Document:

Prepared and filed by St Ives Financial

EXHIBIT 4.1

Citicorp Mortgage Securities, Inc.

  Depositor

CitiMortgage, Inc.

Servicer and Master Servicer

[Trustee]

  Trustee

Citibank, N.A.

Paying Agent, Certificate Registrar

and Authenticating Agent

Pooling
and Servicing Agreement

REMIC Pass-Through
Certificate Trust

Series 200[*]-[*]

[month] 1, 200[*]

 

	Contents	 	 	 
	 	 	 	 
	Parties	 	 	9
	 	 	 	 
	Background	 	 	9
	 	 	 	 
	Agreement	 	 	9
	 	 	 	 
	Series
    Terms	9
	 	 	 	 
	12	The
    series 	9
	 	12.1	Establishment 	9
	 	12.2	General
    terms for classes 	10
	 	12.3	Target
    rate 	11
	 	12.4	Ratio-stripped
    IO and PO classes 	11
	 	12.5	Loss
    limits 	11
	 	12.6	Denominations 	11
	 	12.7	The
    mortgage loans 	12
	 	12.8	Right
    to repurchase 	12
	 	12.9	Book-entry
    and definitive certificates	12
	 	12.10	Voting
    interests	12
	 	12.11	Cash
    deposit	12
	 	 	 	 
	13	Principal
    balances	12
	 	13.1	Class
    balances 	12
	 	13.2	Certificate
    balances 	12
	 	 	 	 
	14	Allocations 	13
	 	14.1	Interest
    allocations 	13
	 	14.2	Principal
    allocations 	13
	 	14.3	Unscheduled
    principal 	14
	 	14.4	Maintenance
    of subordination 	15
	 	 	 	 
	15	Allocations
    among the senior classes	15
	 	15.1	Order
    of allocation among senior target-rate classes	15
	 	15.2	NAS classes	15
	 	15.3	PAC and TAC classes	16
	 	 	 	 
	16	Distributions	16
	 	16.1	Types
    of distributions 	16

 

	 	16.2	Accrual
    and accrual directed classes 	16
	 	16.3	Distribution
    priorities 	16
	 	16.4	Distributions
    to certificate holders 	17
	 	16.5	Final
         distribution on the residual certificates 	17
	 	16.6	Wire
    transfer eligibility 	17
	 	 	 	 
	17	Adjustments
    to class balances	17
	 	 	 
	18	Loss
    recoveries	18
	 	 	 
	19	Additional
    structuring features	19
	 	 	 
	20	LIBOR
    classes	19
	 	 	 
	21	Composite
    and component classes	20
	 	 	 
	22	Multiple-pool
    series	20
	 	22.1	Adjustment
         of subordinated component class principal balances 	21
	 	22.2	Maintenance
    of subordination 	22
	 	22.3	Distribution
    shortfalls 	22
	 	22.4	Undersubordination 	23
	 	22.5	Undercollateralization 	24
	 	22.6	Non-subordinated
    interest shortfalls 	25
	 	 	 	 
	23	Super
    senior classes	25
	 	 	 
	24	Retail
    classes	 25
	 	 	 
	25	Insured
    classes	25
	 	 	 
	26	Advance
    account 	25
	 	 	 
	27	REMIC
    provisions 	26
	 	27.1	Constituent
    REMICs 	26
	 	27.2	The class P and class L regular interests	26
	 	27.3	Distributions
         to class P and class L regular interests 	27
	 	27.4	REMIC
    accounts and distributions 	28
	 	27.5	Tax
    matters person 	29

2

 

	28	Notice addresses 	30
	 	 	 
	29	Initial
    Depositories	30
	 	 
	Standard
    Terms	31
	 	 	 	 
	1	Definitions
    and usages 	31
	 	1.1	Defined
    terms 	31
	 	1.2	Usages 	47
	 	1.3	Calculations respecting mortgage loans	47
	 	 	 	 
	2	Transfer
         of mortgage loans and issuance of certificates;
    repurchase and substitution 	48
	 	2.1	Transfer
    of mortgage loans 	48
	 	2.2	CMSI’s
    representations and warranties 	51
	 	2.3	Repurchase or substitution
    of mortgage loans 	53
	 	 	 	 
	3	Servicing 	55
	 	3.1	CitiMortgage as servicer
         and master servicer	55
	 	3.2	Collections	57
	 	3.3	Certificate and other
    accounts	57
	 	3.4	Prepayment interest
    shortfalls	59
	 	3.5	Advances	60
	 	3.6	Distributions	62
	 	3.7	Third party servicing 	65
	 	3.8	Permitted withdrawals
    from certificate account 	65
	 	3.9	Expenses 	67
	 	3.10	Primary mortgage
    insurance 	67
	 	3.11	Hazard insurance 	67
	 	3.12	Realization on defaulted mortgage loans	68
	 	3.13	Release of mortgage
    files 	70
	 	3.14	Reports to certificate holders and others	71
	 	3.15	Tax returns and reports 	73
	 	3.16	Application of buydown
    funds 	73

	 	3.17	Assumption and modification agreements	74
	 	3.18	Refinancings; curtailments 	74
	 	3.19	Investment accounts 	75
	 	3.20	Paying Agent and Certificate Registrar	78
	 	3.21	Servicer compliance
         statement and attestation report 	79
	 	 	 	 
	4	CitiMortgage	80
	 	4.1	Liability of CitiMortgage
    and others 	80
	 	4.2	Assumption
    of CitiMortgage’s obligations by affiliate 	80
	 	4.3	Maintenance of office
    or agency 	81
	 	4.4	Servicer not to resign 	81
	 	4.5	Delegation of duties 	81
	 	4.6	Errors and omissions
    insurance 	81
	 	 	 	 
	5	The certificates	81
	 	5.1	The certificates	81
	 	5.2	Registration of transfer
         and exchange of certificates	83
	 	5.3	Mutilated, destroyed,
         lost or stolen certificates	86
	 	5.4	Persons deemed owners	86
	 	5.5	Access
    to list of certificate holders’ names and addresses	87
	 	5.6	Definitive certificates	87
	 	5.7	Notices to Clearing
    Agency	87
	 	 	 	 
	6	[Reserved]	 88
	 	 	 
	7	Default 	88
	 	7.1	Events of Default 	88
	 	7.2	Trustee to act; appointment of successor	89
	 	 	 	 
	8	The Trustee	 89
	 	8.1	Duties 	89
	 	8.2	Liability 	90

 

3

 

	 	8.3	Trustee
    not liable for certificates or mortgage loans 	91
	 	8.4	Trustee may own certificates 	91
	 	8.5	Trustee’s
    fees and expenses 	91
	 	8.6	Eligibility requirements
    for Trustee 	92
	 	8.7	Resignation or removal
    of Trustee 	93
	 	8.8	Successor trustee 	93
	 	8.9	Merger or consolidation
    of Trustee 	94
	 	8.10	Appointment of co-trustee
         or separate trustee 	94
	 	8.11	Tax returns 	95
	 	8.12	Appointment of authenticating
    agent 	95
	 	 	 	 
	9	Termination 	97
	 	9.1	Termination upon
         repurchase by CMSI or liquidation of all mortgage loans 	97
	 	 	 	 
	10	General provisions	99
	 	10.1	Amendments 	99
	 	10.2	Recordation of Agreement 	100
	 	10.3	Limitation on rights of certificate holders	100
	 	10.4	Governing law 	101
	 	10.5	Maintenance of REMICs 	101
	 	10.6	Notices 	101
	 	10.7	Severability of provisions 	101
	 	10.8	Assignment 	101
	 	10.9	Certificates nonassessable and fully paid	101
	 	 	 	 
	11	Depositories	101
	 	11.1	Depositories 	101
	 	 	 	 
	Signatures and acknowledgments	1
	 	 	 	 
	CitiMortgage,
    Inc.	 2
	 	 	 	 
	Appendix
    1: Transferee’s Affidavit
	 	 	 	 
	Exhibit A: Forms of certificates A-1

	Exhibit B: Mortgage Loan Schedules B-1, [and B-TP]
	 
	Exhibit C: Form of
         Mortgage Document Custodial Agreement C-1
	 
	Exhibit D: Form of Purchaser Letter D-1
	 
	Exhibit E: Form of ERISA Letter E-1

 

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	Defined
    Terms	 	 
	 	 	 
	accrual
        class, 16	 	class
        B-x, 9
	accrual
        directed class, 16	 	class
        B-x certificates,
        9
	accrual
        termination day, 31	 	class
        IA-IO, 9
	advance
        account, 25	 	class
        IA-IO certificates, 9
	advance
        account advances, 25	 	class
        IA-PO, 9
	advance
        account available advance amount, 25	 	class
        IA-PO certificates, 9
	advance
        account depository, 25	 	class
        IA-x, 9
	advance
        account depository agreement, 26	 	class
        IA-x certificates,
        9
	advance
        account funding date, 26	 	class
        IIA-IO, 9
	advance
        account trigger date, 26	 	class
        IIA-IO certificates, 9
	affiliate,
        31	 	class
        IIA-PO, 9
	affiliated
        mortgage loans, 55	 	class
        IIA-PO certificates, 9
	affiliated
        Paying Agent advances, 61	 	class
        IIA-x, 9
	affiliated
        servicing fee rate, 31	 	class
        IIA-x certificates,
        9
	Agent,
        84	 	class
        L regular interest, 26
	aggregate
        outstanding advances, 31	 	class
        LR certificates, 9
	allocated
        loss, 18	 	class
        P regular interests, 26
	alternative
        certificate account, 102	 	class
        percentage, 32
	alternative
        custodial accounts for P&I, 102	 	class
        PR certificates, 9
	alternative
        escrow account, 102	 	class
        R certificates, 9
	alternative
        servicing account, 102	 	classes
        A-x through
        A-y,
        33
	applicable
        constituent REMIC, 26	 	classes
        B-x through
        B-y,
        33
	appraisal,
        31	 	Clearing
        Agency, 33
	Authenticating
        Agent, 9, 95	 	Clearing
        Agency Participant, 33
	Authorized
        Officer, 31	 	closing
        date, 10
	Bankruptcy
        Code, 31	 	CMSI,
        9
	bankruptcy
        coverage termination date, 31	 	collected
        servicing fee, 33
	bankruptcy
        loss, 31	 	component
        classes, 20
	bankruptcy
        loss limit, 31	 	composite
        class, 20
	beneficial
        owner, 32	 	constituent REMIC,
        26
	book-entry
        certificates, 12	 	corporate
        trust office, 30
	business
        day, 32	 	cumulative
        loss test, 14
	buydown
        account, 32	 	current
        interest allocation, 13
	buydown
        funds, 32	 	custodial
        accounts for P&I, 58
	buydown
        mortgage loan, 32	 	custodial
        investment account, 76
	buydown
        subsidy agreement, 32	 	cut-off
        date, 9
	certificate
        account, 57	 	debt
        service reduction, 33
	certificate
        holder, 32	 	deficient
        valuation, 33
	certificate
        insurance policy, 25	 	definitive
        certificates, 12
	certificate
        rate, 10	 	delegated
        servicer, 33
	Certificate
        Register, 83	 	delinquency
        test, 14
	Certificate
        Registrar, 10	 	denominations,
        11
	certificates,
        9	 	Depository,
        33
	Citibank
        banking affiliate, 32	 	determination
        date, 34
	CitiMortgage,
        9	 	discount
        loan, 34
	class,
        32	 	disqualified
        organization, 83

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	distribution
        account, 62	 	last
        scheduled distribution day, 10
	distribution
        day, 10	 	latest
        possible maturity date, 10
	Distribution
        day statement, 64	 	LIBOR,
        20
	distribution
        report, 71	 	LIBOR accrual
        period, 19
	Eligible
        Account, 34	 	LIBOR classes,
        19
	Eligible
        Investments, 76	 	liquidated
        loan, 36
	eligible
        substitute mortgage loan, 54	 	liquidated
        loan loss, 36
	ERISA,
        34	 	liquidation
        expenses, 36
	ERISA Prohibited
        holder, 84	 	liquidation
        proceeds, 36
	ERISA Restricted
        Certificates, 34	 	loss
        recovery, 37
	escrow
        accounts, 58	 	lower-tier REMIC,
        26
	Events
        of Default, 88	 	lower–tier
        REMIC account, 28
	Exchange
        Act, 34	 	master
        servicer, 55
	extraordinary
        event, 34	 	master
        servicing fee, 37
	FDIC, 34	 	master
        servicing fee rate, 37
	FHLMC,
        34	 	material
        breach, 53
	Fitch,
        34	 	MERS,
        49
	fraud loss,
        35	 	month,
        37
	fraud loss
        limit, 34	 	monthly
        affiliated servicing fee rate, 31
	Furnished
        Document, 90	 	monthly
        master servicing fee rate, 37
	GIC, 35	 	monthly
        pass-through rate, 40
	GNMA, 35	 	monthly
        third party servicing fee rate, 46
	group,
        20, 35	 	Moody’s,
        37
	group target-rate
        class percentage, 35	 	mortgage,
        37
	Guide,
        35	 	Mortgage
        Document Custodial Agreement, 48
	high-cost
        mortgage loan, 35	 	Mortgage
        Document Custodian, 48
	holder,
        35	 	mortgage
        documents, 37
	hypothetical
        mortgage loan, 35	 	mortgage
        file, 37
	impaired
        subordination level, 15	 	mortgage
        loan, 37
	independent
        accountants, 35	 	mortgage
        loan schedule, 37
	Indirect
        Participant, 35	 	mortgage
        note, 37
	initial,
        35	 	Mortgage
        Note Custodian, 37
	initial
        bankruptcy loss limit, 11	 	mortgage
        note rate, 37
	initial
        fraud loss amount, 11	 	mortgaged
        property, 37
	initial
        special hazard loss limit, 11	 	mortgagor,
        37
	insurance
        premium, 25	 	multiple-pool
        series, 37
	insurance
        proceeds, 35	 	NAS class,
        15
	insured
        class, 25	 	net
        liquidation proceeds, 37
	Insurer,
        25	 	net
        Paying Agent advances, 38
	interest
        allocation, 13	 	net REO proceeds,
        38
	interest
        allocation carryforward, 13	 	net
        voluntary advances, 38
	interest
        distribution, 16	 	non-accelerated
        senior class, 15
	interest
        portion of a liquidated loan loss, 36	 	nonrecoverable
        advance, 38
	interest
        portion of a realized loss, 43	 	non-subordinated
        losses, 38
	Internal
        Revenue Code, 35	 	non-supported
        prepayment interest shortfall, 38
	investment
        account, 36	 	notional
        balance, 12
	Investment
        Income, 36	 	officer’s
        certificate, 38
	IO class,
        36	 	opinion
        of counsel, 38
	IO loan,
        36	 	order
        of seniority, 38
	IO strip,
        36	 	order
        of subordination, 38

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	original
        value, 38	 	Relieved
        interest, 61
	Originator,
        39	 	REMIC,
        43
	outstanding,
        39	 	REMIC Provisions,
        43
	overcollateralized,
        24	 	remittance
        delinquency, 60
	PAC class,
        16	 	remittances
        on affiliated mortgage loans, 57
	Participant,
        40	 	remittances
        on third party loans, 59
	pass-through
        rate, 40	 	REO loan,
        43
	Paying
        Agent, 10	 	REO proceeds,
        43
	Paying
        Agent failure, 26	 	REO property,
        43
	Paying
        Agent failure advance, 26	 	Required
        Amount of Certificates, 43
	percentage
        interest, 40	 	reserve
        fund, 25
	person,
        40	 	residual
        certificates, 9
	planned
        amortization class, 16	 	residual
        distribution, 16
	PO class,
        40	 	residual
        interest, 26
	PO loan,
        40	 	Responsible
        Officer, 43
	PO strip,
        40	 	retail
        class, 25
	pool, 40	 	retail
        reserve fund, 25
	pool distribution
        amount, 40	 	S&P,
        44
	pool I,
        20	 	scheduled
        monthly loan payment, 44
	pool II,
        20	 	scheduled
        principal balance, 44
	pooling
        REMIC, 26	 	scheduled
        principal payments, 44
	pooling
        REMIC account, 28	 	scheduled
        servicing fee, 44
	predatory
        lending law, 41	 	Securities
        Act, 44
	Predecessor
        Certificates, 41	 	senior
        classes, 9
	premium
        loan, 41	 	senior
        to, 44
	prepayment
        interest shortfall, 41	 	Series
        Terms, 9
	primary
        mortgage insurance certificate, 41	 	servicing
        account advances, 60
	principal
        allocation, 13	 	servicing
        accounts, 58
	principal
        balance, 12	 	Servicing
        Officer, 44
	principal
        distribution, 16	 	Similar
        Law, 85
	principal
        portion of a liquidated loan loss, 36	 	single
        certificate, 44
	principal
        portion of a realized loss, 43	 	single-pool
        series, 45
	principal
        prepayment, 41	 	special
        hazard loss, 45
	private
        certificates, 41	 	special
        hazard loss limit, 45
	Proceeding,
        41	 	special
        hazard percentage, 45
	property
        protection expenses, 41	 	special
        serviced mortgage loans, 55
	Purchaser,
        10	 	special
        servicer, 55
	Qualified
        GIC, 41	 	special
        servicing agreement, 55
	Qualified
        Nominee, 42	 	Standard
        Terms, 9
	rating
        agency, 10	 	startup
        day, 10
	ratio-stripped
        IO class, 42	 	subordinate
        to, 45
	ratio-stripped
        IO loan, 42	 	subordinated
        classes, 9
	ratio-stripped
        PO class, 43	 	subordinated
        losses, 45
	ratio-stripped
        PO loan, 43	 	subordination
        depletion date, 45
	realized
        losses, 43	 	subordination
        level, 15
	record
        date, 43	 	substitution
        adjustment amount, 54
	reduction
        amount, 23	 	substitution
        day, 54
	regular
        interests, 26	 	super
        senior class, 25
	reimbursement,
        16	 	super
        senior support class, 25
	relevant
        servicer, 43	 	TAC class,
        16

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	target
        rate, 11	 	Trust,
        9
	targeted
        amortization class, 16	 	Trust
        Fund, 46
	target-rate
        class, 11	 	Trustee,
        9
	target-rate
        class percentage, 45	 	U.S.
        person, 46
	target-rate
        loan, 45	 	uncommitted
        cash, 46
	target-rate
        strip, 46	 	uncommitted
        cash advances, 60
	tax matters
        person, 29	 	undercollateralized,
        24
	third party
        mortgage loans, 55	 	undersubordination,
        23
	third party
        Paying Agent advance, 61	 	Underwriter,
        10
	third party
        servicer, 55	 	unscheduled
        principal payments, 46
	third party
        servicer advance, 60	 	upper-tier REMIC,
        26
	third party
        servicing agreement, 55	 	upper-tier REMIC account,
        28
	third party
        servicing fee, 46	 	voluntary
        advance, 61
	third party
        servicing fee rate, 46	 	voting
        interest, 12
	Transfer
        Instrument, 46	 	 

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POOLING AND SERVICING AGREEMENT

[Month] 1, 200[*]

	PARTIES

	•	Citicorp
          Mortgage Securities, Inc.,
    a Delaware corporation (CMSI)
	 	 
	•	CitiMortgage,
    Inc., a New York corporation (CitiMortgage)  

	 	 
	•	 [***], [a
            national banking association,] in its individual capacity and as
    Trustee

	 	 
	•	Citibank,
            N.A., a national banking association, in
            its individual capacity and as Paying Agent, Certificate Registrar,
    and Authenticating Agent 

BACKGROUND

In the
regular course of their business, affiliates of CMSI originate and acquire mortgage loans. CMSI, CitiMortgage and the Trustee wish to set forth the terms and conditions under which the Trust will acquire the mortgage loans listed in exhibit B, certificates will be issued to holders evidencing ownership interests in the Trust Fund, and CitiMortgage will manage and service the mortgage loans.

  AGREEMENT

  This
  Pooling and Servicing Agreement (this agreement) consists of sections
  1 through 11 (the Standard Terms) and sections 12 and following (the Series
  Terms). The Standard Terms follow the Series Terms. If there is a conflict
  or inconsistency between the Standard Terms and the Series Terms, the Series
  Terms will prevail. 

  SERIES TERMS 

12 The series

  12.1 Establishment

A
common law trust is established under New York law as of [Month] 1, 200[*] (the cut-off
date,
to be called the “Citicorp Mortgage Securities, Inc. REMIC Pass-Through

  Trust Series 200[*]-[*]” (the Trust). CMSI is
  the settlor of the Trust, and [***] is the trustee (in such capacity, the Trustee).

      The
    Trust will issue a series of certificates designated as “Citicorp Mortgage
  Securities, Inc. REMIC Pass-Through
  Certificates, Series 200[*]-[*]”). The certificates will consist of and
  be further designated as

       (i)   [**] senior classes of certificates
individually designated as

  •    for
  each integer x,
  from 1 through [*], inclusive, “Senior Class IA-x Certificates” (the class
  IA-x certificates or class IA-x); 

  •    for each integer x,
from 1 through [*], inclusive, “Senior Class IIA-x Certificates” (the class IIA-x certificates or class IIA-x);

  •    “Senior Class IA-PO Certificates” (the class IA-PO certificates or class IA-PO).

  •    “Senior Class IIA-PO Certificates” (the class IIA-PO certificates or class IIA-PO).

  •     “Senior Class IA-IO Certificates” (the class IA-IO certificates or class IA-IO);

  •    “Senior Class IIA-IO Certificates” (the class IIA-IO certificates or class IIA-IO); and

       (ii)   six subordinated
        classes of certificates designated, for each integer x,
      from 1 through 6, inclusive, as “Subordinated Class B-x Certificates” (the class
      B-x certificates or class B-x) (together with the senior classes
      of certificates, the certificates);
      and

         (iii)   [three] residual interests
individually
designated as

  •    “Class
  PR Certificates” (the class PR certificates,

•    “Class LR Certificates” (the class LR certificates and

•    [“Class
  R Certificates” (the class R certificates.]

      The
class PR, LR [and R] certificates together constitute the residual certificates.

     The
  Trustee hereby appoints Citibank, N.A. as Authenticating Agent.

      CMSI,
        with the approval of the Trustee, hereby appoints the institutional trust
de-

 

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partment of Citibank, N.A. as Paying Agent and Certificate Registrar.
     The Mortgage Document Custodian is Citibank (West), FSB.
     The Underwriter and the Purchaser for the series is [Underwriter].
     The certificates will be first executed, authenticated and delivered on [closing date] (the closing date). The startup day will be same as closing date].
     The 25th day of each month (or if the 25th is not a business day, the next succeeding business day), beginning in [month/year], will be a distribution day. The last scheduled distribution day for each class is specified in the following table. The latest
possible maturity

 date of each class for purposes of section 860G(a)(1) of the Internal Revenue Code and Treasury Regulations section 1.860G-1(a)(4)(iii) will be December 25, 2034.

     The nationally recognized statistical rating agencies for
the senior classes are [S&P/Moody’/ Fitch], and the rating agency for
classes B-1 through B-5 is [***] 

12.2   General
terms
for classes

The classes will have the following initial principal balances, certificate rates, and for the subordinated classes, initial target-rate class percentages and initial subordination levels: 

	   class	initial
       principal (or

       notional)
    balance	 	certificate rate

    (per annum)	 	initial
       target-rate

       class
    percentage

    (1)	 	initial
    subordination

    level (2)	 	last
    scheduled

    distribution day	 
	

	   IA-1	 $[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-2 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-3 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-4 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-5 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-6 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-7 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-8 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-PO 	$[***]	 	0% (3)	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IA-IO 	$[***]	 	(5)	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	             	(notional)(4)	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	   IIA-1 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IIA-2 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IIA-3 	$[***]	 	[**]%	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IIA-PO	 $[***]	 	0%
    (3)	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	   IIA-IO 	$[***]	 	(6)	 	 	 	N/A	 	 	 	N/A	 	[Month] 25, 20[**]	 
	             	(notional)(4)	 	 	 	 	 	 	 	 	 	 	 	 	 
	
    

	   B-1 (composite) 	$[***]	 	Blended	 	[***]% 	 	 	 	[***]%	 	 	 	[Month] 25, 20[**]	 
	      IB-1 (component)	 $[***]	 	[**]%	 	[***]% 	 	 	 	 	 	N/A	 	N/A	 
	      IIB-1 (component) 	$[***]	 	[**]%	 	[***]% 	 	 	 	 	 	N/A	 	N/A	 
	

	   B-2 (composite) 	$[***]	 	Blended	 	[***]% 	 	 	 	[***]%	 	 	 	[Month] 25, 20[**]	 
	      IB-2 (component) 	$[***]	 	[**]%	 	[***]% 	 	 	 	 	 	N/A	 	N/A	 
	      IIB-2 (component)	 $[***]	 	[**]%	 	[***]% 	 	 	 	 	 	N/A	 	N/A	 
	
    

	   B-3 (composite) 	$[***]	 	Blended	 	[***]% 	 	 	 	[***]%	 	 	 	[Month] 25, 20[**]	 
	      IB-3 (component) 	$[***]	 	[**]%	 	[***]% 	 	 	 	 	 	N/A	 	N/A	 
	      IIB-3 (component) 	$[***]	 	[**]%	 	[***]% 	 	 	 	 	 	N/A	 	N/A	 
	
    

	   B-4 (composite) 	$[***]	 	Blended	 	[***]% 	 	 	 	[***]%	 	 	 	[Month] 25, 20[**]	 
	      IB-4 (component) 	$[***]	 	[**]%	 	[***]% 	 	 	 	 	 	N/A	 	N/A	 

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	   class 	initial
    principal (or notional) balance	 	certificaterate
    (per annum)	 	initial
    target-rate class percentage 

    (1)	 	initial
    subordination

    level (2)	 	last scheduled distribution
    day 	 
	

	      IIB-4 (component) 	$[***]	 	[**]%	 	[***]%	 	 	 	 	 	N/A	 	N/A	 
	

	   B-5 (composite) 	$[***]	 	Blended	 	[***]%	 	 	 	[***]%	 	 	 	[Month] 25, 20[**]	 
	      IB-5 (component) 	$[***]	 	[**]%	 	[***]%	 	 	 	 	 	N/A	 	N/A	 
	      IIB-5 (component) 	$[***]	 	[**]%	 	[***]%	 	 	 	 	 	N/A	 	N/A	 
	

	   B-6 (composite) 	$[***]	 	Blended	 	[***]%	 	 	 	 	 	N/A	 	[Month] 25, 20[**]	 
	      IB-6 (component) 	$[***]	 	[**]%	 	[***]%	 	 	 	 	 	N/A	 	N/A	 
	      IIB-6 (component) 	$[***]	 	[**]%	 	[***]%	 	 	 	 	 	N/A	 	N/A	 

	 	 	 	 	 	 
	
	 	 	 	 
	(1)	The initial target-rate class percentages are:	 	 	 	 
	 	senior target-rate classes:	[***]%	 	 	 
	 	group I senior target-rate classes:	[***]%	 	 	 
	 	group II senior target-rate classes:	[***]%	 	 	 
	 	subordinated classes:	[***]%	 	 	 
	(2)	The initial subordination level for the senior classes is [***]%.
	(3)	Classes
       IA-PO and IIA-PO are ratio stripped PO classes and do not bear interest.
	(4)	Classes
       IA-IO and IIA-IO are ratio stripped IO classes and have no principal balance.
	(5)	The
       certificate rate for class IA-IO for each month will equal the weighted
       average pass-through-rate of the premium loans on the last day of that
       month, minus the targetrate. The initial certificate rate for class IA-IO
    is expected to be 0.[***]% per annum.
	(6)	The
       certificate rate for class IIA-IO for each month will equal the weighted
       average pass-through rate of the premium loans on the last day of that
       month, minus the target-rate. The initial certificate rate for class IIA-IO
    is expected to be 0.[***] % per annum.

 

12.3    Target
      rate

The per annum target
rates for
the pools are

      pool I:      [***]%

      pool II:     [***]%

      Each class other than
any ratio-stripped
IO or ratio-stripped PO class is a target-rate
class.

12.4   Ratio-stripped
IO and PO classes
Each of classes IA-IO and IIA-IO is a ratio-stripped IO class. The class IA-IO and IIA-IO certificates are private certificates.
     Each of classes IA-PO and IIA-PO is a ratio-stripped PO class.

12.5   Loss limits

[There is no initial
special hazard loss limit.

      There
is no initial
bankruptcy loss limit.

      There
is no initial
fraud loss amount.]

12.6   Denominations

The denominations of

 •   the
senior class certificates and the class B-1 through B-3 certificates are initial
principal (or, for any IO classes, notional) balances of $1,000 and any whole
dollar amount above $1,000,

•   the
class B-4, B-5 and B-6 certificates are $100,000 initial principal balance and
any larger integral multiple of $1,000, and

•   the residual certificates are percentage interests summing
to 100%. 

      If the initial principal or notional balance of
a class is not a permitted denomination for a certificate of that class, one
certificate of the class may be issued in
a different denomination. 

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12.7   The
mortgage
loans

The mortgage loans in the Trust Fund are identified on the mortgage loan schedule. The mortgage loans in

•   pool
I will consist primarily of [***]-year fixed-rate conventional one- to four-family
mortgage loans, and

•   pool
II will consist primarily of [***]year fixed-rate conventional one- to four-family
mortgage loans. 

12.8   Right
to repurchase

CMSI
can not exercise its right to repurchase the mortgage loans pursuant to section
9.1(a)
of the Standard Terms unless

•   the
aggregate scheduled principal balance of the mortgage loans is less than $[***]
at the time of repurchase, and 

•   if there is an insured class outstanding and the exercise
of such repurchase right would result in a draw under any certificate insurance
policy, the Insurer
has previously consented. 

12.9    Book-entry
and definitive certificates

All senior class certificates (other than certificates of a ratio-stripped IO class that are private certificates) and the class B-1, B-2 and B-3 certificates will be issued as book-entry certificates. Book-entry certificates for a class or a group of classes will be represented by one or more certificates issued in the name of a depository. Any ratio-stripped IO class certificates that are private certificates, the class B-4, B-5 and B-6 certificates and the residual certificates will be issued in fully registered certificated form (definitive certificates). 

12.10   Voting
interests

Each IO class will have a 1% voting interest.
The remaining voting interest will be allocated to the other classes in proportion
to their principal balances. The voting interest of any class will be allocated
among the 

certificates
of the class in proportion to the certificates’ principal or notional balances,
, except that an Insurer will be entitled to the voting interest of an insured
class for as long as the insured class is outstanding and the Insurer is not
in default.. 

12.11    Cash
deposit

No cash will be deposited into the certificate account on the closing date. 

13   Principal balances 

13.1   Class
balances

Each class that is not an IO class will have a principal balance, and each IO class will have a notional balance. The principal or notional balance of multiple classes (e.g., the senior classes) is the aggregate of the principal or notional balances of those classes.

     The
initial principal or notional balance for each class is stated in “The series – General terms for classes” above. The principal balance of each class that is not an IO class will be adjusted on each distribution day, as described in “Adjustments to class balances” below.

     The notional balance of a ratio-stripped IO class
for any day after the initial distribution day will equal the aggregate of the
principal balances for that day of the hypothetical mortgage loans in its IO
strip.

     The
notional balance of each IO class that is not a ratio-stripped IO class will
be adjusted on each distribution day as described in “The series – General terms for classes” above. 

13.2 Certificate balances

The sum of the initial principal or notional balances stated on the certificates of each class will equal the initial principal or notional balance of the class.

     Except
as may be provided in “Retail classes” below, the principal or notional
balance of each certificate will equal its pro- 

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portional share, based on the initial principal or notional balances stated on
    the certificates of the class, of the principal balance or notional balance
    of the class to which the certificate belongs. 

14   Allocations 

14.1   Interest allocations

Beginning
on the cut-off date, each class (other than any PO class) will accrue interest
for
each month on its principal or notional balance at the certificate rate for the
class stated in “The series – General terms for classes” above.
In calculating accrued interest,

•   a
class’s principal or notional balance on the last day of a month will be considered to be the class’s
principal or notional balance on every day of the month, and

•   interest for a month will be calculated at 1/12 of the
certificate rate, regardless of the number of days in the month. 

      Example:
        Suppose that on January 1, a class has a principal balance of $1,020,000
        and a certificate rate of 6% per annum. On the January distribution day,
        the class’s principal balance is reduced by $20,000. As a result,
        the principal balance of the class on January 31 is $1 million. Then
        the interest accrued for the class during January (which is paid on the
        February distribution day) is 1/12 of 6% of $1 million = $5,000; that
        the principal balance of the class was greater than $1 million before
        the January distribution day, and that January has 31 days, are irrelevant.

     A
class’s interest allocation for a distribution day is the sum of

•   the
class’s current interest allocation for
the distribution day, consisting of the class’s accrued interest for the
preceding month minus the
class’s proportional share, based on accrued interest, of (1) any non-supported
prepayment interest shortfall, and (2) the interest portion of any non- 

subordinated losses, for the preceding month,

 •   plus any
excess of the class’s interest allocation for the preceding distribution
day over the interest distributed to the class on that preceding distribution
day (the interest allocation carryforward from
that distribution day). (If the class is an insured class, for purposes of calculating
allocations and distributions to the class, the interest allocation carryforward
from a distribution day will be reduced by any payments to the class from the
Insurer relating to the interest allocation carryforward, but will not be so
reduced for purposes of effecting the Insurer’s subrogation rights relative
to the interest portion of any insured payment.) 

14.2   Principal allocations

The principal allocation for a distribution day is:

     (a) for any ratio-stripped PO class, the sum for that distribution day of scheduled and unscheduled principal payments on its PO strip for that distribution day.

     (b) for the senior target-rate classes collectively, the sum for that distribution day of

 •   the target-rate class percentage for the senior target-rate classes of scheduled principal payments on the target-rate strip, and

 •   all
unscheduled principal payments on the target-rate strip allocated to the senior
target-rate classes pursuant to “ – Unscheduled principal” below.

     The
principal allocation for the senior target-rate classes will be allocated among
the individual senior target-rate classes pursuant to “Allocations among the senior classes” below.

     (c) for each subordinated class,

 •   the
class’s target-rate class percentage of scheduled principal payments on
the target-rate strip for that distribution day,

 •   plus the
class’s proportional share, based on the principal balances of the subordi- 

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nated classes, of unscheduled principal payments on the target-rate strip for that distribution day that are not allocated to the senior target-rate classes pursuant to the preceding paragraph (b),

 •   plus or minus any amounts that are reallocated to or from the class pursuant to “Maintenance of subordination” below.

14.3   Unscheduled principal

For each distribution day, the following percentage of unscheduled principal payments on the target-rate strip received during the preceding month will be allocated to the senior target-rate classes:

 •   100% if the target-rate class percentage for all the senior target-rate classes on the distribution day exceeds the initial target-rate class percentage for all the senior target-rate classes.

•   otherwise, and subject to the following proviso, the sum of (1) the target-rate class percentage for the senior target-rate classes, plus (2) the following percentage of the target-rate class percentage for the subordinated classes: 

	 	 	 
	distribution
    days	 	percentage
	

	1	 	through	60	 	100	%	 
	61	 	through	72	 	70	%	 
	73	 	through	84	 	60	%	 
	85	 	through	96	 	40	%	 
	97	 	through	108	 	20	%	 
	 	 	109 and after	 	 	0	%	 

provided, that

•   if
the distribution day is one on which the percentage shown in the preceding table
is to be reduced – that is, the 61st, 73rd, 85th 97th or 109th distribution day – and
either the cumulative loss test or the delinquency test described below are not
satisfied, then the percentage will not be reduced on that distribution day or
on any subsequent distribution day until both the cumulative loss and delinquency
tests are passed, and 

 •   if the cumulative loss test is not satisfied for a distribution day, the percentage of unscheduled principal payments allocated to the senior target-rate classes will be the greater of the percentage of unscheduled principal payments allocated to the senior target-rate classes for that distribution day calculated in accordance with the preceding rules of this section, or the percentage of unscheduled principal payments allocated to the senior target-rate classes for the preceding distribution day.

     The cumulative loss test is satisfied for a distribution day if cumulative realized losses through that distribution day do not exceed the following percentages of the initial principal balance of the subordinated classes:

	distribution
    days	 	percentage
         of 

        initial
         principal

        balance
    of

    subordinated

    classes
	

	61	 	through	72	 	30	%	 
	73	 	through	84	 	35	%	 
	85	 	through	96	 	40	%	 
	97	 	through	108	 	45	%	 
	 	 	109 and after	 	 	50	%	 

     The delinquency test is satisfied for a distribution day if CitiMortgage certifies to the Trustee that the average of the aggregate scheduled principal balance of mortgage loans delinquent 60 days or more (including, for this purpose, mortgage loans in foreclosure and real estate owned by the Trust as a result of mortgagor default) for that distribution day and the preceding five distribution days is either (1) less than 50% of the average of the principal balance of the subordinated classes for those distribution days, or (2) less than 2% of the average scheduled principal balance of all of the mortgage loans for those distribution days.

     If there  are composite and component subordinated classes, only the composite

 

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subordinated classes are considered in the cumulative loss and delinquency tests. 

14.4   Maintenance
of subordination 

The subordination
level for
a class (other than a ratio-stripped IO class) is the sum of the class percentages
of all classes that are subordinate to that class. If a class’s subordination
level on the day before a distribution day is less than the class’s initial
subordination level, then the class will have an impaired
subordination level on
that distribution day.

     If
a subordinated class has an impaired subordination level on a distribution day,
then all principal originally allocated to the subordinated classes will be allocated
to the most senior of the subordinated classes with an impaired subordination
level and to those subordinated classes that are senior to the impaired class,
in proportion to their principal balances, up to those classes’ principal balances, and any remainder will be allocated to the remaining subordinated classes, in order of seniority, up to those classes’ principal
balances.

     Example: Suppose that on a distribution day, (a) each of classes B-1 through B-6 had a principal balance on the preceding day of $1,000, (b) the aggregate principal allocation to the subordinated classes is $3,120, and (c) class B-2 has an impaired subordination level. Then on that distribution day

     (1)
      the entire amount allocated to the subordinated classes will be allocated
      to classes B-1 and B-2, in proportion to their principal balances, up to
  their principal balances, and

     (2)
      $1,000 of the remaining $1,120 will be allocated to class B-3, reducing
  its principal balance to zero, and 

     (3)
  the remaining $120 will be allocated to class B-4. 

15   Allocations
        among
the senior classes

15.1   Order of allocation
among senior target-rate classes

On each distribution day before the subordination depletion date, the aggregate scheduled and unscheduled principal allocated to the senior target-rate classes of a group will be allocated to the individual senior target-rate classes of that group as follows: 

     Group I: Principal allocated to the group I senior target-rate classes from the pool I target-rate strip will be allocated sequentially as follows:

     [Order of
  allocation rules]

     Beginning
    on the subordination depletion date, the priorities stated above will cease
    to be in effect, and the principal allocation for
      the senior target-rate classes of each group will be allocated to the senior
      target-rate classes of the group in proportion to their principal balances
      on the preceding day. 

  15.2   NAS classes 

  Classes [***] and [***] are non-accelerated senior, or NAS classes.

      For the first 60 distribution days, the principal
allocation for each NAS class will be zero.

     For distribution day 61 and after, the principal
allocation for each NAS class will equal the following percentage of its proportionate
share, based on principal balances of the group I target-rate classes, of scheduled
and unscheduled principal payments on the pool I target-rate strip allocated
to the group I target-rate classes for that distribution day: 

 

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	distribution day	percentage
	
	

	61 – 72	30%
	73 – 84	40%
	85 – 96	60%
	97 – 108	80%
	109 and after	100%

15.3   PAC
and TAC classes 

There are no planned amortization (or PAC) classes.

     There are no targeted amortization (or TAC) classes.

16   Distributions 

16.1   Types of distributions

Each distribution will be either an interest distribution, a principal distribution, a reimbursement, or a residual distribution,
as described in “– Distribution priorities” below. 

16.2   Accrual and
accrual directed classes

Class [***] is an accrual class.
Class [***]’s accrual directed class is class [***].

     On
each distribution day before its accrual termination day, the interest distribution
for class [accrual class] will be redirected to class [accrual directed class]
until its principal balance is reduced to zero.

     If
on a distribution day before an accrual class’s accrual termination day, the accrual class’s
interest distribution exceeds the aggregate principal balances of its accrual
directed classes, then

•      only
that portion of the accrual class’s interest distribution that equals the
aggregate principal balances of its accrual directed classes will be redirected
to the accrual directed classes, and

•      the
excess will be distributed as principal to the accrual class itself.

16.3   Distribution
priorities

Subject
to section 18, “loss recoveries,” on each distribution day, the pool
distribution

amount will be first distributed
    to any Insurer to pay any insurance premium, and then to the outstanding
    classes in the following priority (and, if there are any insured classes,
    the insured payment and amounts withdrawn from the reserve fund will be applied
    to make payments to the insured class certificates as provided in “Insured classes” below):

     (1) To each senior class, first,
its current interest allocation for that distribution day, and second its
interest allocation carryfor-ward from the preceding distribution day, except that
an accrual class’s interest distributions may be redirected as described
in “– Accrual
and accrual directed classes” above. Distributions of current allocations
among the senior classes will be in proportion to current interest allocations
for, and distributions of interest allocation carryfor-wards will be in proportion
to interest allocation carryforwards to, that distribution day.

     (2)
(a) To any ratio-stripped PO class, principal up to its principal allocation
for that distribution day, and (b) to the senior target-rate classes, principal
up to their aggregate principal allocation for that distribution day, to be distributed
to the senior target-rate classes in the priorities described in “Allocations among the senior classes –Order of allocation among senior target-rate classes” above.

     (3)
To each subordinated class, in order of seniority, first,
interest up to its interest allocation for that distribution day, and second,
principal up to its principal allocation for that distribution day, except that
a subordinated class’s principal distribution may be used to reimburse a
ratio-stripped PO class, as described in the following paragraph.

     (4)
Principal distributed to the subordinated classes under the preceding paragraph
will be used to reimburse a ratio-

 

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stripped
    PO class up to the amount of (a) any realized subordinated losses previously
    allocated to the ratio-stripped PO class, and (b) any reduction to the ratio-stripped
    PO class’s principal balance to reflect the excess of (i) the aggregate principal allocations to the ratio-stripped PO class over (ii) the aggregate principal distributions to the ratio-stripped classes, as described in “Adjustments to class balances” below, to the extent that such losses and reductions were not previously reimbursed under this paragraph (4) or “Loss recoveries” below.
    Such reimbursements will be taken from distributions to the subordinated
  classes in order of subordination.

       (5)
  To each class, in order of seniority, a reimbursement of any reduction to the
  classes’ principal balances to reflect the excess of (a) the aggregate principal allocations to the classes over (b) the aggregate principal distributions to the classes, as described in “Adjustments to class balances” below,
  to the extent such reductions were not previously reimbursed. Classes with
  equal seniority will share in the reimbursement in proportion to such unreimbursed
  reductions. 

     (6) To the residual certificates, a residual distribution
of the remaining pool distribution amount.

     A
  class that is no longer outstanding can not receive a distribution.

     Notwithstanding anything to the contrary in this
agreement, no distribution will be made to a subordinated class on a distribution
day if on that distribution day the principal balance of a more senior class
would be reduced by any part of the principal portion of a realized subordinated
loss. 

16.4   Distributions to certificate holders 

On each distribution day, distributions to a class will be distributed to the holders of the certificates of the class in proportion to the

principal or notional balances of their certificates. 

16.5&nbsp;&nbsp;&nbsp;Final distribution on the residual certificates

Upon termination
of the Trust in accordance with section 9.1, “Termination upon repurchase
by CMSI or
liquidation of all mortgage loans,” any class PR certificates, and if there
are no class PR certificates, the LR certificates will receive all amounts remaining
in the certificate account and in any retail reserve fund after all required
distributions on the certificates, and any required distributions to any Insurer,
have been made. 

16.6   Wire transfer
eligibility

The minimum number of single certificates eligible for wire transfer on each distribution day, for the certificates, is 1,000 (representing a $1,000,000 initial principal balance or initial notional balance) and, for the residual certificates, a 100% percentage interest. 

17   Adjustments
to class balances

On each distribution day, the principal balance of each class that is not an IO class will be adjusted, in the following order, as follows:

      (1) The
    principal balance of any ratio-stripped PO class will be reduced by realized
  losses on its PO strip for the preceding month.

     (2) The aggregate principal balance of the target-rate
classes will be reduced by the principal portion of realized non-subordinated
losses on the target-rate strip for the preceding month. The reduction will first
be allocated between the subordinated classes, collectively, and the senior target-rate
classes, collectively, in proportion to aggregate principal balances. The reduction
for the subordinated classes will be allo-

 

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cated to the
individual subordinated classes in proportion to their principal balances. The
reduction for the senior target-rate classes will be allocated to the individual
senior target-rate classes in proportion to their principal balances, except that
the principal balance of an accrual class will be deemed to be the lesser of
its principal balance or its initial principal balance.

     (3) To the extent that on the distribution day
an interest distribution to an accrual class is redirected to an accrual directed
class, the principal balance of the accrual class will be increased.

     (4)
The principal balance of each class will be reduced by its principal distributions
for that distribution day, including

	(a)	 principal
        distributions to an accrual directed class that are redirected from interest
      distributions to an accrual class, and
	(b)	       principal
distributions to a subordinated class, even if part or all of those principal
distributions are, pursuant to section 16.3(4), used to reimburse a ratio-stripped
PO class.

However, any
portion of an accrual class’s interest distribution that, on the distribution
day before the class’s accrual termination day, is distributed as principal
to the accrual class itself, will neither increase nor decrease the class’s
principal balance.

     (5) The aggregate principal balance of the target-rate
classes will be reduced by the principal portion of realized subordinated losses
on the target-rate strip for the preceding month. The reductions will be applied
first to the subordinated classes in order of subordination, in each case until
the principal balance of the class is reduced to zero. If the realized subordinated
losses exceed the principal balance of the subordinated classes, the principal
balance of the senior target-rate classes will be reduced by the

amount of the
excess. The excess will be allocated among the senior target-rate classes in
proportion to their principal balances, except that
for this allocation, the principal balance of an accrual class will be deemed
to be the lesser of its principal balance or its initial principal balance.

     (6)
The principal balance of any ratio-stripped PO class will be reduced by the excess
of (a) the class’s principal allocation over (b) the class’s principal
distribution for that distribution day.

     (7) The principal balance of each target-rate class
will be reduced, in order of subordination, in an aggregate amount equal to the
excess of (a) the aggregate principal allocations to the target-rate classes
over (b) the aggregate principal distributions to the target-rate classes. Classes
of equal seniority will share in such reduction in proportion to the amounts
by which the principal allocation to each such class exceeded its principal distribution.

     For purposes of the preceding paragraphs (1) through
(7), 

•      the
principal portion of a debt service reduction will not be considered a realized
loss, and 

•      references
to the class principal balances in any paragraph mean the principal balances
after the adjustments required by the preceding numbered paragraphs. 

     Where the principal balance of a class is reduced
due to a realized loss under the preceding paragraphs (1), (2) or (5), the loss
will be said to be allocated to the class (an allocated loss) to the extent of the reduction.

18   Loss
recoveries

The
following rules for loss recoveries supersede any conflicting rules in “Distributions” or “Adjustments to class balances” above. 

 

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      On
each distribution day, the amount of any loss recovery for the preceding month
will be distributed as follows:

     First,
to each senior class to the extent of and in proportion to its aggregate realized
losses for that and all preceding months that were not previously reimbursed
under this paragraph or, for a ratio-stripped PO class, paragraph 4 of “Distributions — Distribution
priorities” above.

     Second,
to the target-rate classes in the same manner as a distribution of unscheduled
principal.

     Distributions
made pursuant to paragraph First above
will not result in any adjustments to class balances, but distributions made
pursuant to paragraph Second above
will result in the normal adjustments to the class balances described in paragraph
4 of “Adjustments to class balances” above.

     The principal balances of the subordinated classes
will be increased in order of seniority to the extent of their aggregate realized
losses for that and all preceding months that were not previously reimbursed
under this paragraph, up to an aggregate amount for all subordinated classes
equal to the loss recovery less the amounts distributed to the senior classes
under paragraph First above.

     
Example:
In May, there is a $1,000 of loss recovery. On the June distribution day, prior
to any distributions or adjustments, the senior classes have aggregate unreimbursed
losses of $100 and the subordinated classes have aggregate unreimbursed losses
of $700. Then on the June distribution day,

     1    $100 of the loss recovery will
be distributed to the senior classes to reimburse them for previously allocated
losses, but the distribution will not reduce the principal balances of the senior
classes.

     2    The remaining $900 of the loss recovery will be distributed to the target-rate classes in

the
same manner as unscheduled principal, and class balances will be reduced by the
amount of the distributions.

     3
The principal balances of the subordinated classes will be increased by the remaining
$900. (The increase may be less than $900 if any of the subordinated classes
are no longer outstanding.)

     If expenses on the liquidated loans for any
month exceed the amounts recovered on the liquidated loans for the month, the
excess will be treated as a realized loss on the mortgage loans.

19   Additional
structuring features

The preceding provisions for allocations and distributions, and for adjustments
to class balances, are subject to the following sections on LIBOR classes, composite
and component classes, multiple-pool series, retail classes, and insured classes. 

20   LIBOR classes

Classes [***] and [***] are LIBOR classes.

     Each LIBOR class
will have a monthly LIBOR accrual
period from
the day of the month indicated in the footnotes to the table in “The Series – General
terms for classes” above
through the day preceding the first day of the next LIBOR accrual
period. The first LIBOR accrual
period for a class will be the latest possible LIBOR accrual
period that ends before the first distribution day.

     Example: The LIBOR accrual period for a LIBOR
class begins on the 25th day of the month, and the first distribution day is
February 25, 200x. Then the first LIBOR accrual period for the class begins on
January 25, 200x and runs through February 24, 200x, the second LIBOR accrual
period begins on February 25, 200x and runs through March 24, 200x, and so forth.

     A LIBOR class will not accrue interest for
any period before its first LIBOR accrual period. The interest rate for each LIBOR class
is

 

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stated in “The series – General terms for classes” above.  

     
CitiMortgage will determine LIBOR for each LIBOR accrual period (after the first LIBOR accrual period) on the second business day before the beginning of each LIBOR accrual period as follows:

•    LIBOR will be the arithmetic mean (rounded upward, if necessary, to the nearest multiple of 1/16 of 1%) of the offered rates for deposits in U.S. Dollars having a maturity of one month as of approximately 
11AM (London time) on the determination day, as such offered rates appear on Teler-ate page 3750 (as defined by reference to the International Swap Dealers Association, Inc. 1991 ISDA definitions). 

•   If no rate appears on Telerate page 3750 on that day, CitiMortgage will determine LIBOR on the basis of the rates on that day at approximately 11AM, London time, at which deposits in U.S. Dollars with a maturity of one month in a principal amount of not less than U.S. $1 million and representative for a single transaction in that market at that time, are offered to prime banks in the London interbank market for at least four major banks in the London interbank market selected by CitiMortgage. CitiMortgage will request the principal London office of each such bank to provide a quotation of its rate. If at least two such quotations are provided, LIBOR will be the arithmetic mean of those quotations.

•    If fewer than two quotations are provided, LIBOR will be the arithmetic mean of the rates quoted at approximately 11AM, New York time, on that day by three major banks in New York City selected by Citi-Mortgage for loans in U.S. Dollars to leading European banks having a maturity of one month in a principal amount of not less than U.S. $1 million that is representative for a single transaction in such market at 

such time. If the banks selected by Citi-Mortgage are not quoting such rates, LIBOR will be LIBOR for the preceding LIBOR accrual period. 

21   Composite and
component classes

The composite classes of
the series, and each composite class’s component classes are
shown in the table in “The series – General terms for classes” above.  

     
Each composite class is comprised of two or more component classes. Certificates are only issued for composite classes. Component classes can not be severed from their composite classes, and can not be separately transferred. Component classes are, however, considered classes for all purposes of the preceding sections on allocations and distributions except that all distributions to the component classes of a composite class will become distributions to the composite class. A composite class is not considered a class for purposes of allocations and distributions, but instead receives all the distributions made to any of its component classes. Voting is by composite, not component, classes.  

     
In
a multiple-pool series, each subordinated class is a composite class formed of
two or more component classes. Unless otherwise specified, references to a “subordinated class” mean
the composite class. 

22   Multiple-pool series 

This is a multiple-pool series. The mortgage loans of this series are divided into two pools. Pool I consists of the mortgage loans described in exhibit B-1, and Pool II consists of the mortgage loans described in exhibit B-2.  

     
Each class of this series (other than certain composite classes) belongs to a group of classes related to a specific pool. The designation of each class in a group bears the

 

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roman numeral prefix of its related pool, and the group is referred to by that prefix.

         Example:
          Classes related to pool I bear the prefix “I,” as IA-1, IB-1, etc., and are referred to collectively as “group
          I.” 
      

         With exceptions described below, the classes of each group are treated like a separate series, with allocations to the classes of the group being based solely on payments on the related pool. Any ratio-stripping will be done on a pool basis, so that there will be separate PO, IO and target-rate strips for each pool, with the related group having its own target-rate, and ratio-stripped IO and PO, classes.
    

         The
        subordinated classes of each group will be component classes. A ratio-stripped
        IO or PO class of a group will only be a component class if so designated
      in “The series – General terms for classes” above. 

22.1   Adjustment of subordinated component class principal
balances 

On each distribution day,
the aggregate amount of any

•   realized
  subordinated losses on the mortgage loans in a pool, or

•   excess
    of the aggregate principal allocations to the related group’s target-rate classes over the aggregate principal distributions to those classes,

         that, in accordance with “Adjustments to class balances” above, would reduce the principal balances of the group’s
    subordinated component classes in order of subordination if the pool and
    the related groups were considered a separate series, will instead reduce

    •   the
    principal balances of the subordinated composite classes in order of subordination,
    and

    •   the
    aggregate principal balance of the group’s subordinated component classes,
  by that amount. 

      Such
      reduction in the aggregate principal balance of a group’s subordinated
      component classes will result in adjustments to the principal balance of
      the subordinated component classes of each group so the ratio of the principal
      balances of the component classes from each group will be the same for
      each subordinated composite class. 
  

       Example:
        Assume subordinated composite classes B-1 through B-6, each with a principal
        balance of $1,000. There are two groups, I and II, and the aggregate
        principal balance of each group’s subordinated component classes
        is $3,000. Then for each subordinated composite class, the ratio of the
        principal balance of its group I component class to the principal balance
        of its group II component class must be 1 to 1. Consequently, both the
        group I and the group II component class of each subordinated composite
        class will have a principal balance of $500. 
  

       Now assume a $750 subordinated loss in pool I. Then

  •   the principal balance of class B-6 will be reduced by $750, to $250, which will reduce the aggregate principal balance of the subordinated composite classes to $5,250,

  •   the aggregate principal balance of the group I subordinated component classes will be reduced by $750, to $2,250, while the aggregate principal balance of the group II subordinated component classes will remain at $3,000;

  •   the ratio of the aggregate principal balance of the group I subordinated component classes to the aggregate principal balance of the group II subordinated component classes will be $2,250 to $3,000, or 3 to 4;

  •   for
  classes B-1 through B-5, the principal balance of the composite class will
  remain at $1,000, but the principal balance of its group I component class
  will be approximately $428.57, and the principal balance of its group II component
  class will be approximately $571.43 (a ratio of 3 to 4); and 
  

 

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  •   class
  B-6’s principal balance of $250 will be comprised of a group I component
  class with a principal balance of approximately $107.14, and a group II component
  class with a principal balance of approximately $142.86 (a ratio of 3 to 4). 
  

       If subordinated losses on a mortgage pool for a distribution day exceed the aggregate principal balance of the subordinated component classes of the related group, the aggregate principal balance of such component classes will be reduced to zero, and the aggregate principal balance of the subordinated component classes of the other groups will be reduced by the excess. 

       Example:
        Suppose that in the series in the preceding example, the group I subordinated
        component classes and the group II subordinated component classes each
        have an aggregate initial principal balance of $3,000, and that each
        subordinated composite class, B-1 through B-6 has a principal balance
        of $1,000. Now suppose that there are $4,000 of subordinated losses on
        the mortgage loans in pool II’s target-rate strip, but no losses on the mortgage loans in pool I’s
        target-rate strip. Then the entire $4,000 of losses will be allocated
        to the subordinated classes, reducing the principal balance of classes
        B-3 through B-6 to zero. Classes B-1 and B-2 will each retain a principal
        balance of $1,000, comprised of a group I component class with a principal
        balance of $1,000 and a group II component class with a principal balance
        of $0. The principal balance of the subordinated group I component classes
        will thus be reduced by $1,000 even though there are no losses on the
        pool I target-rate strip. 
  

       Subject
      to “– Undercollateralization” below, if realized subordinated losses on a distribution day exceed the aggregate principal balance of the subordinated classes, the aggregate principal balance of the senior classes in each group will be reduced by the group’s
      proportional share of the excess losses, based on the proportions of all
      the
  

losses for that distribution day in the mortgage loan pools. 
  

       Example: Assume that for a distribution day, there are $2,250 of realized subordinated losses in pool I and $4,500 of realized subordinated losses in pool II. The aggregate principal balance of the subordinated classes is only $6,000. Then the principal balance of the subordinated classes will be reduced to $0, and the remaining $750 of losses will reduce the aggregate principal balance of the senior classes of group I by $250 (or 1/3 of $750), and will reduce the aggregate principal balance of the senior classes of group II by $500 (or 2/3 of $750). The principal balances of the component classes of the subordinated classes are irrelevant for these purposes. 
  

22.2   Maintenance of subordination 

Impairment of subordination
for subordinated classes of a multiple-pool series will be determined based on
composite, not component, classes. In determining whether a composite class has
an impaired subordination level, the principal balance of the composite class
will equal the sum of the principal balances of its component classes. If a subordinated
composite class has an impaired subordination level, then principal will be allocated
among the subordinated composite classes
pursuant to “Allocations
– Maintenance
of subordination” above, and, for purposes of adjusting principal balances,
will be further allocated to the component classes in proportion to their principal
balances. 

22.3   Distribution shortfalls 

If on a distribution day,
payments on the mortgage loans in the target-rate strip for a pool are not sufficient
to permit payments of any insurance premium due to an Insurer, and all interest
and principal allocated to the senior target-rate classes of the related group,
then the pool may receive insurance premium, interest and principal

 

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  distributions from payments on the mortgage loans in another pool once any insurance premium due is paid to the Insurer, and full interest and principal distributions are made to the senior target-rate classes of the group related to the other pool. 
  

       Example:
        Suppose that there are two groups of classes and that on a distribution
        day, cash available for distribution to the group I senior-target rate
        classes from payments on the pool I mortgage loans is $1,000 less than
        the aggregate interest and principal allocations to group I’s senior target-rate classes, while cash available for distribution to the group II senior-target rate classes from payments on the pool II mortgage loans exceeds the aggregate interest and principal allocations to group II’s
        senior target-rate classes by $1,500. Then $1,000 of the extra $1,500
        available to group II will be used to make full interest and principal
        distributions to the group I senior target-rate classes, and only the
        remaining $500 will be distributed to the group II subordinated component
        classes. 
  

       If there are several pools for which mortgage loan payments do not provide enough cash for full distributions to the senior target-rate classes and any Insurer, the related groups will receive cash from other pools in proportion to the aggregate amount by which any insurance premium due to an Insurer, and interest and principal distributions would otherwise fall short of interest and principal allocations. If there are several pools where mortgage loan payments provide cash in excess of the amount required for full distributions, they will provide cash to the senior target-rate classes, and any Insurer, of those groups related to the other pools in proportion to the amounts of the excess. 

22.4   Undersubordination 

If on a distribution day
before the subordination depletion date, the principal balances of all the senior
target-rate classes of any

group (but not the principal balances of all the group’s subordinated component
classes) have been reduced to zero, and there is undersubordination (as defined
below), then on that distribution day, before any distributions are
made,

•   the pool distribution amount of the group will be reduced by an amount (the reduction amount)
equal to the lesser of (1) unscheduled principal payments on the related pool’s target-rate strip received by the Trust during the preceding month and (2) the excess, determined without regard to this section “– Undersubordination,” of
the pool distribution amount over the amount required to be used to reimburse
any ratio-stripped PO classes,

•   the
principal allocation to each class in the group will be reduced by the class’s
proportionate share, based on principal balances, of the reduction amount,

•   the
pool distribution amount of each group whose senior target-rate classes have
not been reduced to zero will be increased by a proportionate share of the reduction
amount based on the aggregate principal balance of the senior target-rate classes
of each such group, and

•   the
aggregate principal allocation for the senior target-rate classes of each group
whose senior target-rate classes have not been reduced to zero will be increased
by the portion of the reduction amount added to its pool distribution amount,
which increased aggregate allocation will be further allocated among the senior
target-rate classes in accordance with the rules in “Allocations among the senior target-rate classes” above. 

