Document:

exv4w2

 

Exhibit 4.2

STANDARD TERMS

to

MASTER SERVICING AGREEMENT

January 1, 2006 EDITION

FREMONT MORTGAGE SECURITIES CORPORATION

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	 ARTICLE I
	 	 	 	 
	 DEFINITIONS
	 	 	 	 
	Section 1.01. Definitions

	 	 	1	 
	 ARTICLE II
	 	 	 	 
	 ASSIGNMENT OF MORTGAGE LOANS AND TRUST ESTATE;
	 	 	 	 
	 DOCUMENTS TO BE DEPOSITED WITH THE TRUSTEE
	 	 	 	 
	 
	 	 	 	 
	Section 2.01. Trustee to Retain Possession of Documents
	 	 	6	 
	Section 2.02. Trustee to Retain Possession of Certain Insurance Policies and Documents

	 	 	6	 
	 ARTICLE III
	 	 	 	 
	 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
	 	 	 	 
	 
	 	 	 	 
	Section 3.01. General Duties of Master Servicer

	 	 	6	 
	Section 3.02. Termination of Sales/Servicing Agreements

	 	 	7	 
	Section 3.03. Enforcement of “Due-on-Sale” Clauses; Assumption Agreements

	 	 	8	 
	Section 3.04. Release of Trustee Mortgage Loan Files

	 	 	8	 
	Section 3.05. Documents, Records and Funds in Possession of Master Servicer to be
eld for Trustee

	 	 	10	 
	Section 3.06. Modification of Requirements to Servicing Provisions of the
Sales/Servicing Agreement

	 	 	11	 
	Section 3.07. Waiver by master Servicer of Certain Requirements in the
Sales/Servicing Agreement

	 	 	11	 
	Section 3.08. Assignment of Sales/Servicing Agreements

	 	 	12	 
	Section 3.09. Representations and Warranties

	 	 	12	 
	Section 3.10. Closing Certificate and Opinion

	 	 	13	 
	 ARTICLE IV
	 	 	 	 
	 INSURANCE AND BONDS
	 	 	 	 
	 
	 	 	 	 
	Section 4.01. Maintenance of Insurance and Collections Thereunder

	 	 	13	 
	Section 4.02. Payment of Premiums

	 	 	14	 
	Section 4.03. Presentment of Claims and Collection of Proceeds

	 	 	14	 
	Section 4.04. Renewal of Primary Mortgage Insurance Policies

	 	 	15	 
	 ARTICLE V
	 	 	 	 
	 ADVANCES BY MASTER SERVICER FOR P & I
	 	 	 	 
	 ADVANCES, ATTORNEYS’ FEES AND OTHER COSTS
	 	 	 	 
	 
	 	 	 	 
	Section 5.01. Recoverable Advances

	 	 	15	 
	Section 5.02. Non-Recoverable Advances

	 	 	16	 
	 ARTICLE VI
	 	 	 	 
	 PAYMENTS BY MASTER SERVICER
	 	 	 	 
	 
	 	 	 	 
	Section 6.01. General

	 	 	16	 

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	 	 	Page
	Section 6.02. Deposits Into Master Custodial P&I Account

	 	 	17	 
	Section 6.03. Withdrawals From Master Custodial P&I Accounts

	 	 	17	 
	Section 6.04. Payments for Additional Interest In Connection with Certain
Prepayments and Other Liquidations

	 	 	18	 
	Section 6.05. Payments for the Repurchase of Loans

	 	 	19	 
	Section 6.06. Payments for Losses due to Mortgagor Bankruptcies

	 	 	20	 
	 ARTICLE VII
	 	 	 	 
	 COMPENSATION AND DISBURSEMENTS TO MASTER SERVICER
	 	 	 	 
	 
	 	 	 	 
	Section 7.01. Compensation to the Master Servicer

	 	 	20	 
	Section 7.02. Authorized Disbursements from the Collateral Proceeds Account

	 	 	20	 
	 ARTICLE VIII
	 	 	 	 
	 REPORTS AND CERTIFICATE TO TRUSTEE
	 	 	 	 
	 
	 	 	 	 
	Section 8.01. Monthly Reports to the Issuing Entity and Trustee

	 	 	21	 
	Section 8.02. Annual Statement as to Compliance

	 	 	21	 
	Section 8.03. Annual Reports to the Issuing Entity and Trustee

	 	 	22	 
	Section 8.04. Commission Reporting

	 	 	23	 
	 ARTICLE IX
	 	 	 	 
	 MERGER OR CONSOLIDATION OF MASTER SERVICER; RESIGNATION
	 	 	 	 
	 
	 	 	 	 
	Section 9.01. Merger or Consolidation

	 	 	31	 
	Section 9.02. Assignment or Transfer of Master Servicing Agreement

	 	 	31	 
	Section 9.03. Resignation of Master Servicer

	 	 	31	 
	 ARTICLE X
	 	 	 	 
	 DEFAULT
	 	 	 	 
	 
	 	 	 	 
	Section 10.01. Events of Default by Master Servicer

	 	 	32	 
	Section 10.02. Other Remedies of Trustee

	 	 	33	 
	 ARTICLE XI
	 	 	 	 
	 DUTIES OF THE MASTER SERVICER
	 	 	 	 
	 
	 	 	 	 
	Section 11.01. General Bond Administration

	 	 	33	 
	Section 11.02. REMIC Bond Administration

	 	 	35	 
	Section 11.03. Additional Bond Administration Rights and Duties of Master Servicer

	 	 	36	 
	Section 11.04. Additional Costs Payable by Master Servicer

	 	 	36	 
	 ARTICLE XII
	 	 	 	 
	 MISCELLANEOUS
	 	 	 	 
	 
	 	 	 	 
	Section 12.01. No Assignment or Delegation of Duties by Master Servicer

	 	 	36	 
	Section 12.02. Binding Nature of Agreement; Assignment

	 	 	37	 
	Section 12.03. Entire Agreement

	 	 	37	 
	Section 12.04. Amendments and Supplements

	 	 	37	 
	Section 12.05. Controlling Law

	 	 	37	 
	Section 12.06. Indulgences, No Waivers

	 	 	37	 
	Section 12.07. Titles Not to Affect Interpretation

	 	 	38	 
	Section 12.08. Attorney’s Fees

	 	 	38	 

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EXHIBITS

	 	 	 
	Exhibit A

	 	Monthly Bond Remittance Report
	Exhibit B

	 	Relevant Servicing Criteria
	Exhibit C

	 	Form 10-D, Form 8-K and Form 10-K Reporting Responsibility
	Exhibit D

	 	Form of Additional Disclosure Notification
	Exhibit E

	 	Form of Servicer Certification

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RECITALS

     A master servicer identified in the Master Servicing Agreement of which these Standard Terms
are a part (the “Master Servicer”) intends to act as “master servicer” on behalf of Fremont
Mortgage Securities Corporation (“FMSC”) for one or more Series of collateralized structured
securities (the “Securities”) pursuant to an indenture between FMSC or an owner trust created by it
(the “Issuing Entity”) and the trustee identified in such indenture (the “Trustee”). The
Securities are to be secured by mortgage loans that have been sold or pledged to the Issuing Entity
by FMSC (the “Mortgage Loans”). Collection of the scheduled principal and interest payments on the
Mortgage Loans, plus pass-through payments of prepayments and liquidation proceeds, will be paid to
the Trustee on behalf of the Issuing Entity for the payment of the principal and interest on the
Securities.

     FMSC has entered into Sales/Servicing Agreements with various Servicers acceptable to the
Master Servicer and has assigned its interest in the Sales/Servicing Agreements either to the
Issuing Entity or to one of its subsidiaries, which, in turn, has assigned its interest to the
Issuing Entity. Under the terms of its Sales/Servicing Agreement, each Servicer has agreed to
service the mortgage loans sold by it to FMSC. To provide for the administration and servicing of
the Mortgage Loans that secure payment of the Securities, including the orderly and timely
collection of scheduled payments of principal and interest and the advance of such payments by the
Master Servicer to the extent recoverable from Liquidation Proceeds, Insurance Proceeds, or
subsequent payments by the Borrower, the Issuing Entity and FMSC, on behalf of itself or one of its
subsidiaries, have retained the Master Servicer to act as a “master servicer” for all Mortgage
Loans and to manage and supervise the administration and servicing of the Mortgage Loans by all
Servicers for the benefit of the Issuing Entity, FMSC, the Trustee and the Securityholders.

STANDARD TERMS

     NOW THEREFORE, in consideration of the mutual covenants and obligations contained below and
for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the
Issuing Entity, FMSC and Master Servicer agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.01. Definitions.

     The following terms shall have the meanings ascribed to them below, unless the context or use
otherwise clearly indicates another or different meaning and intent. Moreover, such meanings are
equally applicable to the singular and the plural forms of such terms, as the context may require.
Capitalized terms not otherwise defined in

 

 

these Standard Terms shall have the meanings ascribed to them in the Sales/Servicing
Agreement. (Copies of the Sales/Servicing Agreement are held by the Master Servicer and the
Issuing Entity at their respective places of business located at the addresses specified in the
Master Servicing Agreement.)

     “Advance Claims Endorsement”: An endorsement to the Pool Insurance Policy which
obligates the Mortgage Insurer that issued such Pool Insurance Policy to advance delinquent
principal and interest installments on any Mortgage Loan.

     “Collateral Proceeds Account”: A trust account established by the Trustee with a
bank, savings and loan association or other depository to which the Master Servicer shall remit
from time to time the funds the Master Servicer has collected and deposited in a Master Custodial
P&I Account in respect of the Mortgage Loans pledged to the Trustee as collateral for Securities.

     “Event of Default”: As provided in Section 10.01 of these Standard Terms.

     “FMSC”: Fremont Mortgage Securities Corporation, a Delaware corporation.

     “FNMA Guidelines”: The guidelines contained in the FNMA Seller’s Guide and in the
FNMA Servicing Guide pertaining to one-to-four family, first-lien, conventional residential
mortgage loans, and such other rules, regulations and guidelines adopted by FNMA that establish
eligibility requirements for the purchase of conventional, residential mortgage loans by FNMA or
establish loan service requirements for mortgage loans purchased by FNMA, as amended or
supplemented from time to time.

     “Indenture”: A trust indenture between the Trustee and the Issuing Entity under which
Securities are issued, as amended or supplemented from time to time.

     “Issuing Entity”: An affiliate of FMSC which has issued Securities secured by
Mortgage Loans.

     “Master Custodial P & I Account”: An account maintained by the Master Servicer
specifically for the collection from any Servicer of the payment of principal and interest on
mortgage loans purchased by FMSC.

     “Master Servicer Remittance Date”: The date specified in the Master Servicing
Agreement, which is the day each month on which the Master Servicer will remit funds to the
Trustee.

     “Master Servicer”: The Person designated and appointed by the Trustee to act as
“master servicer” pursuant to Sections 9.03 and 10.01 of these Standard Terms.

     “Master Servicer Errors and Omissions Insurance Policy”: Insurance coverage in an
amount and otherwise in form and substance acceptable under FNMA guidelines, insuring the Master
Servicer as the named insured against liability for damages arising out of errors, omissions or
mistakes committed in the performance of the services and other obligations required of the Master
Servicer under its Master Servicing Agreement

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with the Issuing Entity and, unless waived by the Master Servicer, naming the Trustee as an
additional insured, containing a severability of interests provision, but no other exclusion or
other provision that would limit the liability of any insured to any other insured.

     “Master Servicer Fidelity Bond”: A fidelity bond issued by an insurer and in form and
substance acceptable under FNMA Guidelines, under which such insurer (a) agrees to indemnify the
Master Servicer for all losses sustained as a result of any theft, embezzlement, fraud or other
dishonest act on the part of the Master Servicer’s directors, officers or employees, and (b)
provides for limits of liability under such bond for each director, officer or employee of not less
than an amount required by such guidelines.

     “Master Servicing Agreement”: Each agreement between the Issuing Entity and the
Master Servicer under which the Master Servicer agrees to supervise the Servicers of the Mortgage
Loans and to assume certain other obligations in accordance with such agreement and the terms and
conditions of these Standard Terms, as supplemented and amended from time to time.

     “Monthly Remittance Report”: The monthly report to be provided by the Master Servicer
to the Trustee pursuant to Section 8.01 of these Standard Terms, providing such information as is
set forth in Exhibit A.

     “Monthly P & I Advance”: An advance of funds by the Master Servicer pursuant to the
Master Servicing Agreement or by any other institution pursuant to an Advance Claims Endorsement to
pay delinquent principal and interest installments (net of related servicing fees) on any Mortgage
Loan.

     “Mortgage Loans”: The loans evidenced by the Notes and Security Instruments referred
to in the Mortgage Loan Schedule attached to the Indenture Supplement, respectively, which the
Issuing Entity has pledged to the Trustee as collateral for the Securities pursuant to the
Indenture.

     “Mortgagor Bankruptcy Bond”: A surety bond, insurance policy, letter of credit or
other credit instrument, in form and substance satisfactory to the Issuing Entity and the Trustee,
issued by an insurance company, surety company, or by a bank, trust company, savings and loan
association or other financial institution acceptable to the Trustee providing coverage against
loss resulting from any order, decree or other action by a court in connection with a bankruptcy
proceeding that reduces the amount of indebtedness secured by any Security Instrument or the
interest rate of any Note.

     “Non-Recoverable Advance”: As provided in Section 5.01(f) to these Standard Terms.

     “Officer’s Certificate”: A certificate signed by a Servicing Officer.

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     “Opinion of Counsel”: A written opinion of counsel to the Master Servicer, which
opinion is as to form and substance, and is issued by counsel, reasonably acceptable to the
Trustee.

     “Purchase Price”: With respect to a Mortgage Loan purchased from the Trust Estate, an
amount equal to the unpaid Principal Balance of the Mortgage Loan plus thirty days interest thereon
at the Note Rate.

     “Rating Agency”: The rating agency or rating agencies that rate the Securities at the
request of the Issuing Entity at the time of issuance of the Securities.

     “REMIC Election”: An election to treat the collateral pledged to secure the
Securities as a real estate mortgage investment conduit (a “REMIC”) pursuant to Section 860D of the
Code.

     “REMIC Pool”: The collateral pledged to secure the Securities as to which a REMIC
Election is made.

     “Sales/Servicing Agreement”: Each of the several Sales/Servicing Agreements between a
Servicer and FMSC under which the Servicer has agreed to service certain Mortgage Loans, and in
case any of such Sales/Servicing Agreements is hereafter terminated, any substitute Sales/Servicing
Agreement between FMSC and a substitute servicer, together with all amendments or supplements to
the foregoing as may be entered into from time to time.

     “Securities”: Obligations of the Issuing Entity secured by Mortgage Loans and issued
pursuant to the terms of an Indenture.

     “Securityholder”: A Person whose name appears as the holder of Securities on the
register maintained by or for an Issuing Entity.

     “Series Year”: The twelve month period following the date of the Master Servicing
Agreement and each anniversary thereof.

     “Servicer”: The mortgage loan servicing company that has entered into a
Sales/Servicing Agreement with FMSC and is servicing Mortgage Loans, its successors and permitted
assigns, and any other Person that shall enter into a substitute Sales/Servicing Agreement with the
consent of the Master Servicer.

     “Servicing Function Participant”: Any Sub-Servicer or Subcontractor of a Servicer,
the Master Servicer, the Trustee, the Custodian or the Trustee, respectively.

     “Servicing Officer”: Any officer of the Master Servicer who is responsible for the
administration and supervision of servicing of the Mortgage Loans.

     “Special Hazard Insurance Policy”: A casualty insurance policy, in form and substance
satisfactory to the Issuing Entity and the Trustee, insuring the Trustee

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against loss sustained by damage or destruction to Mortgaged Premises, which loss is not
insured by a Hazard Insurance Policy or Flood Insurance Policy (if any).

     “Standard Terms to Master Servicing Agreement” or “Standard Terms”: These Standard
Terms and all exhibits, schedules and appendices hereto, as amended and supplemented from time to
time.

     “Subcontractor”: Any vendor, subcontractor or other Person that is not responsible
for the overall servicing of Mortgage Loans but performs one or more discrete functions identified
in Item 1122(d) of Regulation AB with respect to Mortgage Loans under the direction or authority of
any Servicer (or a Sub-Servicer of any Servicer), the Master Servicer, the Trustee, the Custodian
or the Trustee.

     “Sub-Servicer”: Any Person that services Mortgage Loans on behalf of a Servicer, and
is responsible for the performance (whether directly or through sub-servicers or Subcontractors) of
servicing functions required to be performed under this Agreement, any related Servicing Agreement
or any sub-servicing agreement that are identified in Item 1122(d) of Regulation AB.

     “Trust Estate”: The corpus of the trust created by the Indenture consisting of (i)
the Mortgage Loans, excluding all payments of principal and interest due before the Cut-Off Date;
(ii) such funds as from time to time are held in the Collateral Proceeds Account; (iii) such funds
as from time to time are held in the Master Custodial P & I Account and the Custodial P & I
Accounts; (iv) the Mortgaged Premises that secure a Mortgage Loan which have been acquired by
foreclosure (of any type) or by deed-in-lieu of foreclosure; (v) any Insurance Proceeds or
Liquidation Proceeds to which the holder of any Mortgage Loan or the Trustee is entitled; (vi) all
right, title and interest of the Issuing Entity under the Master Servicing Agreement; (vii) all
rights of FMSC pursuant to the respective Sales/Servicing Agreements relative to the Servicers’
obligations with respect to the Mortgage Loans; and (viii) any other tangible or intangible
property, rights or benefits that were granted, assigned or conveyed to the Trustee under the
Indenture as collateral for the Securities.

     “Trust Receipt”: As provided in Section 3.04(b) of these Standard Terms.

     “Trustee”: The trustee acting as “trustee” for the Bondholders under the Indenture.

     “Trustee Mortgage Loan File”: As provided in Section 2.01 of these Standard Terms.

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ARTICLE II

ASSIGNMENT OF MORTGAGE LOANS AND TRUST ESTATE;

DOCUMENTS TO BE DEPOSITED WITH THE TRUSTEE

     Section 2.01. Trustee to Retain Possession of Documents.

     Concurrently with the execution and delivery of the Master Servicing Agreement, the Issuing
Entity shall have pledged, transferred and assigned to the Trustee, as collateral for the payment
of principal and interest on the Securities, all right, title and interest of the Issuing Entity in
and to the Trust Estate. Prior to or contemporaneously with the execution of such Master Servicing
Agreement, the Issuing Entity shall have delivered or caused to be delivered to the Trustee or its
agent with respect to each Mortgage Loan certain documents and instruments as specified in Section
362 of the Sales/Servicing Agreement, which shall be referred to in these Standard Terms as the
“Trustee Mortgage Loan File.” The Trustee or its agent shall retain possession of these documents
and shall release them only under the circumstances specified herein.

     Section 2.02. Trustee to Retain Possession of Certain Insurance Policies and
Documents.

     The Trustee or its agent shall also retain possession and custody of the originals of any
Special Hazard Insurance Policy, any Pool Insurance Policy, any Mortgagor Bankruptcy Bond, and any
certificates of renewal as to the foregoing as may be issued from time to time as contemplated by
these Standard Terms. Until the Bonds have been paid in full and the Issuing Entity otherwise has
fulfilled its obligations under the Indenture, the Trustee or its agent shall also retain
possession and custody of each Trustee Mortgage Loan File in accordance with and subject to the
terms and conditions of the Indenture. The Master Servicer shall promptly deliver to the Trustee
or its agent upon the execution or receipt thereof, the originals of any Special Hazard Insurance
Policy, any Pool Insurance Policy, any Mortgagor Bankruptcy Bond, and any certificates of renewal
thereof, and such other documents or instruments that constitute portions of the Trustee Mortgage
Loan File that come into the possession of the Master Servicer from time to time.

ARTICLE III

ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

     Section 3.01. General Duties of Master Servicer.

