Document:

Exhibit 10.10

 

Equitable Resources, Inc.

 

DIRECTORS’
DEFERRED COMPENSATION PLAN

 

 

Amended and
Restated as of May 15, 2003

 

 

ARTICLE I

 

1.1                               Purpose of Plan.

 

This Equitable Resources, Inc. Directors’
Deferred Compensation Plan (the “Plan”) hereby is created to provide an
opportunity for the members of the Board of Directors of Equitable Resources,
Inc. (the “Board”) to defer payment of all or a portion of the fees to
which they are entitled as compensation for their services as members of the
Board.  The Plan also shall provide for
an award of Phantom Stock to certain members of the Board and for the deferral
of stock units and phantom stock awarded pursuant to the 1999 Equitable
Resources, Inc. Non-Employee Directors’ Stock Incentive Plan (the “NEDSIP”).
 In addition, Plan Participants shall be
entitled to direct the Company to transfer to this Plan directors’ fees
previously deferred under the 1980 Board of Directors’ Deferred Compensation
Plan as in effect prior to May 26, 1999 (the “Prior Plan”).  The Plan originally was effective as of
May 26, 1999, and supersedes all prior deferred compensation and
retirement plan arrangements established or maintained for the benefit of
non-employee members of the Board.  The
Plan was amended and restated (i) as of May 16, 2000, to reflect a
change in the benefits committee structure of the Company, (ii) as of
December 6, 2000 to provide for increased flexibility in directing
investment in available investment options, and to modify vesting of Phantom Stock,
and (iii) as of May 15, 2003 to reflect the payment of deferred stock
units to non-employee directors in substitution for stock options.

 

ARTICLE II

 

DEFINITIONS

 

When used in this Plan and initially capitalized,
the following words and phrases shall have the meanings indicated:

 

2.1                               “Account” means the total of a Participant’s Deferral Account, Phantom Stock
Account and Transferred Amounts Account under the Plan.

 

2

 

2.2                               “Beneficiary” means the person or persons designated or deemed to be designated by the
Participant pursuant to Section 7.1 of the Plan to receive benefits payable
under the Plan in the event of the Participant’s death.

 

2.3                               “Change in Control” means any of the following events:

 

(a)                                  The sale or other disposition by the Company of
all or substantially all of its assets to a single purchaser or to a group of
purchasers, other than to a corporation with respect to which, following such
sale or disposition, more than eighty percent (80%) of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of the
Board of Directors is then owned beneficially, directly or indirectly, by all
or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Company common stock and the combined
voting power of the then outstanding voting securities immediately prior to
such sale or disposition in substantially the same proportion as their
ownership of the outstanding Company common stock and voting power immediately
prior to such sale or disposition.

 

(b)                                 The acquisition in one or more transactions by
any person or group, directly or indirectly, of beneficial ownership of twenty
percent (20%) or more of the outstanding shares of Company common stock or the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of the Board; provided, however,
that any acquisition by (x) the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any of its subsidiaries or (y) any person

 

3

 

that
is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is
in effect as of November 1, 1995) to file a statement on Schedule 13G with
respect to its beneficial ownership of Company common stock and other voting
securities whether or not such person shall have filed a statement on Schedule
13G, unless such person shall have filed a statement on Schedule 13D with
respect to beneficial ownership of fifteen percent (15%) or more of the
Company’s voting securities, shall not constitute a Change in Control;

 

(c)                                  The Company’s termination of its business and
liquidation of its assets;

 

(d)                                 The reorganization, merger or consolidation of
the Company into or with another person or entity, by which reorganization,
merger or consolidation the persons who hold one hundred percent (100%) of the
voting securities of the Company prior to such reorganization, merger or
consolidation receive or continue to hold less than sixty percent (60%) of the
outstanding voting shares of the new or continuing corporation; or

 

(e)                                  If, during any two-year period, less than a
majority of the members of the Board are persons who were either
(i) nominated or recommended for election by at least two-thirds vote of
the persons who were members of the Board or Nominating Committee of the Board
at the beginning of the period, or (ii) elected by at least two-thirds
vote of the persons who were members of the Board at the beginning of the
period.

 

2.4                               “Code” means the Internal Revenue Code of 1986, as amended.

 

2.5                               “Committee” means the Compensation Committee of the Board.

 

2.6                               “Company” means Equitable Resources, Inc. and any successor thereto.

 

4

 

2.7                               “Deferral Account” means the recordkeeping account established on
the books and records of the Company to record a Participant’s deferral amounts
under Section 5.1 of the Plan, plus or minus any investment gain or loss
allocable thereto under Section 5.5 of the Plan.

 

2.8                               “Directors’ Fees” means the fees that are paid by the Company to
members of the Board as compensation for services performed by them as members
of the Board.

 

2.9                               “Enrollment Form” means the agreement to participate and related
elections filed by a Participant pursuant to Section 5.1 of the Plan, in the
form prescribed by the Committee, directing the Company to reduce the amount of
Directors’ Fees otherwise currently payable to the Participant and credit such
amount to the Participant’s Deferral Account hereunder.

 

2.10                        “Hardship Withdrawal” shall have the meaning set forth in Section 6.4
of the Plan.

 

2.11                      “In-Service Distribution” shall have the meaning set forth in Section 6.3
of the Plan.

 

2.12                        “Investment Options” means the investment options described in
Appendix A to the Plan into which a Participant may direct all or part of his
or her Deferral Account and/or Transferred Amounts Account pursuant to Section
5.2 of the Plan.

 

2.13                        “Investment Return Rate” means:

 

(a)                                  In the case of an Investment Option named in
Exhibit A of a fixed income nature, the interest deemed to be credited as
determined in accordance with the procedures applicable to the same investment
option provided under the Equitable Resources, Inc. Employee Savings Plan,
originally adopted September 1, 1985, as amended (“Equitable 401(k) Plan”);

 

(b)                                 In the case of a Investment Option named in
Exhibit A of an equity investment nature, the increase or decrease in deemed
value and any dividends deemed to be credited as determined in accordance with
the

 

5

 

procedures
applicable to the same investment option provided under the Equitable 401(k)
Plan; or

 

(c)                                  In the case of the Equitable Resources Common
Stock Fund, the increase or decrease in the deemed value, and the reinvestment
in the Equitable Resources Common Stock Fund of any dividends deemed to be
credited, as determined in accordance with the procedures applicable to
investments in the Equitable Resources Common Stock Fund under the Equitable
401(k) Plan.

 

2.14                        “Irrevocable Trust” means a grantor trust that may  be established
prior to the occurrence of a Change in Control of the Company to assist the
Company in fulfilling its obligations under this Plan but which shall
be established by the Company in the event of a Change in Control of the
Company.  All amounts held in such
Irrevocable Trust shall remain subject to the claims of the general creditors
of the Company and Participants in this Plan shall have no greater rights to
any amounts held in any such Irrevocable Trust than any other unsecured general
creditor of the Company.

 

2.15                        “Participant” means any non-employee member of the Board who (i) receives an award of
Phantom Stock pursuant to Section 4.1 of the Plan or an award of Phantom Stock
under the NEDSIP, (ii) who elects to participate in the Plan for purposes of
deferring his or her Directors’ Fees by filing an Enrollment Form with the
Committee pursuant to Section 5.1 of the Plan, and/or (iii) who elects to
transfer amounts previously deferred under the Prior Plan to this Plan by
filing a Transfer of Existing Account Credits, or other form supplied by and/or
acceptable to the Committee, pursuant to Section 5.2 of the Plan.

 

6

 

2.16                        “Phantom Stock” means those shares of the common stock or stock
units of the Company:

 

(i)                                     conditionally awarded to certain members of the
Board in the amounts described in Appendix B to the Plan,

 

(ii)                                  which are subject to forfeiture in accordance
with Section 6.1(a) of the Plan,

 

(iii)                               which are contributed to the Irrevocable Trust by the Company to assist
it in satisfying its potential obligations under this Plan, and

 

(iv)                              which will be distributed to eligible Plan Participants satisfying all
the conditions of this Plan, or

 

(v)                                 awarded pursuant to the NEDSIP, and

 

(vi)                              which will be distributed to eligible Plan Participants in the form
elected by the Plan Participant and at the time specified in the Phantom Stock
Agreement referred to in Section 2.18(ii) of the Plan.

 

2.17                        “Phantom Stock Account” means the recordkeeping account established on
the books and records of the Company to record the number of shares of Phantom
Stock allocated to a Participant under the Plan.

 

2.18                        “Phantom Stock Agreement” means

 

(i)                                     the agreement filed by a Participant pursuant to
Section 4.1(a) of the Plan in the form prescribed by the Committee directing
the Company to convert the Participant’s benefit under the Equitable Resources,
Inc. Directors’ Defined Benefit Plan (the “Defined
Benefit Plan”) into
Phantom Stock

 

7

 

under
this Plan and relinquishing all rights to any benefits under such Defined
Benefit Plan, and

 

(ii)                                  any agreements and/or terms of award of Phantom
Stock under the NEDSIP pursuant to which Phantom Stock is or may be deferred.

 

2.19                        “Plan” means this Equitable Resources, Inc. Directors’ Deferred Compensation
Plan, as amended from time to time.

 

2.20                        “Plan Year” means a twelve-month period commencing January 1 and ending the following
December 31.

 

2.21                        “Prior Plan” means the 1980 Board of Director’s Deferred Compensation Plan as in
effect prior to May 26, 1999, under which members of the Board were permitted
to defer payment of all or a portion of the fees to which they were entitled as
compensation for their services as members of the Board.

 

2.22                        “Transferred Amounts Account” means the recordkeeping account established on
behalf of a Participant to account for those amounts previously deferred under
the Prior Plan which were transferred to this Plan by filing a Transfer of
Existing Account Credits, or other form supplied by and/or acceptable to the
Committee, pursuant to Section 5.2 of the Plan.

 

2.23                        “Transfer of Existing Account Credits” means the form filed with the Committee by a
Participant directing the Committee to transfer amounts previously deferred
under the Prior Plan to this Plan.

 

2.24                        “Valuation Date” means the last day of each calendar quarter and
any other date determined by the Committee or specified herein.

 

2.25                        “Year of Service” means the twelve (12) month period beginning on
the first day an individual is a member of the Board, and each twelve (12)
month period thereafter.

 

8

 

ARTICLE III

 

ELIGIBILITY AND PARTICIPATION

 

3.1                               Eligibility for Phantom Stock Account.

 

Eligibility
to participate in the Plan for purposes of the Phantom Stock Account under
Article IV  of the Plan is limited to
those non-employee members of the Board who are either (i) designated by
the Committee and listed on Exhibit B to the Plan or (ii) who receive
Phantom Stock pursuant to the terms of the NEDSIP.  An eligible Board member shall commence participation in the Plan
for purposes of the Phantom Stock Account on the earlier of May 26, 1999
or the date on which an award of Phantom Stock is made pursuant to the terms of
the NEDSIP.

 

3.2                               Eligibility for Deferral Account.

 

Eligibility
to participate in the Plan for purposes of deferring Directors’ Fees under
Section 5.1 of the Plan is limited to non-employee members of the Board.  An eligible Board member shall commence
participation in the Plan for purposes of deferring Directors’ Fees as of the
first day of the month following the receipt of his or her Enrollment Form by
the Committee.

