agreement.

<PAGE>

            3. If Assignor has any outstanding principal under the Credit and
Security Agreement and Liquidity Agreement, at or before 12:00 noon, local time
of Assignor, on the Effective Date Assignee shall pay to Assignor, in
immediately available funds, an amount equal to the sum of (i) the Transferred
Percentage of the outstanding principal of Assignor's Advances and, without
duplication, Assignor's Percentage Interests (as defined in the Liquidity
Agreement) (such amount, being hereinafter referred to as the "Assignee's
Principal"); (ii) all accrued but unpaid (whether or not then due) Interest
attributable to Assignee's Principal; and (iii) accruing but unpaid fees and
other costs and expenses payable in respect of Assignee's Principal for the
period commencing upon each date such unpaid amounts commence accruing, to and
including the Effective Date (the "Assignee's Acquisition Cost"); whereupon,
Assignor shall be deemed to have sold, transferred and assigned to Assignee,
without recourse, representation or warranty (except as provided in paragraph 6
below), and Assignee shall be deemed to have hereby irrevocably taken, received
and assumed from Assignor, the Transferred Percentage of Assignor's Commitment,
Liquidity Commitment, Advances (if applicable) and Percentage Interests (if
applicable) and all related rights and obligations under the Transaction
Documents and the Liquidity Agreement, including, without limitation, the
Transferred Percentage of Assignor's future funding obligations under the Credit
and Security Agreement and the Liquidity Agreement.

            4. Concurrently with the execution and delivery hereof, Assignor
will provide to Assignee copies of all documents requested by Assignee which
were delivered to Assignor pursuant to the Credit and Security Agreement or the
Liquidity Agreement.

            5. Each of the parties to this Assignment Agreement agrees that at
any time and from time to time upon the written request of any other party, it
will execute and deliver such further documents and do such further acts and
things as such other party may reasonably request in order to effect the
purposes of this Assignment Agreement.

            6. By executing and delivering this Assignment Agreement, Assignor
and Assignee confirm to and agree with each other, the Agent and the Alternate
Lenders as follows: (a) other than the representation and warranty that it has
not created any Lien upon any interest being transferred hereunder, Assignor
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made by any other Person in or
in connection with any of the Transaction Documents or the Liquidity Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of Assignee, the Credit and Security Agreement, the Liquidity Agreement
or any other instrument or document furnished pursuant thereto or the
perfection, priority, condition, value or sufficiency of any Collateral; (b)
Assignor makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, any Obligor, any Affiliate
of the Borrower or the performance or observance by the Borrower, any Obligor,
any Affiliate of the Borrower of any of their respective obligations under the
Transaction Documents or any other instrument or document furnished pursuant
thereto or in connection therewith; (c) Assignee confirms that it has received a
copy of each of the Transaction Documents and the Liquidity Agreement, and other
documents and information as it has requested and deemed appropriate to make its
own credit analysis and decision to enter into this Assignment Agreement; (d)
Assignee will, independently and without reliance upon the Agent, Conduit
Lender, the Borrower or any other Alternate Lender or Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Transaction Documents and the Liquidity Agreement; (e) Assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Transaction Documents and the Liquidity Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (f) Assignee agrees that it will perform in
accordance with their terms all of the obligations which, by the terms of the
Liquidity Agreement, the Credit and Security Agreement and the other Transaction
Documents, are required to be performed by it as an Alternate Lender or, when
applicable, as a Lender.

<PAGE>

            7. Each party hereto represents and warrants to and agrees with the
Agent that it is aware of and will comply with the provisions of the Credit and
Security Agreement, including, without limitation, Sections 14.5 and 14.6
thereof.

            8. Schedule I hereto sets forth the revised Commitment and Liquidity
Commitment of Assignor and the Commitment and Liquidity Commitment of Assignee,
as well as administrative information with respect to Assignee.

            9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

            10. Assignee hereby covenants and agrees that, prior to the date
which is one year and one day after the payment in full of all senior
indebtedness for borrowed money of Conduit Lender, it will not institute
against, or join any other Person in instituting against, Conduit Lender any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States.

            IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers of the
date hereof.

                                             [ASSIGNOR]

                                             By:  _________________________
                                             Title:

                                             [ASSIGNEE]

                                             By:  __________________________
                                             Title:

<PAGE>

                                                                      SCHEDULE A

                        COMMITMENTS OF ALTERNATE LENDERS

Alternate Lender                                      Commitment

JPMorgan Chase Bank, National Association             $100,000,000

<PAGE>

                                                                      SCHEDULE D

                              ELIGIBILITY CRITERIA

      1. Such Loan is denominated and payable only in United States dollars in
the United States of America and the related Mortgaged Property is located in a
state within the United States of America or within the District of Columbia.

      2. The related Obligor is not located (within the meaning of Section 9-307
of any applicable enactment of the UCC) in any jurisdiction outside of the
United States and its not (i) an Affiliate of any Transaction Party or (ii) the
United States of America or any state, agency, department or instrumentality of
the United States of America or any state thereof.

      3. Such Loan was originated by the applicable Originator in the United
States, in a state where such Originator is qualified to transact such business
in the ordinary course of its business, except to the extent that any failure to
be so qualified would not materially and adversely affect such Loan or the
related Mortgage or the transfer thereof or the enforceability of the Obligor's
obligations thereunder. Such Loan was not originated in, nor is such Loan
subject to the laws of, any jurisdiction under which the transfer and assignment
of such Loan to PMC and the Borrower would be unlawful, void or voidable. If
such Loan was originated by an Originator other than PMC, such Originator
transferred such Loan to PMC pursuant to the Transfer Agreement.

      4. Immediately prior to transfer of such Loan to the Borrower, each of the
Originator and PMC had good title to, and was the sole owner of, the Loan free
and clear of all Liens, other than Liens for which the Originator and/or PMC
obtained an executed release of Lien. Immediately upon the transfer thereof to
the Borrower pursuant to the Purchase Agreement, the Borrower will have good
title to such Loan, free and clear of all Liens and no Person other than the
Borrower will have any interest in such Loan, whether as mortgagee, assignee,
pledgee or otherwise.

      5. The information set forth in the Loan Schedule with respect to such
Loan is true and correct in all material respects.

      6. The related Loan File with respect to such Loan is complete.

      7. The terms of the related Underlying Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, whether for credit reasons
or otherwise, except by written instruments, executed in accordance with the
Credit and Collection Policy.

      8. The Underlying Note and the related Mortgage by their respective terms
are not subject to any right of rescission, setoff, abatement, diminution,
counterclaim or defense, including the defense of usury, nor will the operation
of any of the terms of the Underlying Note or the Mortgage, or the exercise of
any right thereunder in accordance with the terms thereof, render the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
setoff, abatement, diminution, counterclaim or defense, including the defense of
usury, and no such right of rescission, setoff, abatement, diminution,
counterclaim or defense has been asserted with respect thereto.

<PAGE>

      9. The related Mortgage has not been satisfied, canceled or subordinated,
in whole or in part, or rescinded, and the related Mortgaged Property has not
been released from the lien of the Mortgage, in whole or in part, nor has any
instrument been executed that would effect any such release, cancellation,
subordination or rescission.

      10. The related Underlying Note and the Mortgage delivered to the
Borrower, or its designee, are genuine originals (or with respect to the
Mortgage, a certified copy thereof) and each is the legal, valid and binding
obligation of the maker thereof, enforceable in accordance with its terms.

      11. Such Loan and the related Loan Documents are freely assignable by the
Originator and its assigns without the consent, authorization, approval or
notice to the related Obligor and such Loan Documents do not contain a
confidentiality provision that purports to restrict the ability of the Agent or
any Lender to exercise its rights under the Agreement, including, without
limitation, its right to review such Loan Documents.

      12. According to its terms, the related Underlying Note provides that the
amount payable thereunder will be due not more than 252 months following the
origination date of the Loan and as of the Cut-Off Date (or, in the case of a
Loan in which the Borrower acquires an interest after the Closing Date, as of
the applicable Transfer Date), the remaining term to maturity of such Loan is
less than or equal to 240 months.

      13. The related Underlying Note provides for level monthly payments
(except for the effects of periodic interest rate resets) and no balloon or
bullet payments at maturity.

      14. The Loan-to-Value Ratio of such Loan does not exceed 85%.

      15. There has been no fraud, dishonesty, misrepresentation or negligence
on the part of the Borrower or, to the Borrower's and Servicer's knowledge, the
Originator, PMC or the Obligor in connection with the origination of such Loan
or in connection with the transfer and contribution of such Loan to the
Borrower.

      16. There is no material default, breach, violation or event of
acceleration existing under the related Mortgage or the Underlying Note and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute such a default, breach, violation or
event of acceleration, and since the Cut-Off Date (or, in the case of a Loan in
which the Borrower acquires an interest after the Closing Date, since the
applicable Transfer Date) the Borrower has not waived any default, breach,
violation or event of acceleration.

      17. The related Underlying Note and the Mortgage comply with all
requirements of applicable federal, state and local laws and regulations. The
origination and servicing of the such Loan and the sale or contribution of such
Loan comply with any and all applicable requirements of any applicable federal,
state or local law, including, without limitation, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity and disclosure laws. To the Borrower's and Servicer's knowledge, the
related Mortgaged Property is in compliance in all material respects with all
applicable laws, zoning ordinances, rules, covenants and restrictions affecting
the construction, occupancy, use, and operation of such Mortgaged Property. To
the Borrower's and Servicer's knowledge, all

<PAGE>

inspections, licenses and certificates required, including certificates of
occupancy, whether by law, ordinance, regulation or insurance standards to be
made or issued with regard to the related Mortgaged Property, have been obtained
and are in full force and effect.

      18. Such Loan was originated by the Originator in the ordinary course of
its business in accordance with, and has been serviced since the date of
origination in compliance with the Credit and Collection Policy.

      19. Such Loan was not originated to enable the related Obligor to fund
delinquent payables of the related Obligor.

      20. Such Loan was not selected by the Borrower or the Originator for
inclusion in the Collateral on any basis intended to adversely affect the
Borrower, the Agent or the Lenders.

      21. As of the Cut-Off Date (or, in the case of a Loan in which the
Borrower acquires an interest after the Closing Date, as of the applicable
Transfer Date), such Loan is not 31 or more days contractually past due.

      22. As of the date of determination, such Loan is not and has never been a
Defaulted Loan.

      23. Such Loan bears interest at a floating rate of interest, payable
monthly in arrears.

      24. None of the Originator, PMC nor the Borrower has advanced funds or
induced, solicited or knowingly received any advance of funds from a party other
than the owner of the Mortgaged Property subject to the Mortgage, directly or
indirectly, for the payment of any amount required by such Loan.

      25. There are no delinquent taxes, ground rents, water charges, sewer
rents, assessments (including assessments payable in future installments) or
other outstanding charges affecting the related Mortgaged Property.

      26. The related Mortgaged Property is located in the state indicated on
the Loan Schedule and, except as reflected on the Loan Schedule, consists of a
single parcel of real property. The related Mortgaged Property is in good
repair, is free of damage and waste that would materially and adversely affect
its value and such Mortgaged Property has not been materially damaged by fire,
wind or other cause, which damage has not been fully repaired or for which
insurance proceeds have not been received or are not expected to be received in
an amount sufficient to pay for such repairs.

      27. The related Mortgage is a valid, subsisting and enforceable first
priority Lien (or second priority lien provided the Loan secured by the first
lien Mortgage is a Pool Loan) on the Mortgaged Property, including all buildings
on the Mortgaged Property and all fixtures related thereto, and all additions,
alterations and replacements made at any time with respect to the foregoing,
subject only to (i) Liens for current real property taxes and assessments not
yet due and payable, (ii) covenants, conditions and restrictions, rights-of-way,
easements and other matters of the public record as of the date of recording,
none of which individually or in the aggregate materially interfere with the
benefits of the security intended to be provided by the

<PAGE>

Mortgage or the operation and use of the related Mortgaged Property, and (iii)
other matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be provided
by the Mortgage or the use, enjoyment, value or marketability of the related
Mortgaged Property. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Loan establishes and
creates a valid, subsisting and enforceable first priority Lien on the property
described therein, except as reflected on the Loan Schedule. The related
Underlying Note is not secured by any collateral except the Lien of the
corresponding Mortgage and the security interest of any applicable security
agreement or chattel mortgage referred to in this paragraph.

      28. None of the Originator, PMC or the Borrower has any knowledge of any
mechanics' or similar liens or claims which have been filed for work, labor or
material (or any rights outstanding that under applicable law could give rise to
such lien) affecting the related Mortgaged Property which are or may be Liens
prior to, or equal or on parity with, the Lien of the Mortgage.

      29. The proceeds of such Loan have been fully disbursed and there is no
requirement for future advances thereunder, and any and all requirements as to
completion of any on-site or off-site improvements and as to disbursements of
any escrow funds therefor have been complied with.

      30. The related Mortgage contains provisions for the acceleration of the
payment of the unpaid principal balance of such Loan in the event the related
Mortgaged Property is sold without the prior consent of the Originator.

      31. As of the date of determination, there is no proceeding pending for
the total or partial condemnation of the related Mortgaged Property other than
(a) in connection with a curb cut or street widening or (b) a proceeding which
could not, in the reasonable business judgment of PMC, be expected to (i)
materially decrease the value of the related Mortgaged Property or (ii)
materially interfere with the current use or operation of the Mortgaged
Property.

