Document:

ex10-1.htm

    

    

    

    

    
      
        

      

    

    

    

    MERGER
      AGREEMENT

    

    

    between

    

    

    FIRST
      BANCORP

    

    and

    

    GREAT
      PEE DEE BANCORP, INC.

    

    

    

    

    

    

    

    

    

    Dated
      as
      of July 12, 2007

    

    

    

    
      
        

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

    

    Page

    

     

    ARTICLE
      I

     

    DEFINED
      TERMS

     

     

    ARTICLE
      II

     

    THE
      MERGER; CONVERSION AND  EXCHANGE OF COMPANY
      SHARES

     

    
      
        	
                ARTICLE
                  I  

              
	 
	
                DEFINED
                  TERMS 

              
	 
	
                ARTICLE
                  II  

              
	 
	
                THE
                  MERGER; CONVERSION AND  EXCHANGE OF COMPANY
                  SHARES 

              
	 
	
                2.1

              	
                The
                  Merger.

              	
                1

              
	
                2.2

              	
                Company
                  Shares.

              	
                2

              
	
                2.3

              	
                Merger
                  Consideration.

              	
                2

              
	
                2.4

              	
                Closing
                  Payment

              	
                3

              
	
                2.5

              	
                Exchange
                  Procedures.

              	
                3

              
	
                2.6

              	
                Dissenting
                  Shares

              	
                4

              
	
                2.7

              	
                Company
                  Stock Options.

              	
                4

              
	 
	
                ARTICLE
                  III  

              
	 
	
                THE
                  CLOSING  

              
	 
	
                3.1

              	
                Closing

              	
                5

              
	
                3.2

              	
                Deliveries
                  by the Company

              	
                5

              
	
                3.3

              	
                Deliveries
                  by the Buyer

              	
                5

              
	 
	
                ARTICLE
                  IV  

              
	 
	
                REPRESENTATIONS
                  AND WARRANTIES OF THE COMPANY 

              
	 
	
                4.1

              	
                Organization,
                  Standing and Power.

              	
                6

              
	
                4.2

              	
                Authority;
                  No Conflicts.

              	
                6

              
	
                4.3

              	
                Capital
                  Stock; Subsidiaries.

              	
                7

              
	
                4.4

              	
                SEC
                  Reports; Company Financial Statements.

              	
                7

              
	
                4.5

              	
                Absence
                  of Undisclosed Liabilities

              	
                8

              
	
                4.6

              	
                Absence
                  of Certain Changes or Events

              	
                8

              
	
                4.7

              	
                Tax
                  Matters.

              	
                8

              
	
                4.8

              	
                Assets

              	
                9

              
	
                4.9

              	
                Real
                  Property.

              	
                10

              
	
                4.1

              	
                Securities
                  Portfolio and Investments

              	
                10

              
	
                4.11

              	
                Environmental
                  Matters.

              	
                11

              
	
                4.12

              	
                Compliance
                  with Laws

              	
                11

              
	
                4.13

              	
                Labor
                  Relations

              	
                12

              
	
                4.14

              	
                Employee
                  Benefit Plans.

              	
                12

              
	
                4.15

              	
                Material
                  Contracts.

              	
                13

              
	
                4.16

              	
                Legal
                  Proceedings.

              	
                14

              
	
                4.17

              	
                Proprietary
                  Rights.

              	
                14

              

      

    

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

    
      
        	
                4.18

              	
                Reports

              	
                15

              
	
                4.19

              	
                Registration
                  Statement; Proxy Statement

              	
                15

              
	
                4.2

              	
                Accounting,
                  Tax, and Regulatory Matters

              	
                15

              
	
                4.21

              	
                State
                  Takeover Laws

              	
                15

              
	
                4.22

              	
                Charter
                  Provisions

              	
                16

              
	
                4.23

              	
                Records

              	
                16

              
	
                4.24

              	
                Derivatives

              	
                16

              
	
                4.25

              	
                Certain
                  Regulated Businesses

              	
                16

              
	
                4.26

              	
                Commissions

              	
                16

              
	 
	
                ARTICLE
                  V  

              
	 
	
                REPRESENTATIONS
                  AND WARRANTIES OF THE BUYER 

              
	 
	
                5.1

              	
                Organization.

              	
                16

              
	
                5.2

              	
                Authority;
                  No Conflicts.

              	
                17

              
	
                5.3

              	
                Buyer’s
                  Stock; Subsidiaries.

              	
                17

              
	
                5.4

              	
                SEC
                  Filings; Buyer Financial Statements.

              	
                18

              
	
                5.5

              	
                Absence
                  of Undisclosed Liabilities

              	
                18

              
	
                5.6

              	
                Absence
                  of Certain Changes or Events

              	
                18

              
	
                5.7

              	
                Tax
                  Matters.

              	
                19

              
	
                5.8

              	
                Assets

              	
                20

              
	
                5.9

              	
                Real
                  Property

              	
                20

              
	
                5.1

              	
                Securities
                  Portfolio and Investments

              	
                21

              
	
                5.11

              	
                Environmental
                  Matters.

              	
                21

              
	
                5.12

              	
                Compliance
                  with Laws

              	
                22

              
	
                5.13

              	
                Labor
                  Relations

              	
                22

              
	
                5.14

              	
                Employee
                  Benefit Plans.

              	
                22

              
	
                5.15

              	
                Material
                  Contracts.

              	
                24

              
	
                5.16

              	
                Legal
                  Proceedings

              	
                24

              
	
                5.17

              	
                Proprietary
                  Rights

              	
                25

              
	
                5.18

              	
                Reports

              	
                25

              
	
                5.19

              	
                Registration
                  Statement; Proxy Statement

              	
                25

              
	
                5.2

              	
                Accounting,
                  Tax, and Regulatory Matters

              	
                26

              
	
                5.21

              	
                Derivatives

              	
                26

              
	
                5.22

              	
                Certain
                  Regulated Businesses

              	
                26

              
	
                5.23

              	
                Commissions

              	
                26

              
	 
	
                ARTICLE
                  VI  

              
	 
	
                COVENANTS  

              
	 
	
                6.1

              	
                Covenants
                  of the Company.

              	
                27

              
	
                6.2

              	
                Covenants
                  of the Buyer.

              	
                31

              
	
                6.3

              	
                Covenants
                  of All Parties to the Agreement.

              	
                35

              
	 
	
                ARTICLE
                  VII  

              
	 
	
                DISCLOSURE
                  OF ADDITIONAL INFORMATION 

              
	 
	
                7.1

              	
                Access
                  to Information

              	
                37

              

      

    

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      
        	
                7.2

              	
                Access
                  to Premises

              	
                37

              
	
                7.3

              	
                Environmental
                  Survey

              	
                37

              
	
                7.4

              	
                Confidentiality

              	
                38

              
	
                7.5

              	
                Publicity

              	
                38

              
	 
	
                ARTICLE
                  VIII  

              
	 
	
                CONDITIONS
                  TO CLOSING 

              
	 
	
                8.1

              	
                Mutual
                  Conditions

              	
                38

              
	
                8.2

              	
                Conditions
                  to the Obligations of the Company

              	
                39

              
	
                8.3

              	
                Conditions
                  to the Obligations of the Buyer

              	
                41

              
	 	 	 
	
                ARTICLE
                  IX  

              
	 
	
                TERMINATION 

              
	 
	
                9.1

              	
                Termination

              	
                42

              
	
                9.2

              	
                Procedure
                  and Effect of Termination.

              	
                44

              
	
                9.3

              	
                Termination
                  Fee; Expenses.

              	
                44

              
	 	 	 
	
                ARTICLE
                  X  

              
	 
	
                MISCELLANEOUS
                  PROVISIONS 

              
	 
	
                10.1

              	
                Expenses

              	
                45

              
	
                10.2

              	
                Survival
                  of Representations

              	
                45

              
	
                10.3

              	
                Amendment
                  and Modification

              	
                45

              
	
                10.4

              	
                Waiver
                  of Compliance; Consents

              	
                45

              
	
                10.5

              	
                Notices

              	
                45

              
	
                10.6

              	
                Assignment;
                  Third Party Beneficiaries

              	
                46

              
	
                10.7

              	
                Separable
                  Provisions

              	
                46

              
	
                10.8

              	
                Governing
                  Law

              	
                46

              
	
                10.9

              	
                Counterparts

              	
                47

              
	
                10.1

              	
                Interpretation

              	
                47

              
	
                10.11

              	
                Entire
                  Agreement

              	
                47

              

      

    

     

     

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    
      
        	
                EXHIBITS

              	 
	 	 
	
                Exhibit
                  A

              	
                Form
                  of Plan of Merger

              
	
                Exhibit
                  B

              	
                Form
                  of Employment Agreement

              
	
                Exhibit
                  C

              	
                Form
                  of Affiliate Agreement

              
	 	 
	
                COMPANY’S
                  DISCLOSURE SCHEDULE

              
	 	 
	
                Section
                  4.2(b)

              	
                No
                  Conflicts

              
	
                Section
                  4.3

              	
                Subsidiaries

              
	
                Section
                  4.4

              	
                SEC
                  Reports, Company Financial Statements

              
	
                Section
                  4.10

              	
                Investments

              
	
                Section
                  4.12

              	
                Compliance
                  with Laws

              
	
                Section
                  4.14

              	
                Employee
                  Benefit Plans

              
	
                Section
                  4.15

              	
                Material
                  Contracts

              
	
                Section
                  6.1

              	
                Ordinary
                  Course

              
	
                Section
                  6.2(c)

              	
                Severance
                  Payments

              
	 	 
	 	 
	 	 
	
                BUYER’S
                  DISCLOSURE SCHEDULE

              
	 	 
	
                Section
                  5.3

              	
                Subsidiaries

              
	
                Section
                  5.5

              	
                Absence
                  of Undisclosed Liabilities

              
	
                Section
                  5.14

              	
                Employee
                  Benefit Plans

              
	
                Section
                  5.15

              	
                Material
                  Contracts

              

      

    

     

     

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

    MERGER
      AGREEMENT

     

    THIS
      MERGER AGREEMENT, dated as of the 12th
      day of July, 2007,
      is by and between:

     

    First
      Bancorp, a North Carolina corporation registered as a bank holding
      company with the Board of Governors of the Federal Reserve System under the
      Bank
      Holding Company Act of 1956, as amended (the “Buyer”);
      and

     

    Great
      Pee Dee Bancorp, Inc., a Delaware corporation
      registered as a savings and loan holding company with the Office of Thrift
      Supervision under the Home Owners’ Loan Act, as amended (the
“Company”).