 

3.3                               Eligibility for Transferred Amounts Account.

 

Eligibility
to elect to transfer Transferred Amounts to this Plan is limited to those
non-employee members of the Board who were participants in the Prior Plan and
who had accounts in the Prior Plan as of May 25, 1999, representing fees for
their prior service as members of the Board which were previously deferred
pursuant to the terms of the Prior Plan. 
An eligible Board member not otherwise participating pursuant to
Sections 3.1 or 3.2 of the Plan shall become a Participant in the Plan and have
a Transferred Amounts Account established on his or her behalf as of the
effective date of any transfer of Transferred Amounts to this Plan.

 

9

 

3.4                               Ineligible Participant.

 

Notwithstanding
any other provisions of this Plan to the contrary, if the Committee determines
that the participation in the Plan by any Board member will jeopardize the
status of the Plan as exempt from the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), or regulations thereunder, the
Committee may, in its sole discretion, determine that such Participant shall
cease to be eligible to participate in the Plan.  As soon as administratively feasible following such
determination, the Company shall make a lump sum payment, in cash and/or shares
of Company common stock, as applicable, to the Participant equal to the value
of his or her Account as of the most recent Valuation Date, less any income or
employment tax withholding required under applicable law.  Upon such payment, no benefit shall
thereafter be payable under this Plan either to the Participant or any
Beneficiary of the Participant, and all of the Participant’s elections as to
the time and manner of payment of his or her Account shall be deemed canceled.

 

ARTICLE IV

 

PHANTOM STOCK ACCOUNT

 

4.1                               Phantom Stock Award.

 

(a)                                  As of May 26, 1999, the Phantom Stock Account of
a Participant eligible for an award of Phantom Stock pursuant to Section 3.1(i)
of the Plan shall be credited with an award of Phantom Stock in the number of
shares specified in Exhibit B to the Plan. 
The Company shall contribute shares of Company common stock to
the Irrevocable Trust in an amount equal to the aggregate number of shares of
Phantom Stock credited to all Phantom Stock Accounts under the Plan from such
awards.  Any such contributions to an
Irrevocable Trust and related investments shall be solely to assist the

 

10

 

Company
in satisfying its obligations under this Plan and no Participant shall have any
right, title or interest whatsoever in any such contributions or investments.

 

(b)                                 As of the date of any Phantom Stock award
pursuant to the terms of the NEDSIP, the Phantom Stock Account of a Participant
eligible for such award shall be credited with the number of Phantom Stock
units as specified in such award.  The
Company shall not be required to contribute any shares or other property to the
Irrevocable Trust for such awards.

 

4.2                               Valuation of Phantom Stock Account; Deemed
Reinvestment of Dividends.

 

As
of each Valuation Date, the value of a Participant’s Phantom Stock Account
shall equal (i) the value of the number of shares of Phantom Stock credited to
such account as of the last Valuation Date, plus (ii) the value of the number
of shares of Phantom Stock deemed to have been credited to such account as a
result of the deemed reinvestment of any dividends deemed to have been paid on
such Phantom Stock since the last Valuation Date.  Any dividends paid on the common stock of the Company shall be
deemed to be paid on the Phantom Stock under the Plan in an equal amount;
provided, however, that to the extent they are paid in a form other than
additional shares of the common stock of the Company, they shall be deemed to
be immediately reinvested in such number of shares of the common stock of the
Company as are represented by the aggregate amount of the dividends divided by
the value of one share of the common stock of the Company on the date the
dividend is paid.

 

For
purposes of this Plan, the “value” of a share of Phantom Stock shall be deemed
to equal the closing price of a share of Company common stock as listed on the
New York Stock Exchange (“NYSE”) on any date of reference.  In the event that the date of reference is a
date on which the NYSE is not open for business, the value of a share of
Phantom Stock shall equal the average of the closing prices on the dates
immediately preceding and following the date of reference during

 

11

 

which
the NYSE was open for business. 
Notwithstanding anything in this Plan to the contrary, the Company may
adopt alternate procedures for determining the value of Phantom Stock in the
event Company common stock ceases to be traded on the NYSE or to reflect the
occurrence of a Conversion Event described in Section 4.3.

 

For
purposes of determining the value of the Phantom Stock credited to a
Participant’s Phantom Stock Account as of any time of reference, each share of
Phantom Stock shall be deemed equivalent in value to one share of the
outstanding shares of common stock of the Company.  For purposes of valuing a Participant’s Phantom Stock Account
upon the termination of his or her membership on the Board, the Valuation Date
shall be the business day coincident with or immediately preceding the
termination of the Participant’s Board membership.

 

4.3                             Adjustment and Substitution of Phantom Stock.

 

In
the event of:  (a) a stock split (or
reverse stock split) with respect to the common stock of the Company; (b) the
conversion of the common stock of the Company into another form of security or
debt instrument of the Company; (c) the reorganization, merger or consolidation
of the Company into or with another person or entity; or (d) any other action
which would alter the number of, and/or shareholder rights of, holders of
outstanding shares of the common stock of the Company (collectively, a “Conversion
Event”), then, notwithstanding the fact that Plan Participants have
no rights to the shares of Company common stock represented by their Phantom
Stock Account nor to the shares of such Company common stock which may be
contributed by the Company to the Irrevocable Trust, the number of shares of
Phantom Stock then allocated to a Participant’s Phantom Stock Account shall be
deemed to be converted, to the extent possible, to reflect any such Conversion
Event to the same extent as the shares of holders of outstanding shares of
Company common stock would have been converted upon the occurrence of the
Conversion Event.  On and after any such
Conversion Event, this Plan shall be applied, mutatis mutandis, as if the
Participant’s Phantom Stock Account was comprised of the

 

12

 

cash,
securities, notes or other instruments into which the outstanding shares of
Company common stock was converted. 
Following the occurrence of a Conversion Event, the Board is authorized
to amend the Plan as it, in its sole discretion, determines to be necessary or
appropriate to address any administrative or operational details presented by
the Conversion Event which are not addressed in the Plan.

 

4.4                               Shareholder Rights.

 

Except
as specifically provided herein, an award of Phantom Stock under the Plan shall
not entitle a Participant to voting rights or any other rights of a shareholder
of the Company.

 

4.5                             Statement of Phantom Stock Account.

 

As
soon as administratively feasible following the last day of each calendar
quarter, the Committee shall provide to each eligible Participant a statement
of the value of his or her Phantom Stock Account as of the most recent
Valuation Date.

 

ARTICLE V

 

DEFERRAL ACCOUNT; TRANSFERRED AMOUNTS
ACCOUNT

 

5.1                               Deferral of Directors’ Fees.

 

Any
non-employee member of the Board may elect to defer a specified percentage of
his or her Directors’ Fees under the Plan by submitting to the Committee a
written Enrollment Form.  Such election
shall be effective with respect to Directors’ Fees paid for services performed
by such Participant beginning the first day of the month following the receipt
by the Committee of the Participant’s Enrollment Form and shall remain in
effect until withdrawn by the Participant by written notice to the Committee in
accordance with uniform rules established by the Committee; provided that a
Participant who withdraws his or her Enrollment Form during a Plan Year may not
then file another Enrollment Form with the Committee with respect to the same
Plan Year.

 

13

 

The
withdrawal by a Participant of his or her Enrollment Form shall be effective
with respect to Directors’ Fees payable on or after the first day of the month
following the receipt of such notice by the Committee.

 

5.2                               Option to Establish a Transferred Amounts
Account.

 

Any
non-employee member of the Board may elect to have amounts previously deferred
under the Prior Plan transferred to this Plan by filing with the Committee a
Transfer of Existing Account Credits, or other form supplied by and/or
acceptable to the Committee.  Such
election may be made at any time; provided, however, that any such election
must represent the transfer to this Plan of the eligible non-employee Board
member’s entire account under the Prior Plan. 
Upon receipt of any such election, the Committee shall cause a
Transferred Amounts Account to be established for the Participant under this
Plan documenting the amount initially transferred.  Except to the extent necessary to comply with any applicable law
or regulation, in the event that a Participant electing to transfer a
Transferred Amount from the Prior Plan previously elected (or subsequently
elects) to defer Director’s Fees under the Plan by filing with the Committee a
written Enrollment Form, a separate Transferred Amounts Account will not be
maintained after the initial transfer to the Plan and all Transferred Amounts
shall be commingled with and invested and reinvested in the same manner as a
Participant’s Deferral Account hereunder.

 

5.3                               Investment Direction.

 

A Participant may direct
that amounts deferred pursuant to his or her Enrollment Form (and/or, as the
context so requires, amounts deferred under the Prior Plan which are
transferred to this Plan in accordance with an election made pursuant to
Section 5.2) be deemed to be invested in one or more of the Investment Options
listed in Exhibit A to the Plan (a “New Money Election”) and credited with
shares or units in each such Investment Option in the same manner as equivalent
contributions would be invested under the same Investment Options available
under the Equitable 401(k) Plan.  Except
as otherwise provided with respect to directions to

 

14

 

invest in the Equitable
Resources Common Stock Fund (“Company Stock Fund”), a Participant may
direct that amounts previously credited to his or her Deferral Account and/or
Transferred Amount Account and deemed invested in the available Investment
Options be transferred between and among the then available Investment Options
(a “Reallocation
Election”).

 

Special
rules apply to directions to invest in the Company Stock Fund.  No restrictions are placed on New Money
Elections.  Accordingly, a Participant
may make a New Money Election to invest in the Company Stock Fund or to cease
future investments in such Fund in the same manner as any other Investment Option.  Reallocation Elections, however, may not
direct that amounts previously credited to a Participant’s Deferral Account
and/or Transferred Amount Account and which were directed to be invested in the
Company Stock Fund be transferred out of such Fund and into another
Investment Option.

 

Reallocation
Elections into the Company Stock Fund are permitted.  Accordingly, no restrictions apply to
Reallocation Elections directing that amounts previously credited to a
Participant’s Deferral Account and/or Transferred Amount Account and which were
directed to be invested in an Investment Option other than the Company Stock Fund be
transferred out of such other Investment Option and into the Company Stock
Fund.

 

Except
as otherwise provided with respect to the Company common stock, regardless of
whether the investment direction is a New Money Election or a Reallocation
Election, a Participant’s Deferral Account and/or Transferred Amount Account
shall only be deemed to be invested in such Investment Options for purposes of
crediting investment gain or loss under Section 5.5 of the Plan and the Company
shall not be required to actually invest, on behalf of any Participant, in any
Investment Option listed on Exhibit A to the Plan.  Notwithstanding the preceding sentence, the Company may, but
shall not be required to, elect to make contributions to an Irrevocable Trust
in an amount equal to the amounts deferred by Participants and actually invest
such contributions in the Investment Options elected by a particular Participant;
provided, however,

 

15

 

that
the Company shall contribute shares of Company common stock to the
Irrevocable Trust in an amount equal to the aggregate number of shares of
Company common stock represented by Participant investment directions to the
Company Stock Fund.  Any such
contributions to an Irrevocable Trust and related investments shall be solely
to assist the Company in satisfying its obligations under this Plan and no
Participant shall have any right, title or interest whatsoever in any such
contributions or investments.