     There is undersubordination on a distribution day if either

•   the subordination level of the senior classes (without regard to group) on that distribution day is less than 200% of the ini-

 

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  tial subordination level
  of the senior classes, or

  •   the
  aggregate scheduled principal balance of the mortgage loans in any pool that
  are delinquent 60 days or more (including for this purpose mortgage loans in
  foreclosure and real estate owned by the Trust as a result of Mortgagor default),
  averaged over the last six months, is 50% or more of the principal balance
  of the related group’s subordinated component classes. 

22.5   Undercollateralization 

Because losses on a mortgage
loan may be allocated in part to the subordinated component classes of a different
group, the scheduled principal
balance of a pool’s target-rate strip could differ from the aggregate principal
balance of the related group’s target-rate classes. If the scheduled principal
balance of a pool’s target-rate strip is less than the aggregate principal
balance of the related group’s
target-rate classes, the group will be undercollateralized by the amount
of the difference; conversely, if the scheduled principal balance of a pool’s
targetrate strip is more than the aggregate principal balance of the related
group’s
target-rate classes, the group will be overcollat-eralized by the amount
of the difference.

     If a group is undercollateralized, the normal distribution
rules will be adjusted as follows:

     (1) To the extent that scheduled interest payments
on the target-rate strip of a pool related to an overcollateralized group exceed
the aggregate interest allocations to that groups’ targetrate classes, plus
any insurance premium due to an Insurer, that excess, up to the amount of any
interest allocation carryforwards that the undercollat-eralized group would otherwise
experience on that distribution day and the insurance premium, will be deducted
from the pool distribution amount for the overcollateral-

ized group and added to the pool distribution amounts for the undercollateralized
group. If there is more than one such un-dercollateralized group, or more than
one overcollateralized group, then (a) amounts will be deducted from the pool
distribution amounts for the groups that are overcollateralized in proportion
to such excess interest payments, up to the aggregate amount of such interest
allocation carryforwards and the insurance premium for the under-collateralized
groups, and (b) amounts will be added to the pool distribution amounts of the
undercollateralized groups in proportion to the amount of such interest allocation
carryforwards and insurance premium. 
  

       (2)
      Before the subordination depletion date, if one or more groups is undercollat-eralized
      and the principal balance of each of the groups’ subordinated component
      classes has been reduced to zero, then (a) all amounts that (after required
      reimbursements to any ratio-stripped PO classes) would otherwise be distributed
      as principal to the subordinated component classes of the other groups,
      up to the aggregate amount by which such undercollateralized groups are
      undercollateralized, will, in proportion to the aggregate principal balance
      of the subordinated component classes of such other groups, be deducted
      from the pool distribution amount and the principal allocations to the
      subordinated component classes of such other groups, and (b) such amount
      will be added to the pool distribution amounts and the principal allocations
      of the target-rate classes of such undercol-lateralized groups, in proportion
      to the amount by which such groups are undercollateralized.   

         (3) After the subordination depletion date, if a group is undercollateralized, then

  •   once
    a group’s target-rate classes are all reduced to zero, principal payments
    on the

 

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related pool’s target-rate
strip will be added to the pool distribution amount and to the principal allocations
of the target-rate classes of the undercollateralized groups, in proportion to
the amount by which they are undercollateralized, and 

•     realized
losses on the target-rate strips of the pools related to the overcollateralized
groups will, up to the amount by which the group is overcollateralized, not reduce
the principal balances of the target-rate classes of those groups, but will instead
reduce the principal balances of the target-rate classes of the undercollateralized
groups, in proportion to the amount by which they are undercollateralized, and
in accordance with “Adjustments to class balances” above. If there
is more than one overcollateralized group, the losses that will not reduce principal
balance will be in proportion to the amount by which each group is overcollateralized.
If there is more than one undercol-lateralized group, the aggregate reductions
in principal balances for each group will be in proportion to the amounts by
which such groups are undercollateralized. 

22.6 Non-subordinated
interest shortfalls

Prior to the subordination depletion date, reductions to interest allocations
due to (a) interest shortfalls due to the federal Servicemembers Civil Relief
Act or any comparable state laws and (b) non-supported prepayment interest shortfalls
will be allocated pro-rata to all the classes of all the groups, regardless of
the pools in which the shortfalls originate.

     From and after the subordination depletion date,

•     interest shortfalls due to the federal Servicemembers
Civil Relief Act or any comparable state laws will be separately calculated for
each pool, and will be allocated solely to the classes of the related group,
and

•     the
    compensating cap and non-supported prepayment interest shortfalls will be
    separately calculated for each pool, and non-supported prepayment interest
    shortfalls for a pool will be allocated solely to the classes of the related
  group.

  

  23   Super
  senior classes

  Class IA-7
    is a super
    senior class,
    and class IA-6 is its super
  senior support class.

     After
  the subordination depletion date, any loss (other than a non-subordinated loss)
    on a group’s target-rate strip that would otherwise reduce the principal
    balance of a super senior class on a principal distribution day will instead
    reduce the principal balance of its super senior support class on that principal
    distribution day, until the principal balance of the super senior support
  class is reduced to zero.     
  

     
  For these
  purposes, the principal balance of a super senior support class on a distribution
  day will be determined after giving effect to the adjustments described in
  paragraphs (2) through (5) of section 17, “Adjustments to class balances,“ for
  that distribution day (which include the reductions for non-subordinated losses,
  principal distributions and realized subordinated losses), but before the adjustments
  required by this section 23.

  

    24   Retail
  classes

  [There are no retail
  classes.
  There is no retail
  reserve fund.]

  

  25   Insured classes

  [There are
  no insured
  classes.
  There is no Insurer, certificate
  insurance policy, insurance
  premium,
  or reserve
  fund.]

  

  26   Advance account

  There is/are
  no advance
  account, advance
  account advances, advance
  account available advance amount, advance
  account depository, ad-

  

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vance account depository agreement, advance account funding date, or advance account trigger date, Paying Agent failure, or Paying Agent failure advance. 

27   REMIC provisions

27.1  Constituent REMICs 

(a) CitiMortgage and the Trustee will make the appropriate elections to treat
    the Trust Fund, and the affairs of the Trust Fund will be conducted so as
    to qualify the Trust Fund, for federal income tax purposes as [three] separate constituent
    REMICs – the pooling REMIC, the lower-tier REMIC, [and
    the upper-tier REMIC]. The pooling REMIC will be the applicable
    constituent REMIC for purposes of section 3.19. 

      The assets of
the pooling REMIC will
consist of the mortgage loans, such amounts as may from time to time be held
in the certificate account, any insurance policies relating to a mortgage loan,
and property that secured a mortgage loan and that has been acquired by foreclosure
or deed in lieu of foreclosure and all proceeds thereof. Classes IA-IO, IIA-IO,
IA-PO and IIA-PO and the class P regular interests described below, are designated
as the regular
interests in
the pooling REMIC within
the meaning of Internal Revenue Code Section 860G(a)(1). Class PR is designated
as the residual
interest in
the pooling REMIC within
the meaning of Internal Revenue Code Section 860G(a)(2).

     The assets of the lower-tier REMIC will
consist of the class P regular interests described below, the Trustee’s
rights under any certificate insurance policy and reserve fund, any retail reserve
fund, and any assets in the lower-tier REMIC account described below. Classes
[***], [***], IIA-1 through IIA-3, and B-1 through B-6, and the class L regular
interests described below, are designated as the regular interests in the lower-

 tier REMIC.
Class LR is designated as the residual interest in the lower-tier REMIC.

     [The assets of the upper-tier REMIC will consist
of the class L regular interests described below, and any assets in the upper-tier REMIC account
described below. Classes [***] and [***] are designated as the regular interests
in the upper-tier REMIC. Class R is designated as the residual interest in the
upper-tier REMIC. 

27.2  The
class P and class L regular

interests 

There are [four] uncertificated class P regular interests,
each designated as “Citicorp Mortgage Securities, Inc. REMIC Pass-Through
Certificates, Series 200[*]-[*],” and further individually designated as
a 

•     “PI-M
  regular interest,”

•     “PI-Q
  regular interest,”

•     “PII-M regular interest,” and

•     “ PII-Q
  regular interest.”

      There is [one] uncertificated class L regular interest,
  designated as “Citicorp Mortgage Securities, Inc. REMIC Pass-Through
  Certificates, Series 200[*]-[*],” and further designated as the “LI-[*] regular interest.” The
  initial principal or notional balances and certificate rates of the class P
  and class L regular interests are: 

	Regular	 	 initial
    principal (or	 	certificate rate
	interest	 notional)
    balance	(per annum)
	
	
	
	
	

	PI-M 	 	$[***]	 	[*]%
	PI-Q 	 	$[***]	 	[*]%
	PII-M	 	 $[***]	 	[*]%
	PII-Q	 	 $[***]	 	[*]%
	LI-[*] 	 	$[***]	 	[*]%

      The
    Trustee acknowledges that it is holding the class P regular interests as
    assets of the lower-tier REMIC and the class L regular interests as assets
    of the upper-tier REMIC. 

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27.3   Distributions to class P and class L 

regular interests

On each distribution day, each regular interest will receive a principal distribution, or allocation of the principal portion of realized losses, equal in the aggregate to the principal distribution, or allocation of the principal portion of realized losses, for that day on, 

•     for
the PI-M and PI-Q regular interests, the pool I target-rate strip;

•     for the PII-M and PII-Q regular interests,
  the pool II target-rate strip, and 

•     for the class LI-[*] regular interest,
  class IA-[*].

     Recoveries of previously allocated realized losses
of principal will be allocated to the class P and any class L regular interests
in the same manner as realized losses were allocated to them. 

     For each distribution date, the PI-M and PII-M
regular interests will receive distributions of principal, or allocation of the
principal portion of realized losses on their related target-rate strips, so
as to keep their principal balances (computed to $.000001) equal to 0.01% of
the aggregate principal balance of the subordinated component classes of the
related group. However, if the ratio of the principal balance of either of the
PI-M or PII-M regular interests to the principal balance of the other of such
regular interests is not the same as the ratio of the aggregate principal balance
of any of component classes IB-1 through IB-6 and IIB-1 through IIB-6 to the
other of such aggregate principal balances, respectively, then the least amount
of principal will be distributed to the PI-M, or PII-M regular interest, as applicable,
so that the ratio of the principal balance of each of the PI-M and PII-M regular
interests to the principal balance of the other of such regular interests will
be the same as the ratio of the aggregate principal

balance of each
of component classes IB-1 through IB-6 and IIB-1 through IIB-6 to the other of
such aggregate principal balances, respectively. Also, for such distribution
day, the PI-Q and PII-Q regular interests will receive the balance of the principal
distribution, and allocation of the principal portion of realized losses on their
related target-rate strips.

     As
of any date, the principal balance of the class LI-[*] regular interest will
equal the principal balance of class IA-[*].

     On each distribution day, each class P and class
L regular interest will receive an interest distribution at its certificate rate,
and interest shortfalls and the interest portion of realized losses for the related
target-rate strip will be allocated to such regular interest in the same proportion
as interest is allocated to them, provided that 

•     (a) prior to the subordination depletion
date, non-supported prepayment interest shortfalls will be allocated pro-rata
to all the class P regular interests, regardless of the pool in which the shortfalls
originate, and (b) from and after the subordination depletion date, non-supported
prepayment interest shortfalls for pool I will be allocated solely to the PI-M
and PI-Q regular interests, and non-supported prepayment interest shortfalls
for pool II will be allocated solely to the PII-M and PII-Q regular interests,
and

•     (a) prior to the subordination depletion
date, each class L regular interest will be allocated its proportional share,
based on accrued interest of all the lower-tier REMIC regular interests, of non-supported
prepayment interest shortfalls, regardless of the pool in which the shortfalls
originate, and (b) from and after the subordination depletion date, the class
LI-[*] regular interest will be allocated its proportional share of non-supported
prepayment interest short-

 

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falls originating in pool I, based on accrued interest allocated to classes IA-[*]
    and IA-[*] as a proportion of accrued interest allocated to the group I target-rate
    classes.

         No interest shortfall amount or unpaid
    interest shortfall on any class P or class L regular interest will bear interest.

     The certificate rate for the class L regular interests
is comprised of, for the class LI-[*] regular interest, [***]%per annum payable
on the class IA-[*] certificates, and [***]% per annum payable on the class IA-[*]
certificates. 

27.4   REMIC accounts
and distributions

CitiMortgage, the Trustee and the Paying Agent will 

•     perform their respective duties in a manner
consistent with the REMIC provisions of the Internal Revenue Code, and will not
knowingly take or fail to take any action that would adversely affect the continuing
treatment of the Trust Fund as segregated asset pools and the treatment of each
such segregated asset pool as a REMIC or would result in the imposition of a
tax on the Trust Fund, or any constituent REMIC, and 

•     carry out the covenants in this agreement
and the elections and reporting required in section 3.15 on behalf of each constituent REMIC,
including maintaining the following segregated accounts:

   •     the certificate account, 

   •     if
there is a pooling REMIC,
a pooling REMIC account,

   •     a lower–tier REMIC account, and

   •     if
there is an upper-tier REMIC,
an upper-tier REMIC account.

     Any pooling REMIC account,
the lower-tier REMIC account,
and any upper-tier REMIC account
will be established in the same manner as the certificate account.

     CitiMortgage, on behalf of the Trustee, will deposit
daily in the certificate account in accordance with section 3.3 all remit-

 tances received by it,
    any amounts required to be deposited in the certificate account pursuant
    to section 3.2, all other deposits required to be made to the certificate
    account other than those amounts specifically designated to be deposited
    in any pooling REMIC account, the lower-tier REMIC account, or any upper-tier REMIC account
in this section, “REMIC accounts
and distributions,” and all investments made with moneys on deposit in the
certificate account, including all income or gain from such investments, if any.
Funds on deposit in the certificate account will be held and invested in accordance
with the applicable provisions of section 3.2 and 3.20. Distributions from the
certificate account will be made in accordance with sections 3.6, 3.8 and these
Series Terms to make payments in respect of the regular and residual interests
in any pooling REMIC, the lower-tier REMIC, and any upper-tier REMIC and to pay
servicing fees in accordance with section 3.6(f) and any insurance premium. 

     Notwithstanding anything herein to the contrary,
regular and residual interests in any pooling REMIC, the lower-tier REMIC, and
any upper-tier REMIC will not receive distributions directly from the certificate
account. On each distribution day, 

•     if there is a pooling REMIC, CitiMort-gage,
on behalf of the Trustee, will withdraw from the certificate account and deposit
by 12 noon in the pooling REMIC account all distributions to be made on such
distribution day in respect of interest on or in reduction of the principal balance
of any class P regular interests, and 

•     if there is no pooling REMIC, CitiMort-gage,
on behalf of the Trustee, will withdraw from the certificate account and deposit
by 12 noon in the lower-tier REMIC account all distributions to be made on such
distribution day in respect of interest on or

 

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 in reduction
of the principal balance of the regular interests in the lower-tier REMIC.

     If there is an upper-tier REMIC, CitiMortgage,
on behalf of the Trustee, will immediately thereafter withdraw from the lower-tier REMIC account
and deposit in the upper-tier REMIC account all distributions to be made on such
distribution day in respect of interest on or in reduction of the principal balance
of any class L regular interests.

     The Trustee will cause to be distributed from the
lower-tier REMIC account and any upper-tier REMIC account, to the extent funds
are on deposit therefor, all amounts required to be distributed with respect
to the regular and residual interests in the lower-tier REMIC and any upper-tier REMIC as
specified in these Series Terms. 

     To
the extent that any part of the lower-tier REMIC account
or any upper-tier REMIC account
is designated in these Series Terms as an investment account, the provisions
in section 3.19 applicable to the investment of funds will apply to such REMIC accounts.
In addition, section 3.3(a) regarding commingling will apply to such REMIC accounts.

     (b) CitiMortgage will maintain books for constituent REMICs
on a calendar year taxable year and on the accrual method of accounting. 

     (c)
The Trustee will not create, or permit the creation of, any “interests” in
any constituent REMIC within
the meaning of Internal Revenue Code Section 860D(a)(2) other than the interests
represented by the certificates or, if there are multiple REMICs,
the uncertificated regular interests in any pooling REMIC or
(if there is an upper-tier REMIC)
the lower-tier REMIC.

     (d) Except as otherwise provided in the Internal
Revenue Code, CitiMortgage will not grant, and neither CitiMortgage nor the Trustee
will accept, property unless (i) substantially all of the property held by

 each constituent REMIC constitutes
either “qualified mortgages” or “permitted investments” as
defined in Internal Revenue Code Sections 860G(a)(3) and (5), respectively, and
(ii) no property will be granted to a constituent REMIC after
the startup day, unless the grant would not subject the constituent REMIC to
the 100% tax on contributions to a REMIC after
the startup day imposed by Internal Revenue Code Section 860G(d).

     (e)
The Trustee will not accept on behalf of the Trust Fund or a constituent REMIC any
fee or other compensation for services and will not accept on behalf of the Trust
Fund any income from assets other than those permitted to be held by a REMIC.

     (f) Neither CitiMortgage nor the Trustee will sell
or permit the sale of all or any portion of the mortgage loans, or of an Eligible
Investment held in the certificate account or in any REMIC account
(other than in accordance with sections 2.2, 2.3, 2.4 and 3.19(a)) unless such
sale is pursuant to a “qualified liquidation” as defined in Internal
Revenue Code Section 860F(a)(4)(A) and is in accordance with section 9.1. 

27.5 Tax matters
person

If in any taxable year there will be more than one holder of any class of residual certificates, a tax matters person may
be designated for the related REMIC, who will have the same duties for the related REMIC as
those of a “tax matters partner” under Sub-chapter C of Chapter 63
of Subtitle F of the Internal Revenue Code, and who will be, in order of priority,
(i) CitiMortgage or an affiliate of CitiMortgage, if CitiMortgage or such affiliate
is the holder of a residual certificate of the related REMIC at any time during
the taxable year or at the time the designation is made, (ii) if CitiMortgage
is not a holder of a residual certificate of the related REMIC at the relevant
time, CitiMortgage as

 

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agent for the holder of the residual certificate of the related REMIC, if the designation is permitted to be made under the Internal Revenue Code, or (iii) the holder of a residual certificate of the related REMIC or
person who may be designated a tax matters person in the same manner in which
a tax matters partner may be designated under applicable Treasury Regulations,
including Treasury Regulations § 1.860F-4(d) and temporary Treasury Regulations § 301.6231(a)-(7)-1T. 

28   Notice
  addresses 

  Notices should be sent: 

       To
  the Trustee at its corporate trust office at [address]. 

     To CMSI at
  Citicorp Mortgage Securities, Inc., 1000 Technology Drive, O’Fallon, Missouri
  63304, Attention: Larry Kent Slough. 

       To
  CitiMortgage at CitiMortgage, Inc., 1000 Technology Drive, O’Fallon, Missouri
  63304, Attention: Larry Kent Slough. 

       To
  S&P at 55 Water Street, 41st Floor, New York, New York 10041, Attention:
  RMBS Surveillance.

       To
  Moody’s at 99 Church Street, New York, New York 10007. 

      To Fitch at Residential Mortgage Pass-Through Monitoring, Fitch Ratings, One State Street Plaza, 30th Floor, New York, New York 10004. 

     To Citibank, N.A. at Agency and Trust, 388 Greenwich Street, 14th Floor, New York, NY 10013, Attention: Structured Finance Group.

     To the Mortgage Document Custodian at Citibank (West), FSB, 5280 Corporate Drive, M/C 0005, Frederick, Maryland 21703, Attention: Richard D. Penquite.

     To
any Insurer, at the address given for the Insurer in the first paragraph of “Insured classes” above. 

     The Paying Agent, any Insurer, CMSI and CitiMortgage may each change their address for notices by written notice to the others. The Trustee may change its corporate trust office by written notice to CMSI, CitiMortgage, any Insurer, and all certificate holders. 

29   Initial
Depositories 

The initial Depository for the certificate and servicing accounts for the mortgage loans will be Citibank (West), FSB.  

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STANDARD TERMS 

1    Definitions
  and usages

1.1 Defined
  terms 

  In this agreement, the following words and phrases have the following meanings:

      accrual
  termination day:
  For an accrual class, the earlier of (1) the first distribution day on which
  the principal balance of each of its accrual directed classes on the preceding
  day is zero, or (2) the subordination depletion date.

      affiliate:
  For a specified person, any other person that controls, is controlled by or
is under common control with the specified person. In this definition, “control” of
  a specified person means the power to direct the management and policies of the
  person, directly or indirectly, whether through the ownership of voting securities,
  by contract or otherwise; and the terms “controlling” and “controlled” have
  correlative meanings.

      affiliated
  servicing fee rate:
  0.25% per annum. The monthly affiliated
  servicing fee rate is one-twelfth of the affiliated servicing fee rate. 

      aggregate
  outstanding advances:
  For a determination date, the aggregate of [net servicing account advances,]
  net voluntary advances, net Paying Agent advances and advance account advances
  made from the cutoff date to the determination date, plus any uncommitted cash
  advances to be made on the next distribution day. 

     appraisal:
  For a mortgage loan, the appraisal conducted in connection with the origination
  of the mortgage loan, whether originated upon the purchase of the related mortgaged
  property or in connection with a refinancing. 

      Authorized
  Officer:
  For CitiMortgage or CMSI,
  the Chairman of the Board of Directors, the President, any Executive Vice

President, Senior
Vice President, Vice President, Assistant Vice President, Controller, Assistant
Controller, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer,
or any other natural person designated in an officer’s certificate signed
by any of the foregoing officers and furnished to the Trustee and, solely in
the case of a statement given pursuant to section 3.22, any Servicing Officer.

     Bankruptcy Code: The United States Bankruptcy Code of 1978.

      bankruptcy
coverage termination date:
If there is a bankruptcy loss limit, the distribution day on which the bankruptcy
loss limit has been reduced to zero or a negative number (or the subordination
depletion date, if earlier).

      bankruptcy
loss:
For a mortgage loan, (1) a debt service reduction or (2) a deficient valuation, unless,
in either case, CitiMort-gage has notified the Trustee that CitiMortgage is
diligently pursuing any remedies that may exist in connection with the representations
and warranties made regarding the related mortgage loan and either (A) the related
mortgage loan is not in default with regard to payments due thereunder, or (B)
delinquent payments of principal and interest under the related mortgage loan,
and any premiums on any applicable hazard insurance policy and any related escrow
payments for the mortgage loan, are being advanced on a current basis without
giving effect to any debt service reduction. 

      bankruptcy
loss limit:
If an initial bankruptcy loss limit is stated in the Series Terms, for a distribution
day, the initial bankruptcy loss limit minus the aggregate amount of bankruptcy
losses since the cutoff date. The bankruptcy loss limit may be further reduced
by CitiMortgage (including accelerating the manner in which such coverage is
reduced) provided that prior to the reduction, each rating agency confirms in

 

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writing to
    CitiMortgage (with a copy to the Trustee) that the reduction will not adversely
    affect the rating agency’s then-current rating of the certificates.

       beneficial
owner:
    For a certificate held by a Clearing Agency, the person who is the beneficial
    owner of the certificate as reflected on the Clearing Agency’s books
    or on the books of a person maintaining an account with the Clearing Agency
    (directly or as an Indirect Participant, in accordance with the Clearing
    Agency’s
    rules).

       business
    day:
    Any day other than a Satur-day, a Sunday or a day on which banking institutions
    in New York, New York or in the cities where the Trustee, the Paying Agent, CMSI,
    CitiMortgage, any Insurer (but only to the extent that the Insurer is required
    under this agreement to make or receive a payment on that day), any delegated
    servicers, and (but only if the third party servicer is depositing funds
    received on third party mortgage loans with CitiMort-gage or the Paying Agent
    on that day) the third party servicer is located are authorized or obligated
    by law or executive order to be closed or, in the case of a distribution
    day and if there are book-entry certificates, any day on which the relevant
    Clearing Agency is closed. For purposes of determining LIBOR for
    any LIBOR classes,
    a business day is a day on which banks in London and New York are open for
    the transaction of international business.

       buydown
    account:
    The deposit account or accounts, which may bear interest, created and maintained
    in the name of the Trustee for the benefit of the mortgagors, subject to
    the rights of the Trustee pursuant to the buydown subsidy agreements.

       buydown
    funds:
    Funds contributed at origination by the seller or buyer of a property subject
    to a buydown mortgage loan, or by any other source, plus interest earned
    thereon, in order to reduce the payments

required from the mortgagor for a specified period in specified amounts.

      buydown
mortgage loan:
Any mortgage loan for which, pursuant to a buydown subsidy agreement, (i) the
mortgagor pays less than the full monthly payments specified in the mortgage
note for a specified period, and (ii) the difference between the payments required
under the buydown subsidy agreement and the mortgage note is provided from buydown
funds.

      buydown
subsidy agreement:
The agreement relating to a buydown mortgage loan pursuant to which an Originator
may apply the buydown funds to a mortgagor’s payments.

      certificate
holder or holder:
The person in whose name a certificate is registered in the Certificate Register.

     Citibank banking affiliate: An affiliate of Citibank, N.A. that is either (i) a federal savings and loan association duly organized, validly existing and in good standing under the federal banking laws, (ii) an institution duly organized, validly existing and in good standing under the applicable banking laws of any state, or (iii) a national banking association duly organized, validly existing and in good standing under the federal banking laws.

      class:
For certificates, any certificates designated as a class in the Series Terms,
for any class L or class P regular interests, the regular interests in the constituent REMIC designated
as such in “REMIC provisions” above,
and for residual certificates, all residual certificates having the same class
designation. A “class” will
be understood not to include a residual class of certificates unless otherwise
expressly stated.

      class
percentage:
For one or more classes, the ratio of the aggregate of the principal balances
of the classes to the aggregate of the principal balances of all classes of the
series, expressed as a percentage. 

 

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     classes A-x through A-y: For a positive integer x and a greater integer y, each class A-z for all integers z from x through y, inclusive. Example: “classes A-3 through A-5” means each of classes A-3, A-4, and A-5. If a class is designated with an integer and letter pair, then such class follows the class with the same integer x and precedes the class of the next greater integer y. Example: “classes A-3 through A-5” means, if there are classes A-4A and A-4B, each of classes A-3, A-4, A-4A, A-4B, and A-5. 

      classes
B-x through B-y:
For a positive integer x and
any greater integer y,
each class B-z for
all integers z from x through y,
inclusive. Example: “classes
B-3 through B-5” means each of classes B-3, B-4 and B-5. 

     Clearing Agency:
An organization registered as a “clearing agency” pursuant to Section
17A of the Exchange Act. The initial Clearing Agency will be The Depository Trust
Company. 

     Clearing Agency Participant: A broker, dealer, bank other financial institution or other person for whom a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency.

      collected
servicing fee on
a mortgage loan: For any month, the excess of the interest payment received on
the mortgage loan for the month (including accrued interest due but not received
from liquidation or insurance proceeds for liquidated loans) over the amount
of interest on the mortgage loan for the month at the pass-through rate, up to
the servicing fee CitiMortgage is permitted to retain under this agreement.

      debt
service reduction:
For a mortgage loan, a reduction in the scheduled monthly loan payment for the
mortgage loan by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code or any similar state law, except a reduction that would constitute
a deficient valuation. If the court

proceeding results
in an increase in the scheduled payment for a month (for example, a final balloon
payment or a payment in a month after the originally scheduled maturity of the
mortgage loan), the increased payment will be considered a scheduled payment
and not a debt service reduction.

      Example:
Suppose a homeowner has a mortgage loan with an outstanding principal balance
of $50,000 and an interest rate of 7%. The loan has 10 years to run. The homeowner
files for bankruptcy, and the bankruptcy court (1) reduces the outstanding principal
balance to $40,000, (2) reduces the interest rate to 6%, and (3) stretches the
payments out to 20 years. Then

•    the $10,000 reduction in principal owed is a bankruptcy loss, and

•    the difference between the monthly payment the homeowner would have made on the remaining $40,000 at the original interest rate and maturity, and the monthly payment the homeowner is now required to make on the new lower interest rate and extended maturity, is a debt service reduction, and

•    payments in the final 10 years (that is, after the originally scheduled maturity) will be scheduled payments.

      deficient valuation:
For a mortgage loan, a valuation by a court of competent jurisdiction of the
mortgaged property in an amount less than the then-outstanding indebtedness under
the mortgage loan, or a reduction in the scheduled monthly principal payment
that results in a permanent forgiveness of principal, which valuation or reduction
results from a proceeding under the Bankruptcy Code or any similar state law.

       delegated
servicer:
A person or persons, including a special servicer, to whom Citi-Mortgage delegates
some or all of its servicing obligations pursuant to section 4.5. 

      Depository:
The bank or banks or savings and loan association or associations or trust company
or companies (which may be the

 

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Trustee or which may be Citibank, N.A. or a Citibank banking affiliate ) at which the certificate account, buydown account, escrow account, custodial account for P&I and servicing account are established or maintained pursuant to section 3.2, 3.3 or 3.3. Each Depository must meet the requirements of section 11.2.

      determination
date:
For each distribution day, the close of business on the 18th day (or, if that
day is not a business day, the preceding business day) of the month in which
the distribution day occurs.

      discount
loan:
A mortgage loan that has a pass-through rate less than the target rate. 

      Eligible
Account:
Either

     (A)   a segregated account or accounts maintained at Citibank, N.A. or a Citibank banking
affiliate, provided that the short-term unsecured debt obligations of Citi-bank,
N.A. or the Citibank banking affiliate are rated at least “A-1+” by S&P if S&P is a rating agency, “F-l” by Fitch if Fitch is a rating agency, and “P-1” by Moody’s if Moody’s
is a rating agency, or

      (B)   a segregated account or accounts
maintained
with an
institution

•    whose
deposits are insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC,

•    the
unsecured and uncollateralized debt obligations of which are rated at least “AA” by
S&P if S&P is a rating agency, “AA” by Fitch if Fitch is a
rating agency, and “Aa” by Moody’s if Moody’s
is a rating agency,

•    that
has a short term rating of at least “A-1+” by S&P if S&P is
a rating agency, “F-1” by Fitch if Fitch is a rating agency, and “P-1” by
Moody’s if Moody’s
is a rating agency, and

•     is
either (i) a federal savings and loan association duly organized, validly existing
and in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing

under the applicable banking laws of any state, (iii) a national banking association duly organized, validly existing and in good standing under the federal banking laws and (iv) a principal subsidiary of a bank holding company, or

      (C)   a trust account (which will be a “special
deposit account”) maintained with the trust department of a federal or state
chartered depository institution or of a trust company, having capital and surplus
of not less than $50 million, acting in its fiduciary capacity.

     Any Eligible Account maintained with the Trustee will conform to the preceding clause (C). 

     ERISA: The Employee Retirement Income Security Act of 1974. 

     ERISA Restricted Certificates: The B-4, B-5 and B-6 certificates and each class of ratio-stripped IO certificates. 

     Exchange Act: The Securities Exchange Act of 1934. 

      extraordinary
event:
Any of the following events: (i) hostile or warlike action in time of peace or
war; (ii) the use of any weapon of war employing atomic fission or radioactive
force whether in time of peace or war; or (iii) insurrection, rebellion, revolution,
civil war or any usurped power or action taken by any governmental authority
in preventing such occurrences (but not including looting or rioting occurring
not in time of war). 

     FDIC: The Federal Deposit Insurance Corporation. 

     FHLMC: The Federal Home Loan Mortgage Corporation. 

     Fitch: Fitch Ratings. fraud loss limit: If an initial fraud loss limit is stated in the Series Terms, for a distribution day, (X) prior to the second anniversary of the cut-off date, the initial fraud loss limit mi-

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nus the aggregate amount of fraud losses since the cut-off date, and

     (Y) from the second through fifth anniversary of
the cut-off date, (1) the lesser of (a) the fraud loss limit as of the most recent
anniversary of the cut-off date and (b) 0.50% of the aggregate scheduled principal
balance of all the mortgage loans as of the most recent anniversary of the cut-off
date, minus (2) the aggregate amount of fraud losses since the most recent anniversary
of the cut-off date.

     After the fifth anniversary of the cut-off date the fraud loss limit will be zero.

      fraud
loss:
A liquidated loan loss as to which there was fraud in the origination of the
mortgage loan.

     GIC: A guaranteed investment contract or surety bond. 

     GNMA: the Government National Mortgage Association.

      group: In a multiple-pool series, the classes
related to a pool; in a single-pool series, all the classes.

      group target-rate
class percentage:
For one or more target-rate classes of a group, the ratio of the classes’ principal
balance to the principal balance of all target-rate classes of the group, expressed
as a percentage. For a single pool series, the group target-rate class percentage
is the same as the target-rate class percentage. 

     Guide:
The CitiMortgage, Inc. Servicing Guide, being the manual relating to CitiMortgage’s
mortgage loan purchase program, as revised or supplemented from time to time.

     high-cost
mortgage loan:
A “high cost loan,” “high-rate, high-fee mortgage,” “covered
loan,” or similar loan under any predatory lending law, if the law contains
provisions that may result in liability of the Trust Fund as a purchaser or assignee
of the loan. 

     holder:
Has the same meaning as “certificate holder.”

     hypothetical mortgage loan: A non-existent mortgage loan that, combined with one or more other hypothetical mortgage loans, would have the same interest and principal payments as an actual mortgage loan.

     Example: A mortgage loan having a principal balance of $100,000 and a pass-through rate of 8% could be divided into two hypothetical mortgage loans, the first having a $100,000 principal balance and a pass-through rate of 7% per annum, and the second an IO loan having a $100,000 principal balance and a pass-through rate of 1% per annum. References to the hypothetical mortgage loans in the target-rate strip will include those actual mortgage loans whose pass-through rates equal the target rate. independent accountants :
Accountants who are “independent” within the meaning of Rule 2-01(b) of the Securities and Exchange Commission’s
Regulation S-X under the Exchange Act. 

     Indirect
Participant:
An organization that participates in the Clearing Agency by clearing through
or by maintaining a custodial account with a Participant.

     initial:
As applied to a principal or notional balance, target-rate class percentage,
or subordination level, means the principal or notional balance, target-rate
class percentage, or subordination level as of the cut-off date.

     insurance
proceeds:
Proceeds of

•     a primary mortgage insurance policy,

•     a
hazard insurance policy to the extent not applied to restore the mortgaged property
or released to the mortgagor in accordance with CitiMortgage’s normal servicing
procedures or, for a third party servicer, the Guide, and 

•     any other insurance policy or bond relating to the mortgage loans or their servicing. 

     Internal Revenue Code: The Internal Revenue Code of 1986.

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     investment account: The certificate account (but only if so stated in the Series Terms) and any other account or any portion thereof that consists of cash or Eligible Investments. 

     Investment Income: Any and all investment income and gains, net of any losses, actually received on the investment of funds on deposit in all investment accounts. 

     IO class: A class that has a certificate rate but no principal balance, receives interest distributions on its notional balance, but does not receive principal distributions. 

     IO loan:
A mortgage loan having only a “notional balance.” Such a mortgage loan
would pay interest (usually at a variable rate) on its notional balance, but
would not pay principal. 

     IO strip: The ratio-stripped IO loans for all the premium loans. liquidated loan: A mortgage loan for which 

•      the related mortgaged property has been acquired, liquidated or foreclosed, and the relevant servicer determines that all liquidation proceeds it expects to recover have been recovered, or 

•     the related mortgaged property is retained or sold by the mortgagor, and the relevant servicer has accepted payment from the mortgagor in consideration for the release of the mortgage in an amount that is less than the outstanding principal balance of the mortgage loan as a result of a determination by the relevant servicer that the potential liquidation expenses for the mortgage loan would exceed the amount by which the cash portion of such payment is less than the outstanding principal balance of the mortgage loan. 

     liquidated loan loss: For a distribution day, the aggregate losses for each mortgage loan that became a liquidated loan prior to the first day of the month that contains the distribution day, which for each such liquidated loan will equal the excess of

 •      (A) the unpaid principal balance of the mortgage loan on the first day of the preceding month, plus (B) accrued interest in accordance with the amortization schedule at the time applicable to the mortgage loan at the applicable mortgage note rate from the first day of the month as to which interest was last paid on the mortgage loan through the last day of the month in which the mortgage loan became a liquidated loan, over 

•     the net liquidation proceeds for the mortgage loan. 

     Each liquidated loan loss will have an interest portion and a principal portion. If net liquidation proceeds for the mortgage loan exceed the accrued interest described in clause (B) above, the interest portion of the liquidated loan loss will be zero; otherwise, the interest portion of the liquidated loan loss will be the excess of the accrued interest described in clause (B) above over such net liquidation proceeds. The principal portion of a liquidated loan loss will equal the liquidated loan loss minus the interest portion of the liquidated loan loss. 

     liquidation expenses:
For a liquidated loan, out-of-pocket expenses paid or incurred by or for the
account of the relevant servicer or the Trust Fund for (a) property protection
expenses, (b) property sales expenses, (c) foreclosure costs, including court
costs and reasonable attorneys’ fees, (d) similar expenses reasonably paid
or incurred in connection with the liquidation of the liquidated loan, (e) servicing
fees not previously paid on the liquidated loan, and (f) any tax imposed on the
Trust Fund with respect to a liquidated loan or property received by deed in
lieu of foreclosure. 

     liquidation proceeds: For a period, the amounts received by the relevant servicer in connection with the liquidation of a liquidated loan, whether through judicial or non-judicial foreclosure, proceeds of insur-

 

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ance policies, condemnation proceeds, proceeds of a deficiency action (less amounts retained by CitiMortgage pursuant to section 3.12), or otherwise, including payments received from the mortgagor for the liquidated loan, other than amounts required to be paid to the mortgagor pursuant to the terms of the liquidated loan or to be applied otherwise pursuant to law. 

     loss recovery:
For a liquidated loan, any amounts received on the liquidated loan, (net of expenses on the liquidated loan) for any month after the month in which the mortgage loan becomes a liquidated loan, that are not applied to the reduction of aggregate outstanding advances for the liquidated loan. 

     master servicing fee: The amount payable to CitiMortgage pursuant to section 3.7. 

     master servicing fee rate: The per annum rate agreed between CitiMortgage and a third party servicer for calculating the master servicing fee. The monthly master servicing fee rate will be one-twelfth of the master servicing fee rate. 

     month: a calendar month. 

     Moody’s:
Moody’s Investors Service, Inc. 

     mortgage:
For a mortgage loan, the mortgage or deed of trust creating a first lien on and
an interest (a) for a mortgage loan relating to a cooperative apartment in a
cooperative housing corporation, in the mortgagor’s interest therein securing
a mortgage note, and (b) for other cases, in real property securing a mortgage
note. 

     mortgage documents: All documents contained in the mortgage file. 

     mortgage file: The mortgage documents listed in section 2.1 pertaining to a particular mortgage loan and any additional documents required to be added to such documents pursuant to this agreement. 

     mortgage loan: At any time, the indebtedness of a mortgagor evidenced by a mortgage note that is secured by real property

  (or shares evidencing ownership interest in a cooperative apartment in a cooperative housing corporation) and that is sold and assigned to the Trustee and held at such time in the Trust Fund pursuant to this agreement, the mortgage loans originally so held being identified in the mortgage loan schedule. 

     mortgage loan schedule: The list of mortgage loans transferred to the Trustee as part of the Trust Fund, attached as exhibit B, or separately delivered, in physical or electronic form, to the Trustee.

      mortgage note: For a mortgage loan, the
promissory note or other evidence of indebtedness of the mortgagor. 

     Mortgage Note Custodian: The Mortgage Document Custodian is also designated by CMSI as
the Mortgage Note Custodian. At any time that the rating agencies’ respective rating of Citigroup Inc.’s
long-term senior debt is below the respective rating assigned by each such rating
agency to the certificates, the Mortgage Note Custodian may not be an affiliate
of CMSI. 

     mortgage note rate: For a mortgage loan, the annual rate per annum at which interest accrues on the mortgage loan. 

     mortgaged property: Any real property subject to a mortgage, or any cooperative apartment in a cooperative housing corporation. 

     mortgagor: The obligor on a mortgage note. 

     multiple-pool series: A series in which the mortgage loans are divided into two or more pools for purposes of allocations and distributions. Each series is either a single-pool series or a multiple-pool series. 

     net liquidation proceeds: For a period, the aggregate amount of liquidation proceeds for a liquidated loan, net of related liquidation expenses not previously recovered.

 

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     net REO proceeds: For a REO loan, REO proceeds net of any related expenses of the relevant servicer. 

     net Paying Agent advances: For a period, the amount (which may be negative) obtained by subtracting the amount of any reimbursements for Paying Agent advances received in the period from the aggregate amount of Paying Agent advances made in the period. 

     net voluntary advances: For a period, the amount (which may be negative) obtained by subtracting the amount of any reimbursements for voluntary advances received in the period from the aggregate amount of voluntary advances made in the period. 

     nonrecoverable advance:
Any portion of a voluntary advance or Paying Agent advance previously made or
proposed to be made in respect of a mortgage loan that has not been previously
reimbursed to the relevant servicer or the Paying Agent and that, in the good
faith judgment of such person, would not be ultimately recoverable from liquidation
proceeds or other recoveries in respect of the related mortgage loan. Non-recoverable
advances also include any advance by CitiMortgage
of part or all of the shortfall in interest collections on a mortgage loan due
to the federal Servicemembers Civil Relief Act or any similar state legislation
that can not be recouped from later payments on the mortgage loan. The determination
by such person that it has made a nonrecoverable advance or that any proposed
advance, if made, would be a nonre-coverable advance, will be evidenced by a
certification of a Servicing Officer delivered to the Trustee and the Paying
Agent and detailing the basis for such determination, but any delay or failure
to send such certification will not impair such person’s right to withhold
or recover such advance. 

     non-subordinated losses: (1) Special hazard, fraud or bankruptcy losses that exceed the

then-applicable limit for that type of loss, (2) realized losses from extraordinary events, and (3) interest shortfalls due to limitations on interest rates mandated by the federal Servicemembers Civil Relief Act or any comparable state laws. 

      non-supported prepayment interest
shortfall:
For a distribution day and a class (other than a PO class), the class’s
proportional share, based on interest accrued, of the sum of (1) for affiliated
mortgage loans, the excess, if any, of the prepayment interest shortfalls on
such mortgage loans for that distribution day over the amount deposited in the
distribution account by CitiMortgage pursuant to section 3.4 in connection with
prepayment interest shortfalls, and (2) for third party mortgage loans, any excess
of the prepayment interest shortfalls on such mortgage loans for that distribution
day over the aggregate amount deposited in the certificate account in respect
thereof by the applicable third party servicers as required by section 3.4 and
the Guide. 

     officer’s certificate: A certification signed by an Authorized Officer of CitiMortgage or CMSI and delivered to the Trustee or Paying Agent. 

     opinion of counsel: A written opinion of counsel, who (unless otherwise specified herein) may be counsel for, or an employee of, CMSI or an affiliate of CMSI, which counsel will be reasonably acceptable to the Trustee. 

     order of seniority: For the target-rate classes, the following order: the senior classes, followed by classes B-1, B-2, B-3, B-4, B-5 and B-6. 

     order of subordination: For the target-rate classes, the following order: classes B-6, B-5, B-4, B-3, B-2 and B-1, followed by the senior classes.

      original value: For the mortgaged property underlying a mortgage loan, the lesser of

 

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  •      the sales price of the mortgaged property and 

•     its
appraisal value determined pursuant to an appraisal made in connection with origination
of the mortgage loan, except that the original appraisal of the mortgaged property
may be used for a refinanced mortgage loan the unpaid principal balance of which,
after refinancing, does not exceed the unpaid principal balance of the original
mortgage loan at the time of refinancing by an amount greater than the amount
of the closing costs associated with the refinancing. 

     The original value of a mortgage loan is the original value of the mortgaged property underlying the mortgage loan plus the value of any other property securing the mortgage loan. 

     Originator: The affiliate or affiliates of CMSI, or the third party originators, from which CMSI is acquiring the mortgage loans. 

     outstanding: (1) For certificates as of any date, all certificates previously authenticated and delivered under this agreement except: 

     (i) certificates that have been canceled by the
Certificate Registrar or delivered to the Certificate Registrar for cancellation; 

     (ii) certificates for which money for a distribution
in the necessary amount to reduce the principal balance to zero has been deposited
with the Paying Agent
in trust for the holders of such certificates; provided, however, that if a distribution
in reduction of the principal balance of such certificates to zero will be made,
notice of the distribution has been duly given pursuant to this agreement or
provision therefor, satisfactory to the Trustee, has been made; 

     (iii) certificates in exchange for or in lieu of
which other certificates have been authenticated and delivered pursuant to this
agreement unless proof satisfactory to the Certificate
Registrar is presented that any

  such certificates are held by a protected purchaser under Article 8 of the Uniform Commercial Code in effect in the applicable jurisdiction; and

     (iv) certificates alleged to have been destroyed,
lost or stolen for which replacement certificates have been issued as provided
for in section 5.3 and authenticated
and delivered pursuant to this agreement; 

     provided, however, that in determining whether the holders of the requisite percentage of the aggregate principal balance or percentage interest of any outstanding certificates or of the outstanding certificates of any one or more classes have given any request, demand, authorization, direction, notice, consent or waiver, such percentage will be based on the principal balance of such certificate and provided, further, certificates owned by CMSI or any other obligor upon the certificates or any affiliate of CMSI or such other obligor will be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee will be protected in relying upon any such request, demand, authorization, direction, notice, consent, or waiver, only certificates which the Trustee knows to be so owned will be so disregarded and except that where CMSI or any other obligor upon the certificates or any affiliate of CMSI or such other obligor will be owner of 100% of the aggregate principal balance or percentage interest of any outstanding certificates, CMSI or
such other obligor or affiliate will be permitted to give any request, demand,
authorization, direction, notice, consent or waiver hereunder. Certificates so
owned that have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee’s
right so to act with respect to such certificates and that the pledgee is not CMSI or any other obligor upon the certifi-

 

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  cates or any
affiliate of CMSI or
such other obligor.

     (2)  for
a class for any day, a class with a non-zero principal balance or non-zero notional
balance on that day, and

     (3)  for
a mortgage loan, for the first day of a month, a mortgage loan that, prior to
such first day, was not the subject of a principal prepayment in full, did not
become a liquidated loan, and was not purchased pursuant to section 2.2 or 2.3.

     Participant: A participating organization in the Clearing Agency.

     pass-through rate: For a mortgage loan for
any date or period, the applicable mortgage note rate, minus

•    for an affiliated mortgage loan, the affiliated servicing fee rate, and

    •    for
    a third party mortgage loan, the sum of the third party servicing fee rate
    and the master servicing fee rate.

    Any regular monthly remittance of interest at the pass-through rate for a mortgage loan is based upon annual interest at that rate on the scheduled principal balance as of the first day of the month of the mortgage loan divided by twelve. Interest at the pass-through rate will be computed on the basis of a 360-day year, each month being assumed to have 30 days. The monthly pass-through rate will be one-twelfth of the pass-through rate. 

         (Any partial remittance of interest at such rate by reason of a full principal prepayment is based upon annual interest at that rate on the prepaid principal balance of the related mortgage loan, multiplied by a fraction the numerator of which is the actual number of days elapsed in the month of the prepayment to the date of the prepayment, and the denominator of which is 360. For affiliated mortgage loans, and some or all of the third party mortgage loans, the mortgagor is not required to pay interest on a partial principal prepayment that is received

during a month. The amounts required to be paid pursuant to section 3.4 are in addition to any interest payments made by mortgagors and passed through on full and partial prepayments.) 
     
percentage interest: For a class of residual certificates, if the residual certificate has a principal balance as specified in the Series Terms, the ratio of the initial principal balance of the residual certificate to the aggregate initial principal balance of the entire class, expressed as a percentage; if the residual certificate does not have a principal balance, the portion represented by such residual certificate (expressed as a percentage) of the total ownership interest in the applicable constituent REMIC represented by all residual certificates of the class. For a certificate of an IO class, the ratio of the notional balance of the certificate to the aggregate notional balance of the entire class.

     person: Any legal person, including any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 

     PO
class:
A class that has a principal balance and receives principal distributions, but
does not have a certificate rate and does not receive interest distributions.

     PO loan: A mortgage loan that has a principal balance, but on which no interest is paid by the mortgagor. 

     PO strip: The ratio-stripped PO loans for all the discount loans.

     pool:A pool of mortgage loans.

     pool distribution amount: For a distribution day and a mortgage loan pool, the funds eligible for distribution to the related classes on that distribution day, being all amounts deposited into the certificate account relating to that pool, but excluding the following: 

 

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     (a)   uncommitted
cash that will not be used on the distribution day for an uncommitted cash advance;

     (b)   all permitted withdrawals
from the certificate account pursuant to section 3.8; and 

     (c)   all
income from Eligible Investments that are held in an investment account.

     predatory
lending law:   The
Georgia Fair Lending Act, the Maine Consumer Credit Code – Truth-in-Lending,
  the New Jersey Home Ownership Security Act of 2002, the New Mexico Home Loan
  Protection Act, the New York Predatory Lending Act, or any similar state, local
  or federal law that regulates high-cost mortgage loans.

     Predecessor
  Certificates:   For
  a particular certificate of a class, every previous certificate of that class
  evidencing all or a portion of the same principal balance, notional balance
  or percentage interest as that evidenced by the particular certificate; for
  the purpose of this definition, any certificate authenticated and delivered
  under section 5.3 in lieu of a lost, destroyed or stolen certificate will be
  deemed to evidence the same principal balance, notional balance or percentage
  interest, as the case may be, as the lost, destroyed or stolen certificate.

       premium loan:   A
  mortgage loan having a pass-through rate equal to or greater than the target
  rate. 

       prepayment
  interest shortfall:   For
  a mortgage loan that was the subject of a principal prepayment applied during
  the preceding month, an amount equal to (1) one month of interest on the principal
  prepayment at the pass-through rate, less (2) the amount of any interest (adjusted
  to the pass-through rate) on the principal prepayment received from the mortgagor.

       primary mortgage insurance certificate:   The
  certificate of primary mortgage insurance relating to a particular mortgage
  loan to the

extent initially
set forth in the mortgage loan schedule.

     principal
prepayment:   For
a mortgage loan, a payment of principal on the mortgage loan that is received
in advance of the date it is scheduled to be paid and that is not accompanied
by an amount representing scheduled interest for any month subsequent to the
month of prepayment, but excluding any proceeds of or advances on a liquidated
loan.

     private
  certificates:   The
  residual certificates and certificates of classes B-4 through B-6 and, unless
  otherwise stated in the Series Terms, any ratio-stripped IO classes.

       Proceeding:   Any
  suit in equity, action at law or other judicial or administrative proceeding. 

       property
    protection expenses:   For
    mortgage loans, expenses paid or incurred by or for the account of CitiMortgage
    or the Trust Fund in accordance with the related mortgages for (a) real estate
    property taxes and property repair, replacement protection and preservation
    expenses, and (b) similar expenses reasonably paid or incurred to preserve
    or protect the
    value of the mortgages.

         Qualified GIC:   A
    GIC, assigned to the Trustee or Paying Agent, or entered into by the Trustee
  or Paying Agent at the direction of CMSI, on or before the closing date, providing for the investment of funds insuring a minimum or fixed rate of return on investments of such funds, which contract or surety bond will

        (a)   be
  an obligation of an insurance company, trust company, commercial bank (which
    may be Citibank, N.A. or a Citibank banking affiliate) or other entity whose
  credit standing is confirmed in writing as acceptable by each rating agency;

        (b)   provide
  that the Trustee or the Paying Agent may exercise all of the rights of CMSI under such contract or surety bond

 

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without the necessity of the taking of any action by CMSI; 

     (c)   provide that if at any time (subject to the second proviso of this section (c)) the then current credit standing of the obligor under such guaranteed investment contract is such that continued investment pursuant to such contract of funds included in the Trust Fund would result in a downgrading of any rating of any class of the certificates, the Trustee or the Paying Agent may terminate such contract and be entitled to the return of all funds previously invested there-under, together with accrued interest thereon at the interest rate provided under such contract through the date of delivery of such funds to the Trustee or the Paying Agent, provided that the Trustee or the Paying Agent will not be charged with knowledge of any such potential downgrading unless it will have received written notice of such potentiality from the provider of the GIC which must be obligated to give such notice at least once per year; provided, further, that upon any such event CMSI, by written notice to the Trustee or the Paying Agent, may replace such contract with a substitute GIC having substantially the same terms (including without limitation a rate of return at least as high as the contract being replaced) so long as such substitute contract has an obligor with a credit standing no less than the credit standing of the obligor under the contract to be replaced at the time the contract was executed and such fact is certified by CMSI to
the Trustee or the Paying Agent;

     (d)   provide
    that the Trustee’s interest
  therein will be transferable to any successor trustee hereunder;

     (e)   provide
    that the funds invested thereunder and accrued interest thereon be available
    not later than the day prior to any distribution day on which such funds
  may be required for distribution hereunder; and 

     (f)   meet
such other standards as may be specified in the Series Terms.

     Qualified Nominee:   A
person (who may not be CMSI or an affiliate of CMSI) in whose name Eligible Investments held by the Trustee or Paying Agent may be registered as nominee of the Trustee or the Paying Agent in lieu of registration in the name of the Trustee or the Paying Agent, provided that the following conditions will be satisfied in connection with such registration:

     (a)   the
    instruments governing the creation and operation of the nominee provide that
    neither the nominee nor any owner of an interest in the nominee (other than
    the Trustee or the Paying Agent) will have any interest, beneficial or otherwise,
    in any Eligible Investments held in the name of the nominee, except for the
  purpose of transferring and holding legal title thereto;

     (b)   the
    nominee and the Trustee or the Paying Agent have entered into a binding agreement
  in substantially the form to be provided by CMSI establishing that any Eligible Investments held in the name of the nominee are to be held by the nominee as agent (other than commission agent or broker) or nominee for the account of the Trustee; and 

       (c)   in
  connection with the registration of any Eligible Investment in the name of
  the nominee,
    all requirements under applicable governmental regulations necessary to effect
    a valid registration of transfer of such Eligible Investment are complied
    with as evidenced to the Trustee and the Paying Agent upon its request by
  an opinion of counsel. 

       ratio-stripped IO class:   An
  IO class with an initial notional balance equal to the initial notional balance
  of one or more IO strips, and that receives interest distributions solely from
  distribution on those strips. 

       ratio-stripped IO loan:   For
  any premium loan with a pass-through rate greater than

 

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the target rate,
a single hypothetical IO loan that, combined with a single hypothetical target-rate
loan, has the same interest and principal payments as the premium loan.

     Example:   For
a premium loan with a $100,000 principal balance and a pass-through rate 1% per
annum greater than the target rate, the (hypothetical) ratio-stripped IO loan
will have a notional balance of $100,000 and a pass-through rate of 1% per annum,
and the (hypothetical) target-rate loan will have a principal balance of $100,000
and a pass-through rate equal to the target rate.

     ratio-stripped PO class:
A PO class whose initial principal balance equals the initial principal balance
of one or more PO strips (rounded down to the nearest whole dollar), and that
receives principal distributions solely from distribution on those strips, or
from reimbursements from subordinated classes.

     ratio-stripped
PO loan:   For
any discount loan, a single hypothetical PO loan that, combined with a single
hypothetical target-rate loan, has the same interest and principal payments as
the original discount loan.

     Example:   For
a discount loan with a $100,000 principal balance and a pass-through rate 1%
per annum less than the target rate of 5% per annum, the (hypothetical) ratio-stripped
PO loan will have a principal balance of $20,000 and a pass-through rate of 0%,
and the (hypothetical) target-rate loan will have a principal balance of $80,000
and a pass-through rate equal to the target rate.

      realized losses:   For
a distribution day, liquidated loan losses (including special hazard losses and
fraud losses) and bankruptcy losses incurred in the preceding month. For a realized
loss consisting of a liquidated loan loss, the interest and principal portions of the realized loss will equal the interest and principal portions of the liquidated loan loss.

     record date:   For
      a distribution day, the close of business on (a) for a LIBOR class, the last day (whether or not a business day) of its last LIBOR accrual period preceding the distribution day, and (b) for any other class, the last day of the preceding month.      relevant
      servicer: CitiMortgage or a third party servicer, as the context requires.      REMIC:   A “real estate mortgage investment conduit” within
      the meaning of Internal
Revenue Code Section 860D. References to the “REMIC” are
to the constituent REMICs constituted by the Trust Fund. 

     REMIC Provisions:   The
provisions of the federal income tax law relating to REMICs, which appear at Sections 860A through 860G of the Internal Revenue Code. 

     REO loan:   A
mortgage loan that is not a liquidated loan and as to which the related mortgaged
property is held as part of the Trust Fund. 

     REO proceeds:   Proceeds,
net of any related expenses, received in respect of any REO loan
(including, without limitation, proceeds from the rental of the related mortgaged
property). 

     REO property:   A
mortgaged property acquired by the Trust Fund through foreclosure or deed-in-lieu
of foreclosure in connection with a defaulted mortgage loan or otherwise treated
as having been acquired pursuant to the REMIC Provisions.      Required
Amount of Certificates:   (i)
2/3 or more of the aggregate voting interest of the outstanding certificates,
if affected by the occurrence of an Event of Default and (ii) 2/3 or more of
the aggregate outstanding percentage interest of the residual certificates, if
affected by such an Event of Default.

     Responsible Officer:   For
any person, the Chairman or any Vice Chairman of the Board of Directors or Trustees,
the Chairman or Vice Chairman of the Executive or Standing Committee of the Board
of Direc-

 

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tors or Trustees,
the President, the Chairman of the committee on trust matters, any executive
vice president, senior vice president, first vice president, second vice president,
vice president, any assistant vice president, the Secretary, any assistant secretary,
the Treasurer, any assistant treasurer, the Cashier, any assistant or deputy
cashier, any trust officer or assistant trust officer, the Controller and any
assistant controller or any other officer of the person who customarily performs
functions similar to those performed by any of the above designated officers
and also, for a particular matter, any other officer of the person to whom such
matter is referred because of the officer’s knowledge of and familiarity
with the particular subject; provided, however, that for the Trustee or the Paying
Agent, a “Responsible Officer” is an officer who is employed in the
Corporate Trust Department or a similar group for the Trustee or the Paying Agent.

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

     scheduled monthly loan payment:   For
a mortgage loan (including a REO loan) and a distribution day, the payment of principal and interest due on the first day of the month in which the distribution day occurs in accordance with the amortization schedule applicable to the mortgage loan at that time (after adjustment for any partial principal prepayments or deficient valuations occurring prior to such first day of the month but before any adjustment to such amortization schedule other than deficient valuations by reason of any bankruptcy, or similar proceeding or any moratorium or similar waiver or grace period). 

     scheduled principal balance:   For
one or more mortgage loans on a date, the initial principal balance of the loans, less the sum of (a) the aggregate of the principal portion

of all scheduled monthly loan payments required to be made on the loans on or before the first day of the month in which the date falls (whether or not received), provided that after the bankruptcy coverage termination date, the scheduled principal balance will not be reduced by the principal portion of any debt service reductions, and (b) any principal prepayments on the loans received or posted before the close of business on the last business day of the preceding month. 

     scheduled principal payments:   For
one or more mortgage loans for a distribution day, the principal portion of the
scheduled monthly loan payments on the loans for the distribution day. 

     scheduled
servicing fee:   For
any month, a fee equal to

•     for
each affiliated mortgage loan, the scheduled principal balance of the mortgage
loan as of the close of business on the last day of the preceding month, multiplied
by the monthly affiliated servicing fee rate, and

•     for
each third party mortgage loan, the scheduled principal balance of the mortgage
loan as of the close of business on the first day of the month, multiplied by
the relevant monthly third party servicing fee rate.

     Securities
Act:   The
Securities Act of 1933.

     senior
to:
A target-rate class is senior to another target-rate class if it is ranked above
it in order of seniority. 