     

    Background
      Statement

     

    The
      Buyer
      and the Company desire to effect a merger pursuant to which the Company will
      merge with and into the Buyer, with the Buyer being the surviving corporation
      (the “Merger”).  In consideration of the Merger, the
      shareholders of the Company will receive shares of common stock of the
      Buyer.  It is intended that the Merger qualify as a reorganization
      under Section 368(a) of the Internal Revenue Code.

     

    Statement
      of Agreement

     

    In
      consideration of the premises and the mutual representations, warranties,
      covenants, agreements and conditions contained herein, the parties hereto agree
      as follows:

     

    ARTICLE
      I

     

    DEFINED
      TERMS

     

    Capitalized
      terms used herein shall have the meanings set forth in Appendix
      1.

     

    ARTICLE
      II

     

    THE
      MERGER; CONVERSION AND

    EXCHANGE
      OF COMPANY SHARES

    

     

    2.1           The
      Merger.

     

    (a)           The
      Merger.  On the terms and subject to the conditions of this
      Agreement, the Plan of Merger, and the Laws of North Carolina and Delaware,
      the
      Company shall merge into the Buyer, the separate existence of the Company shall
      cease, and the Buyer shall be the surviving corporation (the “Surviving
      Company”).

     

    (b)           Governing
      Documents.  The articles of incorporation of the Buyer in effect
      at the Effective Time (as defined below) shall be the articles of incorporation
      of the Surviving Company until further amended in accordance with applicable
      law.  The bylaws of the Buyer in effect at the Effective Time shall be
      the bylaws of the Surviving Company until further amended in accordance with
      applicable law.

     

    (c)           Directors
      and Officers.  From and after the Effective Time, (i) subject to
Section 6.2(b)(i), until successors or additional directors are
      duly elected or appointed in accordance with

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    applicable
      law, the directors of the Buyer at the Effective Time shall be the directors
      of
      the Surviving Company, and (ii) the officers of the Buyer at the Effective
      Time
      shall be the officers of the Surviving Company.

     

    (d)           Approval.  The
      parties hereto shall take and cause to be taken all action necessary for the
      corporate approval and authorization of (i) this Agreement and the other
      documents contemplated hereby (including without limitation the Plan of Merger)
      and (ii) the Merger and the other transactions contemplated hereby.

     

    (e)           Effective
      Time.  The Merger shall become effective on the date and at the
      time of filing of the articles of merger in respect of the Merger, in the form
      required by and executed in accordance with the Laws of North Carolina and
      Delaware, or at such other time specified therein.  The date and time
      when the Merger shall become effective is herein referred to as the
“Effective Time.”

     

    (f)           Filing
      of Articles of Merger.  At the Closing, the Buyer and the Company
      shall cause the articles of merger (containing the Plan of Merger) in respect
      of
      the Merger to be executed and filed with the Secretary of State of North
      Carolina and the Secretary of the State of Delaware, as required by the Laws
      of
      North Carolina and Delaware, and shall take any and all other actions and do
      any
      and all other things to cause the Merger to become effective as contemplated
      hereby.

     

    2.2           Company
      Shares.

     

    (a)           Each
      share of the Company’s common stock (the “Company Shares”), par
      value $0.01 per share, issued and outstanding, except for Company Shares held
      by
      the Buyer and its Affiliates immediately prior to the Effective Time (other
      than
      shares held in a fiduciary capacity or as collateral for outstanding loans
      made
      by the Buyer or its subsidiaries), shall, by virtue of the Merger and without
      any action on the part of the holders thereof, be canceled, retired and
      converted at the Effective Time into the right to receive the Merger
      Consideration (as defined below) in accordance with this Article
      II.  Each holder of certificates representing any such
      Company Shares shall thereafter cease to have any rights with respect to such
      shares, except for the right to receive the Merger Consideration.

     

    (b)           Notwithstanding
      anything contained in this
Section 2.2 to the contrary, any
      Company Shares held in the treasury of the Company immediately prior to the
      Effective Time shall be canceled without any conversion thereof, and no payment
      shall be made with respect thereto.

     

    (c)           From
      and after the Effective Time, there shall be no transfers on the stock transfer
      books of the Company or the Surviving Company of the Company Shares that were
      outstanding immediately prior to the Effective Time.  If, after the
      Effective Time, certificates representing Company Shares are presented to the
      Surviving Company, they shall be canceled, and exchanged and converted into
      the
      Merger Consideration as provided for herein.

     

    2.3           Merger
      Consideration.

     

    (a)           Subject
      to Sections 2.4, 2.5 and
9.1(h), at the Effective Time,
      the holders of Company Shares
      outstanding at the Effective Time, other than the Buyer and its Affiliates
      in
      the cases set forth above, shall be entitled to receive, and the Buyer shall
      issue and deliver, a number of shares of the Buyer’s Stock representing 1.15
      shares of the Buyer’s Stock for each Company Share (the “Per Share Stock
      Consideration”).  The foregoing consideration, collectively
      and in the aggregate, shall be referred to herein as the “Merger
      Consideration.”

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (b)           In
      the event the Buyer changes the number of shares of the Buyer’s Stock issued and
      outstanding prior to the Effective Time as a result of a stock split, stock
      dividend or similar recapitalization with respect to such stock (each such
      event, a “Stock Adjustment”) and the record date therefor (in
      the case of a stock dividend) or the effective date thereof (in the case of
      a
      stock split or similar recapitalization for which a record date is not
      established) is prior to such Effective Time, the Exchange Ratio shall be
      appropriately and proportionately adjusted to reflect such change.

     

    (c)           No
      fractional shares of the Buyer’s Stock shall be issued or delivered in
      connection with the Merger.  In lieu of any such fractional share,
      each holder of Company Shares who would otherwise have been entitled to a
      fraction of a share of the Buyer’s Stock shall be entitled to receive cash
      (without interest) in an amount equal to such fraction multiplied by the Market
      Value of one share of the Buyer’s Stock on the trading day immediately prior to
      the Effective Time.

     

    2.4           Closing
      Payment.  No
      later than the Effective Time, the Buyer shall deposit with an exchange and
      transfer agent selected by the Buyer and reasonably acceptable to the Company
      (the “Exchange Agent”), for the benefit of the holders of
      Company Shares, a certificate or certificates representing the aggregate number
      of shares of the Buyer’s Stock to be issued and paid as the Merger Consideration
      in accordance with the provisions of this Agreement.  The Exchange
      Agent shall deliver the Merger Consideration in accordance with the procedures
      set forth in Section 2.5 below.

     

    2.5           Exchange
      Procedures.

     

    (a)           As
      promptly as practicable after the Effective Time, but in no event later than
      10
      Business Days after the Effective Time, the Buyer shall mail, or cause the
      Exchange Agent to mail, to each holder of record of a certificate or
      certificates that immediately prior to the Effective Time represented
      outstanding Company Shares (i) a letter of transmittal (which shall be in
      customary form and shall specify that delivery shall be effected, and risk
      of
      loss and title to such certificates shall pass, only upon proper delivery of
      such certificates to the Exchange Agent) and (ii) instructions for use in
      effecting the surrender of such certificates in exchange for payment of the
      Merger Consideration (such materials, collectively, the “Transmittal
      Letter”).  The Transmittal Letter shall be in such form as
      the Buyer and the Company agree.

     

    (b)           After
      the Effective Time, the Buyer shall cause the Exchange Agent to deliver the
      Merger Consideration in accordance with the provisions of this Agreement to
      each
      holder of Company Shares who has properly delivered a Transmittal Letter and
      surrendered its certificate or certificates representing its shares of Company
      Stock to the Exchange Agent.  The Buyer shall not be obligated to
      deliver any of the Merger Consideration until such holder properly delivers
      a
      completed Transmittal Letter and surrenders the certificate(s) representing
      such
      holder’s Company Shares (or executes such documentation as appropriate in
      connection with lost or otherwise misplaced certificates).  Any other
      provision of this Agreement notwithstanding, neither the Buyer nor the Exchange
      Agent shall be liable to any holder of Company Shares for any amounts paid
      or
      properly delivered in good faith to a public official pursuant to any applicable
      abandoned property Law.

     

    (c)           To
      the extent permitted by applicable Law, after the Effective Time, former
      shareholders of record of the Company shall be entitled to vote at any meeting
      of the Buyer’s shareholders the number of whole shares of the Buyer’s Stock into
      which their respective Company Shares are converted pursuant to the Merger,
      regardless of whether such holders have exchanged their certificates
      representing such Company Shares for certificates representing the Buyer’s Stock
      in accordance with the provisions of this Agreement.  Whenever a
      dividend or other distribution is declared by the Buyer on the Buyer’s Stock,
      the record date for which is at or after the

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     Effective
      Time, the declaration shall include dividends or other distributions on all
      shares of the Buyer’s Stock issuable pursuant to this Agreement, but beginning
      at such Effective Time, no dividend or other distribution payable to the holders
      of record of the Buyer’s Stock as of any time subsequent to such Effective Time
      shall be delivered to the holder of any certificate representing any of the
      Company Shares issued and outstanding at such Effective Time until such holder
      surrenders such certificate for exchange as provided in this Section
      2.5.  However, upon surrender of such certificate(s), both
      the certificate(s) representing the shares of the Buyer’s Stock to which such
      holder is entitled and any such undelivered dividends (without any interest)
      shall be delivered and paid with respect to each share represented by such
      certificates.