      32. Such Loan is not secured by a ground lease.

      33. The related Mortgage contains customary provisions such as to render
the rights and remedies of the holder thereof adequate for the realization
against the related Mortgaged Property of the benefits of the security provided
thereby, including, (i) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (ii) otherwise by judicial foreclosure or power of sale.
To the Borrower's knowledge, there is no homestead or other exemption available
to the Obligor which would interfere with the right to sell the related
Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage.

      34. In the event the related Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by the Partnership or its assignees to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the Obligor.

<PAGE>

      35. The form of endorsement of the related Underlying Note satisfies the
requirement, if any, of endorsement in order to transfer all right, title and
interest of the party so endorsing, as noteholder or assignee thereof, in and to
such Underlying Note, and each form of assignment will be in recordable form and
will be sufficient to effect the assignment of and to transfer to the assignee
thereof, all right, title and interest under the related Mortgage to which that
assignment relates.

      36. A Phase I environmental report was prepared with respect to such
Mortgaged Property. The related Mortgaged Property was, as of its date of
origination of the related Underlying Note and as of the Transfer Date, in
material compliance with all applicable environmental laws and regulations.

      37. All escrow deposits, if any, and other payments relating to such Loan
have been delivered to the Servicer or its agent, and all amounts required to be
deposited by the Originator, PMC or the related Obligor have been deposited and
there are no deficiencies with regard thereto.

      38. The related Obligor has good title to the Mortgaged Property.

      39. The Lien of the related Mortgage is insured by an ALTA lender's title
insurance policy (or a binding commitment) or its equivalent, as adopted in the
applicable jurisdiction. The policy (or such binding commitment) insures the
Originator, its successors and assigns, as to the first-priority Lien of the
related Mortgage in the original principal amount after all advances of
principal, subject only to permitted encumbrances, none of which, individually
or in the aggregate should interfere with the current use of the related
Mortgaged Property or materially detract from the benefit of the first-priority
(except as reflected on the Loan Schedule) Lien of the Mortgage. The Originator
(including its successors and assigns) is the sole named insured of the policy
(or such binding commitment), and the policy (or such binding commitment) is
assignable to the Agent without the consent of or any notification to the
insurer. No claims have been made under such policy (or such binding
commitment), and the Borrower has no knowledge of any matter that would impair
or diminish the coverage of such policy.

      40. The related Mortgaged Property is covered by insurance policies
providing (i) coverage against loss or damage sustained by fire and extended
perils included within the classification "All Risk of Physical Loss" in an
amount sufficient to prevent the related Obligor from being deemed a co-insurer,
and to provide coverage of replacement or actual cost, consistent with industry
standards; and the policies contain a standard mortgagee clause naming the
mortgagee and its successors as loss payees; (ii) flood insurance (if any
portion of the Mortgaged Property is located in an area identified by the
Federal Emergency Management Agency as having special hazards); and (iii)
comprehensive general liability insurance in amounts as are generally required
by commercial mortgage lenders. The insurance policies contain clauses providing
they are not terminable and may not be reduced without ten (10) days prior
written notice to the mortgagee, and all premiums due and payable through the
Closing Date have been made. No notice of termination or cancellation with
respect to any such policies has been received by the Originator or the Borrower
which remains effective. The related Mortgage obligates the related Obligor to
maintain all such insurance at its cost and expense, and

<PAGE>

on the Obligor's failure to do so, authorizes the holder of such Mortgage to
maintain such insurance and to obtain reimbursement therefor from such Obligor.

      41. To the best of the Originator's, PMC's and the Borrower's knowledge,
the related Mortgaged Property was not, as of the Cut-Off Date (or the Transfer
Date, in the case of a Loan added to the Collateral after the Closing Date)
located within a one-mile radius of any site listed in the National Priorities
List as defined under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or on any similar state list of hazardous
waste sites which are known to contain any hazardous substance or hazardous
waste.

      42. To the best of the Originator's, PMC's and the Borrower's knowledge,
no improvement located on or being part of the Mortgaged Property is in
violation of any applicable zoning law or regulation.

      43. The Agent, in its sole and absolute discretion, has not notified PMC
or the Borrower that such Loan is not acceptable for any reason.

      44. Such Loan is not a Loan that was rejected for inclusion in any Term
Securitization (other than by reason of such Loan being originated after the
applicable cut-off date for such Term Securitization).

      45. The Principal Balance of such Loan, when added to the aggregate
Principal Balance of all other Pool Loans owed by the same Obligor or any
Affiliates thereof, does not cause the aggregate Principal Balance of all Pool
Loans owing by such Obligor and its Affiliates to exceed $4,000,000; provided,
that if the aggregate Principal Balance of all such Pool Loans exceeds
$4,000,000, only the portion in excess of $4,000,000 shall be deemed ineligible
pursuant to this criterion.

      46. As of the applicable Transfer Date, the inclusion of such Loan in the
Collateral does not cause the weighted average Loan-to-Value Ratio of all Pool
Loans (weighted by their respective Principal Balances as of such date) to
exceed 80%.

      47. The Principal Balance of such Loan does not exceed $4,000,000;
provided, that if the Principal Balance of such Loan exceeds $4,000,000, only
the portion in excess of $4,000,000 shall be deemed ineligible pursuant to this
criterion.

<PAGE>

                                                                      SCHEDULE E

                   HOTEL FRANCHISORS FOR APPROVED FRANCHISEES

ACCOR ECONOMY LODGING                  INNSUITES HOSPITALITY TRUST
Studio 6                               InnSuites Hotels & Suites
Motel 6
Red Roof Inn                           INTERCONTINENTAL HOTELS GROUP
                                       Holiday Inn
BEST VALUE INN                         Holiday Inn Express
Best Value Inn                         Holiday Inn Select
                                       Crown Plaza
BEST WESTERN INTERNATIONAL             Intercontinental
Best Western                           Stay Bridge
                                       Candlewood
BUCKHEAD AMERICA CORP
Country Hearth Inn                     JACKSON HOSPITALITY SERVICES
                                       Key West Inn
BUDGET HOST INTERNATIONAL
Budget Host                            LAQUINTA CORP.
                                       La Quinta Inns/Inns & Suites
CARLSON HOSPITALITY                    Baymont Inns & Suites
Country Inns & Suites
Raddison                               MARRIOTT CORP.
Park Inn                               Fairfield Inn
Park Plaza                             Courtyard by Marriott
                                       Town Place Suites
CENDANT                                Marriott Hotels
Days Inn                               Residence Inn
Village Inn                            Springhill Suites
Super 8
Ramada                                 NORTHCOTT HOSPITALITY
Ramada Ltd.                            AmericInn
Howard Johnson
Wingate Inn                            PRIME HOSPITALITY
Travelodge                             Amerisuites
Knights Inn                            Wellsley Inn & Suites
Amerihost
                                       STARWOOD HOTELS & RESORTS WORLDWIDE
CHOICE HOTELS                          Four Points
Comfort Inn                            Sheraton Hotels
Comfort Suites
Sleep Inn                              SHOLODGE
Quality Inn                            Guest House Inns
Clarion
Econolodge                             SUBURBAN FRANCHISE SYSTEMS
Friendship Inn                         Suburban Extended Stay Hotels
Rodeway
Mainstay Suites                        US FRANCHISE SYSTEMS
                                       Microtel
CLUBHOUSE LLC                          Hawthorn Suites
Clubhouse Inn & Suites                 Best Inn
Clubhouse Resorts
                                       VALUE PLACE LLC
HILTON HOTEL CORP.                     Value Place
Hampton
Hampton Inn & Suites                   WEST COAST HOSPITALITY
Homewood Suites                        Red Lion Inn
Hilton Garden Inn                      West Coast Hotels
Hilton Hotels
Doubletree                             WYNDHAM INTERNATIONAL
Embassy Suites                         Summerfield Suites
                                       Wyndham Hotels
HOSPITALITY INTERNATIONAL              Wyndham Garden
Scottish Inn
Red Carpet Inns                        WOODFIN SUITE HOTELS
Master Hosts Inn                       Woodfin Suite Hotels
Passport Inn                           Chase Suite Hotel by Woodfin
Downtowner Inn

<PAGE>

                                                                      SCHEDULE F

                               FINANCIAL COVENANTS

      A. Minimum Net Worth. The Companies' consolidated Net Worth shall not at
any time be less than the sum of (a) 90% of Net Worth as of the Closing Date,
plus (b) 100% of the Net Proceeds from any Equity Issuances by Borrower after
the Closing Date.

      B. Maximum Leverage Ratio. The ratio of the Consolidated Companies'
consolidated Total Liabilities to the Consolidated Companies' consolidated Net
Worth shall not at any time exceed 2.00 to 1.00.

      Capitalized terms used in this Schedule F shall have the meanings set
forth below:

      "Administrative Agent" means JPMorgan Chase Bank, National Association
(successor by merger to Bank One, NA) (or its successors appointed under Section
12 of the Credit Agreement), acting as administrative, managing and syndication
agent for Lenders under the Credit Documents.

      "Affiliate" of a Person means any other Person who directly or indirectly
controls, is controlled by, or is under common control with that Person. For
purposes of this definition (a) "control," "controlled by," and "under common
control with" mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
voting securities or other interests, by contract or otherwise) and (b) the
Companies are "Affiliates" of each other.

      "Asset Securitization" means any transaction or series of transactions
that may be entered into by any Company pursuant to which such Company or any of
its Subsidiaries may sell, convey or otherwise transfer any of their assets to a
Special Purpose Entity, and pursuant to which the Special Purpose Entity will,
in turn, pay to such Company a portion of the proceeds of a secured loan or debt
offering to public or private investors (with such secured loan or debt offering
being, among other things, non-recourse to Borrower).

      "Assignment" means any assignment described in Section 13.3 of the Credit
Agreement.

      "Borrower" means PMC Commercial Trust.

      "Capital Lease" means any capital lease or sublease which should be
capitalized on a balance sheet in accordance with GAAP.

      "CDO Subsidiary" means a Subsidiary (i) of which all of the issued and
outstanding common equity interests are held by Borrower or one or more of its
wholly-owned Subsidiaries, (ii) which is formed for the sole purpose of issuing
preferred securities to an unrelated third party, and (iii) which has no assets
other than its rights as payee in respect of Qualified Intercompany Debt.

      "Companies" means at any time, Borrower and each of its subsidiaries
(other than any Special Purpose Entities).

      "Consolidated Companies" means, at any time, Borrower and each of its
Subsidiaries (including any Special Purpose Entities that, according to GAAP,
are required to be shown on Borrower's consolidated Financials).

<PAGE>

      "Credit Agreement" means that certain Credit Agreement dated as of
February 29, 2004, as amended by that certain First Amendment dated as of March
15, 2004, that certain Second Amendment dated as of December 29, 2004 and that
certain Third Amendment dated as of February 7, 2005, among the Borrower, the
Administrative Agent and the Lenders.

      "Credit Documents" means (a) the Credit Agreement, certificates and
reports delivered under the Credit Agreement, and exhibits and schedules to the
Credit Agreement, (b) all agreements, documents, and instruments in favor of
Administrative Agent or Lenders (or Administrative Agent on behalf of Lenders)
ever delivered under the Credit Agreement or otherwise delivered in connection
with all or any part of the Obligation (other than Assignments), and (c) all
renewals, extensions, modifications and restatements of, and amendments and
supplements to, any of the foregoing, which are made in accordance with the
provisions of the respective Credit Documents.

      "Debt" means, with respect to any Person on any date of determination
(without duplication), (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations to pay the deferred purchase price of property or services,
except trade accounts payable arising in the ordinary course of business, which
are paid when due in accordance with ordinary-course payment terms or which are
being contested in good faith in appropriate proceedings, (d) all obligations
arising under acceptance facilities or facilities for the discount or sale of
accounts or loans receivable, (e) all direct or contingent obligations in
respect of letters of credit, (f) Capital Lease obligations, (g) liabilities
secured (or for which the holder of any obligations or liabilities has an
existing Right, contingent or otherwise, to be so secured) by any Lien existing
on property owned or acquired by that Person and (h) all guaranties,
endorsements and other contingent obligations for liabilities, obligations or
the maintenance of the financial condition of others, including obligations to
repurchase or purchase properties or to maintain or cause to maintain any
financial condition.

      "Debtor Relief Laws" means the Bankruptcy Code of the United States of
America and all other applicable laws providing for liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or suspension of payments or similar Governmental
Requirements affecting creditors' Rights.

      "Equity Issuance" means the issuance by Borrower of any shares of any
class of beneficial interests, stock, warrants, options or other equity
interests, whether pursuant to a public offering or otherwise, but does not
include (a) any present and future shares of beneficial interests, stock,
options or warrants issued to employees or trust managers of Borrower or (b) any
present and future shares of beneficial interests, stock, options or warrants
issued in respect of any dividend reinvestment plan established and maintained
by Borrower.

      "Financials" of a Person means balance sheets, profit and loss statements,
reconciliations of capital and surplus, and statements of cash flow prepared (a)
according to GAAP (subject to year-end audit adjustments with respect to interim
Financials) and (b) except as stated in Section 1.4 of the Credit Agreement, in
comparative form to prior year-end figures or corresponding periods of the
preceding fiscal year or other relevant period, as applicable.

      "GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable from time to time.

      "Lenders" means the financial institutions (including, without limitation,
Administrative Agent in respect of its share of Borrowings) named on Schedule 2
of the Credit Agreement or on the most recently amended Schedule 2 of the Credit
Agreement, if any, delivered by Administrative Agent under

<PAGE>

the Credit Agreement, and, subject to the Credit Agreement, their respective
successors and assigns (but not any Participant who is not otherwise a party to
the Credit Agreement).