     For and on behalf of the Trustee, FMSC, and the Securityholders, the Master Servicer shall
supervise, administer, monitor and oversee the servicing of the Mortgage Loans by the Servicers and
the observance and performance by the Servicers of all services, duties, responsibilities and
obligations that are to be observed or performed by them under their respective Sales/Servicing
Agreements. Upon the request of a Servicer, the Master Servicer will not unreasonably withhold its
consent to the transfer

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of the servicing obligations from such Servicer to another Servicer, provided, however, that
the new Servicer executes a new Sales/Servicing Agreement whose servicing provisions are identical
to the previous Sales/Servicing Agreement, and the new Servicer has been approved by the Master
Servicer. Moreover, the Master Servicer agrees to maintain the Master Servicer Errors and
Omissions Policy and the Master Servicer Fidelity Bond in full force and effect throughout the term
of the Master Servicing Agreement.

     During the term of the Master Servicing Agreement the Master Servicer shall consult fully with
each of the Servicers as may be necessary from time to time to perform and carry out the Master
Servicer’s obligations hereunder and receive, review and evaluate all reports, information and
other data that are provided to the Master Servicer by each Servicer and otherwise exercise
reasonable efforts to cause each Servicer to perform and observe the covenants, obligations and
conditions to be performed or observed by it under its Sales/Servicing Agreement. If any Servicer
materially breaches or fails to perform or observe any material obligations or conditions of its
Sales/Servicing Agreement, the Master Servicer shall promptly deliver to the Trustee, FMSC and the
Issuing Entity an Officer’s Certificate certifying that such Servicer is in default and describing
the events and circumstances giving rise to the default and what action (if any) has been, or is to
be, taken by the Servicer to cure the default and setting forth what action (if any) that the
Master Servicer plans to take.

     Section 3.02. Termination of Sales/Servicing Agreements.

     If the Master Servicer or the Trustee terminates any Sales/Servicing Agreement with a
Servicer, the Master Servicer, at its election, shall enter into a substitute servicing agreement
with FMSC, or arrange for another mortgage loan service company acceptable to it to do so, under
which such mortgage loan service company or the Master Servicer, as the case may be, shall assume,
satisfy, perform and carry out all liabilities, duties, responsibilities and obligations that are
to be, or otherwise were to have been, satisfied, performed and carried out by the Servicer under
such terminated Sales/Servicing Agreement, regardless whether such liabilities, duties,
responsibilities or obligations shall have accrued before or after the termination of such
Sales/Servicing Agreement, including but not limited to, the Servicer’s obligations to purchase
certain Mortgage Loans and any other liabilities or obligations of the Servicer arising from any
breach by the Servicer of any representations and warranties contained in its Sales/Servicing
Agreement causing a material impairment in the value of such Mortgage Loans. If the Master
Servicer does not elect to enter into a substitute Sales/Servicing Agreement with FMSC, the Master
Servicer shall nevertheless assume, satisfy, perform and carry out all obligations which otherwise
were to have been satisfied, performed and carried out by the Servicer under such terminated
Sales/Servicing Agreement until a substitute mortgage loan service company has been appointed and
designated and a substitute Sales/Servicing Agreement has been entered into by FMSC and such
substitute Servicer.

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     Section 3.03. Enforcement of “Due-on-Sale” Clauses; Assumption Agreements.

     (a) Enforcement. Each Sales/Servicing Agreement requires the Servicer to enforce any
“due-on-sale clause” contained in any Note or Security Instrument to the extent that such
enforcement is permissible by law and governmental regulation and will not adversely affect or
jeopardize coverage under any Primary Mortgage Insurance Policy or any Pool Insurance Policy;
provided, however, that if the Servicer reasonably expects that the enforceability or legality of
the “due-on-sale clause” will be litigated, the Servicer shall promptly notify the Master Servicer
and each Mortgage Insurer and obtain their written approval before initiating any enforcement
proceedings. The Master Servicer shall grant such approval if, in its and its counsel’s reasonable
judgment, such enforcement is permissible by law and governmental regulation, will not adversely
affect or jeopardize coverage under any Primary Mortgage Insurance Policy or any Pool Insurance
Policy and will not result in advances by or other expenses to the Servicer or the Master Servicer
that are not recoverable from Liquidation Proceeds or Insurance Proceeds relating to the Mortgage
Loan.

     (b) Assumptions. Subject to the limitation specified in Subsection 3.03(a) above and
to such other limitations or conditions in the related Sales/Servicing Agreement, whenever a
Mortgaged Premises is to be conveyed to a Person by a Borrower and the Person is to enter into an
assumption agreement or modification agreement or supplement to the Note or the Security Instrument
that requires the signature of the Trustee, or if an instrument of release signed by the Trustee is
required to release the Borrower from liability on the Mortgage Loan, the Master Servicer shall
obtain from the Servicer the assumption agreement with the Person to whom the Mortgage Premises is
to be conveyed and such modification agreement or supplement to the Note or the Security Instrument
or other instruments as are reasonable or necessary to carry out the terms of the Note or the
Security Instrument or otherwise to comply with any applicable laws regarding assumptions and/or
the transfer of the Mortgaged Premises to such Person, and deliver them to the Trustee for
signature with a letter explaining the nature of such documents and the reason or reasons why the
Trustee’s signature is required. With such letter, the Master Servicer shall also deliver to the
Trustee an Officer’s Certificate from the applicable Servicer as provided in Section 741 of the
Sales/Servicing Agreement. Upon the closing of the transactions contemplated by such documents,
the Master Servicer shall cause the fully executed and duly recorded (where appropriate) originals
of the assumption agreement, the release (if any) or the modification or supplement to the Note or
the Security Instrument to be delivered to the Trustee or its agent and deposited in the Trustee
Mortgage Loan File.

     Section 3.04. Release of Trustee Mortgage Loan Files.

     (a) Payments-in-Full. The Sales/Servicing Agreement requires that upon the
payment-in-full of any Mortgage Loan, the Servicer shall deposit the proceeds thereof in the
appropriate Custodial P & I Account maintained by the Servicer, and prepare and deliver to the
Master Servicer with respect to the Security Instrument which secures the Note, a request for
reconveyance, deed or conveyance or release or satisfaction of the

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Security Instrument or other appropriate instrument releasing the Mortgaged Premises from the
lien represented by the Security Instrument. Upon receipt of the certificate (RMIC Form 340) as
required by the Sales/Servicing Agreement, the Master Servicer shall deliver such certificate to
the Trustee, together with a certificate of a Servicing Officer setting forth the Master Servicer’s
recommendations as to what action should be taken by the Trustee in respect of such documents. In
the event the Trustee Mortgage Loan File with respect to such Mortgage Loan is released, the
Trustee or its agent shall send such Trustee Mortgage Loan File to the Servicer for recordation of
the mortgage release or satisfaction in the proper recording office.

     (b) Release of Trustee Mortgage Loan File for Other Purposes. From time to time as is
appropriate for the servicing or foreclosure of a Mortgage Loan or the acquisition of Mortgaged
Premises in lieu of foreclosure or for the making of any claim against or collection under any
Mortgage Insurance Policy, Flood Insurance Policy, Hazard Insurance Policy, Mortgagor Bankruptcy
Bond, the Special Hazard Insurance Policy, the Servicer Fidelity Bond, the Servicer Errors and
Omissions Policy, or for purposes of effecting a partial release of any Mortgaged Premises from the
lien of the Security Instrument or for making any corrections to the Note or the Security
Instrument or other documents constituting the Trustee Mortgage Loan File, the Master Servicer
shall deliver to the Trustee, with a copy to the Issuing Entity, (i) an officer’s certificate of
the Servicer (RMIC Form 340) as required under Section 731 or Section 742 of the Sales/Servicing
Agreement, and shall certify as to the reason for such release and that such release will not
invalidate the insurance coverage provided in respect to the Mortgage Loan under any of the
foregoing insurance policies, and (ii) an executed Trust Receipt (RMIC Form 347), executed by an
officer of the Lender or by a Servicing Officer, designating whether the Trustee Mortgage File, or
the part thereof requested, shall be released to the Master Servicer or the Servicer. Upon receipt
of the foregoing, the Issuing Entity will cause the Trustee or its agent to deliver to the Master
Servicer, or the Servicer if the Master Servicer so requests, the Trustee Mortgage Loan File or
documents so requested. Subject to the further limitations in this Section 3.04(b) below, the
Master Servicer shall cause the Trustee Mortgage Loan File or documents so released to be returned
to the Trustee or its agent when the need therefor by the Master Servicer or Servicer no longer
exists, unless the Mortgage Loan is liquidated and the proceeds thereof are deposited in a
Custodial P & I Account, in which case the Issuing Entity shall cause the Trustee to deliver the
Trust Receipt to the Master Servicer. If a Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Premises as authorized by its Sales/Servicing Agreement, the
Master Servicer shall deliver or cause to be delivered to the Trustee, for signature, as
appropriate, any court pleadings, request for trustee’s sale or other documents necessary to such
foreclosure or to any legal action brought to obtain judgment against the Borrower on the Note or
the Security Instrument or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Note or the Security Instrument or otherwise available at law or in equity.
Together with such documents or pleadings, the Master Servicer shall deliver to the Trustee an
officer’s certificate of the Servicer as required under Section 731 or Section 742 of the
Sales/Servicing Agreement requesting that such pleadings or documents be executed by the Trustee
and a Servicing Officer shall certify as to the reason such documents or pleadings are

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required and that the execution and delivery thereof by the Trustee will not invalidate the
insurance coverage under the Special Hazard Insurance Policy, Flood Insurance Policy (if any), or
Mortgagor Bankruptcy Bond or invalidate or otherwise affect the lien of the Security Instrument
except for the termination of such lien upon completion of the foreclosure. Notwithstanding the
foregoing, the Master Servicer shall cause possession of any Trustee Mortgage Loan File or
documents therein which have been released by the Trustee to be retained at all times by the Master
Servicer or the Servicer, if appropriate, unless (i) the Mortgage Loan has been liquidated and the
Insurance Proceeds or Liquidation Proceeds relating to the Mortgage Loan have been deposited in a
Custodial P & I Account or (ii) the Trustee Mortgage Loan File or documents have been delivered to
an attorney or to a public trustee or other public official as required by law for purposes of
initiating or pursuing legal action or other proceedings for the foreclosure of the Mortgage
Premises and the Master Servicer has delivered to the Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which the Trustee Mortgage Loan File or
documents were delivered and the purpose or purposes of such delivery.

     Section 3.05. Documents, Records and Funds in Possession of Master Servicer to be Held
for Trustee.

     Notwithstanding other provisions of the Master Servicing Agreement, the Master Servicer shall
transmit to the Trustee as required by the Master Servicing Agreement and the Sales/Servicing
Agreement all documents and instruments coming into the possession of the Master Servicer from time
to time and shall account fully to the Trustee and FMSC for all funds received by the Master
Servicer in the Master Custodial P & I Account or which otherwise are collected by the Master
Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any Mortgage Loan. All
Trustee Mortgage Loan Files, Lender Mortgage Loan Files and funds collected or held by, or under
the control of, the Master Servicer in respect of any Mortgage Loans, whether from the collection
of principal and interest payments or from Liquidation Proceeds or Insurance Proceeds, including
but not limited to, any funds on deposit in the Master Custodial P & I Account and in any Custodial
P & I Account, shall be held by the Master Servicer for and on behalf of the Trustee, FMSC and the
Securityholders and shall be and remain the sole and exclusive property of the Trustee. The Master
Servicer also agrees that it shall not create, incur or subject any Lender Mortgage Loan File,
Trustee Mortgage Loan File or funds that are deposited in any Custodial P & I Account or Custodial
T & I Reserve Account, in the Master Custodial P & I Account and or any funds that otherwise are or
may become due or payable to the Trustee, to any claim, lien, security interest, judgment, levy,
writ of attachment or other encumbrance, nor assert by legal action or otherwise any claim or right
of set-off against any Lender Mortgage Loan File or Trustee Mortgage Loan File or any funds
collected on, or in connection with, a Mortgage Loan except, however, that the Master Servicer
shall be entitled to set-off against and deduct from any such funds any amounts that are properly
due and payable to the Master Servicer under this Agreement. The Master Servicer hereby
acknowledges that concurrently with the execution of the Master Servicing Agreement, the Trustee
shall have acquired and shall hold a security interest in the Lender Mortgage Loan Files and
Trustee Mortgage Loan Files (and in all Mortgage

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Loans represented by such Lender Mortgage Loan Files and Trustee Mortgage Loan Files) and in
all funds now or hereafter held by, or under the control of, a Servicer or the Master Servicer that
are collected by any Servicer or the Master Servicer in connection with the Mortgage Loans, whether
as scheduled installments or principal or interest or as full or partial prepayments of principal
or interest or as Liquidation Proceeds or Insurance Proceeds, and in all proceeds of the foregoing
and proceeds of proceeds (but excluding any Servicing Fees or other amounts to which the Servicer
is entitled under its Sales/Servicing Agreement or the Master Servicer is entitled to under the
Master Servicing Agreement); and the Master Servicer agrees that so long as the Mortgage Loans are
assigned to and held by the Trustee, all Lender Mortgage Loan Files and Trustee Mortgage Loan Files
(and any documents or instruments constituting a part of such files) and such funds which come into
the possession or custody of, or which are subject to the control of, the Master Servicer shall be
held by the Master Servicer for and on behalf of the Trustee as the Trustee’s agent and bailee for
purposes of perfecting the Trustee’s security interest therein as provided by the applicable
uniform commercial code or other laws.

     Section 3.06. Modification of Requirements to Servicing Provisions of the Sales/Servicing
Agreement.

     Subject to the prior written approval of the Issuing Entity, FMSC and the Trustee, the Master
Servicer from time to time may issue to any Servicer, to the extent permitted by such Servicer’s
Sales/Servicing Agreement, such modifications and amendments to the Sales/Servicing Agreement that
the Master Servicer deems necessary or appropriate to confirm or carry out more fully the intent
and purpose of the Sales/Servicing Agreement and the duties, responsibilities and obligations to be
performed by the Servicer thereunder. Such consents by the Issuing Entity, FMSC and the Trustee
will not be unreasonably withheld. Prior to the issuance of any modification or amendment, the
Master Servicer shall deliver to the Trustee, with a copy to the Issuing Entity and FMSC, an
Officer’s Certificate setting forth (i) the provision that is to be modified or amended, (ii) the
modification or amendment that the Master Servicer desires to issue and (iii) the reason or reasons
for such proposed amendment or modification.

     Section 3.07. Waiver by master Servicer of Certain Requirements in the Sales/Servicing
Agreement.

     In addition to any other powers granted the Master Servicer, the Master Servicer is
specifically hereby authorized, in its sole discretion, to waive compliance by any Servicer with:

     (a) the requirement in the Sales/Servicing Agreement that the Fidelity Bond and Errors and
Omissions Policy name FMSC and the Master Servicer as additional obligees or insureds;

     (b) the requirement in the Sales/Servicing Agreement that the Errors and Omissions Policy
contain a severability of interests provisions; and

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     (c) the requirement in the Sales/Servicing Agreement that property taxes and insurance
premiums be collected on any Mortgage Loan with a Loan-to-Value in excess of 80% and deposited in a
Custodial T & I Account either (i) on a loan by loan basis for a Servicer whose Errors and
Omissions Policy is in an amount equal to at least $1 million or (ii) on an over-all Servicer basis
for a Servicer whose Errors and Omissions Policy is in an amount equal to at least $5 million.

     Section 3.08. Assignment of Sales/Servicing Agreements.

     Pursuant to Section 140 of the Sales/Servicing Agreement, without the consent of the Master
Servicer, a Servicer may not transfer or assign all or substantially all of its rights, benefits or
privileges under any Sales/Servicing Agreement to any other Person nor delegate to or subcontract
with, nor authorize or appoint, any other Person to perform all or substantially all of the
Servicer’s duties, covenants or obligations to be performed by the Servicer under the
Sales/Servicing Agreement. The Master Servicer agrees that on written application from a Servicer,
it will consider promptly such a request to transfer and/or delegate and will not unreasonably
withhold its consent to such transfer and/or delegation.

     Section 3.09. Representations and Warranties.

     The Master Servicer hereby represents and warrants to the Issuing Entity, the Trustee, FMSC,
and the underwriters for the Securities, and at all times during the terms of each Master Servicing
Agreement shall be deemed to represent and warrant, that:

     (a) The Master Servicer has been duly incorporated and is validly existing in good standing
under the laws of the jurisdiction of its incorporation and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction in which the
performance of its duties under the Master Servicing Agreement would require such qualification;
the Master Servicer holds all material licenses, certificates and permits from all governmental
authorities necessary for the conduct of its business and has received no notice of proceedings
relating to the revocation of any such license, certificate or permit, which singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would materially affect
the conduct of the business, results of operations, net worth or condition (financial or otherwise)
of the Master Servicer; and the Master Servicer will have the corporate power and authority to
conduct its business as required or contemplated by the Master Servicing Agreement and to perform
the covenants and obligations to be performed by it hereunder.

     (b) The execution and delivery by the Master Servicer of the Master Servicing Agreement is
within the corporate power of the Master Servicer and has been duly authorized by all necessary
corporate action on the part of the Master Servicer; and neither the execution and delivery of the
Master Servicing Agreement by the Master Servicer, nor the consummation by the Master Servicer of
the transactions herein contemplated, nor compliance with the provisions hereof by the Master
Servicer, will (1) conflict with or result in a breach of, or will constitute a default under, any
of the

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provisions of the certificate of incorporation or by-laws of the Master Servicer or any law,
governmental rule or regulation, or any judgment, decree or order binding on the Master Servicer or
its properties, or any of the provisions of any indenture, mortgage, deed of trust, contract or
other instrument to which the Master Servicer is a party or by which it is bound or (2) result in
the creation or imposition of any lien, charge or encumbrance upon any of its properties pursuant
to the terms of any such indenture, mortgage, deed of trust, contract or other instrument.

     (c) The Master Servicing Agreement has been duly executed and delivered by the Master Servicer
and constitutes a legal, valid and binding agreement of the Master Servicer enforceable against the
Master Servicer in accordance with its terms, subject to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency or other similar laws affecting the enforcement of
creditors’ rights generally and to general principles of equity.

     Section 3.10. Closing Certificate and Opinion.

     On or before the date of closing of a series of Securities, the Master Servicer will deliver
to the Issuing Entity an Officer’s Certificate, dated the date of the closing of such series of
Securities, confirming that the representations and warranties contained in Section 3.09 are true
and correct as of such date, and that the underwriters of such series of Securities shall be
entitled to rely thereon. The Master Servicer shall cause to be delivered to the underwriters of
such series of Securities an opinion of counsel, dated the date of closing on such series of
Securities, in form and substance satisfactory to such underwriters, as to the due authorization,
execution and delivery of the Master Servicing Agreement by the Master Servicer and the
enforceability thereof. The Master Servicer shall also deliver a Certificate dated the date of
closing on such series of Securities, signed by two officers, as required under the Indenture, to
the effect that:

     (a) No Event of Default by the Master Servicer has occurred hereunder;

     (b) To the extent required by any Rating Agency rating the Securities, a guarantee of the
performance of certain obligations of the Master Servicer hereunder has been provided; and

     (c) The Master Servicer maintains such errors and omissions insurance and fidelity bond
coverage as is required hereunder.

ARTICLE IV

INSURANCE AND BONDS

     Section 4.01. Maintenance of Insurance and Collections Thereunder.

     The Master Servicer shall maintain and keep in full force and effect during the term of the
Master Servicing Agreement each Pool Insurance Policy (and any endorsement thereto), the Mortgagor
Bankruptcy Bond and the Special Hazard

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Insurance Policy and shall provide from time to time to the surety or insurer under each such
policy or bond all reports and other information required thereby; provided, however, that the
Trustee must pay when due the premium or premiums due each surety or insurance company issuing such
policies and bonds. In the event (i) that any insurance company or surety company for any of the
foregoing policies or bonds shall be unable to fulfill its obligations under such bond or policy,
or (ii) any Rating Agency shall lower or propose to lower the rating on the Securities due to the
financial condition of such insurance company or surety company, the Master Servicer upon approval
of the Trustee shall terminate such policy or bond and secure replacement policies in form and
substance satisfactory to the Trustee with coverage comparable to that which has been terminated.
A replacement policy or bond shall also be obtained for any such policy or bond that is cancelled
or terminated for any reason. Notwithstanding the foregoing, if the cost of any such replacement
policy or bond shall be greater than the cost of the policy or bond that has been terminated, then
the Master Servicer shall notify FMSC of such increase in cost and, if FMSC does not agree to pay
such additional amounts, the amount of coverage shall be reduced to a level such that the premium
therefor shall not exceed the cost of premium for the policy or bond that has been terminated,
provided that the Rating Agency has consented to such reduction in coverage. If FMSC does agree to
pay an amount in excess of the cost of the original policy or bond, the Master Servicer shall
structure the replacement policy or bond so that failure by FMSC to pay such additional amount will
not affect the amount of coverage obtainable for the cost of the original policy or bond.

