EXECUTION COPY 


AMENDED AND RESTATED 


LIMITED LIABILITY COMPANY OPERATING AGREEMENT 


FRANKLIN VENTURE, LLC 


Dated as of September 30, 2009 


Franklin- LLC Operating Agreement 

8545936.5 
TABLE OF CONTENTS 


ARTICLE I 


1.1 

ARTICLE IT 

2.1 

2.2 

2.3 

2.4 

2.5 

2.6 

2.7 

ARTICLETII 

3.1 . 

3.2 

3.3 

3.4 

3.5 

3.6 

3.7 

3.8 

3.9 

3.10 

3.11 

3.12 

3.13 

3.14 

ARTICLE IV 


4.1 

4.2 

4.3 

4.4 

4.5 

ARTICLEV 

5.1 

5.2 

5.3 

5.4 

ARTICLE VI 


6.1 

6.2 

Page 

CERTAIN DEFINITIONS ...................................................................................2 


Definitions ............................................................................................................2 


ORGANIZATION OF THE COMPANY............................................................2 


Formation; Continuation and Admission ofMembers.........................................2 


Name....................................................................................................................2 


Organizational Contributions and Related Actions ..............................................3 


Registered Office; Chief Executive Office ..........................................................3 


Purpose; Duration ........................................................-.........................................3 


Single Purpose Entity; Limitations on Company's Activities .............................4 


Ratification ofCertain Actions ............................................................................6 


MANAGEMENT AND OPERATIONS OF THE COMPANY ..........................6 


Management ofthe Company's Affairs ................................ : .............................. 6 


Removal ofManaging Member ...........................................................................8 


Employees and Services .......................................................................~ ...............8 


Restrictions on Managing Member ......................................................................9 


Related Party Agreements .................................................................................. 1 0 


Real Property ...................................................................................................... 1 0 


Custodian and Paying Agent ...........................................•.................................. 1 0 


Relationships with Borrowers, etc .....................................................................11 


No Conflicting Obligations ................................................................................11 


Compliance with Law ........................................................................................ 11 


No Bankruptcy Filing .........................................................................................11 


No Liens .............................................................................................................12 


MERS .................................................................................................................12 


Power ofAttorney ..............................................................................................12 


MEMBERSHIP INTERESTS; RIGHTS AND DUTIES OF, AND 


RESTRICTIONS ON, MEMBERS ................................................................... 13 


General ............................................................................................................... l3 


Interests........................................................ : ..................................................... 13 


Filings; Duty ofMembers to Cooperate .............................................................13 


Certain Restrictions and Requirements ..............................................................14 


Liability ofMembers..........................................................................................14 


CAPITAL CONTRIBUTIONS; WORKING CAPITAL ADVANCES ........... .l5 


Capital Contributions; Working Capital Advances ........................................... .15 


Defaults..............................................................................................................16 


Security Interest ..................................................................................................16 


No Reliance by Parties Extending Credit... ........................................................ 17 


CAPITAL ACCOUNTS; ALLOCATIONS; PRIORITY OF PAYMENTS; 


DISTRIBUTIONS .............................................................................................. 17 · 


Capital Accounts ................................................................................................17 


Allocations to .Capital Accounts ......................................................................... l7 


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TABLE OF CONTENTS 


6.3 

6.4 

6.5 

6.6 

ARTICLE VII 


7.1 

7.2 

7.3 

7.4 

7.5 

7.6 

ARTICLE VIII 


8.1 

8.2 

8.3 

8.4 

8.5 

8.6 

8.7 

8.8 

8.9 

ARTICLE IX 


9.1 

9.2 

ARTICLE X 


10.1 

ARTICLE XI 


11.1 

ARTICLE XII 


12.1 

12.2 

12.3 

12.4 

12.5 

12.6 

12.7 

12.8 

12.9 

12.10 

12.11 

Page 

Tax Allocations ..................................................................................................19 


Determinations by Managing Member ..............................................................20 


Priority ofPayments ...........................................................................................21 


Distributions.......................................................................................................21 


ACCOUNTING, REPORTING AND TAXATION ......................................... .22 


Fiscal Year ..........................................................................................................22 


Maintenance ofBooks and Records ...................................................................22 


Financial Statements ..........................................................................................23 


Additional Reporting and Notice Requirements ................................................23 


Designation ofTax Matters Member; Certain Tax Matters ...............................26 


Tax Information ..................................................................................................26 


RESTRICTIONS ON DISPOSITION OF INTERESTS ...................................27 


Limitations on Disposition of Interests ..............................................................27 


Change ofControl ..............................................................................................27 


Additional Provisions Relating to Permitted Dispositions .................................27 


Effect ofPermitted Dispositions ........................................................................28 


Effect ofProhibited Dispositions ....................................................................... 29 · 


Distributions After Disposition ..........................................................................29 


Transfers By Initial Member ..............................................................................29 


Resignation; Dissolution ....................................................................................29 


Applicable Law Withdrawa1 ............................................................................. .30 


DISSOLUTION AND WINDING-UP OF THE COMPANY ..........................30 


Dissolution .........................................................................................................30 


Winding-Up Procedures .....................................................................................31 


QUALIFIED TRANSFEREES ......................................................................... .32 


Qualified Transferees ........................................................................................ .32 


MANAGING MEMBER LlAB1LITY .............................................................. .35 


Liability ofManaging Member ......................................................................... .35 


SERVICING OF LOANS ................................................................................. .36 


Servicing............................................................................................................ .36 


Servicing Standard ............................................................................................ .39 


Servicing ofLoans..........................................................................•................. .40 


Removal ofServicer ...........................................................................................41 


Management Fee ................................................................................................44 


Servicing Expenses ........................................................................................... .44 


Use of Loan Proceeds ........................................................................................ .45 


Delinquent Real Property Taxes ....................................................................... .46 


Collection Account ............................................................................................ .46 


Distribution Account ......................................................................................... .46 


Liquidity Reserves; Liquidity Reserve Account ............................................... .46 


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12.12 

12.13 

12.14 

12.15 

12.16 

12.17 

ARTICLE XIII 


13.1 

13.2 

13.3 

13.4 

13.5 

13.6 

13.7 

13.8 

13.9 

13.10 

13.11 

13.12 

13.13 

Page 

Recovery of Expenses; Interest ..................................................... ................... .47 


Certain Servicing and Loan Administration Decisions ..................................... .4 7 


Management and Disposition ofCollateral ....................................................... .47 


Acquisition ofCollateral......................................... , ......................................... .47 


Releases ofCollateral........................................................................................ .48 


Clean-Up Call Rights .........................................................................................48 


MISCELLANEOUS .......................................................................................... .49 


Waiver ofRights ofPartition and Dissolution .................................................. .49 


Entire Agreement .............................................................................................. .49 


Governing Law; Jurisdiction ............................................................................. .49 


Third Party Beneficiaries ...................................................................................50 


Expenses .............................................................................................................50 


Waivers and Amendments .................................................................................50 


Notices ................................................................................................................50 


Counterparts; Facsimile Signatures ....................................................................52 


Successors and Assigns ......................................................................................52 


Construction.......................................................................................................52 


Compliance With Law; Severability ................................................................. .53 


Power ofAttorney ..............................................................................................54 


Submission to Jurisdiction; Waivers ................................................................. .54 


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FRANKLIN VENTURE, LLC 


AMENDED AND RESTATED 


LIMITED LIABILITY COMPANY OPERATING AGREEMENT 


THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING 

AGREEMENT (as the same may be amended or modified from time to time in accordance with 

the terms hereof, this "Agreement"), is made and effective as of September 30, 2009 (the 

"Closing Date"), by and among the Federal Deposit Insurance Corporation ("FDIC"), in its 

capacity as receiver for Franklin Bank, S.S.B. ("Failed Bank"), RCS Franklin Venture LLC, a 

Delaware limited liability company (the "Private Owner"), and Franklin Venture, LLC, a 

Delaware limited liability company (the "Company"). For purposes of this Agreement, 

references to the "Receiver" shall be a reference to the FDIC, in its capacity as receiver ofFailed 

Bank; references to the "Initial Member" shall be a reference to the FDIC, in its capacity as a 

Member of the Company, together with any successor of the FDIC or any transferee of the 

Interest held by the FDIC); references to the "Secured Partv" shall be a reference to the FDIC, 

in its capacity as the secured party under Section 5.3 hereunder and under the Reimbursement 

and Security Agreement; and references to the "Managing Member" shall be a reference to 

Private Owner (or a successor Member) in its capacity as the manager ofthe Company. 

WHEREAS, on November 7, 2008, the FDIC was appointed Receiver for Failed Bank; 

WHEREAS, on September 18, 2009, Receiver formed the Company as a Delaware 

limited liability company for the purpose of acquiring the Loans and carrying on the Business; 

WHEREAS, the FDIC and the Company entered into a Loan Contribution and Sale 

Agreement dated of even date hereof (the "Contribution Agreement") pursuant to which (i) 

Receiver sold in part and contributed in part, to the Company, and the Company purchased and 

assumed from Receiver, all of the Receiver's right, title and interest in and to the Loans, (ii) the 

Company executed and delivered to the Receiver that certain Purchase Money Note for the 

benefit of Receiver and dated the date hereof (the "Purchase Money Note"); and (iii) the 

Secured Party guaranteed payment of principal and interest on the Purchase Money Note 

pursuant to the terms of a Guaranty Agreement dated the date hereof between the FDIC, in its 

corporate capacity, and the Receiver (the "Purchase Money Note Guaranty"), and obtained a 

security interest in the Loans and Collateral under the Reimbursement and Security Agreement; 

WHEREAS, in connection with the transactions contemplated by the Contribution 

Agreement, Receiver was admitted as the "Initial Member" of the Company and received an 

Interest in the Company representing a one hundred percent (100%) Percentage Interest pursuant 

to the terms of that certain Limited Liability Company Operating Agreement dated as of 

September 18, 2009 by and between Receiver and the Company (the "Original LLC Operating 

Agreement"); 

WHEREAS, following closing of the transactions contemplated by the Contribution 

Agreement and the execution of the Original LLC Operating Agreement, Initial Member agreed, 

pursuant to the terms of that certain Limited Liability Company Interest Sale and Assigoment 

Agreement dated of even date herewith (the "LLC Interest Sale Agreement"), to sell to Private 

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Owner, effective as ofthe Closing Date, an Interest representing a fifty percent (50%) Percentage 

Interest in exchange for the Bid Amount; 

WHEREAS, at the closing under the LLC Interest Sale Agreement, Residential Credit 

Solutions, Inc., as the sole member of Private Owner, will execute and deliver a guaranty in 

favor of the Initial Member guaranteeing the obligations of the Private Owner hereunder (the 

"Sponsor Guaranty"); 

WHEREAS, after giving effect to the transactions contemplated by the LLC Interest Sale 

Agreement, as ofthe Closing Date the Initial Member and Private Owner will own all the issued 

and outstanding Interests in the Company; 

WHEREAS, the parties desire to amend and restate the Original LLC Operating 

Agreement in its entirety in order to reflect the admission of Private Owner as a Member of the 

Company and to set forth the terms and conditions on which the Company shall be owned and 

operated; 

NOW, THEREFORE, in consideration of the premises and the other covenants and 

conditions contained herein, and for other good and valuable consideration the receipt and 

sufficiency ofwhich are hereby acknowledged, the parties hereto agree as follows: 

ARTICLE I 


Certain Definitions 


1.1 Definitions. Initially capitalized terms used and not defined herein shall have the 

meanings assigned to them in Annex I hereto, which is hereby incorporated into this Agreement 

as ifset forth in full herein. 

ARTICLE IT 


Organization of the Company 


2.1 Formation; Continuation and Admission of Members. 

(a) On September 18, 2009, the Receiver caused the Certificate of Formation 

of the Company, in the form attached as Exhibit A hereto (the "Certificate"), to be filed in the 

office of the Secretary of State of the State of Delaware. The Certificate shall not be amended 

except to change the registered agent or office ofthe Company. 

(b) The Company shall continue as a limited liability company under the Act 

and in accordance with the further terms and provisions ofthis Agreement. 

(c) The Initial Member previously was, and the Private Owner hereby agrees 

to be, and is, admitted as a Member ofthe Company such that, as ofthe Closing Date, the Initial 

Member and the Private Owner are the sole Members of the Company. Until the Company is 

dissolved pursuant to Section 9.1, the Company shall at all times have two Members. 

2.2 Name. 

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(a) The name ofthe Company shall be "Franklin Venture, LLC". 

(b) The Business shall be conducted only under the name of the Company or 

such other name or names that comply with applicable Law as the Members may select from 

time to time. 

2.3 Organizational Contributions and Related Actions. 

(a) Prior to the execution of this Agreement, pursuant to the terms of the 

. Contribution Agreement, the Initial Member: 

(i) made a Capital Contribution to the Company in the form of certain 

Loans with a fair market value equal to $128,430,000 (the "Initial Member. 

Capital Contribution") in exchange for the issuance by the Company to the 

Initial Member of an Interest representing a one hundred percent (1 00%) 

Percentage Interest; and 

(ii) sold and assigned to the Company, and the Company purchased 

and assumed from Initial Member, Loans (other than that portion of the Loans 

comprising the Initial Member Capital Contribution in accordance with Section 

2.3(a)(i) above) in exchange for the Purchase Money Note. 

(b) Contemporaneously with the execution of this Agreement, pursuant to the 

terms of the LLC Interest Sale Agreement, the Private Owner is acquiring from the Initial 

Member an Interest representing a fifty percent (50%) Percentage Interest for an aggregate 

purchase price equal to the Bid Amount, subject to adjustment in accordance with Section 2.3 of 

the Contribution Agreement. · 

(c) Upon the consununation of the transactions contemplated in Sections 

2.3(a) and .(hl, the Members, collectively, shall own one hundred percent (100%) of the issued 

and outstanding Interests, and each such Member shall have a fifty percent (50%) Percentage 

Interest. 

2.4 Registered Office; Chief Executive Office. The Company shall maintain a 

registered office and registered agent in Delaware to the extent required by the Act, which office 

and agent shall be as determined by the Managing Member from time to time and which shall be 

set forth in the Certificate. Initially (and until otherwise determined by the Managing Member), 

the registered office in Delaware shall be, and the name and address ofthe Company's registered 

agent in Delaware shall be, as specified in the Certificate as originally filed, which may be 

amended by the Managing Member from time to time as necessary to correctly reflect the name 

and address of the Company's registered agent. The chief executive office of the Company shall 

be located at 4282 North Freeway, Fort Worth, Texas, 76137, or such other place as shall be 

determined by the Managing Member from time to time. 

2.5 Purpose; Duration. 

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Franklin - LLC Operating Agreement 

8545936.5 
(a) The purpose of the Company is to engage in and conduct the Business, 

directly or, to the extent specifically_ authorized in this Agreement, indirectly through other 

Persons. Without limiting the foregoing, the Company shall not form or have any Subsidiaries 

unless authorized in or pursuant to this Agreement. The Company shall have all powers 

necessary, desirable or convenient, or which the Managing Member deems necessary, desirable 

or convenient, and may engage in any and all activities necessary, desirable or convenient, or 

which the Managing Member deems necessary, desirable or convenient, to accomplish the 

purposes ofthe Company or consistent with the furtherance thereof. 

(b) Subject to Section 9.1, the Company shall continue m existence 

perpetually. 

2.6 Single Purpose Entity; Limitations on Company's Activities. Except to the extent 

expressly permitted by this Agreement or the Ancillary Documents, the following shall govern 

for so long as the Company is in existence: 

(a) Subject to Section 9.1, the Members shall cause the Company to do or 

cause to be done all things necessary to preserve and keep in full force and effect its existence, 

rights (charter and statutory) and franchises, and the Managing Member also shall cause the 

Company to: 

(i) maintain financial statements separate from any Affiliate; 

provided, however, that each Ownership Entity shall be consolidated in the 

financial statements of the Company; and provided, further, that the assets, 

liabilities and results of operations of the Company may be included in the 

consolidated financial statements of its parent or ultimate parent in accordance 

withGAAP; 

(ii) at all times hold itself out to the public as a legal entity separate 

from the Members and any other Person; 

(iii) file its own tax returns, as may be required under applicable Law, 

and pay any taxes so required to be paid under applicable Law; 

(iv) except as contemplated hereby or by the Ancillary Documents, 

segregate its assets and not commingle its assets with assets of any other Person; 

(v) conduct the business in its own name and strictly comply with all 

organizational formalities to maintain its separate legal existence; 

(vi) pay its own liabilities only out ofits own funds; 

(vii) maintain an arm's length relationship with any Affiliate upon 

terms that are commercially reasonable and that are no less favorable to the 

Company than could be obtained in a comparable arm's length transaction with an 

unrelated Person; 

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8545936.5 
(viii) subject at all times to Section 3.3, pay the salaries of its own 

employees, if any, and maintain, or cause to be maintained, a sufficient number of 

employees, if any, in light ofits contemplated business operations; 

(ix) allocate, fairly and reasonably, shared expenses, including any 

overhead for shared office space; 

(x) use separate stationery, invoices and checks; 

(xi) correct any known misunderstanding regarding its separate 

identity; and 

(xii) maintain adequate capital in light of its contemplated business 

purpose, transactions and liabilities, if any. 

(b) Neither any Member nor the Managing Member shall cause or permit a 

Dissolution Event or an Insolvency Event to occur with respect to the Company to which the 

Initial Member and, so long as the Purchase Money Note is outstanding, the Secured Party, has 

not provided its written consent, and neither any Member nor the Managing Member shall, 

without the written consent of the Initial Member and the Secured Party, cause or permit the 

Company to: 

(i) except as contemplated hereby or by the Ancillary Documents, 

hold out its credit or assets as being available to satisfy the obligations of others, 

or become bound by any Guarantee of, or otherwise obligate itself with respect to, 

the Debts of any other Person, including any Affiliate; 

(ii) except as contemplated hereby or by the Ancillary Documents 

(including the Purchase Money Note, the Purchase Money Note Guaranty, and the 

Reimbursement and Security Agreement), pledge its assets for the benefit of any 

other Person, make any loans or advances to any other Person, or encumber or 

permit any Lien to be placed on the Loans, the Collateral, or the proceeds 

therefrom; provided that the Company may invest its funds in interest bearing 

accounts held by any bank that is not its Affiliate and make advances in 

accordance with Article XII; 

(iii) own any assets, or engage m any business, unrelated to the 

Business; 

(iv) incur, create or assume any Debt other than the Purchase Money 

Note, any Working Capital Advance or as otherwise .expressly permitted hereby 

or by the Ancillary Documents; 

(v) make or permit to remain outstanding any loan or advance to, or 

own or acquire any stock or securities of, any Person (other than an Ownership 

Entity), except that the Company may invest in those investments permitted under 

the Ancillary Documents and may make any advance required or expressly 

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Franklin- LLC Operating Agreement 

8545936.5 
permitted to be made pursuant to any provisions of Article XII or the Ancillary 

Documents and permit the same to remain outstanding in accordance with such 

prOVISIOnS; 

(vi) to the fullest extent permitted by Law, the Company shall not 

consolidate or merge with or into any other Person, convert into any other type of 

Person or convey or transfer its properties and assets substantially as an entirety to 

any entity, transfer its ownership interests, or engage in any dissolution or 

liquidation, except in each case to the extent such activities are expressly 

permitted pursuant to any provision of this Agreement or the Ancillary 

Documents (and subject to obtaining any approvals required hereunder or 

thereunder, as applicable); or 

(vii) except as contemplated or permitted by this Agreement or the 

Servicing Agreement, form, acquire or hold any Subsidiary other than an 

Ownership Entity or form any trust for the purpose of holding Loans for the 

benefit ofthe Company. 

(c) The failure of the Company, the Members, or the Managing Member on 

behalf of the Company, to comply with any of the foregoing covenants or any other covenants 

contained in this Agreement shall not affect the status of the Company as a separate legal entity 

or the limited liability ofthe Members. 

2.7 Ratification of Certain Actions. Prior to the Closing Date, the Company 

previously approved (a) each of the Ancillary Documents, and (b) the taking of all action 

reasonably necessary to effect the foregoing approvals, including without linritation the 

execution and performance of this Agreement and the Ancillary Documents (the "Previously 

Approved Matters"). The Previously Approved Matters, and all actions taken by the Company 

in furtherance of the Previously Approved Matters, are hereby ratified, approved and confirmed 

in their entirety and the Managing Member is hereby authorized and directed to execute and 

deliver, for and on behalf of the Company, any and all documents as may now or hereafter be 

reasonably required in order to effect the Previously Approved Matters. 

ARTICLE ill 


Management and Operations of the Company 


3.1 Management ofthe Company's Affairs. 

(a) The management of the Company shall be vested exclusively in the 

Person appointed from time-to-time hereunder as the "manager" of the Company (the 

"Managing Member"). Effective as ofthe Closing Date, the Private Owner is hereby appointed 

as Managing Member. Subject to the terms and conditions of this Agreement, the Managing 

Member shall have full and exclusive power and discretion to, and shall, manage the business 

and affairs of the Company in accordance with this Agreement. The Managing Member shall 

not resign as manager, may not assign or delegate its responsibilities as manager to any other 

Person, and shall serve as manager until such time as (i) the Private Owner's Interest is Disposed 

of in accordance with the terms of this Agreement and the transferee is admitted as a Meniber 

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and successor to the Private Owner, in which case the transferee Member (or its designee) shall, 

effective upon such Disposition, be appointed as the "Managing Member" of the Company, 

(ii) the Private Owner is removed as manager by the hritial Member and replaced in accordance 

with Section 3.2 below; or (iii) the Company is dissolved in accordance with the terms of this 

Agreement. In the event that a successor manager is appointed in accordance with the terms of 

this Agreement, all references in this Agreement to the Managing Member, in its capacity as 

manager of the Company, shall be deemed to be references to the successor manager so 

appointed. The Managing Member shall devote such time to the affairs of the Company as is 

necessary to manage the Company as set forth in this Agreement. Private Owner (and any 

successor or transferee of Private Owner) hereby expressly acknowledges that, as it relates to its 

role as the Managing Member, this Agreement constitutes a personal services contract between 

Private Owner and the Company. Nothing in this Section 3.1 eliminates, limits or otherwise 

modifies any of the express terms of this Agreement or any liability, obligation or covenant of 

any Person hereunder. 

(b) Except as otherwise specifically provided in this Agreement and without 

limitation ofthe powers expressly granted to the Managing Member under any other provision of 

this Agreement, the authority, duties (including fiduciary duties) and functions of the Managing 

Member shall be identical to the authority, duties (including fiduciary duties) and functions of 

the board of directors and the officers of a corporation organized under the Delaware General 

Corporation Law (and not electing to be governed by subchapter XN thereof). The Managing 

Member shall have no authority to take or authorize the taking of any action in contravention of 

any express term of this Agreement.· 

(c) No Person dealing with the Company or the Managing Member shall be 

required to determine, and any such Person may conclusively assume and rely upon, the 

authority of the Managing Member to execute any instrument or make any undertaking on behalf 

of the Company. No Person dealing with the Company or the Managing Member shall be 

required to determine any facts or circumstances bearing upon the existence of such authority. 

Without limitation of the foregoing, any Person dealing with the Company or the Managing 

Member is entitled to rely upon a certificate signed by the Managing Member as to: 

(i) the identity ofMembers; 

(ii) the existence or non-existence of any fact or facts that constitute a 

condition precedent to acts by the Managing Member or are in any other manner 

germane to the affairs ofthe Company; 

(iii) the identity of Persons who are authorized to execute and deliver 

any instrument or document ofor on behalf ofthe Company; or 

(iv) any act or failure to act by the Company or any other matter 

whatsoever involving the Company or the Members. 

(d) Notwithstanding anything to the contrary contained in this Agreement, the 

parties hereto acknowledge and agree that: 

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(i) nothing contained in this Agreement creates any fiduciary duty on 

behalf ofthe Initial Member or the Secured Party; 

(ii) the Private Owner and the Company hereby expressly waive any 

fiduciary duties that may otherwise be deemed to be owed by the Initial Member 

or the Secured Party to the Private Owner or the Company; and 

(iii) the Initial Member and, where applicable, the Secured Party shall 

be entitled to act and exercise any right of approval or consent that it has under 

this Agreement in its interest, in its sole and absolute discretion, without regard to 

and against the interests ofthe Private Owner or the Company. 

(e) Unless and to the extent reimbursement is due hereunder or pursuant to a 

Related Party Agreement or any Ancillary Document, the Company shall not be liable for, and 

the Managing Member shall not seek reimbursement from the Company or any Member for any 

expenses or costs incurred after the formation of the Company by the Managing Member and/or 

its Affiliates on behalf of or for the benefit ofthe Company. 

(f) This Section 3.1 is subject to any express requirement of direct Initial 

Member and/or Secured Party consent set forth elsewhere in this Agreement, including without 

liruitation in Sections 2.6, 3.2, 3.4, 3.7, li,l, 8.2, 8.8(a), 9.1, 12.3(c), 12.7(b), 13.6 and in the 

defiuition of Permitted Investments. Any purported action by the Company or the Managing 

Member requiring the consent of the Initial Member and/or Secured Party under this Agreement 

shall be null and void ab initio unless and until the Initial Member's and, where applicable, the 

Secured Party's, consent is obtained. 

3.2 Removal ofManaging Member. Upon an Event of Default, the Secured Party or, 

at the direction of the Secured Party, the Initial Member, may remove Private Owner as the 

Managing Member and appoint a successor manager in the sole discretion of the Secured Party 

or Initial Member, as applicable; provided however, that this remedy shall be exercised only in 

connection with an exercise of remedies under Section 5.3 of this Agreement. In either case, 

such successor manager shall succeed to all rights and obligations of the Managing Member 

hereunder. In the event that Private Owner is so removed, and a successor manager is appointed, 

(a) all references in this Agreement to the Managing Member, in its capacity as manager of the 

Company, shall be deemed to be references to the successor manager so appointed by the Initial 

Member, and (b) the successor Managing Member shall be entitled to be paid the Management 

Fee in accordance with the terms of the Custodial Agreement. 

3.3 Employees and Services. After the Closing Date, the Managing Member shall 

cause to be made available to the Company, from time to time, employees, facilities and support 

services in a manner and to an extent reasonably required for it to fulfill its duties and obligations 

as Managing Member and for the day-to-day operation ofthe Business, including the Managing 

Member's employees, facilities and support services. If necessary to meet the foregoing 

requirements, the Managing Member shall enter into contractual arrangements to secure 

employees, facilities and support services from third parties (including its Affiliates); provided, 

however, that the Managing Member shall at all times provide for the servicing of the Loans 

through a Servicer under contract with the Managing Member in accordance with Article XII and 

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8545936.5 
the safekeeping of the Notes and other Loan Documents by a Custodian under contract with the 

Company in accordance with the provisions of Section 3.7 below. Notwithstanding anything to 

the contrary contained in this Section 3.3, no employees of the Managing Member or any third 

party (including any Affiliate) shall be deemed to be employees of the Company, any contractual 

relationships entered into by the Managing Member to provide employees, facilities or support 

services to the Company shall be relationships between the third parties (or Affiliates) and the 

Managing Member (and not the Company) and shall not relieve the Managing Member of its 

obligations or any liability hereunder, and no expenses incurred to secure or maintain employees, 

facilities or support services shall be an expense of the Company unless the same is expressly 

reimbursable by the Company pursuant to the provisions of Article XII below or is otherwise 

expressly set forth in this Agreement or in the Ancillary Documents to be an expense of the 

Company. 