     Servicing Officer:   Any
officer of CitiMortgage, a delegated servicer or a third party servicer involved
in, or responsible for, the administration and servicing of the Trust
Fund whose name appears on a list of servicing officers attached to an officer’s
certificate furnished to the Trustee by Citi-Mortgage, as such list may from
time to time be amended. 

     single certificate: A single certificate evidences
(a) for a residual certificate, 1% percentage interest, (b) for a certificate
of an IO

 

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   class, $1,000 initial
      notional balance, and (c) for a certificate of any other class, $1,000
      initial principal balance.

         single-pool series. A series in which
    the mortgage loans are not divided into two or more pools for purposes of
    allocations and distributions. Each series is either a single-pool series
    or a multiple-pool series.

         special hazard loss: (i) A liquidated
    loan loss suffered by a mortgaged property on account of direct physical
    loss, exclusive of (a) any loss covered by a hazard policy or a flood insurance
    policy maintained for the mortgaged property pursuant to section 3.11, and
    (b) any loss caused by or resulting from:

     (1)    normal
    wear and tear;

         (2)    infidelity,
     conversion or other dis- honest
      act on the part of the Trustee, CitiMortgage or any of their agents, employees

    or delegees; or

     (3)    errors in design,
    faulty workmanship or faulty materials, unless the collapse of the property
or a part thereof ensues; or

     (ii) a liquidated loan loss suffered by the
    Trust Fund arising from or related to the presence or suspected presence
of hazardous wastes or hazardous substances on a mortgaged property, unless the
loss to a mortgaged property is covered by a hazard policy or a flood insurance
policy maintained for the mortgaged property pursuant to section 3.11.

      special
    hazard loss limit:
    If an initial special hazard loss limit is stated in the Series Terms, for
    a distribution day, the initial special hazard loss limit minus the sum of
    (i) the aggregate amount of special hazard losses and (ii) the Adjustment
    Amount (as defined below) as most recently calculated. For each anniversary
    of the cut-off date, the Adjustment Amount will be the excess of the amount
    calculated in accordance with the preceding sentence (without giving effect
  to the deduction of the Adjustment 

  
  

  
 Amount for such anniversary)
    over the greater of (A) the product of the special hazard percentage for
    such anniversary multiplied by the aggregate scheduled principal balance
    of all the mortgage loans on the distribution day immediately preceding such
    anniversary and (B) twice the scheduled principal balance of the mortgage
    loan in the Trust Fund which has the largest scheduled principal balance
    on the distribution day immediately preceding such anniversary. 

     special hazard percentage: As of each anniversary
of the cut-off date, the greater of (i) 1% and (ii) the largest percentage obtained
by dividing the aggregate scheduled principal balances (as of the immediately
preceding distribution day) of the mortgage loans secured by mortgaged properties
located in a single, five-digit ZIP
  code
  area in the State of California by the aggregate scheduled principal balance
  of all the mortgage loans as of such anniversary. 

     subordinated losses:
  Realized losses other than non-subordinated losses. 

     subordinate to:
  A target-rate class is subordinate to another target-rate class if it is ranked
  below it in order of seniority. 

      subordination depletion date:
  The first distribution day for which the principal balance of the subordinated
  classes on the preceding day is zero. 

     target-rate
  class percentage:
  For one or more target-rate classes, the ratio of the classes’ principal
  balance to the principal balance of all target-rate classes, expressed as a
  percentage. 

     target-rate loan:
  For any mortgage loan, a single hypothetical mortgage loan that has a pass-through
  rate equal to the target rate, and

     (i)    if the mortgage loan
has a pass-through rate equal to or greater than the target rate, has the same
principal balance as
  the mortgage loan, and  

  

  

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      (ii)    if
      the mortgage loan is a discount loan, has a principal balance equal to
      the product of (A) the principal balance of the mortgage loan and (B) the
      ratio
  of the pass-through rate for the mortgage loan to the target-rate. 

      target-rate strip:
  The mortgage loan pool formed of the target-rate loans for all the mortgage
  loans. 

      third party servicing fee:
  For any month, a fee for each third party mortgage loan equal to the lesser
  of (a) the scheduled principal balance of the mortgage loan as of the close
  of business on the first day of the month, multiplied by the relevant monthly
  third party servicing fee rate, and (b) the excess of the interest payment received
  on the mortgage loan for the month (including interest payments included in
  liquidation or insurance proceeds) over the amount of the interest payment to
  be deposited in the certificate account. 

      third party servicing fee rate:
  For a third party mortgage loan other than a special serviced mortgage loan,
the per annum rate specified as such on schedule B-TP to exhibit B under the
  heading “Sub Fee,” reduced (but not below zero) by any applicable
  master servicing fee rate, and for a special serviced mortgage loan, the per
  annum servicing fee rate for the special servicer provided for in the special
  servicing agreement. The monthly
  third party servicing fee rate will be one-twelfth of the relevant third party
  servicing fee rate.  

     Transfer
  Instrument:
  A deed transferring an interest in property subject to a mortgage.  

     Trust
  Fund:
  The corpus of the trust created by this agreement, consisting of the mortgage
  loans, the certificate account, any pooling, lower-tier, or upper-tier REMIC
  account, REO
  property and the primary mortgage insurance certificates, any other insurance
  policies for the mortgage loans, any

  
  

   retail
    reserve fund and the rights of the Trustee under any reserve fund and any
    certificate insurance policy. 

     uncommitted cash:
    For a distribution day, any cash in the certificate account representing principal
    prepayments posted or liquidation proceeds deposited on or after the first
    day of the month immediately preceding such distribution day and all related
    payments of interest and all payments which represent early receipt of scheduled
    payments of principal and interest due on a date or dates subsequent to such
    first day of the month. 

     unscheduled principal payments:
    For one or more mortgage loans for a distribution day, the sum of 

    •    all
    principal prepayments on the mortgage loans received by CitiMortgage or a
    third party servicer during the month preceding the distribution day, up to
    the scheduled principal balance, in each case, of the mortgage loan, 

    •    
    the greater
    of (1) aggregate net liquidation proceeds from any of the mortgage loans
    that  became a Liquidated Loan during the month preceding such distribution
    day,
    minus
    (a) the portion of such proceeds representing interest, and (b) any unreimbursed
     advances of principal made by the CitiMortgage, a third party servicer,
    or
    the Paying Agent on such mortgage loans, and (2) the aggregate scheduled
    principal  balances of such mortgage loans for the distribution day, and 

    •        the
    scheduled principal balance of any of the mortgage loans that was repurchased
    by CMSI during
    such month pursuant to section 2.3, “Repurchase or substitution
    of mortgage loans” below. 

     U.S.
    person:
    A citizen or resident of the United States of America, a corporation or partnership
    (unless, in the case of a partnership, Treasury regulations are adopted that
    provide otherwise) created or organized in 

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or under the laws of the United States of America, any state thereof or the District
of Columbia, including an entity treated as a corporation or partnership for
federal income tax purposes, an estate whose income is subject to U.S. federal
income tax regardless of its source, or a trust if a court within the United
States is able to exercise primary supervision over the administration of such
trust, and one or more such U.S. persons have the authority to control all substantial
decisions of such trust (or, to the extent provided in applicable Treasury regulations,
certain trusts in existence on August 20, 1996 which are eligible to elect to
be treated as U.S. persons). 

   1.2 Usages 
    

      In this agreement
    and the certificates, unless otherwise stated or the context otherwise clearly
    requires, the following usages apply:
    

    •    “This
    agreement,” “herein,” “hereof” and words of similar
    import when used in this agreement will refer to this agreement. 

    •    In
    computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from
    and including,” and the words “to,” “until” and “ending
    on” (and the like) mean “to but excluding.” 

    •    An
    action permitted under this agreement may be taken at any time and from time
    to time. Except as otherwise indicated, a permitted action may be taken in
    the actor’s sole discretion. References to a person’s taking action
    include the person’s refraining from action. Thus, a statement that a
    person “may take any action that ... “ means that a person may
    take or refrain from taking any action that ....  

    •        All
    indications of time of day mean New York City time.  

    •     “Including”
    means “including, but not limited to.” “A or B” means
    “A or B or both.”  

  
  

  
 •      References
  to an agreement (including this agreement) will refer to the agreement as amended
  at the relevant time.  

  •      References
  to numbered sections or paragraphs in this agreement will refer to sections
  or paragraphs of this agreement, and such section references will include all
  included sections. For example, a reference to section 6 will be to section
  6 of this agreement, and also to sections 4.1, 4.2, etc.
  

  •      References
  to an exhibit in this agreement will refer to all included numbered subdivisions
  of the exhibit. For example, references to exhibit A will also refer to subdivisions
  A-1, A-2, etc.
  

  •      References
  to a statute include all regulations promulgated under or implementing the statute,
  as in effect at the relevant time. References to a specific provision of a statute
  includes successor provisions.  

  •      References
  to any governmental or quasi-governmental agency or authority will include any
  successor agency or authority.  

  •      Where
  a decimal appears that has been shortened, it will be rounded according to the
  usual rules; that is, if the decimal is only shown to x places, the last number
  (in the xth place) will be raised by one if the following number (in the x+1st
  place) is 5, 6, 7, 8 or 9.  

   1.3 Calculations
    respecting mortgage loans  

    (a)     In connection with all calculations
    required to be made pursuant to this agreement for remittances on any mortgage
    loan, any payments on the mortgage loans or
    any payments on any other assets included in a Trust Fund, the rules set
    forth in this section 1.2 will be applied.  

     (b)     Calculations
for remittances on mortgage loans will be made on a mortgage-loan-by-mortgage-loan
basis, based upon current information as to the terms of  

  

  

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 such mortgage
  loans and reports of payments received on such mortgage loans supplied to CitiMortgage
  by the person responsible for the servicing thereof and satisfying such requirement,
  if any, as may be set forth in section 3.  

     (c)
  Each remittance receivable on a mortgage loan will be assumed to be received
  on the first day of the month.  

2    Transfer of mortgage loans and issuance of certificates;
repurchase
and substitution 

 2.1 Transfer
  of mortgage loans  

  (a) CMSI,
  as of the closing date, hereby transfers and assigns to the Trustee, without
  recourse, all of CMSI’s
  right, title and interest in and to 

  •      the
  mortgage loans, including all remittances received or receivable by CMSI
  on or with respect to the mortgage loans (other than payments of principal and
  interest due and payable on the mortgage loans, and principal prepayments thereon
  received, on or before the cut-off date), and 

  •      the
  proceeds of any title, primary mortgage, hazard or other insurance policies
  related to the mortgage loans. 

     Such
  transfer and assignment is absolute, is made in exchange for the certificates
  described in section 12, and is intended by the parties to be a sale. Nonetheless,
  to the extent such transfer is held not to be a sale under applicable law, it
  is intended that this agreement shall be a security agreement under applicable
  law, and CMSI
  shall be deemed to have granted to the Trustee, for the benefit of the certificate
  holders and any Insurer, a security interest in the Trust Fund, including the
  mortgage loans, mortgage notes and related documents. CMSI
  will,
  at its own expense, take any action reasonably requested by the Trustee to confirm,
  perfect, and protect the priority of, the

  
  

  
 security
  interest granted hereby, including the filing of Uniform Commercial Code financing
  statements in the appropriate jurisdictions.  

     CMSI
  will not transfer any other property to the Trust Fund except as expressly permitted
  by this agreement.  

     The
  Trustee acknowledges receipt of the documents and other property referred to
  in section 2.1, and declares that the Trustee will hold such documents and other
  property, including property yet to be received in the Trust Fund, in trust,
  upon the trusts herein set forth, for the benefit of all present and future
  certificate holders and any Insurer. 

     (b)
  The Trustee and CitiMortgage have entered into a Mortgage
  Document Custodial Agreement
  substantially in the form of exhibit C with the Mortgage
  Document Custodian
  named in section 12.1. The Mortgage Document Custodian will hold the mortgage
  documents in trust for the Trustee and the benefit of the Trustee, any Insurer
  and all present and future certificate holders. The Mortgage Document Custodian
  may be the Trustee, any affiliate of the Trustee, an affiliate of CMSI,
  or an independent entity. 

     The
  Trustee may at any time remove the initial or any successor Mortgage Document
  Custodian, and enter into a Mortgage Document Custodial Agreement substantially
  in the form of exhibit C hereto pursuant to which the Trustee appoints a successor
  Mortgage Document Custodian to hold the Mortgage Documents in trust for the
  Trustee and the benefit of the Trustee, all present and future certificate holders,
  and any Insurer, which Agreement may provide that the Mortgage Document Custodian
  shall conduct the review of each Mortgage File required under the first paragraph
  of this section 2.1, except that, if the Mortgage Document Custodian so appointed
  is CMSI

  

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   or an affiliate of CMSI,
    the Trustee may conduct such review.  

     (c)
    CMSI
    will on or before the closing date deliver to the Mortgage Document Custodian
    on behalf of the Trustee to be held in trust the following documents or instruments
    for each mortgage loan (other than mortgage loans secured by shares in a cooperative
    housing corporation) (except to the extent CMSI
    is complying with section 2.1(f)): 

     (i) The mortgage note, endorsed by manual or
    facsimile signature without recourse by the Originator or an affiliate of
the Originator in blank or to the Trustee showing a complete chain of endorsements
from the named payee to the Trustee or from the named payee to the affiliate
    of the Originator and from such affiliate to the Trustee, except that endorsement
is not required where Mortgage Electronic Registration Systems, Inc. (MERS)
    is the named payee or the nominee of the named payee.  

     (ii)
    The original recorded mortgage, with evidence of recording thereon or a copy
    of the mortgage certified by the public recording office in those jurisdictions
    where the public recording office retains the original.  

     (iii)
    Any original assumption, modification, buydown or conversion-to-fixed-interest-rate
    agreement applicable to the mortgage.  

     (iv)
    An assignment from the Originator or an affiliate of the Originator to the
    Trustee in recordable form of the mortgage which may be included, where permitted
    by local law, in a blanket assignment or assignments of the mortgage to the
    Trustee, including any intervening assignments and showing a complete chain
    of title from the original mortgagee named under the mortgage to the Originator
    or an affiliate of the Originator and to the Trustee, except
    that (x) if the mortgage is registered with MERS,

 only assignments from
    the origination of the mortgage to its assignment to MERS
  will be required, and (y) if the mortgage was originated with MERS as
  the original mortgagee (a “MOM loan”),
  no interim assignment will be required.  

     (v)
  The original or a copy of the title insurance policy (which may be a certificate
or a short form policy relating to a master policy of title insurance) pertaining
to the mortgaged property, or in the event such original title policy is unavailable,
a copy of the preliminary title report and the lender’s recording instructions,
with the original to be delivered within 180 days of the closing date or other
evidence of title.  

     (vi)
  Any related primary mortgage insurance certificate and related policy or a copy
  thereof.  

     (d)
  CMSI
  will on or before the closing date deliver to the Mortgage Document Custodian
   on behalf of the Trustee to be held in trust the following documents or instruments

  for each mortgage loan secured by shares in a cooperative housing corporation
   (except to the extent CMSI
  is complying with section 2.1(f)):

     (i) The mortgage note, endorsed by manual
   or facsimile signature without recourse by the Originator or an affiliate
  of
  the Originator in blank or to the Trustee showing a complete chain of endorsements
   and assignments from the named payee to the Trustee or from the named payee

  to the affiliate of the Originator and from such affiliate to the Trustee. 
  

     (ii)
  The original mortgage, with evidence of recording thereon (if recordation was
  required under applicable law).  

     (iii)
  Any original assumption, modification, buydown or conversion-to-fixed-interest-rate
  agreement applicable to the mortgage.  

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      (iv)
The original stocks, shares, membership certificate or other contractual agreement
evidencing ownership; (v) The original stock power executed in blank.

     (vi) The original executed security agreement or similar document and all assignments thereof showing a complete chain of assignment from the named secured party to the Trustee. 

     (vii)
The original executed proprietary lease or occupancy agreement and all assignments
thereof showing a complete chain of assignment from the named secured party to
the Trustee.

     (viii)
The original executed recognition agreement and any executed assignments of recognition
agreement showing a complete chain of assignment from the named secured party
to the Trustee.

     (ix)
(Except for mortgage loans (x) secured by mortgaged properties in the State of
New Jersey or (y) originated prior to Oc-tober 1988 and secured by mortgaged
properties in the State of New York) the executed UCC-1 financing statement with
evidence of recording thereon and executed original UCC-3 financing statements
or other appropriate UCC financing statements required by state law, evidencing
a complete and unbroken chain from the mortgagee to the Trustee with evidence
of recording thereon (or in a form suitable for recordation).

     (x)
Any related primary mortgage insurance certificate and related policy.

     (e) CMSI will, on or before the closing date, deposit in the certificate account 

•     all payments on the mortgage loans that CMSI receives after the cut-off date and before the closing date, to the extent such payments are being transferred and assigned to the Trustee under this agreement, except any portion of such payments on mortgage loans (including servicing fees) of a type not

required to be deposited therein as specified in section 11 or the Series Terms, and

•     any amount required to be so deposited under the Series Terms. 

     (f)
If CMSI is
required under this section 2.1 to deliver an original recorded mortgage or a
completed assignment in recordable form to the Mortgage Document Custodian by
the closing date, but can not do so because of a delay in recording the mortgage, CMSI may
instead

•      deliver
a copy of the mortgage, provided that CMSI certifies that the original mortgage has been delivered to a title insurance company for recordation after receipt of its policy of title insurance or binder therefor (which may be a certificate relating to a master policy of title insurance), and

•      an
assignment to the Trustee completed except for recording information.

     In all such instances, CMSI will deliver the original recorded mortgage and completed assignment (if applicable) to the Mortgage Document Custodian promptly upon receipt of such mortgage.

     If an original recorded mortgage has been lost or misplaced, CMSI or the related title insurance company may deliver, in lieu of the mortgage, a copy of the mortgage bearing recordation information and certified as true and correct by the office in which the original mortgage was recorded.

     If CMSI can not deliver the original or a copy of a title insurance policy (which may be a certificate relating to a master policy of title insurance) for a mortgaged property to the Mortgage Document Custodian by the closing date because the policy is not yet available, CMSI may instead deliver a binder for the policy, and deliver the original or a copy of the policy to the Trustee when available.

     If CMSI can not deliver an original assumption, modification, buydown or conversion-to-fixed-interest-rate agreement to

 

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the Mortgage
Document Custodian by the closing date, CMSI may
instead deliver a certified copy thereof. CMSI will
deliver the original assumption, modification, buy-down or conversion-to-fixed-interest-rate
agreement to the Trustee promptly upon receipt thereof.

     CMSI will,
at its own expense, prepare and deliver to the Mortgage Document Custodian each
assignment referred to in clause (a)(iv) or (b)(vi) and (b)(ix) above as soon
as practicable but not later than 60 days after the date of initial issuance
of the certificates. For each mortgage relating to a mortgaged property located
in a state for which the rating agencies require recordation of such assignments
(as will be specified in the Series Terms or a CMSI officer’s
certificate), CMSI intends
to record the assignment in the appropriate public office for real property records
(or supply the Mortgage Document Custodian with evidence of recordation) as soon
as practicable after the initial issuance of the certificates. Except as provided
in this section, neither CMSI nor
any Originator or affiliate of any Originator will have any obligation to record
any assignment of any mortgage in order to name the Trustee as mortgagee of record.
The preceding sentence will not be in derogation of the obligation of CMSI,
the Originators and affiliates of the Originators to record (and supply the Mortgage
Document Custodian with evidence thereof) assignments of mortgages required in
order that CMSI,
an Originator or an affiliate of an Originator be shown as mortgagee of record
of each mortgage.

     CMSI will, at its own expense, record any UCC-3 financing statements not previously recorded, and will supply the Mortgage Document Custodian with evidence of the recordation. CMSI intends to effect recordation in the appropriate public office as soon as practicable after the initial issuance of the certificates. 

      For
mortgage loans that have been prepaid in full after the cut-off date and prior
to the closing date, CMSI,
in lieu of delivering the above documents to the Mortgage Document Custodian,
will on the closing date deliver a certification of a Servicing Officer as set
forth in section 3.13.

     (g)
Concurrently with the transfer and assignment to the Trustee of the mortgage
loans, the Trustee will, in accordance with a written order or request signed
in CMSI’s
name by an Authorized Officer, authenticate and deliver to or upon CMSI’s
order, certificates duly authenticated by the Trustee in authorized denominations
evidencing the entire ownership of the Trust Fund. The Trustee acknowledges that
to the extent it holds any class P or class L regular interests, it holds such
regular interests as assets of the lower-tier or upper-tier REMIC, as
described in the Series Terms.

     (h) CMSI and
the Trustee agree and understand that it is not intended that any mortgage loan
be included in the Trust that is a “High-Cost Home Loan,” as defined in either the Indiana High Cost Home Loan Law, effective January 1, 2005, the New Jersey Home Ownership Security Act of 2002, effective November 27, 2003, or the New Mexico Home Loan Protection Act, effective January 1, 2004, or a “high cost home mortgage loan,” as
defined in the Massachusetts Predatory Home Loan Practices Act, effective November
9, 2004. 

2.2 CMSI’s representations
and warranties

CMSI represents and warrants to the Trustee and any Insurer that: (i) The information in exhibit B was true and correct in all material respects as of the dates respecting which such information is furnished, and the information provided to the rating agencies, including the loan-

 

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level detail, is true and correct according to rating agency requirements.  

     
(ii) As of the closing date, each mortgage will be a valid first lien on the property securing the related mortgage note subject only to 

•      the
lien of current real property taxes and assessments as limited in clause (vi)
below, 

•      covenants,
conditions and restrictions, rights of way, easements and other matters of public
record as of the date of recording of the mortgage, which exceptions appearing
of record are acceptable to mortgage lending institutions generally or specifically
reflected in the appraisal obtained in connection with the origination of the
related mortgage loan, 

•      other
matters to which like properties are commonly subject that do not in the aggregate
materially interfere with the benefits of the security intended to be provided
by the mortgage, and 

•      for
a mortgage on a cooperative apartment in a cooperative housing corporation, the
right of the related cooperative to cancel the related shares and terminate the
proprietary lease for unpaid assessments (general and special) owed by the mortgagor;

     (iii)
Immediately before the transfer and assignment of the mortgage loans to the Trustee, CMSI has
good title to, and is the sole legal owner of, each mortgage loan (except as
set forth in clause (v) below) and immediately upon the transfer and assignment, CMSI will
have taken all steps necessary so that the Trustee will have good title to, and
will be the sole legal owner of, each mortgage loan (except as set forth in clause (v) below);

     (iv) As
of the cut-off date, no payment of principal
of or interest on any mortgage loan was 30 days or more past due (a mortgage
loan being considered 30 days past due in a given month when payment due

on the first day of the prior month has not been made on or before the last day
of such prior month) or has been 30 days or more past due more than once for
the twelve months preceding the cut-off date; 

     (v) As of the closing date, there is no mechanics’ lien
or claim for work, labor or material affecting the mortgaged property that is
or may be a lien prior to, or equal with, the lien of the mortgage except those
that are insured against by the title insurance policy referred to in (x) below; 

     (vi) As of the closing date, there is no delinquent
tax or assessment lien against any mortgaged property; 

     (vii) As of the closing date, there is no valid
offset, defense or counterclaim to any mortgage note or mortgage, including the
obligation of the mortgagor to pay the unpaid principal and interest on the mortgage
note; 

     (viii) As of the closing date, each mortgaged property
is free of material damage and is in good repair; 

     (ix) Each mortgage at the time it was originated
complied in all material respects with applicable state, local and federal laws,
including, without limitation, all applicable usury, equal credit opportunity,
recording, disclosure and predatory lending laws. No mortgage loan is a high
cost loan under the predatory lending law of any jurisdiction in which a mortgaged
property is located, no mortgage loan is a “High Cost Loan” or “Covered
Loan,” as such terms are defined in the current version of Standard & Poor’s
LEVELS® Glossary, (Version 5.6 Revised, Appendix E), and no mortgage loan
originated on or after October 1, 2002 through March 6, 2003 is governed by the
Georgia Fair Lending
Act; 

     (x) A lender’s title insurance policy or binder
approved as such by Fannie Mae or the FHLMC, or other assurance of title customary in the relevant jurisdiction, was is-

 

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sued on the date of the origination of each mortgage loan (other than a mortgage loan for a cooperative apartment), and, as of the closing date, each such policy, binder or assurance is valid and in full force and effect; 

     (xi) The mortgage loans conform in all material
respects with their descriptions in the prospectus relating to the certificates;

     (xii) Each mortgage loan with an original principal
balance exceeding 80% (or, for certain mortgage loans originated before 1995,
90%) of its original value is covered by primary mortgage insurance at least
until its outstanding principal balance is less than or equal to 80% of the original
value, either through principal payments by the mortgagor or as determined by
a new appraisal delivered subsequent to origination. So long as it is in effect,
the primary mortgage insurance covers losses from defaults in an amount equal
to the excess, of the outstanding principal balance of the mortgage loan over
75% of the original value of the mortgage loan; 

     (xiii) The original principal balance of each mortgage
loan was not more than 95% of the original value of the mortgage loan;

     (xiv) For each buydown mortgage loan, the buydown
funds deposited in the buy-down account, if any, will be sufficient, after crediting
interest at the rate per annum, if any, specified in the buydown agreement compounded
monthly to the buydown account and adding the amounts required to be paid by
the mortgagor, to make the scheduled payments stated in the mortgage note for
the term of the buydown subsidy agreement; 

     (xv) Each mortgage loan is a “qualified mortgage” within
the meaning of Section 860G(a)(3) of the Internal Revenue Code.

     The representations and warranties in this section 2.2 will survive delivery of the mortgage files to the Trustee.

2.3 Repurchase or substitution of mortgage loans

(a) Each of CMSI, CitiMortgage and the Trustee will promptly notify the other parties if it discovers a breach of any of the representations and warranties in section 2.2 that materially and adversely affects the interests of the certificate holders or any Insurer in a mortgage loan (including a mortgage loan substituted for a nonconforming mortgage loan pursuant to section 2.4) (a material breach). 

     (b) Pursuant to the Mortgage Document Custodial
Agreement, the Mortgage Document Custodian will review each mortgage file within
90 days after the closing date to ascertain that all required documents have
been executed, received and recorded, if applicable, and that such documents
relate to the mortgage loans identified in exhibit B. If the Mortgage Document
Custodian finds that a document in a mortgage file is missing or materially defective,
the Mortgage Document Custodian will promptly notify CitiMortgage and CMSI by e-mail.

     (c) If CMSI is notified of a material breach, CMSI will have 60 days after the notice (or a longer period approved in advance in writing by a Responsible Officer of the Trustee) to cure the breach in all material respects, or to repurchase the mortgage loan or substitute eligible substitute mortgage loans, as provided in this section 2.3.

     If CMSI is notified by the Mortgage Document Custodian that the documentation for a mortgage loan is defective, CMSI will have 180 days after the notice to cure the breach in all material respects, or to repurchase the mortgage loan or substitute eligible substitute mortgage loans, as provided in this section 2.3, except that CMSI will only have 90 days after the notice to cure, cure, repurchase, or substitute if the defect causes the mortgage loan to fail to be

 

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a “qualified
mortgage” under Internal Revenue Code section 860G(a)(3).

     (d) Any repurchase by CMSI of a mortgage loan will be at a price equal to

     (i) 100% of the scheduled principal balance of
the mortgage loan on the date of repurchase, plus

     (ii) accrued and unpaid interest thereon at the
pass-through rate to the first day of the following month, plus 

     (iii) any costs and damages incurred by the Trust
Fund in connection with any violation by such mortgage loan of any predatory
lending law, plus

     (iv) aggregate outstanding advances for the mortgage
loan, to the extent not recovered in (ii) above.

    (e) CMSI will
pay the repurchase price to CitiMortgage, which will promptly deposit the repurchase
price in the certificate account. A repurchase of a mortgage loan under this
section 2.3 will be considered a prepayment in full of the mortgage loan on the
date of repurchase. Upon the Trustee’s receipt of written notice of the
deposit signed by an Authorized Officer of CitiMortgage, the Trustee will direct
the Mortgage Document Custodian to release the related mortgage file to CMSI and will execute and deliver such instruments of transfer or assignment furnished to the Trustee, in each case without recourse, as CMSI reasonably requests, to vest the mortgage loan in CMSI. Repurchase of the mortgage loan by CMSI will be deemed to include the right to receive any remittance on the mortgage loan payable or received on or after the date of repurchase, and CitiMortgage will, upon receipt, promptly pay CMSI the amount of any such remittance.

     (f) CMSI may, instead of repurchasing a mortgage loan pursuant to this section 2.3, substitute one or more eligible substitute mortgage loans (as defined below) for one or more nonconforming mortgage loans.

Such a substitution will take place on a business day designated by CMSI (the substitution day) occurring before the second anniversary of the startup day, subject to satisfaction of the conditions in section 2.1 and the following conditions: 

     (i) no Event of Default is continuing; and 

     (ii) the aggregate scheduled principal balance of all eligible substitute mortgage loans substituted on the substitution day (determined for each eligible substitute mortgage loan as of the substitution day) does not exceed 40% of the aggregate scheduled principal balance of all mortgage loans as of the closing date; 

     (g) An eligible substitute mortgage loan: is a mortgage loan 

•      for
which all payments of principal and interest due on or before the substitution
day have been received, 

•       that
has a mortgage note rate equal to or greater than the highest mortgage note rate
of any mortgage loan for which it is being substituted, 

•      that
matures no later than, and no more than one year before, any mortgage loan for
which it is being substituted, 

•      that
has an original term to maturity equal to each mortgage loan for which it is
being substituted, and 

•      that
has a scheduled principal balance that, together with any other eligible substitute
mortgage loans being substituted on that substitution day, and any funds CMSI deposits in the certificate account relating to the substitution (the substitution adjustment amount) equals or exceeds the mortgage loans for which they are being substituted. 

     The substitution adjustment amount will be separately accounted for as a reserve fund in the certificate account and will be remitted to certificate holders in the month following receipt when the repurchase proceeds are remitted to compensate for the

 

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resulting shortfall incurred in connection with the substitution of mortgage loans. 

      (h)   If,
      on the substitution day, any installment of principal and interest has
      been received in the certificate account where the principal portion has
      not been applied to reduce the scheduled principal balance of the mortgage
      loan that is being substituted for, because the installment was received
      before the first day of the applicable month, the full amount of such prepaid
      installment will be paid on the substitution day to CMSI from
      the certificate account.] 

     (i)   Upon a substitution of mortgage loans pursuant
to this section 2.3, 

•      exhibit
B to this agreement will be deemed to be amended to exclude all mortgage loans
being replaced by such eligible substitute mortgage loans and to include, pursuant
to section 10.1, the information in the supplemental mortgage loan schedule regarding
the eligible substitute mortgage loans, and all references in this agreement
to mortgage loans will include such eligible substitute mortgage loans, 

•      CMSI will be deemed to represent and warrant, as of the substitution day, that the representations and warranties in section 2.2 are true of the eligible substitute mortgage loans, and 

•      the
Trustee will release to CMSI the nonconforming mortgage loans and execute and deliver any instruments of transfer or assignment required to transfer, without recourse, the nonconforming mortgage loans to CMSI. 

     (j) CMSI’s
obligation under this section 2.3 to repurchase or substitute mortgage loans
will be the sole remedy against CMSI available to the certificate holders or the Trustee on behalf of the certificate holders for a material defect in a mortgage document or a breach of a representation and warranty in section 2.2. 

3     Servicing

3.1 CitiMortgage
  as servicer and master servicer

  (a) Affiliated mortgage loans. CitiMortgage will service those mortgage loans listed in exhibit B, other than any mortgage loans listed on schedule B-TP (the affiliated mortgage loans).

       (b) Third
  party mortgage loans.
  The mortgage loans listed in schedule B-TP to exhibit B (third
  party mortgage loans)
  will be serviced by a third
  party servicer pursuant
  to this agreement, a third
  party servicing agreement between
  CitiMortgage and the third party servicer, and the Guide. CitiMortgage will be
  the master
  servicer for
  each third party mortgage loan. Each third party servicing agreement will be
  consistent with this agreement and, except for special servicing agreements,
  will be effective as of the closing date.

       (c) Special servicing. CitiMortgage may enter into a special servicing agreement with an unaffiliated person who at all times holds, or is an affiliate of a person who holds, 100% of the beneficial interest in the most subordinated class of certificates (the special servicer). The special servicing agreement will provide for the servicing by the special servicer of certain affiliated mortgage loans in default and REO property (special serviced mortgage loans).
  The special servicing agreement will be subject to each rating agency’s acknowledgement that the ratings of the certificates in effect immediately prior to CitiMortgage’s
  entering into the special servicing agreement will not be qualified, downgraded
  or withdrawn, and that the certificates will not be placed on credit review status
  (except for possible upgrading) as a result of the agreement.

     CitiMortgage will be the master servicer and the special servicer will be a third party servicer for the special serviced mortgage

 

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loans. Except as otherwise stated or as the context clearly requires, references in this agreement to third party mortgage loans will include special serviced mortgage loans, and references to third party servicing agreements will include special servicing agreements. 

     
(d) Third party servicing.
With CitiMort-gage’s approval, a third party servicer may delegate its servicing
obligations, but the third party servicer will remain obligated under its third
party servicing agreement. CitiMortgage and any third party servicer may amend
the third party servicing agreement, consistent with this agreement. 

     CitiMortgage
will enforce each third party servicer’s obligations under its third party
servicing agreement, including any obligation to make advances for delinquent
payments or to purchase a mortgage loan on account of defective documentation
or a breach of a representation or warranty. Such enforcement, including the
legal prosecution of claims, termination of third party servicing agreements,
and the pursuit of other appropriate remedies, will as to form, extent and timing
be conducted as CitiMortgage, in its good faith business judgment, would require
if it were the owner of the mortgage loans. CitiMortgage will pay the costs of
enforcement at its own expense, but will be reimbursed only from 

•      a
general recovery resulting from the enforcement only to the extent that the recovery
exceeds all amounts due on the mortgage loans, or 

•      a
specific recovery of costs, expenses or attorneys fees against the party against
whom the enforcement is directed.

     (e) Servicing generally. In connection with its servicing and master servicing, Citi-Mortgage 

•      may,
acting alone or through third party servicers, take any action it deems necessary
or desirable.

•      may
execute and deliver on behalf of itself, the certificate holders or the Trustee
any instruments of satisfaction or cancellation, or of partial or full release
or discharge and all other comparable instruments, for the mortgage loans and
the related mortgaged properties.

•      will
service and master service the mortgage loans in the best interests of, and for
the benefit of, the certificate holders and any Insurer. 

•      will
service the affiliated mortgage loans in accordance with its normal servicing
procedures for mortgage loans held in its own portfolio.

•      will
master service the third party mortgage loans, in accordance with prudent mortgage
loan servicing standards and procedures accepted in the mortgage banking industry
and in accordance with the Guide. 

•      will
promptly notify the Trustee of any circumstance that might adversely affect CitiMortgage’s
ability to service or master service any mortgage loan or to otherwise perform
its obligations under this agreement.

•      will
maintain accurate books and records, and an adequate system of audit and internal
controls, that will permit the Trustee, or its duly authorized representatives
and designees, to examine and audit and make legible reproductions of records
during reasonable business hours. All such records will be maintained for the
period required by the Guide or any longer period required by law. 

     The Trustee will furnish CitiMortgage with any powers of attorney and other documents reasonably necessary or appropriate, and will take any other actions that CitiMortgage reasonably requests, to enable CitiMortgage to carry out its servicing duties. 

 

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3.2 Collections

CitiMortgage and each third-party servicer will, to the extent consistent with this agreement,

•     follow
  such normal collection procedures as it deems necessary and advisable, and

•    make
    reasonable efforts to collect all amounts payable on the mortgage loans it
  services.

     Consistent
with the foregoing, CitiMort-gage may

•      waive
any late payment charge, prepayment charge or penalty interest in connection
with the prepayment of a mortgage loan or any assumption fees or other fees collected
in the ordinary course of servicing the mortgage loan, and 

•      arrange
with a mortgagor a schedule for the payment of principal and interest due and
unpaid after the applicable first day of the month if CitiMortgage reasonably
believes that without the arrangement the mortgagor would default on the mortgage
loan. Regardless of whether such an arrangement is made, the mortgage loan will
be considered delinquent for all purposes of this agreement. 

     CitiMortgage need not institute litigation to collect any payment if it reasonably believes that the cost of litigation is likely to outweigh its economic benefit.

3.3 Certificate and other accounts

(a) Certificate account. On or before the closing date, CitiMortgage will open with Depositories or the Paying Agent one or more certificate accounts (collectively, the certificate account). The certificate account will include any alternative certificate account. The certificate account will be a non-interest bearing account unless the Series Terms state that the certificate account is an investment account. 

     CitiMortgage will not commingle funds and other property in the certificate account

with any other funds or property of Citi-Mortgage or the Trustee. However, in order to efficiently transfer funds in the certificate account to a distribution account, CitiMort-gage may, on the business day preceding the date funds are to be transferred from the certificate account to the distribution account, transfer those funds to a commingled clearance account, provided,
that if Fitch has rated the certificates, CitiMortgage may not so commingle funds
unless CitiMortgage’s short-term rating, or the short-term rating of any person to whom CitiMortgage has delegated servicing under this agreement, by Fitch is at least “F1.” The clearance account will be under CitiMortgage’s
sole control, and CitiMortgage will maintain adequate records indicating the
ownership of the funds in the clearance account. 

     CitiMortgage, on behalf of the Trustee, will deposit in the certificate account, within one business day following receipt and posting, the following amounts received by it on the affiliated mortgage loans (remittances on the affiliated mortgage loans): 

•      all
principal payments and prepayments (other than payments due, and principal prepayments
received, on or before the cutoff date); 

•      all
interest payments (other than payments due on or before the cut-off date), net
of any servicing fee retained by CitiMort-gage pursuant to section 3.8(b); 

•      any
buydown funds required to be deposited pursuant to section 3.16; 

•      all
net liquidation proceeds, other than proceeds to be applied to the restoration
or repair of the related mortgaged property or released to the related mortgagor
in accordance with normal servicing procedures; 

•      proceeds
from the repurchase of a mortgage loan, and the substitution adjustment amount
in connection with an eligible substitute mortgage loan; 

 

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	•      all
      hazard insurance proceeds; 

•      any
advance account advance; 

•      any
loss recoveries; and

  •      the
  amount CitiMortgage is required to pay into the certificate account pursuant
  to section 3.4, “Prepayment interest shortfalls.” 

      If CitiMortgage must repay any amount deposited
in the certificate account, by reason of the reversal of a provisional credit
owing to the dishonor of a mortgagor’s check or otherwise, CitiMortgage
will promptly 

•      withhold
a corresponding amount from a subsequent deposit into the certificate account,
and 

•      restate
its accounts appropriately.

      CitiMortgage
need not deposit in the certificate account
	• 	amounts required to be deposited into the servicing account,
	• 	collected servicing fees,
      except as required by section 3.4, “Prepayment interest shortfalls,” late
	• 	prepayment charges,	payment charges, assumption fees and other similar charges, which CitiMortgage may retain as additional servicing compensation, and
	• 	reimbursements of property protection expenses, received on affiliated mortgage loans.
	     (b) Servicing
        accounts.
        CitiMortgage will establish and maintain servicing
        accounts with
        Depositories, and will deposit therein all collections of taxes, assessments,
        primary mortgage or hazard insurance premiums or comparable items for
        the account of the mortgagors. CitiMortgage may withdraw funds from the
        servicing account, but only 

•     
        to
      effect payment of taxes, assessments, primary mortgage or hazard insurance
      premiums or comparable items, 

•     
      to
      reimburse the relevant servicer for costs incurred in effecting the timely
      pay-  

 

  

  

    ment of taxes and assessments on a mortgaged property, for servicing account advances, and for payments made pursuant to section 3.1 regarding timely payment of taxes and assessments, section 3.10 regarding premiums on primary mortgage insurance policies, and section 3.11 regarding premiums on standard hazard insurance policies, or 
  •      to
    refund to a mortgagor any amounts determined to be overages, or to pay interest
    owed to mortgagors on such account to the extent required by law, or to clear
    and terminate such accounts at the termination of this agreement in accordance
    with section 9.1. 

             The
    servicing account may commingle collections from other series that have the same
    Trustee. The servicing account will be a non-interest bearing account unless
    the Series Terms state that the servicing account is an investment account.

           Any costs incurred by the relevant servicer in effecting the timely payment of taxes and assessments on a mortgaged property will not, for the purpose of calculating monthly distributions to certificate holders, be added to the amount owing under the related mortgage loan, even if the terms of the mortgage loan so permit. 

           (c) Third party accounts. CitiMortgage will establish and maintain with Depositories segregated custodial
    accounts for P&I and segregated escrow accounts in
    accordance with the requirements of the Guide. Each third party servicer will
    deposit in such accounts, within two business days of receipt and posting,
    the amounts related to the third party mortgage loans required by the third
    party
    servicing agreements to be so deposited. Amounts in a custodial account for
    P&I
    will be fully insured by the FDIC or the National Credit Union Share Insurance Fund. To the extent amounts in a custodial

 

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account for
P&I are not fully insured, the excess will either, at CitiMortgage’s
option,

•      be
promptly remitted to the certificate account or a custodial investment account,
or 

•      be
secured by one or more Eligible Investments maturing not later than the determination
date, provided that the Trustee has received an opinion of counsel acceptable
to the Trustee to the effect that Citi-Mortgage has either a claim to the funds
held by the institution or a perfected first security interest against such Eligible
Investments superior to the claims of any other depositor or general creditor
of such institution. 

     Proceeds
received on individual third party mortgage loans from a title, hazard or other
insurance policy covering the mortgage loan, other than a primary mortgage insurance
policy, will be deposited first in the applicable escrow account if required
for the restoration or repair of the related mortgaged property. Proceeds from
such insurance policies not so deposited in the applicable escrow account and
proceeds from primary mortgage insurance policies will be deposited in the custodial
account for P&I and will be applied to the balances of the related third
party mortgage loans as payments of interest and principal.

     Third
party servicers may withdraw funds from custodial accounts for P&I as permitted
by this agreement and in accordance with the Guide. The Trustee will have no
responsibility for monitoring such withdrawals.

     CitiMortgage
will maintain separate accounting on a mortgage loan-by-mortgage loan basis for
any remittances to or payments from the custodial accounts for P&I. 

     (d) Transfers from third party accounts to certificate account.
On each determination date, each third party servicer will withdraw from its
custodial accounts for P&I

and deposit into the certificate account the following amounts (remittances on third party loans): 

•      scheduled
installments of principal and interest on the third party mortgage loans received
by the third party servicers that were due on the first day of that month, net
of third party servicing fees due third party servicers; 

•      principal
prepayments and insurance proceeds, net of third party servicing fees due third
party servicers, received in the preceding month; 

•      liquidation
proceeds on a third party mortgage loan. 

     (e) Accounts generally.
The certificate account, the servicing account, each custodial account for P&I,
the escrow account and the distribution account will each bear a designation
clearly indicating that the funds in the account are held for the benefit of
the Trustee or the certificate holders. CitiMort-gage, each third party servicer,
and the Paying Agent will hold all money and property received by it as part
of the Trust Fund and will apply it as provided in this agreement, except that amounts from buydown funds required to be deposited pursuant to section 3.16 will be held by CitiMortgage in the buydown account on behalf of the mortgagors, subject to withdrawal by CitiMortgage for the purposes set forth in sections 3.6(b) and (c).

3.4 Prepayment interest shortfalls 

(a) Affiliated mortgage loans. CitiMortgage will deposit in the certificate account on the business day preceding each distribution day the aggregate prepayment interest shortfall on the affiliated mortgage loans for the preceding month provided that such deposit need not exceed the lesser of 

•      the
aggregate amount of the collected servicing fees on the affiliated mortgage 

 

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loans for the month preceding such distribution day and 

•      one-half
the scheduled servicing fee on the affiliated mortgage loans for that month. 

     
Such deposit will not be considered to be a voluntary advance by CitiMortgage, and will not be reimbursable to CitiMortgage from the certificate account or otherwise. 

     (b) Third party mortgage loans. Each third party servicer will transfer to the certificate account on each determination date the aggregate amount required under the Guide to be paid by third party servicers in respect of prepayment interest shortfalls on third party mortgage loans for the preceding month. 

     (c) Each third party servicer will deposit in the certificate account on the business day preceding each distribution day the aggregate prepayment interest shortfall on its third party mortgage loans for the preceding month, provided that the aggregate of such deposits for all third party loans for any distribution day will be reduced by any amounts paid by the third party servicer under the preceding paragraph (b) on the preceding determination date. 

3.5 Advances 

(a) Servicing account advances. CitiMortgage will deposit in the servicing account the payment of property taxes and insurance premiums and other similar payments relating to the third party mortgage loans that are not timely paid by the mortgagors or advanced by the third party servicers on the date when such tax, premium or other cost for which such payment is intended is due. 

     (b) Remittance delinquencies. For each distribution day, a remittance delinquency:

•      on
an affiliated loan is the originally scheduled interest at the pass-through rate,
and principal installment (as adjusted for any principal prepayments), on the
mortgage loan due from the mortgagor on (but

not before) the first day of the month but not received in the certificate account
by close of business on the third business day before the distribution day. 

•      on
a third party loan is the originally scheduled interest at the pass-through rate,
and principal installment (as adjusted for any principal prepayments), on the
mortgage loan due from the mortgagor on (but not before) the first day of the
month but not received in the certificate account by close of business on the
determination date for the distribution day. 

•      on
a buydown mortgage loan is the accrued and unpaid interest at the related pass-through
rate, and the principal installment (as adjusted for any principal prepayments)
on the mortgage loan due from the related buydown account on (but not before)
the first day of the month but not received in the certificate account by close
of business on (a) the third business day before the distribution day (for a
buydown mortgage loan that is an affiliated loan) or (b) the determination date
(for a buydown mortgage loan that is a third party mortgage loan). 

     A
remittance delinquency does not include an apparent remittance delinquency that
is determined by CitiMortgage to be the result of the occurrence of an extraordinary
event (but not including a remittance delinquency determined to be eligible for
an advance pursuant to this section 3.5).

     (c) Advances by third party servicers. To the extent required by its third party servicing agreement, each third party servicer will transfer to the certificate account, on the determination date, any amount required to be advanced under its third party servicing agreement (a third party servicer advance).

     (d) Uncommitted cash advances. On the business day before each distribution day, CitiMortgage will transfer from the certificate account to the distribution account 

 

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•      uncommitted
cash related to affiliated mortgage loans in an amount not greater than the remittance
delinquencies on the affiliated mortgage loans for that distribution day, and 

•      uncommitted
cash relating to third party mortgage loans in an amount not greater than the
remittance delinquencies on the third party mortgage loans for that distribution
day. 

     (e) Voluntary advances by CitiMortgage. On the business day before each distribution day, CitiMortgage will deposit in the certificate account a voluntary advance equal to 

•      the
sum of (i) remittance delinquencies on the mortgage loans for that distribution
day, (ii) scheduled interest not required to be paid by the mortgagors on the
first day of the month because of the limitations on mortgage interest payments
under the federal Servicemembers Civil Relief Act or any comparable state laws,
in each case after adjustment of delinquent or non-required interest payments
to interest at the pass-through rate, and (iii) the amount of any uncommitted
cash transferred to the distribution account for the preceding distribution day, minus  

•      the
sum of (i) uncommitted cash transferred to the distribution account on the same
day pursuant to paragraph (d) above, and (ii) any third party servicer advances
for that distribution day. 

     (f) Paying agent advances. Before noon on each distribution day, the Paying Agent will deposit into the distribution account an affiliated Paying Agent advance equal to

•      the
sum of (i) all remittance delinquencies on the affiliated mortgage loans for
that distribution day, and (ii) the amount of all uncommitted cash advances related
to the affiliated mortgage loans transferred to the distribution account for
the preceding distribution day, minus

•      the
sum of (i) any uncommitted cash advance related to the affiliated mortgage loans
for that distribution day and (ii) any voluntary advance by CitiMortgage related to the affiliated loans for that distribution day, other than an advance of interest not required to be paid because of the limitations on mortgage interest payments under the federal Servicemembers Civil Relief Act or any comparable state laws (Relieved interest). 

     Before noon on each distribution day, the Paying
Agent will deposit into the distribution account a third party Paying Agent advance equal to 

•      the
sum of (i) all remittance delinquencies on the third party mortgage loans for
that distribution day, and (ii) the amount of uncommitted cash advances related
to the third party mortgage loans transferred to the distribution account for
the preceding distribution day, minus 

•      the
sum of (i) any uncommitted cash advances related to third party mortgage loans
for that distribution day, and (ii) any third party servicer advance, other than
an advance of Relieved interest, for that distribution day. 

      CitiMortgage will on the business day it receives notice from the Paying Agent of the amount of any affiliated or third party Paying Agent advance, 

•      pay
the Paying Agent a servicing administration fee of $100 for each distribution
day on which the Paying Agent makes such an advance, and

•      reimburse
the Paying Agent for the amount of the advance, provided that if the notice is received after 1PM on a business day, the administration fee and reimbursement will be made to the Paying Agent by 1PM on the following business day.

     Promptly after the Trust Fund is terminated pursuant to section 9, CitiMortgage 

 

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will notify the Paying Agent of the amount of affiliated and third party Paying Agent advances for which CitiMortgage reimbursed the Paying Agent and that were not recovered from later remittances, net recoveries or other proceeds or collections on the affiliated or third party mortgage loans, respectively. The Paying Agent will reimburse CitiMortgage for the amount of reimbursements not so recovered on the next business day after its receipt of the notice. 

     
(g) Limited obligation to make advances. Notwithstanding anything to the contrary in this agreement, neither the relevant servicer nor the Paying Agent will be obligated to make any advance described in sections (a) through (f) above except to the extent that it determines that the advance will be recoverable from future payments and proceeds on the related mortgage loan. 

     CitiMortgage will provide the Paying Agent with any information CitiMortgage has and the Paying Agent requests to help the Paying Agent determine if a Paying Agent advance will be recoverable. 

     (h) Future moratorium legislation. If after the date of this agreement, any state or locality enacts legislation granting mortgagors a full or partial moratorium on mortgage payments while the mortgagor is on active military service, CitiMortgage, will, by notice to the Paying Agent, elect whether CitiMortgage will advance part or all of any postponed payments under such legislation. CitiMortgage will make a separate election for each state or locality that adopts such legislation. To the extent CitiMortgage elects not to advance part or all of such postponed payments, the Paying Agent will not have any obligation to advance such payments. 

3.6 Distributions 

(a) Transfers to distribution account. Not later than 12 noon on each distribution day,

CitiMortgage will withdraw from the certificate account and deposit in a distribution
account established by the Paying Agent (or to the extent provided in the
Series Terms, any pooling, lower-tier or upper-tier REMIC account), all distributions to be made on the distribution day on the certificates (or class P or class L regular interests). The distribution account will be an Eligible Account, and will not be commingled with any other account. 

     (b) Distributions to certificate holders. On each distribution day, the Paying Agent will distribute from the distribution account (or, to the extent provided in the Series Terms, any pooling, lower-tier, or upper-tier REMIC account)
to each certificate holder of record on the preceding record date (other than
as provided in section (c) below for final distributions) the certificate holder’s
share (based on the denomination of certificates of the applicable class held
by the holder) of the amounts distributable to such class in accordance with
the priorities set forth in the Series Terms, as set forth in the applicable
[distribution day statement].

     All reductions in principal balance of a certificate (or one or more Predecessor Certificates) effected by distributions made on any distribution day or reductions thereof without distributions in accordance with this agreement (including final distributions under section (c) below or section 9.1) will be binding upon all holders of such certificate and of any certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not the distributions are noted on the certificate.

     (c) Final distributions. If CitiMortgage expects that the principal balance of any class will be reduced to zero on the next distribution day, it will, not later than the third day before that distribution day, mail to the Paying Agent and each person in whose

 

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	 name a certificate
        to be so retired is registered at the close of business on the applicable
        record date a notice that: 

•       CitiMortgage
expects that funds sufficient to reduce the principal balance of the certificate
to zero will be available in the certificate account on that distribution day,
and

•       if
such funds are available, (A) a final distribution will be made on that distribution
day, but only upon presentation and surrender of the certificate at the office
or agency of the Paying Agent maintained for that purpose pursuant to the Series
Terms (the address of which will be set forth in the notice), and (B) no interest
will accrue on the certificate after the end of the month preceding the distribution
day. 

     The
final distribution on each certificate (including the final distribution on any
certificate receiving a distribution in connection with a termination pursuant
to section 9.1) will be payable only upon presentation and surrender of the certificate
on or after the distribution day for such final distribution at the office or
agency of the Paying Agent maintained for that purpose pursuant to the Series
Terms. 

     (xxx) Method
of payment.
Each distribution will be made
	•	by check
        mailed to the certificate holder at its address appearing in the Certificate
      Register, or
	•	by wire
        transfer if the certificate holder is eligible for wire transfer under
        the Series Terms and the Paying Agent has received wiring instructions
      from the certificate holder, or
	•	by such
        other means of payment as the certificate holder, CitiMortgage, and the
      Paying Agent may agree.
	 Wiring instructions
        received by the Paying Agent will remain in effect until changed by the
      certificate holder by written notice to the 

 

Paying Agent at least five business days before a distribution day.  

     
(xxx) Unclaimed distributions. Any amounts in the distribution account that are distributable as interest or principal pursuant to this section 3.6, but are not distributed because of the non-presentation of the related certificates, or because the check for such payment is returned undelivered, will be held by the Paying Agent for two years in a separate trust account for the benefit of the holders of such certificates. Amounts in the separate account will be deemed to have been distributed to the holders for the purpose of any calculations required by this agreement and will no longer be available for application to any other amounts due under this agreement. 

     After two years, any amount that remains in the separate account will be paid to the holders of the residual certificates, as appropriate (except that any amounts representing reimbursement for an insured payment will be paid to the Insurer). After such payment, the certificate holders will be required to seek payments as unsecured general creditors from the holders of the residual certificates, as appropriate. 

     (xxx) Determination of distributions. Citi-Mortgage will determine on each determination date, based on payments received on the mortgage loans: 

•      the
pool distribution amount; 

•      the
interest allocation and interest allocation carryforward for each class; 

•      the
principal allocation for each class; 

•      the
principal distribution for each class; 

•      any
class A-PO reimbursement; 

•      any
insurance premium; and

•      any
other information required to determine the distributions to be made to certificate
holders in accordance with the Series Terms. 

     (xxx) Distribution day statement. CitiMort-gage will prepare, and will deliver to the 

 

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Paying Agent no later than 12 noon on the third business day before each distribution
day, a Distribution day statement setting forth for that distribution
day: 

     (i)     the pool distribution
amount (including any
portion that represents loss recoveries); 

     (ii)    the aggregate amount
of interest accrued during the related month on all outstanding certificates
and any non-supported prepayment
interest shortfalls; 

     (iii)   the aggregate amount of
interest to be distributed to each class, identifying the portion attributable
to the class’s
interest allocation carryforwards; 

     (iv)   the aggregate distribution
in reduction of
principal balance to be made for each class; 

     (v)    the amount in reduction
of principal balance of the certificates that is not the result of distributions
in reduction of principal
balance; 

     (vi)  whether the amount expected to
be available in the certificate account will be sufficient to pay all amounts
specified in clauses (iii) and (iv) above and, if not, the percentages of each
such amount that may be paid in accordance with the priorities set forth in the
Series Terms
from the amounts expected to be available in the certificate account; 

     (vii) the amounts included in the statement
pursuant to clauses (iii) and (iv) above, expressed in each case per $1,000 initial
principal
balance (or initial notional balance), to be distributed; 

     (viii) the aggregate amounts of affiliated
servicing fee and any third-party servicing fee to be paid pursuant to section
3.6(f);

     (ix)   any special hazard loss limit,
fraud loss limit and bankruptcy loss limit after giving effect to the distributions
to be made on the distribution day; (x) any amount to be withdrawn from the certificate
account and paid over to the

	holders of the class PR or class LR certificates pursuant to section 3.6(f); and

      (xi)  the
principal balance of the certificates that will remain outstanding after giving
effect to the distributions to be made on the distribution day, expressed both
on an aggregate basis and per $1,000 initial principal balance.

     These requirements may be satisfied by timely delivery of the reports to certificate holders required under section 3.14, with copies to the Trustee and the Paying Agent, which reports will then collectively be deemed a Distribution day statement for purposes of this agreement.

      (f) Payment
of servicing fees; distributions to residual holders.
On each distribution day, if
	•	CitiMortgage has delivered to the Paying Agent a distribution day statement for that distribution day, and
	•	the
       Paying Agent (based on such statement) (i) has made, or in accordance
       with this section 3.6 set aside from amounts in the certificate account
       an amount sufficient to make, the required distributions on the certificates,
       as indicated in the distribution day statement, and (ii) has set aside
       any uncommitted cash in the certificate account that is not required for
       an uncommitted cash advance, the amount of which uncommitted cash CitiMortgage
      will certify to the Paying Agent,
	 then
      the Paying Agent will withdraw any cash balance remaining in the certificate
      account, and apply it in the following order: 

      First,
      to the payment to CitiMortgage of any portion of the servicing fee not
      already retained pursuant to section 3.8(b); and 

      Second,
      as a distribution to the holders of any class PR, and if there are no class
      PR certificates, to the holders of the class LR certificates.
	     (g) Transfer
         of certificates.
         Subject to the foregoing provisions of this section 3.6, each certificate
         delivered under this agreement 

 

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upon registration of transfer of or in exchange for or in lieu of any other certificate
will carry the rights to unpaid distributions that were carried by the other
certificate.

3.7 Third party
servicing

(a) Third party servicing fee.
As compensation for its activities under its third party servicing agreements,
each third party servicer will be entitled to a third party servicing fee for
each third party mortgage loan as to which a monthly installment of principal
and interest is received equal to the monthly third party servicing fee rate
for the mortgage loan multiplied by the scheduled principal balance on which
the installment of interest accrued. (The third party servicer’s compensation
may be reduced by any master servicing fee on such third party mortgage loan,
as described in the following paragraph (b).) 

     (b) Master servicing fee. CitiMortgage will be entitled to any master servicing fee that CitiMortgage and the third party servicer may agree upon in the third party servicing agreement, provided that the master servicing fee rate 

•      for
a special serviced mortgage loan may not exceed 0.25% per annum, and

•      for
a third party mortgage loan other than a special serviced mortgage loan may not
exceed the per annum rate specified as the third party servicing fee rate on
schedule B-TP to exhibit B under the heading “Sub Fee.” CitiMortgage
may also be entitled to additional master servicing compensation not based on
the master servicing fee rate, as agreed with the third party servicer, such
as any net REO proceeds in excess of the outstanding principal balance and accrued interest on a mortgage loan. 

     (c) CitiMortgage liability. Notwithstanding any third party servicing agreement, provisions of this agreement relating to agree-

ments or arrangements between CitiMort-gage and a third party servicer, or reference to actions taken through a third party servicer or otherwise, CitiMortgage will remain obligated and liable to the Trustee and the certificate holders for the servicing of the third party mortgage loans in accordance with this agreement to the same extent as though CitiMortgage alone were servicing the third party mortgage loans itself. 

     
All documents, instruments or contracts executed by third party servicers on behalf of CitiMortgage will be treated by the Trustee as though executed by CitiMortgage itself. 

     Any amounts received by a third party servicer for a third party mortgage loan will be deemed to have been received by Citi-Mortgage for purposes of this agreement. If a third party servicer fails to remit any amounts it receives that are required to be transferred to the certificate account or an escrow account, CitiMortgage will transmit the required amounts to the account. 

     Nothing
in this agreement will limit any indemnification agreement between Citi-Mortgage
and a third party servicer, but the indemnification agreement will not diminish
CitiMortgage’s obligations or liability under this agreement. 

3.8 Permitted withdrawals from certificate account 

(a) CitiMortgage may pay the following amounts from the certificate account, in order of priority listed:

     (i) to itself, collected servicing and master servicing
fees (to the extent not withheld from payments of interest received on the mortgage
loans), and, for a liquidated loan, the excess of scheduled servicing fees over
the collected servicing fees; 

     (ii) reimbursements to itself for (A) liquidation
expenses incurred on a mortgage

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loan, up to the liquidation proceeds on the mortgage loan deposited in the certificate
account, net of applicable servicing fees, (B) any amounts due CitiMortgage under
section 3.12 relating to deficiency actions, and (C) any excess of the liquidation
proceeds after such reimbursement over the principal balance of the mortgage
loan, together with accrued and unpaid interest at the mortgage note rate to
the date of purchase at the foreclosure sale, liquidation proceeding or otherwise.
For these purposes, liquidation expenses will include subsequent trailing bills
relating to previously disposed REO property in which distribution of net liquidation proceeds has occurred. 

     
(iii) reimbursement to itself for (x) voluntary advances or (y) reimbursements by CitiMortgage to the Paying Agent for Paying Agent advances. Reimbursements pursuant to this clause (iii) will be limited to amounts received on particular mortgage loans (including, for this purpose, liquidation and insurance proceeds) that represent late payments of principal or interest, or subsequent payments of interest that was excused mortgagors on military service under applicable moratorium legislation; 

     (iv) reimbursement to an advancing person (including
CitiMortgage, to the extent CitiMortgage has reimbursed the Paying Agent for
a Paying Agent advance) for voluntary or Paying Agent advances that the advancing
person determines are nonrecov-erable advances; (v) reimbursement to itself for
servicing account advances not previously reimbursed out of the servicing account, in each case to the extent that amounts representing reimbursements of such advances on mortgage loans may have been deposited in the certificate account;

     (vi) reimbursement to an advancing person of voluntary
advances, Paying Agent advances, or advance account advances,

made on a mortgage loan in an amount not to exceed at any time in the aggregate
the amount of payments from time to time deposited in the certificate account
and not required to be distributed to the certificate holders (including, for
this purpose, liquidation and insurance proceeds covering the mortgaged property); 

     (viii) payments to itself or the holders of the
residual certificates of Investment Income; 

     (ix)
transfers to the distribution account;

         (x) payments
    to clear and terminate the certificate
    account pursuant to section 9.1; and 

      (xi) all remittances received following the repurchase
of a mortgage loan that are required to be paid to CMSI pursuant
    to section 2.3.