 

All investment elections
shall be made by written notice to the Committee in accordance with uniform
procedures established by the Committee; provided, however, that investment directions
to an Investment Option must be in multiples of whole percents (1%) or whole
dollars ($1.00).  Any such investment
election shall be effective as of the Valuation Date immediately following the
date on which the written notice is received and shall remain in effect until
changed by the Participant.  In the
event that a Participant fails to direct the investment of his or her account,
the Committee shall direct such Participant’s Deferral Account and/or Transferred
Amounts Account to an Investment Option named in Exhibit A of a fixed income
nature.

 

5.4                               No Right to Investment Options.

 

Notwithstanding
anything in the Plan to the contrary, the Investment Options offered under the
Plan may be changed or eliminated at any time in the sole discretion of the
Benefits Investment Committee of the Company. 
Prior to the change or elimination of any Investment Option under the
Plan, the Committee shall provide written notice to each Participant with
respect to whom a Deferral Account and/or Transferred Amount Account is
maintained under the Plan and any Participant who has directed any part of his
or her Deferral Account and/or Transferred Amount Account to such Investment
Option shall be permitted to redirect such portion of his or her Deferral
Account and/or Transferred Amount Account to another Investment Option offered
under the Plan.

 

16

 

5.5                               Crediting of Investment Return.

 

Each
Participant’s Deferral Account and/or Transferred Amount Account shall be credited
with deemed investment gain or loss at the Investment Return Rate as of each
Valuation Date, based on the average daily balance of the Participant’s
Deferral Account and/or Transferred Amount Account since the immediately
preceding Valuation Date, but after such Deferral Account and/or Transferred
Amount Account has been adjusted for any contributions or distributions to be
credited or deducted for such period. 
Until a Participant or his or her Beneficiary receives his or her entire
Deferral Account and/or Transferred Amount Account, the unpaid balance thereof
shall be credited with investment gain or loss at the Investment Return Rate,
as provided in this Section 5.5 of the Plan.

 

5.6                               Valuation of Deferral Account.

 

As
of each Valuation Date, a Participant’s Deferral Account and/or Transferred
Amount Account shall equal (i) the balance of the Participant’s Deferral
Account and/or Transferred Amount Account as of the immediately preceding
Valuation Date, plus (ii) the Participant’s deferred Directors’ Fees since the
immediately preceding Valuation Date, plus or minus (iii) investment gain or
loss credited as of such Valuation Date pursuant to Section 5.5 of the Plan,
and minus (iv) the aggregate amount of distributions, if any, made from such
Deferral Account and/or Transferred Amount Account since the immediately
preceding Valuation Date.  For purposes
of valuing a Participant’s Deferral Account and/or Transferred Amount Account
upon the termination of the Participant’s membership on the Board, the Valuation
Date shall be the business day coinciding with or immediately preceding the
date of the termination of the Participant’s Board membership.

 

17

 

5.7                               Statement of Deferral Account and/or Transferred
Amount Account.

 

As
soon as administratively feasible following the last day of each calendar
quarter, the Committee shall provide to each Participant a statement of the
value of his or her Deferral Account and/or Transferred Amount Account as of
the most recent Valuation Date.

 

ARTICLE VI

 

PAYMENT OF BENEFITS

 

6.1                             Payment of Phantom Stock Account.

 

(a)                                  As soon as administratively feasible following a
Participant’s termination of membership on the Board for any reason, and in
accordance with the election provided in Section 6.5 of the Plan, the
Company shall distribute to the Participant or, in the event of the
Participant’s death, to his Beneficiary, the number of shares of Company common
stock payable, based on awards credited to the Participant’s Phantom Stock
Account pursuant to Section 4.1(a) of the Plan, as determined in
accordance with Article IV of the Plan, less any income tax withholding
required under applicable law.

 

(b)                                 As soon as administratively feasible following
the date provided for payment pursuant to the terms of a Phantom Stock
Agreement described in Section 2.18(ii) of the Plan, and in accordance
with the election provided in Section 6.5 of the Plan, the Company shall
pay or distribute to the Participant or, in the event of the Participant’s death,
to his Beneficiary, either an amount equal to the value of the Participant’s
Phantom Stock Account then payable, or the number of shares of Company common
stock then payable, whichever form is elected by the

 

18

 

Participant,
based on awards credited to the Participant’s Phantom Stock Account pursuant to
Section 4.1(b) of the Plan, as determined in accordance with
Article IV of the Plan, less any income tax withholding required under
applicable law.

 

6.2                               Payment of Deferral and/or Transferred Amounts
Account.

 

As
soon as administratively feasible following a Participant’s termination of
membership on the Board and in accordance with the election provided in
Section 6.5 of the Plan, and without regard to whether the Participant is
entitled to payment of his or her Phantom Stock Account, the Company shall pay
to the Participant or, in the event of the Participant’s death, to his
Beneficiary, an amount equal to the  value of the Participant’s Deferral
Account and/or Transferred Amount Account, as determined in accordance with
Article V of the Plan, less any income tax withholding required under
applicable law.  Except as otherwise
provided in the following sentence, such payment shall be made in cash in the form
elected by the Participant pursuant to Section 6.5 of the Plan.  Notwithstanding the preceding sentence, to
the extent the Participant had directed that any portion of his Deferral
Account and/or Transferred Amount Account be invested in the Company Stock
Fund, the Company shall distribute such portion in such number of shares of
Equitable Resources Common Stock as would be represented by an equal amount
invested in the Company Stock Fund under the Company 401(k) Plan.

 

6.3                               In-Service Distribution of Deferral and/or
Transferred Amounts Account.

 

A
Participant may make an irrevocable election to receive a distribution of all
or a specified dollar amount of his or her Deferral Account and/or Transferred
Amount Account on a date certain in the future prior to the termination of his
or her membership on the Board (an “In-Service Distribution”); provided that
such In-Service Distribution shall be subject to any income tax withholding
required under applicable law.  Such
election must be made in writing at

 

19

 

the
time the Participant first elects to participate in this Plan by filing an
Enrollment Form with the Committee.

 

For
purposes of reducing a Participant’s Deferral Account and/or Transferred Amount
Account and adjusting the balances in the various Investment Options in which
such reduced Deferral Account and/or Transferred Amount Account is deemed to be
invested to reflect such In-Service Distribution, amounts represented by such
In-Service Distribution shall be deemed to have been withdrawn first, on a pro
rata basis, from that portion of his Deferral Account and/or Transferred
Amounts Account deemed to be invested in Investment Options other
than the Equitable Common Stock Fund (the “Non Stock Investments”) and,
second, to the extent the In-Service Distribution cannot be fully satisfied by
a deemed withdrawal of the Non Stock Investments, from the portion deemed
invested in the Company Stock Fund.

 

Any
such In-Service Distribution shall be made in one lump sum cash payment.  Notwithstanding the preceding sentence, to
the extent the Participant had directed that any portion of his Deferral
Account and/or Transferred Amount Account be invested in the Company Stock Fund,
the Company shall distribute such portion in such number of shares of Equitable
Resources Common Stock as would be represented by an equal amount invested in
the Company Stock Fund under the Company 401(k) Plan.

 

6.4                               Hardship Withdrawal from Deferral and/or
Transferred Amounts Account.

 

In
the event that the Committee, in its sole discretion, determines upon the
written request of a Participant in accordance with uniform procedures
established by the Committee, that the Participant has suffered an
unforeseeable financial emergency, the Company may pay to the Participant in a
lump sum as soon as administratively feasible following such determination, an
amount necessary to meet the emergency, but not exceeding the aggregate balance
of such Participant’s Deferral Account and/or Transferred Amount Account as of
the date of such

 

20

 

payment
(a “Hardship
Withdrawal”).  Any such
Hardship Withdrawal shall be subject to any income tax withholding required
under applicable law.

 

For
purposes of this Section 6.4, an “unforeseeable financial emergency” shall mean
an event that the Committee determines to give rise to an unexpected need for
cash arising from an illness, casualty loss, sudden financial reversal, or
other such unforeseeable occurrence. 
The amount of a Hardship Withdrawal may not exceed the amount the
Committee reasonably determines to be necessary to meet such emergency needs
(including taxes incurred by reason of a taxable distribution).

 

The
form of payment of the Hardship Withdrawal, the amount of the Participant’s
Deferral Account and/or Transferred Amount Account otherwise payable, and the
amounts deemed credited to the Investment Options under the Plan shall be paid,
reduced and adjusted to reflect the payment of the Hardship Withdrawal in the
same manner described in Section 6.3 applicable to In-Service Distributions.

 

6.5                               Form of Payment.

 

(a)                                  In General.  A Participant may elect to
receive that portion of his or her Account payable hereunder in one of the
following forms:

 

(i)                                     Annual payments of a fixed amount which shall
amortize the value of the Account over a period of five, ten, or fifteen years
(together, in the case of each annual payment, with interest and dividends
credited thereto after the payment commencement date pursuant to Sections 4.2
and 5.5 of the Plan); or

 

(ii)                                  A lump sum.

 

21

 

Such
an election must be made in writing in accordance with uniform procedures
established by the Committee no later than the date that is one (1) year and
one (1) day prior to the date of the Participant’s termination as a member of
the Board.  In the event a Participant
fails to make a distribution election within the time period prescribed, his or
her Account shall be distributed in the form of a lump sum.

 

(b)                                 Distribution of Company Common Stock.  In the
event the Company is required to distribute some or all of a Participant’s
Account in shares of Equitable Resources Common Stock in accordance with Plan
Sections 6.1 and/or 6.2, the aggregate amount of such shares shall be
distributed in the same manner as the Participant elected in subsection
(a).  To the extent the Participant
elected an installment form of payment, the number of shares of Equitable
Common Stock to be distributed in each installment shall be determined by
multiplying (i) the aggregate number of shares of Equitable Resources Common
Stock deemed credited to the Participant’s Account as of the installment
payment date by (ii) a fraction, the numerator of which is one and the denominator
of which is the number of unpaid installments, and by rounding the resulting
number down to the next whole number.

 

6.6                               Payments to Beneficiaries.

 

In
the event of a Participant’s death prior to the Participant’s termination of
membership on the Board, the Participant’s Beneficiary shall receive payment of
the Phantom Stock Account (if any), Participant’s Deferral Account and/or
Transferred Amount Account as soon as administratively feasible following the
Participant’s death in the form elected by the Participant pursuant to Section
6.5 of the Plan, less any income tax withholding required under applicable
law.  If no such election was made by
the Participant, the Participant’s Beneficiary shall receive payment of the
Participant’s Account in the form of a lump sum.  In the event of the Participant’s death after commencement of
installment payments under the Plan, but prior to receipt of his or her entire
Account (including, by way of clarification, the Participant’s Phantom Stock
Account,

 

22

 

if
any), the Participant’s Beneficiary shall receive the remaining installment
payments at such times as such installments would have been paid to the
Participant until the Participant’s entire Account is paid.