      "Lien" means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement or encumbrance of any kind and any other
arrangement for a creditor's claim to be satisfied from assets or proceeds prior
to the claims of other creditors or the owners (other than title of the lessor
under an operating lease).

      "Net Income" of any Person means that Person's profit or loss determined
in accordance with GAAP.

      "Net Proceeds" means the net proceeds, whether received in cash or
otherwise, received before, on or after the date of consummation of a subject
transaction, by any Company from such transaction, after payment of (a) all
usual and customary brokerage commissions and all other reasonable fees and
expenses related to such transaction (including, without limitation, reasonable
attorney's fees and closing costs), and (b) any Debt (other than the Obligation)
relating to the assets being sold which must be repaid in connection with such
subject transaction.

      "Net Worth" means, for any Person, total beneficiaries' or stockholders'
equity, as applicable, as determined in accordance with GAAP.

      "Obligation" means (a) all present and future Debts, liabilities and
obligations of any Company to Administrative Agent, or any Lender and related to
any Credit Document, whether principal, interest, fees, costs, attorneys' fees
or otherwise, (b) all present and future Rate Management Obligations, (c) any of
the foregoing amounts that would become due but for the operation of 11 U.S.C.
Section 502 and 503 or any other provision of Title 11 of the United States
Code, (d) all present and future pre- and post-maturity interest on any of the
foregoing, including all post-petition interest if any Company voluntarily or
involuntarily files for protection under any Debtor Relief Law, and (e)
renewals, extensions, rearrangements and modifications of any character
whatsoever of any the foregoing.

      "Qualified Intercompany Debt" means any unsecured indebtedness, in a
principal amount not to exceed $100,000,000, owing by the Borrower to a CDO
Subsidiary from time to time and evidenced by one or more promissory notes or
other evidences of indebtedness, which indicate that such indebtedness is
subordinated to the Obligation (such subordination to be on terms reasonably
acceptable to the Administrative Agent). In any case, the Borrower shall deliver
the promissory notes or other documents evidencing the terms of such
indebtedness, containing all the materially final or substantially final terms,
to the Administrative Agent at least 5 Business Days in advance of the
incurrence of any Qualified Intercompany Debt.

      "Rate Management Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) under (i) any and all Rate
Management Transactions, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management Transactions.

      "Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into between
Borrower and any Lender or any Affiliate thereof which is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction

<PAGE>

(including any option with respect to any of these transactions) or any
combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures.

      "Rights" means rights, remedies, powers, privileges and benefits.

      "Special Purpose Entity" means a special purpose Wholly-owned Subsidiary
of Borrower, created in connection with the transactions contemplated by an
Asset Securitization, which engages in no activities, has no material
liabilities, and owns no other assets, other than those incidental to such Asset
Securitization.

      "Subsidiary" of any Person means any other Person of which (a) more than
50% (in number of votes) of the stock (or equivalent interests) is owned of
record or beneficially, directly or indirectly, by that Person or (b) such
Person serves as a general partner or in a similar capacity. Unless otherwise
specified or the context otherwise requires, "Subsidiary" refers to a Subsidiary
of Borrower.

      "Total Liabilities" means, at any time and for the Consolidated Companies,
all liabilities properly reflected on the Consolidated Companies' consolidated
balance sheet in accordance with GAAP (other than any Qualified Intercompany
Debt).

      "Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (or
equivalent interests) are owned by Borrower or one or more of its Wholly-owned
Subsidiaries.<PAGE>
                                                                    EXHIBIT 10.2

                                                                  EXECUTION COPY

                               SERVICING AGREEMENT

                                  by and among

                                PMC CONDUIT L.P.,
                                  as Borrower,

                              PMC COMMERCIAL TRUST,
                                   as Servicer

                                       and

                    JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
                                    as Agent

                          ----------------------------

                          Dated as of February 7, 2005

                          ----------------------------

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                             <C>
ARTICLE I  DEFINITIONS

ARTICLE II  REPRESENTATIONS, WARRANTIES AND COVENANTS

      Section 2.1.  Representations and Warranties of Servicer................................................   3
      Section 2.2.  Covenants of Servicer.....................................................................   4
      Section 2.3.  Closing Certificate and Opinion...........................................................   4
      Section 2.4.  Fidelity Bond and Insurance...............................................................   4
      Section 2.5.  Access to Certain Documentation and Information Regarding the Loans.......................   4
      Section 2.6.  Merger or Consolidation...................................................................   5

ARTICLE III  GENERAL ADMINISTRATION AND SERVICING OF THE LOANS

      Section 3.1.  General Duties of the Servicer............................................................   5
      Section 3.2.  No Assignment or Delegation of Duties by Servicer.........................................   6
      Section 3.3.  Establishment of Lockbox Account; Notices to Obligors; Deposits in Lockbox
               Account........................................................................................   7
      Section 3.4.  Permitted Withdrawals from the Lockbox Account............................................   8
      Section 3.5.  Payment of Taxes and Other Charges........................................................   8
      Section 3.6.  Collection of Certain Loan Payments.......................................................   9
      Section 3.7.  Limitation of Liability of Servicer' Officers and Others..................................   9
      Section 3.8.  Servicing Compensation; Advances and Expenses.............................................   9
      Section 3.9.  Maintenance and Release of Loan Documentation; Satisfaction of Mortgages..................  10
      Section 3.10.  Notice of Liens and Other Actions........................................................  11
      Section 3.11.  Waivers, Releases, Condemnations, Easements and Alterations..............................  11
      Section 3.12.  Limitation on Liability of Servicer and Others...........................................  12
      Section 3.13.  Property Address Change..................................................................  12

ARTICLE IV  SPECIFIC SERVICING PROCEDURES

      Section 4.1.  Assumption Agreements.....................................................................  12
      Section 4.2.  Servicing Delinquent Accounts; Liquidation of Loans.......................................  13
      Section 4.3.  Foreclosure Expenses......................................................................  15
      Section 4.4.  Title, Management and Disposition of REO Property.........................................  16

ARTICLE V  REPORTS TO BE PROVIDED BY SERVICER

      Section 5.1.  Monthly Reports...........................................................................  17
      Section 5.2.  Reports of Foreclosure and Abandonment of Mortgaged Property..............................  18
      Section 5.3.  Quarterly Statement as to Compliance......................................................  18
      Section 5.4.  Annual Independent Public Accountants' Servicing Report...................................  18

ARTICLE VI  AMORTIZATION EVENTS; REMEDIES

      Section 6.1.  Remedies..................................................................................  19
      Section 6.2.  Additional Remedies of Agent Upon Amortization Events.....................................  19
      Section 6.3.  Agent To Act; Appointment of Successor....................................................  19
      Section 6.4.  Waiver of Defaults........................................................................  20
</TABLE>

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                             <C>
ARTICLE VII  TERMINATION

      Section 7.1.  Servicer Not To Resign....................................................................  20
      Section 7.2.  Term of Agreement.........................................................................  20

ARTICLE VIII  MISCELLANEOUS PROVISIONS

      Section 8.1.  Amendment.................................................................................  21
      Section 8.2.  Governing Law.............................................................................  21
      Section 8.3.  Notices...................................................................................  21
      Section 8.4.  Severability of Provisions................................................................  21
      Section 8.5.  No Partnership............................................................................  21
      Section 8.6.  Counterparts..............................................................................  21
      Section 8.7.  Successors and Assigns; Beneficiaries; Assignment.........................................  21
      Section 8.8.  Indulgences; No Waivers...................................................................  22
      Section 8.9.  Titles Not To Affect Interpretation.......................................................  22
      Section 8.10.  Entire Agreement.........................................................................  22
      Section 8.11.  Recordation of Agreement.................................................................  22
      Section 8.12.  No Setoff................................................................................  22
</TABLE>

EXHIBIT A         Form of Lockbox Agreement
EXHIBIT B         Form of Lockbox Notice Letter
EXHIBIT C         Form of Monthly Report
EXHIBIT D         Form of Quarterly Officer's Certificate
EXHIBIT E         Form of Obligor Letter

<PAGE>

                               SERVICING AGREEMENT

      This Servicing Agreement (this "Agreement"), dated as of February 7, 2005
is made and entered into by and among PMC CONDUIT, L.P., a Delaware limited
partnership, as Borrower (the "Borrower"), PMC COMMERCIAL TRUST, a Texas real
estate investment trust, as servicer ( the "Servicer"), and JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION as agent (the "Agent").

                             PRELIMINARY STATEMENTS

      The Borrower is the owner of the Loans and the other property being
pledged, assigned and conveyed by it to the Agent for the benefit of the Lenders
(as defined below) pursuant to that certain Credit and Security Agreement, dated
as of the date hereof (the "Credit Agreement"), by and among the Borrower, PMC
Conduit, LLC, the Servicer, the other lenders party thereto (the "Lenders") and
the Agent. The Servicer is in the business, among other things, of servicing
Loans. The Borrower hereby appoints the Servicer to service the Loans that were
transferred by the Servicer to the Borrower and are included in the Collateral,
and the Servicer hereby accepts such appointment.

      All covenants and agreements made by the Borrower and the Servicer herein
are for the benefit of the Agent and the Secured Parties. The Borrower, the
Servicer and the Agent are entering into this Agreement for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.

      In consideration of the mutual agreements herein contained, the Borrower,
the Servicer and the Agent hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

      All capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in Exhibit I to the Credit Agreement.

      "Collection" means all payments received by the Servicer in respect of the
Mortgage Loans, including, without limitation, Monthly Payments, Principal
Payments, Liquidation Proceeds and insurance proceeds.

      "Determination Date" means, with respect to a Settlement Date, the close
of business on the last day of the related Due Period.

      "Environmental Law" means any and all federal, state and local statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment including, without
limitation, ambient air, surface water, ground processing, distribution, use,
treatment, storage,

<PAGE>

disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.

      "Law" means all statutes, rules, regulations, ordinances, orders or
decrees of any federal or state government or political subdivision, agency or
public official thereof that apply to or affect a Loan or Mortgaged Property or
the Servicer under this Agreement.

      "Liquidated Loan" means any Defaulted Loan as to which the Servicer has
certified to the Agent that all amounts which it expects to recover from or on
account of such Loan and related Mortgaged Property (including REO Property)
have been recovered and that no further Liquidation Proceeds will be received in
connection therewith.

      "Liquidation Expenses" means, with respect to Loans being liquidated and
REO Properties, expenses paid or incurred by or for the account of the Servicer
with respect to such Loans for (i) property protection expenses; (ii) property
sales expenses; (iii) foreclosure costs, including court costs and reasonable
attorneys' fees; and (iv) similar expenses reasonably paid or incurred in
connection with liquidation.

      "Liquidation Proceeds" means amounts received by the Servicer with respect
to such a Loan in connection with the liquidation of such Loan, whether from (i)
proceeds from a trustee's sale or judicial or nonjudicial foreclosure or
otherwise; (ii) payments received from guarantors; (iii) condemnation proceeds
received from any taking of the property by condemnation or otherwise; or (iv)
any final disposition of REO Property, in each case, net of related Liquidation
Expenses and any amounts required to be returned to the applicable Obligors
pursuant to applicable law.

      "Lockbox Account" means the bank account into which Obligors are directed
by the Servicer to make payments in respect of the Loans, which account is
maintained at JPMorgan Chase Bank, N.A. or another financial institution
approved by the Agent.

      "Lockbox Agreement" means an agreement in the form attached hereto a
Exhibit A or otherwise satisfactory to the Agent.

      "Monthly Payments" means, with respect to any Loans, each scheduled
monthly payment of principal and interest on such Loan, which is payable by an
Obligor from time to time under the related Underlying Note.

      "Monthly Report" shall have the meaning set forth in Section 5.1 hereof.

      "Principal Prepayments" means any payment of principal or other recovery
of principal (whether in the form of Liquidation Proceeds or otherwise) on a
Loan which is received in advance of its scheduled due date and which is not
accompanied by an amount of interest representing the full amount of scheduled
interest due on any date or dates in any month or months subsequent to the month
of prepayment.

      "Realized Loss" means, with respect to each Liquidated Loan, an amount
(not less than zero or greater than the related Principal Balance as of the date
of the final liquidation) equal to the Principal Balance of the Loan as of the
date of liquidation, minus the Liquidation Proceeds

                                       2

<PAGE>

relating to such Liquidated Loan applied to principal (such Liquidation Proceeds
to be applied first to unpaid interest due on the Liquidated Loan and then to
the principal balance of the Liquidated Loan).

      "REO Property" means a Mortgaged Property acquired by the Servicer on
behalf of the Borrower through foreclosure or deed in lieu of foreclosure,
pursuant to Section 4.4 hereof.

      "Reporting Date" means the third (3rd) Business Day preceding each
Settlement Date.

      "Servicing Expenses" shall have the meaning set forth in Section 3.8
hereof.

      "Servicing Fee" means an amount payable monthly in arrears on each
Settlement Date, equal, for each month during the term of the Credit Agreement,
to one-twelfth of 0.30% per annum times the aggregate outstanding Pool Principal
Balance on the immediately preceding Determination Date.

      "Servicing Officer" means an officer or other authorized employee of the
Servicer involved in, or responsible for, the administration and servicing of
the Loans whose name appears on an incumbency certificate of servicing officers
and employees furnished to the Agent by the Servicer, as such certificate may
from time to time be amended.