3.4 Restrictions on Managing Member. Notwithstanding the delegation of authority 

to the Managing Member, the Managing Member shall in no event do any act or take any action 

in contravention of any Law, nor shall it take any of the following actions on behalf of, or with 

respect to, the Company without the prior written approval ofthe Initial Member and the Secured 

Party, which approval may be withheld or conditioned in the Initial Member's and Secured 

Party's sole and absolute discretion: 

(i) admitting additional or substitute Members, except in accordance 

with Article VIII; 

(ii) changing the legal form of the Company to other than a limited 

liability company; 

(iii) taking any action that would cause the Company to be treated as 

other than a partnership for federal tax purposes; 

(iv) taking any action that would make it impossible to carry on the 

ordinary business of the Company; · 

(v) taking any action to conduct a Bulk Sale during the 24 month 

period commencing on the date ofthis Agreement; 

(vi) incurring any liability on behalf of the Company (other 

than liabilities to trade creditors in the ordinary course of business and such other 

liabilities as may be permitted by this Agreement or any Ancillary Document); 

(vii) possessing or transferring Company Property for other than 

Company purposes; 

(viii) taking any action that would require the Company to register as an 

"investment company" (as defined in the Investment Company Act); 

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Franklin - LLC Operating Agreement 

8545936.5 
(ix) selling or otherwise transferring any Loan, Collateral or Acquired 

Collateral (or any portion thereof) to any Mfiliate of the Managing Member, any 

Servicer or any Subservicer, or any Affiliate of any Servicer or any Subservicer; 

(x) financing the sale or other transfer of any Loan, Collateral or 

Acquired Collateral (or any portion thereof); 

(xi) selling any Loan, Collateral or Acquired Collateral (or any portion . 

thereof) in a transaction that provides for any recourse against FDIC, in any 

capacity, or against the Interest held by the Initial Member; 

(xii) disbursing funds from the Collection Account other than in 

accordance with the provisions of this Agreement and the Custodial and Paying 

Agency Agreement; 

(xiii) ceasing to be, or causing or permitting the Company to cease 

being, a member in good standing ofMERS; 

(xiv) other than capitalizing accrued and unpaid interest, other amounts 

permitted to be capitalized pursuant to the Loan Modification Program, and 

Servicing Expenses, advancing additional funds that would increase the Unpaid 

Principal Balance; 

(xv) reimbursing the Managing Member for any expense or cost 

incurred (or paid) to any Mfiliate of the Company the Managing Member or any 

Affiliate ofthe Servicer or any Subservicer; or 

(xvi) · doing any act for which the consent of the Members is required by 

the Act. 

3.5 Related Party Agreements. Neither the Company nor any ofits Subsidiaries shall 

enter into any current or future contract, agreement, commitment, arrangement or transaction 

(including any agreement to sell Company Property, incur any Debt or become bound by any 

Guarantee of any obligations) with or pay any fee to any Mfiliate of the Company or of the 

Private Owner or the Managing Member (a "Related Party Agreement"), except as may 

otherwise be expressly provided herein or in any Ancillary Document. 

3.6 Real Propertv. The Company shall not take title in its own name to any Acquired 

Collateral consisting of real property, and any ownership of any such Acquired Collateral shall 

be governed by Section 12.15 and the relevant terms ofthe Servicing Agreement. 

3.7 Custodian and Paying Agent. The Managing Member shall cause the Company to 

retain and enter into and, at all times, be a party to written custodial agreement with a document 

custodian (the "Custodian") that is a Qualified Custodian and selected by the Initial Member, 

and such Custodian shall at all times have custody and possession of the Notes and other 

Custodial Documents. The Managing Member shall also cause the Company to retain and enter 

into and, at all times, be a party to written paying agency agreement with a paying agent selected 

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8545936.5 
by the Initial Member (the "Paying Agent"), which Paying Agent shall receive and distribute 

Loan Proceeds in accordance with the applicable paying agency agreement. Except as 

contemplated by Section 13.6(b) below, the Custodian and the Paying Agent shall be the same, 

and the custodial and paying agency functions shall be performed on the terms set forth in a 

Custodial and Paying Agency Agreement that is acceptable to the Initial Member and the 

Secured Party. At no time shall the Managing Member permit the Company to have more than 

one Custodian or one Paying Agent. The fees and expenses paid to the Custodian and Paying 

Agent shall be no more than market rates and the Custodian and Paying Agent shall be 

terminable by the Company or by the Secured Party upon a minimum notice period not to exceed 

thirty (30) days, without cause under the Custodial and Paying Agency Agreement. In the event 

that the Managing Member removes, or causes the Company (or any Servicer) to remove, any 

Notes or other Custodial Documents from the possession of the Custodian (which shall be done 

only in accordance with the relevant Custodial and Paying Agency Agreement), (i) any loss or 

destruction of or damage to such Notes or Custodial Documents shall be the liability of the 

Managing Member (who, along with the relevant Servicer(s), shall be responsible for 

safeguarding such Notes and Custodial Documents), and (ii) such Notes shall be returned to the 

Custodian within the time provided under the applicable Uniform Commercial Code to maintain 

the Secured Party's perfection ofits security interest therein by possession. If any Notes or other 

Custodial Documents are removed in connection with the modification or restructuring of a 

Loan, the modified or restructured Notes and other Custodial Documents removed in connection 

therewith shall be returned to the Custodian as soon as possible following the completion of the 

restructuring .or modification (and, in any event, in accordance with clause (ii) of the 

immediately preceding sentence). The Managing Member shall ensure that the Initial Member 

receives a copy of each demand, notice or other communication given under the Custodial and 

Paying Agency Agreement at the time that such notice or other communication is given 

thereunder. The Managing Member shall indemnify and hold harmless the Initial Member and 

the other Persons referred to in Section 4.14 of the Contribution Agreement from and against the 

claims (including any counterclaim or defensive claim), demands, causes ·of action, judgments or 

legal proceedings and other remedies with respect to which Initial Member and the other Persons 

referred to therein were released in accordance with Section 4.14 ofthe Contribution Agreement. 

3.8 Relationships with Borrowers, etc. The Managing Member shall not, at any time, 

(a) be an Mfiliate of or a partner or joint venturer with any Borrower, (b) be an agent of any 

Borrower, or allow any Borrower to be an agent of the Managing Member or the Company, or 

(c) except as is otherwise contemplated by its ownership of the Loans and its right to hold 

Acquired Collateral, have any interest whatsoever in any Borrower, Guarantor or other obligor 

with respect to any Loan or any ofthe Collateral. 

3.9 No Conflicting Obligations. The Managing Member shall not, at any time, enter 

into or become a party to any agreement that would conflict with the terms ofthis Agreement. 

3.10 Compliance with Law. The Managing Member shall, and shall cause the 

Company to, at all times, comply with applicable Law in connection with the performance ofthe 

obligations under this Agreement. 

3.11 No Bankruptcy Filing. The Managing Member shall not cause or permit the 

Company to: (a) file a voluntary petition for bankruptcy, (b) file a petition or answer seeking any 

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8545936.5 
reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief 

under any Law, (c) make an assignment for the benefit of creditors, (d) seek, consent or 

acquiesce in the appointment of a trustee, receiver or liquidator or of all or any substantial part of 

its properties, (e) file an answer or other pleading admitting or failing to contest the material 

allegations of (i) a petition filed against it in any proceeding described in clause (a) through (d), 

or (ii) any order adjudging it a bankrupt or insolvent or for relief against it in any bankruptcy or 

Insolvency Proceeding, or (f) allow itself to become unable to pay its obligations as they become 

due. 

3.12 No Liens. The Managing Member shall not cause or permit the Company to 

. place, or permit (voluntarily or involuntarily) any Lien to be placed, on any of the assets of the 

Company (other than the security interest granted to the Secured Party under the Reimbursement 

and Security Agreement), and shall not take any action to interfere with the rights of Secured 

Party as a secured party with respect to the Company assets pledged as security under the 

Reimbursement and Security Agreement or under Section 5.3 ofthis Agreement. 

3.13 MERS. The Managing Member shall, and shall cause the Company and each 

Servicer to, become a member of Mortgage Electronic Registration Services, Incorporated 

("MERS") on or before the initial Servicing Transfer Date, and maintain itself as aMERS 

member in good standing (including paying all dues and other fees required to maintain its 

membership and complying with MERS policies and procedures). The Managing Member shall 

provide Initial Member with such reports from the MERS® System as Initial Member, from time 

to time, may request, including to allow Initial Member to verify the Persons identified on the 

MERS® System as having any interest in any of the Loans and to confirm that the Loans 

required to be registered on the MERS® System are so registered. Without limiting the 

foregoing, upon the request ofInitial Member, the Managing Member shall cause MERS to run a 

query with respect to any and all specified fields on the MERS® System with respect to any or 

all of the Loans registered on the MERS® System and provide the results to Initial Member and, 

ifrequested by Initial Member, shall cause MERS to change the information in such fields, to the 

extent MERS will do so in accordance with its policies and procedures and otherwise consistent 

with this Agreement and the Servicing Agreement, to reflect its instructions. 

3~14 Power of Attorney. In the event the Company fails to promptly satisfy its 

obligations under Section 3.1 or Section 3.2 of the Contribution Agreement as it relates to the 

transfer and/or recording of any of the Transfer Documents or any other relevant matter set forth 

therein, the Company hereby grants a limited power of attorney to the Initial Member for the 

purposes of executing all relevant Transfer Documents and other documents as may be 

reasonably necessary to satisfy the transfer and recording obligations of the Company under 

Section 3.1 and Section 3.2 of the Contribution Agreement. Managing Member agrees to cause 

the Company to comply with its obligations under Section 3.1 and Section 4.15 of the 

Contribution Agreement with respect to preparing and furnishing special warranty deeds for the 

Initial Member's approval and execution in order to convey the real property subject to any such 

contract to the Company. All such title curative work, if required, shall be at the Managing 

Member's sole cost and expense. The Managing Member shall indemnify and hold harmless the 

Initial Member from and against the claims (including any counterclaim or defensive claim), 

demands, causes of action, judgments or legal proceedings and other remedies with respect to 

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8545936.5 . 
which Initial Member was released m accordance with Section 3.1(d) of the Contribution 

Agreement. 

ARTICLE IV 

Membership Interests; Rights and Duties of, and Restrictions on, Members 

4.1 General. The membership of the Company shall consist of the Members listed 

from time to time in the Member Schedule, and such additional and substituted Members as may 

be admitted to the Company pursuant to Article Vill. The Managing Member shall cause the 

Member Schedule to be amended from time to time to reflect the admission of any additional 

Members, Capital Contributions ofthe Members, the issuance of additional Interests, transfers of 

Interests, repurchases, redemptions or cancellations ofInterests, the cessation or withdrawal of a 

Member for any reason or the receipt by the Company of notice of any change of name or 

address of a Member. 

4.2 Interests. 

(a) Creation and Issuance. Subject to the terms of this Agreement, the 

Company is only authorized to issue the Interests, which shall constitute common equity interests 

in the Company. The Interests shall have the relative rights, powers and duties specified in this 

Section 4.2. As of the Closing Date, Interests are owned by the Initial Member and the Private 

Owner in equal proportions, as set forth in the Member Schedule. Other than as set forth in this 

Agreement, each Interest shall be identical in all respects to each other outstanding Interest. 

(b) Distributions. Subject to Sections 6.6, distributions to the holders of 

Interests shall be made as provided in Section 6.6(b) and Section 9 .2. 

(c) No Retirement Fund or Conversion. The Interests shall not be subject to 

the operation of a retirement or sinking fund to be applied to the purchase or redemption thereof 

for retirement and shall not be convertible into any other class of Interests. 

(d) Voting Rights. Except to the extent otherwise required by the Act or 

expressly provided in this Agreement, the holders of Interests shall be entitled to vote on all 

matters upon which Members have the right to vote as set forth in this Agreement or provided in 

the Act. Except as expressly set forth elsewhere in this Agreement (including without limitation 

Section 3.1 and Section 3.4), the voting rights of each holder of Interests shall be based on such 

holder's Percentage Interest. 

(e) Interests Uncertificated. No certificates shall be issued evidencing the 

Interests. 

4.3 Filings; Dutv of Members to Cooperate. The Managing Member shall promptly 

cause to be executed, delivered, filed, recorded or published, as appropriate, and the Members 

will, as requested by the Managing Member from time to time but at the sole expense of the 

Managing Member, execute and deliver, (a) all certificates, documents and other instruments that 

the Managing Member deems necessary or appropriate to form, qualify or continue the existence 

or qualification of the Company as a limited liability company in the State of Delaware or as a 

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8545936.5 
foreign linrited liability company in all other jurisdictions in which the Company may, or may 

desire to, conduct business or own Company Property, (b) any amendment to the Certificate or 

any instrument described in clause (a) required because of, or in order to effectuate, an 

amendment to this Agreement, or any change in the membership ofthe Company, in accordance 

with the terms hereof, (c) all certificates, documents and other instruments (including 

conveyances and a certificate of cancellation) that the Managing Member deems necessary or 

appropriate to reflect the dissolution and liquidation ofthe Company pursuant to the terms ofthis 

Agreement, and (d) such other certificates, documents and other instruments as are required by 

Law or by any Governmental Authority to be executed by them in connection with the Business 

as conducted or proposed to be conducted by the Company from time to time. In addition, as 

soon as reasonably practical after the date hereof, the Managing Member shall, at its own 

expense, cause the Company to apply for, and thereafter use its reasonable best efforts to obtain 

and maintain, all such licenses as are required to conduct the Business, including qualifications 

to conduct business in jurisdictions other than Delaware and licenses to purchase, own or service 

the Loans, if the failure to so obtain such licenses would reasonably be expected to result in the 

imposition of fines, penalties or other liabilities on the Company, claims and defenses being 

asserted against the Company (including counterclaims and defenses asserted by borrowers 

under the Loans), or materially adversely affect the Company or the Company's ability to 

foreclose on the Collateral securing or otherwise realize the full value of any Loan or Acquired 

Collateral. 

4.4 Certain Restrictions and Requirements. 

(a) No Member may use or possess Company Property other than for a 

Company purpose, except as provided under license or other contractual arrangements. No 

Member shall have authority to bind, or otherwise to act on behalf of, the Company except 

pursuant to authority expressly granted herein or pursuant to authority granted by the Managing 

Member in accordance with the terms hereof. 

(b) From and after the Closing Date, no Person may or shall be adnritted as a 

Member in the Company except pursuant to and in accordance with Article VITI hereof. 

(c) Each Member, other than the Initial Member, shall at all times meet the 

qualifications of a Qualified Transferee. 

4.5 Liabilitv ofMembers. Neither any Member nor any of its Affiliates, any officer, 

. director, stockholder, member, manager, employee, agent or assign of any Member or any of its 

Affiliates, but in all events· excluding the Managing Member (collectively, the "Related 

Persons"), shall be liable, responsible or accountable, whether directly or indirectly, in contract 

or tort or otherwise, to the Company or any other Person in which the Company has a direct or 

indirect interest or any Member (or any Affiliate thereof) for any Damages asserted against, 

suffered or incurred by the Company or any Person in which the Company has a direct or 

indirect interest or any Member (or any oftheir respective Affiliates) arising out of, relating to or 

in connection with any act or failure to act pursuant to this Agreement or otherwise with respect 

to: 

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8545936.5 
(a) the management or conduct of the business and affairs of the Company or 

any Person in which the Company has a direct or indirect interest or any of their respective 

Affiliates (including, without limitation, actions taken or not taken by any Related Person as an 

officer or director of any Person in which the Company has a direct or indirect interest or any 

Affiliates ofsuch Person); 

(b) the offer and sale ofInterests in the Company; and 

(c) the management or conduct of the business and affairs of any Related 

Person insofar as such business or affairs relate to the Company or any Person in which the 

Company has a direct or indirect interest or to any Member in its capacity as such, including, 

without limitation, all: 

(i) activities in the conduct of the Business, and 

(ii) activities in the conduct of other business engaged in by it (or 

them) which might involve a conflict of interest vis-a-vis the Company or any 

Person in which the Company has a direct or indirect interest or any Member (or 

any oftheir respective Affiliates) or in which any Related Person realizes a profit 

or has an interest, in each case to the extent not permitted by this Agreement or 

the Ancillary Documents; 

except, in each case, Damages resulting from acts or omissions of such Related Person which 

were taken or omitted which constituted fraud, gross negligence, willful misconduct, or an 

intentional material breach ofthis Agreement or any Ancillary Document. 

ARTICLEV 


Capital Contributions; Working Capital Advances 


5.1 Capital Contributions; Working Capital Advances. 

(a) Members' Contribution. Pursuant to the Contribution Agreement, the 

Initial Member made a Capital Contribution to the Company in an amount equal to the Initial 

Meinber Capital Contribution in exchange for an Interest representing a one hundred percent 

(1 00%) Percentage Interest. In connection with the LLC Interest Sale .Agreement, Private Owner 

acquired from the Initial Member an Interest representing a fifty percent (50%) Percentage 

Interest in exchange for the Bid Amount. After giving effect to the foregoing transactions, the 

respective Capital Accounts of the Initial Member and the Private Owner as of the Closing Date 

are as set forth in the Member Schedule. 

(b) From and after the Closing Date, the Members shall have no obligation to 

make any additional Capital Contributions to the Company; provided, however, that the 

Managing Member shall be obligated to make Working Capital Advances to the Company in 

accordance with the definition thereof. Without in any way limiting the foregoing, the Managing 

Member shall make Working Capital Advances to the Company, and shall cause the proceeds 

thereof to be deposited in the Collection Account, to the extent necessary to ensure that the 

amount transferred from the Collection Account to the Distribution Account with respect to a 

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Franklin- LLC Operating Agreement 

8545936.5 
Due Period in accordance with the Custodial and Paying Agency Agreement will be sufficient to 

permit the Paying Agent to distribute from the Distribution Account all distributions identified in 

the relevant Distribution Date Report for such Due Period. No Working Capital Advance shall 

accrue any interest thereon. If and to the extent any portion of a Working Capital Advance is 

used to fund amounts that are reimbursable to the Managing Member hereunder or under the 

Custodial and Paying Agency Agreement, the reimbursable portion of such Working Capital 

Advance shall be repaid, in accordance with the Custodial and Paying Agency Agreement, prior 

to the Company making any other distributions to Members with respect to their Interests 

pursuant to Section 6.6. Working Capital Advances shall be used by the Company solely for 

working capital purposes and all Working Capital Advances, together with a detailed statement 

of the sources and uses . thereof (which shall be broken out by the reimbursable and 

uureimbursable portions thereof), shall be reflected in the Monthly Report with respect to the 

calendar month during which the relevant Working Capital Advance was made. 

(c) Obligation Following Removal or Replacement of Managing Member. In 

the event the Private Owner is removed as the Managing Member pursuant to Section 3.2 above 

or Section 5.2 below and/or the equity of the Private Owner is transferred to a third party 

pursuant to Section 5.3 or Section 8.1, such third party, as the successor Managing Member, 

shall be obligated to make all Working Capital Advances required hereunder. 

5.2 Defaults. 

(a) In the event the Managing Member fails to make a required Working 

Capital Advance in accordance with Section 5.1 above, and such failure constitutes an Event of 

Default, in addition to all other remedies available hereunder or under the Ancillary Documents 

upon such an Event ofDefault, the Secured Party shall be entitled to direct the Initial Member to 

(or, if the Purchase Money Note is no longer outstanding, the Initial Member shall be entitled to) 

(i) remove the Private Owner as the Managing Member, (ii) foreclose on the Interest held by the 

Private Owner under Section 5.3 and transfer such Interest to a third party, and (iii) designate the 

transferee Member as the Managing Member hereunder. 

(b) The provisions of this Section 5.2 are intended to comply with the 

provisions of Section 18-502( c) of the Act. The Members each acknowledge that (i) the 

Working Capital Advances are critical to the Company's business, (ii) the interest of the 

Company may be at risk by reason of the failure of the Managing Member to make a required 

Working Capital Advance, (iii) the extent of the risk and the damage and loss to the Company 

resulting from such default by the Managing Member is impossible to foresee or predict at this 

time, but such risk, damage and loss could imperil the Company's assets, and (iv) in view of the 

serious consequences that could arise from the Managing Member's default in making required 

Working Capital Advance, the provisions of this Section 5.2 and Section 5.3 below relating to 

such a default are reasonable. 

5.3 Securitv Interest. This Agreement shall constitute a security agreement under 

applicable Law and, in furtherance thereof the Company shall be deemed to have granted, and 

does hereby grant, to the Initial Member a first priority security interest in the Secured Assets for 

the benefit of Initial Member and its assignees as security for the Private Owner's and the 

Managing Member's obligations under this Agreement, including the Managing Member's 

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Franklin- LLC Operating Agreement 

8545936.5 
obligation to make Working Capital Advances under Section 5.2 of this Agreement. For 

purposes of this Agreement, the term "Secured Assets" shall mean (i) the Interest held by 

Private Owner, and (ii) all rights to distributions thereon. 

The Private Owner hereby authorizes the filing by Initial Member of such financing statements 

in such jurisdictions as Initial Member deems appropriate (in its sole and absolute discretion) 

with respect to the Secured Assets. The Private Owner shall deliver to Initial Member an 

assignment and assumption agreement with respect to the Interest held by it, in form and 

substance satisfactory to the Initial Member, endorsed in blank, and executed by the Private 

Owner. Initial Member may cause the assignment and assumption agreement to be dated and 

executed by the assignee in order to effect the assignment of the. Interest held by the Private 

Owner at any time if an Event ofDefault occurs and is continuing. Initial Member's election to 

exercise any remedy under this Section 5.3 shall in no way limit Initial Member's rights under 

the Sponsor Guaranty. 

5.4 No Reliance by Parties Extending Credit. Without limitation of the generality of 

Section 13.4 hereof, the provisions of Section 5.2 are hereby expressly stated not to be for the 

benefit of any Person (including any Person now or hereafter extending credit to the Company), 

other than the Members, the Company and the Secured Party, and it is the intent ofthe Members, 

the Company and the Secured Party that reliance on the provisions of Section 5.2 by any such 

Person other than the Members, the Company and the Secured Party should be deemed 

unreasonable for purposes of Section 18-502(b) of the Act. 

ARTICLE VI 


Capital Accounts; Allocations; Priority of Payments; Distributions 


6.1 Capital Accounts. A Capital Account shall be established and maintained for 

each Member to which shall be credited the Capital Contributions made by such Member and 

such Member's allocable share of Net Income (and items thereof), and from which shall be 

deducted distributions to such Member of cash or other Property and such Member's allocable 

share of Net Loss (and items thereof). As to the Private Owner, the initial Capital Account shall 

correspond to that portion of the Capital Account of the Initial Member that is attributable to the 

Interest acquired by the Private Owner pursuant to the LLC Interest Sale Agreement. A 

Member's Capital Account also shall be adjusted for items specially allocated to such Member 

under this Article VI. The Capital Accounts of the Members generally shall be adjusted and 

maintained in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv); provided, 

however, that such adjustments to, and maintenance of, the Capital Accounts shall not adversely 

affect the manner in which distributions are to be made to the Members under Section 6.6. 

6.2 Allocations to Capital Accounts. Allocation ofNet Income and Net Loss shall be 

made as provided in this Article VI. Except as otherwise provided in this Article VI, Net Income 

and Net Loss shall be allocated among the Members as follows: 

(a) Net Income. For each Fiscal Year, Net Income shall be allocated among 

the Members as necessary to cause the Capital Account balance of each Member to equal the 

sum of (i) the amount that would be distributed to such Member pursuant to Section 6.6 with 

respect to such Fiscal Year if the Company applied and distributed all Distributable Cash for 

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8545936.5 
such Fiscal Year, plus (ii) the amount that would be distributed to such Member pursuant to 

Section 9.2 if the Company sold all of its remaining assets for their then Fair Market Value and 

applied and distributed the net proceeds therefrom to the Members pursuant to Section 9 .2. 

(b) Net Loss. For each Fiscal Year, Net Loss shall be allocated among the 

Members, first, as necessary to cause the Capital Account balance of each Member to equal the 

sum of (i) the amount that would be distributed to such Member pursuant to Section 6.6 with 

respect to such Fiscal Year if the Company applied and distributed all Distributable Cash for 

such Fiscal Year, plus (ii) the amount that would be distributed to such Member pursuant to 

Section 9.2 if the Company sold all of its remaining assets for their then Fair Market Value, and 

applied and distributed the net proceeds therefrom to the Members pursuant to Section 9.2; and, 

second, after giving effect to the allocations made pursuant to the preceding provision, m 

accordance with the Members' respective Percentage Interests. 

(c) Allocations in Special Circumstances. The following special allocations 

shall be made in the following order: 

(i) Minimum Gain Chargeback. Notwithstanding any other provision 

of this Article VI, if there is a net decrease in minimum gain (as it corresponds to 

the definition of "partnership minimum gain" in Treasury Regulations Section 

1.704-2(b)(2) and (d)) during any Fiscal Year, the Members shall be specially 

allocated items of Company income and gain for such Fiscal Year (and, if 

necessary, subsequent Fiscal Years) in an amount equal to the portion of such 

Member's share of the net decrease in minimum gain, determined in accordance 

with Treasury Regulations Section 1.704-2(f) and (g). This Section 6.2(c)(i) is 

intended to comply with the "minimum gain chargeback" requirement in such 

section of the Treasury Regulations and shall be interpreted consistently 

therewith. 

(ii) Member Minimum Gain Chargeback. Notwithstanding any other 

provision of this Article VI other than Section 6.2(c)(i), if there is a net decrease 

in minimum gain attributable to a Member nonrecourse debt (as it corresponds to 

the definition of "partnership nonrecourse debt minimum gain" in Treasury 

Regulations Section 1.704-2(i)) during any Fiscal Year, each Member shall be 

specially allocated items of Company income and gain for such Fiscal Year (and, 

if necessary, subsequent Fiscal Years) in an amount equal to the portion of such 

Member's share of the net decrease in such minimum gain attributable to such 

Member's nonrecourse debt, determined in accordance with Treasury Regulations 

Section 1.704-2(i). This Section 6.2(c)(ii) is intended to comply with the "partner 

minimum gain chargeback" requirement in such section of the Treasury 

Regulations and shall be interpreted consistently therewith. 