 

6.7                               Small Benefit.

 

In
the event that the value of a Participant’s Account is less than $5,000 as of
the Valuation Date immediately preceding the commencement of payment to the
Participant under the Plan, or the balance of the Participant’s Account payable
to any Beneficiary is less than $5,000 as of the Valuation Date immediately
preceding the commencement of payment to the Participant’s Beneficiary under
the Plan, the Committee may inform the Company and the Company, in its
discretion, may choose to pay the benefit in the form of a lump sum,
notwithstanding any provision of the Plan or an election of a Participant under
Section 6.5 of the Plan to the contrary.

 

ARTICLE VII

 

BENEFICIARY DESIGNATION

 

7.1                               Beneficiary Designation.

 

Each
Participant shall have the sole right, at any time, to designate any person or
persons as his or her Beneficiary to whom payment may be made of any amounts
which may become payable in the event of his or her death prior to the complete
distribution to the Participant of his or her Account.  Any Beneficiary designation shall be made in
writing in accordance with uniform procedures established by the
Committee.  A Participant’s most recent
Beneficiary designation shall supersede all prior Beneficiary
designations.  In the event a Participant
does not designate a Beneficiary under the Plan, any payments due under the
Plan shall be made first to the Participant’s spouse; if no spouse, then in
equal amounts to the Participant’s children; if no children, then to the
Participant’s estate.

 

23

 

ARTICLE VIII

 

ADMINISTRATION

 

8.1                               Committee.

 

The
Committee shall have sole discretion to: 
(i) designate non-employee directors eligible to participate in the
Plan; (ii) interpret the provisions of the Plan; (iii) supervise the
administration and operation of the Plan; and (iv) adopt rules and
procedures governing the Plan.

 

8.2                               Investments.

 

The
Benefits Investment Committee of the Company shall have the sole discretion to
choose the Investment Options available under the Plan and to change or
eliminate such Investment Options, from time to time, as it deems appropriate.

 

8.3                               Agents.

 

The
Committee may delegate its administrative duties under the Plan to one or more
individuals, who may or may not be employees of the Company.

 

8.4                               Binding Effect of Decisions.

 

Any
decision or action of the Committee with respect to any question arising out of
or in connection with the eligibility, participation, administration,
interpretation, and application of the Plan shall be final and binding upon all
persons having any interest in the Plan.

 

8.5                               Indemnification of Committees.

 

The
Company shall indemnify and hold harmless the members of the Committee and the
Benefits Investment Committee and their duly appointed agents under Section 8.3
against any and all claims, losses, damages, expenses, or liabilities arising
from any action or failure to act

 

24

 

with
respect to the Plan, except in the case of gross negligence or willful
misconduct by any such member or agent of the Committee or Benefits Investment
Committee.

 

ARTICLE IX

 

AMENDMENT AND TERMINATION OF PLAN

 

9.1                               Amendment.

 

The
Company (or its delegate) may at any time, or from time to time, modify or
amend any or all of the provisions of the Plan.  Where the action is to be taken by the Company, it shall be
accomplished by written action of the Board at a meeting duly called at which a
quorum is present and acting throughout. 
Where the action is to be taken by a delegate of the Company, it shall
be accomplished pursuant to any procedures established in the instrument
delegating the authority.  Regardless of
whether the action is taken by the Company or its delegate, no such modification
or amendment shall have the effect of reducing the value of any Participant’s
Account under the Plan as it existed as of the day before the effective date of
such modification or amendment, without such Participant’s prior written
consent.  Written notice of any
modification or amendment to the Plan shall be provided to each Participant
under the Plan.

 

9.2                               Termination.

 

The
Company, in its sole discretion, may terminate this Plan at any time and for
any reason whatsoever by written action of the Board at a meeting duly called
at which a quorum is present and acting throughout; provided that such
termination shall not have the effect of reducing the value of any
Participant’s Account under the Plan as it existed on the day before the
effective date of the termination of the Plan without such Participant’s prior
written consent.  Notwithstanding any
Participant election to the contrary, the Account of each Participant under the
Plan shall be paid as soon as administratively feasible following the termination
of the Plan.

 

25

 

The
Valuation Date for purposes of determining the value of Participants’ Accounts
upon termination of the Plan shall be the date prior to the date of the
termination of the Plan.

 

ARTICLE X

 

MISCELLANEOUS

 

10.1                        Funding.

 

The
Company’s obligation to pay benefits under the Plan shall be merely an unfunded
and unsecured promise of the Company to pay money in the future.  Except as otherwise provided in
Sections 4.1(a) and 5.3, prior to the occurrence of a Change in Control,
the Company, in its sole discretion, may elect to make contributions to an
Irrevocable Trust to assist the Company in satisfying all or any portion of its
obligations under the Plan.  Regardless
of whether the Company elects to or otherwise contributes to an Irrevocable
Trust, Plan Participants, their Beneficiaries, and their heirs, successors and
assigns, shall have no secured interest or right, title or claim in any
property or assets of the Company.

 

Notwithstanding
the foregoing, upon the occurrence of an event resulting in a Change in
Control, the Company shall make a contribution to an Irrevocable Trust in an
amount which, when added to the then value of any amounts previously
contributed to an Irrevocable Trust to assist the Company in satisfying all or any
portion of its obligations under the Plan, shall be sufficient to bring the
total value of assets held in the Irrevocable Trust to an amount not less than
the total value of all Participants’ Accounts under the Plan as of the
Valuation Date immediately preceding the Change in Control; provided that any
such funds contributed to an Irrevocable Trust pursuant to this Section 10.1
shall remain subject to the claims of the Company’s general creditors and
provided, further, that such contribution shall reflect any Conversion Event
described in Section 4.3.  Upon the
occurrence of the Change in Control of the Company, all deferrals to the Plan
shall cease, any adjustments required by Section 4.3 shall be made and the

 

26

 

Company
shall provide to the trustee of the Irrevocable Trust all Plan records and
other information necessary for the trustee to make payments to Participants
under the Plan in accordance with the terms of the Plan.

 

10.2                        Nonassignability.

 

No right
or interest of a Participant or Beneficiary under the Plan may be assigned,
transferred, or subjected to alienation, anticipation, sale, pledge,
encumbrance or other legal process or in any manner be liable for or subject to
the debts or liabilities of any such Participant or Beneficiary, or any other
person.

 

10.3                        Legal Fees and Expenses.

 

It
is the intent of the Company that no Participant be required to incur the
expenses associated with the enforcement of his or her rights under this Plan
by litigation or other legal action because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Participant hereunder.  Accordingly, if
after a Change in Control it should appear that the Company has failed to comply
with any of its obligations under this Plan, or in the event that the Company
or any other person takes any action to declare this Plan void or
unenforceable, or institutes any litigation designed to deny, or to recover
from, the Participant the benefits intended to be provided to such Participant
hereunder, the Company irrevocably authorizes such Participant to retain
counsel of his or her choice, at the expense of the Company as hereafter
provided, to represent such Participant in connection with the initiation or
defense of any litigation or other legal action, whether by or against the
Company or any director, officer, stockholder or other person affiliated with
the Company in any jurisdiction.  The
Company shall pay and be solely responsible for any and all attorneys’ and
related fees and expenses incurred by such Participant as a result of the
Company’s failure to perform under this Plan or any provision thereof; or as a
result of the Company or any person contesting the validity or enforceability
of this Plan or any provision thereof.

 

27

 

10.4                        Captions.

 

The
captions contained herein are for convenience only and shall not control or
affect the meaning or construction hereof.

 

10.5                        Governing Law.

 

The
provisions of the Plan shall be construed and interpreted according to the laws
of the Commonwealth of Pennsylvania.

 

10.6                        Successors.

 

The
provisions of the Plan shall bind and inure to the benefit of the Company, its
affiliates, and their respective successors and assigns.  The term successors as used herein shall
include any corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise, acquire all or substantially all of the
business and assets of the Company or a participating affiliate and successors
of any such corporation or other business entity.

 

10.7                        Right to Continued Service.

 

Nothing
contained herein shall be construed to confer upon any Participant the right to
continue to serve as a member of the Board or in any other capacity.

 

28Exhibit 10.1

 

 

U.S. $225,000,000

 

AMENDED AND RESTATED

LOAN FUNDING AND SERVICING AGREEMENT

 

by and among

 

ACS FUNDING TRUST I,

as the Borrower

 

AMERICAN CAPITAL STRATEGIES, LTD.,

as the Servicer

 

VARIABLE FUNDING CAPITAL CORPORATION,

as the Conduit Lender

 

WACHOVIA SECURITIES, LLC,

as the Deal Agent

 

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

as the Swingline Lender

 

and

 

WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION,

as the Backup Servicer and as the Collateral Custodian

 

Dated as of June 13, 2003

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE
  I       DEFINITIONS

  
	
  Section 1.1

  	
  Certain Defined Terms

  
	
  Section 1.2

  	
  Other Terms

  
	
  Section 1.3

  	
  Computation of Time
  Periods

  
	
  Section 1.4

  	
  Interpretation

  
	
  Section 1.5

  	
  Section References

  
	
  Section 1.6

  	
  Calculations

  
	
  ARTICLE
  II       PURCHASE OF THE STRUCTURED NOTES

  
	
  Section 2.1

  	
  The Structured Notes

  
	
  Section 2.2

  	
  Procedures for Swingline
  Advances

  
	
  Section 2.3

  	
  Procedures for Advances
  by the Conduit Lender

  
	
  Section 2.4

  	
  Optional Changes in
  Facility Amount; Prepayments

  
	
  Section 2.5

  	
  Reimbursement of
  Swingline Advances

  
	
  Section 2.6

  	
  Notations on the
  Structured Notes

  
	
  Section 2.7

  	
  Principal Repayments

  
	
  Section 2.8

  	
  Interest Payments

  
	
  Section 2.9

  	
  Settlement Procedures

  
	
  Section 2.10

  	
  Collections and
  Allocations

  
	
  Section 2.11

  	
  Payments,
  Computations, Etc

  
	
  Section 2.12

  	
  Reserved

  
	
  Section 2.13

  	
  Fees

  
	
  Section 2.14

  	
  Increased Costs;
  Capital Adequacy; Illegality

  
	
  Section 2.15

  	
  Taxes

  
	
  Section 2.16

  	
  Assignment of the Purchase
  Agreement

  
	
  Section 2.17

  	
  Lien Release Dividend

  
	
  Section 2.18

  	
  Appointment of
  Registrar and Duties

  
	
  Section 2.19

  	
  Substitution of Loans

  
	
  ARTICLE
  III       CLOSING; CONDITIONS OF CLOSING
  AND ADVANCES

  
	
  Section 3.1

  	
  Conditions to Closing
  and Initial Advances

  
	
  Section 3.2

  	
  Conditions Precedent to
  All Advances

  

 

i

 

	
  ARTICLE
  IV       REPRESENTATIONS AND WARRANTIES

  
	
  Section 4.1

  	
  Representations and
  Warranties of the Borrower

  
	
  Section 4.2

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

  
	
  Section 4.3

  	
  Breach of Certain
  Representations and Warranties

  
	
  ARTICLE
  V       GENERAL COVENANTS OF THE BORROWER

  
	
  Section 5.1

  	
  Covenants of the Borrower

  
	
  Section 5.2

  	
  Hedging Agreement

  
	
  Section 5.3

  	
  Delivery of Loan Files

  
	
