Document:

Security Agreement relating to Override Agreement

 Exhibit 10.2 
 SECURITY AGREEMENT 
 dated as of 
 April 1, 2008 
 among 
 THORNBURG MORTGAGE INC., 
 EACH OTHER LIEN GRANTOR PARTY HERETO, 
 EACH COUNTERPARTY PARTY HERETO, 
 and

 CREDIT SUISSE SECURITIES (USA) LLC 
 as Collateral Agent 

 TABLE OF CONTENTS 
  

							
	 	 	 	  	 	  	PAGE
	ARTICLE 1	  	
	DEFINITIONS	  	
	 Section 1.01.
	 	Defined Terms	  	1
	 Section 1.02.
	 	Interpretation	  	7
		
	ARTICLE 2	  	
	SECURITY INTERESTS	  	
	 Section 2.01.
	 	Grant of Security Interest	  	7
	 Section 2.02.
	 	Counterparties’ Special Rights as Secured Parties	  	8
	 Section 2.03.
	 	Application of Cash Received in Respect Of Financing Agreements	  	9
	 Section 2.04.
	 	Additional Obligations	  	11
	 Section 2.05.
	 	Agreement Regarding the Liquidity Fund Account	  	11
		
	ARTICLE 3	  	
	[RESERVED]	  	
		
	ARTICLE 4	  	
	REPRESENTATIONS AND WARRANTIES	  	
		
	ARTICLE 5	  	
	COVENANTS OF THE COMPANIES	  	
		
	ARTICLE 6	  	
	REMEDIES UPON OVERRIDE TERMINATION EVENT	  	
			
	 Section 6.01.
	 	Remedies upon Override Termination Event	  	17
	 Section 6.02.
	 	Application of Proceeds	  	19
	 Section 6.03.
	 	Exercise Of Rights In Respect Of Mortgage Servicing Agreements	  	19
		
	ARTICLE 7	  	
	THE COLLATERAL AGENT AND THE COUNTERPARTIES	  	
			
	 Section 7.01.
	 	Appointment of Collateral Agent	  	19
	 Section 7.02.
	 	Sub-agents and Related Parties	  	20
	 Section 7.03.
	 	Authority to Administer Collateral	  	21

							
	 Section 7.04.
	 	Limitation on Duty in Respect of Collateral	  	22
	 Section 7.05.
	 	Information as to Obligations and Actions by Secured Parties	  	22
	 Section 7.06.
	 	Refusal to Act	  	22
	 Section 7.07.
	 	Copies of Certain Notices	  	22
	 Section 7.08.
	 	Successor Collateral Agent	  	23
	 Section 7.09.
	 	Fees and Expenses; Indemnification	  	23
	 Section 7.10.
	 	Rights As Counterparty	  	25
		
	ARTICLE 8	  	
	MISCELLANEOUS	  	
	 Section 8.01.
	 	Binding upon Successors	  	25
	 Section 8.02.
	 	Entire Agreement; Severability	  	26
	 Section 8.03.
	 	Choice of Law	  	26
	 Section 8.04.
	 	Notices	  	26
	 Section 8.05.
	 	Defeasance	  	26
	 Section 8.06.
	 	Counterparts	  	27
	 Section 8.07.
	 	Conflicts Between Documents	  	27
	 Section 8.08.
	 	Jurisdiction	  	27
	 Section 8.09.
	 	WAIVER OF JURY TRIAL	  	28
	 Section 8.10.
	 	Section Headings and Defined Terms	  	28
	 Section 8.11.
	 	Additional Lien Grantors	  	28
	 Section 8.12.
	 	Obligations Unconditional	  	28

  

					
	 Exhibit A
	  	–	  	Form of Security Agreement Supplement
	 Exhibit B
	  	–	  	Form of Monthly Servicing Report
			
	 Schedule I
	  	–	  	Existing Mortgage Servicing Agreements

  

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 SECURITY AGREEMENT 
 THIS SECURITY AGREEMENT (this “Agreement”) is made and dated as of April 1, 2008 by and among Thornburg Mortgage Inc. (“TMI” or a “Company”), Thornburg Mortgage
Hedging Strategies, Inc. (“TMHS” or a “Company”), Thornburg Mortgage Home Loans, Inc. (“TMHL” or a “Company”; and together with TMI, TMHS and any other Person that becomes a Lien
grantor hereunder pursuant to Section 8.11, collectively, the “Companies”), each entity designated on the signature pages hereto as a “Counterparty” (each a “Counterparty” and collectively, the
“Counterparties”) and Credit Suisse Securities (USA) LLC, acting in its capacity as the collateral agent for the Counterparties (in such capacity, the “Collateral Agent”). 
 WHEREAS, the Counterparties, TMI and TMHS are parties to the Financing Agreements (as defined below), and prior to the date hereof, various defaults
arose under the Financing Agreements, as a result of which certain of the Companies and the Counterparties entered into the Override Agreement (as defined below); 
 WHEREAS, the Override Agreement provides that certain of the existing terms of each of the Financing Agreements be overridden for the Override Period and contemplates, among other things, that the Companies will grant
to each of the Counterparties and the Collateral Agent, for the benefit of the Counterparties, the security interest in the Collateral (as defined below) in accordance with the terms of this Agreement; 
 NOW, THEREFORE, in consideration thereof and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows: 
 ARTICLE 1 
 DEFINITIONS 
 Section 1.01. Defined Terms. (a) Terms defined in the Override
Agreement and not otherwise defined in this Agreement have, as used herein, the respective meanings provided for therein. 
 (b) As used
herein, each of the following terms has the meaning specified in the UCC: 
  

			
	 Term
	  	 UCC

	 Authenticate
	  	9-102
	 Certificated Security
	  	8-102

			
	 Term
	  	 UCC

	 Control
	  	8-106 & 9-106
	 Deposit Account
	  	9-102
	 Document
	  	9-102
	 Entitlement Holder
	  	8-102
	 Entitlement Order
	  	8-102
	 Financial Asset
	  	8-102 & 103
	 Instrument
	  	9-102
	 Location
	  	9-307
	 Securities Account
	  	8-501
	 Securities Intermediary
	  	8-102
	 Security
	  	8-102 & 103
	 Security Entitlement
	  	8-102
	 Supporting Obligation
	  	9-102
	 Uncertificated Security
	  	8-102

 (c) As used herein, the following terms have the meanings specified below: 
 “Affiliate” shall mean, as to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person. “control” as used in this definition means the power to direct the management and policies of such Person. 
 “Collateral” means all property, whether now owned or hereafter acquired, on which a Lien is granted or purports to be granted to the Collateral Agent pursuant to the Security Documents. When used
with respect to a specific Lien grantor, the term “Collateral” means all its property on which such a Lien is granted or purports to be granted. 
 “Collateral Accounts” means the Liquidity Fund Account, the Counterparty Excess Collateral Account, the Liquidity Fund Cash Account and the Counterparty Excess Collateral Cash Account. 
 “Collateral Securities Intermediary” means The Bank of New York or any other bank or broker-dealer designated by the Required
Counterparties which is a Securities Intermediary. 
 “Control Agreement” means the Securities Account Control Agreement
dated as of the date hereof among the Collateral Agent, TMI and the Collateral Securities Intermediary. 
 “Counterparty Excess
Collateral Account” means securities account number 109636 established with the Collateral Securities Intermediary in the name “Thornburg-CS Excess Coll AC” subject to the terms and conditions set 

  

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forth in this Agreement and the Control Agreement. References in this Agreement to the “Counterparty Excess Collateral Account” shall be
deemed to include, as the context may require, the Counterparty Excess Collateral Cash Account. 
 “Counterparty Excess Collateral
Cash Account” means deposit account number 109637 established with the Collateral Securities Intermediary in the name “Thornburg-CS Excess Coll Cash AC” subject to the terms and conditions set forth in this Agreement and the
Control Agreement. 
 “Excess Interest Amount” means, in respect of any amount of interest received by any Secured Party in
respect of any Financing Agreement Securities, the portion of such amount that is not applied to Payment Obligations pursuant to Sections 2(f) or 2(g) of the Override Agreement. 
 “Financing Agreement” means each Master Repurchase Agreement, Global Master Securities Lending Agreement and/or auction rate swap and
other specified transaction under any ISDA Master Agreement with respect to which amounts are set forth for each Counterparty on Schedule I to the Override Agreement (including in each case each of the related agreements and corresponding
confirmations thereunder and, for avoidance of doubt, excluding any agreements or transactions with respect to which amounts are not set forth on Schedule I to the Override Agreement). 
 “Financing Agreement Collateral” means all of each Company’s right, title and interest, whether now owned or hereafter acquired,
in, under and to (i) all Financing Agreements and Financing Agreement Securities and all proceeds thereof, (ii) the Financing Agreement Collateral Accounts and all amounts and other assets from time to time held therein or credited thereto
and (iii) any other collateral held by any Counterparty securing any Company’s obligations in respect of any Financing Agreement. 
 “Financing Agreement Collateral Accounts” means each of the collateral accounts maintained by any Counterparty securing any Company’s obligations in respect of any Financing Agreement. 
 “Financing Agreement Securities” means, with respect to any Financing Agreement, all cash, securities, loans and other assets purchased
by or otherwise transferred or delivered to a Counterparty from a Company pursuant to such Financing Agreement, and all substitutions and replacements of such cash, securities, loans, instruments and other assets. 
 “Governmental Authority” means any nation or government, any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 
  

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 “Liquidity Fund Account” means securities account number 109638 established with the
Collateral Securities Intermediary in the name “Thornburg-CS Liquidity Fd AC” subject to the terms and conditions set forth in this Agreement and the Control Agreement. References in this Agreement to the “Liquidity Fund
Account” shall be deemed to include, as the context may require, the Counterparty Excess Collateral Cash Account. 
 “Liquidity Fund Cash Account” means deposit account number 109639 established with the Collateral Securities Intermediary in the name “Thornburg-CS Liquidity Fd Cash AC” subject to the terms and conditions set
forth in this Agreement and the Control Agreement. 
 “Lien” means, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. 
 “Mortgage Servicing Agreements” means each mortgage loan servicing and sub-servicing agreement to which any Company is a party pursuant
to which such Company is the owner of the related mortgage servicing rights or has the right to receive any payments related to mortgage servicing, including, without limitation, each servicing agreement and sale and service agreement set forth with
respect to each Company on Schedule I. 
 “Obligations” means, collectively, (i) all obligations of the Companies to
the Counterparties arising under or in connection with the Financing Agreements, (ii) all obligations of any Company to a Secured Party under any other Transaction Document and (iii) all other obligations or liabilities of the Companies to
the Counterparties. 
 “Override Agreement” means the Override Agreement, dated as of March 17, 2008, by and among TMI,
TMHS and each Counterparty. 
 “Permitted Liens” means the Liens created pursuant to the Transaction Documents. 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity. 
 “Proceeds” means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange, 

  

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assignment, licensing or other disposition of, or other realization upon, any Collateral, including all claims of the relevant Company against third parties
for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect to any Collateral.

 “pro rata” means, on any date of determination, in accordance with each Counterparty’s share of the sum on such date
of determination of (i) the repurchase prices under each Financing Agreement that is a repurchase agreement, (ii) the market value of the collateral posted by Counterparties under each Financing Agreement that is a securities lending
agreement, and (iii) the amounts (if any) that would be payable to the Counterparties under each Financing Agreement that is a swap agreement pursuant to Section 6(e)(ii)(2)(A) of the ISDA Master Agreement for such Financing Agreement, as
determined in accordance with the definition of “Exposure” in the Credit Support Annex forming a part thereof. 
 “Related
Parties” means, with respect to any Person, such Person’s Affiliates and the respective directors, officers and employees of such Person and such Person’s Affiliates. 
 “Required Counterparties” means, from time to time as applicable, the Counterparties entitled to payment of more than 50% of the
aggregate amount of outstanding Payment Obligations in respect of all outstanding Financing Agreements, as determined in good faith by TMI, which determination shall be binding absent demonstrable error. Upon the written request of the Collateral
Agent from time to time, TMI agrees to send to the Collateral Agent and the Counterparties a schedule of such aggregate amounts. Notwithstanding the foregoing, during the continuation of an Override Termination Event, the Collateral Agent may, at
its election, determine the amount of outstanding Payment Obligations based on such information as it considers reasonable to use under the circumstances in its sole discretion. 
 “Required Terminating Counterparties” means, from time to time as applicable, the Counterparties that have terminated the Override
Agreement with respect to themselves and are entitled to payment of more than 50% of the aggregate amount of outstanding Payment Obligations in respect of all outstanding Financing Agreements of Counterparties that have terminated the Override
Agreement, as determined in good faith by TMI, which determination, subject to the last sentence of this definition, shall be binding absent demonstrable error. Upon the written request of the Collateral Agent from time to time, TMI agrees to send
to the Collateral Agent and the Counterparties a schedule of such aggregate amounts. Notwithstanding the foregoing, the Collateral Agent may, at its election, determine the amount of outstanding Payment Obligations of such Counterparties based on
such information as it considers reasonable to use under the circumstances in its sole discretion. 
  

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 “Secured Parties” means, collectively, the Collateral Agent and the Counterparties.

 “Security Agreement Supplement” shall mean any Security Agreement Supplement substantially in the form of Exhibit A
hereto executed and delivered by a party that becomes a Company hereunder after the date hereof. 
 “Security Documents”
means this Agreement, any Security Agreement Supplement, the Control Agreement and any other document, instrument or agreement executed in connection herewith. 
 “Servicing Records” shall mean all servicing files, papers and records relating to the servicing of any mortgage loan subject to any Mortgage Servicing Agreement. 
 “Sub-servicer” means Cenlar FSB, a federal savings bank. 
 “Sub-servicing Agreement” means any sub-servicing agreement to which any of the Companies is a party with a third party sub-servicer, including, without limitation (a) the Sub-Servicing
Acknowledgement Agreement between TMHL and the Sub-Servicer, as sub-servicer, dated as of March 1, 2002; (b) the Sub-Servicing Agreement between the Sub-servicer and TMI dated as of February 22, 2000; and (c) the Sub-Servicing
Acknowledgement Agreement between TMHL and the Sub-servicer dated as of August 1, 2007. 
 “Transaction Documents”
means the Security Documents, the Override Agreement, all Financing Agreements and each other document, instrument and agreement executed by the Companies or any of them in connection herewith. 
 “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if perfection or
the effect of perfection or non-perfection or the priority of any security interest created hereunder on any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “UCC” means the
Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority. 
 “Warehouse Agreements” means (a) the Master Repurchase Agreement among Credit Suisse First Boston Mortgage Capital LLC, TMHL and
TMI dated as of December 23, 2005; and (b) the Master Repurchase Agreement between Greenwich Capital Financial Products, Inc. and TMHL dated as of January 27, 2006. 
  

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 Section 1.02. Interpretation. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (i) any definition of
or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (iii) the words “herein”, “hereof”
and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (iv) all references herein to Articles, Sections, Exhibits and Schedules shall
be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement. 
 ARTICLE 2 
 SECURITY INTERESTS 
 Section 2.01. Grant of Security Interest. (a) Each Company, in order to secure the Obligations, grants to the Collateral Agent for the benefit of the Secured Parties a continuing security interest in all the following
property of such Company, whether now owned or existing or hereafter acquired or arising and regardless of where located: 
 (i) the Collateral Accounts and all amounts and other assets, from time to time held therein or credited thereto; 
 (ii) all of the Companies’ rights from time to time in, under and to the Mortgage Servicing Agreements, Sub-Servicing Agreements and all Servicing Records, solely as the owner of the mortgage servicing rights or rights to receive any
payments related to such mortgage servicing rights under such Mortgage Servicing Agreements; 
 (iii) the Financing Agreement
Collateral; and 
 (iv) all Proceeds of the Collateral described in the foregoing clauses (i) through (iii). 