      "Servicing Standard" means to service and administer the Loans with the
same care, skill and diligence with which the Servicer services and administers
mortgage loans held for its own account, and with which prudent institutional
commercial mortgage lenders and loan servicers service comparable Loans, and
with a view to the timely collection of all scheduled payments of principal and
interest under the Loans or, if a default under a Loan occurs and continues and
no satisfactory arrangements can be made for the collection of the delinquent
payments, the maximization of the recovery of such Loan to the Agent and Lenders
(as a collective whole) on a present value basis.

                                   ARTICLE II
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

            Section 2.1. Representations and Warranties of Servicer. The
Servicer hereby reaffirms those representations and warranties it has made
pursuant to Section 5.1 of the Credit Agreement. In addition, the Servicer
hereby represents and warrants on behalf of itself to the Agent for the benefit
of the Agent, the Lenders and the Borrower as of the Closing Date, and at all
times during the term of this Agreement shall be deemed to represent and warrant
on behalf of itself, that:

            (a) it does not believe, nor does it have any reason or cause to
believe, that it cannot perform each of its covenants contained in this
Agreement; and

            (b) it is not in default with respect to any order or decree of any
court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default might have consequences that would materially
and adversely affect the condition

                                       3

<PAGE>

(financial or other) or operations of the Servicer or its properties or might
have consequences that would materially and adversely affect its performance
hereunder.

            Section 2.2. Covenants of Servicer. The Servicer hereby reaffirms
those covenants specified in Article VII of the Credit Agreement. The Servicer
hereby agrees with respect to itself that during the term of this Agreement, it
shall maintain all licenses, permits, charters and registrations which are
material to the performance by the Servicer of its obligations under this
Agreement.

            Section 2.3. Closing Certificate and Opinion. On the Closing Date,
the Servicer will deliver to the Borrower and the Agent an Opinion of Counsel,
dated the Closing Date, in form and substance satisfactory to the Agent, as to
the due authorization, execution and delivery of this Agreement by the Servicer
and the enforceability thereof and such other matters as reasonably requested by
the Agent. On the Closing Date, the Servicer shall also deliver an Officer's
Certificate, dated the Closing Date, signed by two Authorized Officers of the
Servicer, to the effect that:

            (a) the representations and warranties contained in Section 5.1 of
the Credit Agreement are true and correct in all material respects as of the
Closing Date;

            (b) no Amortization Event or Unmatured Amortization Event exists;
and

            (c) the Servicer maintains such errors and omissions insurance and
fidelity bond coverage as is required by this Agreement.

            Section 2.4. Fidelity Bond and Insurance. The Servicer shall
maintain with a responsible company, at its own expense, a blanket fidelity bond
in a minimum amount of $1,000,000 (the "Fidelity Bond") and an errors and
omissions insurance policy with coverage in an amount deemed reasonable by the
Servicer (but in no event less than $1,000,000) with coverage on all officers,
employees or other persons acting in any capacity requiring such persons to
handle funds, money, documents or papers relating to the Loans ("Servicer
Employees"). Any such fidelity bond and errors and omissions insurance shall
protect and insure the Collateral and the Agent, as Agent for the Lenders, its
officers, employees and agents against losses, including losses resulting from
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
the Servicer's employees. Such fidelity bond shall name the Agent, for the
benefit of the Secured Parties, as a loss payee and shall provide that such bond
cannot be cancelled without 30 days' prior notice to the Agent. No provision of
this Section 2.4 requiring such fidelity bond and errors and omissions insurance
shall diminish or relieve the Servicer from its duties and obligations as set
forth in this Agreement. Upon the request of the Agent, the Servicer shall cause
to be delivered to the Agent a certified true copy of such fidelity bond and
insurance policy. Coverage of the Servicer under a policy or bond obtained by an
Affiliate of the Servicer and providing the coverage required by this Section
shall satisfy the requirements of this Section.

            Section 2.5. Access to Certain Documentation and Information
Regarding the Loans. The Servicer shall provide to the Agent and the Borrower,
the Lenders and their representatives or designees, access to the documentation
regarding the Loans, such access being

                                       4
<PAGE>

afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer provided that such access shall
not be requested more frequently than is reasonable or justifiable; provided,
further, however, following the occurrence and during the continuance of an
Amortization Event, Borrower and the Agent shall have unfettered access to the
documentation relating to the Loans. The Servicer shall at all times maintain
accurate records and books of account and an adequate system of audit and
internal controls. All accounting and loan servicing records pertaining to each
Loan shall be maintained in such manner as will permit the Agent and the Lenders
or their duly authorized representatives and designees to examine and audit and
make legible reproductions of records upon reasonable prior notice and during
reasonable business hours. All such records shall be maintained until no Loans
remain outstanding or such longer period as is required by Law, including but
not limited to, all transaction registers and loan ledger histories.

            Section 2.6. Merger or Consolidation. The Servicer will keep in full
effect its existence, rights and franchises, and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Agreement or any of the Loans it services and to perform its duties under this
Agreement. The Servicer shall not merge with, consolidate with or otherwise sell
substantially all of its assets to, another Person except in accordance with the
Purchase Agreement and in accordance with this Section 2.6. Any Person into
which the Servicer may be merged or consolidated, or any Person resulting from
any merger, conversion or consolidation to which the Servicer shall be a party,
or any Person succeeding to the business of the Servicer, shall be an
established Loan servicing institution that has a net worth of at least
$50,000,000 (unless such Person is then the Servicer hereunder or is otherwise
consented to in writing by the Agent and the Required Alternate Lenders) and
shall be the successor of the Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, provided such successor accepts
the terms and conditions of this Agreement. The Servicer shall, upon making a
determination that it will enter into any such merger or consolidation, send
written notice thereof to the Agent which shall in no event be less than thirty
(30) days prior written notice.

                                  ARTICLE III
                GENERAL ADMINISTRATION AND SERVICING OF THE LOANS

            Section 3.1. General Duties of the Servicer.

            (a)   For and on behalf of the Borrower, the Agent and the Secured
Parties, the Servicer shall service and administer the Loans in accordance with
the provisions of this Agreement and the instructions of the Agent hereunder.
Unless otherwise specified herein with respect to specific obligations of the
Servicer, the Servicer shall service and administer the Loans in the best
interests of, and for the benefit of, the Lenders, in accordance with the Credit
and Collection Policy and the Servicing Standard.

            (b)   Consistent with the terms of this Agreement, the Servicer may
waive, modify or vary any term of any Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Obligor if, in the Servicer's reasonable

                                       5
<PAGE>

determination, such waiver, modification, postponement or indulgence is not
materially adverse to the interests of the Secured Parties, is consistent with
the Credit and Collection Policy and the Servicing Standard; provided, however,
that the Servicer may not permit any modification (except in connection with a
plan of liquidation or reorganization of the related Obligor) with respect to
any Loan that would decrease the Loan Rate or the default rate, forgive the
payment of any principal or interest (unless in connection with the liquidation
of the related Loan or in connection with a plan of liquidation or
reorganization of the related Obligor), release any primary collateral (the
first lien Mortgage) securing the Loan or defer or extend the final maturity
date of such Loan without the written consent of the Agent. Notwithstanding the
foregoing, in the event that any Loan is a Defaulted Loan, the Servicer,
consistent with the Servicing Standard and upon written notice to the Agent,
may, so long as no Amortization Event exists and it deems such action reasonably
prudent in order to maximize Collections on such Loan, also waive, modify or
vary any term of such Loan (including modifications that would change the Loan
Rate or the default rate, forgive the payment of any principal or interest,
waive any prepayment fee or penalty, release any primary collateral securing the
Loan or defer or extend the final maturity date of such Loan. No such waiver or
modification described above shall change the status of an otherwise ineligible
Loan to an Eligible Loan). Without limiting the generality of the foregoing, and
subject to the consent of the Agent and in accordance with the Servicing
Standard, the Servicer shall continue, and is hereby authorized and empowered,
to execute and deliver on behalf of the Agent, all instruments of satisfaction
or cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Loans it services and with respect
to the Mortgaged Properties. If reasonably required by the Servicer, the
Borrower shall furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.

            Section 3.2. No Assignment or Delegation of Duties by Servicer.

            (a)   The Servicer, as an independent contractor, shall service and
administer the Loans and shall have full power and authority, acting alone, to
do any and all things in connection with such servicing and administration which
the Servicer may deem necessary or desirable and consistent with the terms of
this Agreement. The Servicer may not enter into subservicing agreements (except
with an Affiliate) for any servicing and administration of Loans without the
prior written consent of the Agent. Except as expressly provided herein, the
Servicer shall not assign or transfer (except to an Affiliate) any of its
rights, benefits or privileges hereunder to any other Person, or delegate to or
subcontract with, or authorize or appoint any other Person to perform any of the
duties, covenants or obligations to be performed by the Servicer hereunder,
without notice to the Agent and without the prior written consent of the Agent
and absent such written consent any agreement, instrument or act purporting to
effect any such assignment, transfer, delegation or appointment shall be void.

            (b)   Notwithstanding any subservicing agreement or any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a sub-servicer or reference to actions taken through a sub-servicer
or otherwise, the Servicer shall remain obligated and primarily liable for the
servicing and administering of the Loans in accordance with the provisions of
this Agreement and the other Transaction Documents without diminution of such
obligation or liability by virtue of such subservicing agreements or
arrangements or by

                                       6
<PAGE>

virtue of indemnification from the sub-servicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Loans. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on a Loan when a sub-servicer has received such
payments. The Servicer shall be entitled to enter into any agreement with a
sub-servicer for indemnification of the Servicer by such sub-servicer, and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.

            (c) Any subservicing agreement that may be entered into and any
transactions or services relating to the Loans involving a sub-servicer shall be
deemed to be between the sub-servicer and the Servicer alone, and the Agent and
Lenders shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the sub-servicer except as
set forth in Section 3.2(d). The Servicer shall be solely liable for all fees
owed by it to any sub-servicer irrespective of whether the Servicer's
compensation pursuant to this Agreement is sufficient to pay such fees. Each
sub-servicing agreement shall provide that it is assignable in accordance with
Section 3.2(d) and may be terminated in accordance with such subsection.

            (d) In the event a successor Servicer is appointed hereunder
(including by reason of an Amortization Event), the Agent or its designee may in
its sole discretion assume all of the rights and obligations of the predecessor
Servicer under each subservicing agreement that the predecessor Servicer may
have entered into, unless the Agent or designee elects to terminate any such
subservicing agreement. Any fee payable in connection with such a termination
will be payable by the predecessor Servicer. If the Agent, its designee or the
successor Servicer for the Agent elects to assume all of the Servicer's rights
and obligations under a subservicing agreement, then the Agent, such designee or
such successor Servicer shall be deemed to have replaced the predecessor
Servicer as a party to such subservicing agreement to the same extent as if the
subservicing agreements had been assigned to the assuming party, except that the
predecessor Servicer shall not thereby be relieved of any liability or
obligations under the subservicing agreements with regard to events that
occurred prior to the date the predecessor Servicer ceased to be the Servicer
hereunder. The predecessor Servicer, at its expense and without right of
reimbursement therefor, shall, upon the request of the Agent, deliver to the
assuming party all documents and records and afford the assuming party
reasonable access (to the extent practicable) to the computer systems,
electronic files and personnel as they relate to each subservicing agreement and
the Loans then being serviced and an accounting of amounts collected and held by
it and otherwise use its best efforts to effect the orderly and efficient
transfer of the subservicing agreements to the assuming party.

            (e) The Servicer shall be liable for all acts and omissions of any
sub-servicer, delegate, subcontractor or other agent appointed pursuant to this
Agreement. Nothing contained in this Section 3.2 shall prohibit or be deemed to
prohibit the Servicer from contracting with third parties to perform duties that
are not duties of the Servicer hereunder that the Servicer deems reasonably
necessary in connection with the servicing of the Loans for which it is
responsible for servicing including, without limitation, title work, surveying,
environmental consulting, property management and maintenance, construction,
engineering and architectural consulting.

            Section 3.3. Establishment of Lockbox Account; Notices to Obligors;
Deposits in Lockbox Account.

                                       7
<PAGE>

            (a) On or prior to the Closing Date, the Servicer shall cause to be
established and maintained, at the Servicer's expense, the Lockbox Account with
JPMorgan Chase Bank, N.A. or another financial institution approved by the Agent
and which has entered into a Lockbox Agreement.

            (b) Within three (3) Business Days after the Closing Date, the
Servicer will prepare and deliver to each of the Obligors with respect to the
Loans, with a copy of such correspondence to the Agent, notices in the form
attached hereto as Exhibit B, directing each such Obligor to send all future
Monthly Payments or Principal Prepayments directly to the Lockbox Account. Prior
to the time the Obligations are satisfied in full, the Servicer will not direct
the Obligors to send Monthly Payments or Principal Prepayments to any other
address without the prior written consent of the Agent.

            (c) Notwithstanding the foregoing notices, if the Servicer receives
any Collections, including, without limitation, any Monthly Payments, late
payment charges or other payments relating to any Loan, the Servicer will
receive such funds in trust for the Agent and the Secured Parties and will
forward such funds to the Lockbox Account no later than the Business Day
immediately following the date the Servicer obtains knowledge of such receipt.
In addition, any Liquidation Proceeds received by the Servicer will be deposited
into the Lockbox Account no later than the Business Day immediately following
the day the Servicer obtains knowledge of such receipt.