     Section 4.02. Payment of Premiums.

     No later than 15 Business Days prior to the date thereof, the Master Servicer shall deliver to
the Trustee a statement of the premium due on the Mortgagor Bankruptcy Bond (if any), each Pool
Insurance Policy (if any), and the Special Hazard Policy (if any), together with an Officer’s
Certificate certifying that the amount reflected on the statement is correct and is properly due
and payable and instructing the Trustee to pay such amounts to the appropriate insurer or surety.
The Master Servicer shall obtain and provide to the Trustee from each such insurer or surety a
renewal policy or a certificate evidencing that such policy or bond has been renewed and will
remain in force for the renewal period stated thereon.

     Section 4.03. Presentment of Claims and Collection of Proceeds.

     The Master Servicer shall prepare and present on behalf of the Trustee and the Securityholders
all claims under any Mortgagor Bankruptcy Bond, each Servicer Fidelity Bond, each Servicer Errors
and Omissions Policy, and the Special Hazard Insurance Policy, and take such actions (including the
negotiation, settlement, compromise or enforcement of the insured’s claim) as shall be necessary to
realize recovery under such bonds and policies. Any proceeds disbursed to the Master Servicer in
respect of such policies or bonds shall be promptly deposited in the Master Custodial P & I Account
upon receipt, except for any amounts realized under the Special Hazard Insurance Policy that are to
be applied to the repair or restoration of the related property as a condition requisite to the
presentation of claims on the related Mortgage Loan to

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the insurer under any applicable Mortgage Insurance Policy. The Master Servicer shall also
assure that each Servicer prepares and presents on behalf of the Trustee and the Securityholders
all claims under each applicable Mortgage Insurance Policy, and that each Servicer takes such other
actions (including the negotiation, settlement, compromise and enforcement of the insured’s claim)
as is necessary to realize recovery under such policies and that all claim proceeds are deposited
in the appropriate Custodial P & I Account.

     Section 4.04. Renewal of Primary Mortgage Insurance Policies.

     The Master Servicer may, subject to applicable law, direct any Servicer to renew any Primary
Mortgage Insurance Policy on any Mortgage Loan not insured by the Mortgage Insurer that issued the
Pool Insurance Policy which covered such Mortgage Loan with a Primary Mortgage Insurance Policy
issued by the Mortgage Insurer which issued the Pool Insurance Policy relating to such Mortgage
Loan.

ARTICLE V

ADVANCES BY MASTER SERVICER FOR P & I

ADVANCES, ATTORNEYS’ FEES AND OTHER COSTS

     Section 5.01. Recoverable Advances.

     The Master Servicer shall be required to make the following advances with respect to Mortgage
Loans to the extent the Master Servicer determines, in good faith, that an advance made hereunder
is recoverable from Insurance Proceeds, Liquidation Proceeds or subsequent payments by the Borrower
of the related Mortgage Loans. In the event the Master Servicer determines that all, or a portion,
of any advance required by this Section 5.01 is not so recoverable, the Master Servicer shall
promptly deliver to the Trustee and to FMSC an Officer’s Certificate setting forth the reasons for
such determination.

     (a) Monthly P & I Advance. The Master Servicer shall make a Monthly P & I Advance to
the Master Custodial P & I Account, in the amount, if any, of the aggregate scheduled installments
of principal and interest (less applicable servicing fees) on the Mortgage Loans that were due on
the Due Date but which were not received or advanced by the Servicers and remitted to the Master
Custodial P & I Account on or prior to the Master Servicer Remittance Date. Each Monthly P & I
Advance shall be remitted in immediately available funds to the Master Custodial P & I Account no
later than the Master Servicer Remittance Date for the month in which the Due Date occurs. Prior
to the close of business on the Master Servicer Remittance Date, the Master Servicer shall
determine whether and to what extent any Servicers have failed to make any advances of principal or
any interest in respect to scheduled installments of principal and interest that were due on the
Due Date and whether such deficiencies, if advanced by the Master Servicer, would be reimbursable
from Insurance Proceeds, Liquidation Proceeds or subsequent payments by the Borrower of the related
Mortgage Loans.

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     (b) Advances for Attorneys’ Fees. To the extent not made by the Servicer, the Master
Servicer shall make advances from time to time for attorneys’ fees and court costs incurred, or
which reasonably can be expected to be incurred, for the foreclosure of any Mortgage Loan or for
any transaction in which the Trustee is expected to receive a deed-in-lieu of foreclosure.

     (c) Advances for Repairs and Restoration. In the event that any Mortgaged Premises
shall be damaged or destroyed, and if the Servicer fails to advance the funds necessary to repair
or restore the damaged or destroyed Mortgaged Premises, then the Master Servicer shall advance such
funds and take such other action as if necessary to repair or restore the damage or loss.

     (d) Advances for Taxes and Insurance Premiums. To the extent a Servicer is required
to advance funds sufficient to pay the taxes or insurance premiums with respect to a Mortgage Loan
pursuant to Section 980 of the Sales/Servicing Agreement and the Servicer fails to make such
advance, the Master Servicer shall advance such funds and take such steps as are necessary to pay
such taxes or insurance premiums.

     (e) Advances for Amounts Collected by Servicer but Not Remitted. In the event that
any Servicer fails to remit to the Master Custodial P & I Account on or before the Master Servicer
Remittance Date, the full amount of the funds in the custody or under the control of the Servicer
that the Servicer is required to remit under its Sales/Servicing Agreement, then the Master
Servicer, upon and subject to the terms of this Article V, shall promptly advance and remit to the
Master Custodial P & I Account an amount equal to the required remittance.

     Section 5.02. Non-Recoverable Advances.

     Any Monthly P & I Advance or other advance previously made by the Master Servicer under this
Section 5.01 which the Master Servicer shall ultimately determine in its good faith judgment to be
not recoverable from Insurance Proceeds, Liquidation Proceeds or subsequent payments by the
Borrower shall be a Non-Recoverable Advance. The determination by the Master Servicer that it has
made a Non-Recoverable Advance shall be evidenced by an Officer’s Certificate of the Master
Servicer promptly delivered to the Trustee and FMSC setting forth the reasons for such
determination. Following the Trustee’s receipt of the Officer’s Certificate and FMSC’s acceptance
of such certification, the Master Servicer shall be entitled to reimbursement for such
Non-Recoverable Advance as provided in Section 7.02 of these Standard Terms.

ARTICLE VI

PAYMENTS BY MASTER SERVICER

     Section 6.01. General.

     The Master Servicer shall establish and maintain a Master Custodial P&I Account into which the
Master Servicer shall deposit payments, collections and advances with

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respect to each Mortgage Loan until such amounts are transferred to the Collateral Proceeds
Account as provided herein. The Master Servicer may elect to use a single Master Custodial P&I
Account for more than one series of Securities. Each separate Master Custodial P&I Account shall
reflect the custodial nature of the account and that all funds in such account are held in trust
for the benefit of the Trustee. In the event that Master Servicer does not timely receive each
installment of principal and interest in respect of any Mortgage Loan, the Master Servicer shall
advance funds as provided in Section 5.01 hereof.

     Section 6.02. Deposits Into Master Custodial P&I Account.

     On the 15th calendar day of each month (or the next preceding business day if such 15th day is
not a business day) the Master Servicer shall withdraw from each Custodial P&I Account maintained
by a Servicer and deposit into the Master Custodial P&I Account an amount with respect to each
Mortgage Loan serviced by such Servicer equal to:

     (a) All scheduled installments of principal and interest on the Mortgage Loan received or
advanced by the Servicer net of (a) Servicing Fees due the Servicer and (b) any funds to be applied
by the Trustee from the Buy-Down Fund;

     (b) Any amounts in respect of a Mortgage Loan representing late payments of principal and
interest to the extent such amounts exceed outstanding unreimbursed advances, if any, of the
Servicer with respect to such Mortgage Loan, net of Servicing Fees due the Servicer;

     (c) Each principal prepayment (whether full or partial) on such Mortgage Loans (net of
Servicing Fees due the Servicer), together with any interest applicable to such principal
prepayments which has been paid by the Borrower; and

     (d) Any Insurance Proceeds (to the extent not applied to the repair or restoration of the
Mortgaged Property) or Liquidation Proceeds (net of Servicing Fees due the Servicer).

     Section 6.03. Withdrawals From Master Custodial P&I Accounts.

     On a daily basis, to the extent of amounts received in respect of a Mortgage Loan from
Insurance Proceeds, Liquidation Proceeds, or late payments made by the Borrower, the Master
Servicer may withdraw from the appropriate Master Custodial P&I Account any amounts advanced by the
Master Servicer for principal and interest on such Mortgage Loan for which the Master Servicer is
entitled to reimbursement under these Standard Terms.

     If at any time the funds in any Master Custodial P&I Account exceed the limits of the FDIC
insurance on such account, the Master Servicer shall promptly withdraw such excess funds from such
account and transfer such excess funds to the appropriate Collateral Proceeds Account or a separate
Master Custodial P&I Account. Any funds

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deposited in a Master Custodial P&I Account, may be invested to the next Master Servicer
Remittance Date only in “Eligible Investments” as defined in the Indenture.

     On or prior to the Master Servicer Remittance Date, the Master Servicer, to the extent not
remitted prior to the Master Servicer Remittance Date, shall remit from the funds in each Master
Custodial P&I Account by wire transfer (or as otherwise instructed by the Trustee) in immediately
available funds to the Collateral Proceeds Account an amount equal to the aggregate of the
following:

     (i) All scheduled installments of principal and interest on the applicable Mortgage
Loans received or advanced by a Servicer or the Master Servicer that were due on the Due
Date, net of (a) Servicing and Master Servicing Fees due the Servicer and the Master
Servicer, respectively, and (b) any funds to be applied by the Trustee from the Buy-Down
Fund;

     (ii) All amounts received in respect of the applicable Mortgage Loans representing late
payments of principal and interest due to the extent such amounts exceed outstanding
unreimbursed advances, if any, of the Servicer or the Master Servicer with respect to such
Mortgage Loans, net of Servicing and Master Servicing Fees;

     (iii) Each principal prepayment (whether full or partial) on the applicable Mortgage
Loans, together with interest calculated to the end of the calendar month during which such
principal prepayment shall have been received by the Servicer as required by Section 6.04
(including the portion of the interest which shall have been paid by the Borrower and the
interest, if any, which shall have been paid by the Master Servicer pursuant to Section 6.04
hereof), net of Servicing and Master Servicing Fees; and

     (iv) Any Insurance Proceeds in respect of such Mortgage Loans (to the extent not
applied to the repair or restoration of the Mortgaged Property) or Liquidation Proceeds
together with interest calculated to the end of the calendar month during which such
Insurance Proceeds or Liquidation Proceeds shall have been received by the Servicer as
required by Section 6.04 (including the portion of the interest which shall have been paid
from such proceeds and the interest, if any, which shall have been paid by the Master
Servicer pursuant to Section 6.04 hereof), net of Servicing and Master Servicing Fees.

     Section 6.04. Payments for Additional Interest In Connection with Certain Prepayments and
Other Liquidations.

     In the event that any Mortgage Loan is paid in full following the 6th day preceding the Master
Servicer Remittance Date or partially prepaid, whether from payment by the Borrower, Liquidation
Proceeds, Insurance Proceeds or otherwise and such prepayment in full or partial prepayment does
not include interest on the outstanding principal balance through and including the last day of the
month during which such prepayment is made, then to the extent that such interest shall not have
been paid by

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the Servicer and deposited in the appropriate Custodial P & I Account on or before the Master
Servicer Remittance Date next succeeding the date of such full or partial prepayment, the Master
Servicer shall pay and deposit into the Master Custodial P & I Account, on or before the Master
Servicer Remittance Date of the month in which such prepayment is remitted to the Trustee an amount
equal to such additional interest (net of Servicing Fees). Such payment will not be considered a
Non-Recoverable Advance; and in case of such payment, the Master Servicer shall not be entitled to
any recovery or reimbursement from the Trustee, FMSC, or the Securityholders, but may seek and
obtain recovery from the Servicer that failed to make the payment through legal action or
otherwise, to the extent provided in the related Sales/Servicing Agreement.

     In the event of any prepayment in full of any Mortgage Loan on or before the 6th day preceding
the Master Servicer Remittance Date, such prepayment shall be deemed to have been made as of the
last day of the preceding calendar month, so that no interest will be deemed to have accrued on
such Mortgage Loan with respect to the calendar month in which the prepayment in full occurs and
the Master Servicer will not be obligated to deposit to the Master Custodial P&I Account any
interest actually accrued and paid on such Mortgage Loan with respect to the calendar month in
which such prepayment occurs.

     Section 6.05. Payments for the Repurchase of Loans.

     In lieu of the Issuing Entity providing a mortgage repurchase bond to secure the Securities,
the Master Servicer agrees to the following condition to secure its obligation under Section 3.02
of these Standard Terms. Section 3.02 specifically requires the Master Servicer, upon a default or
termination of a Servicer under a Sales/Servicing Agreement, to assume the Servicer’s obligations
under the Sales/Servicing Agreement, including the obligation to purchase certain Mortgage Loans
pursuant to Section 630 of the Sales/Servicing Agreement. The Master Servicer’s obligation to
repurchase Mortgage Loans securing a series of Securities is specifically limited to repurchase in
the event that insurance proceeds otherwise payable have been denied on the grounds of fraud and is
further limited at any one time to the First Year Repurchase Limit set forth in the Master
Servicing Agreement for the period ending one year from the date of the Master Servicing Agreement
(the “First Year”); to the Second Year Repurchase Limit set forth in the Master Servicing Agreement
(less any amounts already paid by the Master Servicer under this Section 6.05) for the period
beginning one year from the date of this Master Servicing Agreement and ending one year thereafter
(the “Second Year”); to the Third Year Repurchase Limit set forth in the Master Servicing Agreement
(less any amount already paid by the Master Servicer under this Section 6.05) for the period
beginning two years from the date of this Master Servicing Agreement and ending three years
thereafter (the “Third Year”); to the Fourth Year Repurchase Limit set forth in the Master
Servicing Agreement (less any amounts already paid by the Master Servicer under this Section 6.05)
for the period beginning three years from the date of this Master Servicing Agreement and ending
four years thereafter (the “Fourth Year”); and to the Fifth Year Repurchase Limit set forth in the
Master Servicing Agreement (less any amounts already paid by the Master Servicer under this Section
6.05) for the period beginning four years from the date of this Master Servicing Agreement and
ending five

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years thereafter (the “Fifth Year”). Any payments by the Master Servicer under this Section
6.05 will not be considered a Non-Recoverable Advance.

     Section 6.06. Payments for Losses due to Mortgagor Bankruptcies.

     In lieu of the Issuing Entity providing a mortgagor bankruptcy insurance policy, the Master
Servicer will pledge to the Trustee a Mortgagor Bankruptcy Fund to protect against any losses to
the Securityholders from the reduction of the principal balance or interest rate on any Note by a
bankruptcy court. To the extent the Trustee draws on such Mortgagor Bankruptcy Fund, such loss
will be borne by the Master Servicer, and will not be considered a Non-Recoverable Advance. The
amount of the Mortgagor Bankruptcy Fund will be specified in the Indenture for the Securities.

ARTICLE VII

COMPENSATION AND DISBURSEMENTS TO MASTER SERVICER

     Section 7.01. Compensation to the Master Servicer.

     As compensation for the services provided by the Master Servicer under the Master Servicing
Agreement, the Master Servicer shall be entitled to receive as a monthly servicing fee in respect
of each Mortgage Loan, payable from the Master Custodial P & I Account, an amount equal to the
product of the “Master Servicing Fee Percentage” set forth in the Master Servicing Agreement
multiplied by the outstanding principal amount of each Mortgage Loan determined as of the Due Date
of the month prior to the month for which this fee is due, divided by 12. In return for its
obligations under Section 6.04, the Master Servicer is entitled to receive as additional
compensation, any interest earnings on the Master Custodial P & I Account, and any interest
received on Liquidation principal that is received in the same month that such Liquidation
principal is remitted to the Trustee. The Master Servicer is permitted to pay itself the monthly
servicing fee within five Business Days after the Master Servicer has delivered to the Trustee the
Monthly Remittance Report for such month; provided, however, that the Master Servicer shall not be
entitled to receive any monthly servicing fee until the month during which the first Master
Servicer Remittance Date occurs.

     Section 7.02. Authorized Disbursements from the Collateral Proceeds Account.

     Following receipt by the Trustee of the Officer’s Certificate required by Section 5.01(f) and
FMSC’s acceptance thereof, not later than five Business Days following the Trustee’s receipt of the
Monthly Remittance Report from the Master Servicer, the Trustee shall reimburse or pay the Master
Servicer or each Servicer, as appropriate, from the Collateral Proceeds Account (or any other
account established by the Indenture) to the extent not previously reimbursed or paid, the amounts
set forth below in the following descending order of priority prior to the disbursement of any
funds to the Securityholders:

     (a) Any advances made by the Master Servicer under the Master Servicing Agreement that are
Non-Recoverable Advances; and

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     (b) Any advances made by any Servicer under its Sales/Servicing Agreement that are
Non-Recoverable Advances.

ARTICLE VIII

REPORTS AND CERTIFICATE TO TRUSTEE

     Section 8.01. Monthly Reports to the Issuing Entity and Trustee.

     Not later than the day of each calendar month specified in Subsections (a) or (b) below (or
the previous Business Day if such specified day is not a Business Day), the Master Servicer shall
forward to the Issuing Entity and the Trustee the following statements and reports, each certified
as true and correct by a Servicing Officer:

     (a) On or by the 16th day of each month, the Master Servicer shall notify the Trustee of the
amount of funds to be remitted by the Master Servicer to the Trustee on the Master Servicer
Remittance Date.

     (b) On or by the 20th day of each month, the reports described in paragraphs A, B, C, D and E
on Exhibit A, together with an Officer’s Certificate certifying that all such information
is correct, and that the Master Servicer has complied with all aspects of the Master Servicing
Agreement.

     The reports constituting the Monthly Remittance Report shall be current as of the first day of
such month. The Master Servicer shall use its best efforts promptly to provide such reports to the
Rating Agencies rating the Securities.

     Section 8.02. Annual Statement as to Compliance.

     The Master Servicer shall deliver (or otherwise make available) (and the Master Servicer shall
cause any Servicing Function Participant engaged by it to deliver) to the Issuing Entity and the
Trustee on or before March 1 (with a ten-calendar day cure period) of each year, an Officer’s
Certificate stating, as to the signer thereof, that (a) a review of such party’s activities during
the preceding calendar year or portion thereof and of such party’s performance under this
Agreement, or such other applicable agreement in the case of a Servicing Function Participant, has
been made under such officer’s supervision and (b) to the best of such officer’s knowledge, based
on such review, such party has fulfilled all its obligations under this Agreement, or such other
applicable agreement in the case of a Servicing Function Participant, 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 known to such officer and the
nature and status thereof.

     The Master Servicer shall include all annual statements of compliance received by it from each
Servicer with its own annual statement of compliance to be submitted to the Trustee pursuant to
this Section.

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     In the event the Master Servicer or any Servicing Function Participant engaged by any such
party is terminated or resigns pursuant to the terms of this Agreement, or any applicable agreement
in the case of a Servicing Function Participant, as the case may be, such party shall provide an
Officer’s Certificate pursuant to this Section 3.22 or to such applicable agreement, as the case
may be, notwithstanding any such termination, assignment or resignation.

     Section 8.03. Reports to the Issuing Entity and Trustee.