(iii) Qualified Income 0./ftet. In the event any Member, for any reason, 

whether expected or not, has an Adjusted Capital Account Deficit, items of 

Company income and gain shall be specially allocated to each such Member in an 

amount and manner sufficient to eliminate, to the extent required by the Treasury 

Regulations, such Adjusted Capital Account Deficit as quickly as possible, 

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Fmnklin- LLC Operating Agreement 

8545936.5 
provided that an allocation pursuant to this Section 6.2(c)(iii) shall be made only 

if and to the extent that such Member would have such Adjusted Capital Account 

Deficit after all other allocations provided for in Section 6.2 have been tentatively 

made as if this Section 6.2(c)(iii) were not in this Agreement. This Section 

6.2( c )(iii) is intended to comply with the "qualified income offset" provisions in 

Treasury Regulations Section 1.704-1 (b)(2)(ii)(d) and shall be interpreted 

consistently therewith. 

(iv) Nonrecourse Deductions. Any nonrecourse deductions attributable 

to a Member nonrecourse debt {as described in Treasury Regulations 

Section 1.704-2(i)) shall be allocated to the Member who bears the economic risk 

of loss with respect to such nonrecourse debt. Otherwise, nonrecourse deductions 

shall be allocable in accordance with the Members' respective Percentage 

Interests. 

(v) Loss Allocation Limitation. No allocation ofNet Loss (or any item 

thereof) shall be made to any Member to the extent that such allocation would 

create or increase a Member's Adjusted Capital Account Deficit. If, in the 

allocation ofNet Loss (or any item thereof), less than all Members would have an 

Adjusted Capital Account Deficit as a result of such allocation, then any Net Loss 

(or item thereof) not allocable to any such Member( s) as a result of such 

limitation shall be allocated (subject to such limitation) to the other Member so as 

to allocate the maximum permissible Net Loss to each Member under Treasury 

Regulation Section 1.704-1(b )(2)(ii)( d). 

(vi) Curative Allocations. The allocation provisions of this Section 

6.2(c) are intended to comply with certain requirements of the Treasury 

Regulations. Notwithstanding any other provisions of this Article VI, any 

allocation effected pursuant to this Section 6.2( c) shall be taken into account in 

allocating Net Income and Net Loss among the Members such that the cumulative 

effect of all such allocations achieves the fundamental purpose of Sections 6.2(a) 

and 6.2(b), so that the Capital Account balances correspond to the amounts 

distributable to the Members. 

(d) Transfer of or Change in Interests. The Managing Member is authorized 

to adopt any convention or combination of conventions likely to be upheld for federal income tax 

purposes regarding the allocation of items of Company income, gain, loss, deduction and 

expense with respect to a transferred Interest. A transferee of an Interest in the Company shall 

succeed to the Capital Account of the transferor Member to the extent it relates to the transferred 

Interest. 

6.3 Tax Allocations. 

(a) General Rules. Except as otherwise provided in Section 6.3(b), for each 

Fiscal Year, items of Company income, gain, loss, deduction and expense shall be allocated, for 

federal, state and local income tax purposes among the Members in the same manner as the Net 

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8545936.5 
Income (and items thereof) or Net Loss (and items thereof) of which such items are components 

were allocated pursuant to Section 6.2. 

(b) Section 704(c) of the Code. Income, gains, losses and deductions with 

respect to any property (other than cash) contributed or deemed contributed to the capital of the 

Company shall, solely for income tax purposes, be allocated among the Members so as to take 

account of any variation between the adjusted basis of such property to the Company for federal 

income tax purposes and its Fair Market Value at the time of the contribution or deemed 

contribution in accordance with Section 704( c) of the Code and the Treasury Regulations 

promulgated thereunder. Such allocations shall be made in such manner and utilizing such 

permissible tax elections as determined in good faith by the Managing Member, following 

consultation with the Initial Member. In the event of a revaluation of Property pursuant to the 

definition of Book Value, subsequent allocations of income, gains, losses or deductions with 

respect to such Property shall take account of any variation between the Book Value and Fair 

Market Value of such Property, as so determined from time to time, in accordance with Section 

704(c) of the Code and the Treasury Regulations promulgated thereunder. Such allocations shall 

be made in such manner and utilizing such permissible tax elections as determined in good faith 

by the Managing Member, following consultation with the Initial Member. 

(c) Capital Accounts Not Affected. Allocations pursuant to this Section 6.3 

are solely for federal, state and local tax purposes and shall not affect, or in any way be taken 

into account in computing, any Member's Capital Account or allocable share ofNet Income (or 

items thereof) or Net Loss (or items thereof). 

(d) Tax Allocations Binding. The Members acknowledge that they are aware 

ofthe tax consequences of the allocations made by this Section 6.3 and hereby agree to be bound 

by the provisions of this Section 6.3 in reporting their respective shares of items of Company 

income, gain, loss, deduction and expense. 

6.4 Determinations by Managing Member. All matters concerning the computation 

of Capital Accounts, the allocation of items of Company income, gain, loss, deduction and 

expense and the adoption of any accounting procedures not expressly provided for by the terms 

of this Agreement shall be determined by the Managing Member in good faith, following 

consultation with the Initial Member. Following such consultation, such determinations shall be 

final and conclusive as to all the Members. Without in any way limiting the scope of the 

foregoing, if and to the extent that, for income tax purposes, any contribution to or distribution 

by the Company or any payment by any Member or by the Company is recharacterized, the 

Managing Member may, in good faith following consultation with the Initial Member, specially 

allocate items of Company income, gain, loss, deduction or expense and/or make correlative 

adjustments to the Capital Accounts of the Members in a manner so that the net amount of 

income, gain, loss, deduction and expense realized by each relevant party (after taking into 

account such special allocations) and the net Capital Account balances of the Members (after 

taking into account such special allocations and adjustments) shall, as nearly as possible, achieve 

the fundamental purpose of Sections 6.2(a) and 6.2(b), such that the Capital Account balances 

correspond to the amounts distributable to the Members, as if such recharacterization had not 

occurred. 

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8545936.5 
6.5 Priority of Pavments. Each calendar month the amounts deposited in the 

Distribution Account under the Custodial and Paying Agency Agreement shall be distributed by 

the Paying Agent in the order of the Priority of Payments; provided, however, that for the 

avoidance of doubt, to the extent amounts are available for distribution to the Members with 

respect to their respective Interests (such available amounts, the "Distributable Cash"), such 

Distributable Cash shall be distributed to the Members in accordance with Section 6.6 below. 

6.6 Distributions. 

(a) No Right to Withdraw. No Member shall have the right to withdraw 

capital or demand or receive distributions or other returns of any amount in its Capital Account, 

except as expressly provided in this Agreement. 

(b) Ordinary Distributions. 

(i) Timing. Distributable Cash, if any, shall be distributed to the 

Members on ·a monthly basis by the Paying Agent out ofthe Distribution Account 

in the manner set forth in the Custodial and Paying Agency Agreement; provided, 

however, that the Managing Member shall instruct the Paying Agent as to how 

such distributions are to be allocated as between the Initial Member and the 

Private Owner based on Section 6.6(b)(ii) below (which instructions shall be 

included in one or more reports to be provided to Paying Agent in accordance 

with Section 7 .4(b)). 

(ii) Distributions ofDistributable· Cash. Distributions ofDistributable 

Cash shall be made to the Members in accordance with their respective 

Percentage Interests. 

(c) Restrictions on Distributions. The foregoing provisions ofthis Article VI 

to the contrary notwithstanding, no distribution shall be made if such distribution would violate 

any contract or agreement to which the Company is then a party or any Law or directive of any 

Governmental Authority then applicable to the Company. 

(d) Withholding. Notwithstanding any other provision ofthis Agreement, the 

Managing Member is authorized to take any action that it determines to be necessary or 

appropriate to cause the Company to comply with any foreign or United States federal, state or 

local withholding requirement with respect to any allocation, payment or distribution by the 

Company to any Member or other Person. All amounts so withheld shall be treated as 

distributions to the applicable Members under the applicable provisions ofthis Agreement. If any 

such withholding requirement with respect to any Member exceeds the amount distributable to 

such Member under the applicable provisions of this Agreement, or if any such withholding 

requirement was not satisfied with respect to any amount previously allocated or distributed to 

such Member, such Member and any successor or assignee with respect to such Member's 

Interest hereby agrees to indenmify and hold harmless the Managing Member and the Company 

for such excess amount or such withholding requirement, as the case may be. 

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Franklin- LLC Operating Agreement 

8545936.5 
(e) Record Holders. Any distribution of Property, whether pursuant to this 

Article VI or otherwise, shall be made only to Persons that, according to the books and records 

of the Company, were the holders of record of Interests on the date determined by the Managing 

Member as ofwhich the Members are entitled to any such distribution. 

(f) Final Distribution. The final distribution following dissolution of the 

Company (the "Final Distribution") shall be made in accordance with the provisions of Section 

9.2. 

ARTICLE VII 


Accounting, Reporting and Taxation 


7.1 Fiscal Year. The books and records of the Company shall be kept on an accrual 

basis and the fiscal year of the Company shall commence on January 1 and end on December 31 

(the "Fiscal Year"). 

7.2 Maintenance of Books and Records. 

(a) Maintenance of Books and Records. At all times during the continuance 

of the Company, the Managing Member shall cause to be kept and maintained (including by the 

Servicer and any Ownership Entity and including records transferred by Receiver to the 

Company in connection with its conveyance ofthe Loans to the Company under the Contribution 

Agreement), at all times, at the Company's chief executive office referred to in Section 2.4, a 

complete and accurate set of files, books and records regarding the Loans and the Collateral, and 

the Company's and Secured Party's interests in the Loans and the Collateral, including records 

relating to the Collection Account, any Liquidity Reserve Account, and the disbursement of all 

Loan Proceeds. This obligation to maintain a complete and accurate set of records shall 

encompass all files in the Managing Member's or Company's custody, possession or control 

pertaining to the Loans and the Collateral, including (except as required to be held by the 

Custodian pursuant to the Custodial and Paying Agency Agreement) all original and other 

documentation pertaining to the Loans and the Collateral, all documentation relating to items of 

income and expense pertaining to the Loans and the Collateral, and all of the Managing 

Member's (and each Servicer's and Subservicer's) internal memoranda pertaining to the Loans 

and the Collateral. The books of account shall be maintained in a manner that provides sufficient 

assurance that: (a) transactions of the Company are executed in accordance with the general or 

specific authorization of the Managing Member consistent with the provisions of this 

Agreement; and (b) transactions of the Company are recorded in such form and manner as will: 

(i) permit preparation offederal, state and local income and franchise tax returns and information 

returns in accordance with this Agreement and as required by Law; (ii) permit preparation of the 

Company's financial statements in accordance with GAAP and as otherwise set forth herein and 

the provisions of the reports required to be provided hereunder; and (iii) maintain accountability 

for the Company's assets. 

(b) Retention of Books and Records. The Managing Member shall cause all 

such books and records to be maintained and retained until the date that is the later of ten (1 0) 

years after the Closing Date or three (3) years after the date on which the Final Distribution is 

made. All such books and records shall be available during such period for inspection by the 

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Franklin- LLC Operating Agreement 

8545936.5 
· Initial Member or its representatives (including any Governmental Authority) and agents at the 

Company's chief executive office referred to in Section 2.4 at all reasonable times during 

business hours on any Busin~ss Day (or, in the case of any such inspection after the term hereof, 

at such other location as is provided by notice to the Initial Member), in each instance upon two 

(2) Business Days' prior notice to the Managing Member. Upon request by Initial Member, the 

Managing Member, at the sole cost and expense of the Initial Member, shall promptly send 

copies (the number of copies of which shall be reasonable) of such books.and records to the 

Initial Member or its designee. The Managing Member shall provide the Initial Member with 

reasonable advance notice of the Managing Member's intention to destroy or dispose of any 

documents or files relating to the Loans and, upon the request ofthe Initial Member, shall allow 

Initial Member, at its own expense, to recover the same (or copies thereof) from the Company. 

7.3 Financial Statements. 

(a) Annual Financial Statements. As soon as practicable following, but no 

later than ninety (90) days immediately after, the end of each Fiscal Year, the Managing Member 

shall prepare and deliver to Initial Member and the Secured Party an audited balance sheet of the 

Company as at the end of such Fiscal Year, and audited statements of operations and cash flow 

ofthe Company for such Fiscal Year, .each prepared in accordance with GAAP and accompanied 

by the Accountants' report thereon, which shall be certified in the customary manner by the 

Accountants. Notwithstanding the foregoing, the first such audited financial statements shall be 

due no later than ninety (90) days immediately after the end of the 2010 Fiscal Year, and the 

audited statements of operations and cash flow of the Company included therein shall be 

prepared with respect to the period commencing on the Closing Date and ending on the last day 

of the 2010 Fiscal Year. 

(b) Quarterly Financial Information. As soon as practicable following, but ho 

later than forty-five (45) days immediately after, the end of each quarter of each Fiscal Year 

(other than the last quarter of such Fiscal Year), the Managing Member shall prepare and deliver 

to Initial Member and the Secured Party an unaudited balance sheet ofthe Company as at the end 

of such calendar quarter, and unaudited statements of operations and cash flow of the Company 

for such calendar quarter, each prepared in accordance with GAAP. Notwithstanding the 

foregoing, as soon as practicable following, but no later than ninety (90) days immediately after, 

the end of the 2009 Fiscal Year, the Managing Member shall prepare and deliver to Initial 

Member and the Secured Party an unaudited balance sheet of the Company as at the end of the 

last calendar quarter of the 2009 Fiscal Year, and unaudited statements of operations and cash 

flow ofthe Company for such calendar quarter, each prepared in accordance with GAAP. 

7.4 Additional Reporting and Notice Requirements. 

(a) Managing Member's Dutv to Initial Member and Secured Partv; Delivery 

of Certain Notices. In addition to such other reports and access to books, records and reports as 

are required to be provided under this Agreement, the Managing Member shall cause to be 

delivered to the Initial Member and the Secured Party such information as is specified in Exhibit 

B (in addition to the Monthly Report) and such other information relating to the Loans, _the 

Collateral, the Company, the Servicers and any Subservicers as Initial Member or the Secured 

Party may reasonably request from time to time and, in any case, shall ensure that Initial Member 

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Franklin- LLC Operating Agreement 

8545936.5 
and the Secured Party are promptly advised, in writing, of any matter of which the Managing 

Member, any Servicer or any Subservicer becomes aware relating to the Loans, the Collateral, 

the Collection Account, any Liquidity Reserve Account, or any Borrower or Guarantor that 

materially and adversely affects the interests ofInitial Member hereunder or· ofthe Secured Party 

under the Reimbursement and Security Agreement. Without limiting the generality of the 

foregoing, the Managing Member shall cause to be delivered to Initial Member and the Secured 

Party information indicating any possible Environmental Hazards with respect to any Collateral. 

To the extent Initial Member or the Secured Party requests information which is dependent upon 

obtaining such information from a Borrower, Guarantor or other third party, the Managing 

Member shall cause to be made commercially reasonable efforts to obtain such information but it 

shall not be a breach by the Managing Member ofthis Agreement ifthe Managing Member fails 

to cause such information to be provided to Initial Member and the Secured Party because a 

Borrower, Guarantor or other Person has failed to provide such information after such efforts 

have been made. 

(b) Monthly Reports. For each Due Period, the Managing Member shall 

provide to the Paying Agent, the Initial Member and the Secured Party: (i) the Monthly Report 

with respect to the relevant Due Period, and (ii) the related Distribution Date Report with respect 

to such Due Period, which report shall specify the amounts and recipients of all funds to be 

distributed by the Paying Agent on the relevant Distribution Date. The Managing Member shall 

provide the Monthly Report and related Distribution Date Report to the Paying Agent, the Initial 

Member and the Secured Party: (x) with respect to any Due Period prior to and including the 

Due Period in which the last Servicing Transfer Date occurs, on the date that is two (2) Business 

Days prior to the applicable Distribution Date, and (y) with respect to any Due Period 

commencing after the Due Period in which the last Servicing Transfer Date occurs, on or prior to 

the fifteenth (15th) day of the month immediately following the applicable Determination Date 

(or if the fifteenth (15th) day is not a Business Day, then the first Business Day thereafter). 

Following receipt by the Paying Agent of the Monthly Report and the Distribution Date Report 

with respect to a given Due Period, the Paying Agent shall prepare and deliver the Custodian and 

Paying Agent Report with respect to such Due Period in accordance with the terms of the 

Custodial and Paying Agency Agreement. Each ofthe Monthly Report and the Distribution Date 

Report shall be certified by the chief financial officer (or an equivalent officer) of the Managing 

Member. The Monthly Report shall also include a certification of the Managing Member that all 

withdrawals by the Managing Member from the Collection Account during such Due Period 

were made in accordance with the terms ofthis Agreement and the Custodial and Paying Agency 

Agreement. For purposes of this Section 7.4(b), if, for any period prior to the last Servicing 

Transfer Date, an Existing Servicer fails to report to the Initial Member or the Managing 

Member, as applicable, on a timely basis to permit the inclusion of the data from such Existing 

Servicer in the reports described above, such fact shall be disclosed in such reports and the 

omitted data shall be included in the applicable reports for the following period. 

(c) Annual Compliance Certificates. The Managing Member shall, and shall 

cause each Servicer and Subservicer to, deliver to Initial Member and Secured Party, on or 

before March 15 of each year, commencing in the year 2010, an officer's certificate stating, as to 

the signer thereof, that (i) a review of such party's activities during the preceding calendar year 

(or portion thereof) and ofits performance under this Agreement (or, as applicable, the Servicing 

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Franklin- LLC Operating Agreement 

8545936.5 
Agreement or any Subservicing Agreement) has been made under such officer's supervision, and 

(ii) to the best of such officer's knowledge and belief, based on such review, such party has 

fulfilled all of its obligations under this Agreement (or, as applicable, the Servicing Agreement 

or Subservicing Agreement) in all material respects throughout such year or portion thereof or, if 

there has been a failure to fulfill any such obligation in any material respect, specifying each 

such failure and the nature and status thereof. In the event a Servicer or any Subservicer was 

terminated, resigned or otherwise performed in such capacity for only part of a year, such party 

shall provide art officer's certificate pursuant to this Section 7.4(c) with respect to such portion of 

the year. 

(d) Annual Compliance Report. On or before March 15 of each year, 

commencing in the year 2010, the Managing Member shall cause each Servicer and Subservicer, 

each at its own expense or at the expense ofthe Managing Member, to provide a report prepared 

by a nationally recognized firm of independent certified public accountants to the effect that, 

with respect to the most recently ended Fiscal Year, such firm has examined certain records and 

documents relating to compliance with the servicing requirements in this Agreement and that, on 

the basis of such examination conducted substantially in compliance with either the Uniform 

Single Attestation Program for Mortgage Bankers or Item 1122 of Regulation AB, such firm is 

ofthe opinion that the Managing Member's or its Servicers' or Subservicers' activities have been 

conducted in compliance with this Agreement (including, to the extent applicable, Regulation 

AB), or that such examination has disclosed no material items of noncompliance except for (i) 

such exceptions as such firm believes to be immaterial, and (ii) such other exceptions as are set 

forth in the report. 

(e) Audits. Until the later of the date that is ten (1 0) years after the Closing 

Date and the date that is three (3) years after the Final Distribution, the Managing Member shaH, 

and shaH cause each Servicer and Subservicer to, (i) provide any representative of Initial 

Member (including any Goverumental Authority), during normal business hours and on 

reasonable notice, with access to all of the books of account, reports and records relating to the 

Loans or any Collateral, the Servicing Obligations, the Collection Account, any Liquidity 

Reserve Account, disbursements under the Custodial and Paying Agency Agreement, 

distributions hereunder or any other matters relating to this Agreement or the rights or 

obligations hereunder or under the Ancillary Documents, (ii) permit such representatives to make 

copies of and extracts from the same, (iii) aHow Initial Member to cause such books to be 

audited by accountants selected by Initial Member, and (iv) allow Initial Member's 

representatives to discuss the Company's, Managing Member's and any Servicer's and any 

Subservicer' s affairs, finances and accounts, as they relate to the Loans, the Collateral, the 

Servicing Obligations, the Collection Account, any Liquidity Reserve Account, or any other 

matters relating to this Agreement, the Ancillary Documents, or the rights or obligations 

hereunder and therelinder, with its officers, directors, employees, accountants (and by this 

provision the Company and Managing Member hereby authorizes such accountants to discuss 

such affairs, finances and accounts with such representatives), Servicers and Subservicers, and 

attorneys. Any expense incurred by Initial Member and any reasonable out-of-pocket expense 

incurred by the Company in connection with the exercise by Initial Member of its rights in this 

Section 7.4(e) shall be borne by the Initial Member; provided, however, that any expense 

incident to the exercise by Initial Member of its rights pursuant to this Section 7.4(e) as a result 

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Franklin- LLC Operating Agreement 

8545936.5 
of or during the continuance of an Event of Default shall in all cases be borne by the Managing 

Member. 

7.5 Designation ofTax Matters Member; Certain Tax Matters. 

(a) The Managing Member is hereby designated as the "Tax Matters 

Member" under Section 623l(a)(7) of the Code and under other similar Laws of other relevant 

jurisdictions, to manage, in consultation with the Initial Member, administrative tax proceedings 

conducted at the Company level by the Internal Revenue Service or other tax authorities with 

respect to Company matters. Each Member expressly consents to such designation and agrees 

that, upon the request of the Tax Matters Member, it will execute, acknowledge, deliver, file and 

record at the appropriate public offices such docmnents as may be necessary or appropriate to 

evidence such consent. The Tax Matters Member is specifically directed and authorized to take 

whatever steps the Tax Matters Member in its sole and absolute discretion deems necessary or 

desirable to perfect such designation, including, without limitation, filing any forms or 

docmnents with the Internal Revenue Service (or other tax authorities) and taking such other 

action as may from time to time be required under the Code, Treasury Regulations or other 

Laws. The Tax Matters Member shall have the authority, following consultation with the Initial 

Member, to make any tax elections on behalf of the Company permitted to be made, including 

the election pursuant to Section 754, under any section of the Code or the Treasury Regulations 

promulgated thereunder or under other Laws. In the event the Company may be deemed to be a 

"small partnership" as described in Section 623l(a)(l)(B), each Member consents to the 

Company's electing to be treated as a partnership to which the provisions of Code Section 6221 

et. seq. apply (thereby electing to have Code Section 623l(a)(l)(B)(i) not apply). 

(b) Notwithstanding anything to the contrary contained in this Agreement, in 

no event shall (i) a Member divide or transfer the Interest held by it in a manner that would result 

in the Company falling outside of the scope of the "safe harbor" under Treasury Regulations 

Section 1.7704-l(h)(l) relating to "publicly traded partnerships"; (ii) the Purchase Money Note 

(or any successor note(s)) be reconstituted into debt instrmnents that provide for repayment of 

principal of one or more classes of such debt instrmnents prior to repayment of principal of 

another class thereof (i.e., so-called "time-tranching"), or (iii) the Purchase Money Note (or any 

substitute note(s)) be contributed to a trust or other entity through which time-tranching is 

effectuated. 

7.6 Tax Information. Within ninety (90) days after the end of each Fiscal Year, the 

Managing Member shall send, or cause to be sent to, each Person who was a Member at any time 

during the Fiscal Year then ended a Schedule K-1 and such Company tax information as the 

Managing Member reasonably believes shall be necessary for the preparation by such Person of 

its United States federal, state and local tax returns in accordance with any Law. Such 

information shall include a statement showing such Person's share of distributions, income, gain, 

loss, deductions and expenses and other relevant items of the Company for such Fiscal Year. 

Promptly upon the request of any Member (or any former Member, for tax years during which 

such Person was a Member), the Managing Member will furnish to such Member (or former 

Member): 

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Franklin- LLC Operating Agreement 

8545936.5 
(a) United States federal, state and local income tax returns or information 

returns, if any, which the Company is required to file; and 

(b) at the sole cost and expense of the requesting Member, such other 

information as such Member may reasonably request for the purpose of applying for refunds of 

withholding taxes. 

ARTICLE VIII 


Restrictions on Disposition oflnterests 


8.1 Limitations on Disposition of Interests. Except as otherwise provided in this. 

Article VIII (but subject at all times to Section 7.5(b)(i)), the Private Owner shall not, directly or 

indirectly, Dispose of or permit to be Disposed of, all or any part of its Interest or any of its 

rights or interests under this Agreement unless (a) (i) the transferee is a Qualified Transferee and 

(ii) it first obtains the prior written consent of the Secured Party and the Initial Member, or (b) 

such Disposition is done by or at the direction of the Initial Member and the Secured Party 

pursuant to Section 5.3. In addition, the Private Owner shall not Dispose of less than all of its 

Interest. Transfers satisfying the foregoing criteria are hereinafter referred to as "Permitted 

Dispositions." 

8.2 Change of Control. Except as otherwise provided in this Article VIII, the Private 

Owner will not permit any Change of Control to occur unless (i) it first obtains the prior written 

consent of the Initial Member and the Secured Party, and (ii) following such Change of Control, 

the Member or successor Member, as applicable, would be a Qualified Transferee. 

8.3 Additional Provisions Relating to Permitted Dispositions. Except as otherwise 

expressly provided in this Section 8.3, the following provisions shall apply to each Permitted 

Disposition under this Article VIII: 

(a) The Private Owner shall not take, or cause the Company to take, any 

action that involves any material risk (other than any risk attributable to the fact that such action 

might lead to consummation of the proposed Permitted Disposition) of resulting in a material 

adverse effect on the business, financial condition, properties or prospects of the Company. In 

the event the Private Owner proposes to make a Permitted Disposition, the Private Owner shall 

be required to pay any and all filing and recording fees, fees of counsel and accountants and 

other out-of-pocket costs and expenses reasonably incurred by the Initial Member, the Secured 

Party and/or the Company in connection with such Permitted Disposition. 

(b) The transferee in a Permitted Disposition shall deliver to the Company, 

with a copy to the Initial Member and the Secured Party, an agreement, in form and substance 

reasonably satisfactory to the Initial Member and the Secured Party, by which such transferee 

shall (i) agree to become a party to and be bound by this Agreement as the "Private Owner," 

agree to be appointed as the "Managing Member," and without limitation ofthe generality ofthe 

foregoing, agree to be bound by the other terms of Section 8.4 hereof, (ii) assume and agree to 

perform when due all ofthe obligations of the Private Owner and Managing Member under this 

Agreement (including without limitation the obligation of the Managing Member to make 

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Franklin - LLC Operating Agreement 

8545936.5 
Working Capital Contributions under Section 5.1), and (iii) represent and warrant that it 

complies with the requirements set forth in Article X. 

(c) In connection with each Permitted Disposition, the Private Owner and the 

transferee shall deliver to the Company, the Initial Member and the Secured Party such other 

documents and instruments as the Initial Member or the Secured Party reasonably may request 

and which. are required to effect the Permitted Disposition and substitute the transferee as a 

Member. 