     

    2.6           Dissenting
      Shares.  Notwithstanding
      any other provision of this Agreement to the contrary, Company Shares that
      are
      outstanding immediately prior to the Effective Time and that are held by
      shareholders who shall have not voted in favor of the Merger and who properly
      shall have demanded payment for such shares in accordance with Delaware Law
      (collectively, the “Dissenting Shares”) shall not be converted
      into or represent the right to receive the Merger Consideration.  Such
      shareholders instead shall be entitled to receive payment of the fair value
      of
      such shares held by them, plus accrued interest, in accordance with the
      provisions of Delaware Law, except that all Dissenting Shares held by
      shareholders who shall have failed to perfect or otherwise lost their rights
      to
      appraisal of such shares under Delaware Law shall thereupon be deemed to have
      been converted into and to have become exchangeable, as of the Effective Time,
      for the right to receive, without any interest thereon, the Merger Consideration
      upon surrender in the manner provided in Section 2.5 of
      the certificate or certificates that, immediately prior to the Effective Time,
      evidenced such shares.  The Company shall give the Buyer (i) prompt
      notice of any written demands for payment of fair value of any Company Shares,
      attempted withdrawals of any such demands or any other instruments served
      pursuant to Delaware Law and received by the Company relating to shareholders’
rights to demand payment of fair value of Company Shares, and (ii) the
      opportunity to participate in all negotiations and proceedings with respect
      to
      demands under Delaware Law consistent with the obligations of the Company
      thereunder.  The Company shall not, except with the prior written
      consent of the Buyer, (x) make any payment with respect to such demand, (y)
      offer to settle or settle any demand for appraisal or (z) waive any failure
      to
      timely deliver a written demand for appraisal or timely take any other action
      to
      perfect appraisal rights in accordance with Delaware Law.

     

    2.7           Company
      Stock Options.

     

    (a)           At
      the Effective Time, each right to purchase Company Shares pursuant to stock
      options (“Company Options”) granted by the Company under the
      Company Option Plan that are outstanding at the Effective Time of the Merger
      shall be converted into and become rights with respect to the Buyer’s Stock, and
      the Buyer shall assume each Company Option, in accordance with the terms of
      the
      Company Option Plan and the stock option agreement by which such Company Option
      is evidenced, except that from and after such Effective
      Time:  (i) the Buyer and its compensation committee shall be
      substituted for the Company and the compensation committee of its board of
      directors (including if applicable, the entire Board of Directors of the
      Company) administering the Company Option Plan; (ii) the Company Options
      assumed by the Buyer may be exercised solely for shares of the Buyer’s Stock;
      (iii) the number of shares of the Buyer’s Stock subject to such converted
      Company Options shall be equal to the number of Company Shares subject to such
      Company Options immediately prior to the Effective Time multiplied by the
      Exchange Ratio, rounded to the next highest share; and (iv) the per-share
      exercise price under each such converted Company Option shall be adjusted by
      dividing the exercise price of the Company Option immediately prior to the
      Effective Time by the Exchange Ratio, rounded down to the nearest
      cent.

     

    (b)           In
      addition, notwithstanding clauses (ii), (iii) and (iv) of
Section 2.7(a), each assumed Company Option that is an
“incentive stock option” shall be adjusted as required by Section 424 of
      the Internal Revenue Code, and the regulations promulgated thereunder, so as
      not
      to constitute a modification, extension or renewal of the option, within the
      meaning of Section 424(h) of the Internal Revenue Code.

    

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

     

    (c)           As
      soon as practicable after the Effective Time, the Buyer shall deliver to the
      participants in the Company Option Plan an appropriate notice setting forth
      such
      participant’s rights pursuant thereto, and the grants pursuant to such Company
      Option Plan shall continue in effect on substantially the same terms and
      conditions (subject to the adjustments required by the above subsection
      (a) after giving effect to the Merger), and the Buyer shall comply with the
      terms of the Company Option Plan to ensure, to the extent required by, and
      subject to the provisions of, the Company Option Plan, that the Company Options
      that qualified as incentive stock options prior to the Effective Time continue
      to qualify as incentive stock options after such Effective Time.  At
      or prior to the Effective Time, and at all times thereafter, the Buyer shall
      have reserved a sufficient number of shares of the Buyer’s Stock for issuance
      upon exercise of the Company Options assumed by it in accordance with this
      Section 2.7.  The Buyer agrees to file as promptly as
      practicable, and in no event later than 45 days, after the Effective Time,
      a
      registration statement on Form S-8 covering the shares of the Buyer’s Stock
      issuable pursuant to the Company Options.

     

    ARTICLE
      III

     

    THE
      CLOSING

     

    3.1           Closing.  The
      Closing of the Merger shall take place at the offices of Robinson,
      Bradshaw & Hinson, P.A. in Charlotte, North Carolina as soon as
      reasonably practical after all conditions to Closing have been met, or on such
      other date or at such other location as the Buyer and the Company may mutually
      agree (such date, the “Closing Date”).  At the
      Closing, the parties will execute, deliver and file all documents necessary
      to
      effect the transactions contemplated herein.

     

    3.2           Deliveries
      by the Company.  At
      or by the Closing, the Company shall have executed and delivered or caused
      to be
      executed and delivered the following documents:

     

    (a)           the
      agreements, opinions, certificates, instruments and other documents contemplated
      in Section 8.3;

     

    (b)           articles
      of merger (containing the Plan of Merger) giving effect to the Merger;
      and

     

    (c)           all
      other documents, certificates and instruments required hereunder to be delivered
      to the Buyer, or as may reasonably be requested by the Buyer at or prior to
      the
      Closing.

     

    3.3           Deliveries
      by the Buyer.  At
      or by the Closing, the Buyer shall have executed and delivered or caused to
      be
      executed and delivered the following documents:

     

    (a)           the
      agreements, opinions, certificates, instruments and other documents contemplated
      in Section 8.2;

     

    (b)           articles
      of merger (containing the Plan of Merger) giving effect to the
      Merger;

     

    (c)           the
      Employment Agreement; and

     

    (d)           all
      other documents, certificates and instruments required hereunder to be delivered
      to the Company, or as may reasonably be requested by the Company at or prior
      to
      the Closing.

     

     

    
      
        
        

      

      
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    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    Except
      as
      set forth on the Company’s Disclosure Schedule, the Company represents and
      warrants to the Buyer that each of the statements contained in this
Article IV are correct and complete as of the date of this
      Agreement and will be correct and complete as of the Closing Date.

     

    4.1           Organization,
      Standing and Power.

     

    (a)           The
      Company is a savings and loan holding company registered with the Office of
      Thrift Supervision.  The Company Bank is a federal savings association
      organized under the laws of the United States of America and is an “insured
      institution” as defined in the Federal Deposit Insurance Act and applicable
      regulations thereunder, and subject to dollar limits under such Act, all
      deposits in the Company Bank are fully insured by the FDIC to the extent
      permitted by Law.

     

    (b)           Each
      of the Company and its subsidiaries is either a federal savings association
      or a
      corporation, duly organized, validly existing and in good standing under the
      Laws of the jurisdiction of its incorporation or organization.  Each
      of the Company and its subsidiaries has the corporate or other applicable power
      and authority to carry on, in all Material respects, its businesses as now
      conducted and to own, lease and operate its Assets.  Each of the
      Company and its subsidiaries is duly qualified or licensed to transact business
      as a foreign corporation in good standing in the States of the United States
      and
      foreign jurisdictions where the character of its Assets or the nature or conduct
      of its business requires it to be so qualified or licensed.

     

    4.2           Authority;
      No Conflicts.

     

    (a)           Subject
      to required regulatory and shareholder approvals, the Company has the corporate
      power and authority necessary to execute, deliver and perform its obligations
      under this Agreement and to consummate the transactions contemplated
      hereby.  The execution, delivery and performance of the Company’s
      obligations under this Agreement and the other documents contemplated hereby,
      and the consummation of the transactions contemplated herein, including the
      Merger, have been duly and validly authorized by all necessary corporate action
      (and by Closing, all such shareholder action) in respect thereof on the part
      of
      the Company.  This Agreement represents a legal, valid and binding
      obligation of the Company, enforceable against the Company in accordance with
      its terms (except in all cases as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
      affecting the enforcement of creditors’ rights generally and except that the
      availability of specific
      performance, injunctive relief and other equitable remedies is subject to the
      discretion of the court before which any proceeding may be
      brought).

     

    (b)           Except
      as set forth on Section 4.2(b) of the Company Disclosure
      Schedule, neither the execution and delivery of this Agreement by the Company,
      nor the consummation by the Company of the transactions contemplated hereby,
      nor
      compliance by the Company with any of the provisions hereof, will
      (i) conflict with or result in a breach of any provision of the Company’s
      certificate of incorporation or bylaws or any other similar governing document,
      or (ii) constitute or result in a Default under, or require any Consent
      pursuant to, or result in the creation of any Lien on any Asset of the Company
      or any of its subsidiaries under, any Contract or Permit of the Company or
      any
      of its subsidiaries, except as could not reasonably be expected to have a
      Material Adverse Effect on the Company, or (iii) violate any Law or Order
      applicable to the Company or any of its subsidiaries or any of their
      Assets.

     

     

    
      
        
        

      

      
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    (c)           Other
      than in connection or compliance with the provisions of the Securities Laws
      and
      banking Regulatory Authorities, no notice to, filing with, or Consent of, any
      Governmental Authority is necessary for the consummation by the Company of
      the
      Merger and the other transactions contemplated in this Agreement.

     

    4.3           Capital
      Stock; Subsidiaries.

     

    (a)           The
      authorized capital stock of the Company consists solely of (i) 3,600,000 shares
      of common stock, par value $0.01 per share, of which 1,789,981 shares are issued
      and outstanding as of the date of this Agreement and (ii) 400,000 shares of
      preferred stock, par value $0.01 per share, of which no shares are issued and
      outstanding as of the date of this Agreement.  Except for such shares,
      there are no shares of capital stock or other equity securities of the Company
      outstanding.  The authorized capital stock of the Company Bank
      consists of 20,000,000 shares of common stock, $1.00 par value per share, of
      which 100 shares are issued and outstanding as of the date of this Agreement
      and
      are owned and held by the Company, and except for such shares, there are no
      shares of capital stock or other equity securities of the Company Bank
      outstanding.  Section 4.3 of the Company’s
      Disclosure Schedule lists all of the Company’s direct and indirect subsidiaries
      other than the Company Bank as of the date of this Agreement.  The
      Company or one of its subsidiaries owns all of the issued and outstanding shares
      of capital stock of each such subsidiary.