 

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 With respect to each right to payment or performance included in the Collateral from time to time, the security interest
granted herein includes a continuing security interest in (i) any Supporting Obligation that supports such payment or performance and (ii) any Lien that (x) secures such right to payment or performance or (y) secures any such
Supporting Obligation. 
 (b) Notwithstanding Section 2.01(a) or any other provision of this Agreement, (i) the Obligations shall
not be secured by any mortgage servicing rights at such times and to the extent (but only at such times and to the extent) that a Lien in such rights has been granted pursuant to a Warehouse Agreement and (ii) until any Financing Agreement
Collateral is applied pursuant to the third and fourth clauses of Section 2.03(b), no Counterparty other than the Counterparty holding such Financing Agreement Collateral shall have the right to exercise any rights or remedies
with respect thereto. 
 (c) The security interests granted pursuant to this Agreement are granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or transfer or in any way affect or modify, any obligation or liability of any Company with respect to any of the Collateral or any transaction in connection therewith. 
 Section 2.02. Counterparties’ Special Rights as Secured Parties.  
 (a) Notwithstanding anything to the contrary herein or in any Financing Agreement, each Counterparty shall have the right to hold, and
shall apply in accordance with Section 2(f) of the Override Agreement and Section 2.03, all Financing Agreement Securities, cash collateral, amounts owing by it to an applicable Company and any payments or distributions received, in each
case under any Financing Agreement or in respect of any Financing Agreement Securities and all related Proceeds thereof until the date (in respect of such Counterparty, the “Turnover Date”) on which there shall have occurred
(y) payment of all repurchase prices and satisfaction of all other Obligations under such Financing Agreement and (z) payment and satisfaction in full of all other Obligations of the Companies under any other Financing Agreement or other
obligations and liabilities of any Company to such Counterparty or its Affiliates. After the Turnover Date in respect of any Counterparty, any cash, amounts payable or received by it in respect of any Financing Agreement and any remaining Financing
Agreement Securities shall not be returned to the applicable Company but shall be delivered to the Collateral Securities Intermediary to be held directly, in the Counterparty Excess Collateral Account, for distribution in accordance with
Section 2.03. Any such cash, amounts payable or received by a Counterparty in respect of any Financing Agreement, and any remaining Financing Agreement Securities, not yet delivered to the Collateral Security Intermediary by such 

  

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Counterparty after the occurrence of the Turnover Date with respect to such Counterparty, shall be held in trust by such Counterparty for the benefit of the
Collateral Agent and the other Secured Parties. 
 (b) Each Counterparty shall have the right, at any time and at its option,
to register in its own name or in the name of a nominee any Financing Agreement Securities held by it but currently registered in the name of a Company, and such Company shall promptly deliver any instruments of transfer that may be required to
effectuate such re-registration. 
 (c) During the term of this Agreement, each Company agrees that if it receives Proceeds of
any kind in respect of any Financing Agreement Securities subject to any Financing Agreement, it shall immediately deliver such Proceeds to the applicable Counterparty, and such Counterparty shall, after application of such Proceeds pursuant to
Section 2(f) of the Override Agreement and Section 2.03, deliver such Proceeds to the Collateral Securities Intermediary for deposit into the Counterparty Excess Collateral Account. 
 (d) Notwithstanding anything in this Section 2.02 to the contrary, so long as no Override Termination Event shall have occurred and
be continuing, each Counterparty (prior to the Turnover Date with respect to such Counterparty) shall remit the Excess Interest Amount (after application of any portion thereof as may be permitted by setoff, netting or other similar provision of any
agreement that is not a Financing Agreement between such Counterparty or an Affiliate and TMI or an Affiliate) to TMI on the first Business Day immediately following the receipt of any interest in respect of any Financing Agreement Securities held
by such Counterparty. 
 Section 2.03. Application of Cash Received in Respect Of Financing Agreements. (a) During the
Override Period, any cash received from time to time by any Counterparty in respect of Financing Agreement Securities, whether from payments thereon or Proceeds of sale thereof (each such amount being a “Cash Collection Amount”),
shall, notwithstanding anything to the contrary in any Financing Agreement, be applied by such Counterparty as follows: 
 (i)
an amount equal to such Cash Collection Amount minus the Excess Interest Amount, to the payment of Payment Obligations in respect of any Financing Agreement of such Counterparty that is required by the Override Agreement to be paid during the
Override Period, and 
 (ii) the Excess Interest Amount (after application of any portion thereof as may be permitted by
setoff, netting or other similar provision of any agreement that is not a Financing Agreement between such Counterparty or an Affiliate and TMI or an Affiliate), to TMI. 
  

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 (b) On and after the date of termination of the Override Period with respect to any Counterparty upon the
occurrence of an Override Termination Event, any Cash Collection Amount received by such Counterparty shall, notwithstanding anything to the contrary in any Financing Agreement, be applied in the following order: 
 First, to Payment Obligations in respect of each Financing Agreement in the following order: (A) to the payment of all fees and expenses
required to be paid in accordance with such Financing Agreement, (B) if such Financing Agreement has not been terminated, to cover any margin or collateral deficiencies under such Financing Agreement, (C) if such Financing Agreement has
not been terminated, to the payment of interest or like amounts accrued under such Financing Agreement to the date of such payment, (D) (i) if such Financing Agreement is a repurchase agreement, to the payment of the repurchase price under
such Financing Agreement, (ii) if such Financing Agreement is a securities lending agreement, to the payment of the market value of the equivalent collateral that would be required to be redelivered under such securities lending agreement, and
(iii) if such Financing Agreement is a swap agreement, to the payment of any other amount due under Section 2 or Section 6(e) of the related ISDA Master Agreement, and (E) to the payment of all other Payment Obligations, in each
case until such Financing Agreement is paid in full; 
 Second, to the payment of any other obligations and liabilities of the
Companies to such Counterparty or its Affiliates (other than obligations or liabilities under such Financing Agreement owing by any Company to such Counterparty); 
 Third, with respect to all other Financing Agreements to which the Counterparty under such Financing Agreement (or any Affiliate of such Counterparty) is not a party, to the Collateral Securities Intermediary
for deposit into the Counterparty Excess Collateral Account for distribution to the other Counterparties, pro rata, for application by each such Counterparty in accordance with clauses first and second above; 
 Fourth, the balance shall be retained as Collateral in the Counterparty Excess Collateral Account. 
 The Counterparty under such Financing Agreement shall deliver any amount not applied pursuant to clauses first and second above to the
Collateral Securities Intermediary to be held in or credited to the Excess Counterparty Collateral Account, and the Collateral Agent shall apply such amount pursuant to clauses third and fourth of this Section 2.03(b). 

 

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 Section 2.04. Additional Obligations. (a) No payments shall be made to any Counterparty
pursuant to the third clause of Section 2.03(b) in respect of obligations and liabilities under any agreement other than any Financing Agreement unless such Counterparty shall have delivered a certificate to TMI, the Collateral Agent and
the other Counterparties specifying the nature and the amount of the obligations owing to it by the Companies under such agreement. 
 (b)
The Collateral Agent may at any time from time to time, and shall prior to the distribution of the Counterparties of any amounts from the Counterparty Excess Collateral Account, in order to determine the proper allocation of any balance on deposit
in the Counterparty Excess Collateral Account, request the Counterparties to submit certificates to TMI and the Collateral Agent identifying amounts owing by the Companies to each such Counterparty at such time. 
 Section 2.05. Agreement Regarding the Liquidity Fund Account. The Collateral Agent agrees with the Companies that the Collateral Agent will
not issue a Notice of Exclusive Control (as defined in the Control Agreement) with respect to the Liquidity Fund Account or any financial assets held therein or credited thereto prior to receipt by the Collateral Agent from a Counterparty of a
written request to issue such notice and a statement that one of the following events has occurred: 
 (i) an Override
Termination Event or an event that, with the giving of notice or the lapse of time or both, would constitute an Override Termination Event (which, for purposes of this Section 2.05, shall include any action that, in the reasonable opinion of a
Counterparty, would cause the aggregate market value of the assets held in or credited to the Liquidity Fund Account to be less than $350,000,000); or 
 (ii) (x) TMI has delivered an instruction to the Collateral Securities Intermediary without the certification required by the provisos of Sections 3 and 4 of Article III of the Control Agreement or (y) any
representation or certification made or deemed made by or on behalf of TMI in connection with any instruction or entitlement order delivered by TMI to the Collateral Securities Intermediary in connection with any investment of assets held in or
credited to any Collateral Account has proven to have been materially incorrect when made or deemed made. 
 The parties agree that the agreement contained
in the foregoing sentence is solely an agreement between the Collateral Agent and the Companies and shall not affect the obligations of the Collateral Securities Intermediary under the Control Agreement. 
  

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 ARTICLE 3 
 [RESERVED] 
 ARTICLE 4 
 REPRESENTATIONS AND WARRANTIES 
 Each of
the Companies hereby represents and warrants, such representation and warranty being made solely on its own behalf and as to its own business, operations and assets, that: 
 (a) Such Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. 
 (b) Such Company has good and marketable title to all its Collateral (subject to exceptions that are, in the aggregate, not material), free and clear of any lien other than Permitted Liens. 
 (c) This Agreement is a valid and binding agreement of such Company in accordance with its terms. Such Company has not performed any acts that might
prevent the Collateral Agent or a Counterparty from enforcing any of the provisions of the Transaction Documents or that would limit the Collateral Agent or a Counterparty in any such enforcement. No financing statement, security agreement, mortgage
or similar or equivalent document or instrument covering all or part of the Collateral owned by such Company is on file or of record in any jurisdiction in which such filing or recording would be effective to perfect or record a Lien on such
Collateral, except financing statements, mortgages or other similar or equivalent documents with respect to Permitted Liens. 
 (d) The
security interests created hereby (i) have been validly created, (ii) will attach to each item of the Collateral on the date hereof (or, if such Company first obtains rights thereto on a later date, on such later date) and (iii) when
so attached, will secure all the Obligations. 
 (e) Other than Permitted Liens, no Person has (or, in the case of after-acquired Collateral,
at the time the Companies or any of them acquires rights therein, will have) any right, title, claim or interest (by way of lien or otherwise) in, against or to the Collateral and, in any event, the Counterparties and the Collateral Agent for the
benefit of the Counterparties have (or will have) a perfected, security interest on such Collateral. 
  

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 (f) Schedule I hereto contains a complete and correct list of all Mortgage Servicing Agreements under
which any Company is the owner of the mortgage servicing rights. 
 (g) The definition of “Sub-servicing Agreement” contains a
complete and correct list of the agreements with any third-party sub-servicer to which any Company is a party or under which any Company is obligated to any third party sub-servicer to make payments in respect of the sub-servicing of any mortgage
loans. 
 (h) All written information heretofore, herein or hereafter supplied to the Collateral Agent or any Counterparty by or on behalf of
the Companies or any of them with respect to the Collateral or the Transaction Documents, as updated or corrected from time to time, is or will be accurate and complete in all material respects. 
 (i) Upon (i) the filing of a UCC financing statement in proper and appropriate form in the relevant filing office with respect to any Company, to
the extent that the security interest granted hereunder in the Collateral of such Company may be perfected by filing a UCC financing statement, and (ii) the taking of possession in the case of Collateral with respect to which a security
interest may be perfected through possession, such security interest will constitute a perfected security interest in such Collateral. Upon execution and delivery of the Control Agreement the security interest of the Collateral Agent for the benefit
of the Secured Parties with respect to the Collateral Accounts shall be perfected by Control. 
 (j) Each Company represents that it has
delivered to each Counterparty under any Financing Agreement all originals of the respective Financing Agreement Securities (other than Financing Agreement Securities that are in book-entry form) and, if such Financing Agreement Securities are in
the form of certificated securities or notes, in suitable form for transfer by delivery, or accompanied by duly executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed. 
 (k) The Companies are the only Persons who own the servicing rights with respect to mortgage loans subject to the Mortgage Servicing Agreements (other
than the Sub-servicing Agreements), and no Person other than the applicable Company, as servicer, and the Sub-servicer has been granted or conveyed the right to service such mortgage loans or receive any consideration in connection therewith.

 (l) The Location of TMI is the State of Maryland and the Location of each of TMHS and TMHL is the State of Delaware. The name of each
Company party hereto on the date hereof is correctly stated in the preamble of this Agreement. 
  

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 ARTICLE 5 
 COVENANTS OF THE COMPANIES 
 (a) Each of the
Companies hereby agrees, such agreement being made solely on its own behalf and as to its own business, operations and assets: 
 (i) (x) to procure, execute, deliver and file from time to time, as applicable, any endorsements, stock powers, assignments, financing statements and other writings reasonably deemed necessary by a Counterparty or the Collateral Agent to
perfect, maintain and protect the security interest of such Counterparty and the Collateral Agent in the Collateral to which such Company has title and the priority thereof, (y) to deliver promptly to the Collateral Securities Intermediary all
originals of any Financing Agreement Securities held by such Company in the form of certificated securities or notes that become required to be deposited in the Collateral Accounts, in suitable form for transfer by delivery, or accompanied by duly
executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed, all in form and substance satisfactory to the Collateral Securities Intermediary and (z) at the request of the Collateral Agent, deliver to the
Collateral Agent within ten Business Days from the date of such request written evidence of the consent of any third party required under any Mortgage Servicing Agreement for the assignment to the Secured Parties of mortgage servicing rights of any
Company under such Mortgage Servicing Agreement; 
 (ii) at the reasonable request of the Collateral Agent, to place on each
of its records pertaining to the Collateral, a legend, in form and content reasonably satisfactory to the Collateral Agent, as applicable, indicating that a security interest in such Collateral has been granted to the Collateral Agent for the
benefit of the Counterparties; 
 (iii) to keep the Collateral insured against loss, damage, theft, and other risks
customarily covered by insurance in accordance with its current policies and procedures, and such other risks as the Collateral Agent may reasonably request; 
 (iv) subject to the terms of this Agreement and the Override Agreement, to do all acts that a prudent investor would deem necessary or
desirable to maintain, preserve and protect the Collateral; 
  

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 (v) not knowingly (after due inquiry) to use or permit any Collateral to be used
unlawfully or in violation of any provision of this Agreement, the Override Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering such Collateral; 
 (vi) to pay (or require to be paid) prior to their becoming delinquent all taxes, assessments, insurance premiums, charges, encumbrances,
and liens now or hereafter imposed upon or affecting any Collateral, except where covered by an adequate bond or insurance reasonably satisfactory to the Collateral Agent or where being contested in good faith by appropriate proceedings and for
which provision is made to the reasonable satisfaction of the Collateral Agent for the payment thereof in the event the Companies or any of them are found by the final determination of a court of competent jurisdiction to be obligated to pay such
taxes, assessments, insurance premiums, charges, encumbrances or liens; 
 (vii) to notify the Collateral Agent, in writing,
not less than 30 days before any change in the name, identity or structure (through merger, consolidation or otherwise), or jurisdiction of organization, of any of the Companies shall occur; 
 (viii) subject to the Override Agreement, to appear in and defend, at the Companies’ cost and expense, any action or proceeding which
may affect its title to or the Counterparties’ interest, or the Collateral Agent’s interest for the benefit of the Counterparties, in the Collateral; and 
 (ix) to keep accurate and complete records of the Collateral and to provide the Collateral Agent with such records and such reports and
information relating to such Collateral as may be reasonably required by any Secured Party, and in any event to deliver to each Counterparty a copy of each monthly statement provided to TMI pursuant to the Control Agreement promptly after receipt
thereof by TMI. 
 (b) Unless an Override Termination Event shall have occurred and be continuing, each Company will have the right, but only
to the extent the Company has such rights under the Financing Agreements, from time to time, to vote and to give consents, ratifications and waivers with respect to any pledged Financing Agreement Security in the Collateral Accounts, and the
Collateral Agent will, upon receiving a written request from such Company, deliver to such Company or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any such pledged Financing
Agreement Security in the form of a Security that is registered in the name of the Collateral Agent or its nominee, in each case as shall be specified in such request and be in form and substance satisfactory to the Collateral Agent. 
  