     (a) By March 1 (with a ten-calendar day cure period) of each year, commencing in March 2007,
the Master Servicer, at its own expense, shall furnish or otherwise make available, and shall cause
any Servicing Function Participant engaged by it to furnish, each at its own expense, to the
Trustee and FMSC, a report on an assessment of compliance with the Relevant Servicing Criteria that
contains (i) a statement by such party of its responsibility for assessing compliance with the
Relevant Servicing Criteria as set forth in Exhibit B, (ii) a statement that such party used the
Relevant Servicing Criteria to assess compliance with the Relevant Servicing Criteria, (iii) such
party’s assessment of compliance with the Relevant Servicing Criteria as of and for the fiscal year
covered by the Form 10-K required to be filed pursuant to Section 8.04, including, if there has
been any material instance of noncompliance with the Relevant Servicing Criteria, a discussion of
each such failure and the nature and status thereof, and (iv) a statement that a registered public
accounting firm has issued an attestation report on such party’s assessment of compliance with the
Relevant Servicing Criteria as of and for such period.

     No later than the end of each fiscal year for the Issuing Entity for which a 10-K is required
to be filed, the Master Servicer and the Trustee shall each forward to FMSC the name of each
Servicing Function Participant engaged by it and what Relevant Servicing Criteria will be addressed
in the report on assessment of compliance prepared by such Servicing Function Participant. When
the Master Servicer (or any Servicing Function Participant engaged by it) submit their assessments
to the Trustee, such parties will also at such time include the assessment and attestation pursuant
to Section 8.03(b) of each Servicing Function Participant engaged by it.

     Promptly after receipt of each such report on assessment of compliance, (i) FMSC shall review
each such report and, if applicable, consult with the Master Servicer, the Trustee and any
Servicing Function Participant engaged by such parties as to the nature of any material instance of
noncompliance with the Relevant Servicing Criteria by each such party, and (ii) the Trustee shall
confirm that the assessments, taken as a whole, address all of the Servicing Criteria and taken
individually address the Relevant Servicing Criteria for each party as set forth on Exhibit B and
on any similar exhibit set forth in each Servicing Agreement in respect of each Servicer and notify
FMSC of any exceptions.

     The Master Servicer shall include all annual reports on assessment of compliance received by
it from the Servicers with its own assessment of compliance to be submitted to the Trustee pursuant
to this Section.

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     In the event the Master Servicer or any Servicing Function Participant engaged by any such
party is terminated, assigns its rights and obligations under, or resigns pursuant to, the terms of
this Agreement, or any other applicable agreement, as the case may be, such party shall provide a
report on assessment of compliance pursuant to this Section 8.03(a), or to such other applicable
agreement, notwithstanding any such termination, assignment or resignation.

     (b) By March 1 (with a ten-calendar day cure period) of each year, commencing in March 2007,
the Master Servicer and the Trust Administrator, at its own expense, shall cause, and it shall
cause any Servicing Function Participant engaged by it to cause, each at its own expense, a
registered public accounting firm (which may also render other services to the Master Servicer, or
such other Servicing Function Participants, as the case may be) and that is a member of the
American Institute of Certified Public Accountants to furnish an attestation report to the Trustee
and FMSC, to the effect that (i) it has obtained a representation regarding certain matters from
the management of such party, which includes an assertion that such party has complied with the
Relevant Servicing Criteria, and (ii) on the basis of an examination conducted by such firm in
accordance with standards for attestation engagements issued or adopted by the PCAOB, it is
expressing an opinion as to whether such party’s compliance with the Relevant Servicing Criteria
was fairly stated in all material respects, or it cannot express an overall opinion regarding such
party’s assessment of compliance with the Relevant Servicing Criteria. In the event that an
overall opinion cannot be expressed, such registered public accounting firm shall state in such
report why it was unable to express such an opinion. Such report must be available for general use
and not contain restricted use language.

     Promptly after receipt of each such assessment of compliance and attestation report, the
Trustee shall confirm that each assessment submitted pursuant to Section 8.03(a) is coupled with an
attestation meeting the requirements of this Section and notify FMSC of any exceptions.

     The Master Servicer shall include each such attestation furnished to it by the Servicers with
its own attestation to be submitted to the Trustee pursuant to this Section.

     In the event the Master Servicer or any Servicing Function Participant engaged by any such
party, is terminated, assigns its rights and duties under, or resigns pursuant to the terms of,
this Agreement, or any applicable custodial agreement, Servicing Agreement or sub-servicing
agreement, as the case may be, such party shall cause a registered public accounting firm to
provide an attestation pursuant to this Section 8.03(b), or such other applicable agreement,
notwithstanding any such termination, assignment or resignation.

     Section 8.04. Commission Reporting.

     (a) (i) Using best efforts, within 10 days after each Payment Date, and no later than 15 days
after each Payment Date (subject to permitted extensions under the

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Exchange Act), the Master Servicer shall, in accordance with industry standards, prepare and
file, on behalf of the Issuing Entity, with the Commission via the Electronic Data Gathering and
Retrieval System (“EDGAR”), any Form 10-D required by the Exchange Act, in form and substance as
required by the Exchange Act, signed by the Master Servicer, with a copy of the monthly statement
to be furnished by the Master Servicer to the securityholders for such Payment Date attached
thereto. Any disclosure in addition to the monthly statement that is required to be included on
Form 10-D (“Additional Form 10-D Disclosure”) shall be reported by the parties set forth on Exhibit
C to FMSC and the Trustee and directed and approved by FMSC pursuant to the following paragraph,
and the Master Servicer will have no duty or liability for any failure hereunder to determine or
prepare any Additional Form 10-D Disclosure, except as set forth in the next paragraph.

          (ii) For so long as the Issuing Entity is subject to the reporting requirements of the
Exchange Act, within 5 calendar days after the related Payment Date, (i) the parties set forth in
Exhibit C shall be required to provide, pursuant to Section 8.04(a)(v) below, to the Master
Servicer and FMSC, to the extent known, in EDGAR-compatible format, or in such other format as
otherwise agreed upon by the Master Servicer and such party, the form and substance of any
Additional Form 10-D Disclosure, if applicable, together with an Additional Disclosure Notification
in the form attached hereto as Exhibit D (an “Additional Disclosure Notification”) and (ii) FMSC
will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the
Additional Form 10-D Disclosure on Form 10-D. The Master Servicer has no duty under this Agreement
to monitor or enforce the performance by the parties listed on Exhibit C of their duties under this
paragraph or proactively solicit or procure from such parties any Additional Form 10-D Disclosure
information. FMSC will be responsible for any reasonable fees and expenses assessed or incurred by
the Master Servicer in connection with including any Additional Form 10-D Disclosure on Form 10-D
pursuant to this Section.

          After preparing the Form 10-D, the Master Servicer shall, upon request, forward
electronically a copy of the Form 10-D to FMSC for review, only to the extent that the Form 10-D
contains Additional Form 10-D Disclosure. Within two Business Days after receipt of such copy, but
no later than the 7th calendar day (on a best efforts basis, and in no event later than the
12th calendar day) after the Payment Date, FMSC shall notify the Master Servicer in
writing (which may be furnished electronically) of any changes to or approval of such Form 10-D.
In the absence of receipt of any written changes or approval, or if FMSC does not request a copy of
a Form 10-D, the Master Servicer shall be entitled to assume that such Form 10-D is in final form
and the Master Servicer may proceed with the execution and filing of the Form 10-D. A duly
authorized representative of the Master Servicer shall sign each Form 10-D. If a Form 10-D cannot
be filed on time or if a previously filed Form 10-D needs to be amended, the Master Servicer will
follow the procedures set forth in Section 8.04(a)(vi). Promptly (but no later than one Business
Day) after filing with the Commission, the Master Servicer will make available on its internet
website a final executed copy of each Form 10-D filed by it. The parties to this Agreement
acknowledge that the performance by the Master Servicer and the Trustee of its duties under
Sections 8.04(a)(i), (ii) and (v) related to the timely

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preparation and filing of Form 10-D is contingent upon such parties strictly observing all
applicable deadlines in the performance of their duties under such Sections. FMSC acknowledges
that the performance by the Master Servicer of its duties under this Section 8.04(a)(ii) related to
the timely preparation, execution and filing of Form 10-D is also contingent upon the Servicer, the
Custodian and any Sub-Servicer or Subcontractor strictly observing deadlines no later than those
set forth in this paragraph that are applicable to the parties to this Agreement in the delivery to
the Master Servicer of any necessary Additional Form 10-D Disclosure pursuant to any applicable
agreement. The Master Servicer shall not have any liability for any loss, expense, damage or claim
arising out of or with respect to any failure to properly prepare, execute and/or timely file such
Form 10-D and Form 10-K, where such failure results from the Trustee’s inability or failure to
receive, on a timely basis, any information from any other party hereto or any Custodian,
Sub-Servicer or Subcontractor needed to prepare, arrange for execution or file such Form 10-D, not
resulting from its own negligence, bad faith or willful misconduct.

          (iii) Within four (4) Business Days after the occurrence of an event requiring disclosure on
Form 8-K (each such event, a “Reportable Event”), and if requested by FMSC, the Master Servicer
shall prepare and file on behalf of the Issuing Entity a Form 8-K, as required by the Exchange Act,
provided that FMSC shall file the initial Form 8-K in connection with the issuance of the
Securities. Any disclosure or information related to a Reportable Event or that is otherwise
required to be included on Form 8-K other than the initial Form 8-K (“Form 8-K Disclosure
Information”) shall, be reported by the parties set forth on Exhibit C to FMSC and the Trustee and
directed and approved by FMSC, pursuant to the following paragraph.

          For so long as the Issuing Entity is subject to the Exchange Act reporting requirements, no
later than the close of business (New York City Time) on the 2nd Business Day after the
occurrence of a Reportable Event (i) the parties set forth in Exhibit C shall be required pursuant
to Section 8.04(a)(v) below to provide to the Master Servicer and FMSC, to the extent known, in
EDGAR-compatible format, or in such other format as otherwise agreed upon by the Trustee and such
party, the form and substance of any Form 8-K Disclosure Information, if applicable, together with
an Additional Disclosure Notification and (ii) FMSC will approve, as to form and substance, or
disapprove, as the case may be, the inclusion of the Form 8-K Disclosure Information on Form 8-K.
FMSC will be responsible for any reasonable fees and expenses assessed or incurred by the Master
Servicer in connection with including any Form 8-K Disclosure Information on Form 8-K pursuant to
this Section.

          After preparing the Form 8-K, the Master Servicer shall, upon request, forward electronically
a copy of the Form 8-K to FMSC for review. Promptly, but no later than the close of business on
the third Business Day after the Reportable Event, FMSC shall notify the Master Servicer in writing
(which may be furnished electronically) of any changes to or approval of such Form 8-K. In the
absence of receipt of any written changes or approval, or if FMSC does not request a copy of a Form
8-K, the Master Servicer shall be entitled to assume that such Form 8-K is in final form and the
Master Servicer may proceed with the execution and filing of the Form 8-K. A duly

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authorized representative of the Master Servicer shall sign each Form 8-K. If a Form 8-K
cannot be filed on time or if a previously filed Form 8-K needs to be amended, the Master Servicer
will follow the procedures set forth in Section 8.04(a)(vi). Promptly (but no later than one
Business Day) after filing with the Commission, the Master Servicer will make available on its
internet website a final executed copy of each Form 8-K filed by it. The parties to this Agreement
acknowledge that the performance by the Master Servicer of its duties under this Section
8.04(a)(iii) related to the timely preparation and filing of Form 8-K is contingent upon such
parties strictly observing all applicable deadlines in the performance of their duties under this
Section 8.04(a)(iii). FMSC acknowledges that the performance by the Master Servicer of its duties
under this Section 8.04(a)(iii) related to the timely preparation, execution and filing of Form
10-D is also contingent upon the Servicer, the Custodians and any Sub-Servicer or Subcontractor
strictly observing deadlines no later than those set forth in this paragraph that are applicable to
the parties to this Agreement in the delivery to the Master Servicer of any necessary Form 8-K
Disclosure Information pursuant to the Custodial Agreement or any other applicable agreement. The
Master Servicer shall not have any liability for any loss, expense, damage or claim arising out of
or with respect to any failure to properly prepare, execute and/or timely file such Form 8-K, where
such failure results from the Trustee’s inability or failure to receive, on a timely basis, any
information from any other party hereto or any Custodian, Sub-servicer or Subcontractor needed to
prepare, arrange for execution or file such Form 8-K, not resulting from its own negligence, bad
faith or willful misconduct.

          (iv) (A) On or prior to 90 days after the end of each fiscal year of the Issuing Entity or
such earlier date as may be required by the Exchange Act (the “10-K Filing Deadline”) (it being
understood that the fiscal year for the Issuing Entity ends on December 31st of each
year), the Trustee shall prepare and file on behalf of the Issuing Entity a Form 10-K, in form and
substance as required by the Exchange Act. Each such Form 10-K shall include the following items,
in each case to the extent they have been delivered to the Trustee within the applicable time
frames set forth in this Agreement, (i) an annual compliance statement for the Servicer, the Master
Servicer, the Trustee and any Sub-Servicer, Subcontractor or other Person engaged by such parties
or the Trustee (together with the Custodian, each a “Reporting Servicer”), as described under
Section 8.02 of this Agreement, provided, however, that the Trustee, at its discretion, may omit
from the Form 10-K any annual compliance statement that is not required to be filed with such Form
10-K for each Reporting Servicer pursuant to Regulation AB, (ii)(A) the annual reports on
assessment of compliance with Servicing Criteria for each Reporting Servicer, as described under
Section 8.03 of this Agreement, and (B) if the report on assessment of compliance with the
Servicing Criteria identifies any material instance of noncompliance, disclosure identifying such
instance of noncompliance, or if each reporting Servicer’s report on assessment of compliance with
Servicing Criteria is not included as an exhibit to such Form 10-K, disclosure that such report is
not included and an explanation why such report is not included provided, however, that the
Trustee, at its discretion, may omit from the Form 10-K any assessment of compliance or attestation
report described in clause (iii) below that is not required to be filed with such Form 10-K
pursuant to Regulation AB, (iii)(A) the registered public accounting firm attestation report for
each Reporting Servicer as described under Section 8.03 of this

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Agreement, and (B) if any registered public accounting firm attestation report described under
Section 8.03 identifies any material instance of noncompliance, disclosure identifying such
instance of noncompliance, or if any such registered public accounting firm attestation report is
not included as an exhibit to such Form 10-K, disclosure that such report is not included and an
explanation why such report is not included, and (iv) a Sarbanes-Oxley Certification
(“Sarbanes-Oxley Certification”) as described below. Any disclosure or information in addition to
(i) through (iv) above that is required to be included on Form 10-K (“Additional Form 10-K
Disclosure”) shall, be reported by the parties set forth on Exhibit C to FMSC and the Trustee and
directed and approved by FMSC pursuant to the following paragraph, and the Trustee will have no
duty or liability for any failure hereunder to determine or prepare any Additional Form 10-K
Disclosure, except as set forth in the next paragraph.

     No later than March 1st (with a 10 calendar day cure period) of each year that the
Issuing Entity is subject to the Exchange Act reporting requirements, (i) the parties set forth in
Exhibit C shall be required to provide pursuant to Section 8.04(a)(v) below to FMSC and to the
Trustee, to the extent known, in EDGAR-compatible format, or in such other format as otherwise
agreed upon by the Trustee and such party, the form and substance of any Additional Form 10-K
Disclosure, if applicable, together with an Additional Disclosure Notification and (ii) FMSC will
approve, as to form and substance, or disapprove, as the case may be, the inclusion of the
Additional Form 10-K Disclosure on Form 10-K. The Trustee has no duty under this Agreement to
monitor or enforce the performance by the parties listed on Exhibit C of their duties under this
paragraph or proactively solicit or procure from such parties any Additional Form 10-K Disclosure
information. FMSC will be responsible for any reasonable fees and expenses assessed or incurred by
the Trustee in connection with including any Additional Form 10-K Disclosure on Form 10-K pursuant
to this Section.

          After preparing the Form 10-K, the Trustee shall forward, upon request, electronically a copy
of the Form 10-K to FMSC for review. Within three Business Days after receipt of such copy, but no
later than March 25th, FMSC shall notify the Trustee in writing (which may be furnished
electronically) of any changes to or approval of such Form 10-K. In the absence of receipt of any
written changes or approval, or if FMSC does not request a copy of a Form 10-K, the Trustee shall
be entitled to assume that such Form 10-K is in final form and the Trustee may proceed with the
execution and filing of the Form 10-K. A senior officer of the Master Servicer in charge of the
master servicing function shall sign the Form 10-K. If a Form 10-K cannot be filed on time or if a
previously filed Form 10-K needs to be amended, the Trustee will follow the procedures set forth in
Section 4.07(a)(vi). Promptly (but no later than one Business Day) after filing with the
Commission, the Trustee will make available on its internet website a final executed copy of each
Form 10-K filed by it. The parties to this Agreement acknowledge that the performance by the
Master Servicer and the Trustee of its duties under Section 8.04(a)(iv) and Section 8.04(a) (v)
related to the timely preparation, execution and filing of Form 10-K is contingent upon such
parties strictly observing all applicable deadlines in the performance of their duties under such
Sections, Section 8.02 and Section 8.03. FMSC acknowledges that the performance by the Master
Servicer and the Trustee of its duties under this Section 8.04(a)(iv) related to

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the timely preparation, execution and filing of Form 10-K is also contingent upon the
Servicer, the Custodian and any Sub-Servicer or Subcontractor strictly observing deadlines no later
than those set forth in this paragraph that are applicable to the parties to this Agreement in the
delivery to the Trustee of any necessary Additional Form 10-K Disclosure, any annual statement of
compliance and any assessment of compliance and attestation pursuant to the related Custodial
Agreement or any other applicable agreement. Neither the Master Servicer nor the Trustee shall
have any liability for any loss, expense, damage, claim arising out of or with respect to any
failure to properly prepare, execute and/or timely file such Form 10-K, where such failure results
from the Trustee’s inability or failure to receive, on a timely basis, any information from any
other party hereto or any Custodian, Sub-servicer or Subcontractor needed to prepare, arrange for
execution or file such Form 10-K, not resulting from its own negligence, bad faith or willful
misconduct.

          Each Form 10-K shall include a certification (the “Sarbanes-Oxley Certification”), as set
forth in Exhibit E-1 attached hereto, required to be included therewith pursuant to the
Sarbanes-Oxley Act. Each of the Servicer, the Master Servicer and the Trustee shall provide, and
each such party and the Trustee shall cause any Sub-servicer or Subcontractor engaged by it to
provide, to the Person who signs the Sarbanes-Oxley Certification (the “Certifying Person”), by
March 15th of each year in which the Issuing Entity is subject to the reporting
requirements of the Exchange Act, a certification (a “Back-Up Certification”), in the form attached
hereto as Exhibit E-2, upon which the Certifying Person, the entity for which the Certifying Person
acts as an officer, and such entity’s officers, directors and Affiliates (collectively with the
Certifying Person, “Certification Parties”) can reasonably rely. A senior officer of Fremont shall
serve as the Certifying Person on behalf of the Issuing Entity. Such officer of the Certifying
Person can be contacted by e-mail at [                    ] or by facsimile at [                    ]. In the event
that any such party or any Sub-servicer or Subcontractor engaged by such party is terminated or
resigns pursuant to the terms of this Agreement, or any other applicable agreement, as the case may
be, such party shall provide a Back-Up Certification to the Certifying Person pursuant to this
Section 8.04(a)(iv) with respect to the period of time it was subject to this Agreement or any
other applicable agreement, as the case may be. Notwithstanding the foregoing, (i) the Master
Servicer and the Trustee shall not be required to deliver a Back-Up Certification to each other if
both are the same Person and the Master Servicer is the Certifying Person and (ii) the Master
Servicer shall not be obligated to sign the Sarbanes-Oxley Certification in the event that it does
not receive any Back-Up Certification required to be furnished to it pursuant to this section or
any Servicing Agreement.