     

    (b)           All
      of the issued and outstanding shares of capital stock of the Company and its
      subsidiaries are duly and validly issued and outstanding and are fully paid
      and
      nonassessable.  None of the outstanding shares of capital stock of the
      Company or any of its subsidiaries has been issued in violation of any
      preemptive rights of the current or past shareholders of such
      Persons.  Except as set forth on Section 4.3 of
      the Company’s Disclosure Schedule, no equity securities of any subsidiary of the
      Company are or may become required to be issued (other than to the Company
      or
      any of its subsidiaries) by reason of any Rights, and there are no Contracts
      by
      which any subsidiary of the Company is bound to issue (other than to the Company
      or subsidiary of the Company) additional shares of its capital stock or Rights
      or by which the Company or any of its subsidiaries is or may be bound to
      transfer any shares of the capital stock of any subsidiary of the Company (other
      than to the Company or any of its subsidiaries).  There are no equity
      securities reserved for any of the foregoing purposes, and there are no
      Contracts relating to the rights of the Company or any of its subsidiaries
      to
      vote or to dispose of any shares of the capital stock of any subsidiary of
      the
      Company.

     

    4.4           SEC
      Reports; Company Financial Statements.

     

    (a)           The
      Company has filed and made available to the Buyer all forms, reports, and
      documents required to be filed by the Company with the SEC since December 31,
      2003 (collectively, the “Company
      SEC Reports”).  Except as set forth on Section 4.4
of the Company Disclosure Schedule, the Company
      SEC Reports (i) at the
      time filed, complied in all Material respects with the applicable requirements
      of the Securities Laws, as the case may be, and (ii) did not at the time they
      were filed (or if amended or superseded by a filing prior to the date of this
      Agreement, then on the date of such filing) contain any untrue statement of
      a
      Material fact or omit to state a Material fact required to be stated in such
      Company SEC Reports or necessary in order to make the statements in such Company
      SEC Reports, in light of the circumstances under which they were made, not
      misleading.  None of the Company’s subsidiaries is required to file
      any forms, reports, or other documents with the SEC.

     

    (b)           Each
      of the Company Financial Statements (including, in each case, any related notes)
      contained in the Company SEC Reports, including any Company SEC Reports filed
      after the date of this Agreement until the Effective Time, complied or will
      comply as to form in all Material respects with the applicable published rules
      and regulations of the SEC with respect thereto, was prepared or will be

     

    
      
        
        

      

      
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    prepared
      in accordance with GAAP applied on a consistent basis throughout the periods
      involved (except as may be indicated in the notes to such financial statements,
      or, in the case of unaudited statements, as permitted by Form 10-QSB of the
      SEC), and fairly presented or will fairly present the consolidated financial
      position of the Company and its subsidiaries as at the respective dates and
      the
      consolidated results of its operations and cash flows for the periods indicated,
      except that the unaudited interim financial statements were or are subject
      to
      normal and recurring year-end adjustments that were not or are not expected
      to
      be Material in amount or effect (except as may be indicated in such financial
      statements or notes thereto).

     

    4.5           Absence
      of Undisclosed Liabilities.  Neither
      the Company nor any of its subsidiaries has any Liabilities that could
      reasonably be expected to have a Material Adverse Effect on the Company, except
      Liabilities that are accrued or reserved against in the consolidated balance
      sheets of the Company as of June 30, 2006 included in the Company Financial
      Statements or reflected in the notes thereto and except for Liabilities incurred
      in the ordinary course of business subsequent to June 30,
      2006.  Neither the Company nor any of its subsidiaries has incurred or
      paid any Liability since June 30, 2006, except for (a) such Liabilities incurred
      or paid in the ordinary course of business consistent with past business
      practice and (b) Liabilities that could not reasonably be expected to have
      a
      Material Adverse Effect on the Company.  No facts or circumstances
      exist that could reasonably be expected to serve as the basis for any other
      Liabilities of the Company or any of its subsidiaries, except as could not
      reasonably be expected to have a Material Adverse Effect on the
      Company.

     

    4.6           Absence
      of Certain Changes or Events.  Since
      June 30, 2006, (i) there have been no events, changes, or occurrences that
      have
      had, or could reasonably be expected to have, a Material Adverse Effect on
      the
      Company, and (ii) each of the Company and its subsidiaries has conducted in
      all
      Material respects its respective businesses in the ordinary and usual course
      (excluding the incurrence of expenses in connection with this Agreement and
      the
      transactions contemplated hereby).

     

    4.7           Tax
      Matters.

     

    (a)           All
      Tax Returns required to be filed by or on behalf of any of the Company and
      its
      subsidiaries have been timely filed, or requests for extensions have been timely
      filed, granted, and have not expired for periods ended on or before June 30,
      2006, and, to the Knowledge of the Company, all Tax Returns filed are complete
      and accurate in all Material respects.  All Tax Returns for periods
      ending on or before the date of the most recent fiscal year end immediately
      preceding the Effective Time will be timely filed
      or
      requests for extensions will be timely filed.  All Taxes shown on
      filed Tax Returns have been paid.  There is no audit examination,
      deficiency, or refund Litigation with respect to any Taxes that could reasonably
      be expected to have a Material Adverse Effect on the Company, except to the
      extent reserved against in the Company Financial Statements dated prior to
      the
      date of this Agreement.  All Taxes and other Liabilities due with
      respect to completed and settled examinations or concluded Litigation have
      been
      paid.

     

    (b)           None
      of the Company or its subsidiaries has executed an extension or waiver of any
      statute of limitations on the assessment or collection of any Tax due (excluding
      such statutes that relate to years currently under examination by the Internal
      Revenue Service or other applicable taxing authorities) that is currently in
      effect.

     

    (c)           Adequate
      provision for any Material Taxes due or to become due for any of the Company
      or
      its subsidiaries for the period or periods through and including the date of
      the
      respective Company Financial Statements has been made and is reflected on such
      Company Financial Statements.

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (d)           Each
      of the Company and its subsidiaries is in compliance with, and its records
      contain all information and documents (including properly completed IRS Forms
      W-9) necessary to comply with, all applicable information reporting and Tax
      withholding requirements under federal, state, and local Tax Laws, and such
      records identify with specificity all accounts subject to backup withholding
      under Section 3406 of the Internal Revenue Code, except for any such instances
      of noncompliance and such omissions as could not reasonably be expected to
      have
      a Material Adverse Effect on the Company.

     

    (e)           None
      of the Company and its subsidiaries has made any payments, is obligated to
      make
      any payments, or is a party to any contract, agreement, or other arrangement
      that could obligate it to make any payments that would be disallowed as a
      deduction under Section 280G or 162(m) of the Internal Revenue
      Code.

     

    (f)           There
      are no Material Liens with respect to Taxes upon any of the Assets of the
      Company and its subsidiaries.

     

    (g)           There
      has not been an ownership change, as defined in Internal Revenue Code Section
      382(g), of the Company and its subsidiaries that occurred during any Taxable
      Period in which any of the Company and its subsidiaries has incurred a net
      operating loss that carries over to another Taxable Period ending after June
      30,
      2006.

     

    (h)           After
      the date of this Agreement, no Material election with respect to Taxes will
      be
      made without the prior consent of the Buyer, which consent will not be
      unreasonably withheld.

     

    (i)           Neither
      the Company nor any of its subsidiaries has or has had a permanent establishment
      in any foreign country, as defined in any applicable tax treaty or convention
      between the United States and such foreign country.

     

    4.8           Assets.  Each
      of the Company and its subsidiaries have good and marketable title, free and
      clear of all Liens, to all of their respective Assets, except for Liens to
      secure public deposits in the ordinary course of business consistent with past
      practice.  Except as could not reasonably be expected to have a
      Material Adverse Effect on the Company, all tangible properties used in the
      businesses of the Company and its subsidiaries are in good condition, reasonable
      wear and tear excepted, and are usable in the ordinary course of business
      consistent with each of their past practices.  Except as could not
      reasonably be expected
      to have a Material Adverse Effect on the Company, all Assets held under leases
      or subleases by any of the Company and its subsidiaries are held under valid
      Contracts enforceable in accordance with their respective terms (except as
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, or other Laws affecting the enforcement of
      creditors’ rights generally and except that the availability of specific
      performance, injunctive relief and other equitable remedies is subject to the
      discretion of the court before which any proceedings may be brought), and each
      such Contract is in full force and effect.  Each of the Company and
      its subsidiaries currently maintain insurance in amounts, scope, and coverage
      reasonably necessary for their operations.  None of the Company or its
      subsidiaries has received notice from any insurance carrier that (i) such
      insurance will be canceled or that coverage thereunder will be reduced or
      eliminated, or (ii) premium costs with respect to such policies of insurance
      will be increased in any Material respect.  The Assets of the Company
      and its subsidiaries include all Assets required to operate in all Material
      respects their businesses taken as a whole as presently conducted.

     

    4.9           Real
      Property.

     

     

    
      
        
        

      

      
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    (a)           The
      Company has valid, good and marketable fee simple title to all Real Property
      owned, leased or operated in whole or in part by the Company (the
“Company Real Property”), free and clear of all Liens other
      than Permitted Real Property Encumbrances.

     

    (b)           The
      Company Real Property, and the improvements, buildings and structures thereon
      (the “Company Improvements”), (i) constitute all of the
      Real Property used or operated by the Company and (ii) may continue to be
      used for the operation of its business as currently operated by the Company
      after the Closing.  The current and anticipated use of the Company
      Real Property and the Company Improvements is not a pre-existing, nonconforming
      use, and no notice of the violation of any Law or legal requirement has been
      received by the Company.

     

    (c)           There
      are no pending, or, to the knowledge of the Company, threatened, or contemplated
      condemnation, expropriation or other proceedings (nor is there any basis for
      any
      such action) affecting the Company Real Property, or any part thereof, or of
      any
      assessments made or threatened with respect to the Company Real Property or
      any
      part thereof, or of any sales or other disposition of the Company Real Property,
      or any part thereof, in lieu of condemnation.

     

    (d)           The
      Company does not own or hold, and is not obligated under or a party to, any
      option, right of first refusal or other contractual right to purchase, acquire,
      sell or dispose of the Company Real Property, or any portion thereof or interest
      therein.

     

    (e)           To
      the Knowledge of the Company, no Company Improvement encroaches upon any other
      property, and there are no encroachments by other buildings or improvements
      onto
      the Company Real Property.