         CitiMortgage may also withdraw funds from the certificate account, and adjust the pool distribution amount for any pool or the amount of scheduled or unscheduled principal payments, to appropriately adjust for prior servicing errors, including errors in posting, allocation, or distribution, if Citi-Mortgage believes that such withdrawals or adjustments are necessary to effect the provisions of this agreement. 

         If,
    at the request of the Trustee, CitiMort-gage delivers an officer’s certificate to the Trustee in connection with any such withdrawal or adjustment, the Trustee may conclusively rely without investigation on the officer’s
    certificate as to the reasons, amount and conformity to this agreement of
    the withdrawal or adjustment. 

       CitiMortgage will maintain separate accounting records, on a mortgage loan-by-mortgage loan basis, of withdrawals from the certificate account pursuant to clauses (ii), (iii), (iv), (vi), (vii), (viii) and (x) of this section; provided that such records need not be retained by CitiMortgage for a period longer than its five most recent fiscal years. 

 

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      (b)
      In lieu of withdrawing collected or scheduled servicing fees from the certificate
      account pursuant to paragraph
      (a) above, CitiMortgage may, prior to transferring collection on mortgage
      loans, or liquidation or insurance proceeds, to the certificate account,
      withhold and pay to itself out of each payment received by it on account
      of interest the appropriate collected servicing fee. Any amounts that CitiMortgage
      is required to deposit in the certificate account pursuant to section 3.4, “Prepayment interest shortfalls,” will
      be deemed to reduce the collected or scheduled servicing fee to which CitiMortgage
      is entitled pursuant to this section.

  3.9 Expenses 

  (a) CitiMortgage expenses. CitiMortgage
will pay all expenses incurred by it in connection with its servicing and master
servicing activities under this agreement, and will not be entitled to reimbursement
therefor except as expressly provided in this agreement. CitiMortgage will also
be liable for all expenses, liabilities and obligations of the Trust Fund (other
than the obligation to make principal and interest distributions on the certificates)
including those set forth in section 8.5, “Trustee’s fees and expenses.” To
the extent such expenses, liabilities or obligations consist of federal income
taxes, including, without limitation, prohibited transaction taxes, taxes on
net income from foreclosure property and taxes on certain contributions to a REMIC after
the startup day, nothing will prevent CitiMortgage from contesting any such tax,
if permitted by law, pending the outcome of such proceedings.

     (d) Third party servicer expenses. Each third party servicer will pay all expenses incurred by it in connection with its servicing activities under its third party servicing agreement (including advance payment of pre-

miums for primary mortgage insurance policies, if required) and will not be entitled
to reimbursement therefor except as expressly provided in its third party servicing
agreement. 

3.10 Primary mortgage insurance

CitiMortgage will exercise its best reasonable efforts to maintain each primary mortgage insurance policy in full force. Citi-Mortgage will present claims to the insurer, and take any other reasonable action that may be necessary to permit recovery, under any primary mortgage insurance policy for a defaulted mortgage loan.

     CitiMortgage may substitute for any primary mortgage insurance policy another substantially equivalent policy issued by another insurer, provided that
      no such substitution will be made unless (i) CitiMort-gage is advised by
      each rating agency that the substitution will not negatively affect the
      rating agency’s then-current rating of the certificates (for any insured
      class certificates, without regard to any certificate insurance policy) or
      (ii) the claims-paying ability of the substitute primary mortgage insurer
      is,
      at the time of substitution, rated at least “AA” or its equivalent
      by each rating agency rating the certificates. 

3.11 Hazard insurance 

CitiMortgage will maintain for each mortgage loan (other than a mortgage loan for a cooperative apartment) hazard insurance with extended coverage in an amount at least equal to the lesser of 

•      the
maximum insurable value of the improvements securing the mortgage loan if that
amount is less than the unpaid principal balance on the mortgage loan, 

•      the
principal balance owing on the mortgage loan if that amount is between 80% and
100%, inclusive, of the insurable value, or

 

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•      80%
of the insurable value if the principal balance of the mortgage loan is less
than 80% of the insurable value.

     Except for cooperative apartments, Citi-Mortgage will also maintain on property acquired upon foreclosure, or by deed in lieu of foreclosure, hazard fire insurance with extended coverage in an amount at least equal to the lesser of 

•      the
    maximum insurable value from time to time of the improvements that are a
    part of the property, or 

•      the
    unpaid principal balance of the mortgage loan at the time of foreclosure
    or deed in lieu of foreclosure plus (A) accrued interest at the mortgage
    note rate and (B) CitiMortgage’s good-faith estimate of liquidation
    expenses for the property.
    

     If a mortgaged property is located in a federally designated flood area, the hazard insurance will include flood insurance. No earthquake or other additional insurance will be required for any property, except as required by applicable law.
    

     CitiMortgage may maintain a blanket hazard insurance policy on all of the mortgage loans. However, if the blanket policy contains a deductible clause, CitiMortgage will deposit in the certificate account any amount not payable under the blanket policy because of the deductible clause that would have been paid under a hazard policy that meets the requirements of this section and does not have a deductible clause. 

       Any cost incurred by CitiMortgage in maintaining hazard insurance will not, for the purpose of calculating monthly distributions to the certificate holders, be added to the amount owing under the related mortgage loan, even if the terms of the mortgage loan permit it.
  

3.12 Realization on defaulted mortgage loans 

CitiMortgage will use its best efforts, consistent with its customary servicing procedures, to foreclose upon or otherwise comparably convert the ownership of properties securing any mortgage loans that continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments pursuant to section 3.2. Consistent with the foregoing, Citi-Mortgage will use reasonable efforts to realize upon defaulted mortgage loans in a manner that will maximize the receipt of principal and interest by the certificate holders, taking into account, among other things, the timing of foreclosure proceedings.

     If a deficiency action is available against the mortgagor or any other person, Citi-Mortgage may proceed for the deficiency. CitiMortgage may retain 25% of the net proceeds received from a mortgagor pursuant to a deficiency action as compensation for proceeding with the deficiency action.

     Any property (other than the mortgaged property) pledged by or on behalf of a mortgagor as security for a mortgage loan in default, including marketable securities, may be liquidated and the proceeds thereof applied to cover any shortfalls upon the liquidation of a mortgaged property provided that the Trust Fund will in no event acquire ownership of any such property unless the Trustee receives an opinion of counsel to the effect that such ownership will not cause any constituent REMIC to fail to qualify as a REMIC and will not subject any constituent REMIC to any tax. 

     If title to a mortgaged property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale will be issued to the Trustee, or to its nominee on behalf of the Trust Fund. Notwithstanding such acquisition of title and can-

 

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cellation of the mortgage loan, the mortgage loan will (except for purposes of
section 9.1) be considered an outstanding mortgage loan until the mortgaged property
is sold and the mortgage loan becomes a liquidated loan. Consistent with the
foregoing for purposes of all calculations hereunder so long as the mortgage
loan is considered outstanding, it will be assumed that the related mortgage
note and its amortization schedule in effect on and after the acquisition of
title (after giving effect to any previous principal prepayments, and before
any adjustment thereto by reason of any deficient valuations and debt service
reductions or any similar proceeding or any moratorium or similar waiver or grace
period) remain in effect (notwithstanding that the indebtedness evidenced by
the mortgage note will have been discharged), subject to adjustment to reflect
the application of REO proceeds received in any month.

     Net REO proceeds received in any month will be deemed to have been received first in payment of the accrued interest that remained unpaid on the date that such mortgage loan became an REO loan, with any excess being deemed to have been received for delinquent principal installments that remained unpaid on such date. Thereafter, net REO proceeds received in any month will be applied to the payment of installments of principal and accrued interest on the mortgage loan deemed to be due and payable in accordance with the terms of the mortgage note and amortization schedule. If the net REO proceeds exceed the then delinquent principal and interest installments on the mortgage loan, the excess will be treated as a principal prepayment received on the mortgage loan, up to the outstanding principal balance of the mortgage loan. Any net REO proceeds in excess of the outstanding principal balance and accrued interest on the mortgage loan will be treated as addi-

tional servicing compensation for the relevant servicer.

     If CitiMortgage forecloses or accepts a deed in lieu of foreclosure on a mortgaged property, CitiMortgage will dispose of the mortgaged property before the end of the third calendar year that begins after the year of acquisition by the applicable constituent REMIC, unless 

•      (i)
    the Trustee receives an opinion of counsel to the effect that the holding
    by the applicable constituent REMIC of
    the mortgaged property subsequent to such period (and specifying the period
    beyond such period for which the mortgaged property may be held) will not
    result in the imposition of taxes on “prohibited transactions” of
    any of the constituent REMICs as defined in Internal Revenue Code Section 860F, or cause any of the constituent REMICs to fail to qualify as a REMIC at any time that any certificates are outstanding, in which case the applicable constituent REMIC may continue to hold such mortgaged property (subject to any conditions contained in such opinion of counsel), or 

•      CitiMortgage
    has, prior to the expiration of such period, applied to the Internal Revenue
    Service for an extension of the period in the manner contemplated by Internal
    Revenue Code Section 856(e)(3), in which case the period will be extended
    by the applicable period.
    

     Notwithstanding any other provision of this agreement, unless otherwise required pursuant to applicable state law, no mortgaged property acquired by the applicable constituent REMIC will be 

•      rented
    (or allowed to continue to be rented) or otherwise used for the production
    of income by or on behalf of the applicable constituent REMIC in
    such a manner or pursuant to any terms that would (1) cause such mortgaged
    property to fall to qualify as “foreclosure property” within the
    mean-

 

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ing of Internal Revenue Code Section 860G(a)(8), (2) subject any
of the constituent REMICs
to the imposition of any federal or state income taxes on “net income from
foreclosure property” earned
from such mortgaged property within the meaning of Internal Revenue Code Section
860G(c), or (3) cause the sale of such mortgaged property to result in the receipt
by any of the constituent REMICs
of any income from non-permitted assets as described in Internal Revenue Code
Section 860F(a)(2)(B), or

•      sold
in a manner or pursuant to terms that would subject any of the constituent REMICs
to the imposition of any federal or state income taxes on “net income from
foreclosure property” within
the meaning of Internal Revenue Code Section 860G(c), unless CitiMortgage agrees
to indemnify and hold harmless each constituent REMIC against
the imposition of such taxes. 

     The foregoing is subject to the provision that, if any mortgaged property is damaged, whether from an uninsured cause or otherwise, CitiMortgage will not be required to expend its own funds in connection with any foreclosure or towards the restoration of such property unless it determines that 

•      the
    restoration or foreclosure will increase the net proceeds of liquidation
    of the mortgage loan to the certificate holders, after reimbursement to itself
    for such expenses, and 

    •      CitiMortgage
    will recover such expenses through liquidation or insurance proceeds. 

         CitiMortgage will be responsible for all other costs and expenses incurred by it in any such proceedings; provided, however, that it will be entitled to reimbursement thereof from the related property, as contemplated in section 3.8. Notwithstanding the above, CitiMortgage will not be entitled to recover legal expenses incurred in connection with liquidation proceedings where the mortgagor pays all delinquent pay-
  

ments and expenses and the proceedings are terminated prior to liquidation, other
than sums received from the mortgagor for such expenses.

     Notwithstanding anything to the contrary in this section 3.12, CitiMortgage will not be obligated to foreclose upon or otherwise convert the ownership of any mortgaged property that it believes may be contaminated with or affected by pollutants, contamination, hazardous wastes or hazardous substances. CitiMortgage will not be liable to the certificate holders if, based on its belief that no such contamination or effect exists, CitiMortgage forecloses on a mortgaged property and takes title to such mortgaged property, and the mortgaged property is later determined to be so contaminated or affected. 

     If CitiMortgage does not elect to foreclose on a mortgaged property, CitiMortgage may, in the exercise of its judgment, elect to accept a payment or payments, in connection with the sale by the mortgagor of the mortgaged property or the retention by the mortgagor of the mortgaged property, in aggregate amount less than the outstanding balance of the mortgage loan and accrued interest thereon. 

     The Trustee will furnish CitiMortgage with any powers of attorney and other documents necessary or appropriate to enable CitiMortgage to carry out its efforts in realizing upon defaulted mortgage loans hereunder. 

3.13 Release of mortgage files

(a) CitiMortgage will promptly notify
the Trustee of the payment
in full of any mortgage loan or CitiMortgage’s receipt of notice that payment
in full will be escrowed in a manner customary for such purpose, and will request
delivery to it of the mortgage file. CitiMortgage’s notice will include
a Servicing Officer certification that all

 

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  amounts that CitiMortgage must deposit in the certificate account, in connection with the payment pursuant to section 3.3 have been or will be so deposited. Upon receipt of the certification and request, the Trustee will promptly direct the Mortgage Document Custodian to release the related mortgage documents to CitiMortgage.
  

     For
      the servicing or foreclosure of any mortgage loan, including collection
      under a primary mortgage insurance policy, the Trustee will, upon CitiMortgage’s
      request and its delivery to the Trustee of a receipt signed by a Servicing
      Officer, direct the Mortgage Document Custodian to release the related
      mortgage documents to Citi-Mortgage. The Trustee will execute such documents
      furnished it as are necessary to the prosecution of any such proceedings.
      The receipt will obligate CitiMortgage to return the mortgage documents
      to the Mortgage Document Custodian when Citi-Mortgage no longer needs them,
      unless the mortgage loan has been prepaid or liquidated in the interim,
      in which case, upon receipt of a Servicing Officer certification similar
      to that described in the first paragraph of this section, the Trustee will
      release the receipt to CitiMortgage. 

     (b) CitiMortgage will record any instrument of satisfaction of the mortgage executed by it if required by applicable law, and deliver it to the person entitled thereto. CitiMortgage may not withdraw any expenses incurred in connection with the instrument of satisfaction from the certificate account.
  

3.14 Reports to certificate holders and others 

(a) On or before each distribution
day, Citi-Mortgage will deliver to each certificate and residual certificate
holder, any Insurer, the Trustee, the Paying Agent, each rating agen-

cy and each Underwriter, a distribution report setting forth for that
distribution day: 

     (i) for each pool, the pool distribution amount; 

     (ii) for each outstanding class, the interest distribution
for a single certificate;

     (iii) for each outstanding class, the principal
distribution for a single certificate, net of any deductions for reimbursements
to PO classes; 

     (iv) for each outstanding PO class, the amount
of any reimbursements from the subordinated classes; 

     (v) for each outstanding class, the distribution
of loss recoveries for a single
certificate; 

     (vi) for each outstanding class, the principal
or notional balance of a single certificate, and the aggregate principal or notional
balance of the class, after giving effect to the distributions on the distribution
day; 

     (vii) for each outstanding class, any increase
or decrease in principal or notional balance of a single certificate since the
preceding distribution day (including for each outstanding accrual class, the
amount of any accrued interest added to the principal balance of a single certificate),
after giving effect to the
distributions on the distribution days; 

     (viii) for each outstanding class, any decrease
in principal balance of a single certificate that is not the result of a principal
distribution;

     (ix) for each outstanding target-rate class, its
target-rate class percentage and, for a multi-pool series, its group target rate
class percentage; 

     (x) for each pool, the percentage of unscheduled
principal
payments on the pool‘s target-rate strip allocated on the distribution day
to the related group’s
senior target-rate classes.

 

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      (xi) for each outstanding class, any interest allocation carryforward applicable to the next succeeding distribution day;

       (xii) the collected servicing fee and master servicing fee for the month preceding the month of the distribution day, as reduced, for the servicing fee, by the amount of any deposits by CitiMortgage under section 3.4 for prepayment interest shortfalls; 

     (xiii) for each outstanding insured class, the amount of any premiums paid to an Insurer out of remittances for the month preceding the distribution day, and any amount to be paid by an Insurer to holders of single certificates on the distribution day;

     (xiv) for each pool and for the series, the aggregate amount of remittances received from the first day of the month preceding the month in which the distribution day occurs through the first day of the following month;

     (xv) for each pool and for the series, any servicing account advances, voluntary and third party servicer advances calculated as of the determination date, Paying Agent advances, advance account advances, uncommitted cash advances and any other amounts charged thereto for the applicable distribution day; 

     (xvi) for each pool and for the series, reimbursement for the distribution day of any servicing account advances, voluntary advances, third party servicer advances, Paying Agent advances, advance account advances, and uncommitted cash advances for any prior distribution day; 

     (xvii) for each pool and for the series, the aggregate scheduled principal balance of the mortgage loans as of the last day of the month preceding the month of the distribution, after giving effect to payments on the mortgage loans due on the related first day of the month and principal prepayments distributed on the distribution day; 

      (xviii) for each pool and for the series, the weighted average mortgage interest rate (before deduction of the servicing fee) and the weighted average remaining term to stated maturity, after giving effect to distributions on the distribution day; 

       (xix) for each pool and for the series, the number and aggregate principal balance of mortgage loans delinquent 30 days and 60 or more days (as determined by CitiMort-gage under the Mortgage Bankers Association method);

     (xx) for each pool and for the series, the book value of any REO property; and 

    (xxi) any other information required for a distribution report on Form 10-D under the federal securities laws.

     The distribution report will provide appropriate introductory and explanatory information to introduce any material terms, parties or abbreviations used, and shall state the applicable record, determination and distribution dates. CitiMortgage will determine the format of the distribution report, and may include additional information relating to the series if CitiMortgage believes such information may be material to certificate holders. 

     CitiMortgage will provide certificate holders that are federally insured savings and loan associations with certain reports, and will provide access to information and documentation regarding the mortgage loans included in the Trust Fund, sufficient to permit such associations to comply with applicable regulations of the Office of Thrift Supervision. 

     Any
      report required by this subsection (a) to be delivered to any person will
      be deemed delivered when it is posted to Citi-Mortgage’s website, www.citimortgagembs.-com, or to any other website of which Citi-Mortgage gives prior notice to the person, and the person can access the statement or

 

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report on the website without paying an additional charge or subscription fee. 

     (b) CitiMortgage will provide the Paying Agent and the Trustee by the third business day before each distribution day with a statement of the information set forth in clauses (i) through (xii) of subsection (a), such information to be given in the aggregate.

     (c) Not later than 15 business days after receipt of a written request from the Trustee, CitiMortgage will deliver to the Trustee a statement, certified by a Servicing Officer, of the aggregate of deposits in and withdrawals from the certificate account for each category of deposit specified in sections 3.3 and each category of withdrawal specified in section 3.8 for any distribution day specified by the Trustee. 

     (d)
      The Trustee may at any time during normal business hours inspect and copy
      at CitiMortgage’s expense CitiMortgage’s books, records and accounts
      for the mortgage loans. 

     (e) CitiMortgage will provide to any Insurer each notice, report, opinion or other written item (other than mortgage documents) delivered pursuant to the penultimate paragraph of section 2.3 and sections 2.4, 3.5, 3.6, 3.14(a), 3.19, 3.21, 3.22, 4.3, 4.4, 8.8, 9.1, 10.1, and 11.2. 

3.15 Tax returns and reports

(a) For federal income tax purposes,
each constituent REMIC will have a calendar year taxable year and will maintain its books on the accrual method of accounting. 

     (b) CitiMortgage will prepare and file with the Internal Revenue Service and applicable state or local tax authorities income tax or information returns for each taxable year for each constituent REMIC, and will furnish to certificate holders the schedules, statements or information, as required by

the Internal Revenue Code or state or local tax laws, regulations or rules.

     Within 30 days of the startup day, Citi-Mortgage will furnish to the Internal Revenue Service, on Form 8811 or as otherwise required by the Internal Revenue Code, the name, title, address, and telephone number of the person that certificate holders may contact for tax information relating to the REMICs, together with any additional information required by the Form, and will update such information as required by the Internal Revenue Code. Income tax or information returns will be signed by the Paying Agent or any other person required to sign the returns by the Internal Revenue Code or state or local tax laws, regulations or rules. 

     (c) In the first federal income tax return for each constituent REMIC for its short taxable year ending December 31 in the year in which the startup day occurs, REMIC status will be elected for that taxable year and all succeeding taxable years. 

     (d) CitiMortgage will maintain records relating to each constituent REMIC, including its income, expenses, assets and liabilities, and the adjusted basis of its property as required by the Internal Revenue Code, or as necessary to prepare the foregoing returns, schedules, statements or information. 

     (e)
      Each holder of a residual certificate will be deemed to have agreed, by
      acceptance thereof, to be bound by this section 3.15 and by section 5.2
      and by “REMIC Provisions” in
      the Series Terms. 

3.16 Application of buydown funds

On or before the closing date if
there are any buydown mortgage loans in the Trust Fund, CitiMortgage will open
the buydown account with the Depository in the name of the Trustee, on behalf
of the mortgagors. For each buydown mortgage loan, on the business day following
receipt of the mort-

 

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gagor’s required monthly payment under the buydown agreement, CitiMortgage
will withdraw from the buydown account and deposit in immediately available funds
in the certificate account an amount which, when added to the mortgagor’s
payment, will equal the full monthly payment due under the mortgage note. No
later than the fifth business day before the last business day of each month,
CitiMortgage will deposit in the buydown account in immediately available funds
an amount equal to interest at the rate per annum specified in the buydown agreement
compounded monthly on the buydown funds for each buydown mortgage loan. 

     If a buydown mortgage loan is fully prepaid while buydown funds remain in the buydown account, the unpaid principal balance of the buydown mortgage loan will be reduced by the amount of the buydown funds (which reduction will constitute a principal prepayment) and, on the business day following the date of the principal prepayment, CitiMortgage will deposit the buydown funds in the certificate account. If the property securing a buydown mortgage loan is sold in liquidation of the buydown mortgage loan (either by CitiMortgage or the insurer under any related primary mortgage insurance policy) while buydown funds remain in the buydown account, the buydown funds will be (i) deposited in the certificate account on the business day following the liquidation as a reduction of the unpaid principal balance of the buydown mortgage loan or (ii) to the extent required under an applicable primary mortgage insurance policy, paid to the insurer of the mortgage loan. 

3.17 Assumption and modification agreements

If a mortgagor transfers a mortgaged
property that is subject to an enforceable due-on-

sale clause, CitiMortgage will accelerate the maturity of the mortgage loan to the extent permissible, unless CitiMortgage reasonably believes that the due-on-sale clause is not enforceable.

     If CitiMortgage reasonably believes that the mortgaged property is not subject to an enforceable due-on-sale clause, or that enforcement will adversely affect primary mortgage insurance coverage, CitiMortgage may enter into an assumption and modification agreement with the transferee of the mortgaged property, pursuant to which both the transferee and the original mortgagor will be liable on the mortgage loan, provided that

•      the
mortgage loan as assumed or modified meets the requirements set forth in this
agreement for mortgage loans initially included in the Trust Fund, 

•      the
mortgage loan continues to be covered by any related primary mortgage insurance
and hazard insurance policy, and 

•      no
principal, interest or other payment on the mortgage loan is reduced or postponed. 

     CitiMortgage will forward an original of each assumption and modification agreement to the Mortgage Document Custodian (with a copy to the Trustee) to be added to the related mortgage file, and the agreement will be considered a part of the mortgage file for all purposes to the same extent as all other documents and instruments that are part of the mortgage file. Any fee collected by CitiMortgage for entering into such an agreement will be retained by CitiMortgage as additional servicing compensation. 

3.18 Refinancings; curtailments 

In addition to waivers and arrangements
permitted by section 3.2, CitiMortgage may refinance affiliated or third party
mortgage loans if the refinancing
arises out of a mortgagor’s request for a refinancing, modifica-

 

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tion, or other relief from the provisions of the mortgage loan. 

     On the business day preceding the distribution day in the month following the effective date of the refinancing of a mortgage
    loan pursuant to this section, CitiMortgage will deposit into the certificate
    account the amount of the prepayment in full of the mortgage loan (net of
    all voluntary advances and Paying Agent advances for the mortgage loan, which
    will be reimbursed to the Paying Agent or deemed reimbursed to CitiMortgage,
    as the case may be). Upon the Trustee’s receipt of written notification
    of the deposit signed by an Authorized Officer of CitiMortgage, the related
    mortgage file will be released, and the Trustee will comply with the provisions
    of section 3.13. 

     For
      the purposes of this section, a “refi-nancing” will include any process with a mortgagor that results in the refinanced mortgage loan being identified and serviced as a “new mortgage loan” in CitiMortgage’s books, records and servicing files. However, in connection with a partial prepayment, CitiMortgage may reduce the scheduled monthly payments on the mortgage loan so that the mortgage loan will still be paid in equal monthly installments of principal and interest, but the prepayment will not change the originally scheduled maturity date, and such modification will not be considered a “refinancing” for
      purposes of this section.
  

3.19 Investment accounts 

(a) Investments. CitiMortgage
may invest and reinvest funds in an investment account in accordance with this
section 3.19 in one or more Eligible Investments (as described below) bearing
interest or sold at discount. However, no such investment may mature later than
the business day immediately preceding the next distribution day, except,
that investments (including repurchase agreements) on which the Paying Agent,
in

its commercial capacity, is the obligor may mature on the next distribution day. 

     The Trustee and CitiMortgage will deposit in the certificate account immediately upon receipt all proceeds from investment of funds and disposition of assets in the certificate account. Any loss resulting from such investment will be charged to the certificate account.

     CitiMortgage may, from time to time, withdraw from any investment account (other than the certificate account), any Investment Income therein, and pay same to itself, the seller or the holders of the residual certificates, as applicable. 

     CitiMortgage will not invest funds in the certificate account or sell an investment held in an investment account unless the investment: 

•      is
    made in the name of the Trustee (in its capacity as such) or a Qualified
    Nominee of the Trustee, and 

    •      is
    a “cash flow investment” as defined in Internal Revenue Code Section
    860G(a)(6). 

         CitiMortgage will not dispose of any Eligible Investment prior to its maturity. However, if sufficient uninvested funds are
      not available in the certificate account to make a required disbursement,
      CitiMortgage may sell or otherwise convert to cash a sufficient amount
      of the investments in the certificate account if, prior to such sale or
      conversion, CitiMortgage receives 

         (i) an opinion of counsel (which opinion
      may not be provided by an employee of CitiMortgage or of an affiliate of
      CitiMort-gage) that the sale or conversion will not constitute a “prohibited
      transaction” under Internal Revenue Code Section 860F(a), or

         (ii) if
      the sale or conversion constitutes such a “prohibited transaction,” (A)
      the consent of the holders of 100% percentage interest of the residual
      certificates to the prohibited transaction together with each
  

 

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such holder’s proportionate share of any tax imposed on the Trust Fund attributable
to the transaction, and (B) an opinion of counsel (which opinion may not be provided
by an employee of CitiMortgage or of an affiliate of CitiMortgage) that the transaction
will not disqualify any constituent REMIC as a REMIC. 

     The Trustee will not have any liability for any loss incurred in connection with any investment or any sale or liquidation thereof pursuant to this agreement, unless caused by its negligence or willful misconduct, or for any insufficiency in the certificate account or the buydown account, except for losses on investments that are liabilities of the Trustee in its commercial capacity. 

     (b)     Custodial investment account.
      Prior to the business day preceding the distribution day, CitiMortgage
      may deposit the amounts required to be transferred on the determination
      date from the custodial accounts for P&I in a separate account in the
      name of CitiMortgage and the Trustee (such account will be maintained in
      the trust department of a Depository and will bear a designation clearly
      indicating that the principal of all investments in such account is held
      for the benefit of the Trustee on behalf of the certificate holders) (the custodial investment account) for investment only in one or more Eligible Investments. CitiMortgage will bear any and all losses incurred on any investments made with such funds and will be entitled to retain all gains realized on such investments as additional compensation for its services as master servicer. The amount of any losses incurred in respect of any such investments will be deposited in the custodial investment account by CitiMortgage out of its own funds immediately as realized. Any successor master servicer appointed pursuant to this agreement will not be responsible for losses attributable to its

predecessor. No investments held in the custodial investment account will mature
later than the business day preceding the distribution day. 

     (c) Eligible Investments. Eligible Investments means any one or more of the following obligations or securities: 

     (i)    direct obligations of, and
obligations fully
guaranteed by, the United States of America, FHLMC,
Fannie Mae, the Farm Credit Banks, the Federal Home Loan Banks, the Student Loan
Marketing Association (but only for obligations backed by letters of credit or
senior obligations) or any agency or instrumentality of the United States of
America the obligations of which are backed by the full faith and credit of the
United States of America; provided, however, that any obligation of, or guaranteed
by, the Federal Home Loan Banks or the Farm Credit Banks or any obligation of,
or guaranteed by, FHLMC or
Fannie Mae, other than a senior debt obligation of FHLMC or
Fannie Mae or a mortgage participation or pass-through certificate guaranteed
by FHLMC or
    Fannie Mae, excluding stripped mortgage securities which are valued greater
    than par on the portion of unpaid principal, will be an Eligible Investment
    only if, at the time of investment, each rating agency confirms in writing
    that such investment is acceptable;

         (ii)     Federal Funds, demand and time deposits
    in, certificates of deposits of, or bankers’ acceptances issued by,
    any depository institution or trust company (including the Trustee or any
    agent of the Trustee, acting in their respective commercial capacities) incorporated
    under the laws of the United States of America or any state thereof and subject
    to supervision and examination by federal or state banking authorities, so
    long as at the time of such investment or contractual commitment providing
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deposit or other unsecured short-term debt obligations of such depository institution
or trust company have a maturity of not more than one year and a credit rating
of not less than “A-1+” (“A-1” if the maturity is not greater
than 30 days) by S&P if S&P is a rating agency, “P-1” by
Moody’s if Moody’s is a rating agency, and “F-1” by Fitch
if Fitch is a rating agency; each such investment being expressly authorized
and deemed authorized by a certificate holder’s purchase or acceptance of
any certificate when acting in the capacity of a fiduciary (including a “fiduciary” of
an “employee benefit plan” subject
to ERISA,
as those term are defined in Sections 3(21) and 3(3) of ERISA,
respectively) which purchase or acceptance will also evidence and be deemed to
evidence any such certificate holder’s representation and warranty to CitiMortgage,
the Certificate Registrar and the Trustee and any agent of the Trustee that such
certificate holder is duly authorized by and empowered under appropriate governing
instruments (for example, an employee benefit plan, in the case of an ERISA fiduciary)
to give such authorization; and money market funds investing exclusively in any
of the investments discussed in this definition of Eligible Investments with
a rating of not less than “A-1+” (“A-1” if the maturity is
not greater than 30 days) by S&P if S&P is a rating agency, “F-1” by
Fitch if Fitch is a rating agency, and “P-1” by Moody’s if Moody’s
is a rating agency;

     (iii)   repurchase obligations for (A) any security
described in
clause (i) above or (B) any other security issued or guaranteed by an agency
or instrumentality of the United States of America the obligations of which are
backed by the full faith and credit of the United States of America, in either
case where such security has a remaining maturity of one year or less and where
such repurchase obligation has been entered into

with a depository institution or trust company (acting as principal) with a rating
of not less than “A-1+” by S&P if S&P is a rating agency, “P-1” by
Moody’s if Moody’s is a rating agency, and “F-1” by Fitch
if Fitch is a rating agency;

     (iv)   securities bearing interest
or sold at a discount issued by any corporation incorporated under the laws of
the United States of America or any state thereof which have a maturity not greater
than 30 days and
an unsecured long-term debt rating of at least “AA” if S&P is a
rating agency, “AA” if Fitch is a rating agency, and “Aa” if
Moody’s is a rating agency, or an unsecured short-term debt rating, of at
least “A-1” if S&P is a rating agency, “F-1” if Fitch
is a rating agency, and “P-1” if Moody’s is a rating agency, at
the time of such investment or contractual commitment
providing for such investment; provided, however, that securities issued
by any particular corporation will not be Eligible Investments to the extent
that investment therein will cause the then outstanding principal balance of
securities issued by such corporation and held as part of the Trust Fund to exceed
10% of the aggregate current principal balance of certificates outstanding and
of the current percentage interest of the residual certificates outstanding,
and the aggregate principal balance of all cash and Eligible Investments, held
in the Trust Fund; 

     (v)   commercial paper (including
both non-interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the date
of issuance thereof) having at the time of such investment a rating of not less
than “A-1+” (“A-1” if the maturity is not greater than 30
days and such commercial paper does not exceed 20% of the then current balance
of the certificates) by S&P if S&P is
a rating agency, “F-1” by
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and “P-1” by Moody’s if Moody’s is a rating agency; 

     (vi)   a Qualified GIC; 

     (vii)   certificates or receipts
representing direct ownership interests in future interest or principal payments
on obligations of the United States of America or its agencies or instrumentalities
(which obligations are backed by the full faith and credit of the United States
of America) held by a custodian on behalf of the holders of such receipts;

     (viii)   any other money market deposit,
obligation, security or investment bearing interest or sold at a discount which
has an unsecured short-term debt rating of at least “A-1+” (“A-1” if
the maturity is not greater than 30 days and such investments do not exceed 20%
of the then scheduled principal balance of the mortgage loans) if S&P is
a rating agency, “F-1” if Fitch is a rating agency, and “P-1” if
Moody’s is a rating agency, or if such investment relates to a money market
fund, such fund must be rated in the highest rating category by each rating agency
(which, for S&P, is “AAAm” or “AAAm-G”);
and 

     (ix)   any other demand or time
deposit, obligation, security or investment bearing interest or sold at a discount
that each rating
agency confirms in writing
is acceptable; 

     provided, that each such Eligible Investment
is a “permitted
investment” as
defined in Internal Revenue Code Section 860G(a)(5). 

3.20 Paying Agent and Certificate Registrar 

(a) Paying Agent. CitiMortgage
or the Trustee may remove
a Paying Agent, and Citi-Mortgage, with the Trustee’s approval, may appoint
another Paying Agent.

     A
Paying Agent

•      may
not be an Originator, CitiMortgage or an affiliate of CitiMortgage unless the
Paying Agent is an institutional trust department of Citibank, N.A., 

•      must
be authorized to exercise corporate trust powers under the laws of its jurisdiction
of organization, and 

•      must
be rated at least “A-1” by S&P if S&P is a rating agency, and at least “F-1” by
Fitch if Fitch is a rating agency.

     If no Paying Agent is appointed, the Trustee will be the Paying Agent. CitiMort-gage will notify the rating agencies of any change of Paying Agent. 

The Paying Agent will 

•      hold
all amounts deposited with it by CitiMortgage or the Trustee for payment on the
certificates in trust for the benefit of the certificate holders and any Insurer
until the amounts are paid to the certificate holders or the Insurer or otherwise
disposed of in accordance with this agreement, 

•      give
the Trustee notice of any default by CitiMortgage in making any such deposit,
and 

•      during
the continuance of a default by CitiMortgage in making such a deposit, upon the
Trustee’s written request, immediately pay to the Trustee all amounts so
held in trust by the Paying Agent. 

     CitiMortgage will cause any Paying Agent that is not the Trustee or a signatory to this agreement to execute and deliver to the Trustee an instrument in which the Paying Agent agrees with the Trustee that the Paying Agent will have all the rights and obligations of a Paying Agent under this agreement. 

     (b) Certificate Registrar.
      CitiMortgage or the Trustee may remove a Certificate Registrar, and CitiMortgage,
      with the Trustee’s approval, may appoint another Certificate Registrar.

     A
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•      may
not be an Originator, CitiMortgage or an affiliate of CitiMortgage unless the
Certificate Registrar is an institutional trust department of Citibank, N.A.,
and

•      must
be authorized to exercise corporate trust powers under the laws of its jurisdiction
of organization.

     If no Certificate Registrar is appointed, the Trustee will be the Certificate Registrar. 

3.21 Exchange Act Reporting 

CitiMortgage, as servicer, shall
prepare and file all reports required to be filed by CMSI, as depositor, under the Exchange Act, including required periodic reports on Forms 10-K and 10-D, and any required current report on Form 8-K. CMSI authorizes Citi-Mortgage to sign and file such reports on behalf of CMSI. 

     CMSI and each other person who is or becomes a party to this agreement shall render all reasonably requested assistance to Citi-Mortgage in providing information necessary for the preparation of such reports. CitiMortgage shall require each third-party servicer, and any other person who participates in a material part of the servicing function, to agree to provide such assistance. 

3.22 Servicer compliance statement and attestation report 

(a) For each calendar year,
each of Citi-Mortgage, the Paying Agent, the Certificate Registrar, each servicer
affiliated with Citi-Mortgage, each master servicer, and each servicer who has
serviced more than 10% of the principal amount of the mortgage loans over the
course of the year, will deliver to CMSI by March 31 of the following year (March 30 in leap years) a statement of compliance, signed by an authorized officer of the servicer, to the effect that 

•      the
servicer is responsible for assessing its compliance with the servicing criteria
applicable to it,

•      a
review of the servicer’s activities during the year and of its performance under this agreement has been made under such officer’s
supervision, 

•      the
servicer used the criteria in section 1122(d) of Regulation AB promulgated by
the Securities and Exchange Commission under the Securities Act of 1933 to assess
its compliance with the applicable servicing criteria, 

•      to
the best of such officer’s knowledge, based on such review, the servicer
has fulfilled all of its obligations under this agreement in all material respects
throughout the year or, if there has been a failure to fulfill any such obligation
in any material respect, specifying each such failure known to such officer and
the nature and status thereof, and

•      a
registered public accounting firm has issued an attestation report on the party’s
assessment of compliance with the applicable servicing criteria as of and for
the period ending the end of such year. 

     CitiMortgage authorizes its [senior servicing officer] to sign the statement of compliance on behalf of CitiMortgage. 

     (b)
      CitiMortgage hereby appoints KPMG LLP as its independent accountants for
      purposes of preparing and delivering for each year an attestation on CitiMortgage’s
      assessment of compliance with the applicable servicing criteria as of and
      for the period ending the end of such year. The attestation report must
      be furnished to CitiMortgage and the Trustee by [date] in the following
      year, and must be made in accordance with standards for attestation engagements
      issued or adopted by the Public Company Accounting Oversight Board. 

     If such firm resigns, CitiMortgage will promptly appoint a successor firm of independent accountants of recognized national reputation. CitiMortgage will promptly notify the Trustee if CitiMortgage fails to ap-
  

 

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point a successor firm of independent accountants within 15 days after such resignation.
If CitiMortgage does not appoint a successor within 10 days thereafter, the Trustee
will promptly appoint a successor firm of independent accountants of recognized
national reputation. The fees of the independent accountants and any successor
will be paid by CitiMortgage as servicer, or by any successor servicer. 

4   CitiMortgage 

4.1 Liability of CitiMortgage and others 

CitiMortgage and CMSI will be liable under this agreement to any party or to the certificate holders only to the extent of obligations specifically undertaken by CitiMortgage or CMSI in this agreement. 

     Neither CitiMortgage nor CMSI, nor any of their directors, officers, employees and agents will be liable to the Trust Fund or the certificate holders for any action, or for refraining from taking any action, pursuant to this agreement, or for errors in judgment, provided, however, that neither CitiMort-gage, CMSI nor any such person will be protected against any liability that would otherwise be imposed for willful misfeasance, bad faith or gross negligence in the performance, or for reckless disregard, of their obligations under this agreement. CitiMort-gage, CMSI and any of their directors, officers, employees or agents may rely on any document prima facie properly executed and submitted by any person as to any matters arising under this agreement. 

     CitiMortgage, CMSI, and each of their directors, officers, employees and agents will be indemnified and held harmless by the Trust Fund against any loss, liability or expense incurred in connection with any actual or threatened legal or regulatory proceedings relating to this agreement or the certificates, other than a loss, liability or ex-

pense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance, or reckless disregard, of their obligations under this agreement.

     CitiMortgage
      need not appear in, prosecute or defend any legal action that is not incidental
      to its duties to service the mortgage loans in accordance with this agreement
      and that in its opinion may involve it in any expense or liability. CitiMortgage
      may, however, undertake any such action it deems desirable to enforce or
      secure the rights and duties of the parties or the interests of the certificate
      holders. CitiMort-gage’s legal expenses and costs of such action and
      any resulting liability will be expenses, costs and liabilities of the
      Trust Fund, for which CitiMortgage will be reimbursed out of the certificate
      account.

     Notwithstanding the foregoing, Citi-Mortgage will indemnify, defend and hold harmless the Trustee and the Trust Fund against any damages, claims or liabilities arising out of any violation (or claimed violation) prior to the closing date of any predatory lending law. 

4.2 Assumption of CitiMortgage’s obligations by affiliate 

Any corporation into which CitiMortgage
is merged or consolidated, or that results from a merger, conversion or consolidation
involving CitiMortgage, or that succeeds to the business of CitiMortgage, or
more than 50% of the voting stock of which is, directly or indirectly, owned
by Citigroup Inc., and that executes an agreement of assumption to perform all
of CitiMortgage’s obligations under this agreement, will be CitiMort-gage’s
successor under this agreement, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding. Such agreement of assumption will not, however,
release Citi-

 

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Mortgage from any of its obligations or liabilities under this agreement. 

4.3 Maintenance of office or agency 

CMSI shall maintain or cause to be maintained at its expense an office or offices or agency or agencies where the certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon CMSI in respect of the certificates and this agreement may be served. CMSI initially appoints the Certificate Registrar designated in the Series Terms as its office for purposes of receipt of notices and demands. CMSI will give prompt written notice to CitiMortgage, the Trustee and the certificate holders of any change in the location of the Certificate Register or any such office or agency. 

4.4 Servicer not to resign 

Subject to sections 4.2 and
4.5, CitiMortgage will not resign as servicer without the consent of the Trustee,
any Insurer, the holders of more than 2/3 of the voting interests of the outstanding
certificates and 2/3 of the percentage interests of the residual certificates,
except upon a determination that the performance of its duties hereunder is no
longer permissible under applicable law. Any such determination permitting the
resignation of CitiMortgage as Servicer will be supported by an opinion of counsel
to such effect delivered to the Trustee. No resignation by CitiMortgage will
become effective until the Trustee or a successor servicer and master servicer
have assumed CitiMort-gage’s obligations in
accordance with section 7.2. 

4.5 Delegation of duties 

CitiMortgage may without notice
or consent delegate any of its servicing duties, and any rights relating to such
duties, to any person or persons, including a person more than 50% of whose stock
is owned, directly or

indirectly, by Citigroup Inc.; provided that each such person that services any
mortgage loans has been approved as a seller/servicer by the Federal Housing
Administration, GNMA, Fannie Mae or FHLMC,
and has been approved in writing by the rating agencies. Such delegation will
not, however, relieve CitiMortgage of its responsibility for such duties. Each
delegee of CitiMortgage’s servicing duties will have those powers and duties
that are granted to or required of CitiMortgage as servicer or master servicer
under this agreement for such duties, subject to the limitations imposed by the
agreement between CitiMort-gage and such delegee. 

4.6 Errors and omissions insurance 

CitiMortgage will maintain in force

•      a
policy or policies of insurance covering errors and omissions in the performance
of its servicing obligations, and 

•      a
fidelity bond for its officers, employees and agents.

     Such policies and bond will, together, comply with Fannie Mae or FHLMC requirements for persons servicing mortgage loans purchased by such association. 

5   The certificates 

5.1 The certificates 

(a)  The certificates
and residual certificates will be substantially in the forms set forth in exhibit
A. The certificates will be issued in the denominations specified in the Series
Terms and will be executed by manual or facsimile signature on behalf of CMSI by
its Chairman, President, one of its Vice Presidents, or one of its Assistant
Vice Presidents. Certificates bearing the manual or facsimile signatures of individuals
who were authorized to sign on behalf of CMSI when
the signatures were affixed will bind CMSI,
even if prior to the authentication and delivery of the certificates some of
the indi-

 

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  viduals ceased to be authorized or to hold such offices.
  

     No certificate will be entitled to any benefit under this agreement, or be valid for any purpose, unless it authenticated substantially in the form set forth in exhibit A. The authentication must be manually signed by the Trustee or an Authenticating Agent appointed pursuant to section 8.12, and such signature will be conclusive evidence, and the only evidence, that the certificate has been duly authenticated and delivered. All certificates will be dated the date of their authentication.

     (b)     Upon
original issuance, book-entry certificates will be issued in the form of one
or more typewritten certificates, to be delivered to the initial Clearing Agency,
by, or on behalf of, CMSI.
    Such certificates will initially be registered on the Certificate Register
    in the name of the nominee of the initial Clearing Agency, and will bear
    a legend in substantially the following form:

         “Unless this certificate is presented by an authorized representative of [the Clearing Agency] to Citicorp Mortgage Securities, Inc. or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of [the Clearing Agency nominee] or such other name as requested by an authorized representative of [the Clearing Agency] (and any payment is made to [the Clearing Agency nominee] or to such other entity as is requested by an authorized representative of [the Clearing Agency]), any transfer, pledge, or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, [the Clearing Agency nominee], has an interest herein.” 

         No beneficial owner will receive a definitive certificate representing such beneficial owner’s
    interest in the book-entry certificates, except as provided in section 5.6.
    Un-

til definitive certificates have been issued to beneficial owners pursuant to
section 5.6:

     (i)     This section 5.1(b)
will be in full force and
effect. 

    (ii)    CMSI,
the Certificate Registrar and the Trustee may deal with the Clearing Agency for
all purposes (including distributions on the book-entry certificates and actions
by the holders of book-entry certificates) as the authorized representative of
the beneficial owners. 

     (iii)  To
the extent that this section 5.1(b) conflicts with any other provision of this
agreement, this section 5.1(b) will control. 

     (iv)  The
rights of beneficial owners will be exercised only through the Clearing Agency
and will be limited to those established by law, the rules, regulations and procedures
of the Clearing Agency and agreements between such beneficial owners and the
Clearing Agency or the Clearing Agency Participants. For book-entry certificates,
references in this agreement to 

•      actions
    by certificate holders will refer to actions taken by the Clearing Agency
    upon instructions from the Clearing Agency Participants, and 

    •      distributions,
    notices, reports and statements to certificate holders will refer to distributions,
    notices, reports and statements to the Clearing Agency or its nominee, as
    registered holder of the book-entry certificates for the distribution to
    beneficial owners in accordance with the procedures of the Clearing Agency. 

         (v)  The
    initial Clearing Agency will make book-entry transfers among the Clearing
    Agency Participants, and will receive and transmit distributions of principal
    and interest on the certificates to the Clearing Agency Participants, for
    distribution to the beneficial owners or their nominees. 

         For purposes of any provision of this agreement requiring or permitting actions with the consent of, or at the direction of,
  

 

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holders of book-entry certificates evidencing specified voting interests, such
direction or consent will be given by beneficial owners having the requisite
percentage interests. 
  

       Until definitive certificates are issued to beneficial owners pursuant to section 5.6, copies of the reports or statements referred to in section 3.14 will be available to beneficial owners upon written request to the Trustee at the corporate trust office or, if Citibank, N.A. is the Paying Agent, at the website referred to in section 3.14. 

5.2 Registration of transfer and exchange of certificates 

(a) CMSI will maintain at its expense an office or offices or agency or agencies where the certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon CMSI relating to the certificates and this agreement may be served. CMSI initially appoints the Certificate Registrar designated in the Series Terms as its office for purposes of receipt of notices and demands.

     CMSI will maintain a Certificate Register at such office in which, subject to such reasonable regulations as it prescribes, CMSI will provide for the registration and transfer of certificates. CMSI will give prompt written notice to the Trustee and to the certificate holders of any change in the location of the Certificate Register or any such office or agency. 

     Upon surrender for registration of transfer of any certificate at the office or agency, CMSI will execute and the Trustee or the Authenticating Agent will authenticate and deliver, in the name of the designated transferee or transferee, one or more new certificates in authorized denominations of the same aggregate number of single certificates or the same aggregate percentage interest, as the case may be. 

      At the option of the certificate holder, certificates may be exchanged for other certificates of authorized denominations evidencing the same aggregate number of single certificates or the same aggregate percentage interest, as the case may be, upon surrender of the certificates to be exchanged at the office or agency. CMSI will execute and the Trustee or Authenticating Agent will authenticate and deliver the certificates that the certificate holder is entitled to receive.

     Every certificate surrendered for registration of transfer or exchange will be accompanied by a written instrument of transfer in form satisfactory to the Trustee, CMSI and the Certificate Registrar, duly executed by the holder or his attorney duly authorized in writing.

     No service charge will be made for any registration of transfer or exchange of certificates, but the Certificate Registrar may require a payment sufficient to cover any tax or governmental charge imposed in connection with the transfer or exchange. 

     All certificates surrendered for registration of transfer and exchange will be canceled and, subject to the record retention requirements of the Exchange Act, subsequently destroyed by the Trustee or, at its direction, by the Certificate Registrar. 

     The Certificate Registrar will provide the Paying Agent and the Trustee by the third business day before each distribution day, the names and addresses of each certificate holder as of the record date and the number of single certificates or percentage interest it holds of record. 

     (b)
      Notwithstanding the foregoing section 5.2(a), no legal or beneficial interest
      in all or any portion of a residual certificate may be transferred, directly
      or indirectly, to a “disqualified organization“ within the meaning
      of Internal Revenue Code Section 860E(e)(5), or to an agent of a disqualified
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or other middleman) (an Agent) and any such purported transfer will be void and of no effect. Further, no legal or beneficial interest in all or any portion of a residual certificate may be registered in the name of a Plan or a person investing the assets of a Plan (such Plan or person an ERISA Prohibited holder) or in the name of a person that is not (i) a U.S. person or (ii) a non-U.S. person that holds the residual certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor, the Certificate Registrar, and the Trustee with an effective Internal Revenue Service Form W-8ECI or
(iii) a non-U.S. person that has delivered to the transferor, the Certificate
Registrar, and the Trustee an opinion of a nationally recognized tax counsel
to the effect that the transfer of the residual certificate to it is in accordance
with the requirements of the Internal Revenue Code and that such transfer of
the residual certificate will not be disregarded for federal income tax purposes
(any such person who is not described in clauses (i), (ii) or (iii) above being
referred to herein as a “Non-permitted Foreign holder”). Furthermore,
no legal or beneficial interest in all or any portion of a residual certificate
may be transferred, directly or indirectly, to a foreign permanent establishment
or fixed base, within the meaning of an applicable income tax treaty, of the
transferee or any other person. CMSI will not execute and the Trustee or Authenticating Agent will not authenticate and deliver, a new residual certificate in connection with any transfer of a residual certificate, and neither CMSI, the Certificate Registrar nor the Trustee will accept a surrender for transfer or registration of transfer, or register the transfer of, any residual certificate unless the transferor will have provided to CMSI, the Certificate Registrar and the Trustee an affidavit, substantially in the form of Appendix 1 hereto,

signed by the transferee, to the effect that the transferee is not such a disqualified
organization, an agent for any entity as to which the transferee has not received
a substantially similar affidavit, an ERISA Prohibited holder, a Non-permitted Foreign holder, or a person for whom income on the residual certificate is attributed to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of the transferee or any other person, accompanied by a written statement signed by the transferor to the effect that, as of the time of the transfer, the transferor has no actual knowledge that such affidavit is false. Upon notice by CMSI that any legal or beneficial interest in any portion of a residual certificate has been transferred, directly or indirectly, to a disqualified organization or an Agent in contravention of the foregoing restrictions, the Trustee will furnish to the Internal Revenue Service and the transferor of such residual certificate or to such Agent, within 60 days of the request therefor by such transferor or such Agent, and CMSI agrees to provide the Trustee with the computation of such information necessary to the application of Internal Revenue Code Section 860E(e) as may be required by the Internal Revenue Code, including but not limited to the present value of the total anticipated excess inclusions for such residual certificate (or portion thereof) for periods after such transfer. At the election of CMSI, the reasonable cost of computing and furnishing such information may be charged to the transferor or such Agent; however, the Trustee and CMSI will in no event be excused from furnishing such information. Every holder of a residual certificate will be deemed to have consented to such amendments to this agreement as may be required to further effectuate the restrictions on transfer of residual certificates to a disqualified organization, an Agent, an ERISA Pro-

 

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hibited holder or a Non-permitted Foreign
    holder.

     The
        affidavit described in the preceding paragraph will also contain the statement
        of the transferee that it (i) has historically paid its debts as they have
        come due and intends to do so in the future, (ii) understands that it may
        incur liabilities in excess of cash flows generated by the residual certificate,
        (iii) intends to pay taxes associated with holding the residual certificate
        as they become due, (iv) will not cause the income for the residual certificate
        to be attributable to a foreign permanent establishment or fixed base,
        within the meaning of an applicable income tax treaty, of the transferee
        or any other person and (v) will not transfer the residual certificate
        to any person or entity that does not provide a similar affidavit. The
        transferor’s statement to the Trustee and the Certificate Registrar
        accompanying the affidavit will state that, after conducting a reasonable
        investigation of the financial condition of the transferee, the transferor
        has no knowledge or reason to know that the statements made by the transferee
        for clauses (i) and (iii) of the preceding sentence are false. Each residual
        certificate will bear a legend referring to the restrictions contained
        in this paragraph and the preceding paragraph.

       Notwithstanding
        the foregoing, no transfer of any private certificate may be made unless
        such private certificate has been registered under the Securities Act and
        applicable state securities or “blue sky” laws, or an exemption from the Securities Act and applicable state securities or “blue sky” laws
        is available. Upon surrender for registration of transfer of any private
        certificate, (1) neither the Trustee nor the Certificate Registrar will
        accept surrender for transfer or registration of transfer of, or register
        the transfer of, any private certificate and (2) CMSI will not execute, and neither the Trus-

tee nor the Authenticating Agent will authenticate and deliver, any new private
certificate in connection with the transfer of any private certificate, unless
either (A) such private certificate has been registered under the Securities
Act and applicable state securities or “blue sky” laws, or (B) exemptions
from the registration requirements of the Securities Act and applicable state
securities or “blue sky” laws are available, and the transferee delivers
to CMSI,
the Trustee and the Certificate Registrar a letter substantially to the effect
set forth in exhibit E to this agreement and (1) if such transferee is not a “Qualified
Institutional Buyer” within
the meaning of Rule 144A of the Securities Act, and if so requested by CMSI,
an opinion of counsel acceptable to CMSI will
have been delivered to CMSI,
the Trustee, and the Certificate Registrar, to the effect that such transfer
is in compliance with either subclause (A) or subclause (B) of this clause (i)
of this section 5.2; or (2) if such transfer is to a non-institutional investor,
unless such investor is an accredited investor (as defined in Regulation D under
the Securities Act) and has a net worth (exclusive of primary residence) of at
least $1,000,000 as confirmed in writing to the Trustee and the Certificate Registrar.

     No transfer of an ERISA Restricted Certificate may be made unless any proposed transferee (i) executes a representation letter in substantially the form of exhibit F hereto and in substance satisfactory to the Trustee, the Certificate Registrar and CMSI either stating (a) that it is not, and is not acting on behalf of, any employee benefit plan subject to Title I of ERISA or Section 4975 of the Internal Revenue Code, or a governmental plan, as defined in Section 3(32) of ERISA, subject to any federal, state or local law (Similar Law) which is, to a material extent, similar to the foregoing provisions of ERISA or the Internal Revenue Code (collectively, a

 

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“Plan”) or using the assets
    of any such Plan to effect such purchase or (b) as to the class B-4, class
    B-5 and class B-6 certificates only, it is an insurance company and the source
    of funds used to purchase the class B-4, class B-5 or class B-6 certificates
    is an “insurance company general account” (as such term is defined
    in Section V(e) of Prohibited Transaction Class Exemption 95-60 (“PTE 95-60”),
  60 Fed. Reg. 35925 (July 12, 1995)) and there is no Plan for which the amount
  of such general accounts reserves and liabilities for the contracts) held by
  or on behalf of such Plan and all other Plans maintained by the same employer
  (or affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee organization, exceed 10% of the total of all reserves and liabilities of such general account (as such amounts are determined under Section I(a) of PTE 95-60) at the date of acquisition or (ii) provides (A) an opinion of counsel in form and substance satisfactory to the Trustee, the Certificate Registrar and CMSI that the purchase or holding of ERISA Restricted
  Certificate by or on behalf of such Plan will not result in the assets of the
  Trust being deemed to be “plan assets” and subject to the prohibited
  transaction provisions of ERISA and the Internal Revenue Code or Similar Law and will not subject CMSI,
  the Trustee or the Certificate Registrar to any obligation in addition to those
  undertaken in this agreement and (B) such other opinions of counsel, officers’ certificates
  and agreements as CMSI, the Trustee or the Certificate Registrar may require in connection with such transfer. 

5.3 Mutilated, destroyed, lost or stolen certificates

If

•      any
mutilated certificate is surrendered to the Certificate Registrar, or the Certificate
Registrar receives evidence to its satisfac-

tion of the destruction, loss or theft of any certificate,

•    each
of CMSI, the Certificate Registrar and the Trustee receive such security or indemnity as it requires to save it harmless, and

•      neither
the Certificate Registrar nor the Trustee is notified that the certificate has
been acquired by a protected purchaser under Article 8 of the Uniform Commercial
Code as in effect in the applicable jurisdiction,

      then CMSI will execute and the Trustee or Authenticating Agent will authenticate and deliver, in exchange for or in lieu of such mutilated, destroyed, lost or stolen certificate, a new certificate of like tenor and initial principal balance, initial notional balance or percentage interest. In connection with the issuance of any new certificate under this section 5.3, the Certificate Registrar may require a payment sufficient to cover any tax or other governmental charge imposed and any other expenses (including the fees and expenses of the Trustee and the Certificate Registrar) in connection with the issuance. Any duplicate certificate issued pursuant to this section 5.3 will constitute complete and indefeasible evidence of ownership in the Trust Fund, as if originally issued on the closing date, whether or not the lost, stolen or destroyed certificate is found at any time. 

5.4 Persons deemed owners

Prior to due presentation of
a certificate for registration of transfer, CMSI, the Trustee, any Insurer, the Certificate Registrar and any agent of CMSI, the Trustee or the Certificate Registrar may treat the person in whose name the certificate is registered as the owner of the certificate for the purpose of receiving distributions pursuant to section 3.6 and for all other purposes whatsoever, and neither CMSI, the Trustee, any In-

 

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surer, the Certificate Registrar nor
    any agent of CMSI, the Trustee or the Certificate Registrar will be affected by any notice to the contrary. 

5.5 Access to list of certificate holders’ names and addresses

If the Trustee is not the Certificate
Registrar and requests CMSI or the Certificate Registrar to provide a list of the names and addresses of certificate holders, CMSI or the Certificate Registrar will furnish to the Trustee, within 15 days after receipt of the request, a list as of the most recent record date, in such form as the Trustee reasonably requires.

     If three or more certificate holders

•     request
    such information in writing from the Trustee,

  •     state
    that they desire to communicate with other certificate holders regarding
    their rights under this agreement or under the certificates, and

  •     provide
    a copy of the communication they propose to transmit,

        then
    the Trustee will, within five business days after the receipt of the request,
    afford the
    certificate holders access during normal business hours to the most recent
    list held
      by the Trustee, if any. If such list is as of a date more than 90 days
    prior to the date of receipt of the certificate holders’ request, the
    Trustee will promptly request from CMSI or
    the Certificate Registrar a current list and will afford the certificate
    holders access to the list promptly upon its receipt by the Trustee. Every
    certificate holder, by receiving and holding a certificate, agrees that neither CMSI,
    the Certificate Registrar nor the Trustee will be held accountable by reason
    of the disclosure of any such information as to the list of the certificate
  holders, regardless of the source from which the information is derived. 

	

5.6 Definitive certificates

If

•     DTC advises the Trustee and the Certificate Registrar in writing that the Clearing Agency is no longer willing or able properly to discharge its responsibilities as depository for the book-entry certificates, and

•     CMSI is unable to locate a qualified successor,

      the Certificate Registrar will notify the beneficial
owners, through the Clearing Agency, of the occurrence of such event and of the
availability of definitive certificates to beneficial owners requesting them.
Upon surrender to the Certificate Registrar by the Clearing Agency of the certificates
held of record by its nominee, accompanied by reregistration instructions and
directions to execute and authenticate new certificates from CMSI,
the Trustee or the Authenticating Agent will execute and authenticate definitive
certificates for delivery. CMSI will
arrange for, and will bear all costs of, the printing and issuance of the definitive
certificates. Neither CMSI,
the Trustee, the Certificate Registrar nor the Authenticating Agent will be liable
for any delay in delivery of such instructions by the Clearing Agency and may
conclusively rely on, and will be protected in relying on, such instructions. 

5.7 Notices to Clearing Agency

Whenever notice or other communication
to the holders of book-entry certificates is required under this agreement, until
definitive certificates are issued to beneficial owners pursuant to section 5.6,
the Trustee will deliver such notices and communications to the Clearing Agency. 