            (d) Upon receipt of notice that the institution holding the Lockbox
Account no longer wishes to hold the Lockbox Account or upon such institution
failing to meet with Agent approval, the Agent will provide notice thereof to
the Servicer and the Servicer will, within five (5) Business Days, cause to be
executed a new Lockbox Agreement and to be established and maintained, at its
expense a new Lockbox Account at a financial institution approved by the Agent.
Within five (5) Business Days of establishing the new Lockbox Account, the
Servicer will prepare and deliver to each of the Obligors with respect to the
Loans for which it is responsible for servicing, with copies of such
correspondence to the Agent, notices, in the form of Exhibit B attached hereto,
directing each such Obligor to send all future Monthly Payments directly to the
Lockbox Account. The Servicer will not add, terminate or replace a Lockbox Bank
unless it has obtained a new Lockbox Agreement and shall cause the Lockbox
Account to be subject to a Lockbox Agreement at all times.

            Section 3.4. Permitted Withdrawals from the Lockbox Account. On a
daily basis, all deposits to the Lockbox Account shall be withdrawn
automatically and transferred to the Collection Account established under the
Credit Agreement. The Agent shall cause the entity holding the Lockbox Account
to forward funds held therein as provided herein.

            Section 3.5. Payment of Taxes and Other Charges. If the Servicer
receives notice that any taxes, assessments or other charges which are or may
become a lien upon the Mortgaged Property are overdue, the Servicer will give a
written demand to the Obligor to pay such amounts and will verify whether such
payment has been made within sixty (60) days after mailing such notice (but in
any event prior to the time that any taxing authority commences to exercise its
available remedies), subject to any right, pursuant to the Mortgage, of an
Obligor who is contesting the validity of such charges and has paid to the
Servicer a deposit or security in

                                       8
<PAGE>

the amount of the contested charge plus possible costs, interest and penalties
or who has otherwise established adequate reserves against such liability in
accordance with generally accepted accounting principles; provided, further,
however, that this provision shall not have the effect of permitting the
Servicer to take, or fail to take, any action in respect of the payments
described herein that would adversely affect the interest of the Agent in any
Mortgaged Property. If such amounts have not been paid by the Obligor or the
Obligor has not deposited or reserved funds therefor as described in the
immediately preceding sentence, the Servicer will promptly make such payment as
a Servicing Expense and request reimbursement from the Obligor, and from the
Agent in accordance with Section 3.8 hereof.

            Section 3.6. Collection of Certain Loan Payments. The Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Loans. Consistent with the foregoing, the Servicer shall not,
unless the charging or collection of any such late payment charge, prepayment
fee, assumption fee or any penalty or interest would result in the violation or
contravention of applicable Law, waive or permit to be waived, except pursuant
to the Servicer's customary servicing procedures, any late payment charge or
assumption fee. If an Amortization Event or Unmatured Amortization Event shall
have occurred and be continuing, the Servicer shall not, unless the charging or
collection of any such prepayment fee or penalty would result in the violation
or contravention of applicable Law, waive or permit to be waived any prepayment
fee or any penalty or interest in connection with the prepayment of a Loan.
Notwithstanding any other provisions hereof, the Servicer shall not charge or
impose on any Obligor, nor seek to charge or impose on any Obligor, nor assert a
right to receive, any fee, charge, premium or penalty that if charged or
collected would violate or contravene any Law, including usury laws or the terms
of the related Loan.

            Section 3.7. Limitation of Liability of Servicer' Officers and
Others. No director, officer, employee or agent of the Servicer shall be under
any liability to the Agent, the Borrower, the Lenders or any other persons for
any action taken by them or for their refraining to take any action in good
faith pursuant to this Agreement or for errors in judgment; except that such
provision shall not protect any of them from liability which would be imposed by
reason of willful misfeasance, willful misconduct, bad faith or negligence.

            Section 3.8. Servicing Compensation; Advances and Expenses.

            (a) As compensation for its services hereunder, the Servicer shall
be paid the Servicing Fee with respect to the Loans being serviced under this
Agreement. The Servicer shall be required to pay all Servicing Expenses incurred
by it in connection with its servicing activities hereunder and shall be
entitled to reimbursement therefor as described in Section 3.8(b). The Servicing
Fee shall be paid to the Servicer monthly on each Settlement Date in accordance
with Section 2.2(c) of the Credit Agreement.

            (b) All reasonable and customary "out-of-pocket" costs and expenses
incurred in the performance by the Servicer of its servicing obligations
hereunder ("Servicing Expenses") shall constitute routine servicing
responsibilities of the Servicer, which shall include, but are not limited to,
expenditures for the following, subject to the provisions of this Agreement: (i)
attorneys' fees, trustee fees under any deed of trust, recording, filing and
publication fees, title report and title search costs, costs associated with
environmental audits, court costs, witness fees

                                       9
<PAGE>

and all other costs incurred in respect of any enforcement of a Loan, any
judicial foreclosure, or any foreclosure sale, trustee's sale or acquisition in
lieu of foreclosure, or in respect of the insurance, sale or other disposition
of any Mortgaged Property or REO Property; (ii) repair, restoration, maintenance
or other protection of any Mortgaged Property (whether incurred before or after
such property became an REO Property) in accordance with and subject to the
provisions of this Agreement, as applicable and (iii) compliance with the
Servicer's obligations under Section 3.5 hereof; provided, that the Servicer
shall not be obligated to incur such Servicing Expenses if it has determined in
good faith that such Servicing Expenses will not ultimately be recoverable from
the related Obligor, from the related Liquidation Proceeds or otherwise from
proceeds or collections on the related Loan. Servicing Expenses shall not
include any portion of the Servicer's overhead or normal salary and operating
expenses. The Servicer shall be entitled to be reimbursed for Servicing Expenses
(i) incurred in connection with foreclosure pursuant to Section 4.3; (ii) out of
the Collections paid by any Obligor which, under the terms of the related Loan,
are specifically allocable to such expenses; and (iii) otherwise out of any
available funds otherwise released to the Borrower under Section 2.2(c)(viii) of
the Credit Agreement.

            Section 3.9. Maintenance and Release of Loan Documentation;
Satisfaction of Mortgages.

            (a) The Servicer shall retain, with respect to each Loan, the
originals (or copies if originals are not available) of all Loan Files. Each
Loan File shall remain the property of the Borrower pledged to the Agent for the
benefit of the Lenders and shall be held by the Servicer in trust for the
benefit of the Agent on behalf of the Lenders. Upon written request of the
Agent, the Servicer shall immediately deliver all or any of such instruments,
records and documents in its possession or custody to the Agent, together with a
list identifying each loan to which such records pertain. The Servicer, at its
option, may microfilm, microfiche or otherwise condense any records or documents
constituting a part of, or relating to, any Loan or any Loan File for which it
is responsible, provided that the Servicer, upon written request by the Agent,
promptly reproduces in their entirety any or all such records or documents at no
cost to the Agent.

            (b) The Servicer shall maintain each Loan File for a period of four
(4) years after the related Loan has been paid in full, is foreclosed upon or is
otherwise liquidated, or such longer period as may be required by Law. The
Servicer shall maintain an appropriate account record for each Loan which shall
include the permanent loan number for each Loan serviced by the Servicer as
shown on the Loan Schedule. Any system utilized for the Loan account records
shall be capable of producing, for any Loan, an account transcript itemizing in
chronological order the date, amount and application of each Monthly Payment by
due date and other information affecting the amounts paid by the Obligor,
including the latest outstanding Principal Balance.

            (c) The Servicer shall not grant a satisfaction or release of a
Mortgage without having obtained payment in full of the indebtedness secured by
the Mortgage, nor shall the Servicer otherwise prejudice any right the Agent may
have under the mortgage instruments, subject to Section 4.1 hereof. Upon the
prepayment in full or other liquidation of a Loan, the Servicer shall
immediately deposit the prepayment or Liquidation Proceeds in the Lockbox
Account or the Collection Account and prepare and deliver to the Agent a request
for the

                                       10
<PAGE>

appropriate instrument releasing the Mortgaged Property from the lien of the
Mortgage, together with an Officer's Certificate (i) certifying that (A) all
amounts that the Obligor is obligated to pay under the Underlying Note, the
Mortgage and any other document pertaining to the Loan, including, but not
limited to, all required payments of principal and interest, have been paid in
full and deposited in the Lockbox Account or the Collection Account; or (B) all
Liquidation Proceeds that the Servicer reasonably believes will be collected
with respect to a Liquidated Loan have been collected and deposited in the
Lockbox Account or the Collection Account; and (ii) requesting that the Agent
execute and deliver to the Servicer the appropriate instrument prepared by the
Servicer if necessary to release the lien of the Mortgage, including release to
the Servicer of the Underlying Note, if in Agent's possession, bearing written
evidence of cancellation or assignment thereof, as appropriate. The Agent shall,
upon receipt of a written request from a Servicing Officer, execute any document
provided to the Agent by the Servicer or take any other action requested in such
request, that is, in the opinion of the Servicer as evidenced by such request,
required by any state or other jurisdiction to discharge the lien of a Mortgage
upon the satisfaction thereof and the Agent will sign and post, but will not
guarantee receipt of, any such documents to the Servicer, or such other party as
the Servicer may direct in writing, within five (5) Business Days of the Agent's
receipt of such certificate or documents. Such certificate or documents shall
establish to the Agent's satisfaction that the related Loan has been paid in
full by or on behalf of the Obligor and that such payment has been deposited in
the Lockbox Account or the Collection Account, as the case may be. Any
applications for partial release of any part of a Mortgaged Property must be
approved in the manner set forth in Section 3.11 hereof. If the Servicer at any
time seeks to initiate a foreclosure proceeding with respect to any Mortgaged
Property, then the Servicer shall deliver to the Agent, for signature by the
Agent, if necessary under applicable Law, any court pleadings, requests for
Agent's sale or other documents necessary to the foreclosure or to any legal
action brought to obtain judgment against the Obligor on the Underlying Note or
the Mortgage, or to obtain a deficiency judgment, or to enforce any other
remedies or rights provided by the Underlying Note or the Mortgage or otherwise
available at law or in equity, provided that the Servicer shall be entitled to
make the Agent a party to any litigation without the prior consent of the Agent.
The Servicer shall also deliver to the Agent an Officer's Certificate requesting
that such pleadings or documents be executed by the Agent and certifying as to
the reason such documents or pleadings are required and that the execution and
delivery thereof by the Agent will not invalidate the Mortgage except for the
termination of such lien upon completion of the proposed foreclosure.

            (d) The Servicer shall, at its expense, prepare and deliver to the
Agent any instruments required in connection with substitution of a Loan
pursuant to Section 8.5 of the Credit Agreement and will pay any recording or
filing costs associated therewith.

            Section 3.10. Notice of Liens and Other Actions. The Servicer shall,
at all times, exercise reasonable efforts to prevent any Lien or judicial levy
upon or writ of attachment against a Mortgaged Property of which the Servicer is
notified or otherwise has knowledge, which is, or may be, superior to the lien
of the Mortgage.

            Section 3.11. Waivers, Releases, Condemnations, Easements and
Alterations. Any applications for partial releases of real property and releases
of personal property which are part of a Mortgaged Property, the creation or
release of easements, waivers of rights under any Mortgage, consent to
alteration, removal or demolition of improvements and other matters

                                       11
<PAGE>

affecting the Mortgage or the Mortgaged Property, other than those which are
contractually provided for in the Underlying Note or related loan documents,
shall be subject to the prior written approval of the Agent which consent shall
not be unreasonably withheld and which shall be provided only upon written
certification by the Servicer that such action is consistent with the Servicing
Standard and the relevant Mortgage and the ability to collect under the
Underlying Note will not be adversely affected by such release.

            Section 3.12. Limitation on Liability of Servicer and Others. The
Servicer and any director, officer, employee or agent of the Servicer may rely
on any document of any kind which it in good faith reasonably believes to be
genuine and to have been adopted or signed by the proper authorities respecting
any matters arising hereunder. Subject to the terms of Section 10.2 of the
Credit Agreement, the Servicer shall have no obligation to appear with respect
to, prosecute or defend any legal action which is not incidental to the
Servicer's duty to service the Loans in accordance with this Agreement. The
Borrower agrees to indemnify and hold the Servicer harmless from any loss,
claim, demand, liability or expense (including, without limitation, past acts of
predecessor Servicer and fees and expenses of legal counsel) arising from or
relating to the performance of its duties under this Agreement which do not
result from the Servicer's negligence, bad faith or willful misconduct; provided
that such indemnities shall be only payable out of Collections to the extent
such Collections are not required to be distributed to the Agent or any Lender
under Section 2.2(c) of the Credit Agreement.

      Section 3.13. Property Address Change. The Servicer shall note in its
records and notify the Agent of all changes of address of an Obligor or of a
Mortgaged Property of which the Servicer is notified or of which the Servicer
has knowledge.