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 (c) Subject to Article 6 and the terms of the Override Agreement, if an Override Termination Event shall
have occurred and be continuing, the Collateral Agent will have the right to the extent permitted by law to vote, to give consents, ratifications and waivers and to take any other action with respect to any pledged Financing Agreement Security in
the Collateral Accounts, with the same force and effect as if the Collateral Agent were the absolute and sole owner thereof, and each Company will take all such action as the Collateral Agent may reasonably request from time to time to give effect
to such right. The Collateral Agent shall not be required to exercise such right to vote, to give consents, ratifications and waivers and/or to take any other action with respect to such Collateral unless and until it receives written direction from
the Required Counterparties to do so. 
 (d) Within 26 calendar days after the end of each calendar month or, if the 26th day is not a
Business Day, on the next succeeding Business Day, the Companies shall provide each Secured Party a servicing portfolio report detailing the aggregate delinquency status of all mortgage loans related to any of the Mortgage Servicing Agreements being
serviced by the Companies and the Sub-servicer and such other reports regarding servicing as may reasonably be requested by any Secured Party (including a key performance indicators report, which shall be prepared in a manner consistent with current
investor reporting and shall include, among other things, to the extent consistent with current practice or as agreed upon, details as to delinquency, foreclosures, cumulative loss, rates of reperformance, modification and prepayments and historical
data for comparison purposes). All such reports shall be in substantially the form of Exhibit B. 
 (e) The Companies shall obtain on a
monthly basis and maintain information on all mortgage loans and securities that serve as collateral security hereunder, including, but not limited to, monthly whole loan files, trustee reports for each of the securities and other reports currently
prepared by the Companies, which shall be in form and substance reasonably satisfactory to the Counterparties. The Companies shall make such information available for review and duplication upon the reasonable request of each Secured Party.

 (f) The Companies shall permit each Secured Party and its professionals, during regular business hours and upon reasonable notice, to
visit and inspect the premises of the Companies, meet with representatives of the Companies, review all books and records of the Companies and conduct examinations of the collateral (or reference securities) for the relevant Financing Agreements at
the Companies’ expense (any such out-of-pocket costs incurred by the Secured Parties to be reasonable); provided that prior to the occurrence of an Override Termination Event, the Secured Parties, collectively, shall exercise the right
to such inspections and examinations not more often than once every four months. 
  

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 (g) No Company will create or permit to exist any Lien on any property constituting Collateral under the
Transaction Documents, except for Permitted Liens. 
 ARTICLE 6 
 REMEDIES UPON OVERRIDE TERMINATION EVENT 
 Section 6.01. Remedies upon Override Termination Event. (a) Upon the occurrence of an Override Termination Event or a breach by a Company of its obligations under the Security Documents, and subject to the Override
Agreement, each Counterparty shall have all of the rights and remedies under its Financing Agreements and, with respect to the related Financing Agreement Securities and Proceeds thereof, including in respect of its applicable Financing Agreement
Collateral Accounts, as secured party under the UCC and applicable law and equity. In addition and, to the extent applicable, subject to Sections 2.01(b)(ii) and 2.03 and the Override Agreement, the Collateral Agent shall, at the request and
direction of the Required Terminating Counterparties (which request and direction must be in writing), without notice to or demand upon the Companies (except to the extent required by applicable law): (i) foreclose or otherwise enforce the
Collateral Agent’s security interest for the benefit of the Counterparties in the Collateral in any manner permitted by law or provided for hereunder (to the extent permitted by law); (ii) sell or otherwise dispose of the Collateral or any
part thereof at one or more public or private sales in a commercially reasonable manner, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery and without assumption of any credit risk, on such terms
and in such manner as the Collateral Agent may determine; (iii) require the Companies to assemble the Collateral or books and records relating thereto and make such available to the Collateral Agent at a place to be designated by the Collateral
Agent reasonably convenient to the Companies and the Collateral Agent; (iv) enter onto property where any Collateral or books and records relating thereto are located and take possession thereof with judicial process (or without judicial
process where permitted by law) and without a breach of the peace; (v) prior to the disposition of the Collateral, prepare it for disposition in any commercially reasonable manner and to the extent the Collateral Agent deems appropriate; and
(vi) exercise all such other rights and remedies with respect to the Collateral as are available under the UCC and are otherwise available at law or in equity. The Collateral Agent may sell all of the remaining Collateral, or such lesser
portion thereof as may be necessary to generate proceeds sufficient to satisfy in full all of the Obligations, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery, and
at such price or prices as the Collateral Agent may deem satisfactory. Each purchaser at any such sale or other disposition shall hold the Collateral free from any claim or right of whatever kind, including any equity or right of 

  

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redemption of any of the Companies, and the Companies specifically waive (to the extent permitted by law) all rights of redemption, which they have or may
have under any rule of law or statute now existing or hereafter adopted. The Collateral Agent shall distribute all proceeds that it receives from the exercise of its rights and remedies under this Agreement on behalf of the Counterparties to the
Counterparties in accordance with Section 6.02. Notwithstanding anything contained herein, no Counterparty may individually exercise rights in respect of any Collateral other than, prior to satisfaction in full of the Obligations of the
Companies to such Counterparty or its Affiliates, such Collateral consisting of its Financing Agreement, Financing Agreement of an Affiliate of such Counterparty, any Financing Agreement Securities related to any of the foregoing, all Proceeds
relating to any of the foregoing or the Financing Agreement Collateral Account of such Counterparty or that of any of its Affiliates. 
 (b)
Each Company recognizes that the Collateral Agent may not choose to effect a public sale of all or a part of the Collateral by reason of certain prohibitions contained (x) in the Securities Act of 1933, as amended, as now or hereafter in
effect, or (y) in applicable Blue Sky or other state securities laws, as now or hereafter in effect, and may resort to one or more sales that are exempt from registration to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Company agrees that sales that are exempt from registration so made may be at prices and other terms less
favorable to the seller than if such Collateral were sold at sales pursuant to a registration statement, and that the Secured Parties have no obligation to delay sale of any such Collateral for the period of time necessary to permit the issuer of
such Collateral, even if such issuer would agree, to register such Collateral for a sale pursuant to a registration statement under such applicable securities laws. Each Company agrees that sales that are exempt from registration made under the
foregoing circumstances shall be deemed to have been made in a commercially reasonable manner. In addition to the foregoing and without limitation, each Company agrees that the Collateral Agent’s ability to effect a sale of some or all of the
mortgage servicing rights or rights to receive any payments related to such mortgage servicing rights will be affected by the condition (including the accuracy and completeness) of the related Servicing Records, the outstanding advances associated
with such mortgage servicing rights (including both principal and interest advances as well as corporate advances) and the existence of any delinquent taxes on the related mortgage loans. Each Company agrees that the prices and other terms of any
such sales may be adversely affected based on each of the foregoing considerations, and that the Secured Parties have no obligation to delay the sale of any such Collateral for the period of time necessary to permit the related Company to clean up
the related Servicing Records or document the reasonability of the outstanding advances. Each Company agrees that sales where the Servicing Records are not entirely 

  

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complete or accurate and where advances may or may not be outstanding under the foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner. 
 Section 6.02. Application of Proceeds. Any cash received from any sale by the Collateral Agent of, or other
realization by the Collateral Agent upon, any Collateral shall be applied as follows: 
 (a) First, to any expense and fee amounts then
payable to the Collateral Agent in accordance with Section 7.09; 
 (b) Second, to the Counterparties pro rata, to be applied in
accordance with clauses first, second and third of Section 2.03(b) until all Obligations have been paid in full; and 
 (c)
Third, to the Companies. 
 Section 6.03. Exercise Of Rights In Respect Of Mortgage Servicing Agreements. In addition to
its rights under Section 6.01, upon the occurrence of an Override Termination Event: 
 (a) The Collateral Agent shall have the right to
exercise all rights of the Companies, solely as the owner of the mortgage servicing rights or rights to receive any payments related to such mortgage servicing rights, in respect of any and all Mortgage Servicing Agreements and Sub-servicing
agreements, subject to the terms of those agreements. 
 (b) No Company shall (i) employ any sub-servicers (other than the Sub-servicer
or Affiliates thereof) to service mortgage loans subject to any Mortgage Servicing Agreement, (ii) amend, modify, terminate or waive its rights under any Mortgage Servicing Agreement or Sub-servicing Agreement, except to comply with any rating
agency requirements if failure to comply with such requirements would result in a downgrade of securities backed by the mortgage loans serviced under the Mortgage Servicing Agreement or the Sub-servicing Agreement or (iii) agree to the increase
of any fee or other charges payable to the Sub-servicer under the Sub-servicing Agreement, in each case, without the prior written consent of the Required Counterparties, such approval not to be unreasonably withheld or delayed. 
 ARTICLE 7 
 THE
COLLATERAL AGENT AND THE COUNTERPARTIES 
 Section 7.01.
Appointment of Collateral Agent. Subject to the rights of each Counterparty under Section 2.02 and without limiting the priority, 

  

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distribution and other rights granted under the terms of the Override Agreement, each Counterparty hereby irrevocably appoints the Collateral Agent as the
agent for such Counterparty under this Agreement and the other Security Documents and to act as agent, bailee and custodian for the exclusive benefit of the Counterparties, with respect to the Collateral and the products and Proceeds thereof, and
each Counterparty hereby irrevocably authorizes the Collateral Agent, as the agent for such Counterparty, to take such action on its behalf under the provisions of this Agreement and the other Transaction Documents and to exercise such powers and
perform such duties as are expressly delegated thereto by the terms of this Agreement and the other Transaction Documents, together with such other powers as are reasonably incidental thereto. The Collateral Agent hereby accepts such appointment and
agrees to maintain and hold all Collateral at any time delivered to it as agent, bailee and custodian for the exclusive benefit of the Counterparties (or, in the case of Section 6.01, the Required Terminating Counterparties). The Collateral
Agent is acting and will act with respect to Collateral for the exclusive benefit of the Counterparties and is not, and shall not at any time in the future be, subject with respect to Collateral in any manner or to any extent to the direction or
control of the Companies or any of them except as expressly permitted hereunder and under the other Transaction Documents or as directed, in writing, by the Required Counterparties (or, in the case of Section 6.01, the Required Terminating
Counterparties). The Collateral Agent agrees to act in accordance with this Agreement and the Override Agreement. Without limiting the generality of the foregoing, (i) the Collateral Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether an Override Termination Event has occurred and is continuing, (ii) the Collateral Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated by the Security Documents that the Collateral Agent is required in writing to exercise by the Required Counterparties (or, in the case of Section 6.01, the Required Terminating Counterparties), and
(iii) except as expressly set forth in any Security Document, the Collateral Agent shall not have any duty to disclose, and shall not be liable for any failure to disclose, any information relating to the Collateral that is communicated to or
obtained by the bank serving as Collateral Agent or any of its Affiliates in any capacity. The Collateral Agent shall not be responsible for the existence, genuineness or value of any Collateral or for the validity, perfection, priority or
enforceability of any Lien purported to be created by the Security Documents, whether impaired by operation of law or by reason of any action or omission to act on its part under the Security Documents. The Collateral Agent shall be deemed not to
have knowledge of any Override Termination Event unless and until written notice thereof is given to the Collateral Agent by a Company or a Secured Party. 
 Section 7.02. Sub-agents and Related Parties. The Collateral Agent may perform any of its duties and exercise any of its rights and powers through one or 

  

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more sub-agents appointed by it. The Collateral Agent and any such sub-agent may perform any of its duties and exercise any of its rights and powers through
its Related Parties. The exculpatory provisions of Section 7.04 shall apply to any such sub-agent and to the Related Parties of the Collateral Agent and any such sub-agent. 
 Section 7.03. Authority to Administer Collateral. Each Company irrevocably appoints the Collateral Agent its true and lawful attorney, with
full power of substitution, in the name of such Company, any Secured Party or otherwise, for the sole use and benefit of the Secured Parties, but at the Companies’ expense, to the extent permitted by law to exercise, at any time and from time
to time while an Override Termination Event shall have occurred and be continuing, with respect to the Collateral, all or any of the following powers with respect to all or any of such Company’s Collateral: 
 (a) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, 
 (b) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, 
 (c) to sell, lease, license or otherwise dispose of the same or the proceeds or avails thereof, as fully and effectually as if the Collateral Agent were
the absolute owner thereof, 
 (d) to extend the time of payment of any or all thereof and to make any allowance or other adjustment with
reference thereto; and 
 (e) to exercise all rights of the Companies, solely as the owner of the mortgage servicing rights or rights to
receive any payments related to such mortgage servicing rights, under any Mortgage Servicing Agreement and any Sub-servicing Agreement; 
 provided
that, except in the case of Collateral that threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Collateral Agent will give the relevant Company at least one Business Day’s prior written notice of
the time and place of any public sale thereof or the time after which any private sale or other intended disposition thereof will be made. Any such notice shall (i) contain the information specified in UCC Section 9-613, (ii) be
Authenticated and (iii) be sent to the parties required to be notified pursuant to UCC Section 9-611(c); provided that, if the Collateral Agent fails to comply with this sentence in any respect, its liability for such failure shall
be limited to the liability (if any) imposed on it as a matter of law under the UCC. 
  

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 Section 7.04. Limitation on Duty in Respect of Collateral. Beyond the exercise of reasonable
care in the custody and preservation thereof, the Collateral Agent will have no duty as to any Collateral in its possession or control or in the possession or control of any sub-agent or bailee or any income therefrom or as to the preservation of
rights against prior parties or any other rights pertaining thereto. The Collateral Agent will be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession or control if such Collateral is accorded
treatment substantially equal to that which it accords its own property, and will not be liable or responsible for any loss or damage to any Collateral, or for any diminution in the value thereof, by reason of any act or omission of any sub-agent or
bailee selected by the Collateral Agent in good faith, except to the extent that such liability arises from the Collateral Agent’s gross negligence or willful misconduct. 
 Section 7.05. Information as to Obligations and Actions by Secured Parties. For all purposes of the Security Documents, including determining
the amounts of the Obligations or Payment Obligations and whether an Obligation is contingent or not, or whether any action has been taken under any Financing Agreement (and subject in the case of the Required Counterparties and Required Terminating
Counterparties to the definitions thereof), the Collateral Agent will be entitled to rely on information from (i) its own records for information as to the Counterparties, the Obligations owing to them and actions taken by them, (ii) any
Secured Party for information (including, without limitation, any information delivered pursuant to Section 2.04(b)) as to the Obligations owing to it and actions taken by it, to the extent that the Collateral Agent has not obtained such
information from its own records, and (iii) the Companies, to the extent that the Collateral Agent has not obtained information from the foregoing sources. 
 Section 7.06. Refusal to Act. The Collateral Agent may refuse to act on any notice, consent, direction or instruction from any Secured Parties or any agent, trustee or similar representative thereof that,
in the Collateral Agent’s opinion, (i) is contrary to law or the provisions of any Security Document, (ii) may expose the Collateral Agent to liability (unless the Collateral Agent shall have been indemnified, to its reasonable
satisfaction, for such liability by the Secured Parties that gave such notice, consent, direction or instruction) or (iii) is unduly prejudicial to Secured Parties not joining in such notice, consent, direction or instruction. 
 Section 7.07. Copies of Certain Notices. Within two Business Days after it receives or sends any notice referred to in this
Section 7.07, the Collateral Agent shall send to each Counterparty copies of any notice given by the Collateral Agent to any Company, or received by it from any Company, the Required Counterparties or any Counterparty, pursuant to Article 6 or
Section 7.05. 
  