 

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6   [Reserved]

7   Default

7.1 Events of Default

    If any of the following events
(Events of Default) is continuing:

     (a)  CitiMortgage,
as servicer, master servicer or Paying Agent, fails to make a full payment, deposit,
transfer or distribution required of it in such capacities under this agreement,
and the failure continues unre-medied for

•     10
business days after the Trustee gives written notice of the failure to CitiMortgage,
or the holders of the Required Amount of certificates give written notice of
the failure to CitiMortgage and the Trustee, if the failure results from an error
in calculating the amount of the required deposit, transfer or distribution,
or 

•      three
business days after such notice if the failure results from any other reason;
or

     (b) CitiMortgage
      fails to reimburse a Paying Agent advance as required by section 3.5, and
      the failure is not remedied for 60 business days after the Trustee or the
      Paying Agent gives CitiMortgage written notice of the failure, or the holders
      of the Required Amount of Certificates give CitiMortgage and the Trustee
such notice; or

     (c) CitiMortgage
fails to observe or perform in any material respect any other covenant or agreement
of CitiMortgage set forth in the certificates or in this agreement, and the failure

•      materially
and adversely affects the rights of the certificate holders, and

•      continues
unremedied for 60 business days after the Trustee gives CitiMortgage written
notice of the failure, requiring the failure to be remedied, or the holders of
the Required Amount of Certificates give such notice to CitiMortgage and the
Trustee; or

    (d)
      a court or agency or supervisory authority having jurisdiction enters a
      decree or order for the appointment of a conservator, receiver or liquidator
      for CitiMortgage in any insolvency, readjustment of debt, marshaling of
      assets and liabilities or similar proceeding, or for the winding up or
      liquidation of CitiMortgage’s affairs, and the decree or order continues
      unstayed and in effect for 60 consecutive days; or

     (e) CitiMortgage consents to the appointment of a conservator, receiver or liquidator in an insolvency, readjustment of debt, marshaling of assets and liabilities, or similar proceeding for CitiMortgage or substantially all of its property, or CitiMortgage admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations;

     then the
      Trustee or the holders of the Required Amount of certificates, by notice
      in writing to CitiMortgage (and to the Trustee if given by the certificate
      holders) may terminate all of CitiMortgage’s rights and obligations as servicer of the affiliated mortgage loans and as master servicer of the third party mortgage loans under this agreement. Upon CitiMortgage’s receipt of such notice, all CitiMortgage’s
      authority under this agreement, whether for the certificates or the mortgage
      loans or otherwise, will pass to and be vested in the Trustee pursuant
      to this section 7.1, and the Trustee will be authorized to execute and
      deliver, on behalf of CitiMortgage as attorney-in-fact or otherwise, any
      documents and other instruments, and to do or accomplish all other acts
      or things necessary or appropriate to effect the purposes of such notice,
      whether to complete the transfer and endorsement of the mortgage loans
      and re-

 

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lated documents or otherwise. CitiMortgage
    will cooperate with the Trustee in effecting the termination of CitiMortgage’s
    responsibilities and rights hereunder, including the transfer to the successor
    servicer for the administration by it of all cash amounts held by CitiMortgage
    for deposit, or deposited by CitiMortgage, in the certificate account or
    servicing account or subsequently received on the mortgage loans. In addition
    to any other amounts that are then payable, or, notwithstanding the termination
    of its activities as servicer and master servicer of the mortgage loans,
    may become payable to CitiMortgage under this agreement, CitiMortgage will
    be entitled to receive out of any delinquent interest payment on a mortgage
    loan, due before such termination notice but received afterwards, that portion
    of the payment that it would have received if the notice had not been given. 

7.2 Trustee to act; appointment of successor

Once CitiMortgage receives a
notice of termination under section 7.1, the Trustee will be the successor in
all respects to CitiMortgage in its capacity as servicer and master servicer,
and will be subject to all CitiMortgage’s rights and obligations under this
agreement. As compensation, the Trustee will, except as provided in section 7.1,
be entitled to the same compensation (whether payable out of the certificate
account or otherwise) as CitiMortgage would have been entitled to under this
agreement if no such notice of termination had been given. However, the Trustee
may, if it is unwilling so to act, or will, if it is legally unable so to act,
appoint, or petition a court of competent jurisdiction to appoint, an established
housing finance institution with a net worth of not less than $5 million and
approved as seller/servicer by GNMA,
Fannie Mae or FHLMC as
the successor to CitiMortgage in

the assumption of all or any part of the rights and obligations of CitiMortgage
under this agreement. Until such a successor is appointed, unless the Trustee
is prohibited by law from so acting, the Trustee will act in such capacity as
provided above. The Trustee may make such arrangements for compensation of such
successor out of payments on the mortgage loans as it and the successor
agree; provided,
however, that no such compensation will exceed CitiMortgage’s compensation
under this agreement. The Trustee and the successor will take any actions, consistent
with this agreement, necessary to effect the succession.

     The Trustee will promptly notify the certificate holders and any Insurer of any termination of CitiMortgage or appointment of a successor pursuant to this section 7. 

8 The Trustee

8.1 Duties

  (a) Unless the Trustee has notice
  that an Event of Default is continuing, the Trustee will only have those obligations
  that are specifically set forth in this agreement, and no implied covenants
  of the Trustee will be read into this agreement.

     (b) If the Trustee has notice that an Event of Default is continuing, then notwithstanding anything to the contrary in this agreement, the Trustee will exercise those rights and powers vested in it by this agreement, and use the same degree of care and skill in their exercise, as a prudent man would exercise under the circumstances in the conduct of his own affairs. If the Trustee is incorporated or organized under the laws of the State of New York, then, in considering what actions are prudent in the circumstances, the Trustee will consider, to the extent applicable, the matters enumerated in Section 126(2)(a) through (e) of the New York Real Property Law, as in effect on the

 

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date of this agreement, and will comply with subdivisions (3),(4)
and (5) of Section 126 of the New York Real Property Law, as in effect on the
date of this agreement.

     The
Trustee will not be charged with notice of an Event of Default (other than a
default in payment to the Trustee) unless a Responsible Officer of the Trustee
assigned to and working in the corporate trust office obtains actual knowledge
of such failure or receives written notice of such Event of Default at its corporate
trust office from CitiMortgage or the holders of the Required Amount of Certificates.

     (c)     The
Trustee, upon receipt of all resolutions, certifications, statements, opinions,
reports, documents, orders or other instruments that are specifically required
or requested to be furnished to the Trustee pursuant to this agreement (each
a Furnished Document),
      will examine them to determine whether they conform to the requirements
      of this agreement. The Trustee may request an officer’s certificate
      as to any matter of fact if the Trustee believes it desirable that the
      fact be established before the Trustee takes an action under this agreement.
      Unless the Trustee has notice that an Event of Default is continuing, the
      Trustee may conclusively rely, without investigation, on the truth of the
      statements and the correctness of the opinions expressed in any Furnished
      Document that the Trustee believes to be genuine, signed or presented by
      the proper parties, and in conformity with the requirements of this agreement.

     The Trustee will investigate the facts or matters stated in a Furnished Document if the holders of the Required Amount of Certificates request such investigation in writing. CitiMortgage will pay, or will reimburse the Trustee upon demand, for the reasonable expense of such investigation. If the Trustee believes that the payment within a reasonable time of the costs and liabilities
      

likely to be incurred in the investigation are not reasonably assured
to it, the Trustee may, as a condition to conducting such investigation, require
reasonable indemnity from the certificate holders against such expense or liability.
Nothing in this clause (c) will derogate from CitiMortgage’s obligation
to observe any applicable law prohibiting disclosure of information regarding
the mortgagors.

     (d)     The
Trustee will not be required to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties under this
agreement, or in the exercise of any of its rights or powers, if the Trustee
reasonably believes that the repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.

     (e)     Except
to the extent that the Trustee becomes a successor servicer to CitiMortgage
under sections 4.3 or 7.2, the Trustee will have no responsibility for
      the performance or the manner of performance of any of CitiMortgage’s
      obligations under this agreement. The relationship of CitiMortgage to
      the Trustee under this agreement is intended by the parties to be that
      of an independent contractor and not that of a joint venturer, partner
      or agent.

     (f)     The
Trustee may appoint agents (which may include CitiMortgage and its affiliates)
to perform any of the Trustee’s obligations under this
      agreement. Such agents will have all of the rights and obligations of the
      Trustee conferred on them by such appointment, but the Trustee will continue
      to be responsible for its obligations under this agreement.

8.2 Liability

(a)      In performing its obligations
under this agreement, the Trustee will be liable for its own negligence or misconduct, except that the Trustee will not be liable for 

 

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•      an
error of judgment by a Responsible Officer of the Trustee, unless the Trustee
was negligent in ascertaining the pertinent facts; 

•      an
action by the Trustee believed by it to be permitted under this agreement; and 

•      an
action taken in accordance with the direction of the holders of the Required
Amount of certificates relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this agreement.

     (b)     The
Trustee may consult with counsel, and an opinion of counsel will be full and
complete authorization and protection for any action by the Trustee taken
under this agreement in accordance with such opinion.

     (c)     The
Trustee will not be responsible for the selection of the Mortgage Document Custodian,
or any Note Custodian, Paying Agent, Certificate Registrar, or Authenticating
Agent, nor for their performance of their obligations under this agreement, the
Mortgage Document Custodial Agreement, or any other applicable agreement. 

8.3 Trustee not liable for certificates or mortgage loans

The recitals contained herein and in the certificates (other than the certification of authentication on the certificates) will be taken as the statements of CitiMortgage, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this agreement, the Mortgage Document Custodial Agreement or of the certificates (other than the certification of authentication on the certificates) or of any mortgage loan or related document. The Trustee will not be accountable for the use or application by CitiMortgage of any of the

certificates or of the proceeds of such certificates or for the use or application
of any funds paid to CitiMortgage in respect of the mortgage loans or deposited
in or withdrawn from the certificate account or servicing account by CitiMortgage.
The Trustee will have no liability for any losses incurred as a result of

•      any
failure of the Trust Fund to qualify as the specified separate constituent REMICs,

•      any
termination, inadvertent or otherwise, of the status of the Trust Fund as the
specified separate constituent REMICs,

•      any
tax on prohibited transactions imposed by Internal Revenue Code Section 860F(a)(1),

•      any
tax on net income from foreclosure property imposed by Internal Revenue Code
Section 860G(c),

•      any
tax on contributions to any constituent REMIC after the startup day imposed by Internal Revenue Code Section 860G(d),

•      any
erroneous calculation or determination or any act or omission of CitiMortgage
hereunder or

•      any
erroneous information included in any federal, state or local income tax or information
return prepared pursuant to section 3.16; provided,
that the Trustee will not be excused hereby from liability for its own negligence,
bad faith or failure to perform its duties as specified herein. 

8.4 Trustee may own certificates

The Trustee in its
individual or any other capacity may become the owner or pledgee of one or more
of the certificates with the same rights as it would have if it were not Trustee
and may otherwise deal with CitiMortgage or any of its affiliates as if it were
not the Trustee. 

8.5 Trustee’s fees and expenses

The
Trustee’s fees and expenses (and those of any co-trustee
appointed pursuant to sec-

  

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tion 8.10), and of any Certificate Registrar, Mortgage Document Custodian, Depository,
Paying Agent, Authenticating Agent appointed pursuant to section 8.12, and agent
of the Trustee appointed pursuant to section 8.2(g), will
be paid by CitiMortgage, as servicer, in accordance with section 3.9(a). Citibank,
N.A., as Paying Agent, has agreed to a fee of $3,000 a year. CitiMortgage will
also pay any expenses associated with the resignation or removal of the Trustee
and the appointment of a successor Trustee.

     In
consideration of paying the amounts payable pursuant to this section 8.5, Citi-Mortgage
may retain any trustee fee that may be payable on the third party mortgage loans.
The Trustee (and any such co-Trustee) will be entitled to reasonable compensation
(which will not be limited by any provision of law with respect to the compensation
of a trustee of an express trust) for all services rendered by them in the execution
of the trust or trusts hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee, and upon notice to CitiMortgage,
the Trustee will be paid or reimbursed by CitiMortgage for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not regularly
in its employ) except any such expense, disbursement or advance as may arise
from its negligence or bad faith or which is the responsibility of the certificate
holders hereunder.

     The Trustee, each Certificate Registrar, each Note Custodian, each Mortgage Document Custodian, each Depository, each Paying Agent, each Authenticating Agent and any agent appointed pursuant to section 8.2 are entitled to indemnification

from CitiMortgage, as servicer or master servicer, and will be held harmless
against any loss, liability or expense incurred without negligence or bad faith
on their part, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses of defending
themselves against any claim or liability in connection with the exercise or
performance of any of their powers or duties hereunder. Such indemnification
will survive the payment of the certificates and termination of the Trust Fund,
as well as the resignation or removal of CitiMortgage as servicer (if such action
which caused the need for the indemnification occurred while CitiMortgage acted
as servicer), and for purposes of such indemnification neither the negligence
nor bad faith of any of the entities enumerated in the preceding sentence, nor
of any Note Custodian or Mortgage Document Custodian, will be imputed to, or
adversely affect, the right of any other entity enumerated in the preceding sentence
to be entitled to indemnification. 

8.6 Eligibility requirements for Trustee

The Trustee hereunder will at all times be a corporation or a national banking association, other than an affiliate of CitiMortgage, having its principal office in, and organized and doing business under the laws of, the United States of America or a state thereof, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $30 million, and subject to supervision or examination by federal or state authority. If such corporation or national banking association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this section 8.6, the combined capital and surplus of

 

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such corporation or national banking association will be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so published.
If the Trustee ceases to be eligible in accordance with the provisions of this
section 8.6, the Trustee will resign immediately in the manner and with the effect
specified in section 8.7. 

8.7 Resignation or removal of Trustee

The Trustee may resign
and be discharged from the trusts hereby created by giving written notice thereof
to CitiMortgage. Upon receiving such notice of resignation, CitiMortgage will
promptly appoint a successor Trustee by written instrument, in duplicate, one
copy of which instrument will be delivered to the resigning Trustee and one copy
to the successor Trustee. If no successor Trustee will have been so appointed
and having accepted appointment within 30 days after the giving of such notice
of resignation, the resigning Trustee may petition any court of competent jurisdiction
for the appointment of a successor Trustee.

     If the Trustee ceases to be eligible in accordance with the provisions of section 8.6 and will fail to resign after written request therefor by CitiMortgage, or if the Trustee is legally unable to act, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property is appointed, or any public officer takes charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conversion or liquidation, then CitiMortgage may remove the Trustee. If it removes the Trustee under the authority of the immediately preceding sentence, CitiMortgage will promptly appoint a successor Trustee by written instrument, in duplicate, one copy of which instrument will be delivered to the Trustee

so removed and one copy to the successor Trustee.

     The
Trustee may also be removed (i) by CitiMortgage, (a) if the Trustee ceases to
be eligible to continue as such under this agreement or if the Trustee becomes
insolvent, (b) if the Trustee breaches any of its duties under this agreement
which materially adversely affects the certificate holders, (c) if through the
performance or nonperformance of certain actions by the Trustee, the rating
assigned to the certificates would be lowered or (d) if the credit rating of
the Trustee is downgraded to a level which would result in the rating assigned
to the certificates to be lowered; or (ii) by the holders of certificates evidencing
more than 50% of the voting interest of the certificates then outstanding and
more than 50% of the percentage interests of the residual certificates.

     Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this section 8.7 will not become effective until acceptance of appointment by the successor Trustee as provided in section 8.8. 

8.8 Successor trustee

Any successor Trustee appointed as provided in section 8.7 will execute, acknowledge and deliver to CitiMortgage and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee will become effective and such successor Trustee, without any further act, deed or conveyance, will become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder with like effect as if originally named as Trustee. The predecessor Trustee will deliver to the successor Trustee all mortgage files and related documents and statements held by it hereunder; and, if any

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mortgage notes or mortgage documents are then held by the Mortgage
Note Custodian or Mortgage Document Custodian, respectively, pursuant to a Mortgage
Document Custodial Agreement, the predecessor Trustee and the Mortgage Note Custodian
or the Mortgage Document Custodian, as the case may be, will amend such Mortgage
Document Custodial Agreement to make the successor Trustee the successor to the
predecessor Trustee thereunder; and CitiMortgage and the predecessor Trustee
will execute and deliver such instruments and do other such things as may reasonably
be required for fully and certainly vesting and confirming in the successor Trustee
all such rights, powers, duties and obligations.

     No
successor Trustee will accept appointment as provided in this section 8.8 unless
at the time of such acceptance such successor Trustee will be eligible under
the provisions of section 8.6.

     Upon acceptance of appointment by a successor Trustee as provided in this section 8.8, CitiMortgage will mail notice of the succession of such Trustee hereunder to all holders of certificates at their addresses as shown in the Certificate Register, and to any Insurer. If CitiMortgage fails to mail such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee will cause such notice to be mailed at the expense of CitiMortgage. 

8.9 Merger or consolidation of Trustee

Any corporation or national banking association into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or national banking association resulting from any merger, conversion or consolidation to which the Trustee will be a party, or any corporation or national banking association succeeding to all or substantially all of the corporate trust business of the Trustee, will

be the successor of the Trustee hereunder, provided such corporation or national
banking association will be eligible under the provisions of section 8.6, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding. 

8.10 Appointment of co-trustee or separate trustee

Notwithstanding any other provisions of this agreement, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Fund or property securing any mortgage note may at the time be located, CitiMortgage and the Trustee acting jointly will have the power and will execute and deliver all instruments to appoint one or more persons approved by the Trustee to act as co-trustee or co-trustees jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the Trust Fund, and to vest in such person or persons, in such capacity and for the benefit of the certificate holders and any Insurer, such title to the Trust Fund, or any part thereof, and, subject to the other provisions of this section 8.10, such powers, duties, obligations, rights and trusts as CitiMortgage and the Trustee may consider necessary and desirable. If CitiMortgage will not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in the case an Event of Default will have occurred and be continuing, the Trustee alone will have the power to make such appointment. No co-trustee or separate trustee hereunder will be required to meet the terms of eligibility as a successor trustee under section 8.6 and no notice to the certificate holders of the appointment of any co-trustee or separate trustee will be required under section 8.8. 

 

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      Every separate trustee and co-trustee will, to the extent permitted by law and by the instrument appointing such separate trustee or co-trustee, be appointed and act subject to the following provisions and conditions:

      (a) All rights, powers, duties and obligations
conferred or imposed upon the Trustee will be conferred or imposed upon and exercised
or performed by the Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized to
act separately without the Trustee joining such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts are to
be performed (whether as Trustee hereunder or as successor to CitiMortgage hereunder),
the Trustee will be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Trust Fund or any portion thereof in any such jurisdiction) will
be exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;

     (b) No trustee hereunder will be held personally
liable by reason of any act or omission of any other trustee hereunder; and

     (c) CitiMortgage and the Trustee acting jointly
may accept the resignation of or remove any separate trustee or co-trustee. 
    

     Any notice, request or other writing given to the Trustee will be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee will refer to this agreement and the conditions of this section 8. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, will be vested with
  

  the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all of the provisions of this agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument will be filed with the Trustee and a copy thereof given to CitiMortgage. 
  

     Any
  separate trustee or co-trustee may constitute the Trustee, its agent or attorney-in-fact,
  with full power and authority, to the extent not prohibited by law, to do any
  lawful act under or in respect of this agreement on its behalf and in its name.
  If any separate trustee or co-trustee will die, become incapable of acting,
  resign or be removed, all of its estates, properties, rights, remedies and
  trusts will vest in and be exercised by the Trustee to the extent permitted
  by law, without the appointment of a new or successor trustee.

  8.11   Tax
      returns     

    The Trustee, upon request, will furnish CitiMortgage with all such information as may be reasonably required in connection with the preparation of all federal, state and local income tax or information returns of each constituent REMIC. The Trustee will sign the federal and, if applicable, state and local income tax returns of each constituent
    REMIC. 

8.12   Appointment
      of authenticating agent     

    As long as  any of the certificates remain outstanding the Trustee may appoint an Authenticating Agent or Agents (which may include CitiMortgage or any of its affiliates) which will be authorized to act on behalf of the Trustee to authenticate certificates, and certificates so authenticated will be entitled to the benefit of this agreement and will be valid and obligatory for all purposes as if authenticated by the Trustee
    

 

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  hereunder. Wherever reference made in this agreement to the authentication
and delivery of certificates by the Trustee or the Trustee’s certification
of authentication, such reference will be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certification
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent will be acceptable to CitiMortgage and will at all
times be a corporation or national banking association organized and doing business
under the laws of the United States of America, any state thereof or the District
of Colum-bia, authorized under such laws to act as Authenticating Agent, having
a combined capital and surplus of not less than $15 million, authorized under
such laws to conduct a trust business and subject to supervision or examination
by federal or state authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this section 8.12,
the combined capital and surplus of such Authenticating Agent will be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published. If an Authenticating Agent ceases to be eligible in
accordance with the provisions of this section 8.12, such Authenticating Agent
will resign immediately in the manner and with the effect specified in this section
8.12. 
  

     Any corporation or national banking association into which an authenticating Agent may be merged in or converted or with which it may be consolidated, or any corporation or national banking association resulting from any merger, conversion or consolidation to which such Authenticating Agent will be a party, or any corporation or national banking association succeeding to
  

  the corporate agency or corporate trust business of an Authenticating Agent, will continue to be an Authenticating Agent, provided such corporation or national banking association will be otherwise eligible under this section 8.12, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. 
  

     An Authenticating Agent may resign by giving written notice thereof to the Trustee and to CitiMortgage. The Trustee may terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to Citi-Mortgage. Upon receiving such a notice of resignation or upon such a termination, or if the Authenticating Agent ceases to be eligible in accordance with the provisions of this section 8.12, the Trustee may appoint a successor acceptable to CitiMortgage and will mail written notice of such appointment by first-class mail, postage prepaid to all certificate holders as their names and addresses appear in the Certificate Register, and to any Insurer. Any successor Authenticating Agent upon acceptance of its appointment hereunder will become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent will be appointed unless eligible under the provisions of this section 8.12. 
  

     Any reasonable compensation paid to an Authenticating Agent for its services under this section 8.12 will be a reimbursable expense pursuant to section 8.5 if paid by the Trustee. 
  

     If
      an appointment is made pursuant to this section 8.12, the certificates
      may have endorsed thereon, in addition to the Trustee’s certification
      of authentication, an alternate certification of authentication in the
      following form: 

 

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      “This
      is one of the certificates referred to in the within-mentioned Agreement. 

	 	 	 	 	 
	 	 	As
      Trustee	 	 
	 	 	 	 	 
	 	By	_________________________
	 
	 	 	            Authenticating
      Agent	 
	 	By	_________________________	 
	 	 	        Authenticating
      Signature”  	 

9   Termination 

9.1   Termination upon repurchase by CMSI or
liquidation of all mortgage loans 

The obligations and responsibilities of CMSI, CitiMortgage and the Trustee under, and the Trust Fund created by, this agreement will terminate upon

     (a) the repurchase by CMSI of all of the mortgage loans and all property acquired in respect of any mortgage loan remaining in the Trust Fund, or

     (b) the later of (i) the maturity or other liquidation
(or any advance with respect thereto) of the last mortgage loan remaining in
the Trust Fund and the disposition of all property acquired upon foreclosure
or by deed in lieu of foreclosure of any mortgage loan and (ii) the payment to
the certificate holders and to the Insurer, as subrogee of any insured class
certificates, of all amounts required to be paid to them pursuant to this agreement;

     provided,
however, that in no event will the trust created hereby continue beyond the expiration
of 21 years from the death of the last survivor of the lawful descendants of
Joseph P. Kennedy, the late Ambassador of the United States of America to the
Court of St. James’s, living on the date of this agreement.

     CMSI’s
    right to repurchase all of the mortgage loans on any distribution day pursu-

ant to clause (a) above will be conditioned upon

•    the
aggregate scheduled principal balances of such mortgage loans, at the time of
any such repurchase and after giving effect to distributions to be made on such
distribution day, aggregating an amount less than 10% of the aggregate scheduled
principal balance of the mortgage loans as of the closing date, which amount
is set forth in the Series Terms and

•    any
other condition set forth in the Series Terms.

     The repurchase of the mortgage loans and other property under clause (a) above will be at a price equal to the sum of 

•    100%
    of the unpaid principal balance of each mortgage loan on the first day of
    the month of repurchase (after giving effect to payments of principal due
    on such first day) plus accrued interest at the pass-through rate for each
    mortgage loan to but not including the first day of the month in the month
    in which the related distribution is made to certificate holders, after the
    deduction of (x) unreimbursed voluntary advances, affiliated Paying Agent
    advances, third party Paying Agent advances, and advance account advances
    (other than such payments and advances in respect of interest in excess of
    the pass-through rate on the mortgage loans) made prior to the month of repurchase,
    whereupon such voluntary advances, affiliated Paying Agent advances, third
    party Paying Agent advances and advance account advances will be reimbursed
    to the Paying Agent or deemed reimbursed to CitiMortgage, as the case may
    be, by such deductions, and (y) the aggregate amount of any non-supported
    prepayment interest shortfalls for the distribution day in the month of such
    repurchase, and    

    •    the
  appraised value of any acquired property in the Trust Fund (less the good faith
  estimate of CitiMortgage of liquidation 

 

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  expenses to be incurred in connection with its disposal thereof), such appraisal to be conducted by an appraiser mutually agreed upon by CitiMortgage and the Trustee. 
  

     Notwithstanding anything to the contrary in this section 9.1, if the purchase price of the mortgage loans under clause (a) above would be less than the aggregate fair market value of the mortgage loans on the first day of the month of repurchase (after giving effect to payments of principal due on such first day), then CMSI may so repurchase the mortgage loans only if the repurchase would be permitted under then-applicable risk-based capital rules applicable to securitizations treated as sales. 
  

     Any method of termination or repurchase of the Trust Fund other than as provided in clauses (a) or (b) above must be based on the receipt by the Trustee of an opinion of counsel (who may not be an employee of CMSI or of an affiliate of CMSI)
    or other evidence that such termination and repurchase will be part of a “qualified liquidation” within
    the meaning of Internal Revenue Code Section 860F(a)(4)(A), will not adversely
    affect the status of the Trust Fund as separate constituent REMICs under the Internal Revenue Code and will not otherwise subject the Trust Fund to any tax. CMSI may transfer its right to repurchase all of the mortgage loans pursuant to clause (a) above to any third party of choice. 
    

     Such
      termination will occur only in connection with a “qualified liquidation” of
      each constituent REMIC within the meaning of Internal Revenue Code Section 860F(a)(4)(A), pursuant to which the Trustee will sell or otherwise dispose of all of the remaining assets of the Trust Fund and make all required distributions to certificate holders within 90 days of the adoption of a plan of complete liquidation. For this purpose, the notice of termination described in the next paragraph will be the adoption of a

plan of complete liquidation described in Internal Revenue Code Section 860F(a)(4)-(A)(i),
which will be deemed to occur on the date the first such notice is mailed. Such
date will be specified in the final federal income tax return of each constituent REMIC constituted by the Trust Fund.

     Notice of a termination, specifying the distribution day upon which the certificate holders may surrender their certificates to the Paying Agent for payment of the final distribution and cancellation, will be given promptly by the Trustee by letter to the certificate holders mailed not earlier than 30 days nor more than 60 days prior to such distribution day specifying

	•	the distribution day upon which final
        payment of the certificates will be made upon presentation and surrender
        of the certificates at the office of the Paying Agent designated in the
      notice, 
	•	the amount of the final distribution,
      and 
	•	that the record date otherwise applicable
        to such distribution day will not apply, and that distributions will
        be made only upon presentation and surrender of the certificates at the
      designated office of the Paying Agent. 
	 CMSI
        will give such notice to the Trustee and, if applicable, the Certificate
        Registrar, the Mortgage Document Custodian and the Paying Agent at the
      time the notice is given to the certificate holders. 
	      If
          such notice is given, CMSI will
          deposit in the certificate account or the account designated by the
          Paying Agent, on the business day preceding the distribution day for
          the final distribution, an amount equal to the final distribution on
          the certificates. Upon certification to the Trustee by an Authorized
          Officer of CMSI following
          such final deposit, and delivery by CMSI of
          an opinion of counsel to the effect that all conditions set forth in
      this section 9.1 have been met, the  

 

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Trustee will promptly release to CMSI the mortgage files for the mortgage loans.

     If all of the certificate holders do not surrender their certificates for cancellation within six months after the date specified in the notice, the Trustee will give a second written notice to the remaining certificate holders to surrender their certificates for cancellation and receive the final distribution. If all the certificates have not been surrendered for cancellation within one year after the second notice, the Trustee may take appropriate steps to contact the remaining certificate holders concerning surrender of their certificates, and the cost thereof will be paid out of the funds and other assets which remain subject hereto. Interest will not accrue for the period of any delay in the payment of a certificate resulting from the failure of a holder to surrender the certificate in accordance with the notice. 

10   General provisions

10.1 Amendments 

    This Agreement may be amended by CMSI, CitiMortgage and the Trustee, without the consent of any of the certificate holders,

      •    to
  cure an ambiguity or inconsistency, or to correct a mistake,

      •    to
  add provisions not inconsistent with this agreement,

      •    to
  comply with any requirements imposed by the Internal Revenue Code,

      •    to
  establish a “qualified reserve fund” within the meaning of Internal
  Revenue Code Section 860G(a)(7)(B), or

      •    to
  maintain the status of the Trust Fund as separate constituent REMICs.

     This Agreement may also be amended by CMSI, CitiMortgage and the Trustee, without certificate holder consent, if CMSI or CitiMortgage delivers an opinion of counsel acceptable to the Trustee and the Insurer to the effect that the amendment will not ma-

terially adversely affect the interests of the certificate holders or the Insurer.

     The Trustee will execute and deliver any amendment to this agreement provided by CMSI or
    CitiMortgage that conforms to the preceding two paragraphs, but the Trustee
    need not enter into any such amendment that affects the Trustee’s own
    rights, duties or immunities under this agreement or otherwise. 

     This Agreement may also be amended by CMSI, CitiMortgage and the Trustee to add, change or eliminate provisions of this agreement, or to modify the rights of certificate holders; with the consent of

    1   the
    holders of 2/3 of the certificates,

    2   if
a class of certificates is affected mate-rially and adversely by the amendment in a way that is different from the other affected classes, 2/3 of the certificates of the differently affected class, and 

3    the Insurer
if the Insurer is materially and adversely affected by the amendment 

      Approval
shall be by percentage interest for residual certificates and by principal balance
for all other certificates. 

     In connection with any such amendment, CMSI or CitiMortgage will deliver an opinion of counsel acceptable to the Trustee (x) identifying any class of certificates that may be affected materially and adversely by the amendment in a way that is different from the other affected classes (or stating that there is no such differently affected class) and (y) identifying any class whose certificate holders would not be materially adversely affected by such amendment. 

     Notwithstanding the foregoing, no amendment will, without the consent of the holders of all the outstanding certificates

•    reduce
    or delay collections or payments received on mortgage loans or distributions
    to be made on any certificate, or

    •     reduce
    the proportion required to consent to any such amendment.

 

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      Certificate holders may consent to an amendment by approving the substance of the amendment rather than the particular form of the proposed amendment. The Trustee may prescribe reasonable requirements for the manner of obtaining and evidencing such consents. Any proposed amendment is subject to the receipt by the Trustee of a legal opinion, at the expense of the party proposing the amendment (or at the expense of the Trust Fund if proposed by the Trustee), that the amendment will not cause any constituent REMIC to fail to qualify as a REMIC or subject any constituent REMIC to tax. 

     Promptly after the execution of any such amendment or such consent, the Trustee will notify each certificate holder of the substance of the amendment or provide the holder with a copy of the amendment. 

10.2     Recordation of Agreement 

Any manually signed copy of this
agreement may be recorded in any appropriate public office for real property
records in a county or other jurisdiction where mortgaged properties are located,
or any other appropriate public recording office. CitiMortgage will effect such
recordation at its expense upon the Trustee’s request, acting at the direction
of the holders of a majority by percentage interest of the residual certificates.
The request must be accompanied by a legal opinion to the effect that the recording
will materially and beneficially affects the
interests of the certificate holders.

10.3    Limitation on rights of certificate holders 

A
certificate holder’s death or incapacity will not terminate this agreement
or the Trust Fund, nor entitle the certificate holder’s legal representatives
or heirs to claim an accounting or to take an action or commence a proceeding
in any court for a partition or winding up of the Trust
Fund,

nor otherwise affect the rights, obligations and liabilities of any party to this agreement.

     No certificate holder may vote (except as provided in section 10.1) or otherwise control the operation and management of the Trust Fund or the obligations of the parties, nor will anything in this agreement or the certificates be construed to constitute the certificate holders as partners (except to the extent provided in Internal Revenue Code Section 860F(e) for holders of residual certificates) or members of an association; nor will a certificate holder be liable to any third person for any action taken by the parties to this agreement pursuant to its provisions. 

     A certificate holder may not institute any suit, action or proceeding with respect to this agreement, unless

•     the
    holder has notified the Trustee of the continuance of an event of default,

  •     the
    holders of the Required Amount of certificates have requested the Trustee
    to institute such action, suit or proceeding in its own name as Trustee,
    and have offered the Trustee such reasonable indemnity as it requires against
    the costs, expenses and liabilities to be incurred, and

  •     the
    Trustee, for 60 days after its receipt of the notice, request and offer of
    indemnity, fails to institute any the action, suit or proceeding. 

       Each certificate holder understands, and agrees with every other certificate holder and the Trustee, that no certificate holders may under this agreement affect, disturb or prejudice the rights of any other certificate holders, or obtain priority over or preference to any such other holders, or enforce any right under this agreement, except as provided in this agreement, and for the equal, ratable and common benefit of all certificate holders. For the protection and enforcement of the provisions of this section 10.3, each certificate holder and the Trustee

 

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may seek such relief as can be given either at law or in equity. 

10.4    Governing law 

This Agreement and the certificates
will be governed by the laws of the State of New York, except that the immunities
and standards of care of the Trustee will be governed by the law of the jurisdiction
in which its corporate trust office is located. 

10.5     Maintenance of REMICs

The execution and delivery
of this agreement will constitute an acknowledgment by each of CMSI and
CitiMortgage on behalf of the certificate holders that it intends hereby to establish
and maintain (for federal income tax purposes) one or more “real estate mortgage investment conduits” within
the meaning of Internal Revenue Code Section 860D, and CMSI and CitiMortgage are hereby granted all necessary powers to further such intent. 

10.6    Notices

Except as otherwise stated in
this agreement, all communications relating to this agreement including all demands
and notices will be in writing and will be deemed to have been duly given if
personally delivered at or mailed by first class mail, to a party at the address
for notices set forth in the Series Terms or at such other address as the party
designates in a written notice to each other party. Any notice required or permitted
to be mailed to a certificate holder will be given by first class mail, postage
prepaid, at the holder’s address shown in the Certificate Register. Any
notice so mailed within the time prescribed in this agreement will be conclusively
presumed to have been duly given, whether or not the certificate holder receives
the notice. Notices to
the Trustee will be effective only upon receipt.

10.7    Severability of provisions

If a provision of this agreement
is held invalid, then such provisions will be deemed severable from the remaining
provisions of this agreement and will in no way affect the validity or enforceability
of the other provisions, or of the certificates or the rights of their holders. 

10.8    Assignment 

Notwithstanding anything to
the contrary in this agreement, except as provided in sections 4.2, 4.3 and 4.5, CMSI or CitiMortgage may not assign this agreement without the prior consent of the Trustee and the holders of 2/3 of the outstanding certificate and 2/3 of the percentage interests of the outstanding residual certificates. 

10.9    Certificates nonassessable and fully paid 

It is the intention of the Trustee
that the certificate holders will not be personally liable for obligations of
the Trust Fund, that the interests represented by the certificates will be nonassessable
for any losses or expenses of the Trust Fund or for any reason whatsoever, and
that the certificates upon authentication thereof by the Trustee pursuant to
section 2.5 are and will be deemed fully paid. 

11    Depositories 

11.1  Depositories 

CitiMortgage may transfer the
certificate account, buydown account, if any, escrow account, custodial accounts
for P&I or servicing account to a bank, savings and loan association or trust
company organized under the laws of the United States or any State thereof (an “eligible
depository”). Upon such transfer, such transferee bank, savings and loan
association or trust company will be deemed to be a Depository for the transferred
account or accounts.

 

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       For
      a Depository of the certificate account, buydown account, escrow account,
      custodial accounts for P&I or servicing account to satisfy the “rating
      requirement”

•     its
      long-term debt obligations must be rated at least “A” by Fitch
      if Fitch is a rating agency, and

•     its
      short-term debt obligations are rated at least “A-1+” by S&P
      if S&P is a rating agency, “F-1” by Fitch if Fitch is a rating
      agency, and “P-1” by Moody’s if Moody’s
      is a rating agency.
      

            If
      a Depository ceases to satisfy the rating requirement, then within five
      business days after such cessation, CitiMortgage will

           
      (A)   transfer or direct
      the Trustee to transfer the certificate account, buydown account, escrow
      account, custodial accounts for P&I or servicing account to an eligible
      depository that satisfies the rating requirements,

           
      (B)   establish another
      account in the corporate trust department of the Trustee or if such Trustee
      satisfies the rating requirements, in any department of the Trustee (the “alternative
      certificate account,” “alternative buydown account,” “alternative
      escrow account,” “alternative custodial accounts for P&I,” or “alternative
      servicing account,” as the case may be) and transfer the funds from
      the buydown account to the alternative buydown account, direct CitiMortgage
      or a third party servicer, as applicable, to remit in accordance with this
      agreement any funds deposited into the servicing account, escrow account
      or custodial accounts for P&I to the alternative servicing account,
      alternative escrow account or alternative custodial account for P&I,
      respectively, and direct CitiMortgage to remit in accordance with this
      agreement any funds deposited into the certificate account to the alternative
      certificate account,

           
      (C)   (i) cause the Depository to pledge securities
      in the manner provided by applica-

ble law or (ii) pledge or cause
to be pledged securities, which will be held by the Trustee or its agent free
and clear of the lien of any third party, in a manner conferring on the Trustee
a perfected first lien and otherwise reasonably satisfactory to the Trustee;
such pledge in either case to secure
the Depository’s performance of its obligations in respect of the certificate
account, buydown account, escrow account, custodial accounts for P&I or servicing
account to the extent, if any, that such obligation is not fully
insured by the FDIC; provided, however, that
prior to the day a Depository or CitiMortgage, as the case may be, pledges securities
pursuant to this subsection (C), CitiMortgage, any Insurer and the Trustee have
received the written assurance of each rating agency that the pledging of such
securities and any arrangements or agreements relating thereto will not result
in a reduction or withdrawal of the then-current rating of the certificates (for
any insured class certificates, without reference to any certificate insurance
policy),

      (D) establish an account or accounts or enter
into an agreement so that the existing certificate account, buydown account,
escrow account, custodial
accounts for P&I or servicing account is supported by a letter of credit
or some other form of credit support, which issuer of such letter of credit or
other form of credit support has a long-term and short-term debt rating at least
equal to the rating requirements; provided, however, that prior
to the establishment of such an account or the entering into of such an agreement,
CitiMortgage, any Insurer and the Trustee receive written assurance from each
rating agency that the establishment of such an account or the entering into
of such an agreement so that the existing certificate account, buydown account
or servicing account is supported by a letter of credit or some other form of
credit support will not

 

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  result in a reduction or withdrawal of the then-current rating on the certificates (for an insured class certificates, without reference to a certificate insurance policy),

     (E)   establish another account which constitutes an Eligible Account, or

      (F)    make such other arrangements
 as
to which CitiMortgage, any Insurer and the Trustee have received prior written
assurance from each rating agency that such arrangement will not result in a
reduction or withdrawal of the then-current rating on the certificates.
  

     If the rating on the certificates has been downgraded as a result of a rating downgrade of the Depository, for purposes of this paragraph, the then-current rating on the certificates will be the rating assigned to the certificates prior to any such downgrade (for any insured class certificates, without reference to any certificate insurance policy). 

 

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SIGNATURES AND ACKNOWLEDGMENTS

  Citicorp Mortgage Securities, Inc.

	By:	 	

    
	 	 	 	[Name]
	 	 	 	[Title] 

 

	State of Missouri	)
	 	)  ss.:
	
    County of St. Charles

    	 ) 
	 	 
	On the ______ day
          of [Month] 200[*] before me, a notary public in and for the State of
          Missouri, personally appeared [Name], known to me who, being by me
          duly sworn, did depose and say that he is [Title] of Citicorp Mortgage
          Securities, Inc., one of the parties that executed the foregoing instrument;
          and that he signed his name thereto by authority of the Board of Directors
          of said corporation. 

    
	 
	 
	
	 
	Notary
Public	 	 
	 	 
	 	 
	[Notarial Seal]  	 

 

 

 

	CMSI Series 200[*]-[*]
    Pooling and Servicing Agreement	 Signature page
          1 

 

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CITIMORTGAGE, INC.

	By:	

	 	     [Name]	 	 
	 	     [Title] 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	State
          of Missouri

    	)	 
	 	 	)	ss.:
	 County of St. Charles 	 )	 
	 	 	 	 

On the ______ day of [Month] 200[*]
    before
me, a notary public in and for the State of

Missouri, personally appeared [Name],
known to me who, being by me duly sworn, 

did depose and say that he is [Title] of Citi Mortgage, Inc., one of the parties
that executed the foregoing instrument; and that he signed his name thereto by
authority of the
Board of Directors of said corporation. 

 

	

	 	     Notary
      Public	 
	 	 	 
	 	     [Notarial
      Seal] 	 

 

 

	CMSI Series 200[*]-[*]
        Pooling
and Servicing Agreement 	Signature page 2 

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U.S. Bank National Association,

in its individual capacity and as Trustee 

	By:	

	 	 	 	 
	 	 	 	 
	[State/Commonwealth]
      of [State]	)	 
	 	 	)	ss.: 
	County of [***]	)	 

On the _____ day of [Month] 200[*]-[*] be fore me, a notary public in and for
the

[State/Commonwealth] of [State], personally appeared
____________________

known to me who, being by me duly sworn,
did depose and say that he/she is 

_________________________ of [Trustee], a [national banking association], one
of the parties that executed the foregoing instrument; and that he/she signed
his/her name
thereto by authority
of the Board of Directors of said bank. 

	 	 	 
	

    
	 	     Notary
        Public	 
	 	     	 
	 	     [Notarial
        Seal] 	 

 

 

	 CMSI Series 200[*]-[*]
        Pooling
and Servicing Agreement 	Signature page 3

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Citibank, N.A., 

in its individual capacity and as Paying

Agent, Certificate Registrar and Authenticating 

Agent 

	 	 	 	 
	By:	

    
	 	 	 	 
	 	 	 	 
	State of New York	)	 
	 	 	)	ss.: 
	County of New York	)	 

On the _____ day of [Month] 200[*] before me, a notary public in and for the
State of

New York, personally appeared ____________________
known to me who,

being by me duly sworn, did depose and say that he/she is _______________________
of Citibank, N.A., a national banking association,

one of the parties that executed the foregoing instrument; and that he/she signed
his/her name thereto by authority of the Board of
Directors of said bank. 

	 	 	 
	 	 	 
	

    
	 	     Notary
        Public	 
	 	  	 
	 	     [Notarial
        Seal] 	 

 

 

	 CMSI Series 200[*]-[*]
        Pooling
and Servicing Agreement 	Signature
    page 4

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APPENDIX 1: TRANSFEREE’S AFFIDAVIT 

Transferee’s Affidavit 

Affidavit Pursuant to Section

860e(E)(4)
of the Internal

Revenue Code of 1986, As Amended 

	STATE OF 	 )	 
	     	):	 
	COUNTY OF	)	 
	 	 	 

     [           ], being first duly sworn, deposes and says:

     1.   That
he is [
______________
] of  [ _____________ ]
(the “Investor”), a [state type of entity] duly organized and existing
under the laws of the [State of
____________

] [United States], on behalf of which he makes this affidavit. 

     2.   That the Investor’s
Taxpayer Identification Number is [ ______________
  ].      3.   That the Investor is not a “disqualified organization” within the meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”)
      or an ERISA Prohibited
      holder, and will not be a “disqualified organization” or an ERISA Prohibited holder as of [____,____], and that the Investor is not acquiring a Citicorp Mortgage Securities, Inc. REMIC Pass-Through
      Certificates, Series 200[...]-[ ] Class [R][LR][PR] Certificates (the “residual certificates”) for the account of, or as agent (including a broker, nominee or other middleman) for, any person or entity from which it has not received an affidavit substantially in the form of this affidavit. For these purposes, a “disqualified organization” means
      the United States, any state or political subdivision thereof, any foreign
      governments any international organization, any agency or instrumentality
      of any of the foregoing (other than an instrumentality if all of its activities
      are subject to tax and a majority of its board of directors is not appointed
      by such governmental entity), any cooperative organization 

furnishing electric energy or providing telephone service to persons in rural
areas described in Internal Revenue Code Section 1381(a)(2)(C), or any organization
(other than a farmers’ cooperative described in Internal Revenue Code Section
521) that is exempt from federal income tax unless such organization is subject
to the tax on unrelated business income imposed by Internal Revenue Code Section
511. For these purposes, an “ERISA Prohibited
holder” means an employee benefit plan the investment of which is regulated
under Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, or Internal Revenue Code Section 4975 or a governmental plan, as defined
in Section 3(32) of ERISA,
subject to any federal, state or local law which is, to a material extent, similar
to the foregoing provisions of ERISA or
the Internal Revenue Code (collectively, a “Plan”) or a person investing
the assets of a Plan.

     4.   That the Investor historically has paid its debts as they have come due and intends to pay its debts as they come due in the future and the Investor intends to pay taxes associated with holding the residual certificates as they become due. 

     5.   That
the Investor will not cause the income with respect to the residual certificates
to be attributable to a foreign permanent establishment or fixed base, within
the meaning of an applicable income tax treaty, of the Investor or any other
person.

     6.   That
the Investor understands that it may incur tax liabilities with respect to the
residual certificates
in excess of cash flows generated by the residual certificates. 

     7.   That the Investor will not transfer the residual certificates to any person or entity as to which the Investor has actual knowledge that the requirements set forth in paragraphs 3, 4, 5 or 8 are not satisfied or that the Investor has reason to know does

 

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not satisfy the requirements set forth in paragraph 4.

     8   That
the Investor (i) is not a Non-U.S. person or (ii) is a Non-U.S. person that holds
the residual certificates in connection with the conduct of a trade or business
within the United States and has furnished the transferor and the Trustee with
an effective Internal Revenue Service Form W-8ECI or
    (iii) is a Non-U.S. person that has delivered to both the transferor and
    the Trustee an opinion of a nationally recognized tax counsel to the effect
    that the transfer of the residual certificates to it is in accordance with
    the requirements of the Internal Revenue Code and the regulations promulgated
    thereunder and that such transfer of the residual certificates will not be
    disregarded for federal income tax purposes. “Non-U.S. person” will
    mean an individual, corporation, partnership or other person other than a “U.S.
    person.” “U.S.
    person” will
    mean a citizen or resident of the United States, a corporation, partnership
    (except to the extent provided in applicable Treasury regulations) or other
    entity created or organized in or under the laws of the United States or
    any political subdivision thereof, an estate that is subject to U.S. federal
    income tax regardless of the source of its income or a trust if a court within
    the United States is able to exercise primary supervision over the administration
    of such trust, and one or more such U.S. persons have
    the authority to control all substantial decisions of such trust (or, to
    the extent provided in applicable Treasury regulations, certain trusts in
    existence on August 20, 1996 which are eligible to be treated as U.S. persons).

         9.   That
    the Investor agrees to such amendments of the Pooling and Servicing Agreement
    dated as of [ __________
  ] 1, 200[...] between Citicorp Mortgage Securities, Inc. and [Trustee] [and Paying Agent] (the “Pooling and Servicing Agreement”)
  as
  

may be required to further effectuate the restrictions on transfer of the residual
certificates to such a “disqualified organization,” an agent thereof,
an “ERISA Prohibited
holder” or a person that does not satisfy the requirements of paragraphs
4, 5, 6 and 8.

     10.   That
the Investor consents to the irrevocable designation of CMSI as
    its agent to act as “tax matters person” of the REMIC pursuant
    to the Pooling and Servicing Agreement, and if such designation is not permitted
    by the Internal Revenue Code and applicable law, to act as tax matters person
    if requested to do so.

         11   Check one of the following:

              The Investor has computed any con-sideration
    paid to it to acquire the residual certificates in accordance U.S. Treasury
    Regulations Sections 1.860E-1(c)(7) by computing present values using a discount
    rate equal to the short-term Federal rate prescribed by Section 1274(d) of
    the Code, compounded based on the period selected by the Investor. 

          The
      transfer of the residual certificates complies with U.S. Treasury Regulations
  Section 1.860E-1(c)(5) and, accordingly,

       (i)   the
  Investor is an “eligible corporation,” as defined in U.S. Treasury
  Regulations Section 1.860E-1(c)(6)(i), as to which income from the residual
  certificates will only be taxed in the United States;

      (ii)   at
the time of the transfer, and at the close of the Investor's two fiscal years
preceding the year of the transfer, the Investor had gross assets for financial
reporting purposes (excluding any obligation of a person related to the Investor
within the meaning of U.S. Treasury Regulations Section 1.860E-1(c)(6)(ii),)
in excess of $100 million and net assets in excess of $10 million;

      (iii)   the
Investor will transfer the residual certificates only to another “eligible
corporation,” as defined in U.S. Treasury Regu-
  

 

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lations Section 1.860E-1(c)(6)(i), in a transaction that satisfies the requirements
of Sections 1.860E-1(c)(4)(i), (ii) and (iii) and 1.860E-1(c)(5); and 

   (iv)  the Investor determined the consideration paid
to it to acquire the residual certificates based on reasonable market assumptions
(including, but not limited to, borrowing and investment rates, prepayment and
loss assumptions, expense and reinvestment assumptions, tax rates and other factors
specific to the Investor) that it has determined in good faith. 

          None
of the above. 

 

 

 

 

     IN
  WITNESS WHEREOF, the Investor has caused this instrument to be executed 

on its behalf, pursuant to authority of its Board of Directors, by its [________]
this ____ day of 200__. 

	____________________	 	 
	 	 	 
	By:	_________________	 	 
	Name: 	 	 
	Title: 	 	 
	 	 	 
	COUNTY OF	)	 
	 	 	)
	 STATE OF	)	 

     Personally
      appeared before me the above-named [___________], known or proved to me
      to be the same person who executed the foregoing instrument and to be the
      [___________] of the Investor, and acknowledged to me that he executed
      the same as his free act and deed and the free act and deed of the Investor. 

     Subscribed
      and sworn to before me this ___ day of ________
  200__. 

 

 

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EXHIBIT A-1 

FORM OF OFFERED CERTIFICATES 

REMIC Pass-Through Certificates, Series 200[...]-[...]

Certificate 

representing an ownership interest in a trust fund consisting

  primarily of mortgage loans acquired by 

 CITICORP MORTGAGE SECURITIES, INC. 

  certificate no. 1

 distribution days: 25th of each month
  or next business day

  first distribution day: [...], 200[...]

last scheduled distribution date: [...] 25, 20[...] 

	
      Unless this certificate is
            presented by an authorized representative of The Depository Trust
            Company, a New York corporation (“DTC”) to Citicorp Mortgage
            Securities, Inc. or its agent for registration of transfer, exchange,
            or payment, and any certificate issued is registered in the name
            of Cede & Co. or such other name as requested by an authorized
            representative of DTC (and any payment is made to Cede & Co.
            or such other entity as is requested by an authorized representative
            of DTC), any transfer, pledge, or other use hereof for value or otherwise
            by or to any person is wrongful inasmuch as the registered owner
        hereof, Cede & Co., has an interest herein. 

    
      Neither this certificate nor the underlying
            mortgage loans are insured or guaranteed by the United States government,
            the Federal Deposit Insurance Corporation or any other governmental
            agency or instrumentality. This certificate does not represent an interest
            in or obligation of Citicorp Mortgage Securities, Inc., CitiMortgage,
    Inc., any affiliate thereof, or their ultimate parent, Citigroup Inc. 

 THIS CERTIFIES THAT, for value received, Cede & Co.
    is the registered holder of the number of single certificates (each representing
    $1,000.00 initial principal
balance or, if indicated, initial notional balance) of the class of certificates
listed below. 

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	class	initial principal (or, if

 indicated, initial

 notional)
    balance 	certificate rate	number of single

    certificates 	CUSIP

   number
	
	
	
	
	

	[class]	 $[number]	[rate]	[number]	[  ]

 This certificate represents an undivided
    beneficial ownership interest in the Trust Fund created pursuant to the Pooling
    and Servicing Agreement dated
    as of [...] 1, 200[...] (the “Pooling Agreement”) between
    Citicorp Mortgage Securities, Inc., as Depositor, CitiMortgage, Inc. as Servicer,
    [Trustee], as Trustee, and Citibank, N.A., as Paying Agent, Certificate Registrar
    and Authentication Agent. Terms used in this certificate that are defined
    in the Pooling Agreement have the meanings assigned to them in the Pooling
    Agreement. 

 This certificate is one of a duly authorized
    issue of certificates designated as Citicorp Mortgage Securities, Inc. REMIC
    Pass-Through Certificates, Series 200[...]-[...], consisting of [...]
    senior classes, [six] subordinated classes and [..] class[es] of residual
    certificates. 

 The class of securities represented
    by this certificate is a “regular interest” in a real estate mortgage investment conduit (“REMIC”)
within the meaning of Section 860G(a)(1) of the Internal Revenue Code of 1986,
as amended. 

CERTIFICATES GOVERNED BY POOLING AGREEMENT 

The certificates are issued pursuant to the Pooling Agreement, which states the rights, limitations (including restrictions on transfer), duties and immunities of CMSI, the Trustee and the holders of the certificates, specifies how amounts of interest and principal distributable on the classes of certificates are calculated and when such amounts are payable, sets forth the relative priorities of the classes of certificates to payments and to allocation of losses, and sets forth the terms upon which the certificates are to be authenticated and delivered, and other matters relevant to an investment in certificates. Holders may obtain a copy of the Pooling Agreement (without exhibits) from the Trustee. 

OPTIONAL EARLY TERMINATION 

This certificate may receive a final distribution of all amounts owing in respect
    of the class represented by this certificate before its last scheduled distribution
    day if CMSI (or its assignee) exercises its right under the Pooling Agreement
    to repurchase all of the mortgage loans in the Trust Fund. This right cannot
    be exercised until the aggre-

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gate scheduled principal balance of such mortgage loans is less than [..]% of
the aggregate scheduled principal balance of the mortgage loans as of the cut-off
date. 

GOVERNING LAW 

This certificate and the Pooling Agreement are governed by the laws of the State
of New York. 

AUTHENTICATION REQUIRED 

Unless this certificate has been executed by the Trustee or a duly authorized
    Authenticating Agent by manual signature, this certificate shall not be entitled
to any benefit under the Pooling Agreement or be valid for any purpose. 

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IN WITNESS WHEREOF, Citicorp Mortgage
    Secur ities, Inc. has caused this certificate to be duly executed.

	 	      
    CITICORP MORTGAGE SECURITIES, INC.

    
	 	 	 	 
	 	 	 	 
	 	By:	___________________________
	 	 	 	[Name]
	 	 	 	[Title]

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This is one of the certificates
    referred to in the Pooling Agreement referred to above.

	 	 
	 	[TRUSTEE],
	 	 	 as
    Trustee
	 	 	 	 
	 	 	 	 
	 	By:	

	 	 	     
	 	 	 	Authorized
    Signatory
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	or	 	 
	 	 	 	 
	 	CITIBANK
    N.A.,
	 	 	as
    Authenticating Agent for the Trustee,
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:	

	 	 	 
	 	 	 	Authorized
    Signatory
	 	 	 	 

 Date: [...], 200[...]

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ABBREVIATIONS 

The following abbreviations, when used in the inscription on the face of this
    certificate, shall be construed as though they were written out in full according
    to applicable laws or regulations: 

TEN COM - as tenants in common

TEN ENT - as tenants by the entireties

JT TEN - as joint tenants with right of survivorship and not as tenants in common 

	UNIF GIFT MIN ACT -                                                   Custodian                                                          
	                                         (Cust)                                                              (Minor)
	Under Uniform Gifts
        to Minors Act                                                                                                   
	                                                                                (State) 
	 
	Additional abbreviations
    may also be used though not in the above list.  
	 
	

	 
	FOR VALUE RECEIVED,
    the undersigned hereby sells, assigns and transfers unto
	 
	PLEASE INSERT SOCIAL
    SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
	 
	 
	

	

	(Please print or typewrite
    name and address, including zip code, of assignee)
	 
	 
	

	the within certificate,
    and all rights thereunder, hereby irrevocably constituting and appointing
	 
	 
	

	attorney to transfer
        said certificate on the books of the Certificate Registrar with full
    power of substitution in the premises. 
	 
	Dated:                                                                                         
	 
	Signature Guaranteed
    by:                                                                                                

NOTICE: the signature to this assignment must correspond with the name as written
    upon the face of the within instrument in every particular, without alteration
    or enlargement or any change whatever, and must be guaranteed by a member
    of a Signature Guarantee Medallion Program.

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EXHIBIT A-2

FORM OF CLASS B-4, B-5 AND B-6 CERTIFICATES 

 REMIC
          Pass-Through Certificates, Series 200[...]-[...]

  Subordinated
Class B-[4][5][6] Certificate, [...]% Certificate Rate 

representing an ownership interest in a trust fund consisting primarily of mortgage loans acquired by

 CITICORP MORTGAGE SECURITIES, INC. 

	certificate no. 1	CUSIP [   ]
	 	 
	$[number] initial principal amount	[number] single certificates
	 	 
	distribution days: 25th of each
    month or next business day	 
	 	 
	first distribution day: [...],
    200[...]	 
	 	 
	last scheduled distribution day:
    [...] 25, 20[...]	 

This class B-[4][5][6] certificate is subordinated in right of payments to the class A, B-1, B-2[,][and] B-3[,] [and] [B-4] [and B-5] certificates, as described in the Pooling Agreement referred to below. 

Principal is paid on this certificate in accordance with the terms of the Pooling Agreement. Accordingly, at any time the outstanding principal balance of this certificate may be less than its initial principal balance. 

This certificate has not been registered under the Securities Act of 1933, as amended, and may not be sold, or offered for sale, transferred or otherwise disposed of unless such sale, transfer or other disposition is made pursuant to an effective registration statement under such act and any applicable blue sky law or unless an exemption under such act and any applicable blue sky law is available. 

This certificate may not be purchased by or transferred to any person that
is an employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”) or any Governmental Plan, as defined in Section 3(32) of ERISA, subject to any federal, state or local law which is, to a material extent, similar to the foregoing provisions of ERISA or the Code (collectively, a “Plan”)
or any person investing the assets of a Plan except as provided in section 5.2
of the Pooling Agreement. 

      Neither this certificate nor the underlying mortgage loans are insured or guaranteed by the United States government, the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality. This certificate does not represent an interest in or obligation of Citicorp 

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  Mortgage Securities, Inc., CitiMortgage, Inc., any affiliate thereof, or their ultimate parent, Citigroup Inc. 

 THIS CERTIFIES THAT, for value received,
    [...] is the registered holder of the number of single certificates (each representing $1,000.00 initial principal balance) set forth above. Each certificate represents an undivided beneficial ownership interest in the Trust Fund created pursuant to the Pooling and Servicing Agreement dated as of [...] 1, 200[...] (the “Pooling Agreement”)
between Citicorp Mortgage Securities, Inc., as Depositor, CitiMortgage, Inc.
as Servicer, [Trustee], as Trustee, and Citibank, N.A., as Paying Agent, Certificate
Registrar and Authentication Agent. Terms used in this certificate that are defined
in the Pooling Agreement have the meanings assigned to them in the Pooling Agreement. 

 This certificate is one of a duly authorized
    issue of certificates designated as Citicorp Mortgage Securities, Inc. REMIC
    Pass-Through Certificates, Series
    200[...]-[...], consisting of [...] senior classes, [six] subordinated classes and [...]
    class[es] of residual certificates. 

 The class of securities represented
    by this certificate is a “regular interest” in a real estate mortgage investment conduit (“REMIC”)
within the meaning of Section 860G(a)(1) of the Internal Revenue Code of 1986,
as amended. 

CERTIFICATES GOVERNED BY POOLING AGREEMENT 

The certificates are issued pursuant to the Pooling Agreement, which states the rights, limitations (including restrictions on transfer), duties and immunities of CMSI, the Trustee and the holders of the certificates, specifies how amounts of interest and principal distributable on the classes of certificates are calculated and when such amounts are payable, sets forth the relative priorities of the classes of certificates to payments and to allocation of losses, and sets forth the terms upon which the certificates are to be authenticated and delivered, and other matters relevant to an investment in certificates. Holders may obtain a copy of the Pooling Agreement (without exhibits) from the Trustee. 