                                   ARTICLE IV
                          SPECIFIC SERVICING PROCEDURES

            Section 4.1. Assumption Agreements. When a Mortgaged Property has
been or is about to be conveyed by the Obligor, the Servicer shall, at its
option, to the extent it has knowledge of such conveyance or prospective
conveyance, either (i) exercise its rights to accelerate the maturity of the
related Loan under any "due-on-sale" clause contained in the related Mortgage or
Underlying Note; provided, however, that the Servicer shall not exercise any
such right if the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law or if such enforcement would
materially increase the risk of default or delinquency on, or materially
decrease the security for, such Loan, or (ii) enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Underlying Note and, unless prohibited by applicable law or the Mortgage, the
Obligor shall remain liable thereon. The Servicer may enter into an assumption
agreement with the transferee only if (a) the transferee qualifies for credit
under the customary credit policies of the Servicer, (b) an officer of the
Servicer has examined and approved all instruments as are necessary to carry out
the assumption transaction and approved such instruments as to form and
substance, (c) the execution and delivery of such instruments by all necessary
parties will not cause the unpaid principal balance and any accrued interest
thereon for the Loan to be uncollectible in whole or in part, (d) such
assumption will not cause the related Mortgage Loan to cease to be an Eligible

                                       12
<PAGE>

Mortgage Loan; or cause the Aggregate Principal to exceed the Borrowing Base due
to additional Excess Concentration Amounts or otherwise, and (e) upon closing
the assumption transaction (i) the Mortgage will continue to be a first lien
upon the Mortgaged Property, and (ii) the Loan Rate and Monthly Payment for the
related Loan will not be changed nor will the term of the Note be extended or
shortened. For each proposed assumption transaction, the Servicer shall deliver
an Officer's Certificate to the Agent certifying that each of the applicable
requirements specified in the immediately preceding sentence have been satisfied
together with the assumption instruments requiring execution by the Agent. Such
certificate shall also indicate whether the seller/transferor of the Mortgaged
Property will be released from liability on the Loan and that the Servicer has
made a good faith determination that any such release will not adversely affect
the collectibility of the Loan. The Servicer shall perform substantially the
same level of due diligence with respect to the transferee as was performed on
the seller/transferor in connection with the origination of the Loan and shall
release the seller/transferor from liability only if any applicable Law requires
that the seller/transferor be released from liability on the Loan or the
Servicer has made a good faith determination that the applicable requirements
set forth above have been satisfied. The Servicer is also authorized with the
prior approval of the Agent to enter into a substitution of liability agreement
with such transferee, pursuant to which the original Obligor is released from
liability and such person is substituted as Obligor and becomes liable under the
Underlying Note. The Servicer shall notify the Agent that any such substitution
or assumption agreement has been completed and the original of such substitution
or assumption agreement, shall be added by the Servicer to the appropriate Loan
File and shall, for all purposes, be considered a part of such Loan File to the
same extent as all other documents and instruments constituting a part thereof.
Any fee collected by the Servicer for consenting to any such conveyance or
entering into an assumption or substitution agreement shall be retained by or
paid to the Servicer as additional servicing compensation. Notwithstanding the
foregoing paragraph or any other provision of this Agreement, the Servicer shall
not be deemed to be in default, breach or any other violation of its obligations
hereunder by reason of any assumption of a Loan by operation of law or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatsoever.

            Section 4.2. Servicing Delinquent Accounts; Liquidation of Loans.

            (a) The Servicer shall exercise diligence in obtaining payment of
Monthly Payments when due under the terms of each Loan and shall use reasonable
efforts to contact any delinquent Obligor. If any delinquent Obligor shall be or
become a bankrupt or otherwise become the subject of any insolvency or similar
proceeding, the Servicer shall notify the Agent of such event and, thereafter,
shall carry out all reasonable actions necessary for the benefit and protection
of the interests of the Agent and the Secured Parties, including, but not
limited to, retention of counsel to represent the Borrower in any bankruptcy or
other court proceedings relating to such Obligor or the Mortgaged Property. If
any Loan previously reported on a Monthly Report as ninety one (91) or more days
delinquent is subsequently reported as being brought current, the Servicer will
verify with the relevant Obligor that the Obligor paid the delinquent payments,
by sending the Obligor the letter in the form attached hereto as Exhibit E.

            (b) In the event that any payment due under any Loan and not
postponed pursuant to Section 3.1 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under such Loan and such failure

                                       13
<PAGE>

continues beyond any applicable grace period, the Servicer shall take such other
action as it shall deem to be in the best interests of the Agent and the
Lenders. The Servicer shall foreclose upon or otherwise effect the ownership in
the name of the Agent of Mortgaged Properties relating to Defaulted Loans as to
which no satisfactory arrangements can be made for collection of delinquent
payments in accordance with the customary collection policies of the Servicer
and the provisions of Section 3.1. In connection with such foreclosure or other
conversion, the Servicer shall exercise collection and foreclosure procedures
with the same degree of care and skill in its exercise or use as it would
exercise or use under the circumstances in the conduct of its own affairs and
shall in any event comply with the Servicing Standard. The Servicer shall use
its reasonable efforts to realize upon such Defaulted Loans in accordance with
the Servicing Standard. The Servicer shall be responsible for all other costs
and expenses incurred by it in any foreclosure proceedings; provided, however,
that it shall be entitled to reimbursement thereof as contemplated in Sections
3.8 and 4.3 hereof. No modification, recast or extension of a Loan other than as
provided above and in Section 3.1 is permitted without the prior written consent
of the Agent. Notwithstanding the foregoing provisions of this Section 4.2, the
Servicer shall not, without the prior written consent of the Agent, obtain title
to a Mortgaged Property by deed in lieu of foreclosure or otherwise, or take any
other action with respect to any Mortgaged Property, if, as a result of any such
action, the Agent or the Secured Parties, could, in the reasonable judgment of
the Servicer, made in accordance with the Servicing Standard, be considered to
hold title to, to be a "mortgagee-in possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of CERCLA or any
comparable law. The Servicer shall also not obtain title to any Mortgaged
Property on behalf of the Borrower unless the Servicer has previously determined
in accordance with the Servicing Standard, based on a Phase I Environmental
Assessment (and any additional environmental testing that the Servicer deems
necessary and prudent) of such Mortgaged Property conducted by an Independent
Person who regularly conducts Phase I Environmental Assessments and performed
during the twelve-month period preceding any such acquisition of title or other
action, that the Mortgaged Property is in material compliance with applicable
environmental laws and regulations or, if not, that it would maximize the
recovery to the Secured Parties on a present value basis to acquire title to or
possession of the Mortgaged Property and to effect such compliance.

            (c) If the environmental testing contemplated by Section 4.2(b)
above establishes that any of the conditions set forth therein have not been
satisfied in all material respects with respect to any Mortgaged Property
securing a defaulted Loan, the Servicer shall, in accordance with the Servicing
Standard, prepare a written report to the Agent and the Lenders summarizing the
environmental condition of the Mortgaged Property and proposing a course of
action to pursue with respect to such Mortgaged Property. The Servicer shall not
pursue any such proposed course of action without the prior written consent of
the Agent.

            (d) The Servicer shall report to the Agent monthly in writing as to
any actions taken by the Servicer with respect to any Mortgaged Property as to
which the environmental testing contemplated in Section 4.2(b) above has
revealed that any of the conditions set forth thereon have not been satisfied,
in each case until the earliest to occur of satisfaction of all such conditions
and the release of the Lien of the related Mortgage on such Mortgaged Property.

            (e) If foreclosure has been approved as provided above, the Servicer
shall initiate or cause to be initiated the foreclosure action according to such
procedures as are

                                       14
<PAGE>

authorized by Law and the practices in the locality where the Mortgaged Property
is located. In the event that title to the Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in a manner which preserves on such property the lien of the
Agent for the benefit of the Lenders. The Servicer shall not take title to any
such property in its own name.

            (f) The Servicer shall have the right to determine, in accordance
with the Servicing Standard, the advisability of seeking to obtain a deficiency
judgment if the state in which the Mortgaged Property is located and the terms
of the Loan permit such an action and shall, in accordance with the Servicing
Standard, seek such deficiency judgment if it deems advisable.

            (g) After a Loan has become a Liquidated Loan, the Servicer shall
promptly prepare and forward to the Agent a liquidation report detailing the
Liquidation Proceeds received from the Liquidated Loan, expenses incurred with
respect thereto and any Realized Loss incurred in connection therewith.

            (h) If the requirements of Sections 4.2(b) and (c) hereof have been
satisfied, the Servicer may accept a deed in lieu of foreclosure, provided that
(i) marketable title as evidenced by a policy of title insurance can be conveyed
to and acquired by the Borrower or its designee; (ii) a valid first priority
Lien thereon is created in favor of the Agent as evidenced by a policy of title
insurance; and (iii) no cash consideration is to be paid to the Obligor by the
Agent; and (iv) the Servicer has obtained from the Obligor a written
acknowledgment that the deed is being accepted as an accommodation to the
Obligor and on the condition that the Mortgaged Property will be transferred to
the Borrower or its designee free and clear of all claims, liens, encumbrances,
attachments, reservations or restrictions except for those to which the
Mortgaged Property was subject at the time the Mortgaged Property became subject
to the Mortgage. Title shall be conveyed directly from the Obligor to such
designee as the Agent may direct who will hold such title for the Borrower
subject to the lien of the Agent for the benefit of the Secured Parties.

            (i) The Servicer will indemnify and hold harmless the Agent, the
Lenders and the Secured Parties and their respective directors, officers, agents
and employees from and against any and all claims, demands, losses, penalties,
liabilities, costs, damages, injuries and expenses, including, without
limitation, reasonable attorneys' fees and expenses, suffered or sustained by
such parties, either directly or indirectly, relating to or arising out of the
violation of an Environmental Law with respect to a Mortgaged Property resulting
from the Servicer's failure to perform its obligations hereunder, including
without limitation any expenses and other costs incurred in connection with the
defense of any such action, proceeding or claim. This obligation shall survive
the termination of this Agreement, the Credit Agreement or the earlier
resignation or removal of the Agent, as the case may be.

            Section 4.3. Foreclosure Expenses. The Servicer shall prepare a
written estimate of the amount of attorneys' fees, trustee's fees and other
costs in respect of any foreclosure or acquisition in lieu of foreclosure and
shall send copies of such estimate to the Agent. The Servicer shall arrange
payment of attorneys' fees, trustees' fees and other foreclosure costs at the
commencement of foreclosure proceedings. The Servicer may reimburse itself for

                                       15
<PAGE>

any Servicing Expenses paid by the Servicer, made in connection with a Loan or
such foreclosure or other action, out of amounts received by the Servicer in
connection with liquidation of such Loan, prior to remittance of any such
amounts to the Lockbox Account.

            Section 4.4. Title, Management and Disposition of REO Property.

            (a) Upon the acquisition of REO Property by a Servicer by
foreclosure or conveyance in lieu of foreclosure, the Servicer shall notify the
Agent promptly that the REO Property has been acquired and shall thereafter: (i)
deliver the deed or certificate of sale to the Agent, or its nominee and deliver
to the Agent the related mortgage or deed of trust in favor of the Agent; (ii)
manage, conserve and protect the REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located
including the rental of the same, or any part thereof, as the Servicer deems to
be in the best interest of the Agent for the benefit of the Secured Parties;
(iii) pay all costs such as taxes and assessments relating to the REO Property;
(iv) process any claims for redemption and otherwise comply with any redemption
procedures required by Law; (v) sell or otherwise dispose of the REO Property
and remit the proceeds to the Agent; and (vi) timely file any and all federal,
state and local tax or information returns or reports as are required as a
result of the acquisition or disposition of REO Property and perform any
withholding required in connection therewith. The Servicer shall not acquire any
REO Property relating to a Defaulted Loan that is required to be released from
the lien of the Credit Agreement and disposed of by the Borrower on the next
Payment Date. If any REO Property is expected to be acquired, the Servicer shall
inform the Borrower and the Agent and the Borrower shall acquire and maintain
liability and casualty insurance in accordance with subsection 4.4(c). The
Servicer shall manage, conserve, protect and operate each REO Property for the
Agent solely for the purpose of its prudent and prompt disposition and sale. The
Servicer shall, either itself or through an agent selected by the Servicer,
manage, conserve, protect and operate the REO Property in the same manner that
it manages, conserves, protects and operates other foreclosed property for its
own account and in the same manner that similar property in the same locality as
the REO Property is managed. The Servicer shall attempt to sell the same (and
may temporarily rent the same) on such terms and conditions as the Servicer
deems to be in the best interest of the Agent and the Lenders.

            (b) Until the REO Property is disposed of, the Servicer shall (i)
take appropriate action to secure the REO Property and maintain proper
surveillance over it; (ii) advance all costs such as taxes and assessments;
(iii) maintain the REO Property so as to preserve its value and prevent any
additional deferred maintenance; and (iv) submit monthly statements for services
to the Agent, together with additional documentation including statements of
income and expenses (accompanied by copies of paid invoices for every expense
item).

            (c) Until the REO Property is disposed of, the Servicer shall
maintain for such REO Property, a standard hazard insurance policy providing
fire and extended coverage in an amount equal to the full replacement cost of
all improvements on the Mortgaged Property, which requirement may be satisfied
by a master force placed or blanket insurance policy insuring against hazard
losses. If the Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards (and such flood insurance has been made available) the Servicer shall
maintain a flood hazard insurance policy

                                       16
<PAGE>

meeting the requirements of the current guidelines of the Federal Insurance
Administration with an insurance carrier generally acceptable to commercial
mortgage lending institutions for properties, similar to the REO Property in an
amount representing coverage not less than the lesser of (i) the full insurable
value of such REO Property, or (ii) the maximum amount of insurance which is
available under the Flood Disaster Protection Act of 1973, as amended from time
to time. The Servicer will also maintain comprehensive general liability
insurance, casualty insurance, and business interruption insurance (to the
extent applicable) in such amounts as are then customary for similarly situated
properties and businesses.