     

    4.10           Securities
      Portfolio and Investments.  All
      securities owned by the Company or any of its subsidiaries (whether owned of
      record or beneficially) are held free and clear of all Liens that would impair
      the ability of the owner thereof to dispose freely of any such security and/or
      otherwise to realize the benefits of ownership thereof at any time, except
      for
      those Liens to secure public deposits in the ordinary course of business
      consistent with past practice and Liens that could not reasonably be expected
      to
      have a Material Adverse Effect on the Company.  There are no voting
      trusts or other agreements or undertakings to which the Company or any of its
      subsidiaries is a party with respect to the voting of any such
      securities.  Except for fluctuations in the market values of United
      States Treasury and agency or municipal securities and except as set forth
      on
Section
      4.10 of the Company Disclosure Schedule, since June 30, 2006, there has
      been no significant deterioration or Material adverse change in the quality,
      or
      any Material decrease in the value, of the securities portfolio of the Company
      and its subsidiaries, taken as a whole.

     

    4.11           Environmental
      Matters.

     

    (a)           To
      the Knowledge of the Company, the Participation Facilities and Loan Collateral
      of the Company and it subsidiaries are, and have been, in compliance with all
      Environmental Laws, except those violations that could not reasonably be
      expected to have a Material Adverse Effect on the Company.

     

    (b)           To
      the Knowledge of the Company, there is no Litigation pending or threatened
      before any court, governmental agency, or authority, or other forum in which
      any
      of the Company and its subsidiaries or any of its Participation Facilities
      has
      been or, with respect to threatened Litigation, may reasonably be expected
      to be
      named as a defendant (i) for alleged noncompliance (including by any
      predecessor) with any Environmental Law or (ii) relating to the release into
      the
      environment of any Hazardous Material, whether or not occurring at, on, under,
      or involving a site owned, leased, or operated by the Company or any of its
      subsidiaries or any of its Participation Facilities, except for such Litigation
      

     

    
      
        
        

      

      
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     pending
      or threatened that could not reasonably be expected to have a Material Adverse
      Effect on the Company.

     

    (c)           To
      the Knowledge of the Company, there is no Litigation pending or threatened
      before any court, governmental agency or authority or other forum in which
      any
      of its Loan Collateral (or the Company or any of its subsidiaries in respect
      of
      such Loan Collateral) has been or, with respect to threatened Litigation, may
      reasonably be expected to be named as a defendant or potentially responsible
      party (i) for alleged noncompliance (including by any predecessor) with any
      Environmental Law or (ii) relating to the release into the environment of any
      Hazardous Material, whether or not occurring at, on, under, or involving Loan
      Collateral, except for such Litigation pending or threatened that is could
      not
      reasonably be expected to have a Material Adverse Effect on the
      Company.

     

    (d)           To
      the Knowledge of the Company, no facts exist that provide a reasonable basis
      for
      any Litigation of a type described in subsections (b) or (c), except such as
      could not reasonably be expected to have a Material Adverse Effect on the
      Company.

     

    (e)           To
      the Knowledge of the Company, during and prior to the period of (i) any of
      the
      Company’s or its subsidiaries’ ownership or operation of any of their respective
      current properties, (ii) any of the Company’s or its subsidiaries’ participation
      in the management of any Participation Facility, or (iii) any of the Company’s
      or subsidiaries’ holding of a security interest in Loan Collateral, there have
      been no releases of Hazardous Material in, on, under, or affecting (or
      potentially affecting) such properties, except such as could not reasonably
      be
      expected to have a Material Adverse Effect on the Company.

     

    4.12           Compliance
      with Laws.  Each
      of the Company and its subsidiaries has in effect all Permits necessary for
      it
      to own, lease, or operate its Material Assets and to carry on, in all Material
      respects, its business as now conducted, except for those Permits the absence
      of
      which could not reasonably be expected to have a Material Adverse Effect on
      the
      Company, and there has occurred no Default under any such Permit, other than
      Defaults that could not reasonably be expected to have a Material Adverse Effect
      on the Company.  None of the Company or its subsidiaries: (i) is in
      violation of any Laws, Orders, or Permits applicable to its business or
      employees conducting its business, except for violations that could not
      reasonably be expected to have a Material Adverse Effect on the Company; and
      (ii) has received any notification or communication
      from any agency or department of federal, state, or local government or any
      Regulatory Authority or the staff thereof (a) asserting that any of the Company
      and its subsidiaries is not in compliance with any of the Laws or Orders that
      such governmental authority or Regulatory Authority enforces, except where
      such
      noncompliance could not reasonably be expected to have a Material Adverse Effect
      on the Company, (b) threatening to revoke any Permits, except where the
      revocation of which could not reasonably be expected to have a Material Adverse
      Effect on the Company, or (c) requiring the Company or any of its subsidiaries
      (x) to enter into or consent to the issuance of a cease and desist order, formal
      agreement, directive, commitment, or memorandum of understanding, or (y) except
      as set forth on Section 4.12 of the Company Disclosure
      Schedule, to adopt any board or directors resolution or similar undertaking
      that
      restricts Materially the conduct of its business, or in any manner relates
      to
      its capital adequacy, its credit or reserve policies, its management, or the
      payment of dividends.

     

    4.13           Labor
      Relations.  Neither
      the Company nor any of its subsidiaries is the subject of any Litigation
      asserting that it has committed an unfair labor practice (within the meaning
      of
      the National Labor Relations Act or comparable state Law) or seeking to compel
      it to bargain with any labor organization as to wages or conditions of
      employment, nor is any of them a party to or bound by any collective bargaining
      agreement, Contract, or other agreement or understanding with a labor union
      or
      labor organization, nor is there any strike or other labor dispute involving
      any
      of them, pending or 

     

     

    
      
        
        

      

      
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    threatened,
      or to the Knowledge of the Company, is there any activity involving any of
      the
      Company’s or its subsidiaries’ employees seeking to certify a collective
      bargaining unit or engaging in any other organization activity.

     

    4.14           Employee
      Benefit Plans.

     

    (a)           The
      Company has made available to the Buyer prior to the execution of this Agreement
      correct and complete copies of all Benefit Plans of the Company.

     

    (b)           Except
      as set forth on Section 4.14(b) of the Company Disclosure
      Schedule, all Benefit Plans of the Company are in compliance with the applicable
      terms of ERISA, the Internal Revenue Code, and any other applicable Laws, except
      as could not reasonably be expected to have a Material Adverse Effect on the
      Company.

     

    (c)           Neither
      the Company nor any of its subsidiaries has an “obligation to contribute” (as
      defined in ERISA Section 4212) to a “multiemployer plan” (as defined in ERISA
      Sections 4001(a)(3) and 3(37)(A)).  Each “employee pension benefit
      plan,” as defined in Section 3(2) of ERISA, ever maintained by the Company or
      its subsidiaries that was intended to qualify under Section 401(a) of the
      Internal Revenue Code and with respect to which the Company or any of its
      subsidiaries has any Liability, is disclosed as such in Section
      4.14(c) of the Company’s Disclosure
      Schedule.

     

    (d)           The
      Company has made available to the Buyer prior to the execution of this Agreement
      correct and complete copies of the following documents: (i) all trust agreements
      or other funding arrangements for such Company Benefit Plans (including
      insurance contracts), and all amendments thereto, (ii) with respect to any
      such
      Company Benefit Plans or amendments, all determination letters, Material
      rulings, Material opinion letters, Material information letters, or Material
      advisory opinions issued by the Internal Revenue Service, the United States
      Department of Labor, or the Pension Benefit Guaranty Corporation after June
      30,
      2002, (iii) annual reports or returns, audited or unaudited financial
      statements, actuarial valuations and reports, and summary annual reports
      prepared for any Company Benefit Plan with respect to the most recent plan
      year,
      and (iv) the most recent summary plan descriptions and any Material
      modifications thereto.

     

    (e)           Each
      Company ERISA Plan that is intended to be qualified under Section 401(a) of
      the
      Internal Revenue Code has received a favorable determination letter from the
      Internal Revenue Service, and, to the Knowledge of the Company, there is no
      circumstance that will or could reasonably be expected to result in revocation
      of any such favorable determination letter.  Each trust created under
      any Company ERISA Plan has been determined to be exempt from Tax under Section
      501(a) of the Internal Revenue Code and the Company is not aware of any
      circumstance that will or could reasonably be expected to result in revocation
      of such exemption.  With respect to each such Company Benefit Plan, to
      the Knowledge of the Company, no event has occurred that will or could
      reasonably be expected to give rise to a loss of any intended Tax consequences
      under the Internal Revenue Code or to any Tax under Section 511 of the Internal
      Revenue Code that could reasonably be expected to have a Material Adverse Effect
      on the Company.  There is no Material Litigation pending or, to the
      Knowledge of the Company, threatened relating to any Company ERISA
      Plan.

     

    (f)           Neither
      the Company nor any of its subsidiaries has engaged in a transaction with
      respect to any Company Benefit Plan that, assuming the Taxable Period of such
      transaction expired as of the date of this Agreement, would subject the Company
      or any of its subsidiaries to a Material tax or penalty imposed by either
      Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts
      that could reasonably be expected to have a Material Adverse Effect on the
      Company.  Neither the Company or any of its subsidiaries nor any
      administrator or fiduciary of any Company Benefit Plan (or any agent of

     

     

    
      
        
        

      

      
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    any
      of
      the foregoing) has engaged in any transaction, or acted or failed to act in
      any
      manner, that could subject the Company or any of its subsidiaries to any direct
      or indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
      co-fiduciary, or other duty under ERISA, where such Liability could reasonably
      be expected to have a Material Adverse Effect on the Company.  No oral
      or written representation or communication with respect to any aspect of the
      Company Benefit Plans has been made to employees of the Company or any of its
      subsidiaries that is not in accordance with the written or otherwise preexisting
      terms and provisions of such plans, except where any Liability with respect
      to
      such representation or disclosure could not reasonably be expected to have
      a
      Material Adverse Effect on the Company.

     

    (g)           Neither
      the Company nor any of its subsidiaries maintains or has ever maintained a
      Company Pension Plan.

     

    (h)           Neither
      the Company nor any of its subsidiaries has any Material obligation for retiree
      health and retiree life benefits under any of the Company Benefit Plans other
      than with respect to benefit coverage mandated by applicable Law.