  ARTICLE
  VI       PERFECTION OF TRANSFER AND
  PROTECTION OF SECURITY INTERESTS

  
	
  Section 6.1

  	
  Custody of Loans

  
	
  Section 6.2

  	
  Filing

  
	
  Section 6.3

  	
  Changes in Name,
  Corporate Structure or Location

  
	
  Section 6.4

  	
  Chief Executive Office

  
	
  Section 6.5

  	
  Costs and Expenses

  
	
  Section 6.6

  	
  Sale Treatment

  
	
  Section 6.7

  	
  Separateness from the
  Borrower

  
	
  ARTICLE
  VII       ADMINISTRATION AND SERVICING OF
  LOANS

  
	
  Section 7.1

  	
  Appointment of the
  Servicer

  
	
  Section 7.2

  	
  Duties and
  Responsibilities of the Servicer

  
	
  Section 7.3

  	
  Authorization of the
  Servicer

  
	
  Section 7.4

  	
  Collection of Payments

  
	
  Section 7.5

  	
  Servicer Advances

  
	
  Section 7.6

  	
  Realization Upon
  Defaulted Loans or Charged-Off Loans

  
	
  Section 7.7

  	
  Maintenance of Insurance
  Policies

  
	
  Section 7.8

  	
  Representations and
  Warranties of the Servicer

  
	
  Section 7.9

  	
  Covenants of the
  Servicer

  
	
  Section 7.10

  	
  The Collateral
  Custodian

  
	
  Section 7.11

  	
  Representations and
  Warranties of the Collateral Custodian

  
	
  Section 7.12

  	
  Covenants of the
  Collateral Custodian

  
	
  Section 7.13

  	
  The Backup Servicer

  
	
  Section 7.14

  	
  Representations and
  Warranties of the Backup Servicer

  

 

ii

 

	
  Section 7.15

  	
  Covenants of the
  Backup Servicer

  
	
  Section 7.16

  	
  Payment of Certain
  Expenses by Servicer

  
	
  Section 7.17

  	
  Reports

  
	
  Section 7.18

  	
  Annual Statement as to
  Compliance

  
	
  Section 7.19

  	
  Annual Independent
  Public Accountant’s Servicing Reports

  
	
  Section 7.20

  	
  Limitation on
  Liability of the Servicer and Others

  
	
  Section 7.21

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

  
	
  Section 7.22

  	
  Access to Certain
  Documentation and Information Regarding the Loans

  
	
  Section 7.23

  	
  Merger or
  Consolidation of the Servicer

  
	
  Section 7.24

  	
  Identification of
  Records

  
	
  Section 7.25

  	
  Servicer Termination
  Events

  
	
  Section 7.26

  	
  Appointment of
  Successor Servicer

  
	
  Section 7.27

  	
  Market Servicing Fee

  
	
  ARTICLE
  VIII       SECURITY INTEREST

  
	
  Section 8.1

  	
  Grant of Security
  Interest

  
	
  Section 8.2

  	
  Release of Lien on Loans

  
	
  Section 8.3

  	
  Release of Lien on
  Supplemental Interests

  
	
  Section 8.4

  	
  Further Assurances

  
	
  Section 8.5

  	
  Remedies

  
	
  Section 8.6

  	
  Waiver of Certain Laws

  
	
  Section 8.7

  	
  Power of Attorney

  
	
  ARTICLE IX       TERMINATION
  EVENTS

  
	
  Section 9.1

  	
  Termination Events

  
	
  ARTICLE X       INDEMNIFICATION

  
	
  Section 10.1

  	
  Indemnities by the
  Borrower

  
	
  Section 10.2

  	
  Indemnities by the
  Servicer

  
	
  ARTICLE
  XI       THE DEAL AGENT

  
	
  Section 11.1

  	
  Authorization and
  Action

  
	
  Section 11.2

  	
  Delegation of Duties

  
	
  Section 11.3

  	
  Exculpatory Provisions

  
	
  Section 11.4

  	
  Reliance

  

 

iii

 

	
  Section 11.5

  	
  Non-Reliance on Deal
  Agent

  
	
  Section 11.6

  	
  The Deal Agent in its
  Individual Capacity

  
	
  Section 11.7

  	
  Successor Deal Agent

  
	
  ARTICLE
  XII       MISCELLANEOUS

  
	
  Section 12.1

  	
  Amendments and Waivers

  
	
  Section 12.2

  	
  Notices, Etc

  
	
  Section 12.3

  	
  Liabilities to
  Obligors

  
	
  Section 12.4

  	
  No Waiver, Rights and
  Remedies

  
	
  Section 12.5

  	
  Binding Effect

  
	
  Section 12.6

  	
  Term of this Agreement

  
	
  Section 12.7

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

  
	
  Section 12.8

  	
  WAIVER OF JURY TRIAL

  
	
  Section 12.9

  	
  Costs, Expenses and
  Taxes

  
	
  Section 12.10

  	
  No Proceedings

  
	
  Section 12.11

  	
  Recourse Against
  Certain Parties

  
	
  Section 12.12

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

  
	
  Section 12.13

  	
  Confidentiality

  
	
  Section 12.14

  	
  Third Party
  Beneficiaries

  
	
  Section 12.15

  	
  Execution in
  Counterparts; Severability; Integration

  
	
  Section 12.16

  	
  Waiver of Setoff

  
	
  Section 12.17

  	
  Assignments by the
  Conduit Lender; WCM Transfer

  
	
  Section 12.18

  	
  Heading and Exhibits

  
	
  Section 12.19

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

  
	
  Section 12.20

  	
  Non-Confidentiality
  of Tax Treatment

  

 

EXHIBITS

 

	
  EXHIBIT A-1

  	
  Borrower Notice
  (Funding Request)

  
	
  EXHIBIT A-2

  	
  Borrower Notice
  (Swingline Funding Request)

  
	
  EXHIBIT B-1

  	
  Form of VFCC
  Note

  
	
  EXHIBIT B-2

  	
  Form of
  Swingline Note

  
	
  EXHIBIT C

  	
  “Limited
  Purpose” Provisions

  
	
  EXHIBIT D

  	
  Form of
  Assignment and Acceptance

  
	
  EXHIBIT E

  	
  Form of Monthly
  Report

  
	
  EXHIBIT F

  	
  Form of
  Servicer’s Certificate

  
	
  EXHIBIT G

  	
  Credit and
  Collection Policy

  

 

iv

 

	
  EXHIBIT H

  	
  Form of Hedging
  Agreement (including Schedule and Confirmation)

  
	
  EXHIBIT I

  	
  Form of
  Certificate of Borrower’s Counsel

  
	
  EXHIBIT J

  	
  Form of Trust
  Receipt and Initial Certification

  
	
  EXHIBIT K

  	
  Form of Trust
  Receipt and Final Certification

  
	
  EXHIBIT L

  	
  Form of Request
  for Release of Loan Documents and Receipt

  
	
  EXHIBIT M

  	
  Form of
  Assignment of Mortgage

  
	
  EXHIBIT N

  	
  Form of
  Reinvestment Certification

  
	
  EXHIBIT O-1

  	
  Officer’s
  Certificate as to Solvency from Originator

  
	
  EXHIBIT O-2

  	
  Officer’s
  Certificate as to Solvency from Borrower

  
	
  EXHIBIT P

  	
  Officer’s
  Closing Certificate

  
	
  EXHIBIT P-1

  	
  Officer’s
  Closing Certificate from Originator

  
	
  EXHIBIT P-2

  	
  Officer’s
  Closing Certificate from Borrower

  
	
  EXHIBIT Q-1

  	
  Power of
  Attorney from Originator

  
	
  EXHIBIT Q-2

  	
  Power of
  Attorney from Borrower

  
	
  EXHIBIT R

  	
  Reserved

  
	
  EXHIBIT S

  	
  Reserved

  
	
  EXHIBIT T

  	
  Form of Agent
  and Intercreditor Provisions for Agented Notes

  
	
  EXHIBIT U

  	
  Form of
  Intercreditor and Subordination Agreement

  

 

SCHEDULES

 

	
  SCHEDULE I

  	
  Schedule of
  Documents

  
	
  SCHEDULE II

  	
  Reserved

  
	
  SCHEDULE III

  	
  Reserved

  
	
  SCHEDULE IV

  	
  Loan List

  
	
  SCHEDULE V

  	
  Location of Loan
  Files

  
	
  SCHEDULE VI

  	
  Form of Loans

  

 

v

 

P  R  E
A  M  B  L  E

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

R
E  C  I  T  A  L  S

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I

 

DEFINITIONS

 

Section
1.1                                   Certain
Defined Terms.

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

Advance:  Defined in subsection 2.1(b).

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

Agreement:  Defined in the Preamble.

 

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

 

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

 

American Capital:  Defined in the Preamble.

 

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

 

Applicable Law:  For any Person or property of such Person,
all existing and future applicable laws, rules, regulations (including
proposed, temporary and final income tax regulations), statutes, treaties,
codes ordinances, permits, certificates, orders and licenses of and
interpretations by any Governmental Authority (including, without limitation,
usury laws, predatory lending laws, the Federal Truth in Lending Act, and
Regulation Z and Regulation B of the Federal Reserve Board), and applicable
judgments, decrees, injunctions, writs, orders, or line action of any court,
arbitrator or other administrative, judicial, or quasi-judicial tribunal or
agency of competent jurisdiction.

 

4

 

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

 

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

 

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

 

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

 

Backup Servicer:  Defined in the Preamble.

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

Borrower:  Defined in the Preamble.

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

Closing Date:  June 13, 2003.

 

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

 

Collateral:  All right, title and interest, whether now
owned or hereafter acquired or arising, and wherever located, of the Borrower
in all accounts, cash and currency, chattel paper, tangible chattel paper,
electronic chattel paper, copyrights, copyright licenses, equipment, fixtures,
general intangibles, instruments, commercial tort claims, deposit accounts,
inventory, investment property, letter-of-credit rights, software, supporting
obligations, accessions, and other property consisting of, arising out of, or
related to any of the following (in each case excluding the Retained Interest
and the Excluded Amounts):

 

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

 

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

 

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

 

(iv)                              all
Insurance Policies;

 

(v)                                 the
Loan Documents;

 

7

 

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

 

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

 

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

 

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

 

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

 

(xi)                                the
proceeds of each of the foregoing.

 

Collateral Custodian:  Defined in the Preamble.

 

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

 

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

 

Collection Account:  Defined in subsection 7.4(e).

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

Conduit Lender:  Defined in the Preamble.

 

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

 

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

 

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

 

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

 

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

 

Deemed Collection:  Defined in subsection 2.4(c).

 

10

 

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

 

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

 

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

 

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

 

Determination Date:  The last day of each Collection Period.

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

(xxviii)              with respect to Agented Notes, all
syndicated notes of the Obligor of the same priority are cross-defaulted, the
Related Property securing such notes is held by the collateral agent for the
benefit of all holds of the syndicated notes and all holders of such notes
(a) have an undivided interest in the collateral securing such notes,
(b) share in the proceeds of the sale or other disposition of such
collateral on a pro rata basis and (c) may transfer or assign their right,
title and interest in the Related Property.