            (d) The Servicer shall advance all funds necessary for the proper
operation, management, insurance and maintenance of the REO Property. On each
Monthly Report, the Servicer shall schedule its reasonable expenses with respect
to any REO Property for the related Due Period.

            (e) The Servicer shall deposit all funds collected and received in
connection with the operation or disposition of any REO Property in the Lockbox
Account no later than the Business Day immediately following notice of receipt
of such funds, net of funds necessary for the proper operation, management,
insurance and maintenance of the REO Property.

            (f) If as of the date of disposition of any REO Property there
remain unpaid Servicing Fees with respect to the related Loan, the Servicer
shall be entitled to payment for the unpaid Servicing Fees and reimbursement for
the unreimbursed related Servicing Expenses from proceeds received in connection
with the disposition prior to remittance of any proceeds to the Agent.

            (g) Disposition of REO Property shall be carried out by the Servicer
at such price and upon such terms and conditions as the Servicer, in its
judgment, believes to be in the best interests of the Lenders, subject to and in
accordance with Section 4.2. Upon the sale of any Mortgaged Property, the
Servicer shall remit the net cash proceeds remaining after payment of expenses
of the sale to the Collection Account.

            (h) If any Defaulted Loan is expected to be released from the Lien
of the Credit Agreement on the next Payment Date, the Servicer shall not
commence a foreclosure proceeding or accept a deed in lieu of foreclosure. Any
determination by the Servicer that a Loan is a Defaulted Loan shall be made in
good faith.

                                   ARTICLE V
                       REPORTS TO BE PROVIDED BY SERVICER

            Section 5.1. Monthly Reports.

            (a) Each month, not later than 12:00 noon Dallas, Texas time on each
Reporting Date, the Servicer shall deliver to the Agent, in electronic format,
the receipt and legibility of which shall be confirmed telephonically, with hard
copy thereof to be delivered on the next Business Day, with copies to the Agent,
a monthly report in the form attached hereto as Exhibit C (each a "Monthly
Report") signed by a Servicing Officer stating the date (day, month

                                       17
<PAGE>

and year), referring to this Agreement by name and date and containing
information, as of the close of business on the immediately preceding
Determination Date.

            (b) The Servicer shall furnish to the Agent, during the term of this
Agreement, such periodic, special or other reports, Officer's Certificates, data
relating to the Loans or information, whether or not provided for herein, as
shall be reasonably requested, all such reports or information to be provided by
and in accordance with such applicable instructions and directions as the Agent
may reasonably require.

            Section 5.2. Reports of Foreclosure and Abandonment of Mortgaged
Property. Each year the Servicer shall make any reports of foreclosures and
abandonments of any Mortgaged Property required by the Tax Code.

            Section 5.3. Quarterly Statement as to Compliance. The Servicer will
deliver to the Agent, quarterly, no later than each April 15, July 15, October
15 and January 15, for each quarterly period ending on each March 31, June 30,
September 30 and December 31, commencing on April 15, 2005, an Officer's
Certificate in the form attached hereto as Exhibit D stating that (a) the
Servicer has fully complied with the provisions of this Agreement, (b) a review
of the activities of the Servicer during the preceding quarter and of the
Servicer's performance under this Agreement has been made under such officer's
supervision and (c) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all of its obligations, duties and
responsibilities under this Agreement throughout such quarterly period (or, with
respect to the first such report, since the Closing Date) and no Amortization
Event or Unmatured Amortization Event exists, or, if there has been a default or
failure in the fulfillment of any such obligation, specifying each such default
or failure known to such officer and the nature and status thereof and the
action being taken by the Servicer to cure such default.

            Section 5.4. Annual Independent Public Accountants' Servicing
Report. The Servicer at its expense shall cause a nationally recognized firm of
independent certified public accountants to furnish a statement to the Agent on
or before May 1 of each year, commencing on May 1, 2006, to the effect that,
with respect to the most recently ended fiscal year, such firm has examined
certain records and documents relating to the Servicer's performance of its
servicing obligations and that, on the basis of such examination, conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers, such firm is of the opinion that such servicing has been
conducted substantially in compliance in all material respects with the
requirements of the standard servicing procedures outlined in the Uniform Single
Attestation Program for Mortgage Bankers, except for such exceptions noted
therein. In the event such firm requires the Agent to agree to the procedures
performed by such firm, the Servicer shall direct the Agent in writing to so
agree; it being understood and agreed that the Agent will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and each of
the Agent makes no independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.

                                       18
<PAGE>

                                   ARTICLE VI
                          AMORTIZATION EVENTS; REMEDIES

            Section 6.1. Remedies. Upon the occurrence and during the
continuance of an Amortization Event, the Agent may, and at the written
direction of the Required Alternate Lenders shall, by notice in writing
specifying the termination date to the Servicer, terminate all of the rights and
obligations of the Servicer under this Agreement and in and to the Loans and the
proceeds thereof. On or after the receipt by the Servicer of such written
notice, all authority and power shall pass to and be vested in such Person as
the Agent may designate (such Person, the "Successor Servicer") pursuant to and
under this Section; and, without limitation, the Agent is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the purposes of such
notice of termination, whether to complete the transfer and assignment of the
Loans and related documents or otherwise. All reasonable costs and expenses
(including, without limitation, attorneys' fees) of the Agent, the Successor
Servicer or the Servicer incurred in connection with such termination and
transfer will be at the expense of the Servicer. The Servicer agrees to
cooperate with the Successor Servicer and the Agent in effecting the termination
of the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Successor Servicer for administration by it of
any cash amounts held by the Servicer or thereafter received relating to the
Loans and all Loan Files. In addition to any other amounts which are then, or,
notwithstanding the termination of its activities as Servicer, may become
payable to the Servicer under this Agreement, the Servicer shall be entitled to
receive out of any delinquent payment on account of interest on a Loan due
during a Due Period prior to the notice of termination received pursuant to this
Section 6.3 and received after such notice, that portion of such payment which
it would have received pursuant to Section 3.8 hereof if such notice had not
been given.

            Section 6.2. Additional Remedies of Agent Upon Amortization Events.
Upon any Amortization Event, the Agent, in addition to the rights specified in
Section 6.1 hereof, shall have the right, in its own name and as Agent, to take
all actions now or hereafter existing at law, in equity or by statute to enforce
its rights and remedies and to protect the interests, and enforce the rights and
remedies, of the Secured Parties (including the institution and prosecution of
all judicial, administrative and other proceedings and the filings of proofs of
claim and debt in connection therewith). No remedy provided for by this
Agreement shall be exclusive of any other remedy, and each and every remedy
shall be cumulative and in addition to any other remedy and no delay or omission
to exercise any right or remedy shall impair any such right or remedy or shall
be deemed to be a waiver of any Amortization Event.

            Section 6.3. Agent To Act; Appointment of Successor. On the
effective date of any resignation of the Servicer pursuant to Section 7.1 hereof
or on the date the Servicer is removed as servicer pursuant to this Article VI,
the Successor Servicer hereof shall be the successor in all respects to the
Servicer under this Agreement and the transactions set forth or provided for
herein and shall, except as otherwise agreed to in writing by the Agent, be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the Successor Servicer shall not be liable for any

                                       19
<PAGE>

acts or omissions of the Servicer occurring prior to such succession nor for any
breach by the Servicer of any of its representations or warranties contained
herein or in any related document or agreement. The Servicer shall, upon request
of the Agent but at the expense of the Servicer, deliver to the Successor
Servicer), all Loan Files, documents and records (including computer tapes and
diskettes) relating to the Loans and an accounting of any amounts collected and
held by the Servicer and otherwise use their reasonable efforts to effect the
orderly and efficient transfer of servicing rights and obligations to the
assuming party. The Servicer agrees to cooperate with the Agent and any
Successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Successor
Servicer all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Successor Servicer, as applicable, all amounts which then have been or
should have been deposited in the Lockbox Account by the Servicer or which are
thereafter received with respect to the Loans. Neither the Agent nor any
Successor Servicer shall be held liable by reason of any failure to make, or any
delay in making, any distribution hereunder or any portion thereof caused by (i)
the failure of the Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Servicer hereunder. The Agent shall
provide written notice of each appointment of a successor to the Servicer
hereunder to the Secured Parties.

            Section 6.4. Waiver of Defaults. The Agent (with the written consent
of the Required Lenders) may, on behalf of all Lenders, waive any events
permitting removal of the Servicer pursuant to this Article VI. No such waiver
shall extend to any subsequent or other default or impair any right consequent
thereto except to the extent expressly so waived.

                                  ARTICLE VII
                                  TERMINATION

            Section 7.1. Servicer Not To Resign. The Servicer shall not assign
this Agreement or resign from the obligations and duties hereby imposed on them
except by mutual consent of the Servicer and the Agent (with the Required
Alternate Lenders' consent), or upon the determination that the Servicer's
duties hereunder are no longer permissible under applicable law and such
incapacity cannot be cured by the Servicer. Any such determination permitting
the resignation of the Servicer shall be evidenced by a Certificate of an
Authorized Officer of the Servicer to such effect delivered to the Agent. No
such resignation shall become effective until a successor has assumed the
Servicer's responsibilities and obligations hereunder in accordance with Section
6.3.

            Section 7.2. Term of Agreement. This Agreement shall continue in
existence and effect until the earlier of (a) the later of the final payment or
other liquidation of the last Loan or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Loan and the remittance
of all funds due thereunder, (b) the payment in full of Obligations in
accordance with the Credit Agreement or (c) mutual consent of the Servicer, the
Agent and the Required Alternate Lenders in writing.

                                       20
<PAGE>

                                  ARTICLE VIII
                            MISCELLANEOUS PROVISIONS

            Section 8.1. Amendment. This Agreement may not be amended except by
a written instrument executed by the Servicer, the Borrower and the Agent.

            Section 8.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW (EXCEPT IN THE CASE OF THE OTHER TRANSACTION DOCUMENTS,
TO THE EXTENT OTHERWISE EXPRESSLY STATED THEREIN).

            Section 8.3. Notices. All demands, notices and communications
hereunder shall be in writing and shall be duly given if addressed to the
appropriate Notice Address and delivered by hand or sent by nationally
recognized express courier, or mailed by registered mail, postage prepaid, or
transmitted by telecopy, and shall be effective upon receipt, except when
telecopied, in which case, any such communication shall be effective upon
telecopy against receipt of answer back or written confirmation thereof.

            Section 8.4. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement. The parties hereto further agree that the holding by any court of
competent jurisdiction that any remedy pursued by the Agent hereunder is
unavailable or unenforceable shall not affect in any way the ability of the
Agent to pursue any other remedy available to it.

            Section 8.5. No Partnership. Nothing herein contained shall be
deemed or construed to create a partnership or joint venture between the parties
hereto, and the services of the Servicer shall be rendered as an independent
contractor and not as an agent for the Agent.

            Section 8.6. Counterparts. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate counter-parts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.

            Section 8.7. Successors and Assigns; Beneficiaries; Assignment. This
Agreement shall (i) inure to the benefit of the Servicer, the Borrower, the
Agent, the Lenders and their respective successors and assigns, and (ii) shall
be binding upon the Servicer, the Borrower and the Agent and their respective
successors and assigns. The Servicer acknowledges and consents to the assignment
to the Agent for the benefit of the Lenders of all of the Borrower's rights and
the delegation of any the Borrower's obligations hereunder pursuant to the
Credit Agreement.

                                       21
<PAGE>

            Section 8.8. Indulgences; No Waivers. Neither the failure nor any
delay on the part of a party to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.

            Section 8.9. Titles Not To Affect Interpretation. The titles of
paragraphs and subparagraphs contained in this Agreement are for convenience
only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.

            Section 8.10. Entire Agreement. This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof.

            Section 8.11. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or the comparable
jurisdictions in which any Mortgaged Property is situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer and at its expense upon the written request of the
Agent.

            Section 8.12. No Setoff. The Servicer shall remit Collections as
contemplated under this Agreement and under the Credit Agreement, except as
expressly contemplated in Sections 3.8 and 4.3 hereof, without deduction,
set-off or counterclaim, and, unless and until the Credit Agreement has been
terminated and all amounts owing by the Borrower thereunder shall have been
indefeasibly paid in full, hereby waives any right it may now or at any time
hereafter have to set-off, such Collection against any obligations owed to it by
the Borrower, or by the Agent or any Lenders.

            [The immediately following page contains the signatures.]

                                       22
<PAGE>

      IN WITNESS WHEREOF, the Borrower, the Servicer and the Agent have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.

                                       PMC CONDUIT, L.P.,
                                       as Borrower

                                       By:      PMC Conduit, LLC
                                                Its General Partner

                                       By: /s/ JAN F. SALIT
                                           -----------------------------
                                                Jan F. Salit
                                                Executive Vice President

                                       PMC COMMERCIAL TRUST,
                                       as Servicer

                                       By: /s/ JAN F. SALIT
                                           -----------------------------
                                                Jan F. Salit
                                                Executive Vice President

                                       JPMORGAN CHASE BANK,
                                       NATIONAL ASSOCIATION, as Agent

                                       By: /s/ MAUREEN E. MARCON
                                           -----------------------------
                                       Name: Maureen E. Marcon
                                       Title: Vice President

                     Signature Page to Servicing Agreement

<PAGE>
                                    EXHIBIT A
                                       TO
                               SERVICING AGREEMENT

                            FORM OF LOCKBOX AGREEMENT

                                                                  EXECUTION COPY

                               LOCK-BOX AGREEMENT

                                                                February 7, 2005

JPMorgan Chase Bank, N.A.
Asset Backed Finance
Suite IL1-0612
1 Bank One Plaza
Chicago, Illinois  60670-0079
Fax:     (312) 732-1844

         Re:   PMC Conduit, L.P.