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 Section 7.08. Successor Collateral Agent. Subject to the provisions set forth in this
Section 7.08, the Collateral Agent may resign at any time upon 45 days’ notice to the Counterparties and the Companies. Upon any such resignation, the Required Counterparties shall have the right, in consultation with TMI, to appoint a
successor reasonably acceptable to the Companies. If no successor shall have been so appointed by the Required Counterparties and shall have accepted such appointment within 30 days after the retiring Collateral Agent gives notice of its
resignation, then the retiring Collateral Agent may, on behalf of the Counterparties, appoint a successor Collateral Agent, which shall be a bank or broker-dealer with an office in New York, New York or an Affiliate of any such bank or
broker-dealer. If no successor agent has accepted appointment as Collateral Agent by the date that is 45 days after the date of a retiring Collateral Agent’s notice of resignation, the retiring Collateral Agent’s resignation shall
nonetheless thereupon become effective and the Counterparties or a nominee selected by them shall perform all of the duties of Collateral Agent hereunder and under the other Transaction Documents (as applicable) until such time, if any, as the
Required Counterparties appoint a successor agent as provided for above. Upon the acceptance of its appointment as Collateral Agent hereunder and under the other Security Documents by a successor, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder and thereunder. The fees payable by the Companies to a successor
Collateral Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Companies and such successor. After the Collateral Agent’s resignation hereunder and under the other Security Documents, the provisions
of this Section 7 shall continue in effect for the benefit of such retiring Collateral Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as
Collateral Agent. 
 Section 7.09. Fees and Expenses; Indemnification. (a) TMI will forthwith upon demand pay to the
Collateral Agent: 
 (i) the amount of any taxes that the Collateral Agent may have been required to pay by reason of the
Liens created under the Security Documents or to free any Collateral from any other Lien thereon; 
 (ii) the amount of any
and all reasonable out of pocket expenses, including transfer taxes and reasonable fees and expenses of counsel and other experts, that the Collateral Agent may incur in connection with (x) the administration or enforcement of the Security
Documents, including such expenses as are incurred to preserve the value of the Collateral or the validity, perfection, rank or value of any security interest created under the Security Documents, (y) the collection, sale or other disposition
of any Collateral or (z) the exercise by the Collateral Agent of any of its rights or powers under the Security Documents; 
  

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 (iii) a fee of 0.1875% of (x) the current face value of each security sold pursuant
to Article 6 and (y) the proceeds received from the sale of any Collateral described in Section 2.01(a)(ii); and 
 (iv) no later than April 2, 2008, a collateral administration fee of $25,000. 
 (b) If any transfer tax, documentary stamp tax
or other tax is payable in connection with any transfer or other transaction provided for in the Security Documents, TMI will pay such tax and provide any required tax stamps to the Collateral Agent or as otherwise required by law. 
 (c) The Companies shall jointly and severally indemnify the Collateral Agent (and any sub-agent thereof), each Counterparty, and each Related Party of
any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities (including, without limitation, any liability incurred pursuant
to Section 7.03 and any indemnification obligation to the Collateral Securities Intermediary under the Control Agreement) and related expenses (including without limitation, the reasonable fees, charges and disbursements of any counsel for any
Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by a Company arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Transaction Document,
or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or (ii) any
actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by a Company, and regardless of whether any Indemnitee is
a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. 
 (d) To the extent that the
Companies for any reason fail to pay any amount required under subsection (a), (b) or (c) of this Section 7.09 to be paid by them to the Collateral Agent (or any sub-agent thereof), or any Related Party of any of the foregoing, each
Counterparty agrees to pay to the Collateral Agent (or any such sub-agent) or such Related Party, as the case may be, its pro rata share of such unpaid amount. 
  

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 (e) To the fullest extent permitted by applicable law, no Company shall assert, and each Company hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other
Transaction Document, any agreement or instrument contemplated hereby, or the transactions contemplated hereby or thereby. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Transaction Documents or the transactions contemplated
hereby or thereby. 
 (f) All amounts due under this Section shall be payable not later than ten Business Days after demand therefor. Any
such amount not paid on demand shall bear interest (computed on the basis of a year of 360 days and payable for the actual number of days elapsed) at a rate per annum equal to 2% plus the rate announced from time to time by the Collateral Agent or
its affiliated Counterparty (or any bank reasonably selected by the Collateral Agent) as its prime rate. 
 Section 7.10. Rights As
Counterparty. The Person serving as the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Counterparty as any other Counterparty and may exercise the same as though it were not the Collateral Agent and the
term “Counterparty” or “Counterparties” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Collateral Agent hereunder in its individual capacity. Such Person
and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Companies or their Affiliates as if such Person were not the
Collateral Agent hereunder and without any duty to account therefor to the Counterparties. 
 ARTICLE 8 
 MISCELLANEOUS 
 Section 8.01. Binding upon Successors. This Agreement is for the benefit of the Secured Parties. If all or any part of any Secured Party’s interest in any Obligation is assigned or otherwise transferred in a manner
permitted by the Override Agreement, the transferor’s rights hereunder, to the extent applicable to the obligation so transferred, shall be automatically transferred with such obligation; provided that unless the Collateral Agent has
consented to such assignment (which consent shall not be unreasonably withheld), the assigning Secured Party shall remain responsible to the Collateral Agent hereto for the performance of its obligations under Section 7.09(d). This Agreement
shall be binding on the Companies and the Secured Parties and their respective successors and assigns. 
  

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 Section 8.02. Entire Agreement; Severability. This Agreement, the Override Agreement and the
other Transaction Documents to which the Collateral Agent is a party, and all exhibits, schedules, annexes thereto constitute the entire agreement among the parties hereto with respect to the transactions contemplated hereby and thereby and
supersede all prior discussions, understandings, agreements and negotiations among the parties hereto with respect to such transactions. All waivers by the Companies provided for in this Agreement have been specifically negotiated by the parties
with full cognizance and understanding of their rights. If any of the provisions of this Agreement shall be held invalid or unenforceable, this Agreement shall be construed as if not containing such provisions, and the rights and obligations of the
parties hereto shall be construed and enforced accordingly. This Agreement may be modified and amended only by a written instrument duly executed by the parties hereto. 
 Section 8.03. Choice of Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without reference to principles of conflict of laws other than
Section 5-1401 of the New York General Obligations Law. 
 Section 8.04. Notices. Any written notice, consent or other
communication provided for in this Agreement shall be delivered or sent as provided in the Override Agreement. The address of the Collateral Agent for notice purposes is: 
 Credit Suisse Securities (USA) LLC 
 Eleven
Madison Avenue 
 New York, New York 10010 
 Attention: Bruce Kaiserman 
 Telephone: (212) 538-1962 
 Facsimile: (917) 326-7936 
 Email:
bruce.kaiserman@credit-suisse.com 
 copy to: Lawrence Young 
 Telephone: (212) 325-1866 
 Facsimile:
(917) 326-8022 
 Email: lawrence.young@credit-suisse.com 
 Section 8.05. Defeasance. (a) Subject to the Override Agreement, if (i) all Obligations of the Companies secured hereby shall have
been fully and indefeasibly paid, performed, released or otherwise satisfied or discharged, or (ii) the Override Agreement has expired as provided in Section 1(a) thereof or has been terminated pursuant to Section 1(b) thereof, and,
in each case, the 

  

 26 

 
Compliance Requirements have been satisfied, the security interests created hereunder shall terminate and the Collateral Agent shall promptly deliver any
Collateral then held by it as directed by the Override Agreement, or if the Override Agreement has been terminated, the Companies. Subject to the immediately preceding sentence, the Collateral Agent agrees to transmit all Collateral delivered
pursuant to this Section 8.05 as directed by the Companies at the Companies’ expense, and, upon written request by the Companies, to execute and endorse such instruments of transfer or release as the Companies shall reasonably request.

 (b) The Counterparties hereby irrevocably authorize the Collateral Agent to release any security interest created hereunder on any
Collateral that is sold or to be sold as part of or in connection with any sale permitted under the Override Agreement to any Person other than any of the Companies provided that Collateral Agent shall not be required to release such security
interest until the Companies certify to Collateral Agent, with a copy to each Counterparty, that the sale or disposition is being made in compliance with the Override Agreement (and the Collateral Agent may rely conclusively on any such certificate
without further inquiry). 
 (c) Upon the release of any Collateral in accordance with this Section 8.05, the Collateral Agent or the
relevant Counterparty, as applicable, will, at the expense of the relevant Company, execute and deliver to such Company (or such other Person as such Company shall request) such documents as such Company shall reasonably request to evidence the
release of such Collateral. 
 Section 8.06. Counterparts. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 
 Section 8.07. Conflicts Between Documents. This Agreement shall be subject to the terms of the Override Agreement. In the event that there
exist any explicit inconsistencies or direct conflicts between the terms and provisions of the Financing Agreements or this Agreement and the terms and provisions of the Override Agreement, the terms and provisions of the Override Agreement shall
control. 
 Section 8.08. Jurisdiction. By its execution and delivery of this Agreement, each of the parties hereto irrevocably
and unconditionally agrees that any legal action, suit, or proceeding against it with respect to any matter under or arising out of or in connection with this Agreement or for recognition or enforcement (including specific performance) of any
judgment rendered in any such action, suit or proceeding, shall be brought in the federal district court or appropriate state court in each case located within the State of New York and 

  

 27 

 
County of New York. By its execution and delivery of this Agreement, each of the parties hereto irrevocably accepts and submits itself to the jurisdiction of
the federal and state courts in each case located within the State of New York and County of New York for such purposes. 
 Section 8.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FROM ANY COUNTERCLAIM
THEREIN. 
 Section 8.10. Section Headings and Defined Terms. Nothing in this Agreement, including, without limitation, the
Section headings and defined terms set forth herein, shall have any bearing on the characterization of any agreement or qualification of any agreement for the protections afforded in sections 555-561 of the Bankruptcy Code. This Agreement is
intended to constitute an arrangement related to each “Repurchase Agreement,” “Swap Agreement,” or “Securities Contract” as applicable, and the transactions thereunder, each as defined under section
101 of the Bankruptcy Code. Nothing in this Agreement shall be construed or deemed to affect, impair or interfere with the rights of any Counterparty to exercise any and all rights pursuant to sections 555-561 of the Bankruptcy Code. 
 Section 8.11. Additional Lien Grantors. Each Company shall cause each subsidiary of such Company that after the date hereof acquires any
mortgage servicing rights or becomes a party as an owner of servicing rights to any Mortgage Servicing Agreement to, within five Business Days from the occurrence of any such event, become a party to this Agreement by executing and delivering to the
Collateral Agent a Security Agreement Supplement together with such other documents as the Collateral Agent may reasonably require in connection therewith. Upon the delivery of such Security Agreement Supplement, such subsidiary shall be a Lien
grantor hereunder and a “Company” for all purposes under this Agreement. 
 Section 8.12. Obligations Unconditional.
The obligations of each Company under this Agreement shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: 
 (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any other Company or any other Person under any
Transaction Document, by operation of law or otherwise; 
 (b) any modification or amendment of or supplement to any Transaction Document;

  

 28 

 (c) any release, impairment, non-perfection or invalidity of any direct or indirect security for any
obligation of any other Company or any other Person under any Transaction Document; 
 (d) any change in the corporate existence, structure
or ownership of any other Company or any other Person or any of their respective subsidiaries, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any other Company or any other Person or any of their assets or any
resulting release or discharge of any obligation of any other Company or any other Person under any Transaction Document; 
 (e) the
existence of any claim, set-off or other right that such Company may have at any time against any other Company, any Secured Party or any other Person, whether in connection with the Transaction Documents or any unrelated transactions,
provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; 
 (f) any
invalidity or unenforceability relating to or against any other Company or any other Person for any reason of any Transaction Document, or any provision of applicable law or regulation purporting to prohibit the payment of any Obligation by any
other Company or any other Person; or 
 (g) any other act or omission to act or delay of any kind by any other Company, any other party to
any Transaction Document, any Secured Party or any other Person, or any other circumstance whatsoever that might, but for the provisions of this clause (g), constitute a legal or equitable discharge of or defense to any obligation of any Company
hereunder. 
  

 29 

 IN WITNESS WHEREOF, the parties have signed this Agreement as of the date and year first above written.

 LIEN GRANTORS: 
  

			
	THORNBURG MORTGAGE, INC.
		
	By:	 	 /s/ Larry A. Goldstone

	Name:	 	Larry A. Goldstone
	Title:	 	President & Chief Executive Officer
	
	THORNBURG MORTGAGE HEDGING STRATEGIES, INC.
		
	By:	 	 /s/ Larry A. Goldstone

	Name:	 	Larry A. Goldstone
	Title:	 	Chairman
	
	THORNBURG MORTGAGE HOME LOANS, INC.
		
	By:	 	 /s/ Larry A. Goldstone

	Name:	 	Larry A. Goldstone
	Title:	 	Chairman

 COLLATERAL AGENT: 
  

			
	 CREDIT SUISSE SECURITIES (USA) LLC,
as Collateral Agent

		
	By:	 	 /s/ Bruce S. Kalserman

	Name:	 	Bruce S. Kalserman
	Title:	 	Managing Director

 COUNTERPARTIES: 
  

			
	GREENWICH CAPITAL MARKETS, INC.
		
	By:	 	 /s/ Ronald Weibye

	Name:	 	Ronald Weibye
	Title:	 	Managing Director
	
	 ROYAL BANK OF SCOTLAND PLC acting through its agent
 GREENWICH CAPITAL MARKETS, INC.

		
	By:	 	 /s/ Ronald Weibye

	Name:	 	Ronald Weibye
	Title:	 	Managing Director
	
	 GREENWICH CAPITAL DERIVATIVES INC., acting through its agent
 GREENWICH CAPITAL MARKETS, INC.

		
	By:	 	 /s/ Ronald Weibye

	Name:	 	Ronald Weibye
	Title:	 	Managing Director
	
	BEAR STEARNS INVESTMENT PRODUCTS INC.
		
	By:	 	 /s/ Paul Friedman

	Name:	 	Paul Friedman
	Title:	 	Authorized Signatory

			
	 CITIGROUP GLOBAL MARKETS LIMITED acting through its intermediating agent CITIGROUP GLOBAL MARKETS INC.

		
	By:	 	 /s/ Sanjay V. Reddy

	Name:	 	Sanjay V. Reddy
	Title:	 	Managing Director
	
	CREDIT SUISSE SECURITIES (USA) LLC
		
	By:	 	 /s/ Marisa Scauzillo

	Name:	 	Marisa Scauzillo
	Title:	 	Vice President
	
	CREDIT SUISSE INTERNATIONAL
		
	By:	 	 /s/ Marisa Scauzillo

	Name:	 	Marisa Scauzillo
	Title:	 	Authorized Signatory
		
	By:	 	 /s/ Thelma Loshkajian

	Name:	 	Thelma Loshkajian
	Title:	 	Authorized signatory
	
	UBS SECURITIES LLC
		
	By:	 	 /s/ Larry Cofsky

	Name:	 	Larry Cofsky
	Title:	 	Managing Director
		
	By:	 	/s/ Dominic Haron
	Name:	 	Dominic Haron
	Title:	 	Director

 EXHIBIT A 
 FORM OF SECURITY AGREEMENT SUPPLEMENT 
 SECURITY AGREEMENT SUPPLEMENT dated as of
                    ,             , between [NAME OF NEW LIEN GRANTOR] (the
“New Lien Grantor”) and Credit Suisse Securities (USA) LLC, as Collateral Agent. 
 WHEREAS, Thornburg Mortgage Inc.,
Thornburg Mortgage Hedging Strategies, Inc. and Thornburg Mortgage Home Loans, Inc., each entity designated on the signature pages to the Security Agreement as a “Counterparty”, and Credit Suisse Securities (USA) LLC, as collateral agent
(in such capacity, the “Collateral Agent”), are parties to a Security Agreement dated as of April 1, 2008 (as heretofore amended and/or supplemented from time to time, the “Security Agreement”) under which the
Companies grant the Collateral (as defined therein) to secure the Obligations (as defined therein); 
 WHEREAS, the New Lien Grantor desires
to become a party to the Security Agreement as a “Company” thereunder; and 
 NOW, THEREFORE, in consideration of the foregoing and
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
 2. Definitions and Interpretation. Terms defined in the Security Agreement (or whose definitions are incorporated by reference in Article 1 of the Security Agreement) and not otherwise defined herein have, as used herein, the
respective meanings provided for in the Security Agreement. 
 3. Grant of Security Interest. (a) The New Lien Grantor, in order
to secure the Obligations, grants to the Collateral Agent for the benefit of the Secured Parties a continuing security interest in all the following property of the New Lien Grantor, whether now owned or existing or hereafter acquired or arising and
regardless of where located (the “New Collateral”): 
 (i) the Collateral Accounts and all amounts and other
assets, from time to time held therein or credited thereto; 
 (ii) all of the New Lien Grantor’s rights from time to
time in, under and to the Mortgage Servicing Agreements, Sub-Servicing Agreements and all Servicing Records, solely as the owner of the mortgage servicing rights or rights to receive any payments related to such mortgage servicing rights under such
Mortgage Servicing Agreements; 
 (iii) the Financing Agreement Collateral; and 
 (iv) all Proceeds of the New Collateral described in the foregoing clauses (i) through (iii). 