8.4 Effect ofPermitted Dispositions. 

(a) Upon consummation of any Permitted Disposition: 

(i) the transferee shall be admitted as a Member in the Company and 

be deemed to be a party to this Agreement as the "Private Owner" and shall be 

appointed as the Managing Member; 

(ii) the transferred Interest shall continue to be subject to all the 

provisions of this Agreement, including without limitation Section 5.1 and the 

remainder of this Article VIII, and the transferee Member shall have the same 

status as the Private Owner had at the time of consummation of such Permitted 

Disposition and, without limiting the generality ofthe foregoing, any outstanding 

breach, misrepresentation, violation or default (with respect to this Agreement or 

any Ancillary Document) by_any direct or indirect predecessor to the transferee as 

the Member, or by any Mfiliate of any such predecessor Member, shall be 

deemed to constitute an outstanding breach, misrepresentation, violation or 

default as the case may be, by the transferee Member; 

(iii) subject to Section 8.4(b) and the last sentence of Section 13.9, the 

transferor Private Owner shall cease to be a Member of the Company (and 

accordingly, except as expressly otherwise provided in Section 8.4(b) or the last . 

sentence of Section 13.9), shall cease to be responsible for the payment or 

performance of any of the obligations or liabilities under this Agreement of the 

Private Owner, in any capacity hereunder). 

(b) No Permitted Disposition (and no resulting withdrawal or resignation of 

the transferor Member from the Company) shall: 

(i) relieve the Private Owner of any of the obligations or liabilities of 

the Private Owner, in any capacity, under this Agreement required to have been 

paid or performed prior to the consunnnation of such Permitted Disposition (or of 

any liability it may have arising out of any breach, misrepresentation, violation or 

default by the Private Owner prior to such consummation); 

(ii) result in the termination of, relieve the Private Owner (or any ofits 

Affiliates) of, or otherwise affect, any of the obligations or liabilities of the 

Private Owner, in any capacity, or its Affiliates under, any Related Party 

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Franklin - LLC Operating Agreement 

8545936.5 
Agreement (such Related Party Agreements to continue in effect in accordance 

with their respective terms), except to the extent expressly provided in such 

Related Party Agreement; or 

(iii) dissolve the Company. 

8.5 Effect of Prohibited Dispositions. No actual or purported Disposition of any 

Interest (or any portion thereof) owned by the Private Owner, or of any other right or interest of 

the Private Owner under this Agreement, whether voluntary or involuntary, in violation of any 

provision of this Agreement shall be valid or effective. To the extent Private Owner Disposes or 

purports to Dispose of its Interest (or any portion thereof) in violation of any provision of this 

Agreement, until such Disposition or purported Disposition shall be rescinded, Private Owner 

shall not be entitled to, and hereby specifically waives any right to, receive Company 

distributions from and after the date of such Disposition or purported Disposition or failure to 

comply, as the case may be. Notwithstanding the foregoing, to the extent that the Private Owner 

would have been entitled to Company distributions but for the preceding provisions of this 

Section 8.5 ("Omitted Distributions"), if and when such Disposition or purported Disposition 

shall be rescinded, the Private Owner shall be entitled to receive all such Omitted Dispositions 

(but no interest shall be paid thereon with respect to the period between the date such Omitted 

Dispositions would have been made but for this Section 8.5 and the date they are actually made). 

8.6 Distributions After Disposition. Distributions with respect to an Interest made on 

or after the effective date of the Permitted Disposition of such Interest shall be made to the 

transferee Member with respect to such Interest, regardless of when such distributions accrued 

on the books ofthe Company. 

8.7 Transfers By Initial Member. Notwithstanding anything to the contrary contained 

in this Agreement, except as provided by applicable Law or Section 7.5(b)(i) (and, for so long as 

the Purchase Money Note is outstanding, subject to the consent ofthe Secured Party), there shall 

be no restriction on the Initial Member's ability to transfer the Interest held by it, and the Private 

Owner shall have no right to purchase or right-of-first-refusal in connection with any such sale; 

provided, however, that in the event the Initial Member determines to sell the Interest held by it 

through an auction process, the Private Owner shall be entitled to participate in such auction on 

the same terms that apply generally to other participants in the auction. 

8.8 Resignation; Dissolution. 

(a) Private Owner may not withdraw or resign from the Company, except (i) 

in connection with a Permitted Disposition made in accordance with the applicable provisions of 

this Article Vill or (ii) with the prior written consent of the Initial Member and the Secured 

Party. 

(b) The Private Owner covenants that it shall not allow a Dissolution Event to 

occur with respect to itself. · 

(c) Section 18-304 ofthe Act shall not apply to the Company. Nothing in this 

Section 8.8( c) shall limit the terms ofSection 9.1 hereof. 

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Franklin - LLC Operating Agreement 

8545936.5 
(d) Except as is otherwise expressly provided in this Agreement, no Member 

shall be entitled to receive any payment pursuant to Section 18-604 ofthe Act. 

8.9 Applicable Law Withdrawal. If, as a result of applicable Law, the ownership of 

an Interest by a Member becomes illegal or is likely to become illegal or the applicable Law 

more likely than not requires divestiture of such Member's Interest, or the applicable Law would 

require the Company to register as an investment company under the Investment Company Act, 

then the Managing Member and the Member shall use their respective commercially reasonable 

efforts to avoid a violation of any such applicable Law by a Member or the need for the 

Company to register as an investment company. These steps may include, depending on the 

provisions of such applicable Law, (i) arranging for the sale of the Member's Interest to a third 

party upon terms reasonably satisfactory to the Member in a transaction that complies with 

Articles VIII and X; (ii) making any appropriate applications to the relevant Governmental 

Authority, (iii) prohibiting such Member from making further Capital Contributions, and 

converting its Interest into a special interest with no voting or similar rights but with only an 

economic right (identical to its prior rights as a Member), or (iv) permitting the Member to 

withdraw from the Company for a "payment" to such Member equal to the value of its Interest at 

the time ofwithdrawal, such value to be determined by a third party appraiser mutually agreeable 

to the Managing Member and all Members. The aforesaid "payment" shall be made in cash 

unless the Managing Member determines tliat the payment in cash would be economically 

detrimental to the Company, in which case such payment may be made in kind, subject to the 

applicable Law. The timing of any such withdrawal must be mutually agreeable to the Member 

and the Managing Member taking proper account of the effective date of the applicable Law or 

registration requirement that is the basis for the withdrawal or other remedy provided herein and 

the need of the Managing Member for a reasonable period of time to find a solution to the 

illegality or requirement for divestiture. Such illegality or registration requirement must be 

established by (x) an opinion of counsel (which counsel shall be reasonably satisfactory to the 

Managing Member and the Initial Member) substantially to the effect that the ownership of the 

Interest more likely than not will result in such illegality or requirement for registration or 

divestiture or (y) upon a ruling or order from a Governmental Authority. 

ARTICLE IX 


Dissolution and Winding-Up of the Company 


9.1 Dissolution. A dissolution of the Company shall take place upon the first to occur 

ofthe following: 

(a) the agreement by all Members and, so long as the Purchase Money Note is 

outstanding, the Secured Party, to dissolve the Company; 

(b) the sale of all or substantially all of the Company Property (other than 

cash and cash equivalent instruments), including as an entirety or substantially as an entirety; or 

(c) without limitation of clause (i) above, a Dissolution Event or an 

Insolvency Event occurs with respect to the Managing Member or a Person that Controls the 

Managing Member; or 

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Franklin- LLC Operating Agreement 

8545936.5 
(d) exercise of the Clean-Up Call in accordance with Section 12.17. 

9.2 Winding-Up Procedures. Ifa dissolution of the Company pursuant to Section 9.1 

occurs, subject to the Company's compliance with its obligation under the other agreements to 

which it is a party, the other terms and conditions of this Agreement or the Ancillary Documents, 

the Managing Member shall proceed as promptly as practicable to wind up the affairs of the 

Company in an orderly and businesslike manner. A final accounting shall be made by Managing 

Member. As part of the winding up of the affairs of the Company, the following steps will be 

taken: 

(a) The assets of the Company shall be sold except to the extent that some or 

all of the assets of the Company are retained by the Company for distribution to the Members as 

hereinafter provided. 

(b) The Company shall comply with Section 18-804(b) of the Act. 

(c) Distributions of the assets of the Company after a dissolution of the 

Company shall be conducted as follows: 

(i) first, to creditors, but excluding Members who are creditors, other 

than the Initial Member (to the extent it continues to hold the Purchase Money 

Note), to the extent otherwise permitted by Law (and, to the extent permitted, in 

accordance with the Priority of Payments), in satisfaction of liabilities of the 

Company (whether by payment or the making of reasonable provision for 

payment thereof); 

(ii) second, to Members or former Members who are creditors, to the 

extent otherwise permitted by Law, in satisfaction of liabilities of the Company 

(whether by payment or the making of reasonable provision for payment thereof) 

other than liabilities for which reasonable provision for payment has been made 

and liabilities for distributions to Members and former Members under Section 

18-601 of the Act; 

(iii) third, to Members and former Members in satisfaction ofliabilities 

(if any) for distributions under Section 18-601 ofthe Act; and 

(iv) fmally, to the Members in the manner set forth in Section 6.6(b). 

(d) Upon dissolution, the Managing Member, may, with the consent of all 

Members, (i) liquidate all or a portion of the Company assets and apply the proceeds of such 

liquidation in the manner set forth in Section 9.2(c) and/or (ii) hire independent appraisers to 

appraise the value of Company assets not sold or otherwise disposed of or determine the Fair 

Market Value of such assets, and allocate any unrealized gain or loss determined by such 

appraisal to the Members' respective Capital Accounts as though the properties in question had 

been sold on the date of distribution and, after giving effect to any such adjustment, distribute 

said assets in the manner set forth in Section 9 .2( c). provided that the Managing Member shall in 

good faith attempt to liquidate sufficient Company assets to satisfy in cash the debts and 

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Franklin - LLC Operating Agreement 

8545936.5 
liabilities described in Section 9 .2. If a Member shall, upon the advice of counsel, determine that 

there is a reasonable likelihood that any distribution in kind of an asset would cause such 

Member to be in violation of any Law, such Member and the Managing Member shall each use 

its best efforts to make alternative arrangements for the sale or transfer into an escrow account of 

any such distribution on mutually agreeable terms. 

ARTICLE X 


Qualified Transferees 


10.1 Qualified Transferees. Each Member, other than the Initial Member (including, 

for the avoidance of doubt, its successors and transferees), shall at all times be in compliance 

with the following (and any proposed transferee of any Interest in compliance with the following 

shall be deemed a "Qualified Transferee"): 

(a) Organization; Good Standing; Licenses. Such Member (i) is a Single 

Purpose Entity duly organized, validly existing and in good standing under the Laws ofthe state 

of its organization, (ii) has qualified or will qualify to do business as a foreign corporation, 

partuership or other entity and will remain so qualified, and is and will remain in good standing, 

in each jurisdiction in which the character of its properties or the nature of its activities makes 

such qualification necessary and in which failure to so qualify would have a material adverse 

effect upon such Member or its ability to perform its obligations hereunder, (iii) has full power to 

own its property, to carry on its business as presently conducted, and to enter into and perform its 

obligations under this Agreement, (iv) hits all licenses or other governmental approvals necessary 

to perform its obligations hereunder; and (v) has a net worth calculated in accordance with 

GAAP ofnot less than $5,000,000. 

(b) Authorization; No Violation. The execution and delivery by such Member 

of this Agreement and the consummation of the transactions contemplated hereby have been 

duly and validly authorized by all necessary action. Neither the execution and delivery of this 

Agreement, nor the consummation of the transactions herein contemplated, nor compliance with 

the provisions hereof, will conflict with or result in a breach of, or constitute a default under, (i) 

any of the provisions of any Law binding on such Member or its properties, (ii) the constituent 

documents of such Member, or (iii) any of the provisions of any indenture, mortgage, contract or 

other instrument to which such Member is a party or by which it is bound or result in the creation 

or imposition of any Lien upon any of its property pursuant to the terms of any such indenture, 

mortgage, contract or other instrument. 

(c) Governmental Approvals. All actions, approvals, consents, waivers, 

exemptions, variances, franchises, orders, permits, authorizations, rights and licenses required to 

be taken, given or obtained, as the case may be, by or from any Governmental Authority or 

agency that are necessary in connection with the execution and delivery by such Member of this 

Agreement and the consummation of the transactions contemplated hereby and the performance 

of its obligations hereunder, have been duly taken, given or obtained, as the case may be, are in 

full force and effect, are not subject to any pending proceedings or appeals (administrative, 

judicial or otherwise) and either the time within which any appeal therefrom may be taken or 

review thereof may be obtained has expired or no review thereof may be obtained or appeal 

therefrom taken. 

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Franklin- LLC Operating Agreement 

8545936.5 
(d) No Litigation. On the date such Member becomes a party to this 

Agreement, there is no action, suit, proceeding or investigation pending or threatened against 

such Member before any Governmental Authority. 

(e) No Violation of Orders, Decrees, etc. Such Member is not in default with 

respect to any order or decree of any court or any Law. 

(f) Third Party Consents. No consents, approvals, waivers or notifications of 

stockholders, creditors, lessors or other nongovernmental persons are required to be obtained by 

such Member in COJ\Ilection with the execution and delivery of this Agreement and the 

consummation of all the transactions herein contemplated and the performance of its obligations 

hereunder.. 

(g) Owners Accredited Investors. All of the equity owners of such Member 

are "accredited investors," as that term is defined in Rule 501 under the Securities Act. 

(h) Knowledge and Experience. Such Member, either by itself or through its 

advisers and principals, has such knowledge and experience in the origination, servicing, sale 

and/or purchase of performing and non-performing or distressed loans, including loans secured 

by residential properties, as well as financial and business matters, as to enable such Member to 

utilize the information made available to it with respect to the Interest acquired by it and the 

Loans to evaluate the merits and risks of a purchase of the Interest acquired by it and, indirectly, 

the Loans, and to make an informed decision with respect thereto. 

(i) Economic Risks. Such Member acknowledges, understands and 

represents that it is able to bear the economic risks associated with the acquisition and ownership 

of the Interest acquired by it and, indirectly, the Loans, including the risk of a total loss of its 

investment in the Company and, indirectly, the Loans and/or the risk that it may be required to 

hold the Interest and, indirectly, the Loans for an indefinite period oftime. 

G) No Representations. Such Member hereby acknowledges that, except as is 

otherwise expressly provided in this Agreement, the LLC Interest Sale Agreement, or the 

Contribution Agreement, none of the Initial Member or any Affiliate ofInitial Member, or any of 

their respective officers, directors, employees, agents or contractors makes or has made any 

representation or warranty regarding the Company, the Interest or the Loans or the value of any 

Collateral. 

(k) Due Diligence. Such Member acknowledges and agrees that, whether or 

not information is available with respect to the Interest or the Loans and whether or not it 

chooses to review any information that is or was made available to it regarding the Interest or the 

Loans, such Member, by itself or through its advisers or principals, has the ability and shall be 

responsible for making its own independent investigation and evaluation of the Interest and the 

Loans and the economic, credit or other risks involved in an acquisition of the Interest and, 

indirectly, the Loans. Except as is otherwise expressly provided in this Agreement, none of the 

Initial Member any Mfiliate of Initial Member, or any of their respective officers, directors, 

employees, agents or contractors makes and representation or warranty as to the completeness or 

accuracy of any information provided. 

33 

Franklin - LLC Operating Agreement 

8545936.5 
(1) No Securities. Such Member acknowledges and agrees that (i) neither the 

offer nor the sale of the Interest (and, indirectly, the Loans) is intended to constitute an offer or 

sale of a "security'' within the meaning of the Securities Act or any applicable federal or state 

securities Laws, (ii) no inference that any of the Interest or the Loans is a "security" under such 

federal or state securities Laws shall be drawn from any of the certifications, representations or 

warranties made by any Person in this Agreement, (iii) it is not contemplated that any filing will 

be made with the Securities and Exchange Commission or pursuant to the "Blue Sky'' or 

securities Laws of any jurisdiction, and (iv) if any ofthe Interest or the Loans is a security, such 

may not be resold or otherwise transferred by such Member except in accordance with any and 

all applicable securities and Blue Sky Laws. 

(m) Resales. Such Member is acqmnng the Interest (and, indirectly, the 

Loans) for its own account and not with a view toward resale in a distribution within the 

meaning ofthe Securities Act. 

(n) Resales in Compliance with Law. Such Member will not (i) offer, pledge, 

sell or otherwise dispose of the Interest (or any interest therein) or any Loan (or any interest 

therein or evidence thereof) to, or (ii) solicit any offer to buy or accept a transfer, pledge or other 

disposition of the Interest (or any interest therein) or any Loan (or any interest therein or 

evidence thereof) from, or (iii) otherwise approach or negotiate with respect to the Interest (or 

any interest therein) or any Loan (or any interest therein or evidence thereof) with, any person or 

entity in any manner, or take any other action, that would (A) not comply with Article Vill, or 

(B) render the transfer to such Member of the Interest or any interest in any Loan a violation of 

any Law relating to the issuance, regulation, registration or disposition of securities, nor will it so 

act, nor will it authorize any person or entity to so act, in any manner with respect to the Interest 

(or any interest therein) or any Loan (or interest therein or evidence thereof). 

(o) Acquisition in Compliance with Law. Such Member's acquisition of the 

Interest and the resulting investment in the Loans will comply with all applicable Laws, 

including any and all Laws and/or restrictions imposed on resale of the Interest and the Loans by 

federal and state securities or Blue Sky Laws. 

(p) Independent Evaluation. Such Member has made an independent 

evaluation of the Company and its assets (including the Loans and related Loan files and/or any 

electronic data made available to it pertaining to the Loans held by the Company). Such 

Member also has conducted such other investigations as it deems appropriate, including searches 

of Uniform Commercial Code, title, court, bankruptcy and other public records. Such Member 

agrees and represents that it is entering into this Agreement solely on the basis of its own 

investigations and its judgment as to the value of the Interest and the nature, validity, 

enforceability, collectibility and value of the Loans and all other facts material to their 

ownership, including to the legal matters and risks relating to the collection and enforcement, 

and the performance of any obligations under any of the Loans in any jurisdiction. Such 

Member further acknowledges that no employee or representative of the Initial Member or any 

of its Affiliates or officers, directors, employees, agents or contractors has been authorized to 

make any statements or representations other than those specifically contained in this Agreement 

or the Contribution Agreement. 

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Franklin- LLC Operating Agreement 

8545936.5 
(q) Embargoed Person. Such Member certifies, represents and warrants that 

(a) no consideration that such Member or any of its Affiliates contributes hereunder or under the 

Ancillary Documents in connection with any transaction regarding any assets will have been 

derived from or related to any activity that is deemed criminal under United States law; (ii) 

neither it nor any of its Affiliates or Direct Owners is an Embargoed Person; (iii) neither it nor 

any of its Affiliates or Direct Owners engages in any dealings or transactions, or is "otherwise 

associated with" (as defined in 31 CFR 594.316), any Embargoed Person; and (iv) if and to the 

extent such Member or any of its Affiliates are required by law to maintain an anti-money 

laundering compliance program under applicable anti-money laundering laws and regulations, 

including without limitation, the Uniting and Strengthening America by Providing Appropriate 

Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)) such 

compliance programs are currently being maintained. For purposes of the foregoing 

certifications, representations and warranties, such certifications, representations and warranties 

shall be based upon a due inquiry and investigation; provided, however, that for purposes of 

determining whether any ofthe same with respect to indirect ownership are true, the undersigned 

shall not be required to make an investigation into the ownership of publicly-traded securities 

(including securities of open-end investment companies registered under the Investment 

Company Act of 1940, as amended) or the ownership of assets by a collective investment fund 

that holds assets for employee benefit plans or retirement arrangements. 

ARTICLEXI 


Managing Member Liability 


11.1 Liability ofManaging Member. 

(a) Except as otherwise specifically provided in this Agreement (including in 

the other subsections ofthis Section 11.1 ), the duties (including fiduciary duties) and obligations 

owed to the Company and Initial Member by the Managing Member shall be as provided in 

Section 3.1 (b) hereof. 

(b) The Managing Member may rely, and shall be protected in acting or 

refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, 

notice, request, consent, order, bond, debenture or other paper or document reasonably believed 

by it to be genuine and to have been signed or presented by the proper party or parties. 

(c) The Managing Member may consult with legal counsel, accountants, 

appraisers, management consultants, investment bankers and other consultants and advisers 

selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such 

Persons as to matters that the Managing Member reasonably believes to be within such Person's 

professional or expert competence shall be conclusively presumed to have been done or omitted 

in good faith and in accordance with such opinion. 

(d) The Managing Member shall not be liable to the Company or the 

Members for its good faith reliance on the provisions of this Agreement. 

(e) The limitations and exculpation afforded by each provision ofthis Section 

11.1 are cumulative and not exclusive. Nothing in this Section 11.1 is intended, or shall be 

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Franklin- LLC Operating Agreement 

8545936.5 
deemed, to permit conduct that would otherwise constitute misappropriation of a trade secret of 

the Company under applicable Law or conduct that, even disregarding the terms hereof 

otherwise would be actionable by the Company or the Members. 

(f) The provisions of this Section 11.1 are for the benefit of the Managing 

Member, in its capacity as manager of the Company. This Section 11.1 may be amended, 

modified or repealed in the manner set forth elsewhere in this Agreement, but any amendment, 

modification or repeal of this Section 11.1 or any provision hereof (including as a result of any . 

amendment, modification or repeal of the Act) shall (unless the Managing Member shall 

expressly have consented to such amendment, modification or repeal) be prospective ouly and 

shall (unless the Managing Member shall expressly have consented to such amendment, 

modification or repeal) not in any way affect the limitations on liability under this Section 11.1 

as in effect immediately prior to such amendment, modification or repeal with respect to claims 

arising from or relating to matters occurring, in whole or in part, prior to such amendment, 

modification or repeal, regardless ofwhen such claims may be asserted. 

ARTICLE XII 


Servicing of Loans 


12.1 Servicing. 

(a) Appointment and Acceptance as Servicer. Effective as of the Closing 

Date, but subject to Section 3.3 of the Contribution Agreement (with which the Managing 

Member agrees to comply), the Managing Member is hereby appointed (and hereby accepts the 

appointment as) servicer for the Loans and any Collateral. Until such time as the Company is 

dissolved and liquidated pursuant to Article IX, the Managing Member shall be responsible for 

servicing, administering, managing and disposing of the Loans and the Collateral in accordance 

with the standards (collectively, the "Servicing Standard") set forth in Section 12.2 (such 

obligations referred to collectively herein as the "Servicing Obligations") and the other 

provisions of this Article XII, including the provisions of Section 12.3 (which require that 

servicing be performed through one or more Qualified Servicers). Without in any way limiting 

the foregoing, but subject to Section 3.3 of the Contribution Agreement, the Managing Member 

shall cause the Loans (including, for all purposes under this Article XII, the related Collateral) to 

be serviced as follows: (a) such Loan shall, except as provided in the immediately following 

subsection (b), be serviced by the Servicer(s) appointed in accordance with Section 12.3 below, 

and (b) following the replacement of Servicer as a result of an Event ofDefault, the Loans shall 

be serviced by the Servicer appointed by the Initial Member in accordance with Section 12.4 

below. All servicing of Loans following the relevant Service Transfer Date shall be performed 

in accordance with the terms of the Contribution Agreement and the relevant Servicing 

Agreement and shall be subject to Section 12.1(b) below. 

(b) Servicing and Sub servicing Agreement Requirements. Except as is 

otherwise agreed in writing by Initial Member, each Servicing Agreement (and any Subservicing 

Agreement with any Subservicer) shall, among other things, 

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Franklin- LLC Operating Agreement 

8545936.5 
(i) provide for the servicing of the Loans and management of the 

Collateral by the Servicer (or Subservicer) in accordance with the Servicing 

Standard and the other terms ofthis Agreement; 

(ii) be terminable upon no more than thirty (30) days prior notice if an 

Event of Default or any default under the Servicing Agreement (or Subservicing 

Agreement) has occurred; 

(iii) provide that the Managing Member, the Secured Party, and the 

Initial Member (and, in the case of any Subservicing Agreement, the Servicer) 

shall be entitled to exercise termination rights under the relevant Servicing 

Agreement or Subservicing Agreement; 

(iv) provide that the Servicer (or any Subservicer) and the Managing 

Member acknowledge that the Servicing Agreement (or Subservicing Agreement) 

constitutes a personal services agreement between the Managing Member and the 

Servicer (or between the Servicer and the Subservicer, as applicable); 

(v) provide that the Company, the Initial Member, the Secured Party 

and, in the case of any Subservicing Agreement, the Managing Member, is a third 

party beneficiary thereunder and entitled to enforce the Servicing or Subservicing 

Agreement, as applicable; 

(vi) provide that, upon the occurrence of any Event of Default, Initial 

Member or the Secured Party (or, in the case of any Subservicing Agreement, the 

Managing Member) may exercise all of the rights of the Managing Member (or, 

in the case of a Subservicing Agreement, the Servicer) thereunder and cause the 

termination or assigrnnent of the same to any other Person, without penalty or 

payment of any fee; 

(vii) provide that Secured Party, Initial Member, the Managing Member 

and their respective representatives shall have access to and the right to review, 

copy and audit the books and records of each Servicer and any Subservicers and 

that all Servicers and all Subservicers shall make available their respective 

officers, directors, employees, accountants and attorneys to answer Secured 

Party's, Initial Member's, the Managing Member's, and their respective 

representatives' questions or to discuss any matter relating to the Servicer' s or 

Subservicer' s affairs, finances and accounts, as they relate to the Loans, the 

Collateral, the Collection Account or any other accounts established or 

maintained pursuant to this Agreement or the Servicing Agreement or any 

Subservicing Agreement, or any matters relating to the Servicing Agreement or 

the rights or obligations thereunder; 

(viii) provide that all Loan Proceeds are to be deposited into the 

Collection Account on a daily basis (without reduction or setoff) within two 

Business Days of receipt and that under no circumstances are funds, other than 

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Franklin- LLC Operating Agreement 

8545936.5 
Loan Proceeds and interest and earmngs thereon, to be deposited into the 

Collection Account; 

(ix) provide that the Servicer or Subservicer shall not transfer or assign 

its rights under the Servicing Agreement or Subservicing Agreement, as 

applicable, other than Servicer' s rights to delegate to Subservicers certain 

responsibilities thereunder as and to the extent permitted by this Agreement, and 

that any prohibited transfer shall be void ab initio; 

(x) provide that all of the Loans shall be registered on the MERS® 

System (where applicable) unless default, foreclosure or similar legal or MERS 

requirements dictate otherwise; 

(xi) · provide that (A) the Servicer or Subservicer consents to the 

immediate termination of the Servicer or Subservicer, as applicable, upon the 

occurrence of a termination event under the Servicing or Subservicing 

Agreement, as applicable, and upon the occurrence of any Insolvency Event with 

respect to the Servicer or Subservicer or any of their respective Affiliates, as 

applicable, and (B) the occurrence of any Insolvency Event with respect to the 

Servicer or Subservicer or any Affiliate thereof constitutes a default under the 

Servicing or Subservicing Agreement, as applicable; 

(xii) in the case of a Subservicing Agreement, provide that there shall 

be no right ofsetoff on the part ofthe Subservicer; 

(xiii) provide for such other matters as are necessary or appropriate to 

ensure that the Servicer or Subservicer is obligated to comply with the Servicing 

Obligations ofthe Managing Member hereunder; 

(xiv) provide a full release and discharge of Receiver, the Company, the 

Existing Servicers and any predecessor servicer, and all of their respective 

officers, directors, employees, agents, attorneys, contractors and representatives, 

and all of their respective successors, assigns and Affiliates (but excluding, in all 

cases, the Managing Member) (collectively, the "Prior Servicers"), from any and 

all claims (including any counterclaim or defensive claim), demands, causes of 

action, judgments or legal proceedings and remedies of whatever kind or nature 

that the Servicer had, has or might have in the future, whether known or 

unknown, which are related in any manner whatsoever to the servicing of the 

Loans by the Prior Servicers prior to the applicable Servicing Transfer Date(s) 

(other than due to gross negligence or willful misconduct of such Prior Servicer); 

and 

(xv) not conflict with the terms and provisions ofthis Agreement or the 

Ancillary Documents insofar as the terms and provisions apply to the Servicer or 

the Servicing Obligations. Nothing contained in any Servicing Agreement or any 

Subservicing Agreement shall alter any obligation of the Managing Member 

under this Agreement and, in the event of any inconsistency between the 

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Franklin - LLC Operating Agreement 

8545936.5 
Servicing Agreement (or any Subservicing Agreement) and the terms of this 

Agreement, the terms ofthis Agreement shall control. 