     

    (i)           Except
      as set forth in Section 4.14(i) of the Company Disclosure
      Schedule, neither the execution and delivery of this Agreement nor the
      consummation of the transactions contemplated hereby will (i) result in any
      Material payment (including without limitation severance, unemployment
      compensation, golden parachute, or otherwise) becoming due to any director
      or
      any employee of the Company or it subsidiaries from the Company or any of its
      subsidiaries under any Company Benefit Plan or otherwise, (ii) Materially
      increase any benefit otherwise payable under any Company Benefit Plan, or (iii)
      result in any acceleration of the time of any Material payment or vesting of
      any
      Material benefit.

     

    4.15           Material
      Contracts.

     

    (a)           Except
      as set forth on Section 4.15 of the
      Company’s Disclosure Schedule, none of the Company or its subsidiaries, nor any
      of their respective Assets, businesses, or operations, is a party to, or is
      bound or affected by, or receives benefits under, (i) any employment, severance,
      termination, consulting, or retirement Contract, (ii) any Contract relating
      to
      the borrowing of money by the Company or its subsidiaries or the guarantee
      by
      the Company or its subsidiaries of any such obligation (other than Contracts
      evidencing deposit liabilities, purchases of federal funds, fully secured
      repurchase agreements, and Federal Reserve or Federal Home Loan Bank advances
      of
      depository institution subsidiaries, trade payables, and Contracts relating
      to
      borrowings or guarantees made in the ordinary course of business), and (iii)
      any
      other Contract or amendment thereto that would be required to be filed as an
      exhibit to a Form 10-QSB filed by the Company with the SEC as of the date of
      this Agreement that has not been filed as an exhibit to the Company’s Form
      10-QSB filed for the fiscal quarter ended March 31, 2007, or in another SEC
      document (together with all Contracts referred to in
Sections 4.8 and 4.14 of
      this Agreement, the “Company Contracts”).

     

    (b)           With
      respect to each Company Contract: (i) the Contract is in full force and effect;
      (ii) none of the Company or its subsidiaries is in Default hereunder, other
      than
      Defaults that could not reasonably be expected to have a Material Adverse Effect
      on the Company; (iii) neither the Company nor any of its subsidiaries has
      repudiated or waived any Material provision of any such Contract; and (iv)
      no
      other party to any such Contract is, to the Knowledge of the Company, in Default
      in any respect, other than Defaults that could not reasonably be expected to
      have a Material Adverse Effect on the Company, or has repudiated or waived
      any
      Material provision thereunder.  Except for Federal Reserve or Federal
      Home Loan Bank advances, all of the indebtedness of the Company and its
      subsidiaries for money borrowed (not including deposit Liabilities) is
      prepayable at any time without penalty or premium.

     

     

    
      
        
        

      

      
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    4.16           Legal
      Proceedings.

     

      There
      is no Litigation instituted or pending, or, to the Knowledge of the Company,
      threatened against the Company or any of its subsidiaries, or against any Asset,
      employee benefit plan, interest, or right of any of them, except as could not
      reasonably be expected to have a Material Adverse Effect on the Company, nor
      are
      there any Orders of any Regulatory Authorities, other governmental authorities,
      or arbitrators outstanding against any the Company or its subsidiaries, except
      as could not reasonably be expected to have a Material Adverse Effect on the
      Company.  There is no Litigation to which the Company or any of its
      subsidiaries is a party that names the Company or any of its subsidiaries as
      a
      defendant or cross-defendant and where the maximum exposure is estimated to
      be
      $25,000 or more.

     

    4.17           Proprietary
      Rights.

     

    (a)           Ownership
      and Right to Use.  The Company owns, has been granted a license to
      use or otherwise has the right to use all of the Intellectual Property that
      it
      uses, or holds for use, in its business (the “Company Proprietary
      Rights”).

     

    (b)           Trade
      Secrets.  The Company has taken efforts that are reasonable under
      the circumstances to prevent unauthorized disclosure to any other Person of
      such
      portions of the Company’s trade secrets that would enable such Person to compete
      with the Company within the scope of the Company’s business as now conducted and
      as presently proposed to be conducted.

     

    (c)           No
      Infringement.  The Company has not interfered with, infringed upon
      or misappropriated the Intellectual Property of any other Person and the
      continued operation of the Company’s business by the Buyer, in the manner that
      such business is currently conducted or proposed to be conducted, will not
      interfere with, infringe upon or misappropriate the Intellectual Property of
      any
      other Person.  To the Knowledge of the Company, no Person is
      interfering with, infringing upon or misappropriating any Company Proprietary
      Right.  No claim has been asserted against the Company by any
      Person:  (i) that such Person has any right, title or interest in
      or to any of the Company Proprietary Rights; (ii) that such Person has the
      right to use any of the Company Proprietary Rights; (iii) to the effect
      that any past, present or projected act or omission by the Company infringes
      the
      Intellectual Property of such Person; or (iv) that challenges the Company’s
      right to use any of the Company Proprietary Rights. No
      facts
      or circumstances exist that, with or without the passing of time or the giving
      of notice or both, might reasonably serve as the basis for any such
      claim.

     

    4.18           Reports.  Since
      the date of its organization, each of the Company and its subsidiaries has
      timely filed all reports and statements, together with any amendments required
      to be made with respect thereto, that it was required to file with any
      Regulatory Authorities, except failures to file that could not reasonably be
      expected to have a Material Adverse Effect on the Company.  As of
      their respective dates, each of such reports and documents, including the
      financial statements, exhibits, and schedules thereto, complied with all
      applicable Laws, except noncompliance that could not reasonably be expected
      to
      have a Material Adverse Effect on the Company.

     

    4.19           Registration
      Statement; Proxy Statement.  Subject
      to the accuracy of the representations contained in Section
      5.19, the information supplied by the Company or its subsidiaries for
      inclusion in the registration statement (the “Registration
      Statement”) covering the shares of the Buyer’s Stock to be issued
      pursuant to this Agreement shall not, at the time the Registration Statement
      (including any amendments or supplements thereto) is declared effective by
      the
      SEC, contain any untrue statement of a Material fact or omit to state any
      Material fact required to be stated therein or necessary to make the statements
      therein not misleading.  The information supplied by or on behalf of
      the Company and its subsidiaries for inclusion in the proxy statement/prospectus
      to be sent to the shareholders of the Company to consider, at a special meeting
      (the “Shareholder Meeting”), the Merger (such proxy

     

     

    
      
        
        

      

      
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    statement/prospectus
      as amended or supplemented is referred to herein as the “Proxy
      Statement”) will not, on the date the Proxy Statement is first mailed
      to shareholders, at the time of the Shareholder Meeting and at the Effective
      Time, contain any untrue statement of a Material fact or omit to state any
      Material fact necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading.  If at any
      time prior to the Effective Time any event relating to the Company or its
      subsidiaries or any of their affiliates, officers or directors should be
      discovered by the Company or its subsidiaries that should be set forth in an
      amendment to the Registration Statement or a supplement to the Proxy Statement,
      the Company will promptly inform the Buyer and, at the Buyer’s request, assist
      in the preparation of an amendment for filing with the SEC.  The Proxy
      Statement shall comply in all Material respects with the requirements of the
      Securities Laws and the rules and regulations
      thereunder.  Notwithstanding the foregoing, the Company makes no
      representation or warranty with respect to any information supplied by the
      Buyer
      and its subsidiaries, including information that is contained or incorporated
      by
      reference in, or furnished in connection with the preparation of, the
      Registration Statement or the Proxy Statement.

     

    4.20           Accounting,
      Tax, and Regulatory Matters.  To
      the Knowledge of the Company, none of the Company or its subsidiaries or any
      Affiliate thereof has taken or agreed to take any action, that could reasonably
      be expected to (i) prevent the Merger from qualifying as a reorganization
      within the meaning of Section 368(a) of the Internal Revenue Code, or
      (ii) Materially impede or delay receipt of any Consents of Regulatory
      Authorities referred to in Section 8.1(b) of this
      Agreement.

     

    4.21           State
      Takeover Laws.  Each
      of the Company and its subsidiaries has taken all necessary action to exempt
      the
      transactions contemplated by this Agreement from any applicable “moratorium,”
“control share,” “fair price,” “business combination,” or other anti-takeover
      laws and regulations of the State of Delaware.

     

    4.22           Charter
      Provisions.  Each
      of the Company and its subsidiaries has taken all action so that the entering
      into of this Agreement and the consummation of the Merger and the other
      transactions contemplated by this Agreement do not and will not result in the
      grant of any rights to any Person under the certificate of incorporation,
      bylaws, or other governing instruments of any of them or restrict or impair
      the
      ability of the Buyer or any of its subsidiaries to vote, or otherwise to
      exercise the rights of a shareholder with respect to, the capital stock of
      the
      Company or any of its subsidiaries that may be directly or indirectly acquired
      or controlled by it.

     

    4.23           Records.  Complete
      and accurate copies of the articles of incorporation or charter and bylaws
      of
      each of the Company and its subsidiaries have been made available to the
      Buyer.  The stock book of each such Person contains, in all Material
      respects, complete and accurate records of the record share ownership of the
      issued and outstanding shares of stock thereof.

     

    4.24           Derivatives.  All
      interest rate swaps, caps, floors, option agreements, futures and forward
      contracts, and other similar risk management arrangements, whether entered
      into
      for the account of the Company or it subsidiaries or their customers were
      entered into (i) in accordance with prudent business practices and all
      applicable Laws, and (ii) with counterparties believed to be financially
      responsible.

     

    4.25           Certain
      Regulated Businesses.  Neither
      the Company nor any of its subsidiaries is an “investment company” as defined in
      the Investment Company Act of 1940, as amended.

     

    4.26           Commissions.  Other
      than Howe Barnes Hoefer & Arnett, Inc., no broker, finder or other Person is
      entitled to any brokerage fees, commissions or finder’s fees in connection with
      the transactions contemplated hereby by reason of any action taken by the
      Company, any of its subsidiaries or any of the Company’s
      shareholders.

     

     

     

    
      
        
        

      

      
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    ARTICLE
      V

     

    REPRESENTATIONS
      AND WARRANTIES OF THE BUYER

     

    Except
      as
      set forth on the Buyer’s Disclosure Schedule, the Buyer represents and warrants
      to the Company that each of the statements contained in this
Article V are correct and complete as of the date of this
      Agreement and will be correct and complete as of the Closing Date.