 (b) With respect to each right to payment or performance included in the New Collateral
from time to time, the security interest granted herein includes a continuing security interest in (i) any Supporting Obligation that supports such payment or performance and (ii) any Lien that (x) secures such right to payment or
performance or (y) secures any such Supporting Obligation. 
 (c) The security interests granted pursuant to this
Agreement are granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the New Lien Grantor with respect to any of the New
Collateral or any transaction in connection therewith. 
 4. Party to Security Agreement. Upon delivering this Security Agreement
Supplement to the Collateral Agent, the New Lien Grantor will become a party to the Security Agreement as a “Company” and will thereafter have all the rights and obligations of a Company thereunder and be bound by all the provisions
thereof as fully as if the New Lien Grantor were one of the original parties thereto. 
 5. Representations and Warranties.
(a) The New Lien Grantor is duly organized, validly existing and in good standing under the laws of [jurisdiction of organization]. 
 (b) The execution and delivery of this Security Agreement Supplement by the New Lien Grantor and the performance by it of its obligations under the Security Agreement as supplemented hereby are within its corporate or
other powers, have been duly authorized by all necessary corporate or other actions, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision
of applicable law or regulation or of its organizational documents, or of any agreement, judgment, injunction, order, decree or other instrument binding upon it or result in the creation or imposition of any Lien (except a Permitted Lien) on any of
its assets. 
 (c) The Security Agreement as supplemented hereby constitutes a valid and binding agreement of the New Lien
Grantor, enforceable in accordance with its terms, except as limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting creditors’ rights generally and (ii) general principles of equity.

 (d) Each of the representations and warranties set forth in Article 4 (except for Section 4(l)) of the Security
Agreement is true as applied to the New Lien Grantor and the New Collateral. For purposes of the foregoing sentence, references in such Article to a “Company” shall be deemed to refer to the New Lien Grantor and references to
“Collateral” shall be deemed to refer to the New Collateral. 
 (e) The Location of the New Lien Grantor is
[            ]. The name of the New Lien Grantor is correctly stated in the preamble of this Security Agreement Supplement. 
  

 A-2 

 6. Governing Law. This Security Agreement Supplement shall be governed by, and construed in
accordance with, the internal laws of the State of New York without reference to principles of conflict of laws other than Section 5-1401 of the New York General Obligations Law. 
 7. Notices. (a) All notices and other communications provided for or permitted hereunder shall be in writing (including facsimile
transmission and electronic mail transmission) and shall be sent: 
 (i) If to the New Lien Grantor, to: [150 Washington
Avenue, Suite 302, Santa Fe, New Mexico 87501], fax: [insert fax number], email: [insert email address], or at such other address as shall be designated by the New Lien Grantor in a notice to the Collateral Agent. 
 (ii) If to the Collateral Agent, to it at such address as shall have been designated by it in a notice to the New Lien Grantor.

 (b) All such other notices and communications shall be deemed received on the date of receipt if received prior to 5 p.m.
(local time in the location of the addressee) on a business day. Otherwise, all such notices and other communications shall be deemed received on the next succeeding business day. 
 IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement Supplement to be duly executed by their respective authorized officers as of
the day and year first above written. 
  

			
	[NAME OF NEW LIEN GRANTOR]
		
	By:	 	  

	Name:	 	
	Title:	 	
	
	 CREDIT SUISSE SECURITIES (USA) LLC,
 as Collateral Agent

		
	By:	 	  

	Name:	 	
	Title:	 	

  

 A-3 

 EXHIBIT B 
 FORM OF SERVICING PORTFOLIO REPORT 
 The Servicing Portfolio Report will contain the following data (in
“Standard and Poor’s” format) for all relevant mortgage loans being serviced by the Companies and the Sub-servicer as and to the extent such data is in the possession of the Companies and the Sub-servicer and is contained in the most
current report given by the Companies and/or the Sub-servicer to the respective trustees or bond administrators for such mortgage loans (provided that not all fields of data may necessarily be contained in, or updated in, such most current
report): 
  

	1.	Loan ID Number 

	2.	Occupancy Status 

	3.	Property Type 

	4.	Loan Purpose 

	5.	Documentation Type 

	6.	Product Description 

	7.	First Payment Date 

	8.	Original LTV Ratio 

	9.	Current Loan Balance 

	10.	Original Term 

	11.	Current Interest Rate 

	12.	Loan Type 

	13.	Original Loan Balance 

	14.	Negative Amortization 

	15.	Margin 

	16.	Frequency 

	17.	Original Interest Rate 

	18.	Annual Payment Cap 

	19.	Cap1 

	20.	Ceiling 

	21.	Negative Amortization Limit 

	22.	Cap Subsequent 

	23.	Mortgage Insurance Coverage 

	24.	Primary Mortgage Insurer 

	25.	Zip Code 

	26.	State Code 

	27.	Borrower Credit Quality 

	28.	Risk Grades 

	29.	Original FICO Score 

	30.	Second Lien 

	31.	Combined Original LTV Ratio 

	32.	Combined Current Loan Balance 

	33.	Simultaneous Second 

	34.	Current Delinquency Status 

	35.	Pay History 

	36.	Sales Price 

	37.	Appraised Value 

	38.	Appraisal Type 

	39.	Appraisal Date 

	40.	Cut Off Date 

	41.	Closing Date of Loan 

	42.	Cash Reserves at Closing 

	43.	Number Months Cash Reserves 

	44.	Borrower Income 

	45.	Co Borrower Income 

	46.	PITI Payment Amount 

	47.	Self Employed Borrower 

	48.	Total Other Debt 

	49.	Originator of Loan 

	50.	Primary Servicer of Loan 

	51.	Master Servicer of Loan 

	52.	Special Servicer of Loan 

	53.	Property Address 

	54.	City 

	55.	Loan Origination Source 

	56.	Total Debt to Income Ratio 

	57.	Next Payment Date 

	58.	Maturity DatePurchase Agreement

 Exhibit 10.3 
 THORNBURG MORTGAGE, INC. 
 INVESTMENT PROCEDURES 
 The prospective investor (the “Investor”) understands that the offer and sale of (i) senior subordinated secured notes due 2015 (the
“Notes”), (ii) detachable warrants (together with any additional warrants that may be issued by the Company to the Investor, the “Warrants,” and together with the Notes, the
“Instruments”), to purchase shares of common stock, par value $0.01 per share (the “Common Stock”), of Thornburg Mortgage, Inc., a Maryland corporation (the “Company”), and
(iii) an investment in a participation of certain collateral of the Company (the “Participation”; together with the Instruments, the “Investments”) are not being registered under the Securities
Act of 1933, as amended (the “Securities Act”), but rather is being made privately by the Company (the “Offering”). A summary of the terms of the Investments is set forth in the recitals to the
Purchase Agreement referred to below. 
 The Investor should complete the following steps prior to the intended date of purchase for the Investments:

 1. Complete and execute the attached purchase agreement (the “Purchase Agreement”), registration rights agreement
(the “Registration Rights Agreement”), warrant agreement (the “Warrant Agreement”), principal participation agreement (the “Principal Participation Agreement” and, together with
the Purchase Agreement, the Registration Rights Agreement and the Warrant Agreement, the “Agreements”), send the completed Agreements (including executed signature pages) to Friedman, Billings, Ramsey & Co., Inc. and
UBS Investments LLC, as placement agents (the “Placement Agents”), at the address below so that the Company may determine whether you are eligible to subscribe for and purchase the Investments. 
 2. Upon your delivery of the completed Agreements, you will be deemed to have irrevocably subscribed for the number of Investments indicated in the
Purchase Agreement, which subscription includes an irrevocable commitment to pay the full amount of the purchase price for the Investments (the “Subscription Amount”) for which you subscribed. If the subscription is not
accepted for any reason, the Subscription Amount will be returned to you. 
 3. In connection with the closing of the Offering, you must pay
the Subscription Amount in cash in accordance with prior delivery instructions received from the Placement Agents. 
 4. Please scan the
Agreements, including executed signature pages, and e-mail the scans to Dawn Farrell of Friedman, Billings, Ramsey & Co., Inc. at dfarrell@fbr.com, or fax the Agreements, including executed signature pages, to ATTN: Dawn Farrell at
703-469-1131. Please also send the Agreements, including executed signature pages, and direct all questions to: 
 Friedman, Billings,
Ramsey & Co., Inc. 
 1001 Nineteenth Street North, 18th floor 
 Arlington, Virginia 22209 
 Attention: Dawn Farrell 
 Phone: 703-312-9530 
 5. After the Placement
Agents receive a copy of the Agreements, including executed signature pages, the Placement Agents will notify you whether you are eligible to subscribe for and purchase the Investments and your subscription has been accepted, and will notify you of
the subscription date. 

 6. Upon acceptance of the subscription, a counterpart copy of the executed Purchase Agreement will be
signed as accepted on behalf of the Company and be returned to you. 
 The Agreements, as well as payment in immediately available funds of the Subscription
Amount, must be received no later than the closing of the Offering, subject to the discretion of the Company to waive such “prior receipt” requirement. 
 THE ENCLOSED DOCUMENTS ARE CONFIDENTIAL AND MAY NOT BE REPRODUCED, DUPLICATED OR DELIVERED BY YOU TO ANY OTHER PERSON FOR ANY REASON. 
 If requested by or on behalf of the Company, each Investor which is an entity must provide evidence satisfactory to the Company that the organizational documents of the Investor permit it to make investments in
securities such as the Investments, that all appropriate action has been taken by the Investor to authorize the investment and that the person or persons executing the Agreements have the authority to do so. 
 PURCHASE AGREEMENT 
 This PURCHASE
AGREEMENT (this “Agreement”), dated as of March 31, 2008, is by and among Thornburg Mortgage, Inc., a Maryland corporation (the “Company”), and the investors named on the signature pages
hereto (each, a “Subscriber” and collectively, the “Subscribers”). 
 WHEREAS, the
Company and each Subscriber are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the Securities Act”), and
Regulation D as promulgated thereunder; 
 WHEREAS, each Subscriber wishes to purchase, and the Company wishes to sell, upon the terms
and conditions set forth in this Agreement, that aggregate number of (i) senior subordinated secured notes due 2015 (the “Notes”), (ii) detachable warrants (the “Initial Warrants”) and
(iii) a participation interest in the principal participation agreement (the “Participation”), set forth on Subscriber’s signature page hereto (which aggregate amount for all Subscribers together shall be
$1,150,000,000 aggregate principal amount of Notes, 197,929,427 Initial Warrants, $200,000,000 to be held in escrow pursuant to the Escrow Agreement (as defined below) and 100% of the Participation) for the aggregate purchase price, plus the escrow
amount, set forth on Subscriber’s signature page hereto (which aggregate amount for all Subscribers together shall be $1,350,000,000.00); and 
 WHEREAS, the Notes are to be issued pursuant to an indenture (the “Indenture”) to be dated as of March 31, 2008 between the Company and Wilmington Trust Company, as trustee (the
“Trustee”); and 
 WHEREAS, upon: (a) the affirmative vote of the stockholders of the Company approving
an amendment to the Company’s charter increasing the number of authorized shares of common stock, par value $0.01 per share (the “Common Stock”), of the Company that the Company may issue to at least 4,000,000,000 shares
of Common Stock (“Shareholder Approval”); and (b) completion by the Company of self-tenders for at least 90% of the aggregate liquidation preference of its outstanding preferred stock and at least 66 2/3% of the
aggregate liquidation preference of each series of its outstanding preferred stock, at a price of $5 per $25 of liquidation preference (the “Tender Offer Cash Payment”) plus (i) if the Shareholder Approval is obtained,
Warrants (the “Tender Offer Warrants”) to purchase an aggregate of 5% of the Common Stock outstanding on a fully diluted basis after giving effect to such issuance and all anti-dilution adjustments under all existing
instruments and agreements (other than the 

  

 2 

 
Warrants (as defined below)) or (ii) if the Shareholder Approval is not obtained, such alternative consideration as may be mutually agreed to by the
Company and a majority of the Subscribers based on their respective Notes aggregate principal balance (such tender offer, together with consent solicitations to delete restrictive covenants, including without limitation voting and dividend blocker
provisions, in the Articles Supplementary of the Company for such series of preferred stock, the “Tender Offer”); the Company will issue additional warrants (the “Additional Warrants” and, together
with the Initial Warrants, the “Warrants” and, together with the Initial Warrants and the Notes, the “Instruments” and the Instruments together with the Participation, the
“Investments”); 
 WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights and/or exchange rights with respect to
the Notes, under the Securities Act and the rules and regulations promulgated thereunder; 
 WHEREAS, contemporaneously with the
execution and delivery of this Agreement, the parties hereto are executing and delivering a Warrant Agreement (the “Warrant Agreement”) pursuant to which the Company has agreed to issue the Warrants and provide certain
registration rights with respect to the shares of Common Stock issuable upon an exercise of the Warrants (the “Underlying Common Stock”) under the Securities Act and the rules and regulations promulgated thereunder;

 WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a
Principal Participation Agreement (the “Principal Participation Agreement”) pursuant to which the Company has sold the participants therein (the “Participants”) a 100% participating interest (the
“Participation Percentage”) in the principal amount of certain mortgages, mortgage-backed securities and other assets, subject to the satisfaction in full of all repurchase agreements, reverse repurchase agreements, swaps and
other obligations pursuant to which such assets are financed; 
 WHEREAS, Subscribers and the Company intend that Subscribers will
receive (i) Notes and (ii) Warrants (and/or Participations, if the Participations are not terminated on the Second Closing Date) on a pro rata basis according to the sum of the Note Principal Amount and the Second Closing Note Principal
Amount, after giving effect to the transactions contemplated by Paragraphs 1.2 and 1.3 but without taking into account any transfers of any Investment by a Subscriber. 
 WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering an Escrow Agreement
(the “Escrow Agreement”) with Wilmington Trust Company as escrow agent thereunder (the “Escrow Agent”); and 
 WHEREAS, the Company and the Note Lien Collateral Agent thereto shall execute a Security Agreement with regards to the obligations under the Notes. 
 NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 
 1. Upon the terms and subject
to the conditions set forth in this letter: 
 1.1 Each Subscriber hereby irrevocably subscribes for and agrees to purchase
from the Company such number of aggregate principal amount of Notes (including the respective number of Initial Warrants attached thereto) as is set forth on 

  

 3 

 
Schedule I to such Subscriber’s signature page hereto under the headings “Principal Amount of Notes” (the “Notes Principal
Amount”) and “Number of Initial Warrants” at a price equal to the amount set forth on Schedule I to such Subscriber’s signature page hereto under the heading “Purchase Price for Notes and Initial
Warrants” (the “Notes Purchase Price”) on the closing date (the “Closing Date”) designated by the Company (as set forth in Paragraph 7.1 hereof). Each Subscriber hereby further irrevocably
subscribes for and agrees to purchase from the Company such Participation Percentage as is set forth on Schedule I to such Subscriber’s signature page hereto under the heading “Participation Percentage” at a price equal to the
amount set forth on Schedule I to such Subscriber’s signature page hereto under the heading “Purchase Price for Participation” (the “Participation Purchase Price”) on the Closing Date. The Subscribers
agree to deliver to the Company on the Closing Date, upon receipt of the certificates representing the above referenced Instruments and a fully-executed copy of the Principal Participation Agreement, the Notes Purchase Price and the Participation
Purchase Price by wire transfer of United States dollars in immediately available funds to an account specified by the Company in writing. Each Subscriber hereby further agrees to deposit on the Closing Date in the escrow account under the Escrow
Agreement or the custodial account in accordance with the Escrow Agreement (together, the “Escrow Account”) the amount set forth on Schedule II to such Subscriber’s signature page hereto under the heading
“Escrow Amount” (the “Escrow Amount”), and the Company hereby further agrees to deposit on the Closing Date in the Escrow Account on behalf of each such Subscriber the number of Initial Warrants set forth on
Schedule II to such Subscriber’s signature page hereto under the heading “Number of Initial Warrants” (the “Escrow Warrants”). 
 1.2 (a) On the second closing date (the “Second Closing Date”), which must occur on or prior to June 30,
2008, occurring as set forth in Paragraph 7.2 hereof, each Subscriber other than MP TMA LLC and MP TMA (Cayman) LLC (collectively, “MatlinPatterson”) hereby further irrevocably subscribes for and agrees to purchase
from the Company (the “Escrow Subscribers”) such aggregate principal amount of Notes (the “Second Closing Notes Principal Amount”) equal to the product of (i) (I) the aggregate amount of
Tender Offer Cash Payments, divided by (II) $200,000,000 (such quotient, the “Tender Offer Success Ratio”, which shall be equal to zero if the conditions set forth in Paragraph 6.2 hereof have not been satisfied
on or prior to June 30, 2008), multiplied by (ii) such Escrow Subscriber’s Escrow Amount (the “Second Closing Notes Payment”), and an amount equal to such product shall be distributed to the Company by
the Escrow Agent. Any remaining amounts of any Escrow Subscriber’s Escrow Amounts following the Second Closing Date, including any interest on such Escrow Subscriber’s Escrow Amount, shall be distributed to such Escrow Subscriber. The
Company agrees to deliver to each Escrow Subscriber certificates representing the above referenced Instruments. (b) On the Second Closing Date, the Company shall distribute to each Escrow Subscriber a number of such Escrow Subscriber’s
Escrow Warrants equal to the product of (i) the Tender Offer Success Ratio, multiplied by (ii) such Escrow Subscriber’s Escrow Warrants. Any excess Initial Warrants remaining in the Escrow Account following the Second Closing
are referred to as the “Excess Escrow Warrants”. Each Subscriber shall receive a number of Excess Escrow Warrants equal to the product of (x) the quotient of (1) the sum of such Subscriber’s Notes Principal
Amount, plus such Subscriber’s Second Closing Notes Principal Amount, divided by (2) the sum of the aggregate amount of all Subscribers’ Notes Principal Amount, plus the aggregate amount of all Subscribers’
Second Closing Notes Principal Amount, multiplied by (y) the aggregate number of Excess Escrow Warrants. The Company agrees to deliver to each Subscriber certificates representing the above referenced Instruments. (c) In the 