          (v) With respect to any Additional Form 10-D Disclosure, Additional Form 10-K Disclosure or
any Form 8-K Disclosure Information (collectively, the “Additional Disclosure”) relating to the
Trust Fund, the Master Servicer’s and/or Trustee’s obligation to include such Additional
Information in the applicable Exchange Act report is subject to receipt from the entity that is
indicated in Exhibit C as the responsible party for providing that information, if other than the
Trustee, as and when required as described in Section 8.04(a)(ii) through (iv) above. Each of the
Master Servicer, the Servicer, the Trustee and Depositor hereby agree to notify and to provide,

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to the extent known, to the Trustee and FMSC, all Additional Disclosure relating to the Trust
Fund, with respect to which such party is the responsible party for providing that information, as
indicated in Exhibit D hereof.

     The Master Servicer at its expense shall cause its independent certified public accountants,
which shall be a firm of national reputation, to furnish a single statement to the Trustee and to
the Issuing Entity on or before April 30 of each year relative to all series of Securities for
which a Master Servicing Agreement has been executed to the effect that such firm has examined
certain records and documents prepared by the Master Servicer relating to the Master Servicer’s
performance of its obligations required by Articles Four and Five of the Standard Terms to each
Master Servicing Agreement entered into on or before the preceding December 31, and that, on the
basis of such examination, such firm is of the opinion that the Master Servicer’s activities have
been conducted in compliance with each such Master Servicing Agreement, except for (i) such
exceptions as such firm believes to be immaterial and (ii) such other exceptions as are set forth
in such statement. Such examination shall be performed using various statistical sampling
techniques to verify the performance or occurrence of the following: (i) receipt of the detail and
certification reports and the custodial account reconciliation reports from the Servicers each
month, (ii) reconciliation and verification of the Servicer remittance each month, (iii)
reconciliation of the funds transferred to the Trustee by Bond Series, (iv) receipt of a copy of
the Servicer’s Errors and Omissions Policy, Fidelity Bond Policy and ACH Authorization forms, and
(v) maintenance by the Master Servicer of an Errors and Omission Policy in favor of
[___] and a Fidelity Bond Policy in favor of [___], which additionally names
[___] as a named insured. In addition, such examination shall include inquiries of the
Trustee, to determine whether the Trustee has received (i) a report setting forth the principal
balance and monthly remittance amount for each loan by the 15th day of each month and (ii) funds
due from the Master Servicer by the 20th day of each month. Upon request by the Trustee, FMSC, or
the Issuing Entity, the Master Servicer shall furnish to the Trustee copies of the audit report for
each Servicer as shall be required by the Sales/Servicing Agreement with such Servicer.

          (b) In the event that the Trustee is unable to timely file with the Commission all or any
required portion of any Form 8-K, Form 10-D or Form 10-K required to be filed by this Agreement
because required disclosure information was either not delivered to it or was delivered to it after
the delivery deadlines set forth in this Agreement or for any other reason, the Trustee will
promptly notify electronically FMSC. In the case of Form 10-D and Form 10-K, the parties to this
Agreement will cooperate to prepare and file a Form 12b-25 and a Form 10-D/A and Form 10-K/A as
applicable, pursuant to Rule 12b-25 of the Exchange Act. In the case of Form 8-K, the Trustee
will, upon receipt of all required Form 8-K Disclosure Information and upon the approval and
direction of FMSC, include such disclosure information on the next succeeding Form 10-D. In the
event that any previously filed Form 8-K, Form 10-D or Form 10-K needs to be amended, in connection
with any Additional Form 10-D Disclosure (other than, in the case of Form 10-D, for the purpose of
restating any Monthly Statement), Additional

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Form 10-K Disclosure or Form 8-K Disclosure Information, the Trustee will electronically
notify FMSC and such other parties to the transaction as are affected by such amendment, and such
parties will cooperate to prepare any necessary Form 8-K/A, Form 10-D/A or Form 10-K/A. Any Form
15, Form 12b-25 or any amendment to Form 8-K or Form 10-D shall be signed by a duly authorized
representative or senior officer in charge of master servicing, as applicable, of the Master
Servicer. The parties to this Agreement acknowledge that the performance by the Master Servicer
and the Trustee of its duties under this Section 4.07(a)(vi) related to the timely preparation,
execution and filing of Form 15, a Form 12b-25 or any amendment to Form 8-K, Form 10-D or Form 10-K
is contingent upon each such party performing its duties under this Section. Neither the Master
Servicer nor the Trustee shall have any liability for any loss, expense, damage, claim arising out
of or with respect to any failure to properly prepare, execute and/or timely file any such Form 15,
Form 12b-25 or any amendments to Form 8-K, Form 10-D or Form 10-K, where such failure results from
the Trustee’s inability or failure to receive, on a timely basis, any information from any other
party hereto or any custodian, sub-servicer or subcontractor needed to prepare, arrange for
execution or file such Form 15, Form 12b-25 or any amendments to Form 8-K, Form 10-D or Form 10-K,
not resulting from its own negligence, bad faith or willful misconduct.

          FMSC agrees to promptly furnish to the Trustee, from time to time upon request, such further
information, reports and financial statements within its control related to this Agreement and the
Mortgage Loans as the Trustee reasonably deems appropriate to prepare and file all necessary
reports with the Commission. The Trustee shall have no responsibility to file any items other than
those specified in this Section 8.04; provided, however, the Trustee will cooperate with FMSC in
connection with any additional filings with respect to the Trust Fund as FMSC deems necessary under
the Exchange Act. Fees and expenses incurred by the Trustee in connection with this Section 8.04
shall not be reimbursable from the Trust Fund.

          (A) The Trustee shall indemnify and hold harmless FMSC and its officers, directors and
affiliates from and against any losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments and other costs and expenses arising out of or
based upon (i) a breach of the Trustee’s obligations under this Section 8.04 or the Trustee’s
negligence, bad faith or willful misconduct in connection therewith or (ii) any material
misstatement or omission in the Annual Statement of Compliance and the Assessment of Compliance
delivered by the Trustee pursuant to Section 8.02 and Section 8.03.

     (B) FMSC shall indemnify and hold harmless the Trustee and the Master Servicer and
their respective officers, directors and affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related costs,
judgments and other costs and expenses arising out of or based upon a breach of the
obligations of FMSC under this Section 8.04 or FMSC’s negligence, bad faith or willful
misconduct in connection therewith.

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     (C) The Master Servicer shall indemnify and hold harmless the Trustee and FMSC and
their respective officers, directors and affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related costs,
judgments and other costs and expenses arising out of or based upon (i) a breach of the
obligations of the Master Servicer under this Section or the Master Servicer’s negligence,
bad faith or willful misconduct in connection therewith or (ii) any material misstatement or
omission in the Statement as to Compliance delivered by the Master Servicer pursuant to
Section 8.02 or the Assessment of Compliance delivered by the Master Servicer pursuant to
Section 8.03.

          (c) Notwithstanding any other provisions of this Agreement, this Section 8.04 may be amended
without the consent of the Securityholders.

ARTICLE IX

MERGER OR CONSOLIDATION OF MASTER SERVICER; RESIGNATION

     Section 9.01. Merger or Consolidation.

     Anything herein to the contrary notwithstanding, any corporation into which the Master
Servicer may be merged or consolidated or any corporation resulting from any merger or
consolidation to which the Master Servicer shall be a party or any corporation succeeding to the
business of the Master Servicer shall be the successor of the Master Servicer hereunder without the
execution or filing of any paper or any further act on the part of any of the parties hereto.

     Section 9.02. Assignment or Transfer of Master Servicing Agreement.

     The Master Servicer may, with the prior written consent of the Issuing Entity, FMSC, and the
Trustee, assign or transfer all of its rights and obligations under the Master Servicing Agreement,
provided, however, that the Trustee shall not consent to such an assignment or transfer unless it
shall have received written notice from the Rating Agency that rated the Series to which the Master
Servicing Agreement relates that such assignment or transfer will not result in a reduction of the
rating assigned by the Rating Agency to such Series.

     Section 9.03. Resignation of Master Servicer.

     The Master Servicer shall not resign from the obligations and duties hereby imposed on it
except upon determination that its duties hereunder are no longer permissible under applicable law.
Any such determination permitting the resignation of the Master Servicer shall be evidenced by an
opinion of counsel to such effect delivered to the Trustee. No such resignation shall become
effective until the Trustee shall have assumed or a successor master servicer shall have been
appointed by the Trustee and until such successor shall have assumed the Master Servicer’s
responsibilities and obligations under the Master Servicing Agreement.

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ARTICLE X

DEFAULT

     Section 10.01. Events of Default by Master Servicer.

     The happening of any of the following events shall constitute a default (“Event of Default”)
by the Master Servicer under the Master Servicing Agreement:

     (a) Any failure on the part of the Master Servicer to make when due any of the advances or to
perform any other obligations required under Article V above;

     (b) Any failure on the part of the Master Servicer to make when due any payment or to perform
any other obligations required under Article VI above;

     (c) Any failure on the part of the Master Servicer duly to observe or perform in any material
respect any covenants or conditions (other than those referred to in Section 10.01(a) and 10.01(b)
above) to be performed or observed by it in the Master Servicing Agreement which continues uncured
for a period of 45 days after the date on which the Trustee shall have given to the Master Servicer
written notice of such failure and demanding that such default be cured;

     (d) Any involuntary petition in bankruptcy or any other similar petition shall be filed
against the Master Servicer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal, state or other
statute, law or regulation, and shall remain undismissed for 60 days, or if any custodian, trustee,
receiver or liquidator of all or any substantial part of the assets of the Master Servicer shall be
appointed or take possession of such assets without the consent or acquiescence of the Master
Servicer and such appointment remains unvacated for 60 days;

     (e) The Master Servicer shall consent to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of, or relating to, the Master Servicer, or all or substantially all of the
Master Servicer’s property;

     (f) The Master Servicer shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its
obligations; or

     (g) Any Rating Agency shall lower or give written notice to lower the then current rating of
the Securities because the existing or prospective financial condition or mortgage loan servicing
capability of the Master Servicer is insufficient to maintain the then current rating of the
Securities.

     In case of any Event of Default, the Trustee or the Issuing Entity upon written approval of
the Trustee may terminate all authority, power and rights of the Master

-32-

 

Servicer under the Master Servicing Agreement, and all rights, power and authority of the
Master Servicer shall automatically and without further action by any Person pass to and be vested
in the Trustee. Without limiting the generality of the foregoing, the Trustee is hereby authorized
and empowered to execute and deliver on behalf of the Master Servicer, as the Master Servicer’s
attorney-in-fact, any and all documents and other instruments, and to do or accomplish all other
acts or things that in the Trustee’s sole and absolute judgment may be necessary or appropriate to
effect such termination. Notwithstanding the foregoing, upon any such termination the Master
Servicer shall do all things reasonably requested by the Trustee to effect the termination of the
Master Servicer’s responsibilities, rights and powers hereunder, including, without limitation,
providing to the Trustee all documents and records reasonably requested by the Trustee to enable
the Trustee or its designee to assume and carry out the duties and obligations that otherwise were
to have been performed and carried out by the Master Servicer hereunder but for such termination.

     Section 10.02. Other Remedies of Trustee.

     Upon any Event of Default, the Trustee, in addition to the rights specified in Section 10.01,
shall have the right, in its own name and as “Trustee”, to take all actions now or hereafter
existing at law, in equity or by statute to enforce its rights and remedies, of the Securityholders
(including the institution and prosecution of all judicial, administrative and other proceedings
and the filings of proofs of claim and debt in connection therewith). No remedy provided for by
the Master Servicing Agreement shall be exclusive of any other remedy, and each and every remedy
shall be cumulative and in addition to any other remedy and no delay or omission to exercise any
right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any
Event of Default.

ARTICLE XI

DUTIES OF THE MASTER SERVICER

     Section 11.01. General Bond Administration.

     The Master Servicer shall perform (or supervise the performance of) the following duties on
behalf of the Issuing Entity (unless otherwise specified, references in this subsection are to
Sections of the Indenture and each capitalized term used in this Section 11.01 and not otherwise
defined shall have the meaning ascribed to it in the Indenture):

     (i) cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument specifying the responsibilities of such Paying Agent in accordance
with the provisions of Section 9.03 (Section 9.03);

     (ii) prepare and cause to be delivered to the Trustee the annual written compliance
statement (Section 9.09);

-33-

 

     (iii) compensate and reimburse the Trustee pursuant to Section 7.07 (Section 7.07);

     (iv) prepare (or cause to be prepared) any supplemental indenture or amendment to the
Indenture to be executed subsequent to the Closing Date (and documents required to accompany
them) as the Issuing Entity or Trustee may determine to be necessary or appropriate
(Sections 10.01 and 10.02);

     (v) prepare and deliver notices to the Trustee for execution as necessary, distribute
such notices and prepare such other information and documents as may be required in
connection with any optional redemption of the Bonds (Sections 11.01, 11.03 and 11.04);

     (vi) advise the Issuing Entity with respect to any proposed removal of the Trustee and,
if a successor or additional trustee is to be appointed, solicit and review bids, examine
the qualifications of bidders, submit to the Issuing Entity a list of qualified candidates
from which such appointment may be made by the Issuing Entity and draft any notice required
in connection with the appointment of a successor trustee (Sections 7.10 and 7.11);

     (vii) if a successor to the Bond Registrar is to be appointed subsequent to the Closing
Date, solicit and review bids, examine the qualifications of bidders, and submit to the
Issuing Entity a list of qualified candidates from which such appointment may be made by the
Issuing Entity (Section 3.05);

     (viii) subsequent to the Closing Date, prepare, file, record or deliver such
continuation statements, instruments of further assurance and such other instruments as
required by Section 9.05 of the Indenture and submit such instruments to the Issuing Entity
for execution and filing or delivery and advise the Issuing Entity when the Master Servicer
becomes aware of a necessity to take other action to protect the Trust Estate (Section
9.05);

     (ix) cause all Opinions of Counsel required by Section 9.06 to be prepared and
delivered to the Issuing Entity for delivery to the Trustee (Section 9.06);

     (x) prepare documents necessary for the satisfaction and discharge of the Indenture,
submit such documents to the Issuing Entity and (upon execution by the Issuing Entity)
deliver and (as necessary) record such documents (Section 5.01);

     (xi) prepare and deliver to the Issuing Entity for distribution any notifications
required in connection with any election by the Issuing Entity to defease the Bonds (Section
5.01);

     (xii) prepare all documents required in connection with any Grant of Substitute
Mortgage Collateral and submit such documents to the Issuing Entity

-34-

 

for execution, obtain any Opinions of Counsel required in connection therewith, and
prepare any notices required in connection with the issuance of a replacement Guaranteed
Investment Contract and deliver such notices to the Issuing Entity (Section 3.11);

     (xiii) prepare (or cause to be prepared) certificates or opinions with respect to
compliance with the Indenture and submit such certificates or opinions to the Issuing Entity
for execution (Section 15.01 );

     (xiv) prepare and cause to be filed all reports required to be filed pursuant to
Section 8.04 (Section 8.04);

     (xv) compile and render all Accounting Reports, Interest Payment Date Reports and
Collateral Valuation Reports required pursuant to Section 12.09 (Section 12.09);

     (xvi) cause to be delivered to the Trustee the Yearly Accountants’ Certificates
(Sections 13.01(f));

     (xvii) make any required corrections in Collateral Valuation and Accounting Reports
(Section 13.01(h));

     (xviii) cause to be delivered to the Trustee all Accountants’ Certificates, written
instructions, and other documents required to disburse excess funds or release Mortgage
Collateral from the Trust Estate (Section 13.05); and

     (xix) notify the Rating Agencies of any events of which the Issuing Entity is required
to give notice pursuant to the Indenture.

     Section 11.02. REMIC Bond Administration.

     With respect to a Series of Bonds for which the Issuing Entity has made (or intends to make) a
REMIC Election, the Master Servicer shall perform (or supervise the performance of), on behalf of
the Issuing Entity, the following duties relating to federal, state, and local tax compliance of
the REMIC:

          (i) the preparation of and filing (after execution by the Issuing Entity or other person, as
necessary) with the Internal Revenue Service or other taxing authority any and all tax or
information returns or reports required to be filed by the REMIC Pool that are due after the
Closing Date, including any Forms 8281 (collectively, “Post-Closing Reports and Returns”) in the
time and manner required by the Code, applicable regulations or procedures thereunder, or
equivalent provisions of state or local law;

     (ii) the making of an election for the REMIC Pool to be treated as a REMIC in the time
and manner required by the Code or applicable regulations or procedures thereunder;

-35-

 

     (iii) the provision of advice and instruction to the Issuing Entity as to how to
conduct the affairs of the REMIC Pool in a manner consistent with applicable provisions of
the Code and regulations thereunder in connection with maintaining the status of the REMIC
Pool as a REMIC (including with respect to the termination of the REMIC and, in connection
with the termination of the REMIC, the preparation of a plan of liquidation of the REMIC
Pool at the appropriate time);

     (iv) the acquisition and retention of ownership of a nominal principal amount of any
residual interest Bond or residual interest certificate and the performance of the duties of
the REMIC “tax matters person” under the Code;

     (v) the provision of advice and instruction to the Issuing Entity with respect to all
requirements for any exemption from withholding (that the Master Servicer reasonably
believes to be available) of federal or state income taxes with respect to the Bonds
including the filing of any related Post-Closing Reports and Returns and the acquisition

     Section 11.03. Additional Bond Administration Rights and Duties of Master Servicer.

     The Master Servicer will provide such additional reports, statements and other information
relating to the Securities to the Issuing Entity, the Trustee, or the Securityholders, as may
reasonably be requested by the Issuing Entity.

     Section 11.04. Additional Costs Payable by Master Servicer.

     The Master Servicer will pay all Trustee’s fees associated with the Series Bonds and will bear
all costs associated with the performance of the Master Servicer’s duties hereunder, including (but
not limited to) accountants’ fees, attorneys’ fees, internal costs, and costs associated with the
enforcements and the Pool Insurance Policies.

ARTICLE XII

MISCELLANEOUS

     Section 12.01. No Assignment or Delegation of Duties by Master Servicer.

     Except as expressly provided in the Master Servicing Agreement, the Master Servicer shall not
assign or transfer any of its rights, benefits or privileges under the Master Servicing Agreement
to any other Person, or delegate to or subcontract with, or authorize or appoint any other Person
to perform any of the duties, covenants or obligations to be performed by the Master Servicer
hereunder, without the prior written consent of the Trustee, and any agreement, instrument or act
purporting to effect any such assignment, transfer, delegation or appointment shall be void.
Notwithstanding the foregoing, the Master Servicer shall have the right without the prior written
consent of the Trustee and hereby agrees to delegate to or subcontract with or authorize or appoint
an affiliate of the Master Servicer to perform and carry out any duties,

-36-

 

covenants or obligations to be performed and carried out by the Master Servicer hereunder. In
no case, however, except an assignment pursuant to Section 9.02 of these Standard Terms, shall any
permitted assignment relieve the Master Servicer of any liability to the Trustee, FMSC, or the
Issuing Entity hereunder.

     Section 12.02. Binding Nature of Agreement; Assignment.

     The Master Servicing Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

     Section 12.03. Entire Agreement.

     The Master Servicing Agreement, which includes these Standard Terms and the Sales/Servicing
Agreement, contains the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof, and supersedes all prior and contemporaneous agreements, understanding,
inducements and conditions, express or implied, oral or written, or any nature whatsoever with
respect to the subject matter hereof. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.

     Section 12.04. Amendments and Supplements.

     These Standard Terms may not be modified, amended or superseded other than by an agreement in
writing among the Master Servicer, FMSC, and the Issuing Entity which has been approved in writing
by the Trustee. The Master Servicer shall use its best efforts promptly to provide notice to the
Rating Agency if these Standard Terms are so modified, amended or superseded.

     Section 12.05. Controlling Law.

     The Master Servicing Agreement and all questions relating to its validity, interpretation,
performance and enforcement, shall be governed by and construed, interpreted and enforced in
accordance with the laws of the Commonwealth of Virginia, notwithstanding any Virginia or other
choice-of-law provisions to the contrary.

     Section 12.06. Indulgences, No Waivers.

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

-37-

 

     Section 12.07. Titles Not to Affect Interpretation.

     The titles of paragraphs and subparagraphs contained in these Standard Terms are for
convenience only, and they neither form a part of these Standard Terms nor are they to be used in
the construction or interpretation hereof.