12.2 Servicing Standard. The Managing Member shall perform the Servicing 

Obligations: (i) in the best interests and for the benefit of the Company and the Secured Party, 

(ii) in accordance with the terms of the Loans (and related Loan Documents), (iii) in accordance 

with the terms of this Agreement, (iv) in accordance with all applicable Law, (v) in compliance 

with the Loan Modification Program and, to the extent applicable, the Guidelines, (vi) to the 

extent consistent with the foregoing terms, in the same manner in which a prudent servicer would 

service and administer similar loans and in which a prudent servicer would manage and 

administer similar properties for its own portfolio or for other Persons, whichever standard is 

higher, but using no less care and diligence than would be customarily employed by a prudent 

servicer following customary and usual standards of practice of prudent mortgage lenders, loan 

servicers and asset managers servicing, managing and administering similar loans and properties 

on an arms' length basis, provided that in the absence of a customary and usual standard of 

practice, the Managing Member shall, and shall cause each Servicer and Subservicer to, comply 

with the Fannie Mae Guidelines applicable to similar loans and properties in similar situations. 

The Managing Member shall cause its Servicing Obligations with respect to the Loans and the 

Collateral to be performed without regard to (w) any relationship that the Company, the 

Managing Member, or any Servicer or Subservicer, or any oftheir respective Affiliates may have 

to any Borrower, Guarantor or other obligor, or any of their respective Affiliates, including any 

other banking or lending relationship, (x) the Company's, the Managing Member's, or any 

Servicer's or Subservicer's, obligation to make disbursements and advances with respect to the 

Loans and Collateral, (y) any relationship that the Servicer or any Subservicer may have to each 

other or to the Company, the Managing Member or any of their respective Affiliates, or any 

relationship that any of their respective Affiliates may have to the Company, the Managing 

Member or any oftheir respective Affiliates (other than the contractual relationship evidenced by 

this Agreement or the Servicing Agreement or any Subservicing Agreement), and (z) the 

Managing Member's, or any Servicer' s or Subservicer' s, right to receive compensation 

(including the Management Fee) for its services under this Agreement, the Servicing Agreement 

or any Subservicing Agreement. Without limiting the generality ofthe foregoing, the Managing 

Member's Servicing Obligations hereunder shall include the following: 

(a) discharging in a timely manner each and every obligation which the Loan 

Documents provide is to be performed by the lender thereunder, on its own behalf and on behalf 

ofthe Company, the Initial Member and the Secured Party; 

(b) incurring costs (including Servicing Expenses) in accordance with the 

provisions ofthe Loan Documents; 

(c) causing to be maintained for the Collateral (including any Acquired 

Collateral) with respect to each Loan with respect to which the Borrower has failed to maintain 

required insurance, fire, hurricane, flood and . hazard insurance with extended coverage as is 

customary in the area in which the Collateral is located and in such amounts and with such 

deductibles as the Managing Member may, in the exercise ofits reasonable discretion, determine 

are prudent; 

39 


Franklin- LLC Operating Agreement 

8545936.5 
(d) ensuring compliance with the terms and conditions of each insurer under 

any hazard policy and preparing and presenting claims under any policy in a timely fashion in 

accordance with the terms ofthe policy; 

(e) supervising and coordinating the construction, ownership, management, 

leasing and preservation of the Collateral as well as all other matters involved in the 

administration, preservation and ultimate disposition ofthe Collateral; 

(f) to the extent consistent with the foregoing, seeking to maximize the timely 

and complete recovery of principal and interest on the Loans and otherwise to maximize the 

value ofthe Loans and the Collateral; 

(g) except as otherwise set forth in this Agreement, making decisions under, 

and enforcing and performing in accordance with, the Loan Documents all loan administration, 

inspections, review of financial data and other matters involved in the servicing, administration 

and management of the Loans and the Collateral; and 

(h) ensuring that all filings required to maintain perfection in any Collateral 

remain up to date and in force, including Uniform Commercial Code financing statements. 

12.3 Servicing ofLoans. 

(a) Annointrnent of Servicers. Effective as of the Closing Date, the Managing 

Member shall enter into one or more Servicing Agreements to provide for the servicing and 

administration and management of the Loans and Collateral by one or more Qualified Servicers 

(each, a "Servicer"). Each Servicer, at all times during which it acts as Servicer, shall continue· 

to satisfy the definition of Qualified Servicer. Except for the period between the Cut-Off Date 

and the Servicing Transfer Date with respect to a given Loan, during which time such Loan shall 

be serviced pursuant to the interim servicing obligations in the Contribution Agreement, each 

Loan shall at all times be serviced (and any Collateral managed) by or through at least one 

Servicer (including any subservicers engaged by the Servicer ("Subservicers") as permitted 

hereunder) and the performance of all day-to"day Servicing Obligations of the Managing 

Member shall be conducted by or through one or more Servicers (including any Subservicers 

permitted hereunder). Subject to the other terms and conditions of this Agreement, any Servicer 

may be an Affiliate of the Managing Member. Each Servicer may engage or retain one or more 

Subservicers, including Affiliates of the Managing Member, to perform certain of its duties 

under the Servicing Agreement, as it may deem necessary and appropriate, by entering into a 

subservicing agreement with each such Subservicer ("Subservicing Agreement"), provided that 

any Subservicer meets (and at all times continues to meet) the requirements set forth in clause (i) 

of the definition of Qualified Servicer and, to the extent applicable to the services to be 

performed by such Subservicer, clauses (ii) and (iii) ofthe defmition of Qualified Servicer. The 

costs and fees of the Servicers (and any Subservicers) shall be borne exclusively by the 

Managing Member (it being understood that Managing Member will receive the Management 

Fee in accordance with Section 12.5 hereof). Under no circumstances shall the Managing 

Member transfer, or permit to be transferred, to any Servicer any ownership interest in the 

servicing to the Loans or any right to transfer or sell the servicing to the Loans (other than in 

connection with the sale·of any Loan), and no Servicer shall be permitted to assign, pledge or 

40 


Franklin- LLC Operating Agreement 

8545936.5 
otherwise transfer or purport to assign, pledge or otherwise transfer any interest in the servicing 

to the Loans (other than in connection with the sale of any Loan), and any purported assignment, 

pledge or other transfer in violation ofthis provision shall be void ab initio and ofno effect. 

(b) Managing Member Liable for Servicer and Subservicers. Notwithstanding 

anything to the contrary contained herein, the use of any Servicer (or any Subservicer) shall not 

release the Managing Member from any of its Servicing Obligations or other obligations uuder 

this Agreement, and the Managing Member shall remain responsible and liable for all acts and 

omissions of each Servicer (and each Subservicer of each Servicer) as fully as if such acts and 

omissions were those of the Managing Member. All actions of each Servicer (or any 

Subservicer) performed pursuant to the Servicing Agreement (or any Subservicing Agreement) 

shall be performed as an agent of the Managing Member (or, in the case of Subservicers, the 

Servicer). 

(c) Copies of Servicing and Subservicing Agreements. Copies of all fully 

executed Servicing Agreements and Subservicing Agreements, including all supplements and 

amendments thereto, shall be provided to Initial Member and the Secured Party. 

(d) Regulation AB Requirements. The Managing Member shall ensure that 

each Servicer (and any Subservicer) (i) has in place policies and procedures to comply with the 

provisions of Section 1122( d)(1 )(i) through (iv) of Regulation AB, and (ii) complies with the 

provisions of Sections 1122(d)(2)(i) through (vii), 1122(d)(3)(i) through (iv), and 1122(d)(4)(i) 

through (xv) of Regulation AB (regardless of whether any such requirements apply, by their 

terms, only to compauies registered or required to file reports with the Securities and Exchange 

Commission). 

(e) Servicer and Subservicer Fees. No Servicer or Subservicer shall be paid 

any fees or indemnified out of any Loan Proceeds, it being uuderstood that all fees of the 

Servicers and Subservicers shall be the sole responsibility ofthe Managing Member. 

(f) Fidelity Bond; E&O Insurance. The Servicer and each Subservicer shall 

at all times maintain in effect a blanket fidelity bond and an errors and omissions insurance 

policy affording, in each case, coverage with respect to all officers, directors, employees and 

other Persons acting on behalf of the Servicer or the Subservicer, as applicable, and covering 

errors and omissions in the performance of the Servicer' s, or the Subservicer' s, as applicable, 

obligations uuder this Agreement, the Servicing Agreement and any Subservicing Agreement. 

The errors and omissions insurance policy and the fidelity bond shall be, at all times, in such 

form and amouut that would meet the requirements, as amended from time to time, of Fannie 

Mae if Fannie Mae were the purchaser of the Loans. Copies of fidelity bonds and insurance 

policies required to be maintained pursuant to this Section 12.3(f) shall be made available to the 

Initial Member or its representatives upon request. 

12.4 Removal of Servicer. 

(a) Removal of Servicer. Subject at all times to the terms of the Servicing 

Agreement, upon the occurrence of an Event of Default, in addition to any other rights it may 

have pursuant to this Agreement, any Ancillary Document or applicable Law (including the 

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Franklin- LLC Operating Agreement 

8545936.5 
Uniform Connnercial Code), whether at law or in equity and whether pursuant to statute or 

regulation or otherwise, the Secured Party or, at the Secured Party's direction, the Initial Member 

shall have the right to take, at the Managing Member's expense, one or more of the following 

actions: (i) upon notice in writing to the Managing Member (effective at such time as is specified 

in such notice), to act on behalf ofthe Managing Member to terminate the existing Servicer (and 

any Subservicers) and to cause the Managing Member to enter into a new Servicing Agreement 

with a servicer (a "successor Servicer") selected by Initial Member (in its sole and absolute 

discretion), and (ii) upon notice in writing to the Managing Member (effective at such time as is 

specified in such notice), to terminate the Managing Member's rights as servicer pursuant to this 

Agreement and, in such case, (A) to terminate the Servicer and select (in its sole and absolute 

discretion), and enter into a Servicing Agreement with, a successor Servicer, such Servicing 

Agreement to be between Initial Member and the successor Servicer chosen by Initial Member, 

or (B) to retain the existing Servicer and to enter into a new Servicing Agreement between Initial 

Member and the Servicer (or to effect an assigument of the existing Servicing Agreement from 

the Managing Member to Initial Member). Initial Member shall have no obligation to assume 

any obligations or liabilities ofthe Managing Member under or in connection with any Servicing 

Agreement. Managing Member hereby consents to the innnediate termination of the Servicer 

upon the occurrence of any Event ofDefault. 

(b) Appointment of Successor Servicer. If Initial Member exercises its right 

to act on behalf ofthe Managing Member to appoint a successor Servicer, the costs and expenses 

associated with such successor Servicer (including any servicing fees) shall be borne by the 

. Managing Member (and not the Company or the Initial Member), and no termination or other fee 

shall be due to the Managing Member or the Servicer or any Subservicer in connection with or as 

a result of any such action. 

(c) Termination of Managing Member's Rights as Servicer. If the Initial 

Member exercises its right pursuant to this Section 12.4 to terminate the Managing Member's 

rights as servicer under this Agreement, all authority and power of the Managing Member to act 

as servicer under this Agreement shall pass to and be vested in the Initial Member under this 

Section 12.4 and, without limitation, the Initial Member is hereby authorized and empowered, as 

attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the expense of the 

Managing Member, any and all documents and other instruments and to do or take any and all 

acts necessary or appropriate to effect the termination and replacement ofthe Servicer and, in the 

event the Initial Member decides to retain a new Servicer, to enter into a new Servicing 

Agreement between the Initial Member and the Servicer or to effect an assigll!llent of the 

existing Servicing Agreement from the Managing Member to the Initial Member. 

(d) Cooperation To Facilitate Transfer. In the event a Servicer or Subservicer 

is terminated pursuant to the provisions of this Article XII, the Managing Member shall, and 

shall cause any Servicer (and any Subservicer) to, provide the Initial Member and any successor 

Servicer in a timely manner with all documents, records and data (including electronic 

documents, records and data) requested by the Initial Member or any successor Servicer to 

enable it and any successor Servicer to assume the responsibilities as servicer under this 

Agreement, and to cooperate with the Initial Member in effecting the termination of any Servicer 

(or Subservicer) or the Managing Member's rights as servicer under this Agreement, including 

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Franklin- LLC Operating Agreement 

8545936.5 
(x) the transfer within one (1) Business Day of all cash amounts which, at the time, shall be or 

should have been credited to the Collection Account or are thereafter received with respect to 

any Loans or Acquired Collateral, and (y) the transfer of all lockbox accounts with respect to 

which payments or other amounts with respect to the Loans are directed or the redirection of all 

such payments and other amounts to such account as the Initial Member may specify, and (z) the 

assignment to the Initial Member ofthe right to access all such lockbox accounts, the Collection 

Account, any Liquidity Reserve Account, and any other account into which Loan Proceeds or 

Borrower escrow payments are deposited or held. The Managing Member shall be liable for all 

costs and expenses incurred by the Initial Member (x) associated with the complete transfer of 

the servicing data, (y) associated with the completion, correction or manipulation of servicing 

data as may be required to correct errors or insufficiencies in the servicing data to enable the 

Initial Member and any successor Servicer (and Subservicers) to service the Loans and Acquired 

Collateral properly and effectively, and (z) to retain and maintain the services of a successor 

Servicer (and any Subservicers). Within a reasonable time after receipt of a written request of 

the Managing Member for the same, the Initial Member shall provide reasonable documentation 

evidencing such costs and expenses. 

(e) Power of Attorney. The Company hereby irrevocably constitutes and 

appoints the Initial Member and any officer or agent thereof, with full power of substitution, as 

its true and lawful attorney-in-fact for the purposes of this Agreement and allowing the Initial 

Member to perfect, preserve the validity, perfection and priority of, and enforce any Lien granted 

by this Agreement and, after the occurrence and during the continuance of any Event ofDefault, 

to exercise its rights, remedies and powers and privileges under this Agreement. This 

appointment as attorney-in-fact is irrevocable and coupled with an interest until this Agreement 

is terminated and the security interests created hereby are released. Without limiting the 

generality of the foregoing, but subject at all times to the rights of the Secured Party hereunder 

and under the Reimbursement and Security Agreement, the Initial Member shall be entitled 

under this Section 12.4(e) to do any of the following if an Event of Default has occurred and is 

continuing: (i) ask, demand, collect, sue for, recover, receive and give receipt and discharge for 

amounts due and to become due under and in respect of any or all of the Loans; (ii) file any 

claims or take any action or proceeding in any court of law or equity that the Initial Member may 

reasonably deem necessary or advisable for the collection of all or any part of the Loans, defend 

any suit, action or proceeding brought against the Company with respect to any Loan, and settle, 

compromise or adjust any such suit, action or proceeding; (iii) execute, in connection with any 

sale or disposition of the Loans, any endorsements, assignments, bills of sale or other 

instruments of conveyance or transfer with respect to all or any part of the Loans; (iv) enforce 

the rights of the Company under any provision of any Servicing Agreement to the extent 

permitted thereunder and under the terms of this Agreement; (v) pay or discharge taxes and 

Liens levied or placed on the Loans; (vi) generally, sell, transfer, pledge and make any 

agreement with respect to or otherwise deal with any of the Loans as fully and completely as 

though the Initial Member were the absolute owner thereof for all purposes; and (vii) do, at the 

Initial Member's option and the Company's expense, at any time and from time to time, all acts 

and things that the Initial Member reasonably deems necessary to protect, preserve, or realize 

upon the Loans and the Initial Member's security interests in any Secured Assets and to effect 

the intent of this Agreement, all as fully and effectively as the Company might do. Anything in 

this Section 12.4(e) to the contrary notwithstanding, the Initial Member agrees that it shall not 

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Franklin - LLC Operating Agreement 

8545936.5 
exercise any right under the power of attorney provided for in this Section 12.4(e) unless an 

Event ofDefault shall have occurred and be continuing. 

(f) Offsets. Without limiting any other rights of the Initial Member 

hereunder, in the event the Initial Member exercises any rights or remedies as a result of or in 

connection with the occurrence of an Event of Default, all costs and expenses (including 

reasonable attorneys' fees and litigation and similar costs, and other out-of"pocket expenses 

incurred in investigating, defending, asserting or preparing the defense or assertion of any claim) 

incurred by the Initial Member with respect thereto may be offset by the Initial Member against 

any payment or distribution otherwise payable to the Private Owner, whether in its capacity as a 

Member or as Managing Member. 

12.5 Management Fee. For periods prior to November 1, 2009, the Company shall, at 

the times and in the manner set forth in the Custodial and Paying Agency Agreement, pay to the 

Initial Member the Management Fee with respect to such period; provided, however, that the 

Management Fee payable with respect to a period shall be net of amounts that were deducted by 

Existing Servicers from the Loan Proceeds during the relevant period. For each calendar month 

from and after November 1, 2009, the Company shall, at the times and in the manner set forth in 

the. Custodial and Paying Agency Agreement, pay to the Managing Member the Management 

Fee accrued with respect to such calendar month; provided, however, that the Management Fee 

payable with respect to a calendar month shall be net of amounts that were deducted by Existing 

Servicers, Servicers or Subservicers from the Loan Proceeds during the relevant calendar month. 

From and after November 1, 2009, the Managing Member shall be solely responsible for the 

payment of all fees of Existing Servicers, and all fees and costs (other than Servicing Expenses) 

of the Servicer and Subservicers. In the event the Managing Member is removed and replaced 

by the Initial Member in accordance with Section 3.2 above, the Managing Member so remoyed 

shall, at the time and in the manner set forth in the Custodial and Paying Agency Agreement, be 

entitled to receive the Management Fee accrued through the date of removal, and thereafter the 

Management Fee shall be payable to such successor Managing Member. 

12.6 Servicing Expenses. From and after the Closing Date, but subject at all times to 

Section 3.3 of the Contribution Agreement, the Managing Member shall cause all Servicing 

Expenses to be funded and paid in accordance with the Loan Documents and the terms of this 

Agreement, to the extent not paid by the Borrower or any Guarantor; provided however, that 

with respect to Servicing Expenses required under the Loan Documents to be paid relating to a 

particular Loan, the Managing Member shall advance such amount only if and to the extent the 

Managing Member determines, at the time the advance is to be made, in its discretion exercised 

in accordance with the Servicing Standard, that such amount, when combined with all previous 

Servicing Expenses for such Loan, will ultimately be recoverable from the Loan Proceeds from 

such Loan (including from the related Collateral). The Managing Member shall cause the 

Servicer to use its reasonable best efforts to recover from Borrowers and Guarantors all 

Servicing Expenses that are Servicer Advances. All such Servicing Expenses not recovered from 

Borrowers or Guarantors and all other Servicer Advances shall be reimbursed only in accordance 

with the terms set forth in the applicable the Servicing Agreement, as the same may be amended 

from time to time in accordance with the terms thereof. In the event the Servicer is reimbursed 

for any expense that is not, or cannot be documented as, a Servicer Advance, in the reasonable 

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Franklin - LLC Operating Agreement 

8545936.5 
determination of the Managing Member, Managing Member shall cause the Servicer to refund 

such amounts to the Company in accordance with the Servicing Agreement. No Servicer 

Advances shall bear interest chargeable in any way to the Company or deductible from any Loan 

Proceeds. 

12.7 Use ofLoan Proceeds. 

(a) Permitted Pavments. Subject to Section 12.7(b), each month the Loan 

Proceeds shall be utilized and distributed in the manner set forth in the Custodial and Paying 

Agency Agreement following receipt by the Paying Agent from the Managing Member of the 

Distribution Date Report required to be provided under Section 7 .4(b ). 

(b) Costs That Are Not Reimbursable. Notwithstanding anything else to the 

contrary contained herein or in any Ancillary Document, without the prior written consent ofthe 

Initial Member and the Secured Party (which may be withheld in the Initial Member's or the 

Secured Party's sole and absolute discretion), in no event may the Servicer deduct from the Loan 

Proceeds, or otherwise use Loan Proceeds to reimburse itself or pay for, any ofthe following (all 

ofwhich shall be borne by the Managing Member) (collectively, the "Excluded Expenses"): 

(i) any expenses or costs that are not incurred in accordance with the 

Servicing Standard or the Fannie Mae Guidelines; 

(ii) any expenses or costs that are paid to any Affiliate of the 

Managing Member, or any Affiliate of the Servicer or any Subservicer, except as 

is otherwise expressly permitted pursuant to this Agreement; 

(iii) any expenses incurred by the Managing Member, the Company or 

any Servicer to become a member ofthe MERS Systems or to maintain itself as a 

member in good standing; 

(iv) any fees or other compensation to or expenses of financial 

advisers, except to the extent the same are incurred as brokers' fees or sales 

commissions incurred to market or sell the Loans or any Acquired Collateral in a 

Bulk Sale, the terms of which Bulk Sale (including the financial adviser's or 

broker's fees) are approved in advance by the Initial Member and the Secured 

Party); 

(v) any fine, tax or other penalty, late fee, service charge, interest or 

similar charge, costs to release Liens or any other costs or expenses (including 

legal fees and expenses) incurred by or on behalf of the Company or the 

Managing Member as a result of the Company's or the Managing Member's or 

the Servicer' s or any Subservicer' s failure to service any Loan or Collateral 

properly in accordance with the applicable Loan Documents, this Agreement, the 

Servicing Agreement, any Subservicing Agreement or otherwise, or failure to 

make a payment in a timely manner, or failure otherwise to act in a timely 

manner; 

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Franklin- LLC Operating Agreement 

8545936.5 
(vi) any interest on any Servicing Expenses; 

(vii) any overhead or administrative costs incurred by the Company, the 

Managing Member or any other Person (including any expenses incurred by the 

Managing Member, the Company or any Servicer or Subservicer to comply with 

Section 4.3, Section 7.2, Section 7.3 and Section 7.4); 

(viii) any cost incurred by the Servicer or any other Person to comply 

with the Loan Modification Program; or 

(ix) any servicing, management or similar fees paid to the Servicer, any 

Subservicer or any other Person, including but not limited to interim servicing 

fees paid pursuant to Section 3.3 ofthe Contribution Agreement. 

12.8 Delinquent Real Property Taxes. The Initial Member shall be liable for and shall 

pay real property taxes with respect to the Collateral if and to the extent such taxes (i) are 

delinquent as ofthe Cut-OffDate and (ii) remain delinquent and are paid by the Company. The 

amounts due by the Initial Member pursuant to this Section 12.8 may be deducted from amounts 

to be distributed to Initial Member pursuant to Section 6.6, but shall be accounted for and 

reported separately by the Company (in such form as Initial Member may reasonably request) in 

the monthly reports required pursuant to Section 7.4(b). Amounts paid by the Initial Member 

pursuant to this Section 12.8 (including any such amounts as are deducted from distributions to 

the Initial Member pursuant to Section 6.6) shall not be reimbursable by the Company. 

12.9 . Collection Account. Promptly following the Closing Date, the Managing 

Member shall cause the Company to establish and maintain the Collection Account with the 

Paying Agent in accordance with the Custodial and Paying Agency Agreement. The Collection 

Account (and all funds therein) shall be subject to the security interest granted to the Secured 

Party under the Reimbursement and Security Agreement and to the Account Control Agreement 

under the Custodial and Paying Agency Agreement. 

12.10 Distribution Account. Promptly following the Closing Date, the Managing 

Member shall cause the Company to establish the Distribution Account with the Paying Agent in 

accordance with the Custodial and Paying Agency Agreement. The Distribution Account (and 

all funds therein) shall be subject to the security interest granted to the Secured Party under the 

Reimbursement and Security Agreement and to the Account Control Agreement under the 

Custodial and Paying Agency Agreement. 

12.11 Liquidity Reserves; Liquidity Reserve Account. The Managing Member, in its 

discretion, may establish on behalf of the Company a liquidity reserve (the "Liquidity Reserve") 

from which to fund amounts in accordance with the Custodial and Paying Agency Agreement. If 

the Managing Member elects to establish a Liquidity Reserve it shall establish a segregated 

account to hold amounts allocated to the Liquidity Reserve (the "Liquidity Reserve Accounf') 

on behalf of the. Company. The Liquidity Reserve Account shall be held in trust by the Paying 

Agent for the benefit of the Secured Party and the Company and shall be established and 

maintained for the sole purpose of holding and distributing the Liquidity Reserve funds in 

accordance with the Custodial and Paying Agency Agreement. The Liquidity Reserve Account 

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Franklin- LLC Operating Agreement 

8545936.5 
(and all funds therein) shall be subject to the security interest granted to the Secured Party under 

the Reimbursement and Security Agreement and to the Account Control Agreement under the 

Custodial and Paying Agency Agreement. 

12.12 Recovery ofExpenses; Interest. The Managing Member shall, and shall cause the 

Servicer to, use commercially reasonable efforts to recover from Borrowers and Guarantors 

those Servicing Expenses which such Borrowers or Guarantors are obligated to pay. No 

Servicing Expenses shall bear interest chargeable in any way to the Company or the Initial 

Member. 

12.13 Certain Servicing and Loan Administration Decisions. 

(a) Subject to the terms and conditions of this Agreement (including the 

Servicing Standard), the Managing Member shall have full power and authority, acting alone or 

through any Servicer or Subservicer, to cause to be done any and all things in connection with 

the servicing and administration ofthe Loans that the Managing Member may deem necessary or 

desirable, and cause to be made all servicing decisions in its reasonable discretion, including the 

actions specifically enumerated in the Servicing Agreement. Upon the occurrence of an event of 

default under any of the Loan Documents, but subject to the other terms and conditions of this 

Agreement (including the Servicing Obligations of the Managing Member), the Managing 

Member shall cause to be determined the response to such default and course of action with 

respect to such default, including (i) the selection of attorneys to be used in connection with any 

action, whether judicial or otherwise, to protect the respective interests of the Company and 

Secured Party in the Loan and the Collateral, (ii) the declaration and recording of a notice of 

such default and the acceleration of the maturity of the Loan, (iii) the institution of proceedings 

to foreclose the Loan Documents securing the Loan pursuant to the power of sale contained 

therein or through a judicial action, (iv) the institution of proceedings against any Guarantor, (v) 

the acceptance of a deed in lieu of foreclosure, (vi) the purchase of the real property Collateral at 

a foreclosure sale or trustee's sale or the purchase of the personal property Collateral at a 

Uniform Commercial Code sale, and (vii) the institution or continuation ofproceedings to obtain 

a deficiency judgment against such Borrower or any Guarantor. 