  

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event that the Second Closing Date does not occur by June 30, 2008, then on June 30, 2008 each Escrow Subscriber’s Entire Escrow Amount,
including interest thereon, shall be distributed to such Subscriber and each Subscriber shall receive a number of additional Initial Warrants equal to the product of (i) the quotient of (I) such Subscriber’s Notes Principal Amount,
divided by (II) the aggregate amount of all Subscribers’ Notes Principal Amount, multiplied by (ii) the aggregate number of Escrow Warrants, and the Company agrees to deliver to each Subscriber certificates representing the
above referenced Instruments. 
 1.3 (a) At the time of grant of the Additional Warrants under the Warrant Agreement (the
“Additional Warrant Grant Date”), each Participant shall receive a number of Additional Warrants equal to the product of (i) the aggregate number of Additional Warrant Shares (as defined in the Warrant Agreement),
multiplied by (ii) such Participant’s Participation Percentage (without regard to any termination of the Participation Agreement), multiplied by (iii) (A) $100,000,000, divided by
(B) (I) $100,000,000 plus (II) (1) 0.08695652, multiplied by (2) the aggregate Second Closing Notes Principal Amount (the “Participants Additional Warrants”). The Company agrees to deliver to each
Participant certificates representing the above referenced Instruments. (b) At the time of grant of the Additional Warrants under the Warrant Agreement, each Escrow Subscriber shall receive a number of Additional Warrants equal to the product
of (i) (A) the aggregate number of Additional Warrant Shares, minus (B) the aggregate number of Participants Additional Warrants, multiplied by (ii) (A) such Escrow Subscriber’s Second Closing Notes
Principal Amount, divided by (B) the aggregate Second Closing Notes Principal Amount. The Company agrees to deliver to each Escrow Subscriber certificates representing the above referenced Instruments. 
 1.4 Unless the context otherwise requires or indicates, references herein to the Investments shall also mean each of (i) the Notes,
(ii) the Warrants and (iii) the Participation, individually, and Instrument shall also mean each of the Notes and the Warrants individually. The Notes Purchase Price and the Second Closing Notes Payment shall be allocated between the Notes
and the Warrants based on their relative fair market value. A third party valuation firm shall make such determination within 90 days of the Closing Date. 
 2. Each Subscriber understands and agrees that the Investments are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act, and that the
Investments and the Underlying Common Stock have not been registered under the Securities Act and, unless so registered, may not be resold except as permitted in the following sentence. Each Subscriber agrees, on its own behalf and on behalf of each
account for which it acquires any Investments, that, if in the future it decides to offer, resell, pledge or otherwise transfer such Investments or Underlying Common Stock, such Investments and Underlying Common Stock may be offered, resold, pledged
or otherwise transferred only (a) to the Company or a subsidiary thereof, (b) pursuant to a registration statement that has been declared and is effective under the Securities Act or (c) pursuant to any other available exemption from
the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of Subscriber’s property or the property of such investor account or accounts be at all times within
Subscriber’s or their control and subject to compliance with any applicable state securities laws. Each Subscriber understands that the registrar and transfer agent for the Investments and the Underlying Common Stock will not be required to
accept for registration of transfer any Investments or Underlying Common Stock, except upon presentation of evidence satisfactory to the Company and the transfer agent that, 

  

 5 

 
unless such Investments or Underlying Common Stock are already registered under the Securities Act, an exemption to the registration requirement under the
Securities Act and the rules and regulations thereunder have been complied with. Each Subscriber further understands that any certificates representing Investments or Underlying Common Stock acquired by it will bear a legend reflecting the substance
of this paragraph. Each Subscriber acknowledges, on its own behalf and on behalf of any investor account for which it is purchasing the Investments, that the Company reserves the right to restrict any offer, sale or other transfer of the Investments
and any Underlying Common Stock pursuant to clause (c) above and to require the completion, execution and delivery of (i) a letter from the transferee substantially in the form of the Transferee’s Letter attached hereto as Appendix
A and (ii) an opinion of counsel satisfactory to the Company that the proposed transfer does not require registration under the Securities Act. 
 3. Each Subscriber hereby represents and agrees as follows: 
 3.1 Such Subscriber
acknowledges that such Subscriber must qualify under the standards described below, in order to qualify for the purchase of Investments. 
 3.2 Such Subscriber is an “accredited investor,” as such term is defined in Regulation D under the Securities Act (an “Accredited Investor”) and a “qualified institutional
buyer” as such term is defined in Rule 144A under the Securities Act (a “QIB”). 
 3.3 Such
Subscriber acknowledges that it is able to bear the economic risk of an investment in the Investments. 
 3.4 Such Subscriber
represents, warrants and acknowledges that it: (a) is a sophisticated purchaser with respect to the Investments; (b) has received such information as it deems necessary in order to make an investment decision with respect to the
Investments, the Company and the Offering and has had the opportunity to ask questions of and receive answers from the Company and its officers and directors and to obtain such additional information which the Company or its subsidiaries possess or
could acquire without unreasonable effort or expense as such Subscriber deems necessary to verify the accuracy of the information furnished to such Subscriber and has asked such questions, received such answers and obtained such information as it
deems necessary to verify the accuracy of the information furnished to such Subscriber; (c) understands that the Company has restated its financial statements for the year ended December 31, 2007 on a Form 10-K/A and that the auditors
report on such restated financial statements contains a statement noting that such financial statements were prepared assuming that the Company will continue as a going concern; (d) understands that the Company, Thornburg Mortgage Hedging
Strategies, Inc. and the counterparties named therein (the “Counterparties”) have entered into that certain override agreement, dated as of March 17, 2008 (the “Override Agreement”) and that the
Override Agreement contains significant restrictions on the Company’s ability to conduct its business operations as previously conducted during the term of such agreement. 
 3.5 Such Subscriber became aware of this offering of the Investments and the Investments were offered to such Subscriber solely by means
of direct contact between such Subscriber, on the one hand, and the Company or Friedman, Billings, Ramsey & Co., Inc. and UBS Investments LLC, as placement agents (the “Placement Agents”), on the other hand.
Such Subscriber did not become aware of, nor were the Investments offered to such Subscriber by any other means, including, in each case, by 

  

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any form of general solicitation or general advertising. In making the decision to purchase the Investments, such Subscriber relied solely on the information
obtained by such Subscriber directly from the Company as a result of any inquiries by such Subscriber or such Subscriber’s advisor(s). 
 3.6 Such Subscriber hereby acknowledges that the offering of Investments has not been reviewed by, and the fairness of such Investments has not been determined by, the U.S. Securities and Exchange Commission (the
“Commission”), the New York Stock Exchange or any state regulatory authority, because the Offering is intended to be a private placement pursuant to Section 4(2) of the Securities Act and Regulation D promulgated
thereunder. 
 3.7 Such Subscriber understands that the Investments and the Underlying Common Stock have not been registered
under the Securities Act or any state securities or “blue sky” laws and are being sold in reliance on exemptions from the registration requirements of the Securities Act and such laws. Such Subscriber understands that the Investments will
not be listed on any exchange and thus no trading marketing for such securities may be established. 
 3.8 Such Subscriber is
acquiring the Investments for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. 
 3.9 Such Subscriber consents to the placement of a legend on the certificates evidencing the Investments and any Underlying Common Stock,
stating that such Investments or Underlying Common Stock have not been registered under the Securities Act or any state securities or “blue sky” laws and setting forth or referring to the restrictions on transferability and sale thereof.
Such Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such Investments or Underlying Common Stock. 
 3.10 Such Subscriber, if acting in a representative or fiduciary capacity, has full power and authority to execute and deliver this
Agreement, the Warrant Agreement and the Registration Rights Agreement, to make the representations and warranties specified herein and therein, and to consummate the transactions contemplated herein and therein on behalf of the subscribing
partnership, trust, corporation or other entity for which such Subscriber is acting and such partnership, trust, corporation, or other entity has full right and power to subscribe for Investments and perform its obligations hereunder and thereunder.
This Agreement, the Warrant Agreement and the Registration Rights Agreement have been, or will be as of the Closing Date, duly and validly authorized, executed and delivered by such Subscriber and, will constitute the legal, valid and binding
obligations of such Subscriber enforceable against such Subscriber in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. Such Subscriber acknowledges and agrees that the Company has not made any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set forth in Paragraph 4. 
  

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 3.11 The execution, delivery and performance by such Subscriber of this Agreement, the
Principal Participation Agreement, the Warrant Agreement and the Registration Rights Agreement and the consummation by such Subscriber of the transactions contemplated herein and therein will not conflict with or constitute a material breach of, or
default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of such Subscriber pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other instrument or agreement to
which such Subscriber is a party or by which it or any of them may be bound, or to which any of the property or assets of such Subscriber is subject, nor will any such action result in any violation of the provisions of the articles of
incorporation, bylaws or other organizational documents of such Subscriber or any applicable law, administrative regulation or administrative or court decree. 
 3.12 Such Subscriber is not an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company or acting on behalf
of an affiliate of the Company. 
 3.13 Except as disclosed on the signature page, such Subscriber is not and for so long as
it holds any Investments or Underlying Common Stock will not be (i) an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to Title I of ERISA, including without limitation governmental and non-U.S.
plans, (ii) a plan described in Section 4975 of the Internal Revenue Code (the “Code”), (iii) an entity whose underlying assets include “plan assets” within the meaning of Section 3(42) of ERISA
by reason of a plan’s investment in such entity (including but not limited to an insurance company general account), or (iv) an entity that otherwise constitutes a “benefit plan investor” within the meaning of the DOL Regulation
Section 2510.3-101 (29 C.F.R. Section 2510.3-101) (any of the foregoing, a “Benefit Plan Investor”). To the extent an exception is taken on the signature page, the Subscriber represents and warrants that the
purchase and holding of such Investment or Underlying Common Stock does not and will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. 
 3.14 Such Subscriber acknowledges that the Investments may not be purchased by or otherwise acquired by any Benefit Plan Investor other
than the Subscriber and the Subscriber represents and warrants that on the date hereof and for so long as the Subscriber holds the Investments or Underlying Common Stock either: (i) none of the assets of the Investor are deemed to include
“plan assets” of any “benefit plan investor” as such terms are defined in Department of Labor Regulation Section 2510.3-101, as modified by Section 3(42) of ERISA or (ii) the assets of the Investor are deemed to
include such “plan assets”, but the purchase and holding of such Investment or Underlying Common Stock would not reasonably be expected to constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975
of the Code. 
 3.15 Such Subscriber (and any investor account for which such Subscriber is purchasing Investments pursuant
hereto) agrees that the Company may rely, and shall be protected in acting upon, any papers or other documents which may be submitted to any of them in connection with the sale and subsequent transfers of the Investments or Underlying Common Stock
and which are reasonably believed by them to be genuine and reasonably appear to have been signed or presented by the proper party or parties. 
 3.16 The Company is entitled to rely upon this letter and is irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with
respect to the matters covered hereby. 
  

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 3.17 The foregoing representations, warranties and agreements, together with all other
representations and warranties made or given by such Subscriber to the Company in any other written statement or document delivered in connection with the transactions contemplated hereby, shall be true and correct in all respects on and as of the
date of this Agreement and the Closing Date, as if made on and as of each such date, and shall survive each such date and if there should be any material change in such information prior to the Closing Date of the sale of the Investments, such
Subscriber shall immediately furnish in writing such revised or corrected information to the Company. Such Subscriber understands that the Company will rely upon the accuracy and truth of the foregoing representations, warranties and agreements, and
such Subscriber hereby consents to such reliance. 
 3.18 Such Subscriber is a resident of that jurisdiction specified below
its address on the signature page hereto. 
 4. The Company hereby represents and warrants as follows: 
 4.1 Since January 1, 2008, except as disclosed in the Company’s Revised Annual Report on Form 10-K/A for the year ended
December 31, 2007, as filed on March 11, 2008, the Company’s Current Reports on Form 8-K filed with the Commission since the date of the latest Form 10-K/A, the Company’s Revised Preliminary Prospectus (relating to 12%
Convertible Senior Subordinated Notes due 2015 and Warrants to Purchase Common Stock) dated March 20, 2008, and other information, documents and reports with respect to the Company filed with the Commission pursuant to the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”), since the date of the latest Form 10-K/A (collectively, the “Information”) (but, in each case, excluding any risk factor disclosures contained
under the heading “Risk Factors,” any disclosure of risks included in any “forward-looking statements” disclaimer or any other statements that are similarly non-specific or predictive or forward-looking in nature), to the extent
that it is reasonably apparent on the face of the disclosed information that such disclosure is of an exception to one or more of the following clauses (A) through (E), there has not been (A) any material adverse change, or any development
involving a prospective material adverse change, in the business, properties, management, financial condition or results of operations of the Company and its subsidiaries, (B) any transaction which is material to the Company and its
subsidiaries, (C) any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company or any of its subsidiaries which is material to the Company, (D) any material change in the capital stock or
outstanding indebtedness of the Company or its subsidiaries or (E) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, other than regular quarterly dividends paid on the Company’s Common
Stock or any series of the Company’s preferred stock. As of the date hereof, the Company has filed with the Commission all documents required to be filed by it under the Exchange Act. Each such document, at the time of its filing, was in
compliance with the requirements of the Exchange Act as in effect on such date, and none of such documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading, except to the extent superseded by a subsequent filing made prior to the date hereof. 
  