 

Eligible Obligor:  On any day, any Obligor that satisfies each
of the following requirements at all times:

 

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

 

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

 

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

 

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

 

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

 

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

 

(vii)                           such Obligor is not a
Governmental Authority;

 

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

 

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

 

14

 

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

 

(x)                                   such
Obligor has an Eligible Risk Rating.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

Facility Fee:  Defined in the Fee Letter.

 

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

 

FATF:  Defined in subsection 4.1(hh).

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Governmental Authority:  Any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, any court or arbitrator and any accounting board or authority
(whether or not a part of the government) which is responsible for the
establishment or interpretation of national or international accounting
principles.

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

Hedge Collateral:  Defined in subsection 5.2(b).

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

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

 

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

 

Indemnified Amounts:  Defined in Section 10.1.

 

Indemnified Parties:  Defined in Section 10.1.

 

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

 

Initial Advance:  The first Advance.

 

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

 

19

 

commencement by
such Person of a voluntary case under any applicable Insolvency Law now or
hereafter in  effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.

 

Insolvency Laws:  The Bankruptcy Code and all other applicable
liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency,
reorganization, suspension of payments, or similar debtor relief laws from time
to time in effect affecting the rights of creditors generally.

 

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

 

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

 

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

 

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

 

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

 

	
  IR x P x

  	
  1

  
	
   

  	
  D

  

 

where

 

IR                                    =                                         the
Interest Rate applicable on such day;

 

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

 

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

 

20

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Investment:  With respect to any Person, any direct or
indirect loan, advance or investment by such Person in any other Person,
whether by means of share purchase, capital contribution, loan or otherwise,
excluding the acquisition of assets pursuant to the Purchase Agreement and
excluding commission, travel and similar advances to officers, employees and
directors made in the ordinary course of business.

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Market Servicing Fee:  Defined in Section 7.27.

 

23

 

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

 

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

 

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

 

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

 

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

 

Minimum Overcollateralization Percentage:  133 1/3%.

 

Minimum Portfolio Yield:  6.0%

 

Monthly Report:  Defined in subsection 7.17(a).

 

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

 

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

 

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

 

24

 

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

 

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

 

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

 

Notes:  Defined in subsection 2.1(a).

 

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

 

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

 

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

 

25

 

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

 

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

 

Original Conduit Lender:  Defined in the Recitals.

 

Original Deal Agent:  Defined in the Recitals.

 

Original Lenders:  Defined in the Recitals.

 

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

 

Original Swingline Lender:  Defined in the Recitals.

 

Originator:  American Capital Strategies, Ltd.

 

Other Costs:  Defined in subsection 12.9(c).

 

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

 

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

 

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

 

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

 

26

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

27

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

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

 

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

 

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

 

Purchase Date:  Defined in the Purchase Agreement.

 

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

 

Qualified Institution:  Defined in subsection 7.4(e).

 

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

 

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

 

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

 

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

 

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

 

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

 

Replaced Loan:  Defined in subsection 2.19(a).

 

29

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Restricted Payments:  Defined in subsection 5.1(z).

 

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

 

Retransfer Price:  Defined in subsection 4.3(a).

 

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

 

30

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Servicer:  Defined in the Preamble.

 

Servicer Advance:  Defined in Section 7.5.

 

Servicer Termination Event:  Defined in Section 7.25.

 

Servicer Termination Notice:  Defined in Section 7.25.

 

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

 

Servicing Duties:  Defined in Section 7.2.

 

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

 

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

 

31

 

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

 

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

 

Structured Note:  Defined in subsection 2.1(a).

 

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

 

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

 

Substitute Loan:  Defined in subsection 2.19.

 

Successor Servicer:  Defined in subsection 7.26(a).

 

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

 

Swingline Advance:  Defined in subsection 2.1(c).

 

Swingline Lender:  Defined in the Preamble.

 

32

 

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

 

Swingline Note:  Defined in subsection 2.1(a).

 

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

 

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

 

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

 

Termination Event:  Defined in Section 9.1.

 

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

 

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

 

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

 

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

 

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

 

United States:  The United States of America.

 

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

 

33

 

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

 

Deal Agent:  Defined in the Preamble.

 

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

 

VFCC Note:  Defined in subsection 2.1(a).

 

Wachovia:  Defined in the Preamble.

 

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

 

Wells Fargo:  Defined in the Preamble.

 

WCM:  Defined in subsection 12.17(b).

 

WCM Transfer:  Defined in subsection 12.17(b).

 

WS: 
Defined in the Preamble.

 

Section
1.2                                   Other
Terms.

 

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

 

Section
1.3                                   Computation
of Time Periods.

 

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

 

Section
1.4                                   Interpretation.

 

In each Transaction Document, unless a contrary
intention appears:

 

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

 

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

 

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

 

34

 

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

 

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

 

(vi)                              references
to “writing” include printing, typing, lithography, electronic or other means
of reproducing words in a visible form;

 

(vii)                           reference to any agreement
(including any Transaction Document), document or instrument means such
agreement, document or instrument as amended, modified, waived, supplemented or
restated and in effect from time to time in accordance with the terms thereof and,
if applicable, the terms of the other Transaction Documents and reference to
any promissory note includes any promissory note that is an extension or
renewal thereof or a substitute or replacement therefor; and

 

(viii)                        reference to any Applicable Law
means such Applicable Law as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, including
rules and regulations promulgated thereunder and reference to any section or
other provision of any Applicable Law means that provision of such Applicable
Law from time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section or other
provision.

 

Section
1.5                                   Section References.

 

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

 

Section
1.6                                   Calculations.

 

Except as otherwise provided herein, all interest rate
and basis point calculations hereunder will be made on the basis of a 360-day
year and the actual days elapsed in the relevant period and will be carried out
to at least three decimal places.

 

ARTICLE II

 

PURCHASE
OF THE STRUCTURED NOTES

 

Section
2.1                                   The
Structured Notes.

 

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

 

35

 

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

 

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

 

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

 

36

 

Section
2.2                                   Procedures
for Swingline Advances.

 

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

 

Section
2.3                                   Procedures
for Advances by the Conduit Lender.

 

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

 

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

 

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

 

37

 

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

 

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

 

(i)                                     a
wire disbursement and authorization form; and

 

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

 

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

 

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

 

Section
2.4                                   Optional
Changes in Facility Amount; Prepayments.

 

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

 

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

 

38

 

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

 

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

 

Section
2.5                                   Reimbursement
of Swingline Advances.

 

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

 

Section
2.6                                   Notations
on the Structured Notes.

 

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

 

39

 

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

 

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

 

Section
2.7                                   Principal
Repayments.

 

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

 

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

 

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

 

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

 

40

 

Section
2.8                                   Interest
Payments.

 

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

 

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

 

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

 

Section
2.9                                   Settlement
Procedures.

 

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

 

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

 

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

 

41

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

42

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

43

 

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

 

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

 

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

 

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

 

Section
2.10                            Collections
and Allocations.

 

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

 

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

 

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

 

Section
2.11                            Payments,
Computations, Etc.

 

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

 

44

 

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

 

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

 

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

 

Section
2.12                            Reserved.

 

Section
2.13                            Fees.

 

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

 

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

 

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

 

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

 

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

 

Section
2.14                            Increased
Costs; Capital Adequacy; Illegality.

 

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

 

45

 

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

 

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

 

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

 

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

 

46

 

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

 

Section
2.15                            Taxes.

 

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

 

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

 

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

 

47

 

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

 

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

 

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

 

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

 

Section
2.16                            Assignment
of the Purchase Agreement.

 

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

 

48

 

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

 

Section
2.17                            Lien
Release Dividend.

 

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

 

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

 

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

 

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

 

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

 

49

 

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

 

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

 

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

 

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

 

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

 

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

 

50

 

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

 

Section
2.18                            Appointment
of Registrar and Duties.

 

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

 

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

 

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

 

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

 

Section
2.19                            Substitution
of Loans.

 

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

 

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

 

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

 

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

 

51

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

52

 

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

 

ARTICLE III

 

CLOSING; CONDITIONS OF CLOSING AND
ADVANCES

 

Section
3.1                                   Conditions
to Closing and Initial Advances.

 

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

 

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

 

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

 

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

 

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

 

Section
3.2                                   Conditions
Precedent to All Advances.

 

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

 

53

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)                                  the
Termination Date shall not have occurred;

 

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

 

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

 

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

 

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

 

54

 

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

 

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

 

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

 

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

 

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

 

ARTICLE
IV

 

REPRESENTATIONS AND WARRANTIES

 

Section
4.1                                   Representations
and Warranties of the Borrower.

 

The Borrower represents and warrants as follows:

 

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

 

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

 

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

 

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

 

55

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(m)                               Reserved.

 

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

 

56

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(u)                                 Security
Interest.

 

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

 

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

 

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

 

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

 

57

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                 Reserved.

 

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

 

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

 

58

 

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

 

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

 

(aa)                            Investment
Company Act.

 

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

 

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

 

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

 

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

 

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

 

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

 

59

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

60

 

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

 

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

 

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

 

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

 

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

 

Section
4.3                                   Breach
of Certain Representations and Warranties.

 

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

 

61

 

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

 

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

 

62

 

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

 

ARTICLE
V

 

GENERAL COVENANTS OF THE BORROWER

 

Section
5.1                                   Covenants
of the Borrower.

 

The Borrower hereby covenants that:

 

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

 

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

 

(c)                                  Loans
Not to Be Evidenced by Promissory Notes. 
The Borrower will take no action to cause any Loan not originally
evidenced by an Underlying Note to be evidenced by an instrument (as defined in
the UCC), except in connection with the enforcement or collection of such Loan.

 

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

 

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

 

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

 

63

 

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

 

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

 

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

 

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

 

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

 

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

 

(m)                               Separate
Existence.  The Borrower shall:

 

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

 

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

 

64

 

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

 

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

 

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

 

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

 

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

 

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

 

65

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

66

 

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

 

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

 

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

 

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

 

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

 

Section
5.2                                   Hedging
Agreement.

 

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

 

67

 

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

 

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

 

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

 

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

 

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

 

Section
5.3                                   Delivery
of Loan Files

 

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

 

68

 

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

 

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

 

ARTICLE
VI

 

PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS

 

Section
6.1                                   Custody
of Loans.

 

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

 

Section
6.2                                   Filing.

 

On or prior to the Closing Date, the Borrower and
Servicer shall cause the UCC financing statement(s) referred to in subsection 4.1(u)(v)
hereof to be filed, and from time to time the Servicer shall take and cause to
be taken such actions and execute such documents as are necessary or desirable
or as the Deal Agent or any Secured Party may reasonably request to perfect and
protect the first priority perfected security interest of the Deal Agent, as
agent for the Secured Parties, in the Collateral against all other Persons,
including, without limitation, the filing of financing statements, amendments
thereto and continuation statements, the execution of transfer instruments and
the making of notations on or taking possession of all records or documents of
title.  Notwithstanding the obligations
of the Borrower and the Servicer set forth in the preceding sentence, the
Borrower and the Servicer hereby authorize the Deal Agent to prepare and file,
at the expense of the Servicer, UCC financing statements (including but not
limited to renewal, continuation or in lieu statements) and amendments or
supplements thereto or

 

69

 

other instruments as the Deal Agent may from time to time deem
necessary or appropriate in order to perfect and maintain the security interest
granted hereunder in accordance with the UCC.