(b) The Managing Member shall cause the Company and the Servicer to 

comply with the Loan Modification Program and, to the extent applicable, the Guidelines. 

12.14 Management and Disposition of Collateral. Subject to the other terms and 

conditions of this Agreement (including the Servicing Standard), the Managing Member shall 

have full power and authority, acting alone or through any Servicer and any Subservicer, to 

cause to be done any and all things in connection with the Company's management of any 

Collateral or Acquired Collateral, that the Managing Member may deem necessary or desirable, 

and cause to be made all asset management decisions in its reasonable discretion, including the 

items specifically enumerated in the Servicing Agreement. 

12.15 Acquisition of Collateral. 

(a) If title to any Collateral that constitutes real property is to be acquired by 

foreclosure, by deed in lieu of foreclosure, by power of sale or by sale pursuant to the Uniform 

47 


Franklin - LLC Operating Agreement 

8545936.5 
Commercial Code, or otherwise, title to such Acquired Collateral shall be taken and held in the 

name of an Ownership Entity; provided, however, that for any Collateral with respect to which 

there exists any Environmental Hazard, the Ownership Entity that holds such Collateral may 

hold title only to the relevant Collateral with respect to which the Environmental Hazard exists. 

(b) . Nothing in this Article XII or anything else in this Agreement shall be 

deemed to affirmatively require the Managing Member to cause the Company to acquire all or 

any portion of any Collateral with respect to which there exists any Environmental Hazard. Prior 

to acquisition of title to any Collateral (whether by foreclosure, deed in lieu of foreclosure, by 

power of sale or by sale pursuant to the Uniform Commercial Code, or otherwise), the Managing 

Member shall cause to be commissioned with respect to such Collateral either (i) a Transaction 

Screen Process consistent with ASTM Standard E 1528-06, by an environmental professional or 

(ii) such other site inspections and assessments as would customarily be undertaken or obtained 

by a prudent lender in order to ascertain whether there are any actual or threatened 

Environmental Hazards (a "Site Assessment"), and the cost of such Site Assessment shall be 

reimbursable as ifit were a Servicing Expense as long as the costs for such Site Assessment were 

not paid to any Affiliate of the Managing Member, or any Affiliate of the Servicer or any 

Subservicer. 

(c) The Company or its wholly-owned subsidiary or Affiliate shall be the sole 

managing member of any Ownership Entity. No certificates shall be issued evidencing any 

membership interests in any Ownership Entity. The purposes ofthe Ownership Entity shall be to 

hold the Acquired Collateral pending sale, to complete construction of such Collateral and to 

operate the Collateral as efficiently as possible in order to minimize financial loss to the 

Company, the Receiver and the FDIC and to sell the Acquired Collateral as promptly as 

practicable in a way designed to minimize financial loss to the Company, the Receiver and the 

FDIC. Notwithstanding anything to the contrary contained herein, the Ownership Entity shall be 

a pass-through entity with no entity-level income tax obligations. 

12.16 Releases of Collateral. Subject to the provisions of the Contribution Agreement, 

the Managing Member is authorized to cause the release or assignment of any Lien granted to or 

held by the Company on any Collateral upon payment of any Loan in full and satisfaction in full 

of all of the secured obligations with respect to a Loan, upon receipt of a discounted payoff as 

payment in full of a Loan, or upon a sale ofthe Loan to any Person. 

12.17 Clean-Up Call Rights. 

(a) If, and only if, all amounts owing under the Purchase Money Note have 

paid in full, and all reimbursement obligations to the FDIC under the Reimbursement and 

Security Agreement have been satisfied in full, the Initial Member shall have the right, 

exercisable in its sole and absolute discretion, to require the liquidation and sale, for cash 

consideration, of any remaining Loans and Acquired Collateral held by the Company or any 

Ownership Entity (the "Clean-Up Call") at any time after the tenth (lOth) anniversary of the 

Closing Date. 

(b) In order to exercise its rights under this Section 12.17, Initial Member 

shall give notice in writing to the Managing Member, setting forth the date by which the 

48 


Franklin- LLC Operating Agreement 

8545936.5 
remaining Loans and Acquired Collateral are to be liquidated by the Company, which date shall 

be no less than 150 calendar days after the date of such notice. 

(c) The Managing Member shall proceed expeditiously to cause to be 

commenced the liquidation of the remaining Loans and Acquired Collateral by means of sealed 

bid sales to Persons other than Affiliates of the Company, the Servicer or any Subservicer, or 

Affiliates of the Servicer or any Subservicer. The selection of any financial adviser or other 

Person, broker or sales agent retained for the liquidation of the remaining Loans and Acquired 

Collateral pursuant to this Section 12.17 shall be subject to the prior approval of Initial Member, 

such approval not to be unreasonably withheld, delayed or conditioned as long as the fees to be 

charged by such financial adviser or other Person, broker or sales agent are reasonable. In the 

event the remaining Loans and Acquired Collateral are not liquidated by the date specified in the 

notice provided by Initial Member pursuant to Section 12.17Cb), Initial Member shall be entitled 

to liquidate the remaining Loans and Acquired Collateral in its discretion and Managing Member 

shall, and shall cause the Company to, cooperate and assist with such liquidation to the extent 

reasonably requested by Initial Member. In the event the Managing Member or any Affiliate 

thereof desires to bid to acquire the remaining Loans and Acquired Collateral, then Initial 

Member shall be entitled to liquidate the remaining Loans and Acquired Collateral in its 

discretion. In the event Initial Member undertakes to liquidate the remaining Loans and 

Acquired Collateral pursuant to this Section 12.17(c), all costs and expenses incurred by it shall 

be deducted from the Loan Proceeds and retained by Initial Member and the remaining Loan 

Proceeds shall be distributed in accordance with Section 9 .2. 

ARTICLE XIII 


Miscellaneous 


13.1 Waiver of Rights of Partition and Dissolution. Each Member hereby irrevocably 

waives all rights it may have at any time to maintain any action for division or sale of the 

Company Property as now or hereafter permitted under any applicable Law. Each Member 

hereby waives and renounces its rights to seek a court decree of dissolution or to seek the 

appointment of a court receiver for the Company as now or hereafter permitted under any 

applicable Law. 

13.2 Entire Agreement. This Agreement, together with the. Annexes and Exhibits 

hereto and the Ancillary Documents (and any other agreements expressly contemplated hereby 

or thereby), constitutes the entire agreement and understanding, and supersedes all other prior 

agreements and understandings, both written and oral, between the Members or their respective 

Affiliates or any of them and the Company with respect to the subject matter hereof. The 

Members acknowledge that certain agreements or other instruments are being (or were) executed 

by the Company, the Members and/or Affiliates of the Members simultaneously or otherwise in 

connection with the execution of this Agreement and that notwithstanding anything to the 

contrary contained in the foregoing sentence of this Section 13 .2, such agreements shall be 

effective and binding on the parties thereto in accordance with the terms thereof. 

13.3 Governing Law; Jurisdiction. THIS AGREEMENT IS GOVERNED BY AND 

SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF 

DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT 

49 

Franklin- LLC Operating Agreement 

8545936.5 
MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT 

TO THE LAW OF ANOTHER JURISDICTION. In the event of a direct conflict between the 

provisions of this Agreement and any mandatory, non-waivable provision of the Act, such 

provision of the Act shall control to the extent necessary to eliminate such direct conflict. 

Nothing in this Agreement shall require any unlawful action or inaction by any Person. 

13.4 Third Party Beneficiaries. For so long as the Purchase Money Note is 

outstanding, Secured Party is hereby constituted an express third party beneficiary of this 

Agrt<ement. Subject to Section 11.1, (i) this Agreement is for the benefit solely of, and shall inure 

solely to the benefit of, the Members and the Company and the Secured Party, and (ii) this 

Agreement is not enforceable by any Person (including any creditor of the Company or of any 

Member) other than the Members, the Company and the Secured Party. 

13.5 Expenses. Except as may otherwise be expressly provided herein or in any 

Ancillary Document, each Member shall pay its own expenses (including legal, accounting 

investment banker, broker or finders fees) incident to the negotiation and execution of this 

Agreement and the Ancillary Documents, the consurumation ofthe transactions contemplated by 

Section 2.3 hereof and the performance ofits obligations hereunder. 

13.6 Waivers and Amendments. 

(a) This Agreement may be amended or modified, and the terms hereof may 

be waived, only by a written instrument signed by all Members and the Secured Party. Except 

where a specific period for action or inaction is provided herein, no failure on the part of the 

Members or the Secured Party to exercise, and no delay on the part of the Members or the 

Secured Party in exercising, any right, power or privilege hereunder shall operate as a waiver 

thereof; nor shall any waiver on the part of the Members or the Secured Party of any such right, 

power or privilege, or any single or partial exercise of any such' right, power or privilege, 

. preclude any other 	or further exercise thereof or the exen;ise of any other right, power· or 

privilege. 

(b) Notwithstanding anything to contrary contained elsewhere in this 

Agreement (including without limitation the foregoing Section 13.6(a)) or in any Ancillary 

Document (but subject at all times to Sections 7.5(b)(ii) and (iii)), in order to facilitate the 

possible restructuring and sale ofthe Purchase Money Note, the FDIC, without the consent ofthe 

Private Owner or the Company, may at any time replace the Purchase Money Note with one or 

more substitute notes and make related revisions to this Agreement and the Ancillary 

Documents; provided however, that such modifications shall not adversely affect the amount and 

timing of distributions from cash flow to the Private Owner or materially and adversely affect the 

other rights and obligations ofthe Private Owner hereunder or thereunder. Prior to effecting any 

changes, amendments or modifications pursuant to the immediately preceding sentence, the 

FDIC shall notify Private Owner of any such contemplated changes, amendments or 

modifications, and Private Owner agrees that it will cooperate in good faith with the FDIC in 

effecting all such changes, amendments or modifications. 

13.7 Notices. All notices, requests, demands, and other communications required or 

permitted to be given or delivered under or by reason of the provisions of this Agreement shall 

50 


Franklin- LLC Operating Agreement 

8545936.5 
be in writing and shall be given by certified or registered mail, postage prepaid, or, delivered by 

hand or by nationally recognized air courier service, directed to the address of such Person set 

forth below: 

Ifto the Company, to: 

Franklin Venture, LLC 


4282 North Freeway 


Fort Worth, Texas 76137 


Attention: Dennis G. Stowe 


Tel: (817) 321-6001 


With a copy to: 

K&L Gates LLP 


1601 K Street, N.W. 


Washington, D.C. 20006 


Attention: Phillip J. Kardis, II 


Tel: (202) 778-9401 


Ifto the Initial Member, to: 

Senior Capital Markets Specialist 


c/o Federal Deposit Insurance Corporation 


550 17th Street, NW (Room F-7026) 


Washington, D.C. 20429-0002 


Attention: Timothy A. Kruse 


Tel: (202) 898-6832 


With a copy to: 

Senior Counsel 

FDIC Legal Division 

Litigation and Resolutions Branch, Receivership Section 

Special Issues Unit 

3501 Fairfax Drive (Room E-7056) 

Arlington, VA 22226 

Attention: David Gearin 

Tel: (703) 562-2430 

Ifto the Private Owner, to: 

RCS Franklin Venture LLC 


4282 North Freeway 


Fort Worth, Texas 76137 


Attention: Dennis G. Stowe 


Tel: (817) 321-6001 


51 

Franklin- LLC Operating Agreement 

8545936.5 
With a copy to: 

K&L Gates LLP 


1601 K Street, N.W. 


Washington, D.C. 20006 


Attention: Phillip J. Kardis, II 


Tel: (202) 778-9401 


Any such notice shall become effective when received (or receipt is refused) by the addressee, 

provided that any notice or communication that is received (or refused) other than during regular 

business hours of the recipient shall be deemed to have been given at the opening ofbusiness on 

the next business day of the recipient. From time to time, any Person may designate a new 

address for purposes of notice hereunder by notice to such effect to the other Persons identified 

above. 

13.8 Counterparts; Facsimile Signatures. 

(a) This Agreement may be executed in any nillnber of counterparts, each of 

which shall be an original and all of which shall together constitute one and the same instrument. 

It shall not be necessary for any counterpart to bear the signature of all parties hereto. 

(b) This Agreement and any amendments hereto, to the extent signed and 

delivered by facsimile or other electronic means, shall be treated in all manner and respects as an 

original agreement and shall be considered to have the same binding legal effect as if it were the 

original signed version thereof delivered in person. No signatory to this Agreement shall raise 

the use of a facsimile machine or other electronic means to deliver a signature or the fact that any 

signature or agreement was transmitted or communicated through the use of a facsimile machine 

or other electronic means as a defense to the forination or enforceability of a contract and each 

such Person forever waives any such defense. 

13.9 Successors and Assigns. Except as otherwise specifically provided in this 

Agreement (including in Article VIIl), this Agreement shall be binding upon and inure to the 

benefit of the Members and the Company and their respective Successors and assigns. Without 

limitation of Section 8.4, this Agreement, as in effect on the date that any particular Person shall 

cease to be Member, shall continue to bind such Person in relation to the period during which it 

was Member. 

13.10 Construction. 

(a) Captions. Paragraph titles or captions contained in this Agreement are 

inserted only as a matter of convenience and for reference and in no way defme, limit, extend or 

describe the scope of this Agreement or the intent of any provisions hereof.. All Section and 

paragraph references contained herein shall refer to this Agreement unless otherwise specified. 

(b) References to Persons Exclusive. References to "Affiliates" or 

"Subsidiaries" of a specified Person refer to, and include, only other Persons which from time to 

time constitute "Mfiliates" or "Subsidiaries," as the case may be, of such specified Person, and . 

do not include, at any particular time, other Persons that may have been, but at such time have 

52 


Franklin- LLC Operating Agreement 

8545936.5 
ceased to be, "Affiliates," or "Subsidiaries," as the case may be, of such specified Person, except 

to the extent that any such reference specifically provides otherwise. A reference to Member or 

other Person, in and of itself, does not, and shall not be deemed to, refer to or include any other 

Person having an · interest in Member or other Person (such as, without limitation, any 

stockholder or member of or partner in Member, or other Person) . 

. (c) Use of"Or." The term "or" is not exclusive. 

(d) References to Laws. A reference in this Agreement to a Law includes any 

amendment; modification or replacement to such Law. 

(e) Use of Accounting Terms. Accounting terms used herein shall have the 

meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to 

which they refer. 

(f) References to Documents. References to any document, instrument or 

agreement (i) shall be deemed to include all appendices, exhibits, schedules and other 

attachments thereto and all documents, instruments or agreements issued or executed in 

replacement thereof, and (ii) shall mean such document, instrument or agreement, or replacement 

thereof, as amended, modified and supplemented from time to time in accordance with its terms 

and as the same is in effect at any given time. 

(g) Use of"Herein." Unless otherwise specified, the words "hereof," "herein" 

and "hereunder" and words of similar import when used in this Agreement shall refer to this 

Agreement as a whole and not to any particular provision ofthis Agreement. 

(h) Use of "Including." The words "include" and "including" and words of 

similar import when used in this Agreement are not limiting and shall be construed to be 

followed by the words "without limitation," whether or not they are in fact followed by such 

words. 

(i) Use of "During." The word "during" when used in this Agreement with 

respect to a period of time shall be construed to mean commencing at the beginning of such 

period and continuing until the end ofsuch period. 

13.11 Compliance With Law; Severability. 

(a) Compliance With Law. Except as otherwise specifically provided herein, 

each party to this Agreement shall obey and comply with all applicable Laws, as they may 

pertain to such party's performance ofits obligations hereunder. 

(b) Severability. Any provision of this Agreement which is prohibited or 

unenforceable in any jurisdiction shall be ineffective, but such ineffectiveness shall be limited as 

follows: (i) if such provision is prohibited or unenforceable in such jurisdiction only as to a 

particular Person or Persons and/or under any particular circumstance or circumstances, such 

provision shall be ineffective, but only in such jurisdiction and only with respect to such 

particular Person or Persons and/or under such particular circumstance or circumstances, as the 

53 


Franklin- LLC Operating Agreement 

8545936.5 
case may be; (ii) without limitation of clause (i), such provision shall in any event be ineffective 

only as to such jurisdiction and only to the extent of such prohibition or unenforceability, and 

such prohibition or unenforceability in such jurisdiction shall not invalidate or render 

unenforceable such provision in any other jurisdiction; and (iii) without limitation of clauses (i) 

or (ii), such ineffectiveness shall not invalidate any of the remaining provisions of this 

Agreement. Without limitation of the preceding sentence, it is the intent of the parties to this 

Agreement that in the event that in any court proceeding, such court determines that any 

provision of this Agreement is prohibited or unenforceable in any jurisdiction (because of the 

duration or scope (geographic or otherwise) of such provision, or for any other reason) such 

court shall have the power to, and shall, (x) modify such provision (including without limitation, 

to the extent applicable, by limiting the duration or scope of such provision and/or the Persons 

against whom, and/or the circumstances under which, such provision shall be effective in such 

jurisdiction) for purposes of such proceeding to the minimum extent necessary so that such 

provision, as so modified, may then be enforced in such proceeding and (y) enforce such 

provision, as so modified pursuant to clause (x), in such proceeding. Nothing in this 

Section 13.11 (b) is intended to, or shall, limit (1) the ability of any party to this Agreement to 

appeal any court ruling or the effect of any favorable ruling on appeal or (2) the intended effect 

of Section 13.3. 

13.12 Power of Attorney. (a) Each Member does hereby constitute and appoint the 

Managing Member as its true and lawful representative and attorney-in-fact, in its name, place 

and stead to make, execute, sign, acknowledge, deliver or file any certificate, document or other 

instrument that Member is required to execute and deliver pursuant to clause (a), (b), (c) or (d) of 

Section 4.3 hereof. The foregoing notwithstanding, the Managing Member shall not hl!-ve any 

right, power or authority to amend or modify this Agreement. The power of attorney granted 

hereby is coupled with an interest and shall (i) survive and not be affected by the subsequent 

death, incapacity, disability, dissolution, termination or bankruptcy ofMember granting the same 

or the transfer of all or any portion ofMember's Interest and (ii) extend to Member's Successors, 

assigns and legal representatives. 

(b) The Company hereby grants to the Managing Member a limited power of 

attorney to execute all documents on its behalf In accordance with the Servicing Standard set 

forth above and as may be necessary to effectuate the Managing Member's obligations under 

Article XII until such time as the Company revokes said limited power of attorney. Revocation 

ofthe limited power of attorney shall take effect upon (i) the receiptby the Managing Member of 

written notice thereof from the Initial Member, or (ii) removal of the Managing Member in 

accordance with the terms of this Agreement; provided, however, in the event of such removal, 

the power of attorney granted hereunder shall thereafter automatically be vested in the successor 

or replacement Managing Member appointed in accordance with this Agreement. 

13.13 Submission to Jurisdiction; Waivers. Each ofthe Members, the Company and the 

Managing Member hereby irrevocably and unconditionally: 

(a) (i) agrees that any snit, action or proceeding against it or any of its 

Affiliates by the Initial Member (or its direct or indirect predecessors, as such) arising out of or 

relating to or in connection with this Agreement or any Ancillary Document may be instituted, 

and that any suit, action or proceeding by the Company or any Member or any of their respective 

54 


Franklin - LLC Operating Agreement 

8545936.5 
Affiliates against the Initial Member (or its direct or indirect predecessors, as such) arising out of 

or relating to or in connection with this Agreement or any Ancillary Document shall be instituted 

only, in the Supreme Court ofthe State ofNew York, County ofNew York, or the United States 

District Court for the Southern District of New York or the United States District Court for the 

District of Columbia (and appellate courts from any ofthe foregoing), (ii) consents and submits, 

for itself and its property, to the jurisdiction of such courts for the purpose of any such suit, 

action or proceeding instituted against it, and (iii) agrees that a final judgment in any such suit, 

action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the 

judgment or in any other manner provided by Law; 

(b) · agrees that service of all writs, process and summonses in any suit, action 

or proceeding pursuant to Section 13.13(a) may be effected by the mailing of copies thereof by 

registered or certified mail, postage prepaid, to it at its address for notices pursuant to Section 

13.7 (with copies to such other Persons as specified therein), such service to become effective 30 

days after such mailing, provided that nothing contained in this Section 13.13(b) shall affect the 

right of any party to serve process in any other manner permitted by Law; 

(c) (i) waives any objection which it may now or hereafter have to the laying 

of venue of any suit, action or proceeding arising out of or relating to this Agreement or any 

Ancillary Document brought in any court specified in Section 13.13(a), (ii) waives any claim that 

any such suit, action or proceeding brought in any such court has been brought m an 

inconvenient forum, and (iii) agrees not to plead or claim either ofthe foregoing; 

(d) agrees that nothing contained in this Agreement shall be construed to 

constitute a consent to jurisdiction by the Initial Member in any capacity or a limitation on any 

removal rights the Initial Member, in any capacity, may have; and 

(e) WANES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF 

ANY DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY 

ANCILLARY DOCUMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE 

TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

55 


Franklin- LLC Operating Agreement 

8545936.5 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by 

their respective officers or agents thereunto duly authorized on the date first above written. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION, as Receiver for 

Franklin Bank, S.S.B. 

By: __ --------­ Na

Title

RCS FRANKLIN VENTURE LLC 

By: 	 Residential Credit Solutions, Inc., its sole 

Member 

By:	___________________ 

Name: 

Title: 

FRANKLIN VENTURE, LLC 

By: · 	 RCS Franklin Venture LLC, its Managing 

Member 

By: 	 Residential Credit Solutions, Inc. its 

sole Member 

By:	________________ 

Name: 

Title: 

Franklin Bank- Amended and Restated LLC Operating Agreement 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by 

their respective officers or agents thereunto duly authorized on the date first above written. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION, as Receiver for 

Franklin Bank, S.S.B. 

By: -~------------------------­ Name: 


Title: Attorney-in-Fact 


RCS FRANKLIN VENTURE LLC 

By: 	 Residential Credit Solutions, Inc., its sole 

:;mber 

Nam Title: 

FRANKLIN VENTURE, LLC 

By: 	 RCS Franklin Venture LLC, its Managing 

Member 

By: 	 Residential Credit Solutions, Inc. its . 

sole Member 

By: NaTitle: 

Franklin Bank - Amended and Restated LLC Operating Agreement 

Annex I 


Certain Definitions 


As used in the Agreement, the following terms have the following meanings 

(terms defined in the singular to include the plural and vice versa and references in this Annex I 

to sections constitute references to sections of the Agreement unless otherwise expressly 

indicated): 

"Acceptable Rating" shall mean (a) with respect to a mortgage loan servicer or 

special servicer, (i) a rating of "Strong" by Standard and Poor's Ratings Service, a division of 

The McGraw-Hill Companies, Inc., (ii) the applicable "Level 1" servicer rating for residential 

mortgage servicers by Fitch, Inc., or (iii) a rating of "SQl" by Moody's Investors Service, and 

(b) with respect to any security, obligation or entity (other than a mortgage loan servicer or 

special servicer), any of the top three rating categories that may be assigned to such security, 

obligation or entity by the Rating Agencies. 

"Account Control Agreement" shall have the meaning given in the Custodial 

and Paying Agency Agreement. 

"Accountants" shall mean the independent certified public accountants of the 

Company. 

"Acquired Collateral" shall mean Collateral to which title is acquired by or on 

behalf of the Company or any Ownership Entity by foreclosure, by deed in lieu of foreclosure, 

by power of sale or by sale pursuant to the Uniform Commercial Code, in any such case in 

accordance with the Loan Documents and this Agreement. · 

"Act" shall mean the Delaware Limited Liability Company Act, 6 Del. C. § § 18­

101 et seq. 

"Adjusted Capital Account Deficit" means, with respect to any Member, the 

deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal 

Year, after giving effect to the following adjustments: 

(A) Credit to such Capital Account any amounts that such Member is 

obligated to restore or is deemed to be obligated to restore pursuant to Treasury 

Regulations Sections 1.704-2(g)(l) and 1.704-2(i)(5); and 

(B) Debit to such Capital Account the items described in Treasury Regulations 

Sections 1.704-1 (b)(2)(ii)( d)( 4), 1.704-1 (b )(2)(ii)( d)(5) and 1.704-1 (b )(2)(ii)( d)( 6). The 

foregoing definition of Adjusted Capital Account Deficit is intended with the provisions 

ofTreasury Regulations Section 1.704-1 (b )(2)(ii)( d) and shall be interpreted consistently 

therewith. 

"Affiliate" shall mean, with respect to any specified Person, (i) any other Person 

directly or indirectly Controlling or Controlled by or under common Control with such specified 

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Franklin- LLC Operating Agreement 

8545936.5 
Person, (ii) any Person owning or Controlling ten percent (10%) or more of the outstanding 

voting securities, voting equity interests, or beneficial interests of the Person specified, (iii) any 

officer, director, general partner, managing member, trustee, employee or promoter ofthe Person 

specified or any hnmediate Family Member of such officer, director, general partner, managing 

member, trustee, employee or promoter, (iv) any corporation, partnership, limited liability 

company or trust for which any Person referred to in clause (ii) or (iii) acts in that capacity, or (v) 

any Person who is an officer, director, general partner, managing member, trustee or holder of 

ten percent (1 0%) or more of the outstanding voting securities, voting equity interests or 

beneficial interests of any Person described in clauses (i) through (iv); provided, however, that 

for purposes of this Agreement, neither the Initial Member nor the Secured Party shall be 

deemed to be an Affiliate ofthe Company or any Affiliate ofthe Company. 

"Agreement" shall have the meaning given in the preamble. 

"Ancillarv Documents" shall mean the Contribution Agreement, the Servicing 

Agreement (including the Electronic Tracking Agreement attached as an exhibit thereto), the 

Custodial and Paying Agency Agreement, one or more Account Control Agreements, the LLC 

Interest Sale Agreement (and the Sponsor Guaranty required to be delivered thereby), the 

Purchase Money Note and the Reimbursement and Security Agreement, in each case once 

executed and delivered, and any and all other agreements and instruments executed and delivered 

in connection with the Closing. 

"Bid Amount" shall have the meaning given in the LLC Interest Sale Agreement. 