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 4.2 The Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Maryland, and each of its subsidiaries and Thornburg Mortgage Advisory Corporation (the “Manager”) has been duly formed and is validly existing in its respective state of
formation, in each case with full corporate power and authority to own, lease and operate its properties and conduct its business as described in the Information; and each of the Company, the Manager and its subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction where the respective ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in
good standing would not, individually or in the aggregate, have a material adverse effect on the business, properties, financial condition, results of operation or prospects of the Manager, the Company and/or its subsidiaries taken as a whole (a
“Material Adverse Effect”). 
 4.3 As of the date hereof, the Company had an authorized, issued and
outstanding capitalization as set forth in the Information. The issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non assessable, have been issued in compliance with all
federal and state securities laws and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right. No order halting or suspending trading in securities of the Company nor prohibiting the sale of such
securities has been issued to and is outstanding against the Company or its directors, officers or promoters and no investigations or proceedings for such purposes are pending or threatened. 
 4.4 The Notes have been duly authorized by the Company and, when executed and delivered by the Company and duly authenticated in
accordance with the terms of the Indenture and delivered to and paid for by the Subscribers in accordance with the terms hereof, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and general principles of equity, and will be entitled to the benefits of the Indenture and
the Registration Rights Agreement. 
 4.5 The Warrants have been duly authorized by the Company and, when executed and
delivered by the Company and duly authenticated in accordance with their terms and delivered to and paid for by the Subscribers in accordance with the terms hereof, will constitute legal, valid and binding obligations of the Company, enforceable in
accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and general principles of equity. 
 4.6 The Principal Participation Agreement has been duly authorized by the Company and, when executed and delivered by the Company and
delivered to and paid for by the Subscribers in accordance with the terms hereof, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and general principles of equity. 
 4.7 The Underlying Common Stock issuable upon exercise of the Initial Warrants has been duly authorized and validly reserved for issuance upon exercise of the 

  

 10 

 
Initial Warrants, and, upon exercise of the Initial Warrants in accordance with their terms, will be issued free of statutory and contractual preemptive
rights, resale rights, rights of first refusal and similar rights and free of any voting restrictions (and will be free of any restriction, pursuant to the Company’s charter or bylaws or any agreement or other instrument to which the Company is
a party, upon the transfer thereof except the ownership limits in the Company’s charter and, until the termination of the Company’s Shareholder Rights Agreement as provided in Paragraph 5.2 hereof, the limits on ownership in that
agreement; such Underlying Common Stock, when so issued upon such exercise in accordance with the terms of the Initial Warrants, will be duly and validly issued and fully paid and nonassessable, and will be entitled to the benefits of the
Registration Rights Agreement; and the certificates for such Underlying Common Stock will be in due and proper form. 
 4.8
Assuming Shareholder Approval, the Underlying Common Stock issuable upon exercise of the Additional Warrants has been duly authorized and validly reserved for issuance upon exercise of the Additional Warrants, and, upon exercise of the Additional
Warrants in accordance with their terms, will be issued free of statutory and contractual preemptive rights, resale rights, rights of first refusal and similar rights and free of any voting restrictions (and will be free of any restriction, pursuant
to the Company’s charter or bylaws or any agreement or other instrument to which the Company is a party, upon the transfer thereof except the ownership limits in the Company’s charter and, until the termination of the Company’s
Shareholder Rights Agreement as provided in Paragraph 5.2 hereof, the limits on ownership in that agreement)); such Underlying Common Stock, when so issued upon such exercise in accordance with the terms of the Additional Warrants, will be
duly and validly issued and fully paid and nonassessable, and will be entitled to the benefits of the Registration Rights Agreement; and the certificates for such Underlying Common Stock will be in due and proper form. 
 4.9 Except as set forth in the Information, none of the Manager, the Company nor any of its subsidiaries is in breach or violation of or
in default under (nor has any event occurred which with notice, lapse of time or both would result in any breach of, constitute a default under or give the holder of any indebtedness (or a person acting on such holder’s behalf) the right to
require the repurchase, redemption or repayment of all or a part of such indebtedness under) (A) its charter or by-laws or other applicable formation or organizational documents, or (B) any indenture, mortgage, deed of trust, bank loan or
credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or affected, except, in case of clause (B), for such
breaches, violations or defaults that will be cured or estopped by the transactions contemplated by this Agreement or except as would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the Indenture, the
prepaid cash-settled agreement by and between the Company and MatlinPatterson, dated as of March 24, 2008 (the “Prepaid Agreement”), the Override Agreement and the Registration Rights Agreement, the issuance and sale of
the Investments, the issuance of the Underlying Common Stock upon an exercise of the Initial Warrants and, assuming Shareholder Approval, the Additional Warrants and the consummation of the transactions contemplated hereby and thereby will not
conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would result in any breach of or constitute a default under) (A) the charter or by-laws of the
Company or applicable formation or organizational documents of any of the 

  

 11 

 
Company’s subsidiaries or the Manager, or (B) any indenture, mortgage, deed of trust, bank loan, reverse repurchase agreement or credit agreement
or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Manager, the Company or any of its subsidiaries is a party or by which it or any of their respective properties may be bound or
affected, or any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Manager, the Company or any of its subsidiaries, except, in case of (B), as would not, individually or in the aggregate,
have a Material Adverse Effect. 
 4.10 The Company has been organized in conformity with the requirements for qualification
as a real estate investment trust pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, (the “Code”) and has qualified since formation and will be so qualified after giving effect to the issuance and sale
of the Investments as herein contemplated. The Company does not believe it is a United States real property holding corporation under Section 897 of the Code. 
 4.11 The Company is not and, after giving effect to the offering and sale of the shares of Investments as herein contemplated, will not be
an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended. 
 4.12 Except as set forth in the Information, there are no actions, suits, claims, investigations or proceedings pending or threatened or,
to the knowledge of the Manager, the Company or its subsidiaries, contemplated to which the Company, its subsidiaries, the Manager or any of their respective directors or officers is a party or of which any of their respective properties is subject
at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency, except any such action, suit, claim, investigation or proceeding which would not result in a judgment,
decree or order having, individually or in the aggregate, a Material Adverse Effect or preventing consummation of the transactions contemplated hereby. 
 4.13 The Company is not required to obtain any consent, authorization or order of, or make any filing with, any court, governmental agency or any regulatory or self-regulatory agency or any other person in order for
it to execute, deliver or perform any of its obligations under or contemplated by this Agreement, the Indenture, the Prepaid Agreement, the Principal Participation Agreement, the Override Agreement or the Registration Rights Agreement, in each case
in accordance with the terms hereof or thereof, except as otherwise provided in the Registration Rights Agreement, the Warrant Agreement, the financial distress exemption being pursued with the New York Stock Exchange under Section 312 (the
“NYSE Approval”) and except for the filing of a Form D with the Commission and any state securities regulators. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing Date, except as otherwise provided in the Registration Rights Agreement, except for the filing of a Form D with the Commission and any state securities regulators and
except as required pursuant to Paragraph 5.4. 
 4.14 Except for the approvals contemplated in Paragraph 6
hereof and the Shareholder Approval, no authorization, approval or consent of the stockholders of the Company is required or necessary in connection with the sale of the Investments pursuant to the articles of incorporation, bylaws or other
organizational documents of the Company or the rules and regulations of the New York Stock Exchange (the “NYSE”) except for the NYSE Approval. 
  

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 4.15 The Investments sold in the Offering will be issued and sold pursuant to the
registration exemption provided by Regulation D and Section 4(2) of the Securities Act as a transaction not involving a public offering and the requirements of any other applicable state securities laws and the respective rules and regulations
thereunder. The Investments sold in this Offering will not be subject to preemptive rights, resale rights, rights of first refusal or similar rights arising under any contract or agreement to which the Company is a party. The Company proposes to
offer and sell the Investments exclusively to investors that qualify as both QIBs and Accredited Investors. 
 4.16 Neither
the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Investments
as herein contemplated. 
 4.17 Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Investments under the Securities Act or cause this offer of the
Investments to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or designated. None of the Company, its affiliates or any persons acting on its or their behalf will take any action or steps referred to in the preceding sentence that would
require registration of any of the Investments under the Securities Act or cause the offering of the Investments to be integrated with other offerings. 
 4.18 Each of the Manager, the Company and its subsidiaries has all necessary licenses, authorizations, consents and approvals and has made all necessary filings required under any federal, state, local or foreign law,
regulation or rule, and has obtained all necessary authorizations, consents and approvals from other persons, in order to conduct its business, except as would not have a Material Adverse Effect; none of the Manager, the Company nor its subsidiaries
is in violation of, or in default under, nor has it received notice of any proceedings relating to revocation or modification of, any such license, authorization, consent or approval or any federal, state, local or foreign law, regulation or rule or
any decree, order or judgment applicable to the Manager, the Company or any of its subsidiaries, except where such violation, default, revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect.

 4.19 This Agreement, the Indenture, the Principal Participation Agreement, the Override Agreement, the Warrant Agreement
and the Registration Rights Agreement and any and all instruments necessary or appropriate to effectuate fully the terms and conditions of this Agreement, the Indenture, the Principal Participation Agreement, the Warrant Agreement, the Override
Agreement and the Registration Rights Agreement on behalf of the Company have been, or will be prior to the time of the delivery of the Investments as contemplated in Paragraph 1 hereof, duly authorized, executed and delivered by the Company
and each constitutes, or will constitute, a valid and binding obligation of the Company, enforceable against the Company in accordance with their 

  

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respective terms, subject to the effect of: (a) bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting
creditors’ rights (including, without limitation, the effect of statutory and other laws regarding fraudulent conveyances, fraudulent transfers and preferential transfers), (b) the exercise of judicial discretion and the application of
principles of equity, good faith, fair dealing, reasonableness, conscionability and materiality, and (c) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. 
 4.20 The Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Each of the Company, its subsidiaries and their respective officers and directors are
unaware of any facts or circumstances which might give rise to any of the foregoing. 
 4.21 All disclosure provided to the
Subscribers regarding the Company, its subsidiaries, their respective businesses and the transactions contemplated hereby, furnished by or on behalf of the Company, are true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 
 4.22 Each of the Manager, the Company and its subsidiaries is in compliance with the terms of each employee benefit plan and with all
applicable provisions and requirements of ERISA and the Code and the regulations and published interpretations thereunder with respect to each employee benefit plan, except to the extent that any failure to comply could not reasonably be expected to
result in a material liability. Each employee benefit plan that is intended to qualify under Section 401(a) of the Code either (a) has received a favorable determination letter from the Internal Revenue Service indicating that such
employee benefit plan is so qualified and nothing has occurred subsequent to the issuance of such determination letter that would reasonably be expected to cause such employee benefit plan to lose its qualified status, or (b) is within the
applicable remedial amendment period for requesting such a letter. No material liability to the Pension Benefit Guaranty Corporation (other than required premium payments), the Internal Revenue Service, any employee benefit plan or any trust
established under Title IV of ERISA has been or is reasonably expected to be incurred by any of the Manager, the Company and its subsidiaries. Except to the extent required under Section 4980B of the Code or similar state laws, no employee
benefit plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of any of the Manager, the Company and its subsidiaries that could reasonably be expected to have a material
liability. 
 4.23 None of the Manager, the Company and its subsidiaries is or, immediately after receipt of payment for the
Notes, will be a Person described or designated in the Specially Designated Nationals and Blocked Person List of the Office of Foreign Assets Control of the U.S. Treasury Department or the Anti-Terrorism Order, and none of the Manager, the Company
and its subsidiaries knowingly engages in or, immediately after receipt of payment for the Notes, will knowingly engage in any 

  

 14 

 
dealings or transactions, or, to its knowledge, is otherwise currently associated with, any such Persons. The Subscribers hereby notify the Manager, the
Company and its subsidiaries that pursuant to the requirements of the Patriot Act, the Subscribers may be required to obtain, verify and record information that identifies the Manager, the Company and its subsidiaries, including the names and
addresses and other information that will allow the Subscribers to identify the Manager, the Company and its subsidiaries in accordance with the Patriot Act. 
 4.24 No part of the proceeds from the sale of the Securities will be used, directly or indirectly, for the purpose of buying or carrying
any margin stock. Margin stock does not constitute more than 5% of the value of the consolidated assets of the Manager, the Company and its subsidiaries and none of the Manager, the Company and its subsidiaries has any present intention that margin
stock will constitute more than 25% of the value of such assets. As used in this Section 4.28, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in Regulation U of the
Board of Governors of the Federal Reserve System (or any successor provision), as it may be amended from time to time. 
 4.25
Other than the transactions set forth on Exhibit 4.25 and loans from the Manager to its managing directors for the purpose of purchasing capital stock of the Manager, (a) there is no Indebtedness between the Manager, the Company and its
subsidiaries, on the one hand, and any officer, director, shareholder or affiliate (other than the Manager, the Company and its subsidiaries) of the Company, on the other, (b) no such officer (other than in his or her capacity as an officer),
director (other than in his or her capacity as a director), shareholder or affiliate (other than the Manager, the Company and its subsidiaries) provides or causes to be provided any assets, services or facilities to the Manager, the Company and its
subsidiaries the monetary value of which exceeds $100,000, (c) none of the Manager, the Company and its subsidiaries provides or causes to be provided any assets, services, or facilities to any such officer (other than in his or her capacity as
an officer), director (other than in his or her capacity as a director), shareholder or affiliate (other than the Manager, the Company and its subsidiaries) the monetary value of which exceeds $100,000, and (d) none of the Manager, the Company
and its subsidiaries beneficially owns, directly or indirectly, any investment in or issued by any such officer, director or affiliate. 
 4.26 Other than Friedman, Billings, Ramsey & Co., Inc. and UBS Securities LLC, none of the Manager nor the Company, nor any of their respective officers, directors, employees or Affiliates, has employed any
broker or finder, or incurred any liability for or paid, directly or indirectly, any brokerage fees, commissions, finder’s or other similar fees or expenses in connection with the transactions contemplated hereby. 
 4.27 Subscribers will receive (i) Notes and (ii) Warrants (and/or Participations, if the Participations are not terminated upon
the Second Closing Date) on a pro rata basis according to the sum of the Note Principal Amount and the Second Closing Note Principal Amount, after giving effect to the transactions contemplated by Paragraphs 1.2 and 1.3 but without
taking into account any transfers of any Investment by a Subscriber prior to the consummation of all such transactions. 
 5.
The Company and the Subscribers agree as follows: 
 5.1 The Company agrees with each Subscriber to apply the net proceeds
from the sale of the Investments in the manner set forth in the Uses of Proceeds set forth on Exhibit 5.1 hereto. 
  

 15 

 5.2 The Company agrees to use its best efforts to obtain the Shareholder Approval,
together with the opinion of Maryland counsel, delivered to each Subscriber, as to the effectiveness of the increase in the authorized shares of Common Stock of the Company. 
 5.3 The Company shall use its best efforts to commence and complete the Tender Offer as promptly as practicable. If the Tender Offer is
not successful, with the consent of the Majority Participants (as defined in the Principal Participation Agreement), the Company may recommence the Tender Offer from time to time and consummate the Tender Offer. 
 5.4 The Company shall use its best efforts to obtain the shareholder approval required by Section 312.03 of the NYSE’s Listed
Company Manual or to otherwise comply with all of the requirements of the exception set forth in Section 312.05 of the NYSE’s Listed Company Manual by April 11, 2008. 
 5.5 The Company shall terminate its Shareholder Rights Agreement and the rights issued thereunder within two business days after the
Closing Date, and the Company shall not adopt a new shareholder rights agreement without the consent in writing of holders of a two-thirds of the shares of Common Stock underlying unexercised Warrants or issued upon exercise of the Warrants. The
Company’s waiver of the 9.8% share ownership limit in its Articles of Incorporation in connection with the Investments shall not be revoked or modified adversely to the Subscribers without the consent in writing of each Subscriber affected
thereby. The Company’s waiver of the Maryland Control Share Acquisition Act (and the resolution of its Board of Directors not to opt back into such Act for purposes of the Investment) or its exemption of transactions with the Subscribers from
the Maryland Business Combination Act shall not be revoked or modified adversely to the holders of unexercised Warrants or shares of Common Stock issued upon exercise of the Warrants without the consent in writing of holders of a two-thirds of the
shares of Common Stock underlying unexercised Warrants or issued upon exercise of the Warrants. 
 5.6 The Company and each
Subscriber agree that the settlement contemplated in Paragraph 1.1 shall be accomplished through physical delivery and that the Company and the Subscribers shall cooperate to obtain DTC eligibility for global Notes and have such physical
Notes exchanged for such global Notes, in each case as promptly as practicable following such settlement. 
 5.7 The Company
shall reimburse MatlinPatterson Global Advisers LLC (“MP”) for its out-of-pocket expenses (in the aggregate, the “MP Expenses”) relating to this Agreement, the Notes, the Indenture, the Warrant
Agreement, the Warrants, the Registration Rights Agreement, the Security Agreement, the Prepaid Agreement, the Principal Participation Agreement and the transactions contemplated hereby and thereby, including the fees and expenses of its legal,
financial and tax advisors. 
 5.8 The Company agrees to use its best efforts to cause all of its subsidiaries, to the extent
permitted pursuant to the terms of the agreements, indentures or instruments 

  

 16 

 
existing on the date hereof to which it or its subsidiaries are bound, to guarantee obligations of the Company pursuant to its 8% Senior Notes due 2015 and
pursuant to the Notes as promptly as practicable but no later than April 15, 2008. 
 6. Conditions to the Investment.