OPTIONAL EARLY TERMINATION 

This certificate may receive a final distribution of all amounts owing in respect
    of the class represented by this certificate before its last scheduled distribution
    day if CMSI (or its assignee) exercises its right under the Pooling Agreement
    to repurchase all of the mortgage loans in the Trust Fund. This right cannot
    be exercised until the aggregate scheduled principal balance of such mortgage
    loans is less than [..]% of the aggregate scheduled principal balance of
    the mortgage loans as of the cut-off date. 

GOVERNING LAW 

This certificate and the Pooling Agreement are governed by the laws of the State
    of New York. 

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AUTHENTICATION REQUIRED

Unless this certificate has been executed by the Trustee or a duly authorized
    Authenticating Agent by manual signature, this certificate shall not be entitled
    to any benefit under the Pooling Agreement or be valid for any purpose. 

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IN WITNESS WHEREOF, Citicorp Mortgage Securities,
Inc. has caused this certificate to be duly executed.

	 	CITICORP MORTGAGE SECURITIES,
    INC.
	 	 	 
	 	By:	

	 	 	       [Name]
	 	 	       [Title]

 

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This is one of the certificates referred to in the Pooling Agreement referred to above.

	 	[TRUSTEE], 
	 	 	as Trustee
	 	 	 
	 	 	 
	 	 	 
	 	By:	

	 	 	       Authorized
    Signatory
	 	 	 
	 	 	 
	 	 	 
	 	or	 
	 	 	 
	 	CITIBANK, N.A.,
	 	 	as Authenticating Agent for the
    Trustee,
	 	 	 
	 	 	 
	 	 	 
	 	By:	

	 	 	       Authorized
    Signatory
	 	 	 
	Date:
    [...], 200[...]	 	 

 

	 	A-2-5

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ABBREVIATIONS 

The following abbreviations, when used in the inscription on the face of this
    certificate, shall be construed as though they were written out in full according
    to applicable laws or regulations: 

TEN COM - as tenants in common

TEN ENT - as tenants by the entireties

JT TEN - as joint tenants with right of survivorship and not as tenants in common 

	UNIF GIFT MIN ACT -	
	Custodian	
	 
	 	(Cust)	 	(Minor)	 

	Under Uniform Gifts to Minors Act	
	 
	 	(State)	 

Additional abbreviations may also be used though not in the above list. 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto 

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
    NUMBER OF ASSIGNEE 

________________________________________________________________

________________________________________________________________

(Please print or typewrite name and address, including zip code, of assignee) 

________________________________________________________________

the within certificate, and all rights thereunder, hereby irrevocably constituting and appointing 

________________________________________________________________

attorney to transfer said certificate on the books of the Certificate Registrar with full power of substitution in the premises. 

	Dated:	
	 	
	 
	 	 	 	 	 

	Signature Guaranteed by:	
	 

NOTICE: the signature to this assignment must correspond with the name as written
    upon the face of the within instrument in every particular, without alteration
    or enlargement or any change whatever, and must be guaranteed by a member
of a Signature Guarantee Medallion Program.

 

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  EXHIBIT A-3

FORM OF RESIDUAL CLASS [PR] [R] AND LR CERTIFICATES 
  

      REMIC Pass-Through Certificates, Series 200[...]-[...]

      Residual
Class [PR][R][LR] Certificate

representing an ownership interest
        in a trust fund consisting

  primarily of mortgage loans acquired by

      CITICORP MORTGAGE SECURITIES, INC.

	certificate no. 1	 	100% percentage interest 

This certificate has not been registered under the Securities Act of 1933,
as amended, and may not be sold, or offered for sale, transferred or otherwise
disposed of unless such sale, transfer or other disposition is made pursuant
to an effective registration statement under such act and any applicable blue
sky law or unless an exemption under such act and any applicable blue sky law
is available. 

This certificate may not be purchased by or transferred to any person that
is an employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”) or any Governmental Plan, as defined in Section 3(32) of ERISA, subject to any federal, state or local law which is, to a material extent, similar to the foregoing provisions of ERISA or the Code (collectively, a “Plan”)
or any person investing the assets of a Plan except as provided in section 5.2
of the Pooling Agreement referred to below. 

      Transfer
      of this certificate is restricted as set forth in section 5.2 of the Pooling
      Agreement. As a condition of ownership of this certificate, a transferee
      must furnish an affidavit to the transferor and the Trustee that
  (a) it
      is not a “disqualified organization,” as defined in Section 860e(e)(5)
      of the Code, (b) it is not acquiring this certificate as an agent (including
      a broker, nominee or other middleman) on behalf of a disqualified organization,
      (c) it understands that it may incur tax liabilities in excess of cash
      flows generated by the residual interest and it intends to pay taxes associated
      with holding the residual interest as they become due, (d) it historically
      has paid
  its debts as they have come due and intends to pay its debts as they come due
      in the future, (e) it will not
  cause the income with respect to this certificate to be attributable to a foreign
      permanent establishment
  or fixed base, within the meaning of an applicable income tax treaty, of it
      or any other person, and
  (f) it is not a “Non-permitted Foreign holder,” as
      defined in section 5.2 of the Pooling Agreement.
  By accepting this certificate,
      a transferee will be subject

 

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to such restrictions
      on transferability, and will have consented to any amendments to the Pooling
      Agreement that are required to ensure that this certificate is not transferred
      to a disqualified organization or its agent, or to a Non-permitted Foreign
      holder. To satisfy a regulatory safe harbor against the disregard of such
      transfer, the transferor may be required to conduct a reasonable investigation
      of the financial condition of the transferee and either transfer this certificate
      at a specified minimum price or transfer this certificate to an eligible
transferee

Neither
        this certificate nor the underlying mortgage loans are insured or guaranteed
        by the United States government, the Federal Deposit Insurance Corporation
        or any other governmental agency or instrumentality. This certificate
      does not represent an interest in or obligation of Citicorp Mortgage Securities,
        Inc., CitiMortgage, Inc., any affiliate thereof, or their ultimate parent,
        Citigroup Inc. 

 THIS CERTIFIES THAT, for value received,
    [...]
    is the registered holder of the percentage interest set forth above, representing
    an ownership interest in the Trust Fund created pursuant to the Pooling and
    Servicing Agreement dated as of [...] 1, 200[...] (the “Pooling Agreement”)
between Citicorp Mortgage Securities, Inc., as Depositor, CitiMortgage, Inc.
as Servicer, [Trustee], as Trustee, and Citibank, N.A., as Paying Agent, Certificate
Registrar and Authentication Agent. Terms used in this certificate that are defined
in the Pooling Agreement have the meanings assigned to them in the Pooling Agreement. 

 This certificate is one of a duly authorized
    issue of certificates designated as Citicorp Mortgage Securities, Inc. 

    REMIC
    Pass-Through Certificates, Series
    200[...]-[...], consisting of [...] senior classes, [six] subordinated
    classes 

    and [...]
    class[es] of residual certificates. 

CERTIFICATES GOVERNED BY POOLING AGREEMENT

The certificates are issued
pursuant to the Pooling Agreement, which states the rights, limitations (including
restrictions on transfer), duties and immunities of CMSI, the Trustee and the
holders of the certificates, specifies how amounts of interest and principal
distributable on the classes of certificates are calculated and when such amounts
are payable, sets forth the relative priorities of the classes of certificates
to payments and to allocation of losses, and sets forth the terms upon which
the certificates are to be authenticated and delivered, and
other matters relevant to an investment in certificates. Holders may obtain a
copy of the Pooling Agreement (without exhibits) from the Trustee.

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U.S. FEDERAL INCOME TAX INFORMATION

Elections
will be made to treat [...] segregated asset pools within the Trust Fund as real estate mortgage investment conduits (each, a “REMIC,” or in the alternative, the “upper-tier REMIC,” the “lower-tier REMIC,” and the “pooling REMIC,” respectively). This class [PR][R][LR] certificate represents the “residual interest” in the [pooling][upper][lower]-tier REMIC within the meaning of Code Section 860G(a)(2). As a condition of ownership of this certificate, the holder hereof agrees that it will not take or cause to be taken any action that would adversely affect the status of any of the [...]
segregated asset pools comprising the Trust Fund as a REMIC. 

 The holder further agrees to the designation
    of the Servicer as its agent to act as “tax matters person” for
    purposes of Subchapter C of Chapter 63 of Subtitle F of the Code or, if requested
    by the Servicer, to act as
    tax matters person. 

GOVERNING LAW

This certificate and the Pooling
Agreement are governed by the laws of the State
of New York. 

AUTHENTICATION REQUIRED

Unless this certificate has been executed by the Trustee or a duly authorized
    Authenticating Agent by manual signature, this certificate shall not be entitled
to any benefit under the Pooling Agreement or be valid for any purpose. 

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IN WITNESS WHEREOF, Citicorp Mortgage Securities, Inc. has caused this certificate to be duly executed.

 

	 	CITICORP MORTGAGE SECURITIES,
    INC.
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	

    
	 	 	 	
[Name]       
	 	 	 	[Title] 

  A-3-4

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This is one of the certificates referred to in the Pooling Agreement referred to above.

	 	[TRUSTEE],
	 	 	as Trustee
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	

    
	 	 	 	Authorized Signatory

 

	 	 	 	 
	 	or	 	 
	 	 	 	 
	 	CITIBANK, N.A.,
	 	 	as Authenticating Agent for the
    Trustee, 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	

    
	 	 	 	Authorized Signatory

  Date: [...], 200[...] 

A-3-5

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ABBREVIATIONS 

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full according
to applicable laws or regulations: 

TEN COM - as tenants in common

TEN ENT - as tenants by the entireties

JT TEN - as joint tenants with right of survivorship and not as tenants in common 

	UNIF GIFT MIN ACT -                                                           Custodian                                                           
	                                                              (Cust)                                                                    (Minor)
	Under Uniform Gifts to Minors Act                                                                                                                    
	                                                                                      (State)
	 
	Additional abbreviations may also
    be used though not in the above list. 
	

	FOR VALUE RECEIVED, the undersigned
    hereby sells, assigns and transfers unto
	 
	PLEASE INSERT SOCIAL SECURITY OR
    OTHER IDENTIFYING NUMBER OF ASSIGNEE
	 
	

	

	(Please print or typewrite name
    and address, including zip code, of assignee)  

	 
	

	the within certificate, and all
    rights thereunder, hereby irrevocably constituting and appointing
	 
	

	attorney to transfer said certificate
        on the books of the Certificate Registrar with full power of substitution
    in the premises.
	 
	Dated:                                                                                        
	 
	Signature Guaranteed by:                                                                                               

NOTICE: the signature to this assignment must correspond with the name as written
    upon the face of the within instrument in every particular, without alteration
    or enlargement or any change whatever, and must be guaranteed by a member
    of a Signature Guarantee Medallion Program. 

A-3-6

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  EXHIBIT C 

  FORM OF MORTGAGE DOCUMENT CUTSODIAL AGREEMENT

	MORTGAGE DOCUMENT CUSTODIAL AGREEMENT  
	

    
	 [date] 

 

PARTIES

u    [***], as trustee (the Trustee)

  
    u     Citibank
    (West), FSB, a federal savings bank (Citibank (West))

    u     Citicorp
  Mortgage Securities, Inc., a Dela-ware corporation (CMSI)

    u     CitiMortgage,
  Inc., as servicer (CitiMort-gage)

BACKGROUND 

      The Trustee, CMSI
    and Citibank, N.A. are entering into a Pooling and Servicing Agreement dated
    [date] relating to REMIC Pass-Through Certificates, Series 200[*-*] (the Pooling
    Agreement). Unless otherwise stated, terms defined in the Pooling Agreement
    are used in this agreement with the same meaning.

     Pursuant
    to the Pooling Agreement,

    u         CMSI will sell to the Trustee, without recourse, the mortgage loans identified
    in exhibit
    B to the Pooling Agreement, and

    u      Citibank (West) has been designated as
    Mortgage Document Custodian and Mortgage Note Custodian. 

AGREEMENT 

1    Appointment as Custodian; Acknowledgment of Receipt

     (a)
Citibank (West) will serve as Mortgage Document Custodian and Mortgage Note Custodian
    (collectively, Custodian) under the Pooling Agreement. Citibank (West) certifies to the Trustee that Citibank (West) is qualified to serve as Mortgage Document Custodian and Mortgage Note Custodian under the Pooling Agreement. Citibank (West) will act as Custo-

dian solely for the benefit of the Trustee and the certificate holders.

     (b)
CMSI has delivered to Citibank (West), as Custodian, the Mortgage Files, including
    the Mortgage Notes referred to in section 2.1 of the Pooling Agreement. Citibank
    (West) acknowledges receipt of the Pooling Agreement and the Mortgage Files.

     From
    time to time, CitiMortgage will forward to Citibank (West) additional documents
    evidencing an assumption or modification of a mortgage loan, and Citibank
    (West) will hold such documents in the related Mortgage File in accordance
    with this agreement and the Pooling Agreement.

     (c)
    CitiMortgage will pay the reasonable custodial fees and expenses of Citibank
    (West) or
    its successor, including the Trustee if the Trustee holds any Mortgage Files
    directly as Custodian.

     (d)
        Upon CitiMortgage’s receipt of notice from Citibank (West) or the
        Trustee that Citi-bank (West) has breached this agreement or the Pooling
        Agreement, CitiMortgage will cause Citibank (West) to comply with this
    agreement and the Pooling Agreement. 

2    Maintenance of office

     Citibank
    (West) will maintain the Mortgage Files, at the office of Citibank (West)
    located at Citibank (West), FSB, 5280 Corporate Drive, M/C 0005, Frederick,
    Md. 21703, or at such other office of Citibank (West) as it designates by
    30 days' prior written notice to the Trustee and CMSI.

 

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	MORTGAGE DOCUMENT CUSTODIAL AGREEMENT 
	

	 [date]  
	 

3     Duties of Custodian

    As
      Custodian, Citibank (West) will have all of the rights and obligations
      of the Mortgage Document Custodian and Mortgage Note Custodian set forth
      in the Pooling Agreement, including but not limited to the following:

     (a)     Safekeeping.
      Citibank (West) will

    u      identify
each Mortgage File by loan number, address of mortgaged property, and name
    of Mortgagor,

    u      maintain the Mortgage Files in secure and fire resistant
    facilities in accordance with customary standards for such custody,

    u      identify
    the Mortgage Files as being held and to hold the Mortgage Files for and on
    behalf of the Trustee for the benefit of all present and future certificate
    holders,

    u      maintain accurate records pertaining to Mortgages in the Mortgage
    Files as will enable the Trustee to comply with the terms and conditions
    of the Pooling Agreement, and

    u      maintain
    at all times a current inventory and conduct periodic physical inspections
    of the Mortgage Files in such a
    manner as will enable the Trustee and CitiMortgage to verify the accuracy
of Citibank (West)’s record-keeping, inventory and physical possession.

     Citibank
(West) will promptly report to the Trustee and CitiMortgage any failure on its
part to hold the Mortgage Files as herein provided and will promptly take appropriate
action to remedy any such failure.

     (b)     Release of Files.
      Citibank (West) is authorized, upon receipt of a direction from the Trustee
      pursuant to section 3.13, “Release of Mortgage Files,” of the
      Pooling Agreement, to release to CitiMortgage or its designee, as directed,
      the Mortgage File or the documents set forth in such direction. All documents
      so released will be held by the recipient in trust for the benefit of the
      Trustee in accordance with the Pooling Agreement. Such Mortgage Files

will be returned to Citibank (West) when the need therefor in connection with
foreclosure or servicing no longer exists, unless the mortgage loan is liquidated
or paid in full. Citibank (West) is also authorized to release any Mortgage or
Mortgage Note to CMSI
after purchase by CMSI of the related mortgage loan or the property securing
such mortgage
loan, all as provided in, and subject to the provisions of, the Pooling Agreement.

     (c)     Review
of Mortgage Files; Administration; Reports.
      Citibank (West) will attend to all non-discretionary details in connection
      with maintaining custody of the Mortgage Files, including reviewing each
      Mortgage File within 90 days after issuance of the certificates, ascertaining
      that all documents required to be delivered pursuant to section 2.1, “Transfer
      of mortgage loans,” of
      the Pooling Agreement have been executed, received and recorded, if applicable,
      and, in connection therewith, delivering, in electronic form, such reports
      and certifications to the Trustee and CMSI
      as are required by the Pooling Agreement. If in the course of such review,
      or if at any time during the term of this agreement, Citibank (West) determines
      that a document or documents constituting part of a Mortgage File is defective
      or missing, it will promptly so notify, in electronic form, the Trustee
      and CitiMortgage in accordance with the provisions of section 2.3, “Repurchase
      or substitution of mortgage loans,” of
      the Pooling Agreement, and will, within 30 days thereafter, provide the
      Trustee with an updated report certifying as to the completeness of the
      Mortgage File, with any applicable exceptions noted thereon. Citibank (West)
      will assist the Trustee and CitiMortgage generally in the preparation of
      reports (including by providing information reasonably requested as necessary
      to such preparation) to certificate holders or to regulatory bodies to
      the extent necessitated by Citibank (West)’s custody of the Mortgage
  Files. 

 

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	MORTGAGE DOCUMENT CUSTODIAL AGREEMENT 
	

    
	 [date]  
	 

     (d)     Successor trustees.
      Citibank (West) will, in accordance with section 8.8. “Successor trustee,” of
      the Pooling Agreement, amend this agreement to make a successor Trustee
      the successor to the predecessor Trustee under this agreement. 

4     Access to Records

     Subject
      to section 3(b), upon not less than three days’ notice, Citibank (West)
      will permit the Trustee, CitiMortgage or any Subservicer appointed by CitiMortgage
      or their duly authorized representatives, attorneys or auditors to inspect
      the Mortgage Files and the books and records maintained by Citibank (West)
      pursuant hereto at such times as the Trustee, CitiMortgage or any Subservicer
      may reasonably request, subject only to compliance by the Trustee, CitiMortgage
      or any Subservicer with the security procedures of Citibank (West) applied
      by Citibank (West) to its own employees having access to these and similar
      records. 

5     Instructions; Authority
to Act

     Citibank (West) will be deemed to have received proper instructions with respect to the Mortgage Files upon its receipt of written instructions signed by a Responsible Officer of the Trustee or a Servicing Officer of the Servicer. A certified copy of a resolution of the Board of Directors of the Trustee may be accepted by Citibank (West) as conclusive evidence of the authority of any such officer to act and may be considered as in full force and effect until receipt of written notice to the contrary by Citibank (West) from the Trustee, CitiMortgage or any Subservicer. Such instructions may be general or specific in terms. Citi-bank (West) may rely upon and will be protected in acting in good faith upon any such written instructions received by it and which it reasonably believes to be genuine and duly authorized with respect to all matters pertaining to this agreement and its duties hereunder.

6     Indemnification

      (a) Citibank
    (West) will indemnify the Trustee
    for any and all liabilities, obligations, losses, damages, payments, costs
    or expenses of any kind whatsoever which may be imposed on, incurred or asserted
    against the Trustee as the result of any act or omission in any way relating
    to the maintenance and custody by Citibank (West) of the Mortgage Files; provided,
    however, that Citibank (West) will not be liable for any portion of any
    such amount resulting from the gross negligence or willful misconduct of
    the Trustee.

     (b)     CitiMortgage
      will indemnify Citibank (West) and hold it harmless against any loss, liability
      or expense incurred without gross negligence or bad
      faith on Citibank (West)’s part, arising out of or in connection with
      the acceptance or administration of the trust or trusts created under the
      Pooling Agreement or Citibank (West)’s
      custody of the Mortgage Files, including the costs and expenses of defending
      itself against any claim or liability in connection with the exercise or
      performance of any of its powers or duties hereunder or under the Pooling
      Agreement. Such indemnification will survive the payment of the certificates
      and termination of the Trust Fund, as well as the resignation or removal
      of CitiMortgage as Servicer (if such action which caused the need for the
      indemnification occurred while CitiMortgage acted as Servicer), and for
      purposes of such indemnification neither the negligence nor bad faith of
      the Trustee will be imputed to, or adversely affect, the right of Citibank
  (West) to indemnification. 

7     Limitation of Custodian’s Liabilities
and
Duties

     (a)     Citibank
(West) will not be responsible for preparing or filing any reports or returns
relating to federal, state or local income taxes with respect to this agreement,
other than for 

 

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	MORTGAGE DOCUMENT CUSTODIAL AGREEMENT 
	

    
	 [date]  
	 

Citibank (West)’s compensation
    or for reimbursement of expenses.

     (b)     Citibank
(West) will not be responsible or liable for, and makes no representation or
warranty with respect to, the validity, adequacy or perfection of any lien upon
or security interest in any Mortgage File.

     (c)     Any
other provision of this agreement to the contrary notwithstanding, Citibank (West)
will have no notice, and will not be bound by any of the terms and conditions
of any other document or agreement executed or delivered in connection with,
or intended to control any part of, the transactions anticipated by or referred
to in this agreement unless Citibank (West) is a signatory party to that document
or agreement. Notwithstanding the foregoing sentence, Citibank (West) will be
deemed to have notice of the terms and conditions (including without limitation
definitions not otherwise set forth in full in this agreement) of other documents
and agreements executed or delivered in connection with, or intended to control
any part of, the transactions anticipated by or referred to in this agreement,
to the extent such terms and provisions are referenced, or are incorporated by
reference, into this agreement only as long as the Trustee or CitiMortgage will
have provided a copy of any such document or agreement to Citibank (West).

     (d)     Citibank
      (West)’s rights and obligations will only be such as are
      expressly set forth in this agreement or the Pooling Agreement. In no event
      will Citibank (West) be obligated to ascertain or take action except as
      expressly provided in this agreement or the Pooling Agreement.

     (e)     Nothing
in this agreement will be deemed to impose on Citibank (West) any obligation
to qualify to do business in any jurisdiction, other than (i) a jurisdiction
where a Mortgage File is or may be held by Citibank

(West), and (ii) where failure to qualify could have a material adverse effect
on Citibank (West) or its property or business or on the ability of Citibank
(West) to perform it duties hereunder.

     (f)     Subject
to section 3, under no circumstances will Citibank (West) be obligated to verify
the authenticity of any signature on any of the documents received or examined
by it in connection with this agreement or the authority or capacity of any person
to execute or issue such document, nor will Citibank (West) be responsible for
the value, form, substance, validity, perfection (other than by taking and continuing
possession of the Mortgage Files), priority, effectiveness or enforceability
of any of such documents, nor will Citibank (West) be under a duty to inspect,
review or examine the documents to determine whether they are appropriate for
the represented purpose or that they have been actually recorded or that they
are other than what they purport to be on their face.

     (g)     Citibank
(West) will have no duty to ascertain whether or not any cash amount or payment
has been received by the Trustee, the CMSI
    or any third person.

     (h)     Citibank
      (West) may assign its rights and obligations under this agreement , in
      whole or in part, to any Affiliate; however, Citibank (West) will notify CMSI,
    CitiMortgage and the Trustee of any such assignment. Citibank (West) may
    not assign its
    rights or obligations under this agreement, in whole or in part, to any other
    entity without the prior written consent of CMSI, CitiMortgage and the Trustee,
    which consent will not be unreasonably withheld. An “Affiliate” is an entity
    that directly or indirectly controls, is controlled by or is under common
    control with Citibank (West). Notwithstanding any such assignment, Citibank
    (West) will remain liable for all of its obligations under this agreement
    unless the assign-
  

 

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	MORTGAGE DOCUMENT CUSTODIAL AGREEMENT 
	

    
	 [date]  
	 

ment has been approved by CMSI,
CitiMortgage and the Trustee.

     (i)     Subject
to section 6, “Indemnification,” neither Citibank (West)
      nor any of its Affiliates, directors, officers, agents, and employees will
      be liable for

u     any
action or omission to act hereunder except for its own or such person’s gross
      negligence, willful misconduct, breach of this agreement or violation of
      applicable law, or

    u     any
    special, indirect, punitive or consequential damages resulting from any action
    taken or omitted to be taken by it or them hereunder
      or in connection herewith even if advised of the possibility of such damages.

         (j)     Citibank
      (West) will not be required to expend or risk its own funds or otherwise
      incur any financial liability in the performance of any of its duties under
      this Agreement or the Pooling Agreement or in the exercise of any of its
      rights and obligations, if, in its sole judgment, it will believe that
      repayment of such funds or adequate indemnity against such risk or liability
      is not assured to it.

         (k)     Citibank
      (West) will not be responsible for delays or failures in performance resulting
      from acts beyond its control, such as acts of God, strikes, lockouts, riots,
      acts of war or terrorism, epidemics, nationalization, expropriation, currency
      restrictions, governmental regulations superimposed after the fact, fire,
      communication line failures, computer viruses, power failures, earthquakes
      or other disasters.

         (l)     Any
      entity into which Citibank (West) may be merged or converted or with which
      it may be consolidated, or any entity resulting from any merger, conversion
      or consolidation to which Citibank (West) will be a party, or any entity
      succeeding to the business of Citi-bank (West), will be the successor of
      Citibank (West) hereunder, without the execution or filing of any paper
      or any further act on the
  

part of any of the parties hereto, anything herein to the contrary notwithstanding. 

8.     Advice of Counsel

     Citibank (West) may rely and act upon advice of counsel with respect to its performance as Custodian, and will not be liable for any action it reasonably takes pursuant to such advice, provided that such action is not in violation of applicable federal or state law. 

9.     Effective Period,
Termination and

Amendment,
and Interpretive and Additional

Provisions

     This
      agreement may be terminated (a) by Citibank (West)’s resignation as
      Custodian, or (b) by either CitiMortgage or the Trustee. In each case,
      such termination will be effected by notice to the other parties given
      no less than 60 days prior to termination. Upon notice of such termination,
      CitiMortgage will use its reasonable best efforts to select a successor
      Custodian reasonably acceptable to the Trustee upon substantially the same
      terms and conditions as set forth in this agreement. If no such successor
      Custodian has been selected by the 50th day after such notice, the Trustee may, upon prior notice to CitiMortgage, select a successor Custodian. If no successor Custodian has been selected by CitiMortgage or
      the Trustee by the effective date of the Citibank (West)’s termination,
      the Trustee will act as successor Custodian until the Trustee and CitiMortgage
      agree on a successor Custodian.

           At, or as soon as practicable after, the termination of this agreement, Citibank (West) will deliver the Mortgage Files to the successor Custodian at such place as the successor Custodian reasonably designates.
      

10.     Binding Arbitration

     Any misunderstanding or dispute between Citibank (West) and CMSI
    or CitiMortgage arising out of this agreement will be settled 

 

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	MORTGAGE DOCUMENT CUSTODIAL AGREEMENT 
	

    
	 [date]  
	 

through consultation and negotiation
    in good faith and a spirit of mutual cooperation. However, if these attempts
    fail, such misunderstandings or disputes will be decided by binding arbitration
    conducted, upon request by either of them, in New York, New York, before
    a single arbitrator designated by the American Arbitration Association (the AAA),
    in accordance with the terms of the Commercial Arbitration Rules of the AAA,
  and to the maximum extent applicable, the United States Arbitration Act (Title
  9 of the United States Code). Notwithstanding anything herein to the contrary,
  either Citibank (West), CMSI or CitiMortgage may proceed to a court of competent
  jurisdiction to obtain equitable relief at any time. An arbitrator may not award
  punitive damages or other damages not measured by the prevailing party’s
  actual damages. To the maximum extent practicable, an arbitration proceeding
  under this agreement will be concluded within 180 days of the filing of the dispute
  with the AAA. This arbitration clause will survive any termination or expiration
  of this agreement and if any term, covenant, condition or provision of this arbitration
  clause is found to be unlawful, invalid or unenforceable, the remaining parts
  of the arbitration clause will not be affected thereby and will remain fully
  enforceable. 

11. Governing Law

     This agreement will be governed by, and construed in accordance with, the laws of the State of New York. 

12. Notice

     Notices and other writings will be delivered or mailed, postage prepaid,

	u 	to the Trustee at [address],
	u	to Citibank (West) at 5280 Corporate
        Drive, M/C 0005, Frederick, Maryland 21703, Attention: Richard D. Penquite,
      with a copy to Eric K. Kawamura, Vice President & 

	 	General Counsel, Citibank (West),
        FSB, One Sansome St., 19th fl., San Francisco, California 94104, tel:
      (415) 658-4371, fax: (415) 658-4294, and
	u	to CMSI or CitiMortgage at 1000 Technology
      Drive, O’Fallon, Missouri 63368, Attention: Larry Kent Slough

  or to such other address as the Trustee,
  Citi-bank (West), CMSI
  or
  CitiMortgage subsequently specifies in writing to the other parties. Notices
  or other writings will be effective only upon receipt. 
13. Binding Effect

     This
agreement will be binding upon and will inure to the benefit of the Trustee and
Citibank (West) and their respective successors and permitted assigns. Concurrently
with the appointment of a successor trustee as provided in section 8.8 of the
Pooling Agreement, the Trustee, CMSI,
    CitiMortgage and Citibank (West) will amend this agreement to make the successor
    trustee
    the successor to the Trustee under this agreement. 

 

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	MORTGAGE
    DOCUMENT CUSTODIAL AGREEMENT    
	

    
	[date]  

 

	SIGNATURES  
	 	 
	 	 
	[***],
	
as Trustee under the Pooling Agreement 

 

	By:	 
	 	

	Name:
	Title

 

	 CITIBANK (WEST), FSB,

         as Custodian  
	 	 
	 	 
	By:	 
	 	

	Name:
	 Title:  

 

	 CITICORP MORTGAGE SECURITIES,
    INC. 
	 	 
	 	 
	By:	 
	 	

	Name:
	 Title:  

 

	 CITIMORTGAGE, INC. 
	 	 
	 	 
	By:	 
	 	

	Name:
	 Title:  

C-7Unassociated Document

    
      

    

    Exhibit
      10.1

    

      SECURITY
        AGREEMENT

      

      

      LAURUS
        MASTER FUND, LTD.

      

      

      IMPART
        MEDIA GROUP, INC.

      

      

      

      

      and

      

      

      IMPART,
        INC.

      

      

      

      

      Dated:
        January 27, 2006

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS

    

      
        	 	 	
                Page

              
	 	 	 	 
	
                1.

              	
                General
                  Definitions and Terms; Rules of Construction.

              	
                1

              	 
	 	 	 	 
	
                2.

              	
                Loan
                  Facility

              	
                2

              	 
	 	 	 	 
	
                3.

              	
                Repayment
                  of the Loans

              	
                4

              	 
	 	 	 	 
	
                4.

              	
                Procedure
                  for Loans

              	
                4

              	 
	 	 	 	 
	
                5.

              	
                Interest
                  and Payments.

              	
                4

              	 
	 	 	 	 
	
                6.

              	
                Security
                  Interest.

              	
                5

              	 
	 	 	 	 
	
                7.

              	
                Representations,
                  Warranties and Covenants Concerning the Collateral

              	
                6

              	 
	 	 	 	 
	
                8.

              	
                Payment
                  of Accounts.

              	
                9

              	 
	 	 	 	 
	
                9.

              	
                Collection
                  and Maintenance of Collateral.

              	
                9

              	 
	 	 	 	 
	
                10.

              	
                Inspections
                  and Appraisals

              	
                10

              	 
	 	 	 	 
	
                11.

              	
                Financial
                  Reporting

              	
                10

              	 
	 	 	 	 
	
                12.

              	
                Additional
                  Representations and Warranties

              	
                11

              	 
	 	 	 	 
	
                13.

              	
                Covenants

              	
                22

              	 
	 	 	 	 
	
                14.

              	
                Further
                  Assurances

              	
                28

              	 
	 	 	 	 
	
                15.

              	
                Representations,
                  Warranties and Covenants of Laurus.

              	
                28

              	 
	 	 	 	 
	
                16.

              	
                Power
                  of Attorney

              	
                30

              	 
	 	 	 	 
	
                17.

              	
                Term
                  of Agreement

              	
                30

              	 
	 	 	 	 
	
                18.

              	
                Termination
                  of Lien

              	
                31

              	 
	 	 	 	 
	
                19.

              	
                Events
                  of Default

              	
                31

              	 
	 	 	 	 
	
                20.

              	
                Remedies

              	
                33

              	 
	 	 	 	 
	
                21.

              	
                Waivers

              	
                34

              	 
	 	 	 	 
	
                22.

              	
                Expenses

              	
                35

              	 
	 	 	 	 
	
                23.

              	
                Assignment
                  By Laurus

              	
                35

              	 

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

    

     

    
      
        	 	 	
                Page(s)

              
	 	 	 	 
	
                24.

              	
                No
                  Waiver; Cumulative Remedies

              	
                36

              	 
	 	 	 	 
	
                25.

              	
                Application
                  of Payments

              	
                36

              	 
	 	 	 	 
	
                26.

              	
                Indemnity

              	
                36

              	 
	 	 	 	 
	
                27.

              	
                Revival

              	
                37

              	 
	 	 	 	 
	
                28.

              	
                Borrowing
                  Agency Provisions

              	
                37

              	 
	 	 	 	 
	
                29.

              	
                Notices

              	
                38

              	 
	 	 	 	 
	
                30.

              	
                Governing
                  Law, Jurisdiction and Waiver of Jury Trial

              	
                39

              	 
	 	 	 	 
	
                31.

              	
                Limitation
                  of Liability

              	
                40

              	 
	 	 	 	 
	
                32.

              	
                Entire
                  Understanding

              	
                40

              	 
	 	 	 	 
	
                33.

              	
                Severability

              	
                40

              	 
	 	 	 	 
	
                34.

              	
                Captions

              	
                40

              	 
	 	 	 	 
	
                35.

              	
                Counterparts;
                  Telecopier Signatures

              	
                40

              	 
	 	 	 	 
	
                36.

              	
                Construction

              	
                41

              	 
	 	 	 	 
	
                37.

              	
                Publicity

              	
                41

              	 
	 	 	 	 
	
                38.

              	
                Joinder

              	
                41

              	 
	 	 	 	 
	
                39.

              	
                Legends

              	
                41

              	 

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

    

     

    SECURITY
      AGREEMENT

     

    This
      Security Agreement is made as of January 27, 2006 by and among LAURUS MASTER
      FUND, LTD., a Cayman Islands company (“Laurus”),
      Impart Media Group, Inc., a Nevada corporation (“the
      Parent”),
      and
      each party listed on Exhibit
      A
      attached
      hereto (each an “Eligible
      Subsidiary”
and
      collectively, the “Eligible
      Subsidiaries”)
      the
      Parent and each Eligible Subsidiary, each a “Company” and collectively, the
“Companies”).

     

    BACKGROUND

     

    The
      Companies have requested that Laurus make advances available to the Companies;
      and

     

    Laurus
      has agreed to make such advances on the terms and conditions set forth in this
      Agreement.

     

    

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and undertakings and the
      terms and conditions contained herein, the parties hereto agree as
      follows:

     

    1.     General
      Definitions and Terms; Rules of Construction.

     

    (a)    General
      Definitions.
      Capitalized terms used in this Agreement shall have the meanings assigned to
      them in Annex
      A.

     

    (b)    Accounting
      Terms.
      Any
      accounting terms used in this Agreement which are not specifically defined
      shall
      have the meanings customarily given them in accordance with GAAP and all
      financial computations shall be computed, unless specifically provided herein,
      in accordance with GAAP consistently applied.

     

    (c)    Other
      Terms.
      All
      other terms used in this Agreement and defined in the UCC, shall have the
      meaning given therein unless otherwise defined herein.

     

    (d)    Rules
      of Construction.
      All
      Schedules, Addenda, Annexes and Exhibits hereto or expressly identified to
      this
      Agreement are incorporated herein by reference and taken together with this
      Agreement constitute but a single agreement. The words “herein”, “hereof” and
“hereunder” or other words of similar import refer to this Agreement as a whole,
      including the Exhibits, Addenda, Annexes and Schedules thereto, as the same
      may
      be from time to time amended, modified, restated or supplemented, and not to
      any
      particular section, subsection or clause contained in this Agreement. Wherever
      from the context it appears appropriate, each term stated in either the singular
      or plural shall include the singular and the plural, and pronouns stated in
      the
      masculine, feminine or neuter gender shall include the masculine, the feminine
      and the neuter. The term “or” is not exclusive. The term “including” (or any
      form thereof) shall not be limiting or exclusive. All references to statutes
      and
      related regulations shall include any amendments of same and any successor
      statutes and regulations. All references in this Agreement or in the Schedules,
      Addenda, Annexes and Exhibits to this Agreement to sections, schedules,
      disclosure schedules, exhibits, and attachments shall refer to the corresponding
      sections, schedules, disclosure schedules, exhibits, and attachments of or
      to
      this Agreement. All references to any instruments or agreements, including
      references to any of this Agreement or the Ancillary Agreements shall include
      any and all modifications or amendments thereto and any and all extensions
      or
      renewals thereof.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              2.

            	
              Loan
                Facility.

            

    

     

    
      	 	
              (a)

            	
              Loans.

            

    

     

    (i)    
Subject
      to the terms and conditions set forth herein and in the Ancillary Agreements,
      Laurus may make loans (the “Loans”)
      to
      Companies from time to time during the Term which, in the aggregate at any
      time
      outstanding, will not exceed the lesser of (x) (I) the Capital Availability
      Amount minus (II) such reserves as Laurus may reasonably in its good faith
      judgment deem proper and necessary from time to time (the “Reserves”)
      and
      (y) an amount equal to (I) the Accounts Availability minus (II) the Reserves.
      The amount derived at any time from Section 2(a)(i)(y)(I) minus
      2(a)(i)(y)(II) shall be referred to as the “Formula
      Amount.”
The
      Companies shall, jointly and severally, execute and deliver to Laurus on the
      Closing Date the Note. The Companies hereby each acknowledge and agree that
      Laurus’ obligation to purchase the Note from the Companies on the Closing Date
      shall be contingent upon the satisfaction (or waiver by Laurus) of the items
      and
      matters set forth in the closing checklist previously provided by Laurus to
      the
      Companies prior to the Closing Date. 

     

    (ii)    Notwithstanding
      the limitations set forth above, if requested by any Company, Laurus retains
      the
      right to lend to such Company from time to time such amounts in excess of such
      limitations as Laurus may determine in its sole discretion.

     

    (iii)   The
      Companies acknowledge that the exercise of Laurus’ discretionary rights
      hereunder may result during the Term in one or more increases or decreases
      in
      the advance percentages used in determining Accounts Availability and each
      of
      the Companies hereby consent to any such increases or decreases which may limit
      or restrict advances requested by the Companies.

     

    (iv)   If
      any
      interest, fees, costs or charges payable to Laurus hereunder are not paid when
      due, each of the Companies shall thereby be deemed to have requested, and Laurus
      is hereby authorized at its discretion to make and charge to the Companies’
account, a Loan as of such date in an amount equal to such unpaid interest,
      fees, costs or charges.

     

    (v)    If
      any
      Company at any time fails to perform or observe any of the covenants contained
      in this Agreement or any Ancillary Agreement, Laurus may, but need not, perform
      or observe such covenant on behalf and in the name, place and stead of such
      Company (or, at Laurus’ option, in Laurus’ name) and may, but need not, take any
      and all other actions which Laurus may deem necessary to cure or correct such
      failure (including the payment of taxes, the satisfaction of Liens, the
      performance of obligations owed to Account Debtors, lessors or other obligors,
      the procurement and maintenance of insurance, the execution of assignments,
      security agreements and financing statements, and the endorsement of
      instruments). The amount of all monies expended and all costs and expenses
      (including attorneys’ fees and legal expenses) incurred by Laurus in connection
      with or as a result of the performance or observance of such agreements or
      the
      taking of such action by Laurus shall be charged to the Companies’ account as a
      Loan and added to the Obligations. To facilitate Laurus’ performance or
      observance of such covenants by each Company, each Company hereby irrevocably
      appoints Laurus, or Laurus’ delegate, acting alone, as such Company’s attorney
      in fact (which appointment is coupled with an interest) with the right (but
      not
      the
      duty) from time to time to create, prepare, complete, execute, deliver, endorse
      or file in the name and on behalf of such Company any and all instruments,
      documents, assignments, security agreements, financing statements, applications
      for insurance and other agreements and writings required to be obtained,
      executed, delivered or endorsed by such Company.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (vi)           Laurus
      will account to Company Agent monthly with a statement of all Loans and other
      advances, charges and payments made pursuant to this Agreement, and such account
      rendered by Laurus shall be deemed final, binding and conclusive unless Laurus
      is notified by Company Agent in writing to the contrary within thirty (30)
      days
      of the date each account was rendered specifying the item or items to which
      objection is made.

     

    (vii)           During
      the Term, the Companies may borrow and prepay Loans in accordance with the
      terms
      and conditions hereof. 

     

    (viii)         
      If
      any
      Eligible Account is not paid by the Account Debtor within ninety (90) days
      after
      the date that such Eligible Account was invoiced or if any Account Debtor
      asserts a deduction, dispute, contingency, set-off, or counterclaim with respect
      to any Eligible Account, (a “Delinquent
      Account”),
      the
      Companies shall jointly and severally (i) reimburse Laurus for the amount of
      the
      Loans made with respect to such Delinquent Account plus an adjustment fee in
      an
      amount equal to one-fifth of one percent (0.20%) of the gross face amount of
      such Eligible Account or (ii) immediately replace such Delinquent Account with
      an otherwise Eligible Account.

     

    (b)    Receivables
      Purchase.
      Following the occurrence and during the continuance of an Event of Default,
      Laurus may, at its option, elect to convert the credit facility contemplated
      hereby to an accounts receivable purchase facility. Upon such election by Laurus
      (subsequent notice of which Laurus shall provide to Company Agent), the
      Companies shall be deemed to hereby have sold, assigned, transferred, conveyed
      and delivered to Laurus, and Laurus shall be deemed to have purchased and
      received from the Companies, all right, title and interest of the Companies
      in
      and to all Accounts which shall at any time constitute Eligible Accounts (the
      “Receivables
      Purchase”).
      All
      outstanding Loans hereunder shall be deemed obligations under such accounts
      receivable purchase facility. The conversion to an accounts receivable purchase
      facility in accordance with the terms hereof shall not be deemed an exercise
      by
      Laurus of its secured creditor rights under Article 9 of the UCC. Immediately
      following Laurus’ request, the Companies shall execute all such further
      documentation as may be required by Laurus to more fully set forth the accounts
      receivable purchase facility herein contemplated, including, without limitation,
      Laurus’ standard form of accounts receivable purchase agreement and account
      debtor notification letters, but any Company’s failure to enter into any such
      documentation shall not impair or affect the Receivables Purchase in any manner
      whatsoever.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    3.    Repayment
      of the Loans.
      The
      Companies (a) may prepay the Obligations from time to time in accordance with
      the terms and provisions of the Note (and Section 17 hereof if such prepayment
      is due to a termination of this Agreement); (b) shall repay on the expiration
      of
      the Term (i) the then aggregate outstanding principal balance of the Loans
      together with accrued and unpaid interest, fees and charges and; (ii) all other
      amounts owed Laurus under this Agreement and the Ancillary Agreements; and
      (c)
      subject to Section 2(a)(ii), shall repay on any day on which the then aggregate
      outstanding principal balance of the Loans are in excess of the Formula Amount
      at such time, Loans in an amount equal to such excess. Any payments of
      principal, interest, fees or any other amounts payable hereunder or under any
      Ancillary Agreement shall be made prior to 12:00 noon (New York time) on the
      due
      date thereof in immediately available funds.

     

    4.    Procedure
      for Loans.
      Company
      Agent may by written notice request a borrowing of Loans prior to 12:00 noon
      (New York time) on the Business Day of its request to incur, on the next
      Business Day, a Loan. Together with each request for a Loan (or at such other
      intervals as Laurus may request), Company Agent shall deliver to Laurus a
      Borrowing Base Certificate in the form of Exhibit
      B
      attached
      hereto, which shall be certified as true and correct by the Chief Executive
      Officer or Chief Financial Officer of Company Agent together with all supporting
      documentation relating thereto. All Loans shall be disbursed from whichever
      office or other place Laurus may designate from time to time and shall be
      charged to the Companies’ account on Laurus’ books. The proceeds of each Loan
      made by Laurus shall be made available to Company Agent on the Business Day
      following the Business Day so requested in accordance with the terms of this
      Section 4 by way of credit to the applicable Company’s operating account
      maintained with such bank as Company Agent designated to Laurus. Any and all
      Obligations due and owing hereunder may be charged to the Companies’ account and
      shall constitute Loans.

     

    
      	 	
              5.

            	
              Interest
                and Payments. 

            

    

     

    
      	 	
              (a)

            	
              Interest.

            

    

     

    (i)    
Except
      as
      modified by Section 5(a)(iii) below, the Companies shall jointly and severally
      pay interest at the Contract Rate on the unpaid principal balance of each Loan
      until such time as such Loan is collected in full in good
      funds in
      dollars of the United States of America.

     

    (ii)    Interest
      and payments shall be computed on the basis of actual days elapsed in a year
      of
      360 days. At Laurus’ option, Laurus may charge the Companies’ account for said
      interest.

     

    (iii)   Effective
      upon the occurrence of any Event of Default and for so long as any Event of
      Default shall be continuing, the Contract Rate shall automatically be increased
      as set forth in the Note (such increased rate, the “Default
      Rate”),
      and
      all outstanding Obligations, including unpaid interest, shall continue to accrue
      interest from the date of such Event of Default at the Default Rate applicable
      to such Obligations.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (iv)    In
      no
      event shall the aggregate interest payable hereunder or under the Note exceed
      the maximum rate permitted under any applicable law or regulation, as in effect
      from time to time (the “Maximum
      Legal Rate”),
      and
      if any provision of this Agreement or any Ancillary Agreement is in
      contravention of any such law or regulation, interest payable under this
      Agreement and each Ancillary Agreement shall be computed on the basis of the
      Maximum Legal Rate (so that such interest will not exceed the Maximum Legal
      Rate). 

     

    (v)    The
      Companies shall jointly and severally pay principal, interest and all other
      amounts payable hereunder, or under any Ancillary Agreement, without any
      deduction whatsoever, including any deduction for any set-off or
      counterclaim.

     

    
      	 	
              (b)

            	
              Payments;
                Certain Closing Conditions.
                

            

    

     

    (i)    
Closing/Annual
      Payments.
      Upon
      execution of this Agreement by each Company and Laurus, the Companies shall
      jointly and severally pay to Laurus Capital Management, LLC a closing payment
      in
      an amount equal to three and three-fifths percent (3.60%) of the Capital
      Availability Amount. Such payment shall be deemed fully earned on the Closing
      Date and shall not be subject to rebate or proration for any
      reason.

     

    (ii)    Overadvance
      Payment.
      Without
      affecting Laurus’ rights hereunder in the event the Loans exceed the Formula
      Amount (each such event, an “Overadvance”),
      all
      such Overadvances shall bear additional interest at a rate equal to one and
      one
      half percent (1.5%) per month of the amount of such Overadvances for all times
      such amounts shall be in excess of the Formula Amount. All amounts that are
      incurred pursuant to this Section 5(b)(iii) shall be due and payable by the
      Companies monthly, in arrears, on the first business day of each calendar month
      and upon expiration of the Term. 

     

    (iii)   Financial
      Information Default.
      Without
      affecting Laurus’ other rights and remedies, in the event any Company fails to
      deliver the financial information required by Section 11 on or before the date
      required by this Agreement, the Companies shall jointly and severally pay Laurus
      an aggregate fee in the amount of $150.00 per week (or portion thereof) for
      each
      such failure until such failure is cured to Laurus’ satisfaction or waived in
      writing by Laurus. All amounts that are incurred pursuant to this Section
      5(b)(iii) shall be due and payable by the Companies monthly, in arrears, on
      the
      first business of each calendar month and upon expiration of the
      Term.

     

    (iv)   Expenses.
      The
      Companies shall jointly and severally reimburse Laurus for its expenses
      (including reasonable legal fees and expenses) incurred in connection with
      the
      preparation and negotiation of this Agreement and the Ancillary Agreements,
      and
      expenses incurred in connection with Laurus’ due diligence review of each
      Company and its Subsidiaries and all related matters. Amounts required to be
      paid under this Section 5(b)(iv) will be paid on the Closing Date and shall
      be
      $45,000 for such expenses referred to in this Section 5(b)(iv).

     

    
      	 	
              6.

            	
              Security
                Interest.

            

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (a)    To
      secure
      the prompt payment to Laurus of the Obligations, each Company hereby assigns,
      pledges and grants to Laurus a continuing security interest in and Lien upon
      all
      of the Collateral. All of each Company’s Books and Records relating to the
      Collateral shall, until delivered to or removed by Laurus, be kept by such
      Company in trust for Laurus until all Obligations have been paid in full. Each
      confirmatory assignment schedule or other form of assignment hereafter executed
      by each Company shall be deemed to include the foregoing grant, whether or
      not
      the same appears therein. 

     

    (b)    Each
      Company hereby (i) authorizes Laurus to file any financing statements,
      continuation statements or amendments thereto that (x) indicate the Collateral
      (1) as all assets and personal property of such Company or words of similar
      effect, regardless of whether any particular asset comprised in the Collateral
      falls within the scope of Article 9 of the UCC of such jurisdiction, or (2)
      as
      being of an equal or lesser scope or with greater detail, and (y) contain any
      other information required by Part 5 of Article 9 of the UCC for the sufficiency
      or filing office acceptance of any financing statement, continuation statement
      or amendment and (ii) ratifies its authorization for Laurus to have filed any
      initial financial statements, or amendments thereto if filed prior to the date
      hereof. Each Company acknowledges that it is not authorized to file any
      financing statement or amendment or termination statement with respect to any
      financing statement without the prior written consent of Laurus and agrees
      that
      it will not do so without the prior written consent of Laurus, subject to such
      Company’s rights under Section 9-509(d)(2) of the UCC.

     

    (c)    Each
      Company hereby grants to Laurus an irrevocable, non-exclusive license
      (exercisable upon the termination of this Agreement due to an occurrence and
      during the continuance of an Event of Default without payment of royalty or
      other compensation to such Company) to use, transfer, license or sublicense
      any
      Intellectual Property now owned, licensed to, or hereafter acquired by such
      Company, and wherever the same may be located, and including in such license
      access to all media in which any of the licensed items may be recorded or stored
      and to all computer and automatic machinery software and programs used for
      the
      compilation or printout thereof, and represents, promises and agrees that any
      such license or sublicense is not and will not be in conflict with the
      contractual or commercial rights of any third Person; provided, that such
      license will terminate
      on the termination of this Agreement and the payment in full of all
      Obligations.

     

    7.     
      Representations,
      Warranties and Covenants Concerning the Collateral.
      Each
      Company represents, warrants (each of which such representations and warranties
      shall be deemed repeated upon the making of each request for a Loan and made
      as
      of the time of each and every Loan hereunder) and covenants as
      follows:

     

    (a)    all
      of
      the Collateral (i) is owned by it free and clear of all Liens (including any
      claims of infringement) except (i) those in Laurus’ favor and (ii) those in
      favor of Key Bank, N.A. securing indebtedness to be repaid out of a portion
      of
      the Loan proceeds, which Liens shall be terminated on the Closing Date.
      and
      Permitted Liens and (ii) is not subject to any agreement prohibiting the
      granting of a Lien or requiring notice of or consent to the granting of a
      Lien.

     

    (b)    it
      shall
      not encumber, mortgage, pledge, assign or grant any Lien in any Collateral
      or
      any other assets to anyone other than Laurus and except for Permitted
      Liens.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (c)    the
      Liens
      granted pursuant to this Agreement, upon completion of the filings and other
      actions listed on Schedule
      7(c)
      (which,
      in the case of all filings and other documents referred to in said Schedule,
      have been delivered to Laurus in duly executed form) constitute valid perfected
      security interests in all of the Collateral in favor of Laurus as security
      for
      the prompt and complete payment and performance of the Obligations, enforceable
      in accordance with the terms hereof against any and all of its creditors and
      purchasers and such security interest is prior to all other Liens in existence
      on the date hereof.

     

    (d)    no
      effective security agreement, mortgage, deed of trust, financing statement,
      equivalent security or Lien instrument or continuation statement covering all
      or
      any part of the Collateral is or will be on file or of record in any public
      office, except those relating to Permitted Liens.

     

    (e)    it
      shall
      not dispose of any of the Collateral whether by sale, lease or otherwise except
      for the sale of Inventory in the ordinary course of business and for the
      disposition or transfer in the ordinary course of business during any fiscal
      year of obsolete and worn-out Equipment having a fair market value of not more
      than $7,000 individually or $50,000 in the aggregate and only to the extent
      that
      (i) the proceeds of any such disposition are used to acquire replacement
      Equipment which is subject to Laurus’ first priority security interest or are
      used to repay Loans or to pay general corporate expenses, or (ii) following
      the
      occurrence of an Event of Default which continues to exist the proceeds of
      which
      are remitted to Laurus to be held as cash collateral for the
      Obligations.

     

    (f)    it
      shall
      defend the right, title and interest of Laurus in and to the Collateral against
      the claims and demands of all Persons whomsoever, and take such actions,
      including (i) all actions necessary to grant Laurus “control” of any
      Investment Property, Deposit Accounts, Letter-of-Credit Rights or electronic
      Chattel Paper owned by it, with any agreements establishing control to be in
      form and substance satisfactory to Laurus, (ii) the prompt (but in no event
      later than five (5) Business Days following Laurus’ request therefor) delivery
      to Laurus of all original Instruments, Chattel Paper, negotiable Documents
      and
      certificated Stock owned by it (in each case, accompanied by stock powers,
      allonges or other instruments of transfer executed in blank), (iii) notification
      of Laurus’ interest in Collateral at Laurus’ request, and (iv) the institution
      of litigation against third parties as shall be prudent in order to protect
      and
      preserve its and/or Laurus’ respective and several interests in the Collateral.

     

    (g)    it
      shall
      promptly, and in any event within five (5) Business Days after the same is
      acquired by it, notify Laurus of any commercial tort claim (as defined in the
      UCC) acquired by it and unless otherwise consented by Laurus, it shall enter
      into a supplement to this Agreement granting to Laurus a Lien in such commercial
      tort claim.

     

    (h)    it
      shall
      place notations upon its Books and Records and any of its financial statements
      to disclose Laurus’ Lien in the Collateral.

     

    (i)    
if
      it
      retains possession of any Chattel Paper or Instrument with Laurus’ consent, upon
      Laurus’ request such Chattel Paper and Instruments shall be marked with the
      following legend: “This writing and obligations evidenced or secured hereby are
      subject to the security interest of Laurus Master Fund, Ltd.” Notwithstanding
      the foregoing, upon the reasonable request of Laurus, such Chattel Paper and
      Instruments shall be delivered to Laurus.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (j)    
it
      shall
      perform in a reasonable time all other steps requested by Laurus to create
      and
      maintain in Laurus’ favor a valid perfected first Lien in all Collateral subject
      only to Permitted Liens.

     

    (k)    it
      shall
      notify Laurus promptly and in any event within three (3) Business Days after
      obtaining knowledge thereof (i) of any event or circumstance that, to its
      knowledge, would cause Laurus to consider any then existing Account as no longer
      constituting an Eligible Account; (ii) of any material delay in its performance
      of any of its obligations to any Account Debtor; (iii) of any assertion by
      any
      Account Debtor of any material claims, offsets or counterclaims; (iv) of any
      allowances, credits and/or monies granted by it to any Account Debtor; (v)
      of
      all material adverse information relating to the financial condition of an
      Account Debtor; (vi) of any material return of goods; and (vii) of any loss,
      damage or destruction of any of the Collateral.

     

    (l)    
all
      Eligible Accounts (i) represent complete bona fide transactions which require
      no
      further act under any circumstances on its part to make such Accounts payable
      by
      the Account Debtors, (ii) are not subject to any present, future contingent
      offsets or counterclaims, and (iii) do not represent bill and hold sales,
      consignment sales, guaranteed sales, sale or return or other similar
      understandings or obligations of any Affiliate or Subsidiary of such Company.
      It
      has not made, nor will it make, any agreement with any Account Debtor for any
      extension of time for the payment of any Account, any compromise or settlement
      for less than the full amount thereof, any release of any Account Debtor from
      liability therefor, or any deduction therefrom except a discount or allowance
      for prompt or early payment allowed by it in the ordinary course of its business
      consistent with historical practice and as previously disclosed to Laurus in
      writing.

     

    (m)    it
      shall
      keep and maintain its Equipment in good operating condition, except for ordinary
      wear and tear, and shall make all necessary repairs and replacements thereof
      so
      that the value and operating efficiency shall at all times be maintained and
      preserved. 

     

    (n)    it
      shall
      maintain and keep all of its Books and Records concerning the Collateral at
      its
      executive offices listed in Schedule
      12(aa).

     

    (o)    it
      shall
      maintain and keep the tangible Collateral at the addresses listed in
Schedule
      12(bb),
      provided, that it may change such locations or open a new location, provided
      that it provides Laurus at least ten (10) days prior written notice of such
      changes or new location and (ii) prior to such change or opening of a new
      location]
      where
      Collateral having a value of more than $50,000 will be located, it executes
      and
      delivers to Laurus such agreements deemed reasonably necessary or prudent by
      Laurus, including landlord agreements, mortgagee agreements and warehouse
      agreements, each in form and substance satisfactory to Laurus, to adequately
      protect and maintain Laurus’ security interest in such Collateral.

     

    (p)    Schedule
      7(p)
      lists
      all banks and other financial institutions at which it maintains deposits and/or
      other accounts, and such Schedule correctly identifies the name, address and
      telephone number of each such depository, the name in which the account is
      held,
      a description of the purpose of the account, and the complete account number.
      It
      shall not establish any depository or other bank account with any financial
      institution (other than the accounts set forth on Schedule
      7(p))
      without
      Laurus’ prior written consent.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	 	
              8.

            	
              Payment
                of Accounts. 

            

    

     

    (a)    Each
      Company will irrevocably direct all of its present and future Account Debtors
      and other Persons obligated to make payments constituting Collateral to make
      such payments directly to the lockboxes maintained by such Company (the
“Lockboxes”)
      with
      Key Bank, N.A. or such other financial institution accepted by Laurus in writing
      as may be selected by such Company (the “Lockbox
      Bank”)
      pursuant to the terms of the certain agreements among one or more Companies,
      Laurus and/or the Lockbox Bank dated as of January 26, 2006. On or prior to
      the
      Closing Date, each Company shall and shall cause the Lockbox Bank to enter
      into
      all such documentation acceptable to Laurus pursuant to which, among other
      things, the Lockbox Bank agrees to: (a) sweep the Lockbox on a daily basis
      and deposit all checks received therein to an account designated by Laurus
      in
      writing and (b) comply only with the instructions or other directions of Laurus
      concerning the Lockbox. All of each Company’s invoices, account statements and
      other written or oral communications directing, instructing, demanding or
      requesting payment of any Account of any Company or any other amount
      constituting Collateral shall conspicuously direct that all payments be made
      to
      the Lockbox or such other address as Laurus may direct in writing. If,
      notwithstanding the instructions to Account Debtors, any Company receives any
      payments, such Company shall immediately remit such payments to Laurus in their
      original form with all necessary endorsements. Until so remitted, such Company
      shall hold all such payments in trust for and as the property of Laurus and
      shall not commingle such payments with any of its other funds or
      property.

     

    (b)    At
      Laurus’ election, following the occurrence of an Event of Default which is
      continuing, Laurus may notify each Company’s Account Debtors of Laurus’ security
      interest in the Accounts, collect them directly and charge the collection costs
      and expenses thereof to Company’s and the Eligible Subsidiaries joint and
      several account.

     

    
      	 	
              9.

            	
              Collection
                and Maintenance of Collateral.

            

    

     

    (a)    Laurus
      may verify each Company’s Accounts from time to time, but not more often than
      once every three (3) months, unless an Event of Default has occurred and is
      continuing, utilizing an audit control company or any other agent of
      Laurus.

     

    (b)    Proceeds
      of Accounts received by Laurus will be deemed received on the Business Day
      after
      Laurus’ receipt of such proceeds in good funds in dollars of the United States
      of America to an account designated by Laurus. Any amount received by Laurus
      after 12:00 noon (New York time) on any Business Day shall be deemed
      received on the next Business Day.