"Book Value" shall mean, (i) with respect to contributed property, the initial Fair 

Market Value of such property, and (ii) with respect to any other Company asset, the adjusted 

basis of such asset for federal income tax purposes; provided, however, that the Book Values of 

all Company assets shall be adjusted to equal their respective Fair Market Values, in accordance 

with the rules set forth in Section 1.704-l(b)(2)(iv)(f) of the Treasury Regulations, except as 

otherwise provided herein, immediately prior to: (a) the date of the acquisition of any additional 

Interest by any new or existing Member in exchange for more than a de minimis Capital 

Contribution; (b) the date of the actual distribution of more than a de minimis amount of 

Company property (other than a pro rata distribution) to a Member in connection with the 

redemption of all or part ofsuch Member's Interest; or (c) the date. of the actual liquidation of the 

Company within the meaning of Section 1.704-l(b)(2)(ii)(g) of the Treasury Regulations; and 

provided further, that adjustments pursuant to clauses (a) and (b) above shall be made only if the 

Managing Member reasonably determines, after consultation with the Initial Member, that such 

adjustments are necessary or appropriate to reflect the relative economic interests of the 

Members. The Book Value of any Company Property distributed to any Member shall. be 

adjusted immediately prior to such distribution to equal its Fair Market Value as ofsuch date. 

"Borrower" shall mean any borrower or other obligor with respect to any Loan. 

"Bulk Sale" shall mean the sale or other disposition, in a single transaction or a 

series of related transactions, of (i) Loans having an aggregate Unpaid Principal Balance of 

$20,000,000 or more as of the time of such sale or disposition or (ii) Collateral or Acquired 

I-2 


Franklin- LLC Operating Agreement 

8545936.5 
Collateral having an aggregate value of $10,000,000 or more (based on the most recent appraisal 

or broker price opinion) as of the time ofsuch sale or disposition. 

"Business" shall mean the acquisition of the Loans pursuant to the Contribution 

Agreement and the ownership, servicing, administration, management and liquidation of the 

Loans. 

"Business Day" shall mean any day except a Saturday, Sunday or other day on 

which commercial banks in Washington, D.C. or United States federal government offices are 

required or authorized by Law to close. 

"Capital Account" shall mean the capital account of a Member related to such 

Member's outstanding Interests, as adjusted to account for allocations ofNet Income (and items 

thereof) and Net Loss (and items thereof), and contributions and distributions relating to such 

Interests, as provided in greater detail in Section 6.2 and elsewhere in this Agreement. 

"Capital Contribution" shall mean a contribution to the capital of the Company 

made, deemed to be made, or to be made pursuant to the Original LLC Operating Agreement, the 

Contribution Agreement, or this Agreement. 

"Certificate" shall have the meaning given in Section 2.1(a). 

"Change of Control" with respect to a Member (other than the Initial Member) 

shall mean (i) the Person who currently Controls Member ceasing to Control Member; or (ii) the 

merger ofMember or any Person who Controls Member into another Person. 

"Clean-up Call" shall have the meaning set forth in Section 12.17. 

"Closing" shall mean the consummation of the transactions contemplated in the 

LLC Interest Sale Agreement. 

"Closing Date" shall have the meaning given in the preamble. 

"Code" shall mean the United States Internal Revenue Code of 1986, as amended. 

"Collateral" shall mean any and all real or personal property, whether tangible or 

intangible, securing or pledged to secure a Loan, including any account, equipment, guarantee or 

contract right, or other interest that is the subject of any Collateral Document, and, as the context 

requires, includes Acquired Collateral, whether or not expressly so specified. 

"Collateral Document" shall mean any pledge agreement, security agreement, 

personal or corporate guaranty, deed of trust, deed, mortgage, contract for the sale of real 

property, assignment, collateral agreement or other agreement or document of any kind, whether 

an original or a copy, whether similar to or different from those enumerated, (i) securing in any 

manner the performance or payment by any Borrower ofits obligations or the obligations of any 

other Borrower under any ofthe Loans or the Notes evidencing the Loans, or (ii) evidencing any 

Acquired Collateral. 

I-3 


Franklin- LLC Operating Agreement 

8545936.5 
"Collection Account" shall mean a segregated trust or custodial account 

established and maintained at a branch of the Paying Agent in accordance with, and for the 

purposes set forth in, the Custodial and Paying Agency Agreement. 

"Company" shall have the meaning given in the preamble. 

"Company Property" shall mean all property, whether real or personal, tangible 

or intangible, owned by the Company, including the Loans contributed or sold by the Initial 

Member pursuant to the Contribution Agreement. 

"Contribution Agreement" shall have the meaning given in the recitals. 

"Control" (including the phrases "Controlled by" and "under common Control 

with") when used with respect to any specified Person shall mean the possession, direct or 

indirect, of the power to direct or cause the direction of the management and policies of such 

Person, whether through the ownership ofvoting securities or interests, by contract or otherwise. 

"Custodial and Paying Agency Agreement" shall mean, initially, the Custodian 

and Paying Agent Agreement dated as of September 30, 2009, by and between the Company, the 

Secured Party and Citibank, N.A., and thereafter any replacement agreement entered into with a 

Custodian pursuant to Section 3.7. 

"Custodial Documents" shall have the meaning gtven in the Custodial and 

Paying Agency Agreement. 

"Custodian" shall have the meaning given in the Custodial and Paying Agency 

Agreement. 

"Custodian and Paying Agent Report" shall have the meaning given in the 

Custodial and Paying Agency Agreement. 

"Cut-Off Date" shall have the meaning given in the Contribution Agreement. 

"Damages" shall mean any and all damages, disbursements, suits, claims, 

liabilities, obligations, judgments, fines, penalties, charges, amounts paid in settlement, costs and 

expenses (including, without limitation, attorneys' fees and expenses) arising out of or n;:lated to 

litigation and interest on any ofthe foregoing. 

"Debt" of any Person shall mean (i) all indebtedness of such Person for borrowed 

money, (ii) all obligations of such Person for the deferred purchase price of property or services 

(excluding trade payables arising in the ordinary course of business), (iii) all obligations of such 

Person evidenced by notes, bonds, debentures or other similar instruntents, (iv) all indebtedness 

created or arising under any conditional sale or other title retention agreement with respect to 

property acquired by such Person (even though the rights and remedies of the seller or lender 

under such agreement in the event of default are limited to repossession or sale of such property), 

(v) all obligations of such Person as lessee under leases that have been or should be, in 

accordance with GAAP, recorded as capital leases, or (vi) all indebtedness or obligations of 

I-4 


Franklin- LLC Operating Agreement 

8545936.5 
others of the kinds referred to in clauses (i) through (v) above in respect of which such Person 

has entered into or issued any Guarantee. 

"Determination Date" shall have the meaning given in the Custodial and Paying 

Agency Agreement. 

"Direct Owner" shall mean, with respect to any Person, any other Person who 

has any direct ownership interest in such Person. 

"Disposition" shall mean any sale, assigrnnent, alienation, gift, exchange, 

conveyance, transfer, pledge, hypothecation, granting of a security interest or other disposition or 

attempted disposition whatsoever, whether voluntary or involuntary. For the avoidance of doubt, 

it is understood and agreed that a statutory conversion of a Person into another form of Person 

does not constitute a Disposition. The term "Dispose" shall mean to make or consummate a 

"Disposition." 

"Dissolution Event" shall mean, with respect to any specified Person, (i) in the 

case of a specified Person that is a partnership or limited partnership or a limited liability 

company, the dissolution and commencement of winding up of such partnership, limited 

partnership or limited liability company, and (ii) in the case of a specified Person that is a 

corporation, the filing of a certificate of dissolution, or its equivalent, for the corporation or the 

revocation of its charter and the expiration of 90 days after the date of notice to the corporation 

ofrevocation without a reinstatement of its charter. For the avoidance of doubt, it is understood 

and agreed that a statutory conversion of a Person into another form ofPerson does not constitute 

a "Dissolution Event." 

"Distributable Cash" shall have the meaning given in Section 6.5. 

"Distribution Account" shall mean a segregated trust or custodial account 

established and maintained under the Custodial and Paying Agency Agreement at a branch ofthe 

Paying Agent for the sole purpose of holding and distributing Loan Proceeds in accordance with 

the Custodial and Paying Agency Agreement. 

"Distribution Date" shall have the meaning given in the Custodial and Paying 

Agency Agreement. 

"Distribution Date Report" shall have the meaning given in the Custodial and 

Paying Agency Agreement, which report shall be prepared and distributed by the Managing 

Member to the Paying Agent in accordance with Section 7.4(b). 

"Due Period" shall have the meaning given in the Custodial and Paying Agency 

Agreement. 

"Electronic Tracking Agreement" shall have the meaning given in the Custodial 

and Paying Agency Agreement. 

"Embargoed Person" shall mean any person subject to trade restrictions under 

United States law, including, without limitation, the International Emergency Economic Powers 

I-5 

Franklin- LLC Operating Agreement 

8545936.5 
Act, 50 U.S.C. §§1701, et seq., The Trading with the Enemy Act, 50 U.S.C. §§ App. 1, et seq., 

any foreign assets control regulations of the United States Treasury Department (31 C.F.R., 

Subtitle B, Chapter V, as amended), or any enabling legislation or regulations promulgated 

thereunder or any executive order relating thereto (including Executive Order 13224 of 

September 21, 2001 Blocking Property and Prohibiting Transactions With Persons who Commit, 

Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079 (2001)) or 31 C.F.R. §594.101, et 

seq.) with the result that a purchase ofAssets or any other transaction entered into with respect to 

any Assets (including, without limitation, any investment in any structured transaction), whether 

directly or indirectly, is prohibited by or in violation oflaw. 

"Environmental Hazard" shall mean the presence at, in or under any real 

property constituting part of the Collateral (whether held in fee simple estate or subject to a 

ground lease, or otherwise, and including any improvements whether by buildings or facilities, 

and any personal property, fixtures, leases and other property or rights pertaining thereto) of any 

"hazardous substance," as defined in Section 101(14) of the Comprehensive Environmental 

Response, Compensation and Liability Act of 1980, 42 U.S.C. §9601(14), or any petroleum 

(including crude oil or any fraction thereof that is liquid at standard conditions of temperature 

and pressure), at a level or in an amount that requires remediation or abatement under applicable 

environmental Law. 

"Escrow Account" shall have the meaning given in the Contribution Agreement. 

"Escrow Advance" shall mean any advance made to pay taxes or insurance 

premiums or any other cost or expense that, but for a shortfall in the Borrower's Escrow 

Account, is payable using funds in the Borrower's Escrow Account. 

"Events of Default" shall mean any one of the following events (whatever the 

reason for such Event of Default and whether it shall be voluntary or involuntary or be effected 

by operation of law or pursuant to any judgment, decree or order of any court or any order, rule 

or regulation of any administrative or governmental body): 

(a) any amount payable under Section 2.1 of the Reimbursement and 

Security Agreement (including interest accrued through and including the Determination Date 

immediately preceding the Distribution Date on which such amount becomes payable) or under 

Section 7.15 of the Reimbursement and Security Agreement (including interest accrued through 

and including the Determination Date immediately preceding the Distribution Date on which 

such amount becomes payable) is not paid in full for any three (3) Distribution Dates occurring 

in a twelve (12) month period; or 

(b) any failure of the Company to pay in full on any three (3) 

Distribution Dates occurring in a twelve (12) month period the interest accrued on the Purchase 

Money Note through and including the Determination Date immediately preceding each such 

Distribution Date; or 

(c) the occurrence of any Insolvency Event (without any cure period 

other than as may be provided for in the definition of Insolvency Event) with respect to (i) the 

Company, (ii) the Managing Member or (iii) the Servicer; or 

I-6 

Franklin- LLC Operating Agreement 

8545936.5 
(d) any failure ofManaging Member to cause to be made any payment 

of any Working Capital Advance or any Servicing Expense pursuant to Section 5.l(b) and 

Section 12.7, respectively, oftbis Agreement, which failure continues unremedied for a period of 

sixty (60) days after the date on which written notice of such failure requiring the same to be 

remedied shall have been given to the Managing Member; or 

(e) the failure ofthe Company or the Managing Member to comply in 

any material respect with and enforce the provisions of tbis Agreement, which continues 

unremedied for a period of sixty ( 60) days after the date on which written notice of such failure 

requiring the same to be remedied shall have been given to the Managing Member; or 

(f) the occurrence of either (i) a failure by the Servicer to perform in 

any material respect its obligations under the Servicing Agreement, which continues unremedied 

for a period of sixty (60) days after the date on which written notice of such failure requiring the 

same to be remedied shall have been given by the Managing Member to the Servicer or by 

Secured Party to the Company, or (ii) a failure by the Managing Member to replace the Servicer 

upon the occurrence of either an Event of Default under the Reimbursement and Security 

Agreement as a result of the Servicer' s acts or omissions or a material breach of or event of 

default under the Servicing Agreement by the Servicer, in either case which continues 

unremedied for a period of sixty (60) days after the date on which written notice of such failure 

requiring the same to be remedied shall have been given to the Managing Member; or 

(g) the failure of the Company to comply in any material respect with 

its obligations under the Servicing Agreement or the Custodial and Paying Agency Agreement 

·· 	 (including any failure to pay fees or expenses due thereunder by the Company) which, in either 

case, remains unremedied for a period ofsixty ( 60) days after the date on which written notice of 

such failure requiring the same to be remedied shall have been given to the Company; or 

(h) there shall be a change in the Managing Member or there shall 

occur a Change of Control with respect to the Managing Member without the consent of Secured 

Party; or 

(i) the failure of the Managing Member to remit or cause to be 

remitted all Loan Proceeds to the Paying Agent as and when required; or 

(j) any material breach of a representation or warranty made by the 

Company in the Reimbursement and Security Agreement, which remains unremedied for a 

period of sixty ( 60) days after the date on which written notice ofsuch breach requiring the same 

to be remedied shall have been given to the Company; or 

(k) any payment by the Secured Party of the Loan Parity Obligation; 

or 

(j) any other failure (other than those specified in any of subsections 

(a) through (k) above) on the part of the Company duly to observe or perform in any material 

respect any other covenants or agreements on the part of Company contained in the 

Reimbursement and Security Agreement (including any obligations imposed upon any Servicer 

I-7 


Franklin- LLC Operating Agreement 

8545936.5 
or subservicer), which continues unremedied for a period of sixty (60) days after the date on 

which written notice of such failure requiring the same to be remedied shall have been given to 

the Company; provided, however, that in the case of a failure that cannot be cured .within sixty 

(60) days, the cure period shall be extended for an additional sixty ( 60) days if the Company can 

demonstrate to the reasonable satisfaction of Secured Party that the Company is diligently 

pursuing remedial action. 

"Excluded Expenses" shall have the meaning given in Section 12.7(b). 

"Existing Servicer" shall mean the entities providing servicing immediately prior 

to the Closing Date under the Existing Servicing Arrangements. 

"Existing Servicing Arrangements" shall mean the servicing arrangements in 

effect with respect to the Loans immediately prior to the Closing Date. 

"Failed Bank" shall have the meaning given in the preamble. 

"Fair Market Value" shall mean, with respect to any asset on a given date, the 

gross fair market value of such asset, unreduced by any liability, on such date as determined in 

good faith by the Managing Member after consultation with the Initial Member; provided, 

however, that the parties hereto acknowledge and agree that, as of the Closing Date, the Fair 

Market Value of the Capital Contribution made by the Initial Member shall be based on the Bid 

Amount, as set forth in the LLC Interest Sale Agreement, and such Fair Market Value shall be 

utilized for determining the initial Capital Accounts of the Members as ofthe Closing Date. 

"Fannie Mae" shall mean the Federal National Mortgage Association of the 

United States, or any successor thereto. 

"Fannie Mae Guidelines" shall mean those guidelines governing reimbursement 

of costs and expenses by Fannie Mae with respect to residential loans owned or securitized by 

Fannie Mae, as in effect on the date on which an expense or cost is incurred. 

"FDIC" shall have the meaning given in the preamble. 

"Final Distribution" shall have the meaning given in Section 6.6(f). 

"Fiscal Year" shall have the meaning given in Section 7 .1. 

"Foreign Assets Control Regulations" has the meaning given in Section 


lO.l(q). 


"GAAP" shall mean United States generally accepted accounting principles as in 

effect from time to time. 

"Governmental Authoritv" shall mean any United States or non-United States 

national, federal, state, local, municipal or provincial or international government or any political 

subdivision of any governmental, regulatory or administrative authority, agency or commission, 

or judicial or arbitral body. 

I-8 

Franklin - LLC Operating Agreement 

8545936.5 
"Group .of Loans" shall have the meanmg provided m the Contribution 

Agreement. 

"Guarantee" shall mean, with respect to any particular indebtedness or other 

obligation, (i) any direct or indirect guarantee thereof by a Person other than the obligor with 

respect to such indebtedness or other obligation or any transaction or arrangement intended to 

have the effect of directly or indirectly guaranteeing such indebtedness or other obligation, 

including without limitation any agreement by a Person other than the obligor with respect to 

such indebtedness or other obligation (A) to pay or purchase such indebtedness or other 

obligation or to advance or supply funds for the payment or purchase of such indebtedness or 

other obligation, (B) to purchase, sell or lease (as lessee or lessor) property of, to purchase or sell 

services from or to, to supply funds to or in any other manner invest in, the obligor with respect 

to such indebtedness or other obligation (including any agreement to pay for property or services 

of the obligor irrespective of whether such property is received or such services are rendered), 

primarily for the purpose of enabling the obligor to make payment of such indebtedness or other 

obligation or to assure the holder or other obligee of such indebtedness or other obligation 

against loss, or (C) otherwise to assure the obligee of such indebtedness or other obligation 

against loss with respect thereto, or (ii) any grant (or agreement in favor of the obligee of such 

indebtedness or other obligation to grant such obligee, under any circumstances) by a Person 

other than the obligor with respect to such indebtedness or other obligation of a security interest 

in, or other lien on, any property or other interest of such Person, whether or not such other 

Person has not assumed or become liable for the payment of such indebtedness or other 

obligation. 

"Guarantor" shall mean itny guarantor of all or any portion of any Loan or all or 

any of any Borrower's obligations set forth and described in the Loan Documents. 

"Guidelines" shall mean (i) the Statement on Loss Mitigation Strategies for 

Servicers ofResidential Mortgages (September 2007), issued by the federal financial institutions 

regulatory agencies and the Conference of State Bank Supervisors, (ii) the Statement on Working 

with Mortgage Borrowers (April 2007), issued by the federal financial institutions regulatory 

agencies, and (iii) any amendments, supplements or successors to either of the foregoing. 

"Immediate Family Member" shall mean, with respect to any individual, his or 

her spouse; parents, parents-in-law, grandparents, descendants, nephews, nieces, brothers, sisters, 

brothers-in-law, sisters-in-law, children (whether natural or adopted), children-in-law, 

stepchildren, grandchildren and grandchildren-in-law. 

"Initial Member" shall have the meaning given in the preamble. 

"Initial Member Capital Contribution" shall have the meaning given in Section 

2.3(a)(i). 

"Insolvency Event" shall mean, with respect to any specified Person, the 

occurrence of any ofthe following events: 

1. the specified Person makes an assignment for the benefit of creditors; 

I-9 

Franklin- LLC Operating Agreement 

8545936.5 
2. 	 the specified Person files a voluntary petition for relief in any Insolvency 

Proceeding; 

3. 	 the specified Person is adjudged bankrupt or insolvent or there is entered 

against the specified Person an order for relief in any Insolvency 

Proceeding; 

4. 	 the specified Person files a petition or answer seeking for the specified 

Person any reorganization, arrangement, composition, readjustment, 

liquidation, dissolution, or similar relief under any Law; 

5. 	 the specified Person seeks, consents to, or acquiesces in the appointment 

of a trustee, receiver or liquidator of the specified Person or of all or any 

substantial part ofthe specified Person's properties; 

6. 	 the specified Person files an answer or other pleading admitting or failing 

to contest the material allegations of a petition filed against the specified 

Person in any proceeding described in clauses (1) through ( 5); 

7. 	 the specified Person becomes unable to pay its obligations as they become 

due; or 

8. 	 within ninety (90) days of any proceeding against the specified Person 

seeking reorganization, arrangement, composition, readjustment, 

liquidation, dissolution or similar relief under any Law if the proceeding 

has not been dismissed, or within ninety (90) days after the appointment of 

a trustee, receiver or liquidator for the specified Person or all or any 

substantial part of the specified Person's properties without the specified 

Person's agreement or acquiescence, which appointment is not vacated or 

stayed, or if the appointment is stayed, for ninety (90) days after the 

expiration ofthe stay ifthe appointment is not vacated. 

"Insolvency Proceeding" shall mean any proceeding under Title 11 ofthe United 

States Code (11 U.S.C. §§101, et seq.) or any proceeding under the Law of any jurisdiction. 

involving any reorganization, arrangement, composition, readjustment, liquidation, dissolution, 

or similar relief. 

"Interest" shall mean, with respect to any particular Member, the entire limited 

liability company interest (as such term is defined in the Act) ofsuch Member, including (i) such 

Member's rights to share in the income, gain, loss, deductions and credits of, and the right to 

receive distributions from, the Company, (ii) all other rights, benefits and privileges enjoyed by 

such Member (under the Act, this Agreement or otherwise) in its capacity as a Member, 

including rights to vote, consent and approve, and (iii) all obligations, duties and liabilities 

imposed on such Member (under the Act, this Agreement or otherwise) in its capacity as a 

Member. 

I-10 


Franklin- LLC Operating Agreement 

8545936.5 
"Investment Company Act" shall mean the Investment Company Act of 1940, 

as amended from time to time. 

"Law" shall me;m any applicable statute, law, ordinance, regulation, rule, code, 

injunction, judgment, decree or order (including any executive order) of any Governmental 

Authority. 

"Lien" shall mean any pledge, security interest, charge, restriction on or condition 

to transfer, voting or exercise or enjoyment of any right or beneficial interest, option, right of 

first refusal and any other lien, claim or encumbrance of any nature whatsoever. 

"Liguiditv Reserve" has the meaning given in Section 12.ll(a). 

"Liguiditv Reserve Account" has the meaning given in Section 12.1l(a). 

"LLC Interest Sale Agreement" shall mean that certain Limited Liability 

Company Interest Sale and Assignment Agreement dated the date hereof between the Initial 

Member and the Private Owner pursuant to which the Initial Member has agreed to sell to 

Private Owner, and Private Owner has agreed to acquire from Initial Member, an Interest 

representing a fifty percent (50%) Percentage Interest for a purchase price equal to the Bid 

Amount. 

"Loan" shall have the meaning given in the Contribution Agreement. 

"Loan Documents" shall have the meaning given in the Contribution Agreement. 

"Loan File" shall have the meaning given in the Contribution Agreement. 

"Loan Modification Program" shall mean the loan modification program that 

meets the criteria described in Exhibit C to the Servicing Agreement, <ir any other or additional 

loan modification program (i) that may be required by the FDIC upon written notice to the 

Company or (ii) as proposed by the Company with respect to a group of Loans with similar 

characteristics, if approved in writing by the FDIC. 

"Loan Paritv Obligation" shall have the meaning given in the Purchase Money 

Note Guaranty. 

"Loan Participation" shall mean any asset subject to a shared credit, 

participation or similar inter-creditor agreement under which the Failed Bank or the Receiver 

was the lead or agent financial depository institution or otherwise managed or held the credit or 

sold participations, or under which the Failed Bank or the Receiver was a participating fmancial 

depository institution or purchased participations in a credit managed by another Person. 

"Loan Participation Agreement" shall mean an agreement under which the 

Failed Bank or the Receiver was the lead or agent financial depository institution or otherwise 

managed or held a shared credit or sold participations, or under which the Failed Bank or the 

Receiver was a participating financial depository institution or purchased participations in a 

credit managed by another Person. 

I-ll 

Franklin- LLC Operating Agreement 

8545936.5 
"Loan Proceeds" shall mean (i) any and all proceeds (net of such proceeds as are 

payable to others under any Loan Participation Agreement) with respect to any or all of the 

Loans and any or all of the Collateral that is received at any time after the Cut-Off Date, 

including principal, interest, default interest, prepayment fees, premiums and charges, extension 

and exit fees, late fees, assumption fees, other fees and charges, insurance proceeds and 

condemnation payments (or any portion thereof) that are not used and disbursed to repair, 

replace or restore the related Collateral in accordance with the terms of the Loan Documents; (ii) 

any and all proceeds from sales or other dispositions of any or all of the Loans or the Collateral; 

(iii) any proceeds from making a draw under any letter of credit or certificate of deposit held 

with respect to any Loan, provided that such draw is permitted by the terms of the Loan 

Documents; (iv) any recoveries from Borrowers or Guarantors of any kind or nature with respect 

to the Loans; (v) any investor incentive fees received by the Company under any Loan 

Modification Program (but not any incentive fees payable to servicers under any Loan 

Modification Program), and (vi) any interest or other earnings accrued and paid on any of the 

amounts described in the foregoing clauses (i) through (v) while held in the Collection Account 

or any other account. 

"Management Fee" shall mean a fee, payable on each Distribution Date pursuant 

to Section 5.1, (i) with respect to the initial Distribution Date, equal to the sum of (x) one-twelfth 

(1112'h) of 0.50 percent (0.50%) multiplied by the Unpaid Principal Balance of the Loans 

calculated as of August 1, 2009 plus (y) one-twelfth (1/12'h) of 0.50 percent (0.50%) multiplied 

ill!. the Unpaid Principal Balance of the Loans calculated as of September 1, 2009, and (ii) with 

respect to each subsequent Distribution Date, equal to one-twelfth (1112'h) of 0.50 percent 

(0.50%) multiplied by the Unpaid Principal Balance of the Loans calculated as of the first day of 

the Due Period with respect to such Distribution Date. 

"Managing Member" shall mean, initially, the Private Owner, in its capacity as 

"manager" of the Company, and thereafter shall mean any successor manager appointed in 

accordance with Section 3.l(a) or Section 8.4(a)(i) or by the Initial Member in accordance with 

Section 3 .2. 

"Member" shall mean (i) prior to the Closing Date, the Initial Member, and (ii) 

following the Closing Date, each of the Initial Member and the Private Owner, in each case 

including any successor or permitted assign thereof. 

"Member Schedule" shall mean the schedule attached hereto (and hereby 

incorporated in this Agreement) as Annex II, as amended, restated, supplemented or otherwise 

modified from time to time. 

"MERS" shall have the meaning given in Section 3.13. 

"MERS System" shall mean the MERSCORP, Inc., mortgage electronic registry 

system, as more particularly described in the MERS Procedures Manual (a copy of which is 

attached to the Electronic Tracking Agreement). 

I-12 


Franklin- LLC Operating Agreement 

8545936.5 
"Monthly Report" shall mean a report in electronic format in the form set forth 

in Exhibit B hereto, which report shall be prepared and distributed by the Managing Member in 

accordance with Section 7 .4(b). 

"Mortgage Assignment" shall have the meamng given m the Contribution 

Agreement. 