     

    5.1           Organization.

     

    (a)           The
      Buyer is a bank holding company registered with the Board of Governors of the
      Federal Reserve System under the Bank Holding Company Act of 1956, as amended
      and the North Carolina Commissioner of Banks.  The Buyer Bank is a
      state chartered bank incorporated under North Carolina Law and is an “insured
      institution” as defined in the Federal Deposit Insurance Act and applicable
      regulations thereunder, and subject to dollar limits under such Act, all
      deposits in the Buyer Bank are fully insured by the FDIC to the extent permitted
      by Law.

     

    (b)           Each
      of the Buyer and the Buyer Bank is a corporation duly organized, validly
      existing and in good standing under the Laws of the State of North Carolina,
      and
      has the corporate power and authority to carry on, in all Material respects,
      its
      businesses as now conducted and to own, lease and operate its
      Assets.  Each of the Buyer and the Buyer Bank is duly qualified or
      licensed to transact business as a foreign corporation in good standing in
      the
      States of the United States and foreign jurisdictions where the character of
      its
      Assets or the nature or conduct of its business requires it to be so qualified
      or licensed.

     

    5.2           Authority;
      No Conflicts.

     

    (a)           Subject
      to required regulatory and shareholder approvals, the Buyer has the corporate
      power and authority necessary to execute, deliver and perform its obligations
      under this Agreement and to consummate the transactions contemplated
      hereby.  The execution and delivery of and performance of the Buyer’s
      obligations under this Agreement and the other documents contemplated hereby,
      and the consummation of the transactions contemplated herein, including the
      Merger, have been duly and validly authorized by all necessary corporate action
      (and by Closing, all such shareholder action) in respect thereof on the part
      of
      the Buyer.  This Agreement represents a legal, valid, and binding
      obligation of the Buyer, enforceable against it in accordance with its terms
      (except in all cases as such enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting
      the
      enforcement of creditors’ rights generally and except that the availability of
      specific performance, injunctive relief and other equitable remedies is subject
      to the discretion of the court before which any proceeding may be
      brought).

     

    (b)           Neither
      the execution and delivery of this Agreement by the Buyer, nor the consummation
      by the Buyer of the transactions contemplated hereby, nor compliance by the
      Buyer with any of the provisions hereof will (i) conflict with or result in
      a breach of any provision of the Buyer’s articles of incorporation or bylaws or
      any similar governing documents, or (ii) constitute or result in a Default
      under, or require any Consent pursuant to, or result in the creation of any
      Lien
      on any Asset of the Buyer or any of its subsidiaries under, any Contract or
      Permit of the Buyer or any of its subsidiaries, except as could not reasonably
      be expected to have a Material Adverse Effect on the Buyer, or
      (iii) subject to obtaining the requisite Consents referred to in
Section 8.1(b) of this Agreement, violate any Law or Order
      applicable to the Buyer or any of its subsidiaries or any of their respective
      Assets.

     

     

    
      
        
        

      

      
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    (c)           Other
      than in connection or compliance with the provisions of the Securities Laws
      and
      banking Regulatory Authorities, no notice to, filing with, or Consent of, any
      Governmental Authority is necessary for the consummation by the Buyer of the
      Merger and the other transactions contemplated in this Agreement.

     

    5.3           Buyer’s
      Stock; Subsidiaries.

     

    (a)           The
      authorized capital stock of the Buyer consists of 20,000,000 shares of common
      stock, no par value per share, of which 14,392,803 shares are issued and
      outstanding as of the date of this Agreement, and except for such shares, there
      are no shares of capital stock or other equity securities of the Buyer
      outstanding.  The authorized capital stock of the Buyer Bank consists
      of 2,500,000 shares of common stock, $5.00 par value per share, of which
      1,134,042 shares are issued and outstanding as of the date of this Agreement
      and
      are owned and held by the Buyer, and except for such shares, there are no shares
      of capital stock of the Buyer Bank
      outstanding.  Section 5.3 of the Buyer’s
      Disclosure Schedule lists all of the Buyer’s direct and indirect subsidiaries
      other than the Buyer Bank as of the date of this Agreement.  Except
      as set forth on Section 5.3 of the Buyer’s Disclosure
      Schedule, the Buyer or one of its subsidiaries owns all of the issued and
      outstanding shares of capital stock of each such subsidiary.

     

    (b)           All
      of the issued and outstanding shares of capital stock of the Buyer and its
      subsidiaries are duly and validly issued and outstanding and are fully paid
      and
      nonassessable.  Shares of the Buyer’s Stock to be issued hereunder are
      duly authorized and, upon issuance, will be validly issued and outstanding
      and
      fully paid and nonassessable, free and clear of any Liens, pledges or
      encumbrances.  None of the outstanding shares of capital stock of the
      Buyer or any of its subsidiaries has been issued in violation of any preemptive
      rights of the current or past shareholders of such Persons, and none of the
      shares of the Buyer’s Stock to be issued pursuant to this Agreement will be
      issued in violation of any preemptive rights of the current or past shareholders
      of the Buyer.

     

    5.4           SEC
      Filings; Buyer Financial Statements.

     

    (a)           The
      Buyer has filed and made available to the Company all forms, reports, and
      documents required to be filed by the Buyer with the SEC since December 31,
      2003
      (collectively, the “Buyer SEC Reports”).  The Buyer
      SEC Reports (i) at the time filed, complied in all Material respects with the
      applicable requirements of the Securities Laws, as the case may be, and (ii)
      did
      not at the time they were filed (or if amended or superseded by a filing prior
      to the date of this Agreement, then on the date of such filing) contain any
      untrue statement of a Material fact or omit to state a Material fact required
      to
      be stated in such Buyer SEC Reports or necessary in order to make the statements
      in such Buyer SEC Reports, in light of the circumstances under which they were
      made, not misleading.  None of the Buyer’s subsidiaries is required to
      file any forms, reports, or other documents with the SEC.

     

    (b)           Each
      of the Buyer Financial Statements (including, in each case, any related notes)
      contained in the Buyer SEC Reports, including any Buyer SEC Reports filed after
      the date of this Agreement until the Effective Time, complied or will comply
      as
      to form in all Material respects with the applicable published rules and
      regulations of the SEC with respect thereto, was prepared or will be prepared
      in
      accordance with GAAP applied on a consistent basis throughout the periods
      involved (except as may be indicated in the notes to such financial statements,
      or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC),
      and fairly presented or will fairly present the consolidated financial position
      of the Buyer and its subsidiaries as at the respective dates and the
      consolidated results of its operations and cash flows for the periods indicated,
      except that the unaudited interim financial statements were or are subject
      to
      normal and recurring year-end adjustments that were not or are not expected
      to
      be Material in amount or effect (except as may be indicated in such financial
      statements or notes thereto).

     

     

    
      
        
        

      

      
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    5.5           Absence
      of Undisclosed Liabilities.  Except
      as set forth in Section 5.5 of the Buyer’s Disclosure
      Schedule, neither the Buyer nor any of its subsidiaries has any Liabilities
      that
      could reasonably be expected to have a Material Adverse Effect on the Buyer,
      except Liabilities that are accrued or reserved against in the consolidated
      balance sheets of the Buyer as of December 31, 2006 included in the Buyer
      Financial Statements or reflected in the notes thereto and except for
      Liabilities incurred in the ordinary course of business subsequent to December
      31, 2006.  Neither the Buyer nor any of its subsidiaries has incurred
      or paid any Liability since December 31, 2006, except for (a) such Liabilities
      incurred or paid in the ordinary course of business consistent with past
      business practice and (b) Liabilities that could not reasonably be expected
      to
      have a Material Adverse Effect on the Buyer.  No facts or
      circumstances exist that could reasonably be expected to serve as the basis
      for
      any other Liabilities of the Buyer or any of its subsidiaries, except as could
      not reasonably be expected to have a Material Adverse Effect on the
      Buyer.

     

    5.6           Absence
      of Certain Changes or Events.  Since
      December 31, 2006, (i) there have been no events, changes, or occurrences that
      have had, or could reasonably be expected to have, a Material Adverse Effect
      on
      the Buyer, and (ii) each of the Buyer and its subsidiaries has conducted, in
      all
      Material Respects, its respective businesses in the ordinary and usual course
      (excluding the incurrence of expenses in connection with this Agreement and
      the
      transactions contemplated hereby).

     

    5.7           Tax
      Matters.

     

    (a)           All
      Tax Returns required to be filed by or on behalf of any of the Buyer and its
      subsidiaries have been timely filed, or requests for extensions have been timely
      filed, granted, and have not expired for periods ended on or before December
      31,
      2006, and, to the Knowledge of the Buyer, all Tax Returns filed are complete
      and
      accurate in all Material respects.  All Tax Returns for periods ending
      on or before the date of the most recent fiscal year end immediately preceding
      the Effective Time will be timely filed or requests for extensions will be
      timely filed.  All Taxes shown on filed Tax Returns have been
      paid.  There is no audit examination, deficiency, or refund Litigation
      with respect to any Taxes that could reasonably be expected to have a Material
      Adverse Effect on the Buyer, except to the extent reserved against in the Buyer
      Financial Statements dated prior to the date of this Agreement.  All
      Taxes and other Liabilities due with respect to completed and settled
      examinations or concluded Litigation have been paid.

     

    (b)           None
      of the Buyer or its subsidiaries has executed an extension or waiver of any
      statute of limitations on the assessment or collection of any Tax due (excluding
      such statutes that relate to years currently under examination by the Internal
      Revenue Service or other applicable taxing authorities) that is currently in
      effect.

     

    (c)           Adequate
      provision for any Material Taxes due or to become due for any of the Buyer
      or
      its subsidiaries for the period or periods through and including the date of
      the
      respective Buyer Financial Statements has been made and is reflected on such
      Buyer Financial Statements.

     

    (d)           Each
      of the Buyer and its subsidiaries is in compliance with, and its records contain
      all information and documents (including properly completed IRS Forms W-9)
      necessary to comply with, all applicable information reporting and Tax
      withholding requirements under federal, state, and local Tax Laws, and such
      records identify with specificity all accounts subject to backup withholding
      under Section 3406 of the Internal Revenue Code, except for any such instances
      of noncompliance and such omissions as could not reasonably be expected to
      have
      a Material Adverse Effect on the Buyer.