     Section 12.08. Attorney’s Fees.

     If either party hereto shall bring suit against the other as a result of any alleged breach or
failure by the other party to fulfill or perform any covenants or obligations under the Master
Servicing Agreement or in any deed, instrument or other document delivered pursuant hereto, or to
seek declaratory relief as to the rights or obligations of either party hereto, then in such event,
the prevailing party in such action shall, in addition to any other relief granted or awarded by
the Court, be entitled to judgment for reasonable attorneys’ fees incurred by reason of such action
and all costs of suit and those incurred in preparation thereof, at both trial and appellate
levels.

-38-

 

Exhibits to

Standard Terms to Master Servicing Agreement

	 	 	 
	Exhibits	 	Title
	Exhibit A

	 	Monthly Bond Remittance Report
	Exhibit B

	 	Relevant Servicing Criteria
	Exhibit C

	 	Form 10-D, Form 8-K and Form 10-K Reporting Responsibility
	Exhibit D

	 	Form of Additional Disclosure Notification
	Exhibit E

	 	Form of Servicer Certification

 

 

EXHIBIT A

MONTHLY REMITTANCE REPORT

     The Monthly Remittance Report forwarded to the Issuing Entity and the Trustee for Mortgage
Loans will set forth the information set forth below.

	 	A.	 	Calculation of the monthly remittance to the Trustee (including payments of
principal and interest and all other cash adjustments) (i) for each Mortgage Loan, and
(ii) for all Mortgage Loans in the aggregate.
	 
	 	B.	 	The aggregate remaining scheduled principal balance of the Mortgage Loans.
	 
	 	C.	 	The calculation of the Master Servicing Fee due for the current month.
	 
	 	D.	 	For any uninsured loss, a schedule setting forth the loan number, the
Borrower’s last name, the amount of the uninsured loss and an explanation;
	 
	 	E.	 	If requested by the Issuing Entity, for any principal prepayment (curtailment
or liquidation), a schedule setting forth the loan number, Borrower’s last name, the
amount of the principal prepayment, and, if a curtailment, whether such curtailment is
deemed to have been paid prior to the first day of the remittance month.
	 
	 	F.	 	Calculation and required balance of the Month-End Reserve Fund.

 

 

EXHIBIT B

RELEVANT SERVICING CRITERIA

[To be supplied on transaction basis]

 

 

EXHIBIT C

FORM 10-D, FORM 8-K AND FORM 10-K REPORTING RESPONSIBILITY

ADDITIONAL FORM 10-D DISCLOSURE

	 	 	 
	Item on Form 10-D	 	Party Responsible
	Item 1: Distribution and Pool
	 	 
	Performance Information
	 	 
	 
	 	 
	Information included in the [Monthly

Statement]

	 	Servicer

Master Servicer
	 
	 	 
	Any information required by 1121 which is
NOT included on the [Monthly Statement]

	 	FMSC
	 
	 	 
	Item 2: Legal Proceedings
	 	 
	 
	 	 
	Any legal proceeding pending against
the following entities or their respective
property, that is material to
Certificateholders, including any
proceedings known to be contemplated by
governmental authorities:
	 	 
	 
	 	 
	§ Issuing Entity (Trust Fund)

	 	Trustee, Master Servicer and FMSC
	§ Sponsor (Seller)

	 	Seller or FMSC
	§ Depositor

	 	FMSC
	§ Trustee

	 	Trustee
	§ Master Servicer

	 	Master Servicer
	§ Custodian

	 	Custodian
	§ 1110(b) Originator

	 	FMSC
	§ Any 1108(a)(2) Servicer (other than the

Master Servicer or Securities Administrator)

	 	Servicer
	§ Any other party contemplated by 1100(d)(1)

	 	FMSC
	 
	 	 
	Item 3: Sale of Securities and Use of
Proceeds
	 	FMSC
	 
	 	 
	Information from Item 2(a) of Part II
of Form 10-Q:
	 	 
	 
	 	 
	With respect to any sale of securities by
the sponsor, depositor or issuing entity,
that are backed by the same asset pool or
are otherwise issued by the issuing entity,
whether or not registered, provide the sales
and use of proceeds information in Item 701
of Regulation S-K. Pricing information
	 	 

 

 

ADDITIONAL FORM 10-D DISCLOSURE

	 	 	 
	Item on Form 10-D	 	Party Responsible
	
be omitted if securities were not
registered.

	 	 
	 
	 	 
	Item 4: Defaults Upon Senior
	 	 
	Securities
	 	FMSC
	 
	 	 
	Information from Item 3 of Part II of
Form 10-Q:
	 	 
	 
	 	 
	Report the occurrence of any Event of
Default (after expiration of any grace
period and provision of any required notice)

	 	Trustee
	 
	 	 
	Item 5: Submission of Matters to a
	 	 
	Vote
of Security Holders

	 	 
	 
	
Information from Item 4 of Part II of
Form 10-Q

	 	Trustee
	 
	 	 
	Item 6: Significant Obligors of Pool
	 	FMSC
	Assets
	 	 
	 
	 	 
	Item 1112(b) – Significant Obligor
Financial Information*

	 	 
	 
	 	 
	
 

	* This information need only be reported on
the Form 10-D for the distribution period in
which updated information is required
pursuant to the Item.
	 	 
	 
	 	 
	Item 7: Significant Enhancement
	 	 
	Provider Information
	 	 
	 
	 	 
	Item 1114(b)(2) – Credit Enhancement
Provider Financial Information*
	 	 
	 
	 	 
	§ Determining applicable disclosure threshold

	 	FMSC
	 
	 	 
	§ Requesting required financial information
(including any required accountants’ consent
to the use thereof) or effecting
incorporation by reference

	 	FMSC
	 
	 	 
	Item 1115(b) – Derivative Counterparty
Financial Information*
	 	 
	 
	 	 
	§ Determining current maximum probable

exposure

	 	FMSC
	 
	 	 
	§ Determining current significance percentage

	 	FMSC
	 
	 	 
	§ Requesting required financial information
(including any required accountants’ consent
to the use thereof) or effecting
incorporation by reference

	 	FMSC
	 
	 	 
	
 

	* This information need only be reported on
	 	 

 

 

ADDITIONAL FORM 10-D DISCLOSURE

	 	 	 
	Item on Form 10-D	 	Party Responsible
	the Form 10-D for the distribution period in
which updated information is required
pursuant to the Items.
	 	 
	 
	 	 
	Item 8: Other Information
	 	 
	 
	 	 
	Disclose any information required to be
reported on Form 8-K during the period
covered by the Form 10-D but not reported

	 	Any party responsible for the
applicable Form 8-K Disclosure
item
	 
	 	 
	Item 9: Exhibits
	 	 
	 
	 	 
	Monthly Statement to Certificateholders

	 	Master Servicer
	Exhibits required by Item 601 of Regulation
S-K, such as material agreements

	 	FMSC

 

 

ADDITIONAL FORM 10-K DISCLOSURE

	 	 	 
	Item on Form 10-K	 	Party Responsible
	Item 1B: Unresolved Staff Comments

	 	FMSC
	 
	 	 
	Item 9B:
Other
Information                
	 	 
	Disclose any information required to be
reported on Form 8-K during the fourth quarter
covered by the Form 10-K but not reported

	 	Any party responsible for
disclosure items on Form 8-K
	 
	 	 
	Item 15: Exhibits, Financial Statement

	 	Master Servicer
	Schedules

	 	FMSC
	 
	 	 
	Reg AB Item 1112(b): Significant
	 	 
	Obligors of Pool Assets
	 	 
	 
	 	 
	Significant Obligor Financial Information*

	 	FMSC
	 
	 	 
	
 

	*This information need only be reported on the
Form 10-D for the distribution period in which
updated information is required pursuant to the
Item.
	 	 
	 
	 	 
	Reg AB Item 1114(b)(2): Credit
	 	 
	Enhancement Provider Financial
	 	 
	Information
	 	 
	 
	 	 
	§ Determining applicable disclosure threshold

	 	FMSC
	 
	 	 
	§ Requesting required financial information
(including any required accountants’ consent to
the use thereof) or effecting incorporation by
reference

	 	FMSC
	
 

	*This information need only be reported on the
Form 10-D for the distribution period in which
updated information is required pursuant to the
Items.
	 	 
	 
	 	 
	Reg AB Item 1115(b): Derivative
	 	 
	Counterparty Financial Information
	 	 
	§ Determining current maximum probable

exposure

	 	FMSC
	 
	 	 
	§ Determining current significance percentage

	 	FMSC
	 
	 	 
	§ Requesting required financial information
(including any required accountants’ consent to
the use thereof) or effecting incorporation by
reference

	 	FMSC
	
 

	*This information need only be reported on the
Form 10-D for the distribution period in which
updated information is required pursuant to the
Items.
	 	 

 

 

ADDITIONAL FORM 10-K DISCLOSURE

	 	 	 
	Item on Form 10-K	 	Party Responsible
	Reg AB Item 1117: Legal Proceedings
	 	 
	 
	 	 
	Any legal proceeding pending against the
following entities or their respective property,
that is material to Certificateholders, including
any proceedings known to be contemplated by
governmental authorities:
	 	 
	§ Issuing Entity (Trust Fund)

	 	Trustee, Master Servicer and FMSC
	§ Sponsor (Seller)

	 	Seller or FMSC
	§ Depositor

	 	Depositor
	§ Trustee

	 	[FMSC/Trustee]
	§ Master Servicer

	 	Master Servicer
	§ Custodian

	 	Custodian
	§ 1110(b) Originator

	 	FMSC
	§ Any 1108(a)(2) Servicer (other than the Master

Servicer or Securities Administrator)

	 	Servicer
	§ Any other party contemplated by 1100(d)(1)

	 	FMSC
	 
	 	 
	Reg AB Item 1119: Affiliations and
	 	 
	Relationships
	 	 
	 
	 	 
	Whether (a) the Sponsor (Seller), Depositor
or Issuing Entity is an affiliate of the
following parties, and (b) to the extent known
and material, any of the following parties are
affiliated with one another:

	 	FMSC as to (a)
Sponsor/Seller as to (a)
	 
	 	 
	§ Master Servicer

	 	Master Servicer
	§ Trustee

	 	Trustee
	§ Any other 1108(a)(3) servicer

	 	Servicer
	§ Any 1110 Originator

	 	FMSC/Sponsor
	§ Any 1112(b) Significant Obligor

	 	FMSC/Sponsor
	§ Any 1114 Credit Enhancement Provider

	 	FMSC/Sponsor
	§ Any 1115 Derivate Counterparty Provider

	 	FMSC/Sponsor
	§ Any other 1101(d)(1) material party

	 	FMSC/Sponsor
	 
	 	 
	Whether there are any “outside the ordinary
course business arrangements” other than would be
obtained in an arm’s length transaction between
(a) the Sponsor (Seller), Depositor or Issuing
Entity on the one hand, and (b) any of the
following parties (or their affiliates) on the
other hand, that exist currently or within the
past two years and that are material to a
Certificateholder’s understanding of the
Certificates:

	 	FMSC as to (a)
Sponsor/Seller as to (a)
	 
	 	 
	§ Master Servicer

	 	Master Servicer
	§ Trustee

	 	Trustee

 

 

ADDITIONAL FORM 10-K DISCLOSURE

	 	 	 
	Item on Form 10-K	 	Party Responsible
	§ Any other 1108(a)(3) servicer

	 	Servicer
	§ Any 1110 Originator

	 	FMSC/Sponsor
	§ Any 1112(b) Significant Obligor

	 	FMSC/Sponsor
	§ Any 1114 Credit Enhancement Provider

	 	FMSC/Sponsor
	§ Any 1115 Derivate Counterparty Provider

	 	FMSC/Sponsor
	§ Any other 1101(d)(1) material party

	 	FMSC/Sponsor
	Whether there are any specific relationships
involving the transaction or the pool assets
between (a) the Sponsor (Seller), Depositor or
Issuing Entity on the one hand, and (b) any of
the following parties (or their affiliates) on
the other hand, that exist currently or within
the past two years and that are material:

	 	Depositor as to (a)
Sponsor/Seller as to (a)
	§ Master Servicer

	 	Master Servicer
	§ Trustee

	 	[FMSC/Trustee]
	§ Any other 1108(a)(3) servicer

	 	Servicer
	§ Any 1110 Originator

	 	FMSC/Sponsor
	§Any 1112(b) Significant Obligor

	 	FMSC/Sponsor
	§Any 1114 Credit Enhancement Provider

	 	FMSC/Sponsor
	§ Any 1115 Derivate Counterparty Provider

	 	FMSC/Sponsor
	§ Any other 1101(d)(1) material party

	 	FMSC/Sponsor

 

 

FORM 8-K DISCLOSURE INFORMATION

	 	 	 
	Item on Form 8-K	 	Party Responsible
	Item 1.01- Entry into a Material
	 	 
	Definitive Agreement
	 	 
	Disclosure is required regarding
entry into or amendment of any definitive
agreement that is material to the
securitization, even if depositor is not
a party.
	 	 
	 
	 	 
	Examples: servicing agreement, custodial
agreement.
	 	 
	 
	 	 
	Note: disclosure not required as to
definitive agreements that are fully
disclosed in the prospectus

	 	All parties
	 
	 	 
	Item 1.02- Termination of a Material
	 	 
	Definitive Agreement
	 	 
	 
	 	 
	Disclosure is required regarding
termination of any definitive agreement
that is material to the securitization
(other than expiration in accordance with
its terms), even if depositor is not a
party.
	 	 
	 
	 	 
	Examples: servicing agreement, custodial
agreement.

	 	All parties
	 
	 	 
	Item 1.03- Bankruptcy or Receivership
	 	 
	 
	 	 
	Disclosure is required regarding the
bankruptcy or receivership, with respect
to any of the following:

	 	FMSC
	 
	 	 
	§ Sponsor (Seller)

	 	FMSC/Sponsor (Seller)
	§ Depositor

	 	FMSC
	§ Master Servicer

	 	Master Servicer
	§ Affiliated Servicer

	 	Servicer
	§ Other Servicer servicing 20% or more of
the pool assets at the time of the report

	 	Servicer
	§ Other material servicers

	 	Servicer
	§ Trustee

	 	Trustee
	§ Significant Obligor

	 	FMSC
	§ Credit Enhancer (10% or more)

	 	FMSC
	§ Derivative Counterparty

	 	FMSC
	• Custodian

	 	Custodian

 

 

FORM 8-K DISCLOSURE INFORMATION

	 	 	 
	Item on Form 8-K	 	Party Responsible
	Item 2.04- Triggering Events that
	 	FMSC
	Accelerate or Increase a Direct
	 	Master Servicer
	Financial Obligation or an Obligation
	 	 
	under an Off-Balance Sheet
	 	 
	Arrangement
	 	 
	 
	 	 
	Includes an early amortization,
performance trigger or other event,
including event of default, that would
materially alter the payment
priority/distribution of cash
flows/amortization schedule.
	 	 
	 
	 	 
	Disclosure will be made of events other
than waterfall triggers which are
disclosed in the monthly statements to
the certificateholders.

	 	
	 
	 	 
	Item 3.03- Material Modification to
Rights of Security Holders
	 	Master Servicer
	 
	 	Trustee
	Disclosure is required of any
material modification to documents
defining the rights of
Certificateholders, including the Pooling
and Servicing Agreement.

	 	FMSC
	 
	 	
	Item 5.03- Amendments of Articles of
	 	 
	Incorporation or Bylaws; Change of
	 	 
	Fiscal Year
	 	 
	 
	 	 
	Disclosure is required of any
amendment “to the governing documents of
the issuing entity”.

	 	FMSC
	 
	 	 
	Item 6.01- ABS Informational and
	 	 
	Computational Material

	 	FMSC
	 
	 	 
	Item 6.02- Change of Servicer or
	 	Master Servicer/FMSC/
	Securities Administrator
	 	Servicer/Trustee
	 
	 	 
	Requires disclosure of any removal,
replacement, substitution or addition of
any master servicer, affiliated servicer,
other servicer servicing 10% or more of
pool assets at time of report, other
material servicers or trustee.

	 	 
	 
	 	 
	Reg AB disclosure about any new servicer
or master servicer is also required.

	 	Servicer/Master Servicer/FMSC
	 
	 	 
	Reg AB disclosure about any new Trustee
is also required.

	 	Trustee

 

 

FORM 8-K DISCLOSURE INFORMATION

	 	 	 
	Item on Form 8-K	 	Party Responsible
	Item 6.03- Change in Credit
	 	 
	Enhancement or External Support
	 	 
	 
	 	 
	Covers termination of any
enhancement in manner other than by its
terms, the addition of an enhancement, or
a material change in the enhancement
provided. Applies to external credit
enhancements as well as derivatives.

	 	FMSC/Trustee
	 
	 	 
	Reg AB disclosure about any new
enhancement provider is also required.

	 	FMSC
	 
	 	 
	Item 6.04- Failure to Make a

	 	Master Servicer
	Required Distribution

	 	Trustee
	 
	 	 
	Item 6.05- Securities Act Updating
Disclosure
	 	 
	 
	 	 
	If any material pool characteristic
differs by 5% or more at the time of
issuance of the securities from the
description in the final prospectus,
provide updated Reg AB disclosure about
the actual asset pool.

	 	FMSC
	 
	 	 
	If there are any new servicers or
originators required to be disclosed
under Regulation AB as a result of the
foregoing, provide the information called
for in Items 1108 and 1110 respectively.

	 	FMSC
	 
	 	 
	Item 7.01- Reg FD Disclosure

	 	All parties
	 
	 	 
	Item 8.01- Other Events
	 	 
	 
	 	 
	Any event, with respect to which
information is not otherwise called for
in Form 8-K, that the registrant deems of
importance to certificateholders.

	 	FMSC
	 
	 	 
	Item 9.01- Financial Statements and

	 	Responsible party for

reporting/disclosing the

financial statement or
	Exhibits

	 	exhibit

 

 

EXHIBIT D

FORM OF ADDITIONAL DISCLOSURE NOTIFICATION

Additional Disclosure Notification

[Master Servicer]

[FMSC]

Attn: Corporate Trust Services — Fremont 200[ ]-[ ]-SEC REPORT PROCESSING

RE: **Additional Form [ ] Disclosure**Required

Ladies and Gentlemen:

     In accordance with Section [ ] of the Pooling and Servicing Agreement, dated as of [ ] [ ],
200[ ], among [ ], as [ ], [ ], as [ ], [ ], as [ ] and [ ], as [ ]. The Undersigned, as
[ ], hereby notifies you that certain events have come to our attention that [will][may] need to
be disclosed on Form [ ].

Description of Additional Form [ ] Disclosure:

List of Any Attachments hereto to be included in the Additional Form [ ] Disclosure:

     Any inquiries related to this notification should be directed to [ ], phone number: [ ];
email address: [ ].

	 	 	 	 	 	 	 
	 	 	[NAME OF PARTY]

as [role]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

 

 

EXHIBIT E

Form of Servicer Certificationexv10w1

 

Exhibit
10.1

2002 REDWOOD TRUST, INC. INCENTIVE PLAN

Section 1.     General
Purpose of Plan; Definitions.

     
The name of this plan is the 2002 Redwood Trust, Inc. Incentive
Plan (the “Plan”). The Plan (then known as the 2002
Redwood Trust, Inc. Incentive Stock Plan) was adopted by the
Board on March 21, 2002 and approved by the Company’s
stockholders on May 9, 2002. The Board approved amendments
to the Plan on March 4, 2004 that were approved by the
Company’s stockholders on May 6, 2004. The Board
approved amendments to the Plan on March 9, 2006 (the
“2006 Amendments”) and directed that the amended Plan
be submitted to stockholders of the Company for approval. The
purpose of the Plan is to enable the Company and its
Subsidiaries to obtain and retain competent personnel who will
contribute to the Company’s success by their ability,
ingenuity, and industry, to give the Company’s non-employee
directors a proprietary interest in the Company, and to provide
incentives to the participating directors, officers, and other
key employees, and agents and consultants, that are linked to
performance measures and will therefore inure to the benefit of
all stockholders of the Company.