"Net Income and Net Loss" shall mean, for each Fiscal Year or other period, the 

taxable income or loss of the Company, or particular items thereof, determined in accordance 

with the accounting method used by the Company for federal income tax purposes with the 

following adjustments: (a) all items of income, gain, loss, deduction or expense specially 

allocated pursuant to this Agreement (including pursuant to Sections 6.2(c)(i) through (iv)) shall 

not be taken into account in computing such taxable income or loss; (b) any income of the 

Company that is exempt from federal income taxation and not otherwise taken into account in 

computing the taxable income ofthe Company shall be added to such taxable income or loss; (c) 

ifthe Book Value of any asset differs from its adjusted tax basis for federal income tax purposes, 

any gain or loss resulting from a disposition of such asset shall be calculated with reference to 

such Book Value; (d) upon an adjustment to the Book Value of any asset pursuant to the 

definition of Book Value, the amount of the adjustment shall be included as gain or loss in 

computing such Net Income or Net Loss; (e) if the Book Value of any asset differs from its 

adjusted tax basis for federal income tax purposes, the amount of depreciation, amortization or 

cost recovery deductions with respect to such asset for purposes of determining Net Income or 

Net Loss shall be an amount which bears the same ratio to such Book Value as the federal 

income tax depreciation, amortization or other cost recovery deductions bears to such adjusted 

tax basis (provided that if the federal income tax depreciation, amortization or other cost 

recovery deduction is zero, the Managing Member may use any reasonable method for purposes 

of determining depreciation, amortization or other cost recovery deductions in calculating Net 

Income or Net Loss); and (f) except for items in (a) above, any expenditures ofthe Company not 

deductible in computing taxable income or loss, not properly capitalizable and not otherwise 

taken into account in computing. Net Income or Net Loss pursuant to this definition, shall be 

treated as deductible items. 

"Note" shall have the meaning given in the Contribution Agreement. 

"Omitted Distributions" shall have the meaning given in Section 8.5. 

"Original LLC Operating Agreement" shall have the meaning given in the 

recitals. 

"Ownership Entity" shall mean a Single Purpose Entity, whether already in 

existence or formed by the Company for such purpose, which is used to hold Acquired 

CollateraL 

"Paying Agent" shall mean have the meaning set forth in Section 3.7. 

I-13 

Frank]in- LLC Operating Agreement 

8545936.5 
"Percentage Interest" shall mean, with respect to the Interest held by the Initial 

Member prior to the Closing Date, one hundred percent (1 00%) and, with respect to the Interests 

held by the Initial Member and Private Owner on and after the Closing Date, fifty percent (50%), 

and, with respect to the Interest held by the Private Owner, fifty percent (50%). 

"Permitted Disposition" shall have the meaning given in Section 8.1. 

"Permitted Investments" shall mean any one or more of the following 

obligations or securities having at the time ofpurchase, or at such other time as may be specified, 

the required ratings, if any, provided for in this definition: 

(a) direct obligations of, or guaranteed as to timely payment of principal and 

interest by, the United States of America or any agency or instrumentality of the United 

States of America, the obligations of which are backed by the full faith and credit of the 

United States ofAmerica; 

(b) demand and time deposits in or certificates of deposit of, or bankers' 

acceptances issued by, any bank or trust company, savings and loan association or 

savings bank, provided that, in the case of obligations that are not fully FDIC-insured 

deposits, the commercial paper and/or long-term unsecured debt obligations of such 

depository institution or trust company (or in the case of the principal depository 

institution in a holding company system, the commercial paper or long-term unsecured 

debt obligations ofsuch holding company) have an Acceptable Rating; 

(c) general obligations of or obligations guaranteed by any state ofthe United 

States or the District of Columbia receiving ratings of not less than the highest rating of 

each Rating Agency rating such obligations; 

(d) mutual funds in which investments are limited to the obligations referred 

to in clauses (a), (b) or (c) ofthis definition; and 

(e) with the prior written consent ofthe Initial Member and the Secured Party, 

any other demand, money market or time deposit or other obligation, security or 

investment. 

"Person" shall mean any individual, corporation, partnership (general or limited), 

limited liability company, limited liability partnership, firm, joint venture, association, jointstock company, trust, estate, unincorporated organization, govermnental or regulatory body or 

other entity. 

"Pre-Aimroved Charges" shall have the meaning given in the Contribution 

Agreement. 

"Previously Approved Matters" shall have the meaning given in Section 2.7. 

"Prior Servicer" shall have the meaning given in Section 12.1(b). 

I-14 

Franklin - LLC Operating Agreement 

8545936.5 
"Priority of Payments" shall have the meaning given in the Custodial and 

Paying Agency Agreement. 

"Private Owner" shall have the meaning given in the preamble. 

"Property" shall mean any property contributed to, acquired by or otherwise 

owned by the Company, including, without limitation, any real or personal, tangible or intangible 

property, including but not limited to any legal or equitable interest in such property, ownership 

interests in entities owning real or personal property, and money. 

"Purchase Money Note" shall have the meaning given in the recitals. 

"Purchase Money Note Guaranty" shall have the meaning given in the recitals. 

"Qualified Custodian" shall mean any Person that (i) is a bank, trust company or 

title insurance company subject to supervision and examination by any federal or state regulatory 

authority, (ii) is experienced in providing services of the type required to be performed by the 

Custodian under the Custodial and Paying Agency Agreement, (iii) is qualified and licensed to 

do business in each such jurisdiction to the extent required unless and to the extent the failure to 

be so qualified or licensed will not have a material adverse effect on the Custodian or the ability 

of the Custodian to perform its obligations under the Custodial and Paying Agency Agreement, 

(iv) is not prohibited from exercising custodial powers in any jurisdiction in which the Custodial 

Documents are or will be held, (v) has combined capital and surplus of at least $50,000,000 as 

reported in its most recent report of condition, (vi) has the facilities to safeguard the Loah 

Documents and other Custodial Documents as required by the Custodial and Paying Agency 

Agreement, (vii) is not an Affiliate of the Company or the Servicer, and (viii) is acceptable to 

and approved by the Secured Party and the Initial Member (such approval not to be unreasonably 

withheld, delayed or conditioned). 

"Qualified Servicer" shall mean any Person that (i) is properly licensed and 

qualified to conduct business in each jurisdiction in which such licenses and qualifications to 

conduct business are necessary for the servicing ofthe Loans and management of the Collateral 

and the Acquired Collateral, (ii) is a member of MERS, (iii) has the management capacity and 

experience to service performing and non-performing residential loans of the type held by the 

Company, especially loans secured by residential properties, including the number and types of 

loans serviced, and the ability to track, process and post payments, and to furnish tax reports to 

borrowers, and (iv) either (x) has an Acceptable Rating as a mortgage loan servicer or special 

servicer or (y) is acceptable to and approved by the Initial Member and the Secured Party in their 

sole discretion. 

"Qualified Transferee" shall have the meaning given in Section 1 0.1. 

"Rating Agencies" shall mean each of Moody's Investors Service, Inc., Standard 

& Poor's Rating Services, a division ofThe McGraw-Hill Companies, Inc., Fitch IBCA, Inc. and 

such other rating agencies as are nationally recognized. 

"Receiver" shall have the meaning given in the preamble. 

I-15 


Franklin- LLC Operating Agreement 

8545936.5 
"Reimbursement and Security Agreement" shall mean that certain 

Reimbursement and Security Agreement dated as of September 30, 2009 by and between the 

Company and the Secured Party. 

"Related Party Agreement" shall have the meaning given in Section 3.5. 

"Related Persons" shall have the meaning given in Section 4.5. 

"Secured Party" shall mean the FDIC, in its capacity as the secured party under 

the Reimbursement and Security Agreement. 

"Securities Act" shall mean Securities Act of 1933, as amended. 

"Servicer" shall mean have the meaning given in Section 12.3(a). 

"Servicer Advances" shall mean advances made by or on behalf of the Servicer 

to fund Servicing Expenses. 

"Servicing Agreement" shall mean a servicing agreement to be entered into 

between the Managing Member and the Person designated as the Servicer therein, which 

servicing agreement shall satisfy the requirements of Section 12.1(b) and shall be acceptable to 

the Initial Member in all respects. 

"Servicing Expenses" shall mean all customary and reasonable out-of:pocket 

fees, costs, expenses and indemnified amounts incurred in connection with servicing the Loans 

and the Acquired Collateral, including (i) any and all out-of-pocket fees, costs, expenses and 

indemnified amounts which a Borrower is obligated to pay to any Person or to reimburse to the 

lender pursuant to the applicable Note or any other Loan Documents, including Escrow 

Advances, (ii) any and all reasonable out-of-pocket expenses necessary to protect or preserve the 

value of the Collateral or the priority of the Liens and security interests created by the Loan 

Documents relating thereto, including taxes, insurance premiums (including forced place 

insurance premiums), payment of ground rent, the costs of prevention of waste, repairs and 

maintenance, foreclosure expenses and legal fees and expenses relating to foreclosure or other 

litigation with respect to the Loans, (iii) any and all direct expenses related to the preservation, 

operation, demolition, management and sale of the Acquired Collateral (including real estate 

brokerage fees), and (iv) to the extent not covered by any of clauses (i) through (iii), legal fees 

and expenses (including judgments, settlements and reasonable attorneys fees) incurred by the 

Servicer in its defense of claims asserted against the Company that relate to one or more Loans, 

and (x) arise out of the acts or omissions of the Failed Bank or the Receiver in connection with 

the origination or servicing ofsuch Loans prior to the Servicing Transfer Date for such Loans, or 

(y) allege, as the basis for such claims, any act or omission of the Company (or the Managing 

Member or the Servicer) and such claims are decided (and there are final non appealable orders) 

in favor of the Company (or the Managing Member or the Servicer); provided, however, that 

Servicing Expenses shall not include Excluded Expenses. 

"Servicing Obligations" shall mean have the meaning given in Section 12. L 

1-16 


Franklin - LLC Operating Agreement 

8545936.5 
"Servicing Standard" shall have the meaning given in Section 12.1. 

"Servicing Transfer Date" shall have the meaning given in the Contribution 

Agreement. 

"Single Purpose Entitv" shall mean a corporation or limited liability company 

that (i) is organized under the laws of any state of the United States or the District of Columbia, 

(ii) has no material assets other than the Loans and any Acquired Collateral, its right, title and 

interest in, to and under this Agreement and the other instruments contemplated by this 

Agreement, (iii) is not engaged in any significant business operations except its ownership ofthe 

Loans and any Acquired Collateral and the conduct of its business pursuant to this Agreement, 

(iv) does or causes to be done all things necessary to preserve and keep in full force and effect its 

existence, rights (charter and statutory) and franchises, (v) at all times holds itself out to the 

public as a legal entity separate from any other Person (including any Affiliate), (vi) except as 

expressly contemplated hereby or by the Ancillary Documents, does not commingle its assets 

with assets of any other Person, (vii) conducts its business in its own name and strictly complies 

with all organizatiomll formalities .to maintain its separate existence, (viii) maintains an arm's 

length relationship with any Mfiliate upon terms that are commercially reasonable and on terms 

no less favorable to it than could be obtained in a comparable arm's length transaction with an 

unrelated Person, and (ix) has no Debt. 

"Sponsor Guaranty" shall have the meaning given in the recitals. 

"Subservicers" shall have the meaning given in Section 12.3(a). 

"Subsidiary" shall mean, with respect to any specified Person, each of (i) any 

other Person not less than a majority of the overall economic equity in which is owned, directly 

or indirectly through one of more intermediaries, by such specified Person, and (ii) without 

limitation of clause (i), any other Person who or which, directly or indirectly through one or 

more intermediaries, is Controlled by such specified Person (it being understood that with 

respect to each of clauses (i) and (ii) that a pledge for collateral security purposes of an equity 

interest in a Person shall not be deemed to affect the ownership of such equity interest by the 

pledgor or the Control of such Person so long as such pledgor continues to be entitled, in all 

material respects, to all the voting power and all the income with respect to such equity interest). 

"Successor" shall mean, (i) with respect to Member, any future Member which is 

a direct or indirect transferee (whether by Permitted Disposition, merger, consolidation or 

otherwise) of the Interest of such Member; (ii) with respect to any former Member, the current 

Member which is the direct or indirect transferee (whether by Permitted Disposition, merger, 

consolidation or otherwise) ofthe Interest of such former Member and (iii) with respect to Initial 

Member, any Person that is a direct or indirect transferee (whether by Disposition, merger, 

consolidation or otherwise) of any of Initial Member's rights or interests under this Agreement or 

any other Ancillary Document. 

"Tax" shall mean any federal, state, county, local, or foreign tax, charge, fee, 

levy, duty, or other assessment, including any income, gross receipts, transfer, recording, capital, 

withholding, property, ad valorem, or other tax or governmental fee of any kind whatsoever, 

I-17 


Franklin - LLC Operating Agreement 

8545936.5 
imposed or required to be withheld by any governmental authority having jurisdiction over the 

assessment, determination, collection, or other imposition of any Tax, including any interest, 

penalties and additions imposed thereon or with respect thereto. 

"Tax Matters Member" shall have the meaning given in Section 7.5(a). 

"Transfer Documents" shall have the meamng gwen m the Contribution 

Agreement. 

"Treasury Regulations" shall mean the regulations promulgated by the United 

States Department of the Treasury pursuant to and in respect of provisions of the Code, as 

amended, and all references to sections of the Treasury Regulations shall include any 

corresponding provision or provisions of succeeding, substitute, proposed or final Treasury 

Regulations. 

"Unpaid Principal Balance" shall mean, at any time, (a) when used in 

connection with multiple Loans, an amount equal to the aggregate then outstanding principal 

balance of such Loans, and (b) when used with respect to a single Loan, an amount equal to the 

then outstanding principal balance of such Loan. For this purpose, in the case of a Loan for 

which some or all of the related Collateral has been converted to Acquired Collateral, until such 

time as the Acquired Collateral (or any portion thereof) is liquidated, the unpaid principal 

balance of such Loan shall be deemed to equal the sum of (i) the unpaid principal balance of 

such Loan (adjusted pro rata for partial collateral sales, debt forgiveness or . retained 

indebtedness) at the time at which such Loan was converted to Acquired Collateral plus any 

outstanding balance remaining on such Loan which is evidenced by a modification agreement or 

a replacement or successor promissory note executed by the Borrower. 

"USA PATRIOT Act" has the meaning given in Section lO.l(q). 

"Working Capital Advance" shall mean amounts advanced by or on behalf of 

the Managing Member to fund the Company's operations and operating deficits, which amounts 

shall be funded in accordance with Section 5.l(b). 

"$" shall mean lawful currency ofthe United States ofAmerica. 

I-18 


Franklin - LLC Operating Agreement 

8545936.5 

Annex II 


Member Schedule as of September 30, 2009 


Member 

Federal Deposit 

Insurance Corporation 

RCS Franklin Venture 

LLC 

Percentage Interests Capital Account 

50% $64,215,000 

50% $64,215,000 

Il-l 

Franklin- LLC Operating Agreement 

8545936.5 

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

EXHIBIT A 


CERTIFICATE OF FORMATION 


OF 


FRANKLIN VENTURE, LLC 


Pursuant to and in accordance with the provisions of Section 18-201 of the 

Delaware Limited Liability Company Act, the undersigned hereby certifies that: 

FIRST, the name of the limited liability company is Franklin Venture, LLC (the 

''Company"). 

SECOND, the address of the registered office of the Company in the State of 

Delaware is Corporation Trust Center, 1209 Orange Street, in the City ofWihnington, County of 

New Castle. The name of the registered agent at such address is The Corporation Trust 

Company. 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of 

Formation ofthe Company on this_ day of , 2009. 

By: 

Name: 

Title: Authorized Person 

A-1 

Franklin- LLC Operating Agreement- Leveraged Version 

8545936.5 

EXHIBITB 

FORM OF MONTHLY REPORT 

MONTHLY REPORTS 

Cashtlow and Distribution Report 

Principal collections 

+ Interest collections, net of servicing fees 

+ Loan sale proceeds 

+ Real Estate Owned ("REO") liquidation proceeds 

+Servicing Expenses Recovered 

+ Other Collections (including late fees and penalties) 

+ Release from Liquidity Reserve 

GROSS FUNDS AVAILABLE 


Servicing Expenses Paid 


Pre-Approved Charges 


NET FUNDS AVAILABLE 

+Required Working Capital Advance 

FUNDS DUE TO DISTRIBUTION ACCOUNT 

- Custodian and Paying Agent Fees 

- Prior month cumulative Working Capital Advances used for.purposes 

described in Section S.l(a)(ii)(x) and (y) ofCustodial Agreement 

-Management Fee, net of servicing fees 

-Management Fee payable to predecessor Managing Member (if applicable) 

-Management Fee payable to current Managing Member 

-Purchase Money Note Guaranty Fee 

- Reimbursements due under Reimbursement and. Security Agreement for prior 

payments under Purchase Money Note Guaranty 

- Interest due and payable on the Purchase Money Note 

-Principal due and payable on Purchase Money Note 

- Holdback for Liquidity Reserve Account 

TOTAL DISTRIBUTIONS DUE 

NET DISTRIBUTABLE CASH TO MEMBERS (ifpositive number) 

DISTRIBUTION TO MEMBERS OF COMPANY 

Distribution to Initial Member 

Distribution to Managing Member 

TOTAL DISTRIBUTIONS (Equal to Net Distributable Cash) 

Calculation ofRequired Working Capital Advance 

Net Funds Available before Working Capital Advance 


Less: Custodian and Paying Agent Fees 


B-1 

Franklin- LLC Operating Agreement 

8545936.5 
Total 

Required Working Capital Advance (Total above, ifnegative) 

Interest Collections 

Gross interest collections 

Less: Servicing Fees 

Net Interest Collections 

Management Fee Calculation 

UPB, beginning ofDue Period 

Times Management Fee rate 

Divided by 12 

Management Fee, gross 

Less: Servicing Fees paid 

Management Fee due to predecessor Managing Member (if applicable) 

Management Fee due to current Managing Member 

Allocation ofPrincipal Proceeds 

Part 1- Calculation of amount payable for items in Section 5.1(a)(i) through (vi) of 

the Custodial Agreement 

Gross Funds Available 


Less Principal collections 


Less Loan sale proceeds 


Less REO liquidation proceeds 


=Interest Proceeds available 


Items payable first from Interest Proceeds. then Principal Proceeds 


Servicing Expenses 


Pre-Approved Charges 


Custodian and Paying Agent Fees 


Prior month cumulative Working Capital Advances 


Management Fee 


. Note Guaranty Fee 


Reimbursements due Note Guarantor 


Interest due on Purchase Money Note 


Subtotal, Section 5.1 (a)(i)- (vi) 


Excess (Shortfall) in Interest Proceeds 


Part II- Allocation 

Principal collections on loan·s 


Loan sale proceeds 


REO liquidation proceeds 


Total Principal Proceeds 


- Shortfall in Interest Proceeds 


=Net Principal Proceeds for Allocation (not less than zero) 


I-2 

Franklin - LLC Operating Agreement 

8545936.5 
Percentage allocation to Note (85% or 80%) 

Principal due on Purchase Money Note 

Monthly Loan and REO Roll(orward Report:- by # and $ 

(EXAMPLE COUNT AND BALANCES) 

Loans 


Beginning pool balance (UPB) 


(+) Commitments funded 

(-) Payments received 

(-) Payoffs 

(-) UPS, transfers to REO 

(-) Write down of principal (Other) 

Ending pool balance 

REO 

Beginning UPB of REO properties 

(+) UPS on REO transfers in 

(-) Net liquidation proceeds 

(+/-) Realized Gain (Losses) 

Ending UPB of REO properties 

# 

ASSETS AMOUNT 

927 $1 ,033,143,67 4.89 

6,450.00 

7,382,315.85 

30 

2,237,068.84 

880 $ 985,140,551.23 

36 $ 14,642,495.10 

18 2,237,068.84 

(186,906.95) 

51 $15,953,623.44 

I-3 

Franklin- LLC Operating Agreement 

8545936.5 
Servicing Advances Roll(orlvard Report 

EXAMPLE BALANCES 

Balance, beginning of month 

A

$ 

Escrow 

dvances 

500,000 

(1) 

Other 

Servicing 

Advances 

$ 100,000 

Total 

Servicing 

Advances 

$ 600,000 

Advances 100,000 25,000 125,000 

Recoveries 

Balance, end of month $ 

(30,000) 

570 000 

(2) 

$ 

(5,000) 

120 000 

(2) 

$ 

(35,000) 

690 000 

(1) These may be broken out into additional fields at the discretion of the Managing Member/Servicer, 

such as breaking out the Corporate (Protective) Advances from other types of advances such as 

foreclosure costs. Servicing Advances should include those associated with REO as well as Loans. 

(2) Loan servicing system (and REO system, if separate) should include fields to capture and report 

balances in each category and the totals shown above should agree to the asset-level detail tapes 

provided by the Managing Member/S.ervicer as of each month-end. 

Working Capital Advances Report 

Balance, previous Distribution Date 

- Reimbursement, cumulative advances prior month 

+Working Capital Advance, this period 

Balance, this Distribution Date 

Liquiditv Reserve Report 

Balance, beginning ofDue Period 


Transfers In (1) 


Disbursements (1) 


Balance, end ofDue Period 


(1) Transfers In and Disbursements from the Liquidity Reserve should be reflected in the 

Cashflow and Distribution Report each month: 

(a) 	 Disbursements should be reflected as cash inflow in the line titled "Release from 

Liquidity Reserve" 

(b) 	 Transfers In should be reflected in the line titled "Holdback for Liquidity Reserve 

Account". 

I-4 


Franklin- LLC Operating Agreement 

8545936.5 
PERFORMANCE TESTS 

Delinquency Test 

As of previous Determination Date: 

UPB, Loans 60 Days Delinquent 

UPB, all Loans 

Percentage 60 Days Delinquent 

Maximum 

Performance Test Met? 

Severity Test 

Aggregate Losses incurred in Due Period 

Aggregate UPB of related Loans 

Loss% 

Maximum 

Performance Test Met? 

Principal Reduction Test 

Original 

End of Year 1 

End of Year 2 

End of Year 3 

End of Year 4 

End of Year 5 

End of Year 6 

End of Year 7 

End of Year 8 

End of Year 9 

End of Year 10 

Performance Test Met? 

Withdrawals (rom Collection Account 

60% 

YiN 

1st 

Preceding 

Determination 

Date 

50,000 

100,000 

50.0% 

YiN 


Note 


Balance 


A 

B 

AiB 

(EXAMPLE BALANCES) 

2nd 

Preceding 

Determination 

Date 

3rd 

Preceding 

Determination 

Date 

3-Month 

Total 

5,000 40,000 95,000 

5 000 

100.0% 

100,000 

4o.o% I 205,000 

46.3% I 

70% 

Outstanding 

As%of 

Original 

Maximum 

Outstanding 

As%of 

Original 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

YiN 

I-5 


Franklin- LLC Operating Agreement 

8545936.5 
Managing Member hereby certifies that all withdrawals by the Managing Member from the 

Collection Account during the relevant Due Period were made in accordance with the terms of 

the Amended and Restated Limited Liability Company Operating Agreement and the Custodial 

and Paying Agency Agreement: Y IN 

Delinquency Report 

#and$ by delinquency classification: Current,< 30, 30-60 days, 61-90 days,> 90 days, in 

foreclosure, in bankruptcy, REO 

Breakout of> 60 day delinquencies by collateral type, #and$ 

Breakout of> 60 day delinquencies by state,# and $ 

REO Report 

Listing ofREO properties held to include original loan number, date of ownership, description, 

collateral type, address, UPB (ofthe loan prior to foreclosure), net book value, listing date, 

estimated sale date, appraisal amount, original list price, current list price, cumulative Servicing 

Expenses allocable, broker name, and comments 

Modification Report 

Listing ofloans modified, to include borrower name, loan balance and terms before 

modification, loan balance and terms after modification. Show amounts ofprincipal forgiven, if 

any, and principal forbearance amounts, if any. 

Liquidation Report 

Listing ofloans and REO properties liquidated, to include borrower name, UPB, net liquidation 

proceeds, cumulative Servicing Expenses, realized loss amount 

Short Sale Report 

Listing of loans for which short sales were accepted, to include borrower name, UPB, payoff 

accepted, realized loss amount 

Judgment Report 

Listing ofJudgments obtained, to include borrower name, Judgment amount, current month and 

cumulative payments received, remaining balance 

Significant Litigation Report 

Provide a litigation summary report describing any claim or counterclaim ("claim") filed against 

the Company and/or Servicer with respect to assets subject to this Agreement, the actions taken 

I-6 


Franklin - LLC Operating Agreement 

8545936.5 
to defend such claim, aud au estimate ofthe projected exposure for: a) auy claim in which the 

Company or Servicer expects to incur more thau $10,000 in Servicing Expenses to defend such 

claim, b) auy claim in which multiple plaintiffs have joined in filing au action against the 

Company aucl/or Servicer or the same law firm has filed individual claims on behalf ofmore thau 

one plaintiff, aud c) auy claim(s) regardless ofthe dollar amount naming: (i) Franklin Bank, 

S.S.B., or (ii) FDIC (in auy capacity) as defendaut(s). Activity should be updated quarterly. 

Environmental Exposure Report 

Provide a report identifying auy assets in which the Site Assessment identified au Environmental 

Hazard together with information on the nature ofthe hazard, additional tests performed, aud the 

cost of correcting the hazard identified in the Site Assessment. 

MONTHLY LOAN-LEVEL DETAIL REPORTS 

Monthly Loan Trial Balance and Activity Report 

PROVIDE A MONTHLY LOAN-LEVEL REPORT 


IN EXCEL WITH THE FOLLOWING FIELDS: 


Current Loan Number 


Prior Servicer Loan Number 


P&l Constant 


Note Rate 


Next Due or Paid-Thru Date 


Principal collections- regular 

Principal collections - payoffs 

Principal proceeds- loan sales 

Principal Write-Off Amount 

Other Non-Cash Principal Adjustment 

Transfer to REO 

Escrow balance 


Other Advances Balance 


Interest collections- regular 


Interest collections - payoffs 


Interest collections -loan sales 


Non-Cash Interest Adjustment 


Late Charges 


Pre-Payment Penalty Paid 


Other Fee Income 


Servicing Svstem Data Download- To Initial Member 

I-7 


Franklin- LLC Operating Agreement 

8545936.5 
Provide a monthly loan-level data download in Excel format with every field populated in the 

Servicer' s loan servicing system. This requirement may be modified in the future by the Initial 

Member to include only certain specified fields. 

SEMIANNUALREPORT-TOINITMLMEMBER 

Proiected Cash Flows 

Excel model ofprojected cash flows by month, as ofJune 30 and December 31 each year. The 

model should present projected monthly cash inflows on the Loans and REO, projected outflows 

of Servicing Expenses, net monthly cash available for allocation, net monthly cash available for 

payments of amounts under the Purchase Money Note, and the amount of allocation to Initial 

Member and Private Owner under the LLC Operating Agreement ofthe Company. 

The projection should run through the final projected distribution by the Company. 

AS AVAILABLE- TO INITIAL MEMBER 

Loan Document Exception Report from the Custodian, as provided to the Company. 

I-8 


Franklin- LLC Operating Agreement 

8545936.5