 

Section
6.3                                   Changes
in Name, Corporate Structure or Location.

 

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

 

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

 

Section
6.4                                   Chief
Executive Office.

 

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

 

Section
6.5                                   Costs
and Expenses.

 

The Servicer agrees to pay all reasonable costs and
disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of the Borrower’s and the Deal
Agent’s right, title and interest in and to the Collateral (including, without
limitation, the security interest in the Collateral related thereto and the
security interests provided for herein).

 

Section
6.6                                   Sale
Treatment.

 

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

 

70

 

Section
6.7                                   Separateness
from the Borrower.

 

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

 

ARTICLE
VII

 

ADMINISTRATION AND SERVICING OF LOANS

 

Section
7.1                                   Appointment
of the Servicer.

 

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

 

Section
7.2                                   Duties
and Responsibilities of the Servicer.

 

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

 

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

 

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

 

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

 

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

 

71

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
7.3                                   Authorization
of the Servicer.

 

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

 

72

 

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

 

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

 

Section
7.4                                   Collection
of Payments.

 

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

 

73

 

(b)                                 Reserved.

 

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

 

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

 

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

 

(f)                                    Reserved.

 

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

 

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

 

74

 

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

 

Section
7.5                                   Servicer
Advances.

 

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

 

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

 

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

 

75

 

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

 

Section
7.7                                   Maintenance
of Insurance Policies.

 

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

 

Section
7.8                                   Representations
and Warranties of the Servicer.

 

The Servicer hereby represents and warrants as
follows:

 

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

 

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

 

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

 

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

 

76

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
7.9                                   Covenants
of the Servicer.

 

The Servicer hereby covenants that:

 

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

 

77

 

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

 

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

 

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

 

(e)                                  Reserved.

 

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

 

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

 

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

 

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

 

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

 

78

 

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

 

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

 

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

 

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

 

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

 

79

 

Section
7.10                            The
Collateral Custodian.

 

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

 

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

 

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

 

80

 

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

 

(b)                                 Concerning
the Collateral Custodian.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

81

 

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

 

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

 

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

 

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

 

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

 

82

 

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

 

Section
7.11                            Representations
and Warranties of the Collateral Custodian.

 

The Collateral Custodian represents and warrants as
follows:

 

(a)                                  Organization
and Good Standing. It is a national banking association duly organized,
validly existing and in good standing under the laws of the United States with
all requisite power and authority to own its properties and to conduct its
business as presently conducted and to enter into and perform its obligations
pursuant to this Agreement.

 

(b)                                 Due
Qualification.  It is duly qualified
to do business as a national banking association and is in good standing, and
has obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of its property or the conduct of its business requires
such qualification, licenses or approval except where the failure to so qualify
or have such licenses or approvals has not had, and would not be reasonably expected
to have, a Material Adverse Effect.

 

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

 

(d)                                 No
Violation.  The consummation of the
transactions contemplated by, and the fulfillment of the terms of, this
Agreement by it will not (i) conflict with, result in any breach of any of the
terms or provisions of, or constitute a default under, its articles of
association, or any Contractual Obligation to which it is a party or by which
it or any of its property is bound, (ii) result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any Contractual
Obligation, or (iii) violate any Applicable Law.

 

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

 

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

 

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

 

83

 

Section
7.12                            Covenants
of the Collateral Custodian.

 

The Collateral Custodian hereby covenants that:

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
7.13                            The
Backup Servicer.

 

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

 

(b)                                 Duties.  On or before the initial Funding Date, and
until the receipt by the Servicer of a Servicer Termination Notice, the Backup
Servicer shall perform, on behalf of the Borrower and the Deal Agent and the
Secured Parties, the following duties and obligations:

 

(i)                                     On
or before the Closing Date, the Backup Servicer shall accept from the Servicer
delivery of the information required to be set forth in the Monthly Reports in
hard copy and in an agreed upon electronic format.

 

84

 

(ii)                                  Not
later than 12:00 noon (Charlotte, North Carolina time) on each Reporting Date,
the Servicer shall provide to the Backup Servicer and the Backup Servicer shall
accept delivery of tape in an agreed upon electronic format (the “Tape”)
from the Servicer, which shall include but not be limited to the following
information:  (x) for each Loan, the
name and number of the related Obligor, the collection status, the Loan status,
the date of each Scheduled Payment, the Outstanding Loan Balance and the
Purchased Loan Balance, (y) the Aggregate Purchased Loan Balance, and (z) the
Aggregate Outstanding Loan Balance.

 

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

 

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

 

With respect to the duties described in this subsection
7.13(b), in the absence of bad faith or gross negligence, the Backup
Servicer, in the performance of its duties and obligations hereunder, is
entitled to rely conclusively, and shall be fully protected in so relying, on
the contents of each Tape, including, but not limited to, the completeness and
accuracy thereof, provided by the Servicer.

 

85

 

(c)                                  Transition
to Servicer Role.  After the receipt
by the Servicer of an effective Servicer Termination Notice, all authority,
power, rights and responsibilities of the Servicer, under this Agreement,
whether with respect to the Loans or otherwise, shall pass to and be vested in
the Backup Servicer, subject to and in accordance with the provisions of Section
7.26, as long as the Backup Servicer is not prohibited by Applicable Law from
fulfilling the same, as evidenced by an Opinion of Counsel.

 

(d)                                 Merger
or Consolidation.  Any Person (i)
into which the Backup Servicer may be merged or consolidated, (ii) that may
result from any merger or consolidation to which the Backup Servicer shall be a
party, or (iii) that may succeed to the properties and assets of the Backup
Servicer substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Backup
Servicer hereunder, shall be the successor to the Backup Servicer under this
Agreement without further act on the part of any of the parties to this
Agreement.

 

(e)                                  Backup
Servicing Compensation.  As
compensation for its backup servicing activities hereunder, the Backup Servicer
shall be entitled to receive the Backup Servicing Fee from the Servicer.  To the extent such Backup Servicing Fee is
not paid by the Servicer, the Backup Servicer shall be entitled to receive the
unpaid balance of its Backup Servicing Fee to the extent of funds available
therefor pursuant to the provision of subsections 2.9(a)(iv) and
2.9(b)(iv).  The Backup Servicer’s
entitlement to receive the Backup Servicing Fee (other than due and unpaid
Backup Servicer Fees owed through such date) shall cease on the earliest to
occur of:  (i) it becoming the Successor
Servicer, (ii) its removal as Backup Servicer, or (iii) the Termination of this
Agreement.

 

(f)                                    Backup
Servicer Removal.  The Backup
Servicer may be removed with or without cause by the Borrower with the prior
written approval of the Deal Agent by notice given in writing to the Backup
Servicer.  In the event of any such
removal, a replacement Backup Servicer may be appointed by (i) the Borrower,
acting with the written consent of the Deal Agent or (ii) if no such
replacement is appointed within thirty (30) days following such removal, by the
Deal Agent.

 

(g)                                 Scope
of Backup Servicing Duties.  The
Backup Servicer undertakes to perform only such duties and obligations as are
specifically set forth in this Agreement, it being expressly understood by all
parties hereto that there are no implied duties or obligations of the Backup
Servicer hereunder.  Without limiting
the generality of the foregoing, the Backup Servicer, except as expressly set
forth herein, shall have no obligation to supervise, verify, monitor or
administer the performance of the Servicer. 
The Backup Servicer may act through its agents, attorneys and custodians
in performing any of its duties and obligations under this Agreement, it being
understood by the parties hereto that the Backup Servicer will be responsible
for any misconduct or negligence on the part of such agents, attorneys or
custodians acting on the routine and ordinary day-to-day operations for and on
behalf of the Backup Servicer.  Neither
the Backup Servicer nor any of its officers, directors, employees or agents
shall be liable, directly or indirectly, for any damages or expenses arising
out of the services performed under this Agreement other than damages or
expenses that result from the gross negligence or bad faith of it or them or
the failure to perform materially in accordance with this Agreement.

 

86

 

(h)                                 Limitation
on Liability.  Except for its gross
negligence or bad faith, the Backup Servicer shall not be liable for any
obligation of the Servicer contained in this Agreement or for any errors of the
Servicer contained in any computer tape, certificate or other data or document
delivered to the Backup Servicer hereunder or on which the Backup Servicer must
rely in order to perform its obligations hereunder, and the Borrower, the
Secured Parties, the Deal Agent, the Collateral Custodian and the Backup
Servicer each agree to look only to the Servicer to perform such obligations.  Except for its gross negligence or bad
faith, the Backup Servicer shall have no responsibility and shall not be in
default hereunder or incur any liability for any failure, error, malfunction or
any delay in carrying out any of their respective duties under this Agreement
if such failure or delay results from the Backup Servicer acting in accordance
with information prepared or supplied by a Person other than the Backup
Servicer or the failure of any such other Person to prepare or provide such information.  Except for its gross negligence or bad
faith, the Backup Servicer shall have no responsibility, shall not be in
default and shall incur no liability for (i) any act or failure to act of any
third party, including the Servicer (ii) any inaccuracy or omission in a notice
or communication received by the Backup Servicer from any third party, (iii)
the invalidity or unenforceability of any Loan or Loan Document under
Applicable Law, (iv) the breach or inaccuracy of any representation or warranty
made with respect to any Loan, or (v) the acts or omissions of any successor
Backup Servicer.

 

Section
7.14                            Representations
and Warranties of the Backup Servicer.

 

The Backup Servicer hereby represents and warrants as
follows:

 

(a)                                  Organization
and Good Standing.  It is a national
banking association duly organized, validly existing and in good standing under
the laws of the United States with all requisite power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.

 

(b)                                 Due
Qualification.  The Backup Servicer
is duly qualified to do business as a national banking association and is in
good standing, and have obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of its property and the conduct
of its business requires such qualification, licenses or approvals except where
the failure to so qualify or have such licenses or approvals has not had, and
would not be reasonably expected to have, a Material Adverse Effect.

 

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

 

(d)                                 No
Violation.  The consummation of the
transactions contemplated by, and the fulfillment of the terms of, this
Agreement by it will not (i) conflict with, result in any breach of any of the
terms or provisions of, or constitute a default under, its articles of
association or any Contractual Obligation by which it or any of its property is
bound, (ii) result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any Contractual Obligation (other than the
Agreement), or (iii) violate any Applicable Law.

 

87

 

(e)                                  No
Consent.  No Consents of or with any
Governmental Authority having jurisdiction over it or any of its respective
properties is required to be obtained in order for it to enter into this
Agreement or perform its obligations hereunder.

 

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

 

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

 

Section
7.15                            Covenants
of the Backup Servicer.

 

The Backup Servicer hereby covenants that:

 

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

 

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

 

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

 

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

 

Section
7.16                            Payment
of Certain Expenses by Servicer.

 

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

 

88

 

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

 

Section
7.17                            Reports.

 

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

 

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

 

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

 

Section
7.18                            Annual
Statement as to Compliance.

 

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

 

89

 

Section
7.19                            Annual
Independent Public Accountant’s Servicing Reports.

 

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

 

Section
7.20                            Limitation
on Liability of the Servicer and Others.