     
For purposes of the Plan, the following terms shall be defined
as set forth below:

		
	 	     
    (1) “Administrator” means the
    Board, or as long as the Company is subject to the reporting
    requirements of the Securities Exchange Act of 1934, as amended,
    or as required under Section 162(m) of the Code, the
    Committee appointed by the Board.
	 
	 	     
    (2) “Board” means the Board of
    Directors of the Company.
	 
	 	     
    (3) “Code” means the Internal
    Revenue Code of 1986, as amended from time to time, or any
    successor thereto.
	 
	 	     
    (4) “Committee” means the
    Compensation Committee of the Board, which shall be composed of
    not less than three Board members who shall be
    (i) Independent as defined by the rules of the New York
    Stock Exchange, as they may be amended from time to time;
    (ii) a Non-Employee Director as defined in
    Rule 16b-3
    promulgated under Section 16 of the Securities Exchange Act
    of 1934, as amended; and (iii) an Outside Director as
    defined under Section 162(m) of the Internal Revenue Code
    of 1986, as amended, and rules promulgated thereunder.
	 
	 	     
    (5) “Company” means Redwood Trust,
    Inc., a corporation organized under the laws of the State of
    Maryland (or any successor corporation).
	 
	 	     
    (6) “DERs” shall mean dividend
    equivalent rights, which are the right to receive amounts on
    related Stock awards that are linked to dividends on the Stock
    and that may be paid currently in cash or Stock, or accrued in
    shares of deferred stock with or without compounding through
    subsequent payments or accruals on the accrued shares. Payment
    of such deferred stock from DER accruals on Stock Options and
    Stock Appreciation Rights may or may not be contingent upon the
    exercise of the related award, as determined by the Committee at
    the time of grant.
	 
	 	     
    (7) “Deferred Stock” means an award
    granted pursuant to Section 7 of the right to receive Stock
    at the end of a specified deferral period or on such other bases
    as the Administrator may determine.
	 
	 	     
    (8) “Disability” means permanent
    and total disability as determined under the Company’s
    disability program or policy.
	 
	 	     
    (9) “Effective Date” shall mean the
    date provided pursuant to Section 11.
	 
	 	     
    (10) “Eligible Employee” means an
    employee of the Company or any Subsidiary, and any person to
    whom an offer of employment is made by the Company or any
    Subsidiary, eligible to participate in the Plan pursuant to
    Section 4.

1

 

		
	 	     
    (11) “Eligible Non-Employee
    Director” means a member of the Board or the board
    of directors of any Subsidiary who is not a bona fide employee
    of the Company or any Subsidiary and who is eligible to
    participate in the Plan pursuant to Section 4.
	 
	 	     
    (12) “Fair Market Value” means, as
    of any given date, with respect to any awards granted hereunder,
    at the discretion of the Administrator and subject to such
    limitations as the Administrator may impose, the closing sale
    price of the Stock on the next preceding business day as
    reported in the Western Edition of the Wall Street Journal
    Composite Tape.
	 
	 	     
    (13) “GAAP” means, for any day,
    generally accepted accounting principles, applied on a
    consistent basis, stated in the opinions and pronouncements of
    the Accounting Principles Board and the American Institute of
    Certified Public Accountants, or in statements and
    pronouncements of the Financial Accounting Standards Board or in
    such other statements by another entity or entities as may be
    approved by a significant segment of the accounting profession,
    that are applicable to the circumstances for that day.
	 
	 	     
    (14) “Incentive Stock Option” means
    any Stock Option intended to be designated as an “incentive
    stock option” within the meaning of Section 422 of the
    Code.
	 
	 	     
    (15) “Non-Employee Director” shall
    have the meaning set forth in
    Rule 16b-3
    promulgated under the Securities Exchange Act of 1934, as
    amended.
	 
	 	     
    (16) “Non-Qualified Stock Option”
    means any Stock Option that is not an Incentive Stock Option,
    including any Stock Option that provides (as of the time such
    option is granted) that it will not be treated as an Incentive
    Stock Option.
	 
	 	     
    (17) “Parent Corporation” means any
    corporation (other than the Company) in an unbroken chain of
    corporations ending with the Company, if each of the
    corporations in the chain (other than the Company) owns stock
    possessing 50% or more of the combined voting power of all
    classes of stock in one of the other corporations in the chain.
	 
	 	     
    (18) “Participant” means any
    Eligible Employee, Non-Employee Director, or consultant or agent
    of the Company or any Subsidiary selected by the Committee,
    pursuant to the Administrator’s authority in
    Section 2, to receive grants under the Plan.
	 
	 	     
    (19) “Performance Share” means an
    award of shares of Stock granted pursuant to Section 7 that
    is subject to restrictions based upon the attainment of
    specified performance objectives.
	 
	 	     
    (20) “Performance Unit” means an
    award of a unit valued by reference to a designated amount of
    property (including cash) other than Stock, which value may be
    paid to the Participant by delivery of such property as the
    Committee shall determine, including cash, Stock, other
    property, or any combination thereof, upon achievement of such
    performance goals as the Committee shall establish.
	 
	 	     
    (21) “Restricted Stock” means an
    award granted pursuant to Section 7 of shares of Stock,
    subject to restrictions that will lapse with the passage of time
    or on such other bases as the Administrator may determine.
	 
	 	     
    (22) “Stock” means the common
    stock, $0.01 par value per share, of the Company.
	 
	 	     
    (23) “Stock Appreciation Right”
    means the right pursuant to an award granted under
    Section 6 to receive an amount equal to the difference
    between (A) the Fair Market Value, as of the date such
    Stock Appreciation Right or portion thereof is surrendered, of
    the shares of Stock covered by such right or such portion
    thereof, and (B) the aggregate exercise price of such right
    or such portion thereof.
	 
	 	     
    (24) “Stock Option” means an option
    to purchase shares of Stock granted pursuant to Section 5.

2

 

		
	 	     
    (25) “Subsidiary” means
    (A) any corporation (other than the Company) or other
    entity whose assets and liabilities are consolidated with those
    of the Company on the Company’s consolidated balance sheet
    and (B) any other business venture designated by the
    Administrator in which the Company has a significant interest,
    as determined in the discretion of the Administrator.

Section 2.     Administration.

     
The Plan shall be administered by the Administrator, except as
otherwise expressly provided herein.

     
The Administrator shall have the power and authority to grant to
Participants pursuant to the terms of the Plan: (a) Stock
Options, (b) Stock Appreciation Rights, (c) Restricted
Stock, (d) Deferred Stock, (e) Performance Shares,
(f) Performance Units, or (g) any combination of the
foregoing. DERs may be granted in conjunction with any of the
Stock awards listed above.

     
In addition, the Administrator shall have the authority:

		
	 	     
    (a) to select those employees and prospective employees of
    the Company or any Subsidiary who shall be Eligible Employees;
	 
	 	     
    (b) to determine whether and to what extent Stock Options
    (with or without DERs), Stock Appreciation Rights, Restricted
    Stock, Deferred Stock, Performance Shares, Performance Units, or
    a combination of the foregoing, are to be granted to
    Participants hereunder;
	 
	 	     
    (c) to determine the number of shares to be covered by each
    such award granted hereunder;
	 
	 	     
    (d) to determine the terms and conditions, not inconsistent
    with the terms of the Plan, of any award granted hereunder
    (including, but not limited to, (x) the restricted period
    applicable to Restricted or Deferred Stock awards and the date
    or dates on which restrictions applicable to such Restricted or
    Deferred Stock shall lapse during such period, and (y) the
    performance goals and periods applicable to the award of
    Performance Shares and Performance Units); and
	 
	 	     
    (e) to determine the terms and conditions, not inconsistent
    with the terms of the Plan, which shall govern all written
    instruments evidencing the Stock Options, DERs, Stock
    Appreciation Rights, Restricted Stock, Deferred Stock,
    Performance Shares, Performance Units, or any combination of the
    foregoing.

     
The Administrator may designate whether any award being granted
to any Participant is intended to be “performance-based
compensation” as that term is used in Section 162(m)
of the Code. Any such awards designated as
“performance-based compensation” shall be conditioned
on the achievement of one or more performance measures. The
performance measures that may be used by the Administrator for
such awards shall be based on any one or more of the following,
as selected by the Administrator: revenue; revenue per employee;
GAAP earnings; taxable earnings; GAAP or taxable earnings per
employee; GAAP or taxable earnings per share (basic or diluted);
operating income; total stockholder return; dividends paid or
payable; market share; profitability as measured by return
ratios, including return on revenue, return on assets, return on
equity (including adjusted return on equity), and return on
investment; cash flow; or economic value added (economic
profit); and such criteria generally must be specified in
advance and may relate to one or any combination of two or more
corporate, group, unit, division, affiliate, or individual
performances. For awards intended to be “performance-based
compensation,” the grant of the awards, the establishment
of the performance measures, and the certification that the
performance goals were satisfied shall be made during the period
and in the manner required under Code Section 162(m).

     
The Administrator shall have the authority, in its discretion,
to adopt, alter, and repeal such administrative rules,
guidelines, and practices governing the Plan as it shall from
time to time deem advisable; to interpret the terms and
provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the
administration of the Plan.

3

 

     
All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final and binding on all
persons, including the Company, any Subsidiaries, and the
Participants. Notwithstanding the foregoing or anything else to
the contrary in the Plan, any action or determination by the
Administrator specifically affecting or relating to an award to
a Non-Employee Director shall be approved and ratified by the
Board.

     
Notwithstanding anything to the contrary herein, no award
hereunder may be made to any Participant to the extent that,
following such award, the shares subject or potentially subject
to such Participant’s control (including, but not limited
to, (i) shares of the Company’s equity stock owned by
the Participant, (ii) shares of Stock subject to awards
granted to the Participant under the Prior Plan (whether such
awards are then exercisable or vested), (iii) Stock
Options, whether or not then exercisable, held by the
Participant to purchase additional such shares,
(iv) Restricted Stock, Deferred Stock, and Performance
Share awards to the Participant, whether or not then vested, and
(v) shares of Stock accrued under DERs awarded to the
Participant) would constitute more than 9.8% of the outstanding
capital stock of the Company.

Section 3.     Stock
Subject to Plan.

     
(1) Subject to the following provisions of this
Section 3, the maximum number of shares of Stock that may
be issued with respect to awards granted under the Plan
subsequent to the approval of the 2006 Amendments shall be equal
to the sum of: (i) 650,000 shares of Stock;
(ii) the number of shares of Stock remaining available for
grant under the Plan immediately prior to the stockholder
approval of the 2006 Amendments; (iii) any shares of Stock
that are represented by awards granted under the Company’s
Amended and Restated 1994 Executive and Non-Employee Director
Stock Option Plan (the “Prior Plan”) which are
(A) forfeited, expire, or are canceled without delivery of
shares of Stock or (B) settled in cash; and (iv) any
shares of Stock that are represented by awards granted under the
Prior Plan which are tendered to the Company (by either actual
delivery or attestation) to satisfy the exercise price of Stock
Options or the applicable tax withholding obligation.

     
(2) Any shares of Stock covered by an award that is
forfeited or canceled, or shares of stock not delivered because
the award is settled in cash or used to satisfy the applicable
tax withholding obligation, shall not be deemed to have been
issued for purposes of determining the maximum number of shares
of Stock available for future awards under the Plan.

     
(3) If the exercise price of any Stock Option granted under
the Plan is satisfied by tendering shares of Stock to the
Company (by either actual delivery or by attestation), only the
number of shares of Stock issued net of the shares of Stock
tendered shall be deemed issued for purposes of determining the
maximum number of shares of Stock available for future awards
under the Plan.

     
(4) Subject to Section 3(5), the following additional
maximums are imposed under the Plan:

		
	 	     
    (a) The maximum number of shares of Stock that may be the
    subject of awards granted as Incentive Stock Options under the
    Plan shall be 500,000 shares (regardless of whether the
    awards are canceled, forfeited, or materially amended or the
    shares subject to any such awards are surrendered).
	 
	 	     
    (b) The maximum number of shares that may be the subject of
    awards granted to any one individual pursuant to Sections 5
    and 6 (relating to Stock Options and Stock Appreciation Rights)
    shall be 500,000 shares during any calendar year
    (regardless of whether such awards are canceled, forfeited, or
    materially amended or the shares subject to any such award are
    surrendered).
	 
	 	     
    (c) No more than 500,000 shares of Stock may be the
    subject of awards under the Plan granted to any one individual
    during any one-calendar-year period (regardless of when such
    shares are deliverable or whether the awards are forfeited,
    canceled, or materially amended or the shares subject to any
    such award are surrendered) if such awards are intended to be
    “performance-based compensation” (as the term is used
    for purposes of Code Section 162(m)).

4

 

		
	 	     
    (d) Shares of Stock issued under the Plan or covered by
    awards granted under the Plan pursuant to the settlement,
    assumption, or substitution of outstanding awards or obligations
    to grant future awards as a condition of the Company acquiring
    another entity shall not count against the maximum number of
    shares available for future awards under the Plan.

     
(5) In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend,
stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off,
combination, or exchange of shares), the Administrator may
adjust awards to preserve the benefits or potential benefits of
the awards. Action by the Administrator may include:
(i) adjustment of the number and kind of shares which may
be delivered under the Plan; (ii) adjustment of the number
and kind of shares subject to outstanding awards;
(iii) adjustment of the exercise price of outstanding Stock
Options and Stock Appreciation Rights; and (iv) any other
adjustments that the Administrator determines to be equitable,
in its sole discretion.

Section 4.     Eligibility.

     
Officers and other key employees of the Company or Subsidiaries
who are responsible for or contribute to the management, growth,
and/or profitability of the business of the Company or its
Subsidiaries, Non-Employee Directors, and consultants and agents
of the Company or its Subsidiaries, shall be eligible to be
granted Stock Options, DERs, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Performance Shares, or
Performance Units hereunder. The Participants under the Plan
shall be selected from time to time by the Administrator, in its
sole discretion, from among those eligible.

Section 5.     Stock
Options.

     
Stock Options may be granted alone or in addition to other
awards granted under the Plan, including DERs. Any Stock Option
granted under the Plan shall be in such form as the
Administrator may from time to time approve, and the provisions
of Stock Option awards need not be the same with respect to each
optionee. Recipients of Stock Options shall enter into a Stock
Option agreement with the Company, in such form as the
Administrator shall determine, which agreement shall set forth,
among other things, the exercise price, the term, and provisions
regarding exercisability of the Stock Option granted thereunder.

     
The Stock Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Non-Qualified
Stock Options.

     
The Administrator shall have the authority under this
Section 5 to grant any optionee (except Eligible
Non-Employee Directors) Incentive Stock Options, Non-Qualified
Stock Options, or both types of Stock Options (in each case with
or without DERs or Stock Appreciation Rights), provided,
however, that Incentive Stock Options may not be granted to any
individual who is not an employee of the Company or its
Subsidiaries. To the extent that any Stock Option does not
qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option. More than one option may be
granted to the same optionee and be outstanding concurrently
hereunder.

     
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the
Plan, as the Administrator shall deem desirable:

		
	 	     
    (1) Option Price. The option price per share of
    Stock purchasable under a Stock Option shall be determined by
    the Administrator in its sole discretion at the time of grant
    but shall not be less than 100% of the Fair Market Value of the
    Stock on such date, and shall not, in any event, be less than
    the par value of the Stock. If an employee owns or is deemed to
    own (by reason of the attribution rules applicable under
    Section 425(d) of the Code) more than 10% of the combined
    voting power of all classes of stock of the Company or any
    Parent Corporation or Subsidiary and an Incentive Stock Option
    is granted to such employee, the option price of such Incentive
    Stock Option (to the extent required by the Code at the time of
    grant) shall be no less than 110% of the Fair

5

 

		
	 	
    Market Value of the Stock on the date such Incentive Stock
    Option is granted. The provisions of this Section 5(1)
    shall not be applicable to awards granted under the Plan
    pursuant to the settlement, assumption, or substitution of
    outstanding awards or obligations to grant future awards as a
    condition of the Company acquiring another entity.
	 
	 	     
    (2) Option Term. The term of each Stock Option shall
    be fixed by the Administrator, but no Stock Option shall be
    exercisable more than ten years after the date such Stock Option
    is granted; provided, however, that if an employee owns or is
    deemed to own (by reason of the attribution rules of
    Section 425(d) of the Code) more than 10% of the combined
    voting power of all classes of stock of the Company or any
    Parent Corporation or Subsidiary and an Incentive Stock Option
    is granted to such employee, the term of such Incentive Stock
    Option (to the extent required by the Code at the time of grant)
    shall be no more than five years from the date of grant.
	 
	 	     
    (3) Exercisability. Stock Options shall be
    exercisable at such time or times and subject to such terms and
    conditions as shall be determined by the Administrator at or
    after grant. The Administrator may provide, in its discretion,
    that any Stock Option shall be exercisable only in installments,
    and the Administrator may waive such installment exercise
    provisions at any time in whole or in part based on such factors
    as the Administrator may determine, in its sole discretion. To
    the extent not exercised, installments shall accumulate and be
    exercisable in whole or in part at any time after becoming
    exercisable but not later than the date the Stock Option expires.
	 
	 	     
    (4) Method of Exercise. Subject to
    Section 5(3), Stock Options may be exercised in whole or in
    part at any time during the option period, by giving written
    notice of exercise to the Company specifying the number of
    shares to be purchased, accompanied by payment in full of the
    purchase price in cash or its equivalent as determined by the
    Administrator. The Administrator may also permit a Participant
    to elect to pay the exercise price upon the exercise of a Stock
    Option by irrevocably authorizing a third party to sell shares
    of Stock (or a sufficient portion of the shares) acquired upon
    exercise of the Stock Option and remit to the Company a
    sufficient portion of the sale proceeds to pay the entire
    exercise price and any tax withholding resulting from such
    exercise. As determined by the Administrator, in its sole
    discretion, payment in whole or in part may also be made by
    surrendering unrestricted Stock already owned by the optionee,
    or, in the case of the exercise of a Non-Qualified Stock Option,
    Restricted Stock, or Performance Shares subject to an award
    hereunder (based, in each case, on the Fair Market Value of the
    Stock on the date the option is exercised); provided, however,
    that in the case of an Incentive Stock Option, the right to make
    payment in the form of already owned shares may be authorized
    only at the time of grant. Any payment in the form of stock
    already owned by the optionee may be effected by use of an
    attestation form approved by the Administrator. If payment of
    the option exercise price of a Non-Qualified Stock Option is
    made in whole or in part in the form of Restricted Stock or
    Performance Shares, the shares received upon the exercise of
    such Stock Option (to the extent of the number of shares of
    Restricted Stock or Performance Shares surrendered upon exercise
    of such Stock Option) shall be restricted in accordance with the
    original terms of the Restricted Stock or Performance Share
    award in question, except that the Administrator may direct that
    such restrictions shall apply only to that number of shares
    equal to the number of shares surrendered upon the exercise of
    such option. An optionee shall generally have the rights to
    dividends and other rights of a stockholder with respect to
    shares subject to the option only after the optionee has given
    written notice of exercise, has paid in full for such shares,
    and, if requested, has given the representation described in
    paragraph (1) of Section 11.
	 
	 	     
    (5) Limits on Transferability of Options.

		
	 	     
    (a) Subject to Section 5(5)(b), no Stock Option shall
    be transferable by the optionee otherwise than by will or by the
    laws of descent and distribution or pursuant to a
    “qualified domestic relations order,” as such term is
    defined in the Employee Retirement Income Security Act of 1974,
    as amended (“ERISA”), and all Stock Options shall be
    exercisable, during the

6

 

		
	 	
    optionee’s lifetime, only by the optionee or in accordance
    with the terms of a qualified domestic relations order.
	 