 6.1 As a condition to the Closing Date, (i) each of the representations and warranties of the parties hereto shall be
true and correct in all material respects, (ii) the Subscribers shall have received an opinion from Heller Ehrman LLP, dated as of the Closing Date, substantially in the form attached hereto as Appendix B, (iii) the Subscribers
shall have received an opinion of Venable LLP, Maryland counsel to the Company, dated as of the Closing Date, substantially in the form attached hereto as Appendix C hereto, (iv) the board of directors of the Company shall have waived
any limitations on the ownership of Common Stock under Maryland law, and shall have waived the ownership limitations in the Company’s charter and under the Company’s Shareholder Rights Agreement for Subscribers, (v) Thornburg Mortgage
Advisory Corporation shall have waived the “change of control” put right under the amended and restated management agreement, dated as of July 1, 2004, between the Company and Thornburg Mortgage Advisory Corporation, (vi) each
Subscriber shall have delivered to the Placement Agents a “big boy” letter in the form attached hereto as Appendix D, (vii) the Subscribers shall have received an opinion of, McKee Nelson, special tax counsel to the Company, to
the effect that the Company qualifies as a REIT under Sections 856 through 860 of the Code, (viii) the Subscribers shall have received a Secretary’s Certificate of the Company and of Thornburg Mortgage Home Loans, Inc. in form and
substance reasonably satisfactory to the Subscribers, (ix) MatlinPatterson and the Company shall have terminated the Prepaid Agreement, (x) the Company shall have paid to MP by wire transfer of immediately available funds the MP Expenses
and (xi) the Company, Thornburg Mortgage Hedging Strategies, Inc., the Manager and the counterparties to the Override Agreement shall have entered into an Amendment No. 1 to the Override Agreement in the form attached hereto as Appendix
E whereby, effective upon the satisfaction of the conditions set forth therein, among other things, such counterparties have (a) consented to this Agreement, the Notes, the Indenture, the Warrant Agreement, the Warrants, the Registration
Rights Agreement, the Security Agreement, the Prepaid Agreement, the Principal Participation Agreement and the transactions contemplated hereby and thereby, (b) deemed that such transactions constitutes a “Capital Raise” as defined in
the Override Agreement and (c) waived any failure to timely comply with the provisions of the Capital Raise set forth in Section 3(a) of the Override Agreement. 
 6.2 As a condition to the Second Closing Date, (i) the Tender Offer shall have been completed on the terms described herein or as
otherwise consented to in writing by the Majority Participants (the “Tender Offer Condition”), (ii) the Shareholder Approval shall have been received by June 15, 2008 (or such later date consented to in writing by the Majority
Participants), together with the opinion of Maryland counsel delivered to the Subscribers as to the effectiveness of the increase in the authorized shares of Common Stock of the Company (the “Shareholder Condition”) and
(iii) the Principal Participation Agreement shall have been terminated (such termination, together with the satisfaction of the Shareholder Condition and the Tender Offer Condition, the “Triggering Event”). 

 

 17 

 7. Timing of the Closings. 
 7.1 Provided that the conditions set forth in Paragraph 6.1 hereto have been met at such time, the transactions contemplated in
Paragraph 1.1 hereto shall be consummated upon one business days’ notice to the Subscribers but not later than March 31, 2008, or at such other time and date as the parties hereto shall agree to in writing. 
 7.2 Provided that the Triggering Event occurs on or prior to June 30, 2008, the transactions contemplated by Paragraphs 1.2(a)
and (b) shall occur immediately and the Company shall promptly provide written notice to the Subscribers and their successors and assigns of such event, and shall otherwise consummate the transactions contemplated by Paragraphs
1.2(a) and (b). 
 7.3 Provided that the Triggering Event occurs, the transactions contemplated by Paragraph
1.3 shall occur immediately and the Company shall promptly provide written notice to the Subscribers and their successors and assigns of such event, and shall otherwise consummate the transactions contemplated by Paragraph 1.3.

 8. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to each of the other parties. 
 9. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The parties consent to the exclusive jurisdiction of the United States District Court for the Southern
District of New York in connection with any civil action concerning any controversy, dispute or claim arising out of or relating to this Agreement, or any other agreement contemplated by, or otherwise with respect to, this Agreement or the breach
hereof, unless such court would not have subject matter jurisdiction thereof, in which event the parties consent to the jurisdiction of the State of New York. The parties hereby waive and agree not to assert in any litigation concerning this
Agreement the doctrine of forum non conveniens. 
 10. This Agreement, including the exhibits and other documents
referred to herein (which form a part hereof), constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings between the parties, and all such prior agreements and
understandings are merged herein and shall not survive the execution and delivery hereof. 
 11. All notices or other
communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service or be telecopier and shall be
deemed given when so delivered by hand or, if mailed, three days after mailing (one Business Day in the case of express mail or overnight courier service), addressed as follows: 
  

			
	If to each Holder:	  	To the address of such Holder
		  	set forth on the signature page hereto
		
	If to the Company:	  	Thornburg Mortgage, Inc.
		  	150 Washington Avenue, Suite 302
		  	Santa Fe, New Mexico 87501
		  	Attn: Larry Goldstone
		  	Chief Executive Officer and President

  

 18 

			
		  	Facsimile: 505-989-8156
		
		  	with a copy to:
		
		  	Heller Ehrman LLP
		  	Attention: Sheri Fox
		  	Facsimile: 213-244-7611

 12. This Agreement shall inure to the benefit of and be binding upon the Company
and the Subscribers. Nothing in this Agreement is intended, or shall be construed, to give any other person or entity any right hereunder or by virtue hereof. This Agreement may not be assigned by the Company or the Subscribers without the prior
written consent of the other party hereto. 
 13. For the purposes hereof, (i) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms “hereof,” “herein,” and “herewith” and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, paragraph or other references are to the sections, paragraphs, or other references to this Agreement
unless otherwise specified, (iii) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified,
(iv) the word “or” shall not be exclusive and (v) provisions shall apply, when appropriate, to successive events and transactions. 
 14. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instruments to be drafted. 
 15. If any provision of this Agreement shall be or shall be held or deemed by a final order by a competent authority to be invalid,
inoperative or unenforceable, such circumstance shall not have the effect of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable, but this Agreement shall be construed as if such invalid, inoperative or
unenforceable provision had never been contained herein so as to give full force and effect to the remaining such terms and provisions. 
 16. The parties recognize that various other rights rendered under this Agreement are unique and, accordingly, the parties shall, in addition to such other remedies as may be available to them at law or in equity,
have the right to enforce the rights under this Agreement by actions for injunctive relief and specific performance. 
 17. In
connection with this Agreement, as well as all transactions and covenants contemplated by this Agreement, each party hereto agrees to execute and deliver or cause to be executed and delivered such additional documents and instruments and to perform
or cause to be performed such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions and covenants contemplated by this
Agreement. 
 18. The waiver of any breach of any term or condition of this Agreement shall not operate as a waiver of any
other breach of such term or condition or of any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof. 
  

 19 

 [Signature Page Follows] 
  

 20 

 IN WITNESS WHEREOF, the parties have caused this signature page to the Purchase Agreement to be
duly executed as of the date first written above. 
  

			
	COMPANY:
	
	THORNBURG MORTGAGE, INC.
		
	By:	 	 /s/ Larry Goldstone

	Name:	 	Larry Goldstone
	Title:	 	Chief Executive Officer and President

 Purchase Agreement 
  

 21 

 IN WITNESS WHEREOF, the parties have caused this signature page to the Purchase Agreement to be
duly executed as of the date first written above. 
  

			
	Company Name:	 	  

			
		
	By:	 	  

			
		
	Name:	 	  

			
		
	Title:	 	  

			
		
	Name to appear on certificate/note:	 	  

			
		
	Tax ID:	 	  

			
		
	Mailing address:	 	  

			
		
	Mailing address for interest payments, if any:	 	  

	
	  

	
	  

			
		
	Mailing address for notices, if any:	 	  

			
		
	Physical Delivery Address for Notes and Warrants:	 	  

	
	  

	
	  

			
		
	Total Investment Amount:	 	  

 Purchase Agreement 

 Subscriber Name:
                                 
 Schedule I * 
 CLOSING 

  

									
	 Principal
 Amount
 of Notes
	 	 Number
 of Initial
 Warrants
	 	 Purchase Price
 For Notes and
 Initial Warrants
	 	 Participation
 Percentage
	 	 Purchase
 Price for
 Participation

 Schedule II 
 ESCROW 
  

									
	 Escrow
 Amount
	 	 Number
 of Initial
 Warrants
	 	 	 	 	 	 

  

	*	If purchasing on behalf of one or more accounts, please complete Schedule III. 

 Purchase Agreement 

 Subscriber Name:
                                 
 Schedule III 
  

													
	 Account Name,
 Principal Place of
 Business and Type of
 Entity
	 	 Eligibility(1)
	 	 Principal
 Amount of
 Notes (2)
	 	 Number of
 Initial
 Warrants (2)
	 	 Purchase
 Price For
 Notes and
 Initial
 Warrants
	 	 Participation
Percentage
	 	 Purchase
 Price for
Participation

  

									
	 	 	 Account Name,
 Principal Place of
 Business and Type of
 Entity
	 	 Escrow Amount(2)
	 	 Number of Initial
 Warrants(2)
	 	 

  

	(1)	Confirm QIB status by marking the box. 

	(2)	To the extent the actual principal amount of Notes and number of Initial Warrants purchased and received or escrow amount funded by the undersigned (and/or any Account) is different
from the number subscribed for, the Company, FBR and UBS may amend this Purchase Agreement to reflect the actual principal amount of Notes and number of Initial Warrants purchased and received and escrow amount funded by the undersigned (and/or any
Account). 

 Purchase Agreement 

 Appendix A 
 TRANSFEREE’S LETTER 
 Thornburg Mortgage, Inc. 
 150 Washington Avenue, Suite 302 
 Santa Fe, New Mexico 87501 
 [Seller] 
 Dear Sirs: 
 In
connection with the undersigned’s proposed purchase of (i) senior subordinated secured notes due 2015, (the “Notes”), (ii) detachable warrants (together with any additional warrants that may be issued by the
Company for the purchase of Common Stock (the (“Underlying Common Stock”) to the Investor, the “Warrants,” and together with the Notes, the “Instruments”), to purchase shares of common
stock, par value $0.01 per share (the “Common Stock”) of Thornburg Mortgage, Inc., a Maryland corporation (the “Company”), and (iii) an investment in a participation in certain collateral of the
Company (the “Participation”; together with the Instruments, the “Investments”), from
                     (“Seller”), the undersigned confirms and agrees that: 
 1. The undersigned understands and agrees that the Investments have been offered in a transaction not involving any public offering within the United
States within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and that the Investments have not been registered under the Securities Act and, unless so registered, may not be resold except as
permitted in the following sentence. The undersigned agrees, on its own behalf and on behalf of each account for which it acquires any Investments that, if in the future it decides to offer, resell, pledge or otherwise transfer such Investments,
such Investments may be offered, resold, pledged or otherwise transferred only (a) to the Company or a subsidiary thereof, (b) pursuant to a registration statement that has been declared and is effective under the Securities Act or
(c) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of the undersigned’s property or the property of
such investor account or accounts be at all times within the undersigned’s or their control and subject to compliance with any applicable state securities laws. The undersigned understands that the registrar and transfer agent for the
Investments will not be required to accept for registration of transfer any Investments except upon presentation of evidence satisfactory to the Company and the transfer agent that, unless such Investments are already registered under the Securities
Act, an exemption to the registration requirement under the Securities Act and the rules and regulations thereunder have been complied with. The undersigned further understands that any certificates representing Investments acquired by it will bear
a legend reflecting the substance of this paragraph. The undersigned acknowledges, on its own behalf and on behalf of any investor account for which it is purchasing the Investments, that the Company reserves the right to restrict any offer, sale or
other transfer of the Investments pursuant to clause (c) above or to require the completion, execution and delivery of a letter from the transferee substantially in the form hereof and certifications and other information satisfactory to the
Company and the registrar and transfer agent and an opinion of counsel satisfactory to the Company that the proposed transfer does not require registration under the Securities Act. WITHOUT LIMITING THE FOREGOING, UNLESS AND UNTIL THE COMPANY
NOTIFIES YOU OTHERWISE IN WRITING, THE UNDERSIGNED ACKNOWLEDGES AND AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT IS PURCHASING NOTES, WARRANTS OR UNDERLYING SHARES, THAT IT CANNOT AND WILL NOT SELL OR OTHERWISE
TRANSFER ANY SECURITIES WITHOUT (I) A COMPLETED AND EXECUTED LETTER FROM THE PROSPECTIVE 

  

 A-1 

 
TRANSFEREE IN THE FORM OF THIS TRANSFEREE’S LETTER AND THE DELIVERY OF SUCH TRANSFEREE’S LETTER TO THE COMPANY AND (II) AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. 
 2. The
undersigned is a “qualified institutional buyer” as defined in Rule 144A under the Securities Act. 
 3. The undersigned has such
knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Investments, and each of the undersigned and any account for which the undersigned is acting is able to bear the
economic risk of such investment and can afford the complete loss of such investment. 
 4. The undersigned is acquiring the Investments for
investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. The undersigned was not formed for the specific purpose of acquiring the Investments. 
 5. The undersigned is acquiring the Investments for the undersigned’s own account or for one or more accounts (each of which is a QIB) as to each of
which the undersigned exercises sole investment discretion and is authorized to make the representations, and enter into the agreements, contained in this letter. 
 6. The undersigned has received such information as the undersigned deems necessary in order to make an investment decision with respect to the Investments. The undersigned acknowledges that the undersigned and the
undersigned’s advisor(s), if any, have had the right to ask questions of and receive answers from the Company and its officers and directors, and to obtain such information concerning the terms and conditions of this offering of the
Investments, as the undersigned and the undersigned’s advisor(s), if any, deem necessary to verify the accuracy of any information that the undersigned deems relevant to making an investment in the Investments. The undersigned represents and
agrees that prior to the undersigned’s agreement to purchase Investments, the undersigned and the undersigned’s advisor(s), if any, will have asked such questions, received such answers and obtained such information as the undersigned
deems necessary to verify the accuracy of any information that the undersigned deems relevant to making an investment in Investments. The undersigned became aware of this offering of the Investments and the Investments were offered to the
undersigned solely by direct contact between the undersigned and Seller. The undersigned did not become aware of, nor were the Investments offered to the undersigned by any other means, including, in each case, by any form of general solicitation or
general advertising. In making the decision to purchase the Investments, the undersigned relied solely on the information filed with the Securities and Exchange Commission or obtained by the undersigned directly from the Company as a result of any
inquiries by the undersigned or the undersigned’s advisor(s). 
 7. The undersigned is not an “affiliate” (as defined in Rule
144 under the Securities Act) of the Company or acting on behalf of an affiliate of the Company. 
 8. The undersigned is not and for so long
as it holds the Notes, Warrants or Underlying Shares will not be (i) an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to Title I of ERISA, including without limitation governmental and
non-U.S. plans, (ii) a plan described in Section 4975 of the Internal Revenue Code, (iii) an entity whose underlying assets include plan assets by reason of a plan’s investment in such entity (including but not limited to an
insurance company general account), or (iv) an entity that otherwise constitutes a “benefit plan investor” within the meaning of the DOL Regulation Section 2510.3-101 (29 C.F.R. Section 2510.3-101) (any of the
foregoing, a “Benefit Plan Investor”). 
  

 A-2 

 9. The undersigned acknowledges that the Company, Seller and others will rely on the acknowledgments,
representations and warranties contained in this letter. The undersigned agrees to promptly notify the Company and Seller if any of the acknowledgments, representations and warranties set forth herein are no longer accurate. The undersigned agrees
that each purchase by the undersigned of securities from Seller will constitute a reaffirmation of the acknowledgments, representations and warranties herein (as modified by any such notice) as of the time of such purchase. 
 10. The Company and Seller are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. 
  

 A-3 

 THE UNDERSIGNED UNDERSTANDS, WITHOUT LIMITATION, THAT TRANSFERS OF THE SECURITIES ARE SUBJECT TO THE REQUIREMENT THAT
A TRANSFEREE’S LETTER AND OPINION LETTER BE DELIVERED TO THE COMPANY, AS PROVIDED ABOVE IN SECTION 1. 
 THIS LETTER SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER STATE. 
  

					
	Date:                     ,         
	 	Very truly yours,
			
		 	By:	 	  

		 		 	Print Name:
		 		 	Company Name:
		 		 	Title:
		 		 	Address:

  

 A-4 

 Appendix B 
 FORM OF OPINION OF HELLER EHRMAN 
 HELLER EHRMAN TO PROVIDE DRAFT OPINION OF COUNSEL UNDER SEPARATE
COVER 
  

 B-1 

 Appendix C 
 [FORM OF OPINION OF OUTSIDE MARYLAND COUNSEL TO THE COMPANY] 
  

 C-1 

 Appendix D 
 FORM OF “BIG BOY” LETTER 
  

 D-1 

 Appendix E 
 FORM OF AMENDMENT NO. 1 TO THE OVERRIDE AGREEMENT 
  

 E-1

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