 

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

 

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

 

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

 

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

 

90

 

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

 

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

 

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

 

Section
7.23                            Merger
or Consolidation of the Servicer.

 

(a)                                  The
Servicer will keep in full force and effect its existence, rights and franchise
as a Delaware corporation, and will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and of any of the Loans and to perform its
duties under this Agreement.

 

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

 

Section
7.24                            Identification
of Records.

 

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

 

91

 

Section
7.25                            Servicer
Termination Events.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

92

 

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

 

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

 

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

 

Section
7.26                            Appointment
of Successor Servicer.

 

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

 

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

 

93

 

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

 

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

 

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

 

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

 

Section
7.27                            Market
Servicing Fee.

 

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

 

ARTICLE
VIII

 

SECURITY INTEREST

 

Section
8.1                                   Grant
of Security Interest.

 

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

 

94

 

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

 

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

 

Section
8.2                                   Release
of Lien on Loans.

 

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

 

Section
8.3                                   Release
of Lien on Supplemental Interests.

 

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

 

95

 

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

 

Section
8.4                                   Further
Assurances.

 

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

 

Section
8.5                                   Remedies.

 

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

 

Section
8.6                                   Waiver
of Certain Laws.

 

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

 

Section
8.7                                   Power
of Attorney.

 

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

 

96

 

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

 

ARTICLE
IX

 

TERMINATION EVENTS

 

Section
9.1                                   Termination
Events.

 

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

 

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

 

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

 

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

 

(d)                                 [Reserved];
or

 

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

 

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

 

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

 

97

 

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

 

(i)                                     a
Servicer Termination Event occurs; or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

98

 

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

 

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

 

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

 

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

 

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

 

ARTICLE
X

 

INDEMNIFICATION

 

Section
10.1                            Indemnities
by the Borrower.

 

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

 

99

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

100

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

101

 

Section
10.2                            Indemnities
by the Servicer.

 

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

 

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

 

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

 

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

 

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

 

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

 

102

 

ARTICLE
XI

 

THE DEAL AGENT

 

Section
11.1                            Authorization
and Action.

 

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

 

Section
11.2                            Delegation
of Duties.

 

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

 

Section
11.3                            Exculpatory
Provisions.

 

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

 

103

 

Section
11.4                            Reliance.

 

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

 

Section
11.5                            Non-Reliance
on Deal Agent.

 

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

 

Section
11.6                            The
Deal Agent in its Individual Capacity.

 

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

 

Section
11.7                            Successor
Deal Agent.

 

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

 

104

 

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

 

ARTICLE
XII

 

MISCELLANEOUS

 

Section
12.1                            Amendments
and Waivers.

 

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

 

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

 

Section
12.2                            Notices,
Etc.

 

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

 

105

 

Section
12.3                            Liabilities
to Obligors.

 

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

 

Section
12.4                            No
Waiver, Rights and Remedies.

 

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

 

Section
12.5                            Binding
Effect.

 

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

 

Section
12.6                            Term
of this Agreement.

 

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

 

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

 

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

 

106

 

Section
12.8                            WAIVER
OF JURY TRIAL.

 

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

 

Section
12.9                            Costs,
Expenses and Taxes.

 

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

 

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

 

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

 

Section
12.10                     No
Proceedings.

 

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

 

107

 

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

 

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

 

Section
12.11                     Recourse
Against Certain Parties.

 

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

 

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

 

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

 

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

 

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

 

108

 

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

 

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

 

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

 

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

 

Section
12.13                     Confidentiality.

 

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

 

109

 

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

 

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

 

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

 

Section
12.14                     Third
Party Beneficiaries.

 

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

 

Section
12.15                     Execution
in Counterparts; Severability; Integration.

 

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

 

110

 

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

 

Section
12.16                     Waiver of
Setoff.

 

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

 

Section
12.17                     Assignments
by the Conduit Lender; WCM Transfer.

 

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

 

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

 

Section
12.18                     Heading
and Exhibits.

 

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

 

111

 

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

 

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

 

(b)                                 With
respect to any Transferred Loan (including, without limitation, any Revolving
Loan) subject to the Retained Interest provisions of this Agreement, Interest
Collections received by the Servicer on those Transferred Loans will be
allocated between the portion not owned by the Borrower and the portion owned
by the Borrower on a pro rata basis according to the outstanding principal
amount of each such portion.

 

(c)                                  Notwithstanding
the foregoing or anything to the contrary contained herein or any Transaction
Document, any payments made by any Hedge Counterparty pursuant to the terms of
the Hedge Agreements shall be solely for the benefit of the Borrower, subject
to the lien of the Deal Agent and the Secured Parties, and shall not be subject
to the pro rata sharing provisions of subsection 12.19(a).  In furtherance of the foregoing clause of
this paragraph, the Originator hereby releases any right, title, or interest it
may have in or to any payment made or to be made at any time by any Hedge
Counterparty pursuant to the terms of any Hedge Agreement.

 

Section
12.20                     Non-Confidentiality
of Tax Treatment.

 

All parties hereto agree that each of them and each of
their employees, representatives, and other agents may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the transaction and all materials of any kind (including, without limitation,
opinions or other tax analyses) that are provided to any of them relating to
such tax treatment and tax structure. 
“Tax treatment” and “tax structure” shall have the same meaning as such
terms have for purposes of Treasury Regulation Section 1.6011-4; provided, however, that with respect to
any document or similar item that in either case contains information
concerning the tax treatment or tax structure of the transaction as well as
other information, the provisions of this Section 12.20 shall only apply
to such portions of the document or similar item that relate to the tax
treatment or tax structure of the transactions contemplated hereby.

 

[The remainder of this page is intentionally left
blank.]

 

112

 

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

 

	
   

  	
  ACS
  FUNDING TRUST I, as the Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  Malon Wilkus

  
	
   

  	
  Title:  Beneficiary Trustee

  
	
   

  	
   

  
	
   

  	
  ACS Funding
  Trust I

  
	
   

  	
  c/o American
  Capital Strategies, Ltd.

  
	
   

  	
  2 Bethesda Metro
  Center, 14th Floor

  
	
   

  	
  Bethesda,
  Maryland 20814

  
	
   

  	
  Attention:

  	
  Compliance
  Officer

  
	
   

  	
  Facsimile No.:

  	
  (301) 654-6714

  
	
   

  	
  Confirmation
  No.:

  	
  (301) 951-6122

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMERICAN
  CAPITAL STRATEGIES, LTD.,

  as the Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  John Erickson

  
	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer and Secretary

  
	
   

  	
   

  
	
   

  	
  American Capital
  Strategies, Ltd.

  
	
   

  	
  2 Bethesda Metro
  Center, 14th Floor

  
	
   

  	
  Bethesda,
  Maryland 20814

  
	
   

  	
  Attention:

  	
  Compliance
  Officer

  
	
   

  	
  Facsimile No.:

  	
  (301) 654-6714

  
	
   

  	
  Confirmation
  No.:

  	
  (301) 951-6122

  
								

 

[SIGNATURES CONTINUED ON FOLLOWING
PAGE]

 

S-1

 

	
  Commitment:

  	
  VARIABLE
  FUNDING CAPITAL

  	
   

  
	
  $225,000,000; provided,

  	
  CORPORATION,
  as a Conduit Lender

  	
   

  
	
  however,
  the sum of the Advances

  	
   

  	
   

  
	
  outstanding
  under the VFCC Note

  	
   

  	
   

  
	
  and Swingline
  Advances

  	
   

  	
   

  
	
  outstanding
  shall not exceed

  	
  By:

  	
   

  	
   

  
	
  $225,000,000.

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Variable Funding
  Capital Corporation

  	
   

  
	
   

  	
  c/o Wachovia
  Securities, LLC

  	
   

  
	
   

  	
  One Wachovia
  Center, Mail Code:  NC0610

  	
   

  
	
   

  	
  Charlotte, North
  Carolina 28288

  	
   

  
	
   

  	
  Attention:

  	
  Conduit
  Administration

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (704) 383-6036

  	
   

  
	
   

  	
  Confirmation
  No.:

  	
  (704) 383-9343

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Lord Securities
  Corp.

  	
   

  
	
   

  	
  2 Wall Street,
  19th Floor

  	
   

  
	
   

  	
  Attention:

  	
  Vice President

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (212) 346-9012

  	
   

  
	
   

  	
  Confirmation No.:

  	
  (212) 346-9008

  	
   

  
								

 

[SIGNATURES CONTINUED ON FOLLOWING
PAGE]

 

S-2

 

	
   

  	
  WACHOVIA
  SECURITIES, LLC, as the Deal Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wachovia
  Securities, LLC

  
	
   

  	
  One Wachovia
  Center, Mail Code:  NC0610

  
	
   

  	
  Charlotte, North
  Carolina 28288

  
	
   

  	
  Attention:

  	
  Mary Katherine
  Jett

  
	
   

  	
  Facsimile No.:

  	
  (704) 383-4012

  
	
   

  	
  Telephone No.:

  	
  (704) 383-0906

  
	
   

  	
   

  
	
   

  	
   

  
	
  Commitment:

  	
  WACHOVIA
  BANK, NATIONAL

  
	
  $30,000,000;
  provided,

  	
  ASSOCIATION,
  as the Swingline Lender

  
	
  however, the sum
  of the Advances

  	
   

  
	
  outstanding
  under the VFCC Note

  	
   

  
	
  and Swingline
  Advances

  	
  By:

  	
   

  	
   

  
	
  outstanding
  shall not exceed

  	
  Name:

  	
   

  	
   

  
	
  $225,000,000.

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wachovia Bank,
  National Association

  
	
   

  	
  One Wachovia
  Center, Mail Code:  NC0610

  
	
   

  	
  Charlotte, North
  Carolina 28288

  
	
   

  	
  Attention:

  	
  Raj Shah

  
	
   

  	
  Facsimile No.:

  	
  (704) 383-4012

  
	
   

  	
  Telephone No.:

  	
  (704) 374-6230

  
										

 

[SIGNATURES CONTINUED ON FOLLOWING
PAGE]

 

S-3

 

	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wells Fargo Bank
  Minnesota, National Association

  
	
   

  	
  Sixth Street and
  Marquette Avenue

  
	
   

  	
  Minneapolis, MN
  55479-0070

  
	
   

  	
  Attention:

  	
  Corporate Trust
  Services

  
	
   

  	
   

  	
  Asset-Backed
  Administration

  
	
   

  	
  Facsimile No.:

  	
  (612) 667-3539

  
	
   

  	
  Confirmation
  No.:

  	
  (612) 667-8058

  
							

 

[SIGNATURES
CONTINUED ON FOLLOWING PAGE]

 

S-4

 

	
  Acknowledged and
  Agreed to:

  	
   

  
	
   

  	
   

  
	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION,

  	
   

  
	
  as the Hedge
  Counterparty

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Wachovia Bank,
  National Association

  	
   

  
	
  One Wachovia
  Center, Mail Code: NC0610

  	
   

  
	
  Charlotte, North
  Carolina 28288

  
	
  Attention:

  	
  Raj Shah

  
	
  Facsimile No.:

  	
  (704) 383-4012

  
	
  Confirmation
  No.:

  	
  (704) 374-6230

  
							

 

S-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]