     

    (c)    As
      Laurus
      receives the proceeds of Accounts of any Company, it shall (i) apply such
      proceeds, as required, to amounts outstanding under the Note, and (ii) remit
      all
      such remaining proceeds (net of interest, fees and other amounts then due and
      owing to Laurus hereunder) to Company Agent (for the benefit of the applicable
      Companies) upon request (but no more often than twice a week). Notwithstanding
      the foregoing, following the occurrence and during the continuance of an Event
      of Default, Laurus, at its option, may (a) apply such proceeds to the
      Obligations in such order as Laurus shall elect, (b) hold all such proceeds
      as
      cash collateral for the Obligations and each Company
      hereby grants to Laurus a security interest in such cash collateral amounts
      as
      security for the Obligations and/or (c) do any combination of the
      foregoing.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    10.    Inspections
      and Appraisals.
      At all
      times during normal business hours, Laurus, and/or any agent of Laurus shall
      have the right to (a) have access to, visit, inspect, review, evaluate and
      make
      physical verification and appraisals of each Company’s properties and the
      Collateral, (b) inspect, audit and copy (or take originals if necessary) and
      make extracts from each Company’s Books and Records, including management
      letters prepared by the Accountants, and (c) discuss with each Company’s
      directors, principal officers, and independent accountants, each Company’s
      business, assets, liabilities, financial condition, results of operations and
      business prospects. Each Company will deliver to Laurus any instrument necessary
      for Laurus to obtain records from any service bureau maintaining records for
      such Company. If any internally prepared financial information, including that
      required under this Section is unsatisfactory in any manner to Laurus, Laurus
      may request that the Accountants review the same.

     

    11.    Financial
      Reporting.
      Company
      Agent will deliver, or cause to be delivered, to Laurus each of the following,
      which shall be in form and detail acceptable to Laurus:

     

    (a)    As
      soon
      as available, and in any event within ninety (90) days after the end of each
      fiscal year of the Parent, or within the maximum time period filing with the
      SEC
      allowable by law (whichever is greater) each Company’s audited financial
      statements with a report of independent certified public accountants of
      recognized standing selected by the Parent and acceptable to Laurus (the
“Accountants”),
      which
      annual financial statements shall be without qualification and shall include
      each of
      the
      Parent’s and each of its Subsidiaries’ balance
      sheet as at the end of such fiscal year and the related statements of each
      of
      the Parent’s and each of its Subsidiaries’ income, retained earnings
      and cash
      flows for the fiscal year then ended, prepared on a consolidating and
      consolidated basis to include the Parent, each Subsidiary of the Parent and
      each
      of their respective affiliates, all in reasonable detail and prepared in
      accordance with GAAP, together with (i) if and when available, copies of any
      management letters prepared by the Accountants; and (ii) a certificate of the
      Parent’s President, Chief Executive Officer or Chief Financial Officer stating
      that such financial statements have been prepared in accordance with GAAP and
      whether or not such officer has knowledge of the occurrence of any Default
      or
      Event of Default hereunder and, if so, stating in reasonable detail the facts
      with respect thereto;

     

    (b)    As
      soon
      as available and in any event within forty five (45) days after the end of
      each
      fiscal quarter of the Parent, or
      within
      the maximum time period filing with the SEC allowable by law (whichever is
      greater), an
      unaudited/internal balance sheet and statements of income, retained earnings
      and
      cash flows of each
      of
      the
      Parent’s and each of its Subsidiaries’ as at the end of and for such quarter and
      for the year to date period then ended, prepared on a consolidating and
      consolidated basis to include the Parent, each Subsidiary of the Parent and
      each
      of their respective affiliates, in reasonable detail and stating in comparative
      form the figures for the corresponding date and periods in the previous year,
      all prepared in accordance with GAAP, subject to year-end adjustments and
      accompanied by a certificate of the Parent’s President, Chief Executive Officer
      or Chief Financial Officer, stating (i) that such financial statements have
      been
      prepared in accordance with GAAP, subject to year-end audit adjustments, and
      (ii) whether or not such officer has knowledge of the occurrence of any Default
      or Event of Default hereunder not theretofore reported and remedied and, if
      so,
      stating in reasonable detail the facts with respect thereto;

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (c)    As
      soon
      as available and in any event within twenty (20) days after the end of each
      calendar month, an unaudited/internal balance sheet and statements of income,
      retained earnings and cash flows of each of the Parent and its Subsidiaries
      as
      at the end of and for such month and for the year to date period then ended,
      prepared on a consolidating and consolidated basis to include the Parent, each
      Subsidiary of the Parent and each of their respective affiliates, in reasonable
      detail and stating in comparative form the figures for the corresponding date
      and periods in the previous year, all prepared in accordance with GAAP, subject
      to year-end adjustments and accompanied by a certificate of the Parent’s
      President, Chief Executive Officer or Chief Financial Officer, stating (i)
      that
      such financial statements have been prepared in accordance with GAAP, subject
      to
      year-end audit adjustments, and (ii) whether or not such officer has knowledge
      of the occurrence of any Default or Event of Default hereunder not theretofore
      reported and remedied and, if so, stating in reasonable detail the facts with
      respect thereto;

     

    (d)    Within
      fifteen (15) days after the end of each month (or more frequently if Laurus
      so
      requests), agings of each Company’s Accounts, unaudited trial balances and their
      accounts payable and a calculation of each Company’s Accounts and Eligible
      Accounts, provided, however, that if Laurus shall request the foregoing
      information more often than as set forth in the immediately preceding clause,
      each Company shall have fifteen (15) days from each such request to comply
      with
      Laurus’ demand; 

     

    (e)    Promptly
      after (i) the filing thereof,
      copies of the Parent’s most recent registration statements and annual,
      quarterly, monthly or other regular reports which the Parent files with the
      Securities and Exchange Commission (the “SEC”),
      and
      (ii) the issuance thereof, copies of such financial statements, reports and
      proxy statements as the Parent shall send to its stockholders.

     

    (f)    The
      Parent shall deliver, or cause the applicable Subsidiary of the Parent to
      deliver, such other information as Laurus shall reasonably request.

     

    12.    Additional
      Representations and Warranties.
      Each
      Company hereby represents and warrants to Laurus as follows:

     

    (a)    Organization,
      Good Standing and Qualification.
      It and
      each of its Subsidiaries is a corporation, partnership or limited liability
      company, as the case may be, duly organized, validly existing and in good
      standing under the laws of its jurisdiction of organization. It and each of
      its
      Subsidiaries has the corporate, limited liability
      company
      or partnership, as the case may be, power and authority to own and operate
      its
      properties and assets and, insofar as it is or shall be a party thereto, to
      (i)
      execute and deliver this Agreement and the Ancillary Agreements, (ii) to issue
      the Note, (iii) to issue the Warrants and the shares of Common Stock issuable
      upon exercise of the Warrants (the “Warrant
      Shares”),
      and
      (iv) to carry out the provisions of this Agreement and the Ancillary Agreements
      and to carry on its business as presently conducted. It and each of its
      Subsidiaries is duly qualified and is authorized to do business and is in good
      standing as a foreign corporation, partnership or limited liability company,
      as
      the case may be, in all jurisdictions in which the nature or location of its
      activities and of its properties (both owned and leased) makes such
      qualification necessary, except for those jurisdictions in which failure to
      do
      so has not had, or could not reasonably be expected to have, individually or
      in
      the aggregate, a Material Adverse Effect.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (b)    Subsidiaries.
      Each of
      its direct and indirect Subsidiaries, the direct owner of each such Subsidiary
      and its percentage ownership thereof, is set forth on Schedule
      12(b).

     

    (c)    Capitalization;
      Voting Rights.

     

    (i)    
The
      authorized capital stock of the Parent, as of the date hereof consists of
      125,000,000 shares, of which 100,000,000 are shares of Common Stock, par value
      $0.001 per share, 17,400,000 shares of which are issued and outstanding, and
      25,000,000 are shares of ‘blank check’ preferred stock, par value $0.001 per
      share, of none of which are issued and outstanding. The authorized, issued
      and
      outstanding capital stock of each Subsidiary of each Company is set forth on
      Schedule
      12(c).

     

    (ii)    Except
      as
      disclosed on Schedule
      12(c),
      other
      than: (i) the shares reserved for issuance under the Parent’s stock option
      plans; and (ii) shares which may be issued pursuant to this Agreement and the
      Ancillary Agreements, there are no outstanding options, warrants, rights
      (including conversion or preemptive rights and rights of first refusal), proxy
      or stockholder agreements, or arrangements or agreements of any kind for the
      purchase or acquisition from the Parent of any of its securities. Except as
      disclosed on Schedule
      12(c),
      neither
      the offer or issuance of any of the Note or the Warrants, or the issuance of
      any
      of the Warrant Shares, nor the consummation of any transaction contemplated
      hereby will result in a change in the price or number of any securities of
      the
      Parent outstanding, under anti-dilution or other similar provisions contained
      in
      or affecting any such securities.

     

    (iii)   All
      issued and outstanding shares of the Parent’s Common Stock: (i) have been duly
      authorized and validly issued and are fully paid and nonassessable; and
      (ii) were issued in compliance with all applicable state and federal laws
      concerning the issuance of securities.

     

    (iv)   The
      rights, preferences, privileges and restrictions of the shares of the Common
      Stock are as stated in the Parent’s Certificate of Incorporation (the
“Charter”).
      The
      Warrant Shares have been duly and validly reserved for issuance. When issued
      in
      compliance with the provisions of this Agreement and the Parent’s Charter, the
      Securities will be validly issued, fully paid and nonassessable, and will be
      free of any liens or encumbrances; provided,
      however,
      that
      the Securities may be subject to restrictions on transfer under state and/or
      federal securities laws as set forth herein or as otherwise required by such
      laws at the time a transfer is proposed.

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (d)    Authorization;
      Binding Obligations.
      All
      corporate, partnership or limited liability company, as the case may be, action
      on its and its Subsidiaries’ part (including their respective officers and
      directors) necessary for the authorization of this Agreement and the Ancillary
      Agreements, the performance of all of its and its Subsidiaries’ obligations
      hereunder and under the Ancillary Agreements on the Closing Date and, the
      authorization, issuance and delivery of the Note and the Warrant has been taken
      or will be taken prior to the Closing Date. This Agreement and the Ancillary
      Agreements, when executed and delivered and to the extent it is a party thereto,
      will be its and its Subsidiaries’ valid and binding obligations enforceable
      against each such Person in accordance with their terms, except:

     

    (i)    
as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (ii)    general
      principles of equity that restrict the availability of equitable or legal
      remedies.

     

    The
      issuance of the Note is not and will not be subject to any preemptive rights
      or
      rights of first refusal that have not been properly waived or complied with.
      The
      issuance of the Warrants and the subsequent exercise of the Warrants for Warrant
      Shares are not and will not be subject to any preemptive rights or rights of
      first refusal that have not been properly waived or complied with. 

     

    (e)    Liabilities.
      Neither
      it nor any of its Subsidiaries has any liabilities, except current liabilities
      incurred in the ordinary course of business and liabilities disclosed in any
      Exchange Act Filings.

     

    (f)    Agreements;
      Action.
      Except
      as set forth on Schedule
      12(f)
      or as
      disclosed in any Exchange Act Filings:

     

    (i)    
There
      are
      no agreements, understandings, instruments, contracts, proposed transactions,
      judgments, orders, writs or decrees to which it or any of its Subsidiaries
      is a
      party or to its knowledge by which it is bound which may involve: (i)
      obligations (contingent or otherwise) of, or payments to, it or any of its
      Subsidiaries in excess of $50,000 (other than obligations of, or payments to,
      it
      or any of its Subsidiaries arising from purchase or sale agreements entered
      into
      in the ordinary course of business); or (ii) the transfer or license of any
      patent, copyright, trade secret or other proprietary right to or from it (other
      than licenses arising from the purchase of “off the shelf” or other standard
      products); or (iii) provisions restricting the development, manufacture or
      distribution of its or any of its Subsidiaries’ products or services; or (iv)
      indemnification by it or any of its Subsidiaries with respect to infringements
      of proprietary rights.

     

    (ii)    Except
      as
      set forth on Schedule
      12(f)(ii),
      since
      December 31, 2004 (the “Balance
      Sheet Date”),
      neither it nor any of its Subsidiaries has: (i) declared or paid any dividends,
      or authorized or made any distribution upon or with respect to any class or
      series of its capital stock; (ii) incurred any indebtedness for money borrowed
      or any other liabilities (other than ordinary course obligations) individually
      in excess of $50,000 or, in the case of indebtedness and/or liabilities
      individually less than $50,000, in excess of $100,000 in the aggregate; (iii)
      made any loans or advances to any Person not in excess, individually or in
      the
      aggregate, of $100,000, other than ordinary advances for travel expenses; or
      (iv) sold, exchanged or otherwise disposed of any of its assets or rights,
      other
      than the sale of its Inventory in the ordinary course of
      business.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (iii)   For
      the
      purposes of subsections (i) and (ii) of this Section 12(f), all indebtedness,
      liabilities, agreements, understandings, instruments, contracts and proposed
      transactions involving the same Person (including Persons it or any of its
      applicable Subsidiaries has reason to believe are affiliated therewith or with
      any Subsidiary thereof) shall be aggregated for the purpose of meeting the
      individual minimum dollar amounts of such subsections.

     

    (iv)   the
      Parent maintains disclosure controls and procedures (“Disclosure
      Controls”)
      designed to ensure that information required to be disclosed by the Parent
      in
      the reports that it files or submits under the Exchange Act is recorded,
      processed, summarized, and reported, within the time periods specified in the
      rules and forms of the SEC.

     

    (v)    The
      Parent makes and keeps books, records, and accounts, that, in reasonable detail,
      accurately and fairly reflect the transactions and dispositions of its assets.
      It maintains internal control over financial reporting (“Financial
      Reporting Controls”)
      designed by, or under the supervision of, its principal executive and principal
      financial officers, and effected by its board of directors, management, and
      other personnel, to provide reasonable assurance regarding the reliability
      of
      financial reporting and the preparation of financial statements for external
      purposes in accordance with GAAP, including that:

     

    (1)    transactions
      are executed in accordance with management’s general or specific
      authorization;

     

    (2)    unauthorized
      acquisition, use, or disposition of the Parent’s assets that could have a
      material effect on the financial statements are prevented or timely
      detected;

     

    (3)    transactions
      are recorded as necessary to permit preparation of financial statements in
      accordance with GAAP, and that its receipts and expenditures are being made
      only
      in accordance with authorizations of the Parent’s management and board of
      directors;

     

    (4)    transactions
      are recorded as necessary to maintain accountability for assets; and

     

    (5)    the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals, and appropriate action is taken with respect to any
      differences.

     

    (vi)   There
      is
      no weakness in any of its Disclosure Controls or Financial Reporting Controls
      that is required to be disclosed in any of the Exchange Act Filings, except
      as
      so disclosed.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (g)    Obligations
      to Related Parties.
      Except
      as set forth on Schedule
      12(g),
      neither
      it nor any of its Subsidiaries has any obligations to their respective officers,
      directors, stockholders or employees other than:

     

    (i)    
for
      payment of salary for services rendered and for bonus payments;

     

    (ii)    reimbursement
      for reasonable expenses incurred on its or its Subsidiaries’
behalf;

     

    (iii)   for
      other
      standard employee benefits made generally available to all employees (including
      stock option agreements outstanding under any stock option plan approved by
      its
      and its Subsidiaries’ Board of Directors, as applicable); and

     

    (iv)   obligations
      listed in its and each of its Subsidiary’s financial statements or disclosed in
      any of the Parent’s Exchange Act Filings.

     

    Except
      as
      described above or set forth on Schedule
      12(g),
      none of
      its officers, directors or, to the best of its knowledge, key employees or
      stockholders, any of its Subsidiaries or any members of their immediate
      families, are indebted to it or any of its Subsidiaries, individually or in
      the
      aggregate, in excess of $50,000 or have any direct or indirect ownership
      interest in any Person with which it or any of its Subsidiaries is affiliated
      or
      with which it or any of its Subsidiaries has a business relationship, or any
      Person which competes with it or any of its Subsidiaries, other than passive
      investments in publicly traded companies (representing less than one percent
      (1%) of such company) which may compete with it or any of its Subsidiaries.
      Except as described above, none of its officers, directors or stockholders,
      or
      any member of their immediate families, is, directly or indirectly, interested
      in any material contract with it or any of its Subsidiaries and no agreements,
      understandings or proposed transactions are contemplated between it or any
      of
      its Subsidiaries and any such Person. Except as set forth on Schedule
      12(g),
      neither
      it nor any of its Subsidiaries is a guarantor or indemnitor of any indebtedness
      of any other Person.

     

    (h)    Changes.
      Since
      the Balance Sheet Date, except as disclosed in any Exchange Act Filing or in
      any
      Schedule to this Agreement or to any of the Ancillary Agreements, there has
      not
      been:

     

    (i)    
any
      change in its or any of its Subsidiaries’ business, assets, liabilities,
      condition (financial or otherwise), properties, operations or prospects, which,
      individually or in the aggregate, has had, or could reasonably be expected
      to
      have, a Material Adverse Effect;

     

    (ii)    any
      resignation or termination of any of its or its Subsidiaries’ officers, key
      employees or groups of employees; 

     

    (iii)   any
      material change, except in the ordinary course of business, in its or any of
      its
      Subsidiaries’ contingent obligations by way of guaranty, endorsement, indemnity,
      warranty or otherwise;

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (iv)   any
      damage, destruction or loss, whether or not covered by insurance, which has
      had,
      or could reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect;

     

    (v)    any
      waiver by it or any of its Subsidiaries of a valuable right or of a material
      debt owed to it;

     

    (vi)   any
      direct or indirect material loans made by it or any of its Subsidiaries to
      any
      of its or any of its Subsidiaries’ stockholders, employees, officers or
      directors, other than advances made in the ordinary course of
      business;

     

    (vii)          any
      material change in any compensation arrangement or agreement with any employee,
      officer, director or stockholder; 

     

    (viii)        
      any
      declaration or payment of any dividend or other distribution of its or any
      of
      its Subsidiaries’ assets;

     

    (ix)   any
      labor
      organization activity related to it or any of its Subsidiaries;

     

    (x)    any
      debt,
      obligation or liability incurred, assumed or guaranteed by it or any of its
      Subsidiaries, except those for immaterial amounts and for current liabilities
      incurred in the ordinary course of business;

     

    (xi)   any
      sale,
      assignment or transfer of any Intellectual Property or other intangible
      assets;

     

    (xii)         
      any
      change in any material agreement to which it or any of its Subsidiaries is
      a
      party or by which either it or any of its Subsidiaries is bound which, either
      individually or in the aggregate, has had, or could reasonably be expected
      to
      have, individually or in the aggregate, a Material Adverse Effect;

     

    (xiii)        
      any
      other
      event or condition of any character that, either individually or in the
      aggregate, has had, or could reasonably be expected to have, individually or
      in
      the aggregate, a Material Adverse Effect; or

     

    (xiv)         any
      arrangement or commitment by it or any of its Subsidiaries to do any of the
      acts
      described in subsection (i) through (xiii) of this Section 12(h).

     

    (i)    Title
      to Properties and Assets; Liens, Etc.
      Except
      as set forth on Schedule 12(i),
      it and
      each of its Subsidiaries has good and marketable title to their respective
      properties and assets, and good title to its leasehold interests, in each case
      subject to no Lien, other than Permitted Liens.

     

    All
      facilities, Equipment, Fixtures, vehicles and other properties owned, leased
      or
      used by it or any of its Subsidiaries are in good operating condition and repair
      and are reasonably fit and usable for the purposes for which they are being
      used. Except as set forth on Schedule
      12(i),
      it and
      each of its Subsidiaries is in compliance with all material terms of each lease
      to which it is a party or is otherwise bound.

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (j)

            	
              Intellectual
                Property.

            

    

     

    (i)    
It
      and
      each of its Subsidiaries owns or possesses sufficient legal rights to all
      Intellectual Property necessary for their respective businesses as now conducted
      and, to its knowledge as presently proposed to be conducted, without any known
      infringement of the rights of others. There are no outstanding options, licenses
      or agreements of any kind relating to its or any of its Subsidiary’s
      Intellectual Property, nor is it or any of its Subsidiaries bound by or a party
      to any options, licenses or agreements of any kind with respect to the
      Intellectual Property of any other Person other than such licenses or agreements
      arising from the purchase of “off the shelf” or standard products.

     

    (ii)    Neither
      it nor any of its Subsidiaries has received any communications alleging that
      it
      or any of its Subsidiaries has violated any of the Intellectual Property or
      other proprietary rights of any other Person, nor is it or any of its
      Subsidiaries aware of any basis therefor.

     

    (iii)   Neither
      it nor any of its Subsidiaries believes it is or will be necessary to utilize
      any inventions, trade secrets or proprietary information of any of its employees
      made prior to their employment by it or any of its Subsidiaries, except for
      inventions, trade secrets or proprietary information that have been rightfully
      assigned to it or any of its Subsidiaries.

     

    (k)    Compliance
      with Other Instruments.
      Neither
      it nor any of its Subsidiaries is in violation or default of (x) any term of
      its
      Charter or Bylaws, or (y) any provision of any indebtedness, mortgage,
      indenture, contract, agreement or instrument to which it is party or by which
      it
      is bound or of any judgment, decree, order or writ, which violation or default,
      in the case of this clause (y), has had, or could reasonably be expected to
      have, either individually or in the aggregate, a Material Adverse Effect. The
      execution, delivery and performance of and compliance with this Agreement and
      the Ancillary Agreements to which it is a party, and the issuance of the Note
      and the other Securities each pursuant hereto and thereto, will not, with or
      without the passage of time or giving of notice, result in any such material
      violation, or be in conflict with or constitute a default under any such term
      or
      provision, or result in the creation of any Lien upon any of its or any of
      its
      Subsidiary’s properties or assets or the suspension, revocation, impairment,
      forfeiture or nonrenewal of any permit, license, authorization or approval
      applicable to it or any of its Subsidiaries, their businesses or operations
      or
      any of their assets or properties. 

     

    (l)    
Litigation.
      Except
      as set forth on Schedule
      12(l),
      there
      is no action, suit, proceeding or investigation pending or, to its knowledge,
      currently threatened against it or any of its Subsidiaries that prevents it
      or
      any of its Subsidiaries from entering into this Agreement or the Ancillary
      Agreements, or from consummating the transactions contemplated hereby or
      thereby, or which has had, or could reasonably be expected to have, either
      individually or in the aggregate, a Material Adverse Effect, or could result
      in
      any change in its or any of its Subsidiaries’ current equity ownership, nor is
      it aware that there is any basis to assert any of the foregoing. Neither it
      nor
      any of its Subsidiaries is a party to or subject to the provisions of any order,
      writ, injunction, judgment or decree of any court or government agency or
      instrumentality. There is no action, suit, proceeding or investigation by it
      or
      any of its Subsidiaries currently pending or which it or any of its Subsidiaries
      intends to initiate.

    
      
        
        

      

      
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    (m)   Tax
      Returns and Payments.
      It and
      each of its Subsidiaries has timely filed all tax returns (federal, state and
      local) required to be filed by it. All taxes shown to be due and payable on
      such
      returns, any assessments imposed, and all other taxes due and payable by it
      and
      each of its Subsidiaries on or before the Closing Date, have been paid or will
      be paid prior to the time they become delinquent. Except as set forth on
Schedule
      12(m),
      neither
      it nor any of its Subsidiaries has been advised:

     

    (i)    
that
      any
      of its returns, federal, state or other, have been or are being audited as
      of
      the date hereof; or

     

    (ii)    of
      any
      adjustment, deficiency, assessment or court decision in respect of its federal,
      state or other taxes.

     

    Neither
      it nor any of its Subsidiaries has any knowledge of any liability of any tax
      to
      be imposed upon its properties or assets as of the date of this Agreement that
      is not adequately provided for. 

     

    (n)   Employees.
      Except
      as set forth on Schedule
      12(n),
      neither
      it nor any of its Subsidiaries has any collective bargaining agreements with
      any
      of its employees. There is no labor union organizing activity pending or, to
      its
      knowledge, threatened with respect to it or any of its Subsidiaries. Except
      as
      disclosed in the Exchange Act Filings or on Schedule
      12(n),
      neither
      it nor any of its Subsidiaries is a party to or bound by any currently effective
      employment contract, deferred compensation arrangement, bonus plan, incentive
      plan, profit sharing plan, retirement agreement or other employee compensation
      plan or agreement. To its knowledge, none of its or any of its Subsidiaries’
employees, nor any consultant with whom it or any of its Subsidiaries has
      contracted, is in violation of any term of any employment contract, proprietary
      information agreement or any other agreement relating to the right of any such
      individual to be employed by, or to contract with, it or any of its Subsidiaries
      because of the nature of the business to be conducted by it or any of its
      Subsidiaries; and to its knowledge the continued employment by it and its
      Subsidiaries of their present employees, and the performance of its and its
      Subsidiaries contracts with its independent contractors, will not result in
      any
      such violation. Neither it nor any of its Subsidiaries is aware that any of
      its
      or any of its Subsidiaries’ employees is obligated under any contract (including
      licenses, covenants or commitments of any nature) or other agreement, or subject
      to any judgment, decree or order of any court or administrative agency that
      would interfere with their duties to it or any of its Subsidiaries. Neither
      it
      nor any of its Subsidiaries has received any notice alleging that any such
      violation has occurred. Except for employees who have a current effective
      employment agreement with it or any of its Subsidiaries, none of its or any
      of
      its Subsidiaries’ employees has been granted the right to continued employment
      by it or any of its Subsidiaries or to any material compensation following
      termination of employment with it or any of its Subsidiaries. Except as set
      forth on Schedule 12(n),
      neither
      it nor any of its Subsidiaries is aware that any officer, key employee or group
      of employees intends to terminate his, her or their employment with it or any
      of
      its Subsidiaries, as applicable, nor does it or any of its Subsidiaries have
      a
      present intention to terminate the employment of any officer, key employee
      or
      group of employees.

    
      
        
        

      

      
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    (o)    Registration
      Rights and Voting Rights.
      Except
      as set forth on Schedule 12(o)
      and
      except as disclosed in Exchange Act Filings, neither it nor any of its
      Subsidiaries is presently under any obligation, and neither it nor any of its
      Subsidiaries has granted any rights, to register any of its or any of its
      Subsidiaries’ presently outstanding securities or any of its securities that may
      hereafter be issued. Except as set forth on Schedule 12(o)
      and
      except as disclosed in Exchange Act Filings, to its knowledge, none of its
      or
      any of its Subsidiaries’ stockholders has entered into any agreement with
      respect to its or any of its Subsidiaries’ voting of equity
      securities.

     

    (p)    Compliance
      with Laws; Permits.
      Neither
      it nor any of its Subsidiaries is in violation of the Sarbanes-Oxley Act of
      2002
      or any SEC related regulation or rule or any rule of the Principal Market
      promulgated thereunder or any other applicable statute, rule, regulation, order
      or restriction of any domestic or foreign government or any instrumentality
      or
      agency thereof in respect of the conduct of its business or the ownership of
      its
      properties which has had, or could reasonably be expected to have, either
      individually or in the aggregate, a Material Adverse Effect. No governmental
      orders, permissions, consents, approvals or authorizations are required to
      be
      obtained and no registrations or declarations are required to be filed in
      connection with the execution and delivery of this Agreement or any Ancillary
      Agreement and the issuance of any of the Securities, except such as have been
      duly and validly obtained or filed, or with respect to any filings that must
      be
      made after the Closing Date, as will be filed in a timely manner. It and each
      of
      its Subsidiaries has all material franchises, permits, licenses and any similar
      authority necessary for the conduct of its business as now being conducted
      by
      it, the lack of which could, either individually or in the aggregate, reasonably
      be expected to have a Material Adverse Effect.

     

    (q)    Environmental
      and Safety Laws.
      Neither
      it nor any of its Subsidiaries is in violation of any applicable statute, law
      or
      regulation relating to the environment or occupational health and safety, and
      to
      its knowledge, no material expenditures are or will be required in order to
      comply with any such existing statute, law or regulation. Except as set forth
      on
Schedule
      12(q),
      no
      Hazardous Materials (as defined below) are used or have been used, stored,
      or
      disposed of by it or any of its Subsidiaries or, to its knowledge, by any other
      Person on any property owned, leased or used by it or any of its Subsidiaries.
      For the purposes of the preceding sentence, “Hazardous
      Materials”
shall
      mean:

     

    (i)    
materials
      which are listed or otherwise defined as “hazardous” or “toxic” under any
      applicable local, state, federal and/or foreign laws and regulations that govern
      the existence and/or remedy of contamination on property, the protection of
      the
      environment from contamination, the control of hazardous wastes, or other
      activities involving hazardous substances, including building materials;
      and

     

    (ii)    any
      petroleum products or nuclear materials.

     

    (r)    Valid
      Offering.
      Assuming the accuracy of the representations and warranties of Laurus contained
      in this Agreement, the offer and issuance of the Securities will be exempt
      from
      the registration requirements of the Securities Act of 1933, as amended (the
      “Securities
      Act”),
      and
      will have been registered or qualified (or are exempt from registration and
      qualification) under the registration, permit or qualification requirements
      of
      all applicable state securities laws.

    
      
        
        

      

      
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    (s)    Full
      Disclosure.
      It and
      each of its Subsidiaries has provided Laurus with all information requested
      by
      Laurus in connection with Laurus’ decision to enter into this Agreement,
      including all information each Company and its Subsidiaries believe is
      reasonably necessary to make such investment decision. Neither this Agreement,
      the Ancillary Agreements nor the exhibits and schedules hereto and thereto
      nor
      any other document delivered by it or any of its Subsidiaries to Laurus or
      its
      attorneys or agents in connection herewith or therewith or with the transactions
      contemplated hereby or thereby, contain any untrue statement of a material
      fact
      nor omit to state a material fact necessary in order to make the statements
      contained herein or therein, in light of the circumstances in which they are
      made, not misleading. Any financial projections and other estimates provided
      to
      Laurus by it or any of its Subsidiaries were based on its and its Subsidiaries’
experience in the industry and on assumptions of fact and opinion as to future
      events which it or any of its Subsidiaries, at the date of the issuance of
      such
      projections or estimates, believed to be reasonable. 

     

    (t)    Insurance.
      It and
      each of its Subsidiaries has general commercial, product liability, fire and
      casualty insurance policies with coverages which it believes are customary
      for
      companies similarly situated to it and its Subsidiaries in the same or similar
      business.

     

    (u)    SEC
      Reports and Financial Statements.
      Except
      as set forth on Schedule 12(u),
      it and
      each of its Subsidiaries has filed all proxy statements, reports and other
      documents required to be filed by it under the Exchange Act. The Parent has
      furnished Laurus with copies of: (i) its Annual Report on Form 10-KSB for its
      fiscal year ended December 31, 2004 and 2003; and (ii) its Quarterly Reports
      on
      Form 10-QSB for its fiscal quarters ended March 31, 2005, June 30, 2005 and
      September 30, 2005, and the Form 8-K filings which it has made during its fiscal
      year 2006 to date (collectively, the “SEC
      Reports”).
      Except as set forth on Schedule
      12(u),
      each
      SEC Report was, at the time of its filing, in substantial compliance with the
      requirements of its respective form and none of the SEC Reports, nor the
      financial statements (and the notes thereto) included in the SEC Reports, as
      of
      their respective filing dates, 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. Such financial statements have been prepared in
      accordance with GAAP applied on a consistent basis during the periods involved
      (except (i) as may be otherwise indicated in such financial statements or the
      notes thereto or (ii) in the case of unaudited interim statements, to the extent
      they may not include footnotes or may be condensed) and fairly present in all
      material respects the financial condition, the results of operations and cash
      flows of the Parent and its Subsidiaries, on a consolidated basis, as of, and
      for, the periods presented in each such SEC Report.

     

    (v)    Listing.
      The
      Parent’s Common Stock is listed or quoted, as applicable, on the Principal
      Market and satisfies all requirements for the continuation of such listing
      or
      quotation, as applicable, and the Parent shall do all things necessary for
      the
      continuation of such listing or quotation, as applicable. The Parent has not
      received any notice that its Common Stock will be delisted from, or no longer
      quoted on, as applicable, the Principal Market or that its Common Stock does
      not
      meet all requirements for such listing or quotation, as
      applicable.

    
      
        
        

      

      
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    (w)    No
      Integrated Offering.
      Neither
      it, nor any of its Subsidiaries 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 cause the offering of the Securities pursuant to this Agreement
      or
      any Ancillary Agreement to be integrated with prior offerings by it for purposes
      of the Securities Act which would prevent it from issuing the Securities
      pursuant to Rule 506 under the Securities Act, or any applicable
      exchange-related stockholder approval provisions, nor will it or any of its
      Affiliates or Subsidiaries take any action or steps that would cause the
      offering of the Securities to be integrated with other offerings.

     

    (x)    Stop
      Transfer.
      The
      Securities are restricted securities as of the date of this Agreement. Neither
      it nor any of its Subsidiaries will issue any stop transfer order or other
      order
      impeding the sale and delivery of any of the Securities at such time as the
      Securities are registered for public sale or an exemption from registration
      is
      available, except as required by state and federal securities laws.

     

    (y)    Dilution.
      It
      specifically acknowledges that the Parent’s obligation to issue the shares of
      Common Stock upon exercise of the Warrants is binding upon the Parent and
      enforceable regardless of the dilution such issuance may have on the ownership
      interests of other shareholders of the Parent. 

     

    (z)    Patriot
      Act.
      It
      certifies that, to the best of its knowledge, neither it nor any of its
      Subsidiaries has been designated, nor is or shall be owned or controlled, by
      a
“suspected terrorist” as defined in Executive Order 13224. It hereby
      acknowledges that Laurus seeks to comply with all applicable laws concerning
      money laundering and related activities. In furtherance of those efforts, it
      hereby represents, warrants and covenants that: (i) none of the cash or property
      that it or any of its Subsidiaries will pay or will contribute to Laurus has
      been or shall be derived from, or related to, any activity that is deemed
      criminal under United States law; and (ii) no contribution or payment by it
      or
      any of its Subsidiaries to Laurus, to the extent that they are within its or
      any
      such Subsidiary’s control shall cause Laurus to be in violation of the United
      States Bank Secrecy Act, the United States International Money Laundering
      Control Act of 1986 or the United States International Money Laundering
      Abatement and Anti-Terrorist Financing Act of 2001. It shall promptly notify
      Laurus if any of these representations, warranties and covenants ceases to
      be
      true and accurate regarding it or any of its Subsidiaries. It shall provide
      Laurus with any additional information regarding it and each Subsidiary thereof
      that Laurus deems necessary or convenient to ensure compliance with all
      applicable laws concerning money laundering and similar activities. It
      understands and agrees that if at any time it is discovered that any of the
      foregoing representations, warranties and covenants are incorrect, or if
      otherwise required by applicable law or regulation related to money laundering
      or similar activities, Laurus may undertake appropriate actions to ensure
      compliance with applicable law or regulation, including but not limited to
      segregation and/or redemption of Laurus’ investment in it. It further
      understands that Laurus may release confidential information about it and its
      Subsidiaries and, if applicable, any underlying beneficial owners, to proper
      authorities if Laurus, in its sole discretion, determines that it is in the
      best
      interests of Laurus in light of relevant rules and regulations under the laws
      set forth in subsection (ii) above.

    
      
        
        

      

      
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    (aa)        
      Company
      Name; Locations of Offices, Records and Collateral.
      Schedule 12(aa)
      sets
      forth each Company’s name as it appears in official filings in the state of its
      organization, the type of entity of each Company, the organizational
      identification number issued by each Company’s state of organization or a
      statement that no such number has been issued, each Company’s state of
      organization, and the location of each Company’s chief executive office,
      corporate offices, warehouses, other locations of Collateral and locations
      where
      records with respect to Collateral are kept (including in each case the county
      of such locations) and, except as set forth in such Schedule
      12(aa),
      such
      locations have not changed during the preceding twelve months. As of the Closing
      Date, during the prior five years, except as set forth in Schedule
      12(aa),
      no
      Company has been known as or conducted business in any other name (including
      trade names). Each Company has only one state of organization.

     

    (bb)        
      ERISA.
      Based
      upon the Employee Retirement Income Security Act of 1974 (“ERISA”),
      and
      the regulations and published interpretations thereunder: (i) neither it nor
      any
      of its Subsidiaries has engaged in any Prohibited Transactions (as defined
      in
      Section 406 of ERISA and Section 4975 of the Code); (ii) it and each of its
      Subsidiaries has met all applicable minimum funding requirements under Section
      302 of ERISA in respect of its plans; (iii) neither it nor any of its
      Subsidiaries has any knowledge of any event or occurrence which would cause
      the
      Pension Benefit Guaranty Corporation to institute proceedings under Title IV
      of
      ERISA to terminate any employee benefit plan(s); (iv) neither it nor any of
      its
      Subsidiaries has any fiduciary responsibility for investments with
      respect to any plan existing for the benefit of persons other than its or such
      Subsidiary’s employees; and (v) neither it nor any of its Subsidiaries has
      withdrawn, completely or partially, from any multi-employer pension plan so
      as
      to incur liability under the Multiemployer Pension Plan Amendments Act of
      1980.

     

    13.    Covenants.
      Each
      Company, as applicable, covenants and agrees with Laurus as
      follows:

     

    (a)    Stop-Orders.
      It
      shall advise Laurus, promptly after it receives notice of issuance by the SEC,
      any state securities commission or any other regulatory authority of any stop
      order or of any order preventing or suspending any offering of any securities
      of
      the Parent, or of the suspension of the qualification of the Common Stock of
      the
      Parent for offering or sale in any jurisdiction, or the initiation of any
      proceeding for any such purpose.

     

    (b)    Listing.
      It
      shall promptly secure the
      listing
      or quotation, as applicable, of the shares of Common Stock issuable upon
      exercise of the Warrants on the Principal Market upon which shares of Common
      Stock are listed or quoted, as applicable, (subject to official notice of
      issuance) and shall maintain such listing or quotation, as applicable, so long
      as any other shares of Common Stock shall be so listed or quoted, as applicable.
      The Parent shall maintain the listing or quotation, as applicable, of its Common
      Stock on the Principal Market, and will comply in all material respects with
      the
      Parent’s reporting, filing and other obligations under the bylaws or rules of
      the National Association of Securities Dealers (“NASD”)
      and
      such exchanges, as applicable.

    
      
        
        

      

      
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    (c)    Market
      Regulations.
      It
      shall notify the SEC, NASD and applicable state authorities, in accordance
      with
      their requirements, of the transactions contemplated by this Agreement, and
      shall take all other necessary action and proceedings as may be required and
      permitted by applicable law, rule and regulation, for the legal and valid
      issuance of the Securities to Laurus and promptly provide copies thereof to
      Laurus.

     

    (d)    Reporting
      Requirements.
      It
      shall timely file with the SEC all reports required to be filed pursuant to
      the
      Exchange Act and refrain from terminating its status as an issuer required
      by
      the Exchange Act to file reports thereunder even if the Exchange Act or the
      rules or regulations thereunder would permit such termination. 

     

    (e)    Use
      of
      Funds.
      It
      shall use the proceeds of the Loans to repay indebtedness to Key Bank, N.A.
      and
      for general working capital purposes, including acquisitions .

     

    (f)    Access
      to Facilities.
      It
      shall, and shall cause each of its Subsidiaries to, permit any representatives
      designated by Laurus (or any successor of Laurus), upon reasonable notice and
      during normal business hours, at Company’s expense and accompanied by a
      representative of Company Agent (provided that no such prior notice shall be
      required to be given and no such representative shall be required to accompany
      Laurus in the event Laurus believes such access is necessary to preserve or
      protect the Collateral or following the occurrence and during the continuance
      of
      an Event of Default), to:

     

    (i)    
visit
      and
      inspect any of its or any such Subsidiary’s properties;

     

    (ii)    examine
      its or any such Subsidiary’s corporate and financial records (unless such
      examination is not permitted by federal, state or local law or by contract)
      and
      make copies thereof or extracts therefrom; and

     

    (iii)   discuss
      its or any such Subsidiary’s affairs, finances and accounts with its or any such
      Subsidiary’s directors, officers and Accountants.

     

    Notwithstanding
      the foregoing, neither it nor any of its Subsidiaries shall provide any
      material, non-public information to Laurus unless Laurus signs a confidentiality
      agreement and otherwise complies with Regulation FD, under the federal
      securities laws.

     

    (g)    Taxes.
      It
      shall, and shall cause each of its Subsidiaries to, promptly pay and discharge,
      or cause to be paid and discharged, when due and payable, all lawful taxes,
      assessments and governmental charges or levies imposed upon it and its
      Subsidiaries’ income, profits, property or business, as the case may be;
      provided, however, that any such tax, assessment, charge or levy need not be
      paid currently if (i) the validity thereof shall currently and diligently be
      contested in good faith by appropriate proceedings, (ii) such tax, assessment,
      charge or levy shall have no effect on the Lien priority of Laurus in the
      Collateral, and (iii) if it and/or such Subsidiary, as applicable, shall have
      set aside on its and/or such Subsidiary’s books adequate reserves with respect
      thereto in accordance with GAAP; and provided, further, that it shall, and
      shall
      cause each of its Subsidiaries to, pay all such taxes, assessments, charges
      or
      levies forthwith upon the commencement of proceedings to foreclose any lien
      which may have attached as security therefor.

    
      
        
        

      

      
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    (h)    Insurance.
      It
      shall bear the full risk of loss from any loss of any nature whatsoever with
      respect to the Collateral. It and each of its Subsidiaries shall keep its assets
      which are of an insurable character insured by financially sound and reputable
      insurers against loss or damage by fire, explosion and other risks customarily
      insured against by companies in similar business similarly situated as it and
      its Subsidiaries; and it and its Subsidiaries shall maintain, with financially
      sound and reputable insurers, insurance against other hazards and risks and
      liability to persons and property to the extent and in the manner which it
      and/or such Subsidiary thereof reasonably believes is customary for companies
      in
      similar business similarly situated as it and its Subsidiaries and to the extent
      available on commercially reasonable terms. It and each of its Subsidiaries
      will
      jointly and severally bear the full risk of loss from any loss of any nature
      whatsoever with respect to the assets pledged to Laurus as security for its
      obligations hereunder and under the Ancillary Agreements. At its own cost and
      expense in amounts and with carriers reasonably acceptable to Laurus, it and
      each of its Subsidiaries shall (i) keep all their insurable properties and
      properties in which they have an interest insured against the hazards of fire,
      flood, sprinkler leakage, those hazards covered by extended coverage insurance
      and such other hazards, and for such amounts, as is customary in the case of
      companies engaged in businesses similar to it or the respective Subsidiary’s
      including business interruption insurance; (ii) maintain a bond in such amounts
      as is customary in the case of companies engaged in businesses similar to it
      and
      its Subsidiaries’ insuring against larceny, embezzlement or other criminal
      misappropriation of insured’s officers and employees who may either singly or
      jointly with others at any time have access to its or any of its Subsidiaries
      assets or funds either directly or through governmental authority to draw upon
      such funds or to direct generally the disposition of such assets; (iii) maintain
      public and product liability insurance against claims for personal injury,
      death
      or property damage suffered by others; (iv) maintain all such worker’s
      compensation or similar insurance as may be required under the laws of any
      state
      or jurisdiction in which it or any of its Subsidiaries is engaged in business;
      and (v) furnish Laurus with (x) copies of all policies and evidence of the
      maintenance of such policies at least thirty (30) days before any expiration
      date, (y) excepting its and its Subsidiaries’ workers’ compensation policy,
      endorsements to such policies naming Laurus as “co-insured” or “additional
      insured” and appropriate loss payable endorsements in form and substance
      satisfactory to Laurus, naming Laurus as lenders loss payee, and (z) evidence
      that as to Laurus the insurance coverage shall not be impaired or invalidated
      by
      any act or neglect of any Company or any of its Subsidiaries and the insurer
      will provide Laurus with at least thirty (30) days notice prior to cancellation.
      It shall instruct the insurance carriers that in the event of any loss
      thereunder, the carriers shall make payment for such loss to Laurus and not
      to
      any Company or any of its Subsidiaries and Laurus jointly. If any insurance
      losses are paid by check, draft or other instrument payable to any Company
      and/or any of its Subsidiaries and Laurus jointly, Laurus may endorse, as
      applicable, such Company’s and/or any of its Subsidiaries’ name thereon and do
      such other things as Laurus may deem advisable to reduce the same to cash.
      Laurus is hereby authorized to adjust and compromise claims. All loss recoveries
      received by Laurus upon any such insurance may be applied to the Obligations,
      in
      such order as Laurus in its sole discretion shall determine or shall otherwise
      be delivered to Company Agent for the benefit of the applicable Company and/or
      its Subsidiaries. Any surplus shall be paid by Laurus to Company Agent for
      the
      benefit of the applicable Company and/or its Subsidiaries, or applied as may
      be
      otherwise required by law. Any deficiency thereon shall be paid, as applicable,
      by Companies and their Subsidiaries to Laurus, on demand.

    
      
        
        

      

      
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    (i)    
Intellectual
      Property.
      It
      shall, and shall cause each of its Subsidiaries to, maintain in full force
      and
      effect its corporate existence, rights and franchises and all licenses and
      other
      rights to use Intellectual Property owned or possessed by it and reasonably
      deemed to be necessary to the conduct of its business.

     

    (j)    
Properties.
      It
      shall, and shall cause each of its Subsidiaries to, keep its properties in
      good
      repair, working order and condition, reasonable wear and tear excepted, and
      from
      time to time make all needful and proper repairs, renewals, replacements,
      additions and improvements thereto; and it shall, and shall cause each of its
      Subsidiaries to, at all times comply with each provision of all leases to which
      it is a party or under which it occupies property if the breach of such
      provision could reasonably be expected to have a Material Adverse
      Effect.

     

    (k)    Confidentiality.
      It
      shall not, and shall not permit any of its Subsidiaries to, disclose, and will
      not include in any public announcement, the name of Laurus, unless expressly
      agreed to by Laurus or unless and until such disclosure is required by law
      or
      applicable regulation, and then only to the extent of such requirement.
      Notwithstanding the foregoing, each Company and its Subsidiaries may disclose
      Laurus’ identity and the terms of this Agreement to its current and prospective
      debt and equity financing sources.

     

    (l)    
Required
      Approvals.
      It
      shall not, and shall not permit any of its Subsidiaries to, without the prior
      written consent of Laurus, (i) create, incur, assume or suffer to exist any
      indebtedness (exclusive of trade debt) whether secured or unsecured, other
      than
      each Company’s indebtedness to Laurus and as set forth on Schedule 13(l)(i)
      attached
      hereto and made a part hereof; (ii) cancel any debt owing to it in excess of
      $50,000 in the aggregate during any 12 month period; (iii) assume, guarantee,
      endorse or otherwise become directly or contingently liable in connection with
      any obligations of any other Person, except the endorsement of negotiable
      instruments by it or its Subsidiaries for deposit or collection or similar
      transactions in the ordinary course of business; (iv) directly or indirectly
      declare, pay or make any dividend or distribution on any class of its Stock
      or
      apply any of its funds, property or assets to the purchase, redemption or other
      retirement of any of its or its Subsidiaries’ Stock outstanding on the date
      hereof, or issue any preferred stock; (v)
      purchase or hold beneficially any Stock or other securities or evidences of
      indebtedness of, make or permit to exist any loans or advances to, or make
      any
      investment or acquire any interest whatsoever in, any other Person, including
      any partnership or joint venture, except (x) travel advances, (y) loans to
      its
      and its Subsidiaries’ officers and employees not exceeding at any one time an
      aggregate of $10,000, and (z) loans to its existing Subsidiaries so long as
      such
      Subsidiaries are designated as either a co-borrower hereunder or has entered
      into such guaranty and security documentation required by Laurus, including,
      without limitation, to grant to Laurus a first priority perfected security
      interest in substantially all of such Subsidiary’s assets to secure the
      Obligations;
      (vi)
      create or permit to exist any Subsidiary, other than any Subsidiary in existence
      on the date hereof and listed in Schedule
      12(b)
      unless
      such new Subsidiary is a wholly-owned Subsidiary and is designated by Laurus
      as
      either a co-borrower or guarantor hereunder and such Subsidiary shall have
      entered into all such documentation required by Laurus, including, without
      limitation, to grant to Laurus a first priority perfected security interest
      in
      substantially all of such Subsidiary’s assets to secure the Obligations; (vii)
      directly or indirectly, prepay any indebtedness (other than to Laurus and in
      the
      ordinary course of business), or repurchase, redeem, retire or otherwise acquire
      any indebtedness (other than to Laurus and in the ordinary course of business)
      except to make scheduled payments of principal and interest thereof; (viii)
      enter into any merger, consolidation or other reorganization with or into any
      other Person or acquire all or a portion of the assets or Stock of any Person
      or
      permit any other Person to consolidate with or merge with it, unless
      (1) such Company is the surviving entity of such merger or consolidation,
      (2) no Event of Default shall exist immediately prior to and after giving effect
      to such merger or consolidation, (3) such Company shall have provided
      Laurus copies of all documentation relating to such merger or consolidation
      and
      (4) such Company shall have provided Laurus with at least thirty (30) days’
prior written notice of such merger or consolidation; (ix) materially change
      the
      nature of the business in which it is presently engaged; (x) become subject
      to
      (including, without limitation, by way of amendment to or modification of)
      any
      agreement or instrument which by its terms would (under any circumstances)
      restrict its or any of its Subsidiaries’ right to perform the provisions of this
      Agreement or any of the Ancillary Agreements; (xi) change its fiscal year or
      make any changes in accounting treatment and reporting practices without prior
      written notice to Laurus except as required by GAAP or in the tax reporting
      treatment or except as required by law; (xii) enter into any transaction with
      any employee, director or Affiliate, except in the ordinary course on
      arms-length terms; (xiii) bill Accounts under any name except the present name
      of such Company; or (xiv) sell, lease, transfer or otherwise dispose of any
      of
      its properties or assets, or any of the properties or assets of its
      Subsidiaries, except for (1) sales, leases, transfer or dispositions by any
      Company to any other Company, (2) the sale of Inventory in the ordinary course
      of business and (3) the disposition or transfer in the ordinary course of
      business during any fiscal year of obsolete and worn-out Equipment and only
      to
      the extent that (x) the proceeds of any such disposition are used to acquire
      replacement Equipment which is subject to Laurus’ first priority security
      interest or are used to repay Loans or to pay general corporate expenses, or
      (y)
      following the occurrence of an Event of Default which continues to exist, the
      proceeds of which are remitted to Laurus to be held as cash collateral for
      the
      Obligations.

    
      
        
        

      

      
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    (m)   Reissuance
      of Securities.
      The
      Parent shall reissue certificates representing the Securities without the
      legends set forth in Section 39 below at such time as:

     

    (i)    
the
      holder thereof is permitted to dispose of such Securities pursuant to Rule
      144(k) under the Securities Act; or

     

    (ii)    upon
      resale subject to an effective registration statement after such Securities
      are
      registered under the Securities Act.

     

    The
      Parent agrees to cooperate with Laurus in connection with all resales pursuant
      to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow
      such resales provided the Parent and its counsel receive reasonably requested
      representations from Laurus and broker, if any.

     

    (n)   Opinion.
      On the
      Closing Date, it shall deliver to Laurus an opinion acceptable to Laurus from
      each Company’s legal counsel. Each Company will provide, at the Companies’ joint
      and several expense, such other legal opinions in the future as are reasonably
      necessary for the exercise of the Warrants.

     

    (o)   Legal
      Name, etc.
      It
      shall not, without providing Laurus with 30 days prior written notice, change
      (i) its name as it appears in the official filings in the state of its
      organization, (ii) the type of legal entity it is, (iii) its organization
      identification number, if any, issued by its state of organization, (iv) its
      state of organization or (v) amend its certificate of incorporation, by-laws
      or
      other organizational document.

    
      
        
        

      

      
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    (p)    Compliance
      with Laws.
      The
      operation of each of its and each of its Subsidiaries’ business is and shall
      continue to be in compliance in all material respects with all applicable
      federal, state and local laws, rules and ordinances, including to all laws,
      rules, regulations and orders relating to taxes, payment and withholding of
      payroll taxes, employer and employee contributions and similar items,
      securities, employee retirement and welfare benefits, employee health and safety
      and environmental matters.

     

    (q)    Notices.
      It and
      each of its Subsidiaries shall promptly inform Laurus in writing of: (i) the
      commencement of all proceedings and investigations by or before and/or the
      receipt of any notices from, any governmental or nongovernmental body and all
      actions and proceedings in any court or before any arbitrator against or in
      any
      way concerning any event which could reasonably be expected to have singly
      or in
      the aggregate, a Material Adverse Effect; (ii) any change which has had, or
      could reasonably be expected to have, a Material Adverse Effect; (iii) any
      Event
      of Default or Default; and (iv) any default or any event which with the passage
      of time or giving of notice or both would constitute a default under any
      agreement for the payment of money to which it or any of its Subsidiaries is
      a
      party or by which it or any of its Subsidiaries or any of its or any such
      Subsidiary’s properties may be bound the breach of which would have a Material
      Adverse Effect.

     

    (r)    Margin
      Stock.
      It
      shall not permit any of the proceeds of the Loans made hereunder to be used
      directly or indirectly to “purchase” or “carry” “margin stock” or to repay
      indebtedness incurred to “purchase” or “carry” “margin stock” within the
      respective meanings of each of the quoted terms under Regulation U of the Board
      of Governors of the Federal Reserve System as now and from time to time
      hereafter in effect. 

     

    (s)    Offering
      Restrictions.
      Except
      as previously disclosed in the SEC Reports or in the Exchange Act Filings,
      or
      stock or stock options granted to its employees or directors, neither it nor
      any
      of its Subsidiaries shall, prior to (i) the full repayment of all outstanding
      principal under the Notes (together with all accrued and unpaid interest and
      fees related thereto) and (ii) the expiration of the Term and/or termination
      of
      the Note (whichever occurs first), (x) enter into any equity line of credit
      agreement or similar agreement or (y) issue, or enter into any agreement to
      issue, any securities with a variable/floating conversion and/or pricing feature
      which are or could be (by conversion or registration) free-trading securities
      (i.e. common stock subject to a registration statement).

     

    (t)    Authorization
      and Reservation of Shares.
      The
      Parent shall at all times have authorized and reserved a sufficient number
      of
      shares of Common Stock to provide for the exercise of the Warrants.

     

    (u)    Financing
      Right of First Refusal.

     

    (i)    
Each
      Company hereby grants to Laurus a right of first refusal to provide any
      Additional Financing (as defined below) to be issued by any Company and/or
      any
      of its Subsidiaries (the “Additional
      Financing Parties”),
      subject to the following terms and conditions. From and after the date hereof,
      prior to the incurrence of any additional indebtedness and/or the sale or
      issuance of any equity interests of the Additional Financing Parties (an
“Additional
      Financing”),
      Company Agent shall notify Laurus of such Additional Financing. In connection
      therewith, Company Agent shall submit a fully executed term sheet (a
“Proposed
      Term Sheet”)
      to
      Laurus setting forth the terms, conditions and pricing of any such Additional
      Financing (such financing to be negotiated on “arm’s length” terms and the terms
      thereof to be negotiated in good faith) proposed to be entered into by the
      Additional Financing Parties. Laurus shall have the right, but not the
      obligation, to deliver to Company Agent its own proposed term sheet (the
“Laurus
      Term Sheet”)
      setting forth the terms and conditions upon which Laurus would be willing to
      provide such Additional Financing to the Additional Financing Parties. The
      Laurus Term Sheet shall contain terms no less favorable to the Additional
      Financing Parties than those outlined in Proposed Term Sheet. Laurus shall
      deliver to Company Agent the Laurus Term Sheet within ten Business Days of
      receipt of each such Proposed Term Sheet. If the provisions of the Laurus Term
      Sheet are at least as favorable to the Additional Financing Parties as the
      provisions of the Proposed Term Sheet, the Additional Financing Parties shall
      enter into and consummate the Additional Financing transaction outlined in
      the
      Laurus Term Sheet.

    
      
        
        

      

      
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    (ii)    It
      shall
      not, and shall not permit its Subsidiaries to, agree, directly or indirectly,
      to
      any restriction with any Person which limits the ability of Laurus to consummate
      an Additional Financing with it or any of its Subsidiaries.

     

    14.   Further
      Assurances.
      At any
      time and from time to time, upon the written request of Laurus and at the sole
      expense of Companies, each Company shall promptly and duly execute and deliver
      any and all such further instruments and documents and take such further action
      as Laurus may request (a) to obtain the full benefits of this Agreement and
      the
      Ancillary Agreements, (b) to protect, preserve and maintain Laurus’ rights in
      the Collateral and under this Agreement or any Ancillary Agreement, and/or
      (c)
      to enable Laurus to exercise all or any of the rights and powers herein granted
      or any Ancillary Agreement.

     

    15.   Representations,
      Warranties and Covenants of Laurus.
      Laurus
      hereby represents, warrants and covenants to each Company as
      follows:

     

    (a)    Requisite
      Power and Authority.
      Laurus
      has all necessary power and authority under all applicable provisions of law
      to
      execute and deliver this Agreement and the Ancillary Agreements and to carry
      out
      their provisions. All corporate action on Laurus’ part required for the lawful
      execution and delivery of this Agreement and the Ancillary Agreements have
      been
      or will be effectively taken prior to the Closing
      Date.
      Upon their execution and delivery, this Agreement and the Ancillary Agreements
      shall be valid and binding obligations of Laurus, enforceable in accordance
      with
      their terms, except (a) as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other laws of general application affecting
      enforcement of creditors’ rights, and (b) as limited by general principles of
      equity that restrict the availability of equitable and legal
      remedies.

     

    (b)    Investment
      Representations.
      Laurus
      understands that the Securities are being offered pursuant to an exemption
      from
      registration contained in the Securities Act based in part upon Laurus’
representations contained in this Agreement, including, without limitation,
      that
      Laurus is an “accredited investor” within the meaning of Regulation D under the
      Securities Act. Laurus has received or has had full access to all the
      information it considers necessary or appropriate to make an informed investment
      decision with respect to the Note and Warrant to be issued to it under this
      Agreement and the Securities acquired by it upon the exercise of the
      Warrants.

    
      
        
        

      

      
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    (c)    Laurus
      Bears Economic Risk.
      Laurus
      has substantial experience in evaluating and investing in private placement
      transactions of securities in companies similar to the Parent so that it is
      capable of evaluating the merits and risks of its investment in the Parent
      and
      has the capacity to protect its own interests. Laurus must bear the economic
      risk of this investment until the Securities are sold pursuant to (i) an
      effective registration statement under the Securities Act, or (ii) an exemption
      from registration is available.

     

    (d)    Investment
      for Own Account.
      The
      Securities are being issued to Laurus for its own account for investment only,
      and not as a nominee or agent and not with a view towards or for resale in
      connection with their distribution.

     

    (e)    Laurus
      Can Protect Its Interest.
      Laurus
      represents that by reason of its, or of its management’s, business and financial
      experience, Laurus has the capacity to evaluate the merits and risks of its
      investment in the Note, and the Securities and to protect its own interests
      in
      connection with the transactions contemplated in this Agreement, and the
      Ancillary Agreements. Further, Laurus is aware of no publication of any
      advertisement in connection with the transactions contemplated in the Agreement
      or the Ancillary Agreements.

     

    (f)    Accredited
      Investor.
      Laurus
      represents that it is an accredited investor within the meaning of Regulation
      D
      under the Securities Act.

     

    (g)    Shorting.
      Neither
      Laurus nor any of its Affiliates or investment partners has, will, or will
      cause
      any Person, to directly engage in “short sales” of the Parent’s Common Stock so
      long as any amounts under the Note shall be outstanding.

     

    (h)    Patriot
      Act.
      Laurus
      certifies that, to the best of Laurus’ knowledge, Laurus has not been
      designated, and is not owned or controlled, by a “suspected terrorist” as
      defined in Executive Order 13224. Laurus seeks to comply with all applicable
      laws concerning money laundering and related activities. In furtherance of
      those
      efforts, Laurus hereby represents, warrants and covenants that: (i) none of
      the
      cash or property that Laurus will use to make the Loans has been or shall be
      derived from, or related to, any activity that is deemed criminal under United
      States law; and (ii) no disbursement by Laurus to any Company to the extent
      within Laurus’ control, shall cause Laurus to be in violation of the United
      States Bank Secrecy Act, the United States International Money Laundering
      Control Act of 1986 or the United States International Money Laundering
      Abatement and Anti-Terrorist Financing Act of 2001. Laurus shall promptly notify
      the Company Agent if any of these representations ceases to be true and accurate
      regarding Laurus. Laurus agrees to provide the Company any additional
      information regarding Laurus that the Company deems necessary or convenient
      to
      ensure compliance with all applicable laws concerning money laundering and
      similar activities. Laurus understands and agrees that if at any time it is
      discovered that any of the foregoing representations are incorrect, or if
      otherwise required by applicable law or regulation related to money laundering
      similar activities, Laurus may undertake appropriate actions to ensure
      compliance with applicable law or regulation, including but not limited to
      segregation and/or redemption of Laurus’ investment in the Parent. Laurus
      further understands that the Parent may release information about Laurus and,
      if
      applicable, any underlying beneficial owners, to proper authorities if the
      Parent, in its sole discretion, determines that it is in the best interests
      of
      the Parent in light of relevant rules and regulations under the laws set forth
      in subsection (ii) above.