	 	     
    (b) The Administrator may, in its discretion, authorize all
    or a portion of the Non-Qualified Stock Options to be granted to
    an optionee to be on terms which permit transfer by such
    optionee to (i) the spouse, qualified domestic partner,
    children, or grandchildren of the optionee and any other persons
    related to the optionee as may be approved by the Administrator
    (“Immediate Family Members”), (ii) a trust or
    trusts for the exclusive benefit of such Immediate Family
    Members, (iii) a partnership or partnerships in which such
    Immediate Family Members are the only partners, or (iv) any
    other persons or entities as may be approved by the
    Administrator, provided that (x) there may be no
    consideration for any transfer unless approved by the
    Administrator, (y) the stock option agreement pursuant to
    which such options are granted must be approved by the
    Administrator, and must expressly provide for transferability in
    a manner consistent with this Section 5(5)(b), and
    (z) subsequent transfers of transferred Stock Options shall
    be prohibited except those in accordance with
    Section 5(5)(a) or expressly approved by the Administrator.
    Following transfer, any such Stock Options shall continue to be
    subject to the same terms and conditions as were applicable
    immediately prior to transfer, provided that, except for
    purposes of Sections 5(6) and 10(3) hereof, the terms
    “optionee,” “Stock Option holder” and
    “Participant” shall be deemed to refer to the
    transferee. The events of termination of employment contained in
    the option agreement with respect to such Stock Options shall
    continue to be applied with respect to the original optionee,
    following any which event the Stock Options shall be exercisable
    by the transferee only to the extent, and for the periods
    specified in such option agreements. Notwithstanding the
    transfer, the original optionee will continue to be subject to
    the provisions of Section 10(3) regarding payment of taxes,
    including the provisions entitling the Company to deduct such
    taxes from amounts otherwise due to such optionee. Any transfer
    of a Stock Option that was originally granted with DERs related
    thereto shall automatically include the transfer of such DERs,
    any attempt to transfer such Stock Option separately from such
    DERs shall be void, and such DERs shall continue in effect
    according to their terms. “Qualified domestic partner”
    for the purpose of this Section 5(5)(b) shall mean a
    domestic partner living in the same household as the optionee
    and registered with, certified by, or otherwise acknowledged by
    the county or other applicable governmental body as a domestic
    partner or otherwise establishing such status in any manner
    satisfactory to the Administrator.

		
	 	     
    (6) Annual Limit on Incentive Stock Options. To the
    extent that the aggregate Fair Market Value (determined as of
    the date the Incentive Stock Option is granted) of shares of
    Stock with respect to which Incentive Stock Options granted to
    an optionee under this Plan and all other option plans of the
    Company, its Parent Corporation or any Subsidiary become
    exercisable for the first time by the optionee during any
    calendar year exceeds $100,000, such Stock Options shall be
    treated as Non-Qualified Stock Options.

Section 6.     Stock
Appreciation Rights.

     
(1) Grant and Exercise. Stock Appreciation Rights
may be granted either alone (“Free Standing Rights”)
or in conjunction with all or part of any Stock Option granted
under the Plan (“Related Rights”). In the case of a
Non-Qualified Stock Option, Related Rights may be granted either
at or after the time of the grant of such Stock Option. In the
case of an Incentive Stock Option, Related Rights may be granted
only at the time of the grant of the Incentive Stock Option.

     
A Related Right or applicable portion thereof granted in
conjunction with a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the
related Stock Option, except that, unless otherwise provided by
the Administrator at the time of grant, a Related Right granted
with respect to less than the full number of shares covered by a
related Stock Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination
of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.

7

 

     
A Related Right may be exercised by an optionee, in accordance
with paragraph (2) of this Section 6, by
surrendering the applicable portion of the related Stock Option.
Upon such exercise and surrender, the optionee shall be entitled
to receive an amount determined in the manner prescribed in
paragraph (2) of this Section 6. Stock Options
which have been so surrendered, in whole or in part, shall no
longer be exercisable to the extent the Related Rights have been
so exercised.

     
(2) Terms and Conditions. Stock Appreciation Rights
shall be subject to such terms and conditions, not inconsistent
with the provisions of the Plan, as shall be determined from
time to time by the Administrator, including the following:

		
	 	     
    (a) Stock Appreciation Rights that are Related Rights
    (“Related Stock Appreciation Rights”) shall be
    exercisable only at such time or times and to the extent that
    the Stock Options to which they relate shall be exercisable in
    accordance with the provisions of Section 5 and this
    Section 6; provided, however, that no Related Stock
    Appreciation Right shall be exercisable during the first six
    months of its term, except that this additional limitation shall
    not apply in the event of death or Disability of the optionee
    prior to the expiration of such six-month period.
	 
	 	     
    (b) Upon the exercise of a Related Stock Appreciation
    Right, an optionee shall be entitled to receive up to, but not
    more than, an amount in cash or that number of shares of Stock
    (or in some combination of cash and shares of Stock) equal in
    value to the excess of the Fair Market Value of one share of
    Stock as of the date of exercise over the option price per share
    specified in the related Stock Option multiplied by the number
    of shares of Stock in respect of which the Related Stock
    Appreciation Right is being exercised, with the Administrator
    having the right to determine the form of payment.
	 
	 	     
    (c) Related Stock Appreciation Rights shall be transferable
    or exercisable only when and to the extent that the underlying
    Stock Option would be transferable or exercisable under
    paragraph (5) of Section 5.
	 
	 	     
    (d) Upon the exercise of a Related Stock Appreciation
    Right, the Stock Option or part thereof to which such Related
    Stock Appreciation Right is related shall be deemed to have been
    exercised for the purpose of the limitation set forth in
    Section 3 on the number of shares of Stock to be issued
    under the Plan.
	 
	 	     
    (e) A Related Stock Appreciation Right granted in
    connection with an Incentive Stock Option may be exercised only
    if and when the Fair Market Value of the Stock subject to the
    Incentive Stock Option exceeds the exercise price of such Stock
    Option.
	 
	 	     
    (f) Stock Appreciation Rights that are Free Standing Rights
    (“Free Standing Stock Appreciation Rights”) shall be
    exercisable at such time or times and subject to such terms and
    conditions as shall be determined by the Administrator at or
    after grant; provided, however, that no Free Standing Stock
    Appreciation Right shall be exercisable during the first six
    months of its term, except that this limitation shall not apply
    in the event of death or Disability of the recipient of the Free
    Standing Stock Appreciation Right prior to the expiration of
    such six-month period.
	 
	 	     
    (g) The term of each Free Standing Stock Appreciation Right
    shall be fixed by the Administrator, but no Free Standing Stock
    Appreciation Right shall be exercisable more than ten years
    after the date such right is granted.
	 
	 	     
    (h) Upon the exercise of a Free Standing Stock Appreciation
    Right, a recipient shall be entitled to receive up to, but not
    more than, an amount in cash or that number of shares of Stock
    (or any combination of cash or shares of Stock) equal in value
    to the excess of the Fair Market Value of one share of Stock as
    of the date of exercise over the price per share specified in
    the Free Standing Stock Appreciation Right (which price shall be
    no less than 100% of the Fair Market Value of the Stock on the
    date of grant) multiplied by the number of shares of Stock with
    respect to which the right is being exercised, with the
    Administrator having the right to determine the form of payment.

8

 

		
	 	     
    (i) Free Standing Stock Appreciation Rights shall be
    transferable or exercisable subject to the provisions governing
    the transferability and exercisability of Stock Options set
    forth in paragraphs (3) and (5) of Section 5.
	 
	 	     
    (j) In the event of the termination of an employee who has
    been granted one or more Free Standing Stock Appreciation
    Rights, such rights shall be exercisable to the same extent that
    a Stock Option would have been exercisable in the event of the
    termination of the optionee.
	 
	 	     
    (k) For the purpose of the limitation set forth in
    Section 3 on the number of shares to be issued under the
    Plan, the grant or exercise of Free Standing Stock Appreciation
    Rights shall be deemed to constitute the grant or exercise,
    respectively, of Stock Options with respect to the number of
    shares of Stock with respect to which such Free Standing Stock
    Appreciation Rights were so granted or exercised.

Section 7.     Restricted
Stock, Deferred Stock, and Performance Shares.

     
(1) General. Restricted Stock, Deferred Stock, or
Performance Share awards may be issued either alone or in
addition to other awards granted under the Plan. The
Administrator shall determine the Participants to whom, and the
time or times at which, grants of Restricted Stock, Deferred
Stock, or Performance Share awards shall be made; the number of
shares to be awarded; the price, if any, to be paid by the
recipient of Restricted Stock, Deferred Stock, or Performance
Share awards; the Restricted Period (as defined in
Section 7(3)) applicable to Restricted Stock, Deferred
Stock, or Performance Share awards; the performance objectives
applicable to Performance Share, Restricted Stock, or Deferred
Stock awards; the date or dates on which restrictions applicable
to such Restricted Stock or Deferred Stock awards shall lapse
during such Restricted Period; and all other conditions of the
Restricted Stock, Deferred Stock, and Performance Share awards.
The Administrator may also condition the grant of Restricted
Stock, Deferred Stock, or Performance Share awards upon the
exercise of Stock Options or upon such other criteria as the
Administrator may determine, in its sole discretion. The
provisions of Restricted Stock, Deferred Stock, or Performance
Share awards need not be the same with respect to each recipient.

     
(2) Awards and Certificates. The prospective
recipient of a Restricted Stock, Deferred Stock, or Performance
Share award shall not have any rights with respect to such
award, unless and until such recipient has executed an agreement
evidencing the award (a “Restricted Stock Award
Agreement,” “Deferred Stock Award Agreement,” or
“Performance Share Award Agreement,” as appropriate)
and delivered a fully executed copy thereof to the Company,
within a period of sixty days (or such other period as the
Administrator may specify) after the award date. Except as
otherwise provided below in this Section 7(2),
(i) each Participant who is awarded Restricted Stock or
Performance Shares shall be issued a stock certificate in
respect of such shares of Restricted Stock or Performance
Shares; and (ii) such certificate shall be registered in
the name of the Participant, and shall bear an appropriate
legend referring to the terms, conditions, and restrictions
applicable to such award, substantially in the following form:

			
	 	   
    “The transferability of this certificate and the shares of
    stock represented hereby are subject to the terms and conditions
    (including forfeiture) of the 2002 Redwood Trust, Inc. Incentive
    Plan and a Restricted Stock Award Agreement or Performance Share
    Award Agreement entered into between the registered owner and
    Redwood Trust, Inc. Copies of such Plan and Agreement are on
    file in the offices of Redwood Trust, Inc.”	 

     
The Company shall require that the stock certificates evidencing
such shares be held in the custody of the Company until the
restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award or Performance Share
award, the Participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.

9

 

     
(3) Restrictions and Conditions. The
Restricted Stock, Deferred Stock, and Performance Share awards
granted pursuant to this Section 7 shall be subject to the
following restrictions and conditions:

		
	 	     
    (a) Subject to the provisions of the Plan and the
    Restricted Stock, Deferred Stock, or Performance Share award
    agreement, during such period as may be set by the Administrator
    commencing on the grant date (the “Restricted
    Period”), the Participant shall not be permitted to sell,
    transfer, pledge, or assign shares of Restricted Stock,
    Performance Shares, or Deferred Stock awarded under the Plan;
    provided, however, that the Administrator may, in its sole
    discretion, provide for the lapse of such restrictions in
    installments and may accelerate or waive such restrictions in
    whole or in part based on such factors and such circumstances as
    the Administrator may determine, in its sole discretion,
    including, but not limited to, the attainment of certain
    performance related goals, the Participant’s termination,
    death, or Disability or the occurrence of a “Change of
    Control” (as defined by the Administrator at the time of
    grant). Except for certain limited situations, the Restricted
    Period for awards subject solely to continued employment
    restrictions shall be not less than three years from the date of
    grant. The Restricted Period for awards subject to meeting
    specified performance criteria shall generally not be shorter
    than twelve months or longer than five years.
	 
	 	     
    (b) Except as provided in paragraph (3)(a) of this
    Section 7, the Participant shall have, with respect to the
    shares of Restricted Stock or Performance Shares, all of the
    rights of a stockholder of the Company, including the right to
    vote the shares, and the right to receive any dividends thereon
    during the Restricted Period. With respect to Deferred Stock
    awards, the Participant shall generally not have the rights of a
    stockholder of the Company, including the right to vote the
    shares during the Restricted Period; provided, however, that,
    except as otherwise specified by the Administrator at time of
    grant, dividends declared during the Restricted Period with
    respect to the number of shares covered by a Deferred Stock
    award shall accrue to the Participant. Certificates for shares
    of unrestricted Stock shall be delivered to the Participant
    promptly after, and only after, the Restricted Period shall
    expire without forfeiture in respect of such shares covered by
    the award of Restricted Stock, Performance Shares, or Deferred
    Stock, except as the Administrator, in its sole discretion,
    shall otherwise determine.

		
	Section 8.     	
    Performance Units.

     
(1) General. Performance Unit awards may be
issued either alone or in addition to other awards granted under
the Plan. The Administrator shall determine the Participants to
whom, and the time or times at which, grants of Performance Unit
awards shall be made; the number of units to be awarded; the
Performance Period (as defined in Section 8(2)) applicable
to Performance Unit awards; the performance objectives
applicable to Performance Unit awards, including the performance
measures specified in Section 2 for Performance Unit awards
that are intended to be “performance-based
compensation” as that term is used in Section 162(m)
of the Code; and all other conditions of the Performance Unit
awards. The Administrator may also condition the grant of
Performance Unit awards upon such other criteria as the
Administrator may determine, in its sole discretion. The
provisions of Performance Unit awards need not be the same with
respect to each recipient.

     
(2) Performance Period and Conditions. The
Performance Unit awards granted pursuant to this Section 8
shall be subject to the following terms and other conditions:

		
	 	     
    (a) The Performance Unit award agreement shall specify such
    period as may be set by the Administrator commencing on the
    grant date (the “Performance Period”) during which the
    Performance Unit award shall be earned, based on the attainment
    of certain performance related goals and such other factors as
    the Administrator may determine, in its sole discretion;
    provided, however, that the Administrator may waive such goals
    and factors in whole or in part under such circumstances as it
    may determine in its sole discretion, including the
    Participant’s termination, death, or Disability or the
    occurrence of a “Change of Control” (as defined by the
    Administrator at the time of grant). The Performance Period for
    awards shall generally not be shorter than twelve months or
    longer than five years. Notwithstanding anything to the contrary
    herein, with respect to a Perform-

10

 

		
	 	
    ance Unit award intended to qualify as performance-based
    compensation under Section 162(m) of the Code, the
    Committee may adjust downwards, but not upwards, the amount
    payable under such award. Notwithstanding anything to the
    contrary herein, with respect to any Performance Unit award that
    is intended to qualify as performance-based compensation under
    Section 162(m) of the Code, the Committee shall, prior to
    payment on such award, certify in writing that the applicable
    performance related goals have been met.
	 
	 	     
    (b) Except as provided in this Section 8 or as may be
    provided in an award agreement, Performance Units will be paid
    only after the end of the relevant Performance Period.
    Performance Unit awards may be paid in cash, shares of stock,
    other property, or any combination thereof, in the sole
    discretion of the Committee at the time of payment. Awards may
    be paid in a lump sum or in installments following the close of
    the Performance Period or, in accordance with procedures
    established by the Committee, on a deferred basis subject to the
    requirements of Section 409A of the Code.

     
(3) Maximum Dollar Value. The maximum dollar
value payable to any Participant in any
12-month period with
respect to a Performance Unit award that is intended to be
performance-based compensation is $5,000,000. If such an award
is cancelled, the cancelled award shall continue to be counted
towards such maximum dollar value.

Section 9.     Amendment
and Termination.

     
The Board may amend, alter, suspend, terminate, or discontinue
the Plan or any portion thereof at any time; provided, however,
that no such amendment, alteration, suspension, discontinuation,
or termination shall be made without (1) stockholder
approval if such approval is necessary to qualify for or comply
with any tax or regulatory requirement for which or with which
the Board deems it necessary or desirable to qualify or comply
or if such approval is required by the paragraph below or
(2) the consent of the affected Participant, if such action
would impair the rights of such Participant under any
outstanding award. Notwithstanding anything to the contrary
herein, the Committee may amend the Plan in such manner as may
be necessary so as to have the Plan conform to local rules and
regulations in any jurisdiction outside the United States.

     
The Administrator may amend the terms of any award theretofore
granted prospectively or retroactively, but no such amendment
shall (1) impair the rights of any Participant without his
or her consent or (2) without stockholder approval, except
for adjustments made pursuant to Section 3(5) or in
connection with substitute awards, reduce the exercise price of
outstanding Stock Options or Stock Appreciation Rights or cancel
outstanding Stock Options or Stock Appreciation Rights in
exchange for cash, other Awards or Stock Options or Stock
Appreciation Rights with an exercise price that is less than the
exercise price of the original Stock Options or Stock
Appreciation Rights. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the
Participant, be made in a manner so as to constitute a
“modification” that would cause such Incentive Stock
Option to fail to continue to qualify as an Incentive Stock
Option. Notwithstanding the foregoing, any adjustments made
pursuant to Section 3(5) shall not be subject to these
restrictions.

		
	Section 10.     	
    Unfunded Status of Plan.

     
The Plan is intended to constitute an “unfunded” plan
for incentive compensation. With respect to any payments not yet
made to a Participant or optionee by the Company, nothing
contained herein shall give any such Participant or optionee any
rights that are greater than those of a general creditor of the
Company.

		
	Section 11.     	
    General Provisions.

     
(1) The Administrator may require each person purchasing
shares pursuant to a Stock Option to represent to and agree with
the Company in writing that such person is acquiring the shares
without a

11

 

view to distribution thereof. The certificates for such shares
may include any legend which the Administrator deems appropriate
to reflect any restrictions on transfer.

     
All certificates for shares of Stock delivered under the Plan
shall be subject to such stock-transfer orders and other
restrictions as the Administrator may deem advisable under the
rules, regulations, and other requirements of the Commission,
any stock exchange upon which the Stock is then listed, and any
applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such
restrictions.

     
(2) Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is required;
and such arrangements may be either generally applicable or
applicable only in specific cases. The adoption of the Plan
shall not confer upon any employee of the Company or any
Subsidiary any right to continued employment with the Company or
a Subsidiary, as the case may be, nor shall it interfere in any
way with the right of the Company or a Subsidiary to terminate
the employment of any of its employees at any time.

     
(3) Each Participant shall, no later than the date as of
which the value of an award first becomes includable in the
gross income of the Participant for federal income tax purposes,
pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to
the award. The obligations of the Company under the Plan shall
be conditional on the making of such payments or arrangements,
and the Company (and, where applicable, its Subsidiaries) shall,
to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the
Participant.

     
(4) No member of the Board or the Administrator, nor any
officer or employee of the Company acting on behalf of the Board
or the Administrator, shall be personally liable for any action,
determination, or interpretation taken or made in good faith
with respect to the Plan, and all members of the Board or the
Administrator and each and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.

     
(5) The Administrator may permit or require a Participant
to subject any award granted hereunder to any deferred
compensation, deferred stock issuance, or similar plan that may
be made available to Participants by the Company from time to
time. The Administrator may establish such rules and procedures
for participation in such deferral plans as it may deem
appropriate, in its sole discretion.

     
(6) This Plan is intended to comply and shall be
administered in a manner that is intended to comply with
Section 409A of the Code and shall be construed and
interpreted in accordance with such intent. To the extent that
an award or the payment, settlement or deferral thereof is
subject to Section 409A of the Code, the award shall be
granted, paid, settled or deferred in a manner that will comply
with Section 409A of the Code, including regulations or
other guidance issued with respect thereto, except as otherwise
determined by the Committee. Any provision of this Plan that
would cause the grant of an award or the payment, settlement or
deferral thereof to fail to satisfy Section 409A of the
Code shall be amended to comply with Section 409A of the
Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued
under Section 409A of the Code.

		
	Section 12.     	
    Effective Date of Plan.

     
The Plan became effective (the “Effective Date”) on
May 9, 2002, the date the Company’s stockholders
formally approved the Plan. The Plan was amended effective on
May 6, 2004, the date the Company’s stockholders
formally approved amendments to the Plan. The 2006 Amendments
will become effective upon approval by the Company’s
stockholders at the Company’s 2006 Annual Meeting of
Stockholders.

12

 

		
	Section 13.     	
    Term of Plan.

     
The Plan shall remain in full force and effect unless terminated
by the Board or no further shares of Stock remain available for
awards to be granted under Section 3 and there are no
outstanding awards that remain to become vested, exercised, or
free of restrictions.

13

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