Ladies and Gentlemen:

               You have exclusive control of P.O. Box 974347, Dallas, TX
75397-4347 (the "Lock-Box") for the purpose of receiving mail and processing
payments therefrom pursuant to that certain lock-box services agreement (the
"Agreement") dated February 7, 2005 between you and PMC Conduit, L.P. (the
"Customer") for the purposes of (1) that certain Purchase and Contribution
Agreement (the "Purchase Agreement") dated as of February 7, 2005 among PMC
Commercial Trust and PMC Conduit, L.P. and (2) that certain Credit and Security
Agreement dated as of February 7, 2005 (the "Credit Agreement"), among the PMC
Commercial Trust, as servicer (the "Servicer"), PMC Conduit, LLC, as general
partner of the Customer, the Customer, JPMorgan Chase Bank, National
Association, as agent (the "Agent") and the "Conduit Lender" and the "Alternate
Lenders" from time to time parties thereto. You hereby confirm your agreement to
perform the services described therein. Among the services you have agreed to
perform therein is to endorse all checks and other evidences of payment, and
credit such payments to checking account no. 675512990 maintained with you in
the name of the Customer (the "Lock-Box Account").

         We understand that JPMorgan Chase Bank, N.A. (as the "Collection Bank")
and Bank One National Processing Corporation ("BONPC") work together to provide
services with respect to the Lock-Box. All references herein to "you" and "your"
shall mean the Collection Bank and BONPC, as applicable.

         Customer hereby irrevocably instructs you, and you hereby agree, that
from the date hereof, you shall comply with instructions originated by the
Agent, directing disposition of the funds in the Lock-Box Account without
further consent of the Customer. The Agent hereby authorizes you to take
instructions from the Servicer, on behalf of the Agent, with respect to the
funds delivered to the

                                       1
<PAGE>

Lock-Box and/or on deposit in the Lock-Box Account until such time as you
receive notice from the Agent in the form attached hereto as Annex A.

         Customer hereby irrevocably instructs you, and you hereby agree, that
upon receiving notice from the Agent in the form attached hereto as Annex A: (i)
the name of the Lock-Box Account will be changed to "JPMorgan Chase Bank, N.A.,
for itself and as agent" (or any designee of JPMorgan Chase Bank) and the Agent
will have exclusive ownership of and access to such Lock-Box Account, and none
of Customer, Servicer or any of their respective affiliates will have any
control of such Lock-Box Account or any access thereto, (ii) you will either
continue to send the funds from the Lock-Box to the Lock-Box Account, or will
redirect the funds as the Agent may otherwise request, (iii) you will transfer
monies on deposit in the Lock-Box Account, at any time, as directed by the
Agent, (iv) all services to be performed by you under the Agreement will be
performed on behalf of the Agent, and (v) all correspondence or other mail which
you have agreed to send us will be sent to the Agent at the following address:

                  JPMorgan Chase Bank, N.A., as Agent
                  Asset Backed Finance
                  Suite IL1-0612
                  1 Bank One Plaza
                  Chicago, Illinois  60670-0079
                  Fax: (312) 732-1844

         Moreover, upon such notice, the Agent will have all rights and remedies
given to Customer under the Agreement. The Customer agrees, however, to continue
to pay all fees and other assessments due thereunder at any time.

         You hereby acknowledge that monies deposited in the Lock-Box Account or
any other account established with you by the Agent for the purpose of receiving
funds from the Lock-Box are subject to the liens of the Agent for itself and as
agent under the Purchase Agreement, and will not be subject to deduction,
set-off, banker's lien or any other right you or any other party may have
against Customer or the Servicer, except that you may debit the Lock-Box Account
for any items deposited therein that are returned or otherwise not collected and
for all charges, fees, commissions and expenses incurred by you in providing
services hereunder, all in accordance with your customary practices for the
charge back of returned items and expenses.

         You hereby agree that (i) you are a "bank" within the meaning of
Section 9-102 of the Uniform Commercial Code as is in effect in the State of New
York (the "UCC"), (ii) the Lock-Box Account constitutes a "deposit account"
within the meaning of Section 9-102 of the UCC and (iii) this letter agreement
shall constitute an "authenticated record" for purposes of Section 9-104 of the
UCC. The Customer hereby grants to and confers upon the Agent "control" of the
Lock-Box and Lock-Box Account as contemplated in Section 9-104 (and similar and
related provisions) of the UCC.

         You will be liable only for direct damages in the event you fail to
exercise ordinary care. You shall be deemed to have exercised ordinary care if
your action or failure to act is in conformity with general banking usages or is
otherwise a commercially reasonable practice of the banking industry. You shall
not be liable for any special, indirect or consequential damages,

                                       2
<PAGE>

even if you have been advised of the possibility of these damages. You will not
be liable for any failure to perform your obligations when the failure arises
out of causes beyond your control, including, without limitation, an act of a
governmental regulatory/authority, an act of God, accident, equipment failure,
labor disputes or system failure, provided you have exercised such diligence as
the circumstances require.

         Nothing in this agreement, unless otherwise agreed in writing, or any
course of dealing between you, the Customer, the Servicer or the Agent, commits
or obligates you to extend any overdraft or other credit to the Customer, the
Servicer or the Agent.

         You or the Agent, upon thirty (30) days notice to the other parties,
may terminate this agreement. Any claim or cause of action of any party against
any other relating to this agreement which existed at the time such termination
becomes effective shall survive the termination. All mail received after the
date specified in such notice of termination (the "Termination Date") shall be
returned by you to the Agent by first class mail or such other means mutually
agreeable to you and the Agent, and all funds received in the Lock-Box Account
after the Termination Date shall be sent by you to an account specified by the
Agent. Notwithstanding the foregoing, you acknowledge that monies deposited in
the Lock-Box Account after the Termination Date shall continue to be subject to
the liens of the Agent for itself and as agent under the Credit Agreement, and
will not be subject to deduction, set-off, banker's lien or any other right you
or any other party may have against Customer or the Servicer, except as
otherwise provided in this letter agreement.

         The Customer and the Servicer agree to indemnify you for, and hold you
harmless from, all claims, damages, losses, liabilities and expenses, including
legal fees and expenses, resulting from or with respect to this agreement and
the administration and maintenance of the Lock-Box Account and the services
provided hereunder, including, without limitation: (a) any action taken, or not
taken, by you in regard thereto in accordance with the terms of this agreement,
(b) the breach of any representation or warranty made by the Customer pursuant
to this agreement, (c) any item, including, without limitation, any automated
clearinghouse transaction, which is returned for any reason, and (d) any failure
of the Customer to pay any invoice or charge to you for services in respect to
this agreement and the Lock-Box Account or any amount owing to you from the
Servicer with respect thereto or to the service provided hereunder.

                  The parties acknowledge that you may assign or transfer your
rights and obligations hereunder to a wholly-owned subsidiary of JPMorgan Chase
Bank, N.A.

                  This letter agreement and the rights and obligations of the
parties hereunder will be governed by and construed and interpreted in
accordance with the laws of the State of New York. This letter agreement may be
executed in any number of counterparts and all of such counterparts taken
together will be deemed to constitute one and the same instrument.

                  This letter agreement contains the entire agreement between
the parties, and may not be altered, modified, terminated or amended in any
respect, nor may any right, power or privilege of any party hereunder be waived
or released or discharged, except upon execution by all parties hereto of a
written instrument so providing. In the event that any provision in this letter
agreement is in conflict with, or inconsistent with, any provision of the
Agreement, this

                                       3
<PAGE>

letter agreement will exclusively govern and control. Each party agrees to take
all actions reasonably requested by any other party to carry out the purposes of
this letter agreement or to preserve and protect the rights of each party
hereunder.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       4
<PAGE>

               Please indicate your agreement to the terms of this letter
agreement by signing in the space provided below. This letter agreement will
become effective immediately upon execution of a counterpart of this letter
agreement by all parties hereto.

                                     Very truly yours,

                                     PMC CONDUIT, L.P.

                                     By:  PMC Conduit, LLC, its General Partner

                                     By:
                                         -------------------------------------
                                     Name:
                                     Title:

                                     PMC COMMERCIAL TRUST, as Servicer

                                     By:
                                         -------------------------------------
                                     Name:
                                     Title:

Acknowledged and agreed to
this 7th day of February, 2005:

JPMORGAN CHASE BANK, N.A.,
in its capacity as Collection Bank.

By:
    ---------------------------
Name:
Title:

JPMORGAN CHASE BANK, N.A.,
in its capacity as Agent under the Credit Agreement.

By:
    ---------------------------
Name:
Title:

                    Signature Page to the Lock-Box Agreement
<PAGE>
                                     ANNEX A
                            FORM OF COLLECTION NOTICE

                          [ON LETTERHEAD OF THE AGENT]

                                     [DATE]

JPMorgan Chase Bank, N.A.
Asset Backed Finance
Suite IL1-0612
1 Bank One Plaza
Chicago, Illinois  60670-0079
Fax:     (312) 732-1844

         Re:      PMC Conduit, L.P.

Ladies and Gentlemen:

                  We hereby notify you that we are exercising our rights
pursuant to that certain letter agreement among PMC Conduit, L.P., you and us,
to have the name of, and to have exclusive ownership and control of, account
number ________________ (the "Lock-Box Account") maintained with you,
transferred to "JPMorgan Chase Bank, N.A., as Agent." [The Lock-Box Account will
henceforth be a zero-balance account, and funds deposited in the Lock-Box
Account should be sent at the end of each day to _________________]. You have
further agreed to perform all other services you are performing under that
certain agreement dated ____________ between you and PMC Conduit, L.P. on our
behalf.

                 We appreciate your cooperation in this matter.

                                        Very truly yours,

                                            JPMORGAN CHASE BANK, N.A., as Agent

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                     Annex A
<PAGE>

                                    EXHIBIT B
                                       TO
                               SERVICING AGREEMENT

                          FORM OF LOCKBOX NOTICE LETTER

[PMC Commercial Trust Letterhead]

[Date]

[Name of Obligor]
[Address]

      Re:      PMC Commercial Trust ("PMC")
               Loan Number

Dear [Obligor]:

      Unless and until you are otherwise directed by JPMorgan Chase Bank,
National Association, as Agent or any successor thereto to send your payments to
a different address, please send all future payments on your loan including, all
monthly payments of principal and interest and any and all prepayments to the
following address:

                                    PMC Commercial Trust
                                    P. O. Box ______
                                    Dallas, Texas ______

      You should, however, continue to direct any and all inquiries or other
correspondence relating to your loan to the following address:

                                    PMC Commercial Trust
                                    17950 Preston Road, Suite 600
                                    Dallas, Texas 75252

      If you have any questions, please contact the undersigned at (XXX)
XXX-XXXX.

                                                     Sincerely,

                                                     [Officer]
                                                     [Title]

<PAGE>

                                    EXHIBIT D
                                       TO
                               SERVICING AGREEMENT

                         QUARTERLY OFFICER'S CERTIFICATE

[Date]

      The undersigned, pursuant to the provisions of Section 5.3 of the
Servicing Agreement dated as of February 7, 2005 (the "Agreement"), by and among
JPMorgan Chase Bank, National Association in its capacity as Agent, PMC Conduit,
L.P. and the Servicer, do hereby certify on behalf of each the Servicer, as
follows:

      (i)   the Servicer has fully complied with the provisions of the
            Agreement;

      (ii)  a review of the activities of the Servicer during the preceding
            quarter and of the Servicer's performance under the Agreement has
            been made under my supervision; and

      (iii) to the best of my knowledge, based on the review referred to in (ii)
            above, the Servicer has fulfilled all of its obligations, duties and
            responsibilities under the Agreement throughout the preceding
            quarterly period and no Unmatured Amortization Event or Amortization
            Event exists.

      Capitalized terms used but not otherwise defined herein shall have the
same meanings ascribed to such terms in the Agreement.

      IN WITNESS WHEREOF, I have executed this certificate this ____ day of
_________, 20____.

                                               PMC COMMERCIAL TRUST, Servicer

                                               By:
                                               Name:
                                               Title:

<PAGE>

                                    EXHIBIT E
                                       TO
                               SERVICING AGREEMENT

                             FORM OF OBLIGOR LETTER

[Date]

VIA CERTIFIED MAIL

[Obligor]
[Address]

      Re:      PMC Commercial Trust ("PMC")
      Loan Number

Dear [Obligor]:

      Your loan serviced by PMC is part of a pool of loans for which JPMorgan
Chase Bank, National Association serves as Agent. As part of our servicing
responsibility we are required to verify certain information with respect to
your loan.

      Our records indicate your loan was previously delinquent by more than 90
days and has recently been brought current. We are required to demonstrate that
you did in fact make the delinquent payments.

      If these facts are correct, please indicate your acknowledgment by signing
and returning a copy of this letter to our attention, in the envelope provided.
If these facts are not correct, please indicate your disagreement by signing
this letter and indicating your disagreement beneath your signature and
returning a copy of this letter to our attention, in the envelope provided.

      If we do not hear from you within 30 days of the date of this letter we
will assume that these facts are true.

      If you have any questions, please contact the undersigned at (XXX)
XXX-XXXX.

Sincerely,

[Officer]
[Title]

Acknowledged by:

Obligor Name      Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}]]