    
      
        
        

      

      
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    (i)    
Limitation
      on Acquisition of Common Stock.
      Notwithstanding anything to the contrary contained in this Agreement, any
      Ancillary Agreement, or any document, instrument or agreement entered into
      in
      connection with any other transaction entered into by and between Laurus and
      any
      Company (and/or Subsidiaries or Affiliates of any Company), Laurus shall not
      acquire stock in the Parent
      (including, without limitation, pursuant to a contract to purchase, by
      exercising an option or warrant, by converting any other security or instrument,
      by acquiring or exercising any other right to acquire, shares of stock or other
      security convertible into shares of stock in the Parent, or otherwise, and
      such
      options, warrants, conversion or other rights shall not be exercisable) to
      the
      extent such stock acquisition would cause any interest (including any original
      issue discount) payable by any Company to Laurus not to qualify as portfolio
      interest, within the meaning of Section 881(c)(2) of the Internal Revenue Code
      of 1986, as amended (the “Code”)
      by
      reason of Section 881(c)(3) of the Code, taking into account the constructive
      ownership rules under Section 871(h)(3)(C) of the Code (the “Stock
      Acquisition Limitation”).
      The
      Stock Acquisition Limitation shall automatically become null and void without
      any notice to any Company upon the existence of an Event of Default at a time
      when the average closing price of the Common Stock as reported by Bloomberg,
      L.P. on the Principal Market for the immediately preceding five trading days
      is
      greater than or equal to 150% of the Exercise Price (as defined in the
      Warrant).

     

    (j)    
Lock-Up
      of
      Warrant Shares. Notwithstanding anything herein or in the Ancillary
      Agreements to the contrary, Laurus hereby agrees that it shall not sell any
      Warrant Shares prior to January 27, 2007 (the "Lock-Up" Period"). This provision
      shall not, however, prevent Laurus from exercising the Warrant during the
      Lock-Up Period.

     

    16.    Power
      of Attorney.
      Each
      Company hereby appoints Laurus, or any other Person whom Laurus may designate
      as
      such Company’s attorney, with power to: (i) endorse such Company’s name on any
      checks, notes, acceptances, money orders, drafts or other forms of payment
      or
      security that may come into Laurus’ possession; (ii) sign such Company’s name on
      any invoice or bill of lading relating to any Accounts, drafts against Account
      Debtors, schedules and assignments of Accounts, notices of assignment, financing
      statements and other public records, verifications of Account and notices to
      or
      from Account Debtors; (iii) verify the validity, amount or any other matter
      relating to any Account by mail, telephone, telegraph or otherwise with Account
      Debtors; (iv) do all things necessary to carry out this Agreement, any Ancillary
      Agreement and all related documents; and (v) on or after the occurrence and
      during the continuation of an Event of Default, notify the post office
      authorities to change the address for delivery of such Company’s mail to an
      address designated by Laurus, and to receive, open and dispose of all mail
      addressed to such Company. Each Company hereby ratifies and approves all acts
      of
      the attorney. Neither Laurus, nor the attorney will be liable for any acts
      or
      omissions or for any error of judgment or mistake of fact or law, except for
      gross negligence or willful misconduct. This power, being coupled with an
      interest, is irrevocable so long as Laurus has a security interest and until
      the
      Obligations have been fully satisfied.

     

    17.    Term
      of Agreement.
      Laurus’
agreement to make Loans and extend financial accommodations under and in
      accordance with the terms of this Agreement or any Ancillary Agreement shall
      continue in full force and effect until the expiration of the Term. At Laurus’
election following the occurrence of an Event of Default, Laurus may terminate
      this Agreement. The termination of the Agreement shall not affect any of Laurus’
rights hereunder or any Ancillary Agreement and the provisions hereof and
      thereof shall continue to be fully operative until all transactions entered
      into, rights or interests created and the Obligations have been irrevocably
      disposed of, concluded or liquidated. Notwithstanding the foregoing, Laurus
      shall release its security interests at any time after thirty (30) days notice
      upon irrevocable payment to it of all Obligations if each Company shall have
      (i)
      provided Laurus with an executed release of any and all claims which such
      Company may have or thereafter have under this Agreement and all Ancillary
      Agreements and (ii) paid to Laurus an early payment fee in an amount equal
      to
      (1) five percent (5%) of the Capital Availability Amount if such payment occurs
      prior to the first anniversary of the Closing Date, (2) four percent (4%)
      of the Capital Availability Amount if such payment occurs on or after the first
      anniversary of the Closing Date and prior to the second anniversary of the
      Closing Date and (3) three percent (3%) of the Capital Availability Amount
      if
      such termination occurs thereafter during the Term; such fee being intended
      to
      compensate Laurus for its costs and expenses incurred in initially approving
      this Agreement or extending same. Such early payment fee shall be due and
      payable jointly and severally by the Companies to Laurus upon termination by
      acceleration of this Agreement by Laurus due to the occurrence and continuance
      of an Event of Default.

    
      
        
        

      

      
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    18.    Termination
      of Lien.
      The
      Liens and rights granted to Laurus hereunder and any Ancillary Agreements and
      the financing statements filed in connection herewith or therewith shall
      continue in full force and effect, notwithstanding the termination of this
      Agreement or the fact that any Company’s account may from time to time be
      temporarily in a zero or credit position, until all of the Obligations have
      been
      indefeasibly paid or performed in full after the termination of this Agreement.
      Laurus shall not be required to send termination statements to any Company,
      or
      to file them with any filing office, unless and until this Agreement and the
      Ancillary Agreements shall have been terminated in accordance with their terms
      and all Obligations indefeasibly paid in full in immediately available
      funds.

     

    19.    Events
      of Default.
      The
      occurrence of any of the following shall constitute an “Event
      of Default”:

     

    (a)    failure
      to make payment of any of the Obligations when required hereunder, and, in
      any
      such case, such failure shall continue for a period of three (3) days following
      the date upon which any such payment was due; 

     

    (b)    failure
      by any Company or any of its Subsidiaries to pay any taxes when due unless
      such
      taxes are being contested in good faith
      by
      appropriate proceedings and with respect to which adequate reserves have been
      provided on such Company’s and/or such Subsidiary’s books;

     

    (c)    failure
      to perform under, and/or committing any breach of, in any material respect,
      this
      Agreement or any covenant contained herein, which failure or breach shall
      continue without remedy for a period of fifteen (15) days after the occurrence
      thereof;

     

    (d)    any
      representation, warranty or statement made by any Company or any of its
      Subsidiaries hereunder, in any Ancillary Agreement, any certificate, statement
      or document delivered pursuant to the terms hereof, or in connection with the
      transactions contemplated by this Agreement should prove to be false or
      misleading in any material respect on the date as of which made or deemed made;
      

    
      
        
        

      

      
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    (e)    the
      occurrence of any default (or similar term) in the observance or performance
      of
      any other agreement or condition relating to any indebtedness or contingent
      obligation of any Company or any of its Subsidiaries beyond the period of grace
      (if any), the effect of which default is to cause, or permit the holder or
      holders of such indebtedness or beneficiary or beneficiaries of such contingent
      obligation to cause, such indebtedness to become due prior to its stated
      maturity or such contingent obligation to become payable;

     

    (f)    attachments
      or levies in excess of $100,000 in the aggregate are made upon any Company’s
      assets or a judgment is rendered against any Company’s property involving a
      liability of more than $100,000 which shall not have been vacated, discharged,
      stayed or bonded within thirty (30) days from the entry thereof;

     

    (g)    any
      change in any Company’s or any of its Subsidiary’s condition or affairs
      (financial or otherwise) which in Laurus’ reasonable, good faith opinion, could
      reasonably be expected to have a Material Adverse Effect; 

     

    (h)    any
      Lien
      created hereunder or under any Ancillary Agreement for any reason ceases to
      be
      or is not a valid and perfected Lien having a first priority
      interest;

     

    (i)    
any
      Company or any of its Subsidiaries shall (i) apply for, consent to or
      suffer to exist the appointment of, or the taking of possession by, a receiver,
      custodian, trustee or liquidator of itself or of all or a substantial part
      of
      its property, (ii) make a general assignment for the benefit of creditors,
      (iii) commence a voluntary case under the federal bankruptcy laws (as now or
      hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file
      a
      petition seeking to take advantage of any other law providing for the relief
      of
      debtors, (vi) acquiesce to without challenge within ten (10) days of the filing
      thereof, or failure to have dismissed within thirty (30) days, any petition
      filed against it in any involuntary case under such bankruptcy laws, or (vii)
      take any action for the purpose of effecting any of the foregoing;

     

    (j)    
any
      Company or any of its Subsidiaries shall admit in writing its inability, or
      be
      generally unable, to pay its debts as they become due or cease operations of
      its
      present business;

     

    (k)    any
      Company or any of its Subsidiaries directly or indirectly sells, assigns,
      transfers, conveys, or suffers or permits to occur any sale, assignment,
      transfer or conveyance of any assets of such Company or any interest therein,
      except as permitted herein;

     

    (l)    
any
      “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of
      the Exchange Act, as in effect on the date hereof), other than the Holder,
      is or
      becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under
      the Exchange Act), directly or indirectly, of 35% or more on a fully diluted
      basis of the then outstanding voting equity interest of the Parent (other than
      a
“Person” or “group” that beneficially owns 35% or more of such outstanding
      voting equity interests of the Parent on the date hereof), (ii) the Board of
      Directors of the Parent shall cease to consist of a majority of the Board of
      Directors of the Parent on the date hereof (or directors appointed by a majority
      of the board of directors in effect immediately prior to such
      appointment)
      or (iii)
      the Parent or any of its Subsidiaries merges or consolidates with, or sells
      all
      or substantially all of its assets to, any other person or
      entity;

    
      
        
        

      

      
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    (m)    the
      indictment or threatened indictment of any Company or any of its Subsidiaries
      or
      any executive officer of any Company or any of its Subsidiaries under any
      criminal statute, or commencement or threatened commencement of criminal or
      civil proceeding against any Company or any of its Subsidiaries or any executive
      officer of any Company or any of its Subsidiaries pursuant to which statute
      or
      proceeding penalties or remedies sought or available include forfeiture of
      any
      of the property of any Company or any of its Subsidiaries; 

     

    (n)    an
      Event
      of Default shall occur under and as defined in the Note or in any other
      Ancillary Agreement;

     

    (o)    any
      Company or any of its Subsidiaries shall breach any term or provision of any
      Ancillary Agreement to which it is a party (including, without limitation,
      Section 7(e) of the Registration Rights Agreement), in any material respect
      which breach is not cured within any applicable cure or grace period provided
      in
      respect thereof (if any);

     

    (p)    any
      Company or any of its Subsidiaries attempts to terminate, challenges the
      validity of, or its liability under this Agreement or any Ancillary Agreement,
      or any proceeding shall be brought to challenge the validity, binding effect
      of
      any Ancillary Agreement or any Ancillary Agreement ceases to be a valid, binding
      and enforceable obligation of such Company or any of its Subsidiaries (to the
      extent such Persons are a party thereto);

     

    (q)    an
      SEC
      stop trade order or Principal Market trading suspension of the Common Stock
      shall be in effect for five (5) consecutive days or five (5) days during a
      period of ten (10) consecutive days, excluding in all cases a suspension of
      all
      trading on a Principal Market, provided that the Parent shall not have been
      able
      to cure such trading suspension within thirty (30) days of the notice thereof
      or
      list the Common Stock on another Principal Market within sixty (60) days of
      such
      notice;

     

    (r)    The
      Parent’s failure to deliver Common Stock to Laurus pursuant to and in the form
      required by the Warrant and this Agreement, if such failure to deliver Common
      Stock shall not be cured within two (2) Business Days or any Company is required
      to issue a replacement Note to Laurus and such Company shall fail to deliver
      such replacement Note within seven (7) Business Days

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    20.    Remedies.
      Following the occurrence of an Event of Default, Laurus shall have the right
      to
      demand repayment in full of all Obligations, whether or not otherwise due.
      Until
      all Obligations have been fully and indefeasibly satisfied, Laurus shall retain
      its Lien in all Collateral. Laurus shall have, in addition to all other rights
      provided herein and in each Ancillary Agreement, the rights and remedies of
      a
      secured party under the UCC, and under other applicable law, all other legal
      and
      equitable rights to which Laurus may be entitled, including the right to take
      immediate possession of the Collateral, to require each Company to assemble
      the
      Collateral, at Companies’ joint and several expense, and to make it available to
      Laurus at a place designated by Laurus which is reasonably convenient to both
      parties and to enter any of the premises of any Company or wherever the
      Collateral shall be located, with or without force or process of law, and to
      keep and store the same on said premises until sold (and if said premises be
      the
      property of any Company, such Company agrees not to charge Laurus for storage
      thereof), and the right to apply for the appointment of a receiver for such
      Company’s property. Further, Laurus may, at any time or times after the
      occurrence of an Event of Default, sell and deliver all Collateral held by
      or
      for Laurus at public or private sale for cash, upon credit or otherwise, at
      such
      prices and upon such terms as Laurus, in Laurus’ sole discretion, deems
      advisable or Laurus may otherwise recover upon the Collateral in any
      commercially reasonable manner as Laurus, in its sole discretion, deems
      advisable. The requirement of reasonable notice shall be met if such notice
      is
      mailed postage prepaid to Company Agent at Company Agent’s address as shown in
      Laurus’ records, at least ten (10) days before the time of the event of which
      notice is being given. Laurus may be the purchaser at any sale, if it is public.
      In connection with the exercise of the foregoing remedies, Laurus is granted
      permission to use all of each Company’s Intellectual Property. The proceeds of
      sale shall be applied first to all costs and expenses of sale, including
      attorneys’ fees, and second to the payment (in whatever order Laurus elects) of
      all Obligations. After the indefeasible payment and satisfaction in full of
      all
      of the Obligations, and after the payment by Laurus of any other amount required
      by any provision of law, including Section 9-608(a)(1) of the UCC (but only
      after Laurus has received what Laurus considers reasonable proof of a
      subordinate party’s security interest), the surplus, if any, shall be paid to
      Company Agent (for the benefit of the applicable Companies) or its
      representatives or to whosoever may be lawfully entitled to receive the same,
      or
      as a court of competent jurisdiction may direct. The Companies shall remain
      jointly and severally liable to Laurus for any deficiency. In addition, the
      Companies shall jointly and severally pay Laurus a liquidation fee
      (“Liquidation
      Fee”)
      in the
      amount of five percent (5%) of the actual amount collected in respect of each
      Account outstanding at any time during a Liquidation Period”. For purposes
      hereof, “Liquidation
      Period”
means
      a
      period: (i) beginning on the earliest date of (x) an event referred to in
      Section 19(i) or 19(j), or (y) the cessation of any Company’s business; and (ii)
      ending on the date on which Laurus has actually received all Obligations due
      and
      owing it under this Agreement and the Ancillary Agreements. The Liquidation
      Fee
      shall be paid on the date on which Laurus collects the applicable Account by
      deduction from the proceeds thereof. Each Company and Laurus acknowledge that
      the actual damages that would be incurred by Laurus after the occurrence of
      an
      Event of Default would be difficult to quantify and that such Company and Laurus
      have agreed that the fees and obligations set forth in this Section and in
      this
      Agreement would constitute fair and appropriate liquidated damages in the event
      of any such termination.
      The
      parties hereto each hereby agree that the exercise by any party hereto of
      any right granted to it or the exercise by any party hereto of any remedy
      available to it (including, without limitation, the issuance of a notice of
      redemption, a borrowing request and/or a notice of default), in each
      case, hereunder or under any Ancillary Agreement which has been
      publicly filed with the SEC shall not constitute
      confidential information and no party shall have any duty to the other
      party to maintain such information as confidential.

     

    21.    Waivers.
      To the
      full extent permitted by applicable law, each Company hereby waives (a)
      presentment, demand and protest, and notice of presentment, dishonor, intent
      to
      accelerate, acceleration, protest, default, nonpayment, maturity, release,
      compromise, settlement, extension or renewal of any or all of this Agreement
      and
      the Ancillary Agreements or any other notes, commercial paper, Accounts,
      contracts, Documents, Instruments, Chattel Paper and guaranties at any time
      held
      by Laurus on which such Company may in any way be liable, and hereby ratifies
      and confirms whatever Laurus may do in this regard; (b) all rights to notice
      and
      a hearing prior to Laurus’ taking possession or control of, or to Laurus’
replevy, attachment or levy upon, any Collateral or any bond or security that
      might be required by any court prior to allowing Laurus to exercise any of
      its
      remedies; and (c) the benefit of all valuation, appraisal and exemption laws.
      Each Company acknowledges that it has been advised by counsel of its choices
      and
      decisions with respect to this Agreement, the Ancillary Agreements and the
      transactions evidenced hereby and thereby.

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    22.    Expenses.
      The
      Companies shall jointly and severally pay all of Laurus’ out-of-pocket costs and
      expenses, including reasonable fees and disbursements of in-house or outside
      counsel and appraisers, in connection with the preparation, execution and
      delivery of this Agreement and the Ancillary Agreements, and in connection
      with
      the prosecution or defense of any action, contest, dispute, suit or proceeding
      concerning any matter in any way arising out of, related to or connected with
      this Agreement or any Ancillary Agreement. The Companies shall also jointly
      and
      severally pay all of Laurus’ reasonable fees, charges, out-of-pocket costs and
      expenses, including fees and disbursements of counsel and appraisers, in
      connection with (a) the preparation, execution and delivery of any waiver,
      any
      amendment thereto or consent proposed or executed in connection with the
      transactions contemplated by this Agreement or the Ancillary Agreements, (b)
      Laurus’ obtaining performance of the Obligations under this Agreement and any
      Ancillary Agreements, including, but not limited to, the enforcement or defense
      of Laurus’ security interests, assignments of rights and Liens hereunder as
      valid perfected security interests, (c) any attempt to inspect, verify, protect,
      collect, sell, liquidate or otherwise dispose of any Collateral, (d) any
      appraisals or re-appraisals of any property (real or personal) pledged to Laurus
      by any Company or any of its Subsidiaries as Collateral for, or any other Person
      as security for, the Obligations hereunder and (e) any consultations in
      connection with any of the foregoing. The Companies shall also jointly and
      severally pay Laurus’ customary bank charges for all bank services (including
      wire transfers) performed or caused to be performed by Laurus for any Company
      or
      any of its Subsidiaries at any Company’s or such Subsidiary’s request or in
      connection with any Company’s loan account with Laurus. All such costs and
      expenses together with all filing, recording and search fees, taxes and interest
      payable by the Companies to Laurus shall be payable on demand and shall be
      secured by the Collateral. If any tax by any Governmental Authority is or may
      be
      imposed on or as a result of any transaction between any Company and/or any
      Subsidiary thereof, on the one hand, and Laurus on the other hand, which Laurus
      is or may be required to withhold or pay, the Companies hereby jointly and
      severally indemnifies and holds Laurus harmless in respect of such taxes, and
      the Companies will repay to Laurus the amount of any such taxes which shall
      be
      charged to the Companies’ account; and until the Companies shall furnish Laurus
      with indemnity therefor (or supply Laurus with evidence satisfactory to it
      that
      due provision for the payment thereof has been made), Laurus may hold without
      interest any balance standing to each Company’s credit and Laurus shall retain
      its Liens in any and all Collateral.

     

    23.    Assignment
      By Laurus.
      Laurus
      may assign any or all of the Obligations together with any or all of the
      security therefor to any Person and any such assignee shall succeed to all
      of
      Laurus’ rights with respect thereto; provided that Laurus shall not be permitted
      to effect any such assignment to a competitor of any Company unless an Event
      of
      Default has occurred and is continuing. Upon such assignment, Laurus shall
      be
      released from all responsibility for the Collateral to the extent same is
      assigned to any transferee. Laurus may from time to time sell or otherwise
      grant
      participations in any of the Obligations and the holder of any such
      participation shall, subject to the terms of any agreement between Laurus and
      such holder, be entitled to the same benefits as Laurus with respect to any
      security for the Obligations in which such holder is a participant. Each Company
      agrees that each such holder may exercise any and all rights of banker’s lien,
      set-off and counterclaim with respect to its participation in the Obligations
      as
      fully as though such Company were directly indebted to such holder in the amount
      of such participation.

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    24.    No
      Waiver; Cumulative Remedies.
      Failure
      by Laurus to exercise any right, remedy or option under this Agreement, any
      Ancillary Agreement or any supplement hereto or thereto or any other agreement
      between or among any Company and Laurus or delay by Laurus in exercising the
      same, will not operate as a waiver; no waiver by Laurus will be effective unless
      it is in writing and then only to the extent specifically stated. Laurus’ rights
      and remedies under this Agreement and the Ancillary Agreements will be
      cumulative and not exclusive of any other right or remedy which Laurus may
      have.

     

    25.    Application
      of Payments.
      Each
      Company irrevocably waives the right to direct the application of any and all
      payments at any time or times hereafter received by Laurus from or on such
      Company’s behalf and each Company hereby irrevocably agrees that Laurus shall
      have the continuing exclusive right to apply and reapply any and all payments
      received at any time or times hereafter against the Obligations hereunder in
      such manner as Laurus may deem advisable notwithstanding any entry by Laurus
      upon any of Laurus’ books and records.

     

    26.    Indemnity.
      Each
      Company hereby jointly and severally indemnify and hold Laurus, and its
      respective affiliates, employees, attorneys and agents (each, an “Indemnified
      Person”),
      harmless from and against any and all suits, actions, proceedings, claims,
      damages, losses, liabilities and expenses of any kind or nature whatsoever
      (including attorneys’ fees and disbursements and other costs of investigation or
      defense, including those incurred upon any appeal) which may be instituted
      or
      asserted against or incurred by any such Indemnified Person as the result of
      credit having been extended, suspended or terminated under this Agreement or
      any
      of the Ancillary Agreements or with respect to the execution, delivery,
      enforcement, performance and administration of, or in any other way arising
      out
      of or relating to, this Agreement, the Ancillary Agreements or any other
      documents or transactions contemplated by or referred to herein or therein
      and
      any actions or failures to act with respect to any of the foregoing, except
      to
      the extent that any such indemnified liability is finally determined by a court
      of competent jurisdiction to have resulted solely from such Indemnified Person’s
      gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
      RESPONSIBLE OR LIABLE TO ANY COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR,
      ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS
      DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
      CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
      EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY ANCILLARY
      AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
      THEREUNDER.

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    27.   Revival.
      The
      Companies further agree that to the extent any Company makes a payment or
      payments to Laurus, which payment or payments or any part thereof are
      subsequently invalidated, declared to be fraudulent or preferential, set aside
      and/or required to be repaid to a trustee, receiver or any other party under
      any
      bankruptcy act, state or federal law, common law or equitable cause, then,
      to
      the extent of such payment or repayment, the obligation or part thereof intended
      to be satisfied shall be revived and continued in full force and effect as
      if
      said payment had not been made.

     

    
      	 	
              28.

            	
              Borrowing
                Agency Provisions. 

            

    

     

    (a)   Each
      Company hereby irrevocably designates Company Agent to be its attorney and
      agent
      and in such capacity to borrow, sign and endorse notes, and execute and deliver
      all instruments, documents, writings and further assurances now or hereafter
      required hereunder, on behalf of such Company, and hereby authorizes Laurus
      to
      pay over or credit all loan proceeds hereunder in accordance with the request
      of
      Company Agent.

     

    (b)   The
      handling of this credit facility as a co-borrowing facility with a borrowing
      agent in the manner set forth in this Agreement is solely as an accommodation
      to
      the Companies and at their request. Laurus shall not incur any liability to
      any
      Company as a result thereof. To induce Laurus to do so and in consideration
      thereof, each Company hereby indemnifies Laurus and holds Laurus harmless from
      and against any and all liabilities, expenses, losses, damages and claims of
      damage or injury asserted against Laurus by any Person arising from or incurred
      by reason of the handling of the financing arrangements of the Companies as
      provided herein, reliance by Laurus on any request or instruction from Company
      Agent or any other action taken by Laurus with respect to this Paragraph
      28.

     

    (c)   All
      Obligations shall be joint and several, and the Companies shall make payment
      upon the maturity of the Obligations by acceleration or otherwise, and such
      obligation and liability on the part of the Companies shall in no way be
      affected by any extensions, renewals and forbearance granted by Laurus to any
      Company, failure of Laurus to give any Company notice of borrowing or any other
      notice, any failure of Laurus to pursue to preserve its rights against any
      Company, the release by Laurus of any Collateral now or thereafter acquired
      from
      any Company, and such agreement by any Company to pay upon any notice issued
      pursuant thereto is unconditional and unaffected by prior recourse by Laurus
      to
      any Company or any Collateral for such Company’s Obligations or the lack
      thereof.

     

    (d)   Each
      Company expressly waives any and all rights of subrogation, reimbursement,
      indemnity, exoneration, contribution or any other claim which such Company
      may
      now or hereafter have against the other or other Person directly or contingently
      liable for the Obligations, or against or with respect to any other’s property
      (including, without limitation, any property which is Collateral for the
      Obligations), arising from the existence or performance of this Agreement,
      until
      all Obligations have been indefeasibly paid in full and this Agreement has
      been
      irrevocably terminated.

     

    (e)   Each
      Company represents and warrants to Laurus that (i) Companies have one or more
      common shareholders, directors and officers, (ii) the businesses and corporate
      activities of Companies are closely related to, and substantially benefit,
      the
      business and corporate activities of Companies, (iii) the financial and other
      operations of Companies are performed on a combined basis as if Companies
      constituted a consolidated corporate group, (iv) Companies will receive a
      substantial economic benefit from entering into this Agreement and will receive
      a
      substantial economic benefit from the application of each Loan hereunder, in
      each case, whether or not such amount is used directly by any Company and (v)
      all requests for Loans hereunder by the Company Agent are for the exclusive
      and
      indivisible benefit of the Companies as though, for purposes of this Agreement,
      the Companies constituted a single entity.

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    29.    Notices.
      Any
      notice or request hereunder may be given to any Company, Company Agent or Laurus
      at the respective addresses set forth below or as may hereafter be specified
      in
      a notice designated as a change of address under this Section. Any notice or
      request hereunder shall be given by registered or certified mail, return receipt
      requested, hand delivery, overnight mail or telecopy (confirmed by mail).
      Notices and requests shall be, in the case of those by hand delivery, deemed
      to
      have been given when delivered to any officer of the party to whom it is
      addressed, in the case of those by mail or overnight mail, deemed to have been
      given three (3) Business Days after the date when deposited in the mail or
      with
      the overnight mail carrier, and, in the case of a telecopy, when
      confirmed.

     

    
      	
              Notices
                shall be provided as follows:

            	 
	 	
              If
                to Laurus:

            	
              Laurus
                Master Fund, Ltd.

            
	 	 	
              c/o
                Laurus Capital Management, LLC

            
	 	 	
              825
                Third Avenue, 14th Fl.

            
	 	 	
              New
                York, New
                York 10022

            
	 	 	
              Attention:

            	
              John
                E. Tucker, Esq.

            
	 	 	 	
              Jessica
                L. Atkins, Esq.

            
	 	 	
              Telephone:

            	
              (212)
                541-4434

            
	 	 	
              Telecopier:

            	
              (212)
                541-5800

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
              If
                to any Company, 

            	 	 
	 	
              or
                Company Agent:

            	
              Impart
                Media Group, Inc.

            
	 	 	
              1300
                N. Northlake Way

            
	 	 	
              Seattle,
                WA 98103

            
	 	 	
              Attention:

            	
              Joseph
                Martinez

            
	 	 	
              Telephone:

            	
              (949)
                725-0380

            
	 	 	
              Facsimile:

            	
              (949)
                725-1160

            
	 	 	 	 
	 	
              With
                a copy to:

            	
              Pryor
                Cashman Sherman & Flynn LLP

            
	 	 	
              410
                Park Avenue, 10th
                Floor

            
	 	 	
              New
                York, New York 10022

            
	 	 	
              Attention:

            	
              Eric
                M. Hellige, Esq

            
	 	 	
              Telephone:

            	
              (212)
                326-0846

            
	 	 	
              Facsimile:

            	
              (212)
                326-0806

            

    

     

    or
      such
      other address as may be designated in writing hereafter in accordance with
      this
      Section 29 by such Person.

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    30.    Governing
      Law, Jurisdiction and Waiver of Jury Trial. 

     

    (a)    THIS
      AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
      ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
      CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
      CONFLICTS OF LAW.

     

    (b)    EACH
      COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
      IN
      THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
      TO
      HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND,
      AND LAURUS, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE
      ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
      AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED,
      THAT
      LAURUS AND EACH COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
      HAVE
      TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF
      NEW
      YORK; AND FURTHER PROVIDED,
      THAT
      NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM
      BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
      THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
      OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LAURUS.
      EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
      IN
      ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES
      ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
      IMPROPER VENUE OR FORUM
      NON CONVENIENS.
      EACH
      COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
      PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
      SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
      MAIL
      ADDRESSED TO COMPANY AGENT AT THE ADDRESS SET FORTH IN SECTION 29 AND THAT
      SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF COMPANY AGENT’S
      ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
      POSTAGE PREPAID.

     

    (c)    THE
      PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
      OF
      THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS
      TO
      TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
      WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR ANY
      COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
      RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY
      ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
      THERETO.

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    31.    
Limitation
      of Liability.
      Each
      Company acknowledges and understands that in order to assure repayment of the
      Obligations hereunder Laurus may be required to exercise any and all of Laurus’
rights and remedies hereunder and agrees that, except as limited by applicable
      law, neither Laurus nor any of Laurus’ agents shall be liable for acts taken or
      omissions made in connection herewith or therewith except for actual bad
      faith.

     

    32.    
Entire
      Understanding; Maximum Interest.
      This
      Agreement and the Ancillary Agreements contain the entire understanding among
      each Company and Laurus as to the subject matter hereof and thereof and any
      promises, representations, warranties or guarantees not herein contained shall
      have no force and effect unless in writing, signed by each Company’s and Laurus’
respective officers. Neither this Agreement, the Ancillary Agreements, nor
      any
      portion or provisions thereof may be changed, modified, amended, waived,
      supplemented, discharged, cancelled or terminated orally or by any course of
      dealing, or in any manner other than by an agreement in writing, signed by
      the
      party to be charged.
      Nothing
      contained in this Agreement, any Ancillary Agreement or in any document referred
      to herein or delivered in connection herewith shall be deemed to establish
      or
      require the payment of a rate of interest or other charges in excess of the
      maximum rate permitted by applicable law. In the event that the rate of interest
      or dividends required to be paid or other charges hereunder exceed the maximum
      rate permitted by such law, any payments in excess of such maximum shall be
      credited against amounts owed by the Companies to Laurus and thus refunded
      to
      the Companies.

     

    33.    
Severability.
      Wherever possible each provision of this Agreement or the Ancillary Agreements
      shall be interpreted in such manner as to be effective and valid under
      applicable law, but if any provision of this Agreement or the Ancillary
      Agreements shall be prohibited by or invalid under applicable law such provision
      shall be ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provision or the remaining provisions
      thereof.

     

    34.    
Survival.
      The
      representations, warranties, covenants and agreements made herein shall survive
      any investigation made by Laurus and the closing of the transactions
      contemplated hereby to the extent provided therein. All statements as to factual
      matters contained in any certificate or other instrument delivered by
or
      on
      behalf of the Companies pursuant hereto in connection with the transactions
      contemplated herebly shall be deemed to be representations and warranties by
      the
      Companies hereunder solely as of the date of such certificate or instrument.
      All
      indemnities set forth herein shall survive the execution, delivery and
      termination of this Agreement and the Ancillary Agreements and the making and
      repaying of the Obligations.

     

    35.    
Captions.
      All
      captions are and shall be without substantive meaning or content of any kind
      whatsoever.

     

    36.    
Counterparts;
      Telecopier Signatures.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      constitute an original and all of which taken together shall constitute one
      and
      the same agreement. Any signature delivered by a party via telecopier
      transmission shall be deemed to be any original signature
      hereto.

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    37.    
Construction.
      The
      parties acknowledge that each party and its counsel have reviewed this Agreement
      and that the normal rule of construction to the effect that any ambiguities
      are
      to be resolved against the drafting party shall not be employed in the
      interpretation of this Agreement or any amendments, schedules or exhibits
      thereto.

     

    38.    
Publicity.
      Each
      Company hereby authorizes Laurus to make appropriate announcements of the
      financial arrangement entered into by and among each Company and Laurus,
      including, without limitation, announcements which are commonly known as
      tombstones, in such publications and to such selected parties as Laurus shall
      in
      its sole and absolute discretion deem appropriate, or as required by applicable
      law.

     

    39.    
Joinder.
      It is
      understood and agreed that any Person that desires to become a Company
      hereunder, or is required to execute a counterpart of this Agreement after
      the
      date hereof pursuant to the requirements of this Agreement or any Ancillary
      Agreement, shall become a Company hereunder by (a) executing a Joinder Agreement
      in form and substance satisfactory to Laurus, (b) delivering supplements to
      such
      exhibits and annexes to this Agreement and the Ancillary Agreements as Laurus
      shall reasonably request and (c) taking all actions as specified in this
      Agreement as would have been taken by such Company had it been an original
      party
      to this Agreement, in each case with all documents required above to be
      delivered to Laurus and with all documents and actions required above to be
      taken to the reasonable satisfaction of Laurus.

     

    40.    
Legends.
      The
      Securities shall bear legends as follows;

     

    (a)    
The
      Note
      shall bear substantially the following legend: 

     

    “THIS
      SECURED NON-CONVERTIBLE REVOLVING NOTE HAS NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
      THIS SECURED NON-CONVERTIBLE REVOLVING NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
      PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      AS
      TO THIS SECURED NON-CONVERTIBLE REVOLVING NOTE UNDER SAID ACT AND APPLICABLE
      STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IMPART
      MEDIA GROUP, INC.THAT SUCH REGISTRATION IS NOT REQUIRED.”

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    (b)    Any
      shares of Common Stock issued pursuant to exercise of the Warrants, shall bear
      a
      legend which shall be in substantially the following form until such shares
      are
      covered by an effective registration statement filed with the SEC:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
      THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
      THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
      APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO IMPART MEDIA GROUP, INC. THAT SUCH REGISTRATION IS NOT
      REQUIRED.”

     

    (c)    The
      Warrants shall bear substantially the following legend:

     

    “THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
      STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
      OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
      UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
      LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IMPART MEDIA GROUP,
      INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

     

    [Balance
      of page intentionally left blank; signature page follows.]

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Security Agreement as of the
      date first written above.

     

    

      
        	 	
                IMPART
                  MEDIA GROUP, INC.

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/Joseph
                  Martinez

              	
                 

              
	 	
                Name:
                  Joseph Martinez

              	 
	 	
                Title:
                  Chief Financial Officer

              	 
	 	 	 	 
	 	 	 	 
	 	
                IMPART,
                  INC.

              	 
	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/Joseph
                  Martinez

              	
                 

              
	 	
                Name:
                  Joseph Martinez

              	 
	 	
                Title:
                  Chief Financial Officer

              	 
	 	 	 	 
	 	 	 	 
	 	
                LAURUS
                  MASTER FUND, LTD. 

              	 
	 	 	 	 
	 	
                By:

              	/s/
                David Grin	 
	 	
                Name:

              	David
                Grin	 
	 	
                Title:

              	Director	 

      

    

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    Annex
      A - Definitions

     

    “Account
      Debtor”
means
      any Person who is or may be obligated with respect to, or on account of, an
      Account.

     

    “Accountants”
has
      the
      meaning given to such term in Section 11(a).

     

    “Accounts”
means
      all “accounts”, as such term is defined in the UCC, now owned or hereafter
      acquired by any Person, including: (a) all accounts receivable, other
      receivables, book debts and other forms of obligations (other than forms of
      obligations evidenced by Chattel Paper or Instruments) (including any such
      obligations that may be characterized as an account or contract right under
      the
      UCC); (b) all of such Person’s rights in, to and under all purchase orders or
      receipts for goods or services; (c) all of such Person’s rights to any goods
      represented by any of the foregoing (including unpaid sellers’ rights of
      rescission, replevin, reclamation and stoppage in transit and rights to
      returned, reclaimed or repossessed goods); (d) all rights to payment due to
      such
      Person for Goods or other property sold, leased, licensed, assigned or otherwise
      disposed of, for a policy of insurance issued or to be issued, for a secondary
      obligation incurred or to be incurred, for energy provided or to be provided,
      for the use or hire of a vessel under a charter or other contract, arising
      out
      of the use of a credit card or charge card, or for services rendered or to
      be
      rendered by such Person or in connection with any other transaction (whether
      or
      not yet earned by performance on the part of such Person); and (e) all
      collateral security of any kind given by any Account Debtor or any other Person
      with respect to any of the foregoing. 

     

    “Accounts
      Availability”
means
      up to ninety percent (90%) of the net face amount of Eligible
      Accounts.

     

    “Affiliate”
means,
      with respect to any Person, (a) any other Person (other than a Subsidiary)
      which, directly or indirectly, is in control of, is controlled by, or is under
      common control with such Person or (b) any other Person who is a director or
      officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii)
      of
      any Person described in clause (a) above. For the purposes of this definition,
      control of a Person shall mean the power (direct or indirect) to direct or
      cause
      the direction of the management and policies of such Person whether by contract
      or otherwise.

     

    “Ancillary
      Agreements”
means
      the Note, the Warrants, the Registration Rights Agreements, each Security
      Document and all other agreements, instruments, documents, mortgages, pledges,
      powers of attorney, consents, assignments, contracts, notices, security
      agreements, trust agreements and guarantees whether heretofore, concurrently,
      or
      hereafter executed by or on behalf of any Company, any of its Subsidiaries
      or
      any other Person or delivered to Laurus, relating to this Agreement or to the
      transactions contemplated by this Agreement or otherwise relating to the
      relationship between or among any Company and Laurus, as each of the same may
      be
      amended, supplemented, restated or otherwise modified from time to
      time.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Balance
      Sheet Date”
has
      the
      meaning given such term in Section 12(f)(ii).

     

    “Books
      and Records”
means
      all books, records, board minutes, contracts, licenses, insurance policies,
      environmental audits, business plans, files, computer files, computer discs
      and
      other data and software storage and media devices, accounting books and records,
      financial statements (actual and pro forma), filings with Governmental
      Authorities and any and all records and instruments relating to the Collateral
      or otherwise necessary or helpful in the collection thereof or the realization
      thereupon.

     

    “Business
      Day”
means
      a
      day on which Laurus is open for business and that is not a Saturday, a Sunday
      or
      other day on which banks are required or permitted to be closed in the State
      of
      New York.

     

    “Capital
      Availability Amount”
means
      $6,000,000.

     

    “Charter”
has
      the
      meaning given such term in Section 12(c)(iv).

     

    “Chattel
      Paper”
means
      all “chattel paper,” as such term is defined in the UCC, including electronic
      chattel paper, now owned or hereafter acquired by any Person.

     

    “Closing
      Date”
means
      the date on which any Company shall first receive proceeds of the initial Loans
      or the date hereof, if no Loan is made under the facility on the date
      hereof.

     

    “Code”
has
      the
      meaning given such term in Section 15(i).

     

    “Collateral”
means
      all of each Company’s property and assets, whether real or personal, tangible or
      intangible, and whether now owned or hereafter acquired, or in which it now
      has
      or at any time in the future may acquire any right, title or interests including
      all of the following property in which it now has or at any time in the future
      may acquire any right, title or interest:

     

    
      	 	
              (a)

            	
              all
                Inventory;

            

    

     

    
      	 	
              (b)

            	
              all
                Equipment;

            

    

     

    
      	 	
              (c)

            	
              all
                Fixtures;

            

    

     

    
      	 	
              (d)

            	
              all
                Goods;

            

    

     

    
      	 	
              (e)

            	
              all
                General Intangibles;

            

    

     

    
      	 	
              (f)

            	
              all
                Accounts;

            

    

     

    
      	 	
              (g)

            	
              all
                Deposit Accounts, other bank accounts and all funds on deposit
                therein;

            

    

     

    
      	 	
              (h)

            	
              all
                Investment Property;

            

    

     

    
      	 	
              (i)

            	
              all
                Stock;

            

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (j)

            	
              all
                Chattel Paper;

            

    

     

    
      	 	
              (k)

            	
              all
                Letter-of-Credit Rights;

            

    

     

    
      	 	
              (l)

            	
              all
                Instruments;

            

    

     

    
      	 	
              (m)

            	
              all
                commercial tort claims set forth on Schedule
                1(A);

            

    

     

    
      	 	
              (n)

            	
              all
                Books and Records;

            

    

     

    
      	 	
              (o)

            	
              all
                Intellectual Property;

            

    

     

    (p)   all
      Supporting Obligations including letters of credit and guarantees issued in
      support of Accounts, Chattel Paper, General Intangibles and Investment
      Property;

     

    (q)   (i)
      all
      money, cash and cash equivalents and (ii) all cash held as cash collateral
      to
      the extent not otherwise constituting Collateral, all other cash or property
      at
      any time on deposit with or held by Laurus for the account of any Company
      (whether for safekeeping, custody, pledge, transmission or otherwise);
      and

     

    (r)   all
      products and Proceeds of all or any of the foregoing, tort claims and all claims
      and other rights to payment including (i) insurance claims against third parties
      for loss of, damage to, or destruction of, the foregoing Collateral and (ii)
      payments due or to become due under leases, rentals and hires of any or all
      of
      the foregoing and Proceeds payable under, or unearned premiums with respect
      to
      policies of insurance in whatever form.

     

    “Common
      Stock”
means
      the shares of stock representing the Parent’s common equity
      interests.

     

    “Company
      Agent”
means
      the Parent.

     

    “Contract
      Rate”
has
      the
      meaning given such term in the Note. 

     

    “Default”
means
      any act or event which, with the giving of notice or passage of time or both,
      would constitute an Event of Default.

     

    “Deposit
      Accounts”
means
      all “deposit accounts” as such term is defined in the UCC, now or hereafter held
      in the name of any Person, including, without limitation, the
      Lockboxes.

     

    “Disclosure
      Controls”
has
      the
      meaning given such term in Section 12(f)(iv).

     

    “Documents”
means
      all “documents”, as such term is defined in the UCC, now owned or hereafter
      acquired by any Person, wherever located, including all bills of lading, dock
      warrants, dock receipts, warehouse receipts, and other documents of title,
      whether negotiable or non-negotiable.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Eligible
      Accounts”
means
      each Account of each Company which conforms to the following criteria: (a)
      shipment of the merchandise or the rendition of services has been completed;
      (b)
      no return, rejection or repossession of the merchandise has occurred;
      (c) merchandise or services shall not have been rejected or disputed by the
      Account Debtor and there shall not have been asserted any offset, defense or
      counterclaim; (d) continues to be in full conformity with the representations
      and warranties made by such Company to Laurus with respect thereto; (e) Laurus
      is, and continues to be, satisfied with the credit standing of the Account
      Debtor in relation to the amount of credit extended; (f) there are no facts
      existing or threatened which are likely to result in any adverse change in
      an
      Account Debtor’s financial condition; (g) is documented by an invoice in a form
      approved by Laurus and shall not be unpaid more than ninety (90) days from
      invoice date; (h) not more than twenty-five percent (25%) of the unpaid amount
      of invoices due from such Account Debtor remains unpaid more than ninety (90)
      days from invoice date; (i) is not evidenced by chattel paper or an instrument
      of any kind with respect to or in payment of the Account unless such instrument
      is duly endorsed to and in possession of Laurus or represents a check in payment
      of an Account; (j) the Account Debtor is located in the United States;
provided,
      however,
      Laurus
      may, from time to time, in the exercise of its sole discretion and based upon
      satisfaction of certain conditions to be determined at such time by Laurus,
      deem
      certain Accounts as Eligible Accounts notwithstanding that such Account is
      due
      from an Account Debtor located outside of the United States; (k) Laurus has
      a
      first priority perfected Lien in such Account and such Account is not subject
      to
      any Lien other than Permitted Liens; (l) does not arise out of transactions
      with any employee, officer, director, stockholder or Affiliate of any Company;
      (m) is payable to such Company; (n) does not arise out of a bill and hold sale
      prior to shipment and does not arise out of a sale to any Person to which such
      Company is indebted; (o) is net of any returns, discounts, claims, credits
      and
      allowances; (p) if the Account arises out of contracts between such Company,
      on
      the one hand, and the United States, on the other hand, any state, or any
      department, agency or instrumentality of any of them, such Company has so
      notified Laurus, in writing, prior to the creation of such Account, and there
      has been compliance with any governmental notice or approval requirements,
      including compliance with the Federal Assignment of Claims Act; (q) is a good
      and valid account representing an undisputed bona fide indebtedness incurred
      by
      the Account Debtor therein named, for a fixed sum as set forth in the invoice
      relating thereto with respect to an unconditional sale and delivery upon the
      stated terms of goods sold by such Company or work, labor and/or services
      rendered by such Company; (r) does not arise out of progress billings prior
      to
      completion of the order; (s) the total unpaid Accounts from such Account Debtor
      does not exceed twenty-five percent (25%) of all Eligible Accounts; (t) such
      Company’s right to payment is absolute and not contingent upon the fulfillment
      of any condition whatsoever; (u) such Company is able to bring suit and enforce
      its remedies against the Account Debtor through judicial process; (v) does
      not
      represent interest payments, late or finance charges owing to such Company,
      and
      (w) is otherwise satisfactory to Laurus as determined by Laurus in the exercise
      of its sole discretion. In the event any Company requests that Laurus include
      within Eligible Accounts certain Accounts of one or more of such Company’s
      acquisition targets, Laurus shall at the time of such request consider such
      inclusion, but any such inclusion shall be at the sole option of Laurus and
      shall at all times be subject to the execution and delivery to Laurus of all
      such documentation (including, without limitation, guaranty and security
      documentation) as Laurus may require in its sole discretion.

     

    “Eligible
      Subsidiary”
means
      each Subsidiary of the Parent set forth on Exhibit
      A hereto,
      as the same may be updated from time to time with Laurus’ written
      consent.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Equipment”
means
      all “equipment” as such term is defined in the UCC, now owned or hereafter
      acquired by any Person, wherever located, including any and all machinery,
      apparatus, equipment, fittings, furniture, Fixtures, motor vehicles and other
      tangible personal property (other than Inventory) of every kind and description
      that may be now or hereafter used in such Person’s operations or that are owned
      by such Person or in which such Person may have an interest, and all parts,
      accessories and accessions thereto and substitute ons and replacements
      therefor.

     

    “ERISA”
has
      the
      meaning given such term in Section 12(bb).

     

    “Event
      of Default”
means
      the occurrence of any of the events set forth in Section 19. 

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “Exchange
      Act Filings”
means
      the Parent’s filings under the Exchange Act made prior to the date of this
      Agreement.

     

    “Financial
      Reporting Controls”
has
      the
      meaning given such term in Section 12(f)(v).

     

    “Fixtures”
means
      all “fixtures” as such term is defined in the UCC, now owned or hereafter
      acquired by any Person.

     

    “Formula
      Amount”
has
      the
      meaning given such term in Section 2(a)(i).

     

    “GAAP”
means
      generally accepted accounting principles, practices and procedures in effect
      from time to time in the United States of America.

     

    “General
      Intangibles”
means
      all “general intangibles” as such term is defined in the UCC, now owned or
      hereafter acquired by any Person including all right, title and interest that
      such Person may now or hereafter have in or under any contract, all Payment
      Intangibles, customer lists, Licenses, Intellectual Property, interests in
      partnerships, joint ventures and other business associations, permits,
      proprietary or confidential information, inventions (whether or not patented
      or
      patentable), technical information, procedures, designs, knowledge, know-how,
      Software, data bases, data, skill, expertise, experience, processes, models,
      drawings, materials, Books and Records, Goodwill (including the Goodwill
      associated with any Intellectual Property), all rights and claims in or under
      insurance policies (including insurance for fire, damage, loss, and casualty,
      whether covering personal property, real property, tangible rights or intangible
      rights, all liability, life, key-person, and business interruption insurance,
      and all unearned premiums), uncertificated securities, choses in action, deposit
      accounts, rights to receive tax refunds and other payments, rights to received
      dividends, distributions, cash, Instruments and other property in respect of
      or
      in exchange for pledged Stock and Investment Property, and rights of
      indemnification.

     

    “Goods”
means
      all “goods”, as such term is defined in the UCC, now owned or hereafter acquired
      by any Person, wherever located, including embedded software to the extent
      included in “goods” as defined in the UCC, manufactured homes, fixtures,
      standing timber that is cut and removed for sale and unborn young of
      animals.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Goodwill”
means
      all goodwill, trade secrets, proprietary or confidential information, technical
      information, procedures, formulae, quality control standards, designs, operating
      and training manuals, customer lists, and distribution agreements now owned
      or
      hereafter acquired by any Person.

     

    “Governmental
      Authority”
means
      any nation or government, any state or other political subdivision thereof,
      and
      any agency, department or other entity exercising executive, legislative,
      judicial, regulatory or administrative functions of or pertaining to government.
      

     

    “Instruments”
means
      all “instruments”, as such term is defined in the UCC, now owned or hereafter
      acquired by any Person, wherever located, including all certificated securities
      and all promissory notes and other evidences of indebtedness, other than
      instruments that constitute, or are a part of a group of writings that
      constitute, Chattel Paper.

     

    “Intellectual
      Property”
means
      any and all patents, trademarks, service marks, trade names, copyrights, trade
      secrets, Licenses, information and other proprietary rights and
      processes.

     

    “Inventory”
means
      all “inventory”, as such term is defined in the UCC, now owned or hereafter
      acquired by any Person, wherever located, including all inventory, merchandise,
      goods and other personal property that are held by or on behalf of such Person
      for sale or lease or are furnished or are to be furnished under a contract
      of
      service or that constitute raw materials, work in process, finished goods,
      returned goods, or materials or supplies of any kind, nature or description
      used
      or consumed or to be used or consumed in such Person’s business or in the
      processing, production, packaging, promotion, delivery or shipping of the same,
      including all supplies and embedded software.

     

    “Investment
      Property”
means
      all “investment property”, as such term is defined in the UCC, now owned or
      hereafter acquired by any Person, wherever located.

     

    “Letter-of-Credit
      Rights”
means
      “letter-of-credit rights” as such term is defined in the UCC, now owned or
      hereafter acquired by any Person, including rights to payment or performance
      under a letter of credit, whether or not such Person, as beneficiary, has
      demanded or is entitled to demand payment or performance.

     

    “License”
means
      any rights under any written agreement now or hereafter acquired by any Person
      to use any trademark, trademark registration, copyright, copyright registration
      or invention for which a patent is in existence or other license of rights
      or
      interests now held or hereafter acquired by any Person.

     

    “Lien”
means
      any mortgage, security deed, deed of trust, pledge, hypothecation, assignment,
      security interest, lien (whether statutory or otherwise), charge, claim or
      encumbrance, or preference, priority or other security agreement or preferential
      arrangement held or asserted in respect of any asset of any kind or nature
      whatsoever including any conditional sale or other title retention agreement,
      any lease having substantially the same economic effect as any of the foregoing,
      and the filing of, or agreement to give, any financing statement under the
      UCC
      or comparable law of any jurisdiction.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Loans”
has
      the
      meaning given such term in Section 2(a)(i) and shall include all other
      extensions of credit hereunder and under any Ancillary Agreement.

     

    “Lockboxes”
has
      the
      meaning given such term in Section 8(a).

     

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (a) the business, assets, liabilities, condition
      (financial or otherwise), properties, operations or prospects of any Company
      or
      any of its Subsidiaries (taken individually and as a whole), (b) any Company’s
      or any of its Subsidiary’s ability to pay or perform the Obligations in
      accordance with the terms hereof or any Ancillary Agreement, (c) the value
      of
      the Collateral, the Liens on the Collateral or the priority of any such Lien
      or
      (d) the practical realization of the benefits of Laurus’ rights and remedies
      under this Agreement and the Ancillary Agreements.

     

    “NASD”
has
      the
      meaning given such term in Section 13(b).

     

    “Note”
means
      that certain Secured Non-Convertible Revolving Note dated as of the Closing
      Date
      made by the Companies in favor of Laurus in the original face amount of
      $6,000,000, as same may be amended, supplemented, restated and/or otherwise
      modified from time to time.

     

    “Obligations”
means
      all Loans, all advances, debts, liabilities, obligations, covenants and duties
      owing by each Company and each of its Subsidiaries to Laurus (or any corporation
      that directly or indirectly controls or is controlled by or is under common
      control with Laurus) of every kind and description (whether or not evidenced
      by
      any note or other instrument and whether or not for the payment of money or
      the
      performance or non-performance of any act), direct or indirect, absolute or
      contingent, due or to become due, contractual or tortious, liquidated or
      unliquidated, whether existing by operation of law or otherwise now existing
      or
      hereafter arising including any debt, liability or obligation owing from any
      Company and/or each of its Subsidiaries to others which Laurus may have obtained
      by assignment or otherwise and further including all interest (including
      interest accruing at the then applicable rate provided in this Agreement after
      the maturity of the Loans and interest accruing at the then applicable rate
      provided in this Agreement after the filing of any petition in bankruptcy,
      or
      the commencement of any insolvency, reorganization or like proceeding, whether
      or not a claim for post-filing or post-petition interest is allowed or allowable
      in such proceeding), charges or any other payments each Company and each of
      its
      Subsidiaries is required to make by law or otherwise arising under or as a
      result of this Agreement, the Ancillary Agreements or otherwise, together with
      all reasonable expenses and reasonable attorneys’ fees chargeable to the
      Companies’ or any of their Subsidiaries’ accounts or incurred by Laurus in
      connection therewith.

     

    “Payment
      Intangibles”
means
      all “payment intangibles” as such term is defined in the UCC, now owned or
      hereafter acquired by any Person, including, a General Intangible under which
      the Account Debtor’s principal obligation is a monetary obligation.

     

    “Permitted
      Liens”
means
      (a) Liens of carriers, warehousemen, artisans, bailees, mechanics and
      materialmen incurred in the ordinary course of business securing sums not
      overdue; (b) Liens incurred in the ordinary course of business in connection
      with worker’s compensation, unemployment insurance or other forms of
      governmental insurance or benefits, relating to employees, securing sums (i)
      not
      overdue or (ii) being diligently contested in good faith provided that adequate
      reserves with respect thereto are maintained on the books of the Companies
      and
      their Subsidiaries, as applicable, in conformity with GAAP; (c) Liens in
      favor of Laurus; (d) Liens for taxes (i) not yet due or (ii) being diligently
      contested in good faith by appropriate proceedings, provided that adequate
      reserves with respect thereto are maintained on the books of the Companies
      and
      their Subsidiaries, as applicable, in conformity with GAAP; and which have
      no
      effect on the priority of Liens in favor of Laurus or the value of the assets
      in
      which Laurus has a Lien; (e) Purchase Money Liens securing Purchase Money
      Indebtedness to the extent permitted in this Agreement and (f) Liens specified
      on Schedule
      2
      hereto.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    “Person”
means
      any individual, sole proprietorship, partnership, limited liability partnership,
      joint venture, trust, unincorporated organization, association, corporation,
      limited liability company, institution, public benefit corporation, entity
      or
      government (whether federal, state, county, city, municipal or otherwise,
      including any instrumentality, division, agency, body or department thereof),
      and shall include such Person’s successors and assigns.

     

    “Principal
      Market”
means
      the NASD Over The Counter Bulletin Board, NASDAQ Capital Market, NASDAQ National
      Market System, American Stock Exchange or New York Stock Exchange (whichever
      of
      the foregoing is at the time the principal trading exchange or market for the
      Common Stock).

     

    “Proceeds”
means
      “proceeds”, as such term is defined in the UCC and, in any event, shall include:
      (a) any and all proceeds of any insurance, indemnity, warranty or guaranty
      payable to any Company or any other Person from time to time with respect to
      any
      Collateral; (b) any and all payments (in any form whatsoever) made or due and
      payable to any Company from time to time in connection with any requisition,
      confiscation, condemnation, seizure or forfeiture of any Collateral by any
      governmental body, governmental authority, bureau or agency (or any person
      acting under color of governmental authority); (c) any claim of any Company
      against third parties (i) for past, present or future infringement of any
      Intellectual Property or (ii) for past, present or future infringement or
      dilution of any trademark or trademark license or for injury to the goodwill
      associated with any trademark, trademark registration or trademark licensed
      under any trademark License; (d) any recoveries by any Company against third
      parties with respect to any litigation or dispute concerning any Collateral,
      including claims arising out of the loss or nonconformity of, interference
      with
      the use of, defects in, or infringement of rights in, or damage to, Collateral;
      (e) all amounts collected on, or distributed on account of, other Collateral,
      including dividends, interest, distributions and Instruments with respect to
      Investment Property and pledged Stock; and (f) any and all other amounts, rights
      to payment or other property acquired upon the sale, lease, license, exchange
      or
      other disposition of Collateral and all rights arising out of
      Collateral.

     

    “Purchase
      Money Indebtedness”
means
      (a) any indebtedness incurred for the payment of all or any part of the purchase
      price of any fixed asset, including indebtedness under capitalized leases,
      (b)
      any indebtedness incurred for the sole purpose of financing or refinancing
      all
      or any part of the purchase price of any fixed asset, and (c) any renewals,
      extensions or refinancings thereof (but not any increases in the principal
      amounts thereof outstanding at that time).

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Purchase
      Money Lien”
means
      any Lien upon any fixed assets that secures the Purchase Money Indebtedness
      related thereto but only if such Lien shall at all times be confined solely
      to
      the asset the purchase price of which was financed or refinanced through the
      incurrence of the Purchase Money Indebtedness secured by such Lien and only
      if
      such Lien secures only such Purchase Money Indebtedness.

     

    “Registration
      Rights Agreements”
means
      that certain Registration Rights Agreement dated as of the Closing Date by
      and
      between the Parent and Laurus and each other registration rights agreement
      by
      and between the Parent and Laurus, as each of the same may be amended, modified
      and supplemented from time to time.

     

    “SEC”
means
      the Securities and Exchange Commission.

     

    “SEC
      Reports”
has
      the
      meaning given such term in Section 12(u).

     

    “Securities”
means
      the Note and the Warrants and the shares of Common Stock which may be issued
      pursuant to exercise of such Warrants.

     

    “Securities
      Act”
has
      the
      meaning given such term in Section 12(r).

     

    “Security
      Documents”
means
      all security agreements, mortgages, cash collateral deposit letters, pledges
      and
      other agreements which are executed by any Company or any of its Subsidiaries
      in
      favor of Laurus.

     

    “Software”
means
      all “software” as such term is defined in the UCC, now owned or hereafter
      acquired by any Person, including all computer programs and all supporting
      information provided in connection with a transaction related to any
      program.

     

    “Stock”
means
      all certificated and uncertificated shares, options, warrants, membership
      interests, general or limited partnership interests, participation or other
      equivalents (regardless of how designated) of or in a corporation, partnership,
      limited liability company or equivalent entity whether voting or nonvoting,
      including common stock, preferred stock, or any other “equity security” (as such
      term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
      by the SEC under the Securities Exchange Act of 1934).

     

    “Subsidiary”
means,
      with respect to any Person, (i) any other Person whose shares of stock or other
      ownership interests having ordinary voting power (other than stock or other
      ownership interests having such power only by reason of the happening of a
      contingency) to elect a majority of the directors or other governing body of
      such other Person, are owned, directly or indirectly, by such Person or (ii)
      any
      other Person in which such Person owns, directly or indirectly, more than 50%
      of
      the equity interests at such time.

     

    “Supporting
      Obligations”
means
      all “supporting obligations” as such term is defined in the
      UCC.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    “Term”
means
      the Closing Date through the close of business on the day immediately preceding
      the third anniversary of the Closing Date, subject to acceleration at the option
      of Laurus upon the occurrence of an Event of Default hereunder or other
      termination hereunder.

     

    “UCC”
means
      the Uniform Commercial Code as the same may, from time to time be in effect
      in
      the State of New York; provided, that in the event that, by reason of mandatory
      provisions of law, any or all of the attachment, perfection or priority of,
      or
      remedies with respect to, Laurus’ Lien on any Collateral is governed by the
      Uniform Commercial Code as in effect in a jurisdiction other than the State
      of
      New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in
      such other jurisdiction for purposes of the provisions of this Agreement
      relating to such attachment, perfection, priority or remedies and for purposes
      of definitions related to such provisions; provided further, that to the extent
      that UCC is used to define any term herein or in any Ancillary Agreement and
      such term is defined differently in different Articles or Divisions of the
      UCC,
      the definition of such term contained in Article or Division 9 shall
      govern.

     

    “Warrant
      Shares”
has
      the
      meaning given such term in Section 12(a).

     

    “Warrants”
means
      that certain Common Stock Purchase Warrant dated as of the Closing Date made
      by
      the Parent in favor of Laurus and each other warrant made by the Parent in
      favor
      Laurus, as each of the same may be amended, restated, modified and/or
      supplemented from time to time.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A

     

    Eligible
      Subsidiaries

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      B

     

    Borrowing
      Base Certificate

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