     

    (e)           None
      of the Buyer and its subsidiaries has made any payments, is obligated to make
      any payments, or is a party to any contract, agreement, or other arrangement
      that could obligate it to make any payments that would be disallowed as a
      deduction under Section 280G or 162(m) of the Internal Revenue
      Code.

     

     

    
      
        
        

      

      
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    (f)           There
      are no Material Liens with respect to Taxes upon any of the Assets of the Buyer
      and its subsidiaries.

     

    (g)           There
      has not been an ownership change, as defined in Internal Revenue Code Section
      382(g), of the Buyer and its subsidiaries that occurred during any Taxable
      Period in which any of the Buyer and its subsidiaries has incurred a net
      operating loss that carries over to another Taxable Period ending after December
      31, 2006.

    (h)           After
      the date of this Agreement, no Material election with respect to Taxes will
      be
      made without the prior consent of the Company, which consent will not be
      unreasonably withheld.

     

    (i)           Neither
      the Buyer nor any of its subsidiaries has or has had a permanent establishment
      in any foreign country, as defined in any applicable tax treaty or convention
      between the United States and such foreign country.

     

    5.8           Assets.  Each
      of the Buyer and its subsidiaries have good and marketable title, free and
      clear
      of all Liens, to all of their respective Assets.  Except as could not
      reasonably be expected to have a Material Adverse Effect on the Buyer, all
      tangible properties used in the businesses of the Buyer and its subsidiaries
      are
      in good condition, reasonable wear and tear excepted, and are usable in the
      ordinary course of business consistent with each of their past
      practices.  Except as could not reasonably be expected to have a
      Material Adverse Effect on the Buyer, all Assets held under leases or subleases
      by any of the Buyer and its subsidiaries are held under valid Contracts
      enforceable in accordance with their respective terms (except as enforceability
      may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
      or other Laws affecting the enforcement of creditors’ rights generally and
      except that the availability of the specific performance, injunctive relief
      or
      other equitable remedies is subject to the discretion of the court before which
      any proceedings may be brought), and each such Contract is in full force and
      effect.  Each of the Buyer and its subsidiaries currently maintain
      insurance in amounts, scope, and coverage reasonably necessary for their
      operations.  None of the Buyer or its subsidiaries has received notice
      from any insurance carrier that (i) such insurance will be canceled or that
      coverage thereunder will be reduced or eliminated, or (ii) premium costs with
      respect to such policies of insurance will be increased in any Material
      respect.  The Assets of the Buyer and its subsidiaries include all
      Assets required to operate in all Material respects their businesses taken
      as a
      whole as presently conducted.

     

    5.9           Real
      Property.

     

    (a)           The
      Buyer has valid, good and marketable fee simple title to all Real Property
      owned, leased or operated in whole or in part by the Buyer (the “Buyer
      Real Property”), free and clear of all Liens other than Permitted Real
      Property Encumbrances.

     

    (b)           The
      Buyer Real Property, and the improvements, buildings and structures thereon
      (the
“Buyer Improvements”), (i) constitute all of the real
      property used or operated by the Buyer and (ii) may continue to be used for
      the operation of its business as currently operated by the Buyer after the
      Closing.  The current and anticipated use of the Buyer Real Property
      and the Buyer Improvements is not a pre-existing, nonconforming use, and no
      notice of the violation of any Law or legal requirement has been received by
      the
      Buyer.

     

     

    
      
        
        

      

      
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    (c)           There
      are no pending, or to the Knowledge of the Buyer, threatened or contemplated
      condemnation, expropriation or other proceedings (nor is there any basis for
      any
      such action) affecting the Buyer Real Property, or any part thereof, or of
      any
      assessments made or threatened with respect to the Buyer Real Property or any
      part thereof, or of any sales or other disposition of the Buyer Real Property,
      or any part thereof, in lieu of condemnation.

     

    (d)           The
      Buyer does not own or hold, and is not obligated under or a party to, any
      option, right of first refusal or other contractual right to purchase, acquire,
      sell or dispose of the Buyer Real Property, or any portion thereof or interest
      therein.

     

    (e)           To
      the Knowledge of the Buyer, no Buyer Improvement encroaches upon any other
      property, and there are no encroachments by other buildings or improvements
      onto
      the Buyer Real Property.  

     

    5.10           Securities
      Portfolio and Investments.  All
      securities owned by the Buyer or any of its subsidiaries (whether owned of
      record or beneficially) are held free and clear of all Liens that would impair
      the ability of the owner thereof to dispose freely of any such security and/or
      otherwise to realize the benefits of ownership thereof at any time, except
      for
      those Liens to secure public deposits in the ordinary course of business
      consistent with past practice and those Liens that could not reasonably be
      expected to have a Material Adverse Effect on the Buyer.  There are no
      voting trusts or other agreements or undertakings to which the Buyer or any
      of
      its subsidiaries is a party with respect to the voting of any such
      securities.  Except for fluctuations in the market values of United
      States Treasury and agency or municipal securities, since December 31, 2006,
      there has been no significant deterioration or Material adverse change in the
      quality, or any Material decrease in the value, of the securities portfolio
      of
      the Buyer and its subsidiaries, taken as a whole.

     

    5.11           Environmental
      Matters.

     

    (a)           To
      the Knowledge of the Buyer, the Participation Facilities and Loan Collateral
      of
      the Buyer and its subsidiaries are, and have been, in compliance with all
      Environmental Laws, except those violations that could not reasonably be
      expected to have a Material Adverse Effect on the Buyer.

     

    (b)           To
      the Knowledge of the Buyer, there is no Litigation pending or threatened before
      any court, governmental agency, or authority, or other forum in which any of
      the
      Buyer and its subsidiaries or any of its Participation Facilities has been
      or,
      with respect to threatened Litigation, may reasonably be expected to be named
      as
      a defendant (i) for alleged noncompliance (including by any predecessor) with
      any Environmental Law or (ii) relating to the release into the environment
      of
      any Hazardous Material, whether or not occurring at, on, under, or involving
      a
      site owned, leased, or operated by the Buyer or any of its subsidiaries or
      any
      of its Participation Facilities, except for such Litigation pending or
      threatened that could not reasonably be expected to have a Material Adverse
      Effect on the Buyer.

     

    (c)           To
      the Knowledge of the Buyer, there is no Litigation pending or threatened before
      any court, governmental agency, or authority, or other forum in which any of
      its
      Loan Collateral (or the Buyer or any of its subsidiaries in respect of such
      Loan
      Collateral) has been or, with respect to threatened Litigation, may reasonably
      be expected to be named as a defendant or potentially responsible party
      (i) for alleged noncompliance (including by any predecessor) with any
      Environmental Law or (ii) relating to the release into the environment of
      any Hazardous Material, whether or not occurring at, on, under, or involving
      Loan Collateral, except for such Litigation pending or threatened that could
      not
      reasonably be expected to have a Material Adverse Effect on the
      Buyer.

     

     

    
      
        
        

      

      
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    (d)           To
      the Knowledge of the Buyer, no facts exist that provide a reasonable basis
      for
      any Litigation of a type described in subsections (b) or (c), except such could
      not reasonably be expected to have a Material Adverse Effect on the
      Buyer.

     

    (e)           To
      the Knowledge of the Buyer, during and prior to the period of (i) any of
      the Buyer’s or its subsidiaries’ ownership or operation of any of their
      respective current properties, (ii) any of the Buyer’s
      or its subsidiaries’ participation in the management of any Participation
      Facility, or (iii) any of the Buyer’s or subsidiaries’ holding of a
      security interest in Loan Collateral, there have been no releases of Hazardous
      Material in, on, under, or affecting (or potentially affecting) such properties,
      except such as could not reasonably be expected to have a Material Adverse
      Effect on the Buyer.

     

    5.12           Compliance
      with Laws.  Each
      of the Buyer and its subsidiaries has in effect all Permits necessary for it
      to
      own, lease, or operate its Material Assets and to carry on, in all Material
      respects, its business as now conducted, except for those Permits the absence
      of
      which could not reasonably be expected to have a Material Adverse Effect on
      the
      Buyer, and there has occurred no Default under any such Permit, other than
      Defaults that could not reasonably be expected to have a Material Adverse Effect
      on the Buyer.  None of the Buyer or its subsidiaries: (i) is in
      violation of any Laws, Orders, or Permits applicable to its business or
      employees conducting its business, except for violations that could not
      reasonably be expected to have a Material Adverse Effect on the Buyer; and
      (ii) has received any notification or communication from any agency or
      department of federal, state, or local government or any Regulatory Authority
      or
      the staff thereof (a) asserting that any of the Buyer and its subsidiaries
      is not in compliance with any of the Laws or Orders that such governmental
      authority or Regulatory Authority enforces, except where such noncompliance
      could not reasonably be expected to have a Material Adverse Effect on the Buyer,
      (b) threatening to revoke any Permits, except where the revocation of which
      could not reasonably be expected to have a Material Adverse Effect on the Buyer,
      or (c) requiring the Buyer or any of its subsidiaries (x) to enter into or
      consent to the issuance of a cease and desist order, formal agreement,
      directive, commitment, or memorandum of understanding, or (y) to adopt any
      board or directors resolution or similar undertaking that restricts Materially
      the conduct of its business, or in any manner relates to its capital adequacy,
      its credit or reserve policies, its management, or the payment of
      dividends.  The most recent regulatory rating given to the Buyer as to
      compliance with the Community Reinvestment Act was “satisfactory” or
      better.

     

    5.13           Labor
      Relations.  Neither
      the Buyer nor any of its subsidiaries is the subject of any Litigation asserting
      that it has committed an unfair labor practice (within the meaning of the
      National Labor Relations Act or comparable state Law) or seeking to compel
      it to
      bargain with any labor organization as to wages or conditions of employment,
      nor
      is any of them a party to or bound by any collective bargaining agreement,
      Contract, or other agreement or understanding with a labor union or labor
      organization, nor is there any strike or other labor dispute involving any
      of
      them, pending or threatened, or to the Knowledge of the Buyer, is there any
      activity involving any of the Buyer’s or its subsidiaries’ employees seeking to
      certify a collective bargaining unit or engaging in any other organization
      activity.

     

    5.14           Employee
      Benefit Plans.

     

    (a)           The
      Buyer has made available to the Company prior to the execution of this Agreement
      correct and complete copies in each case of all Buyer Benefit
      Plans.

     

    (b)           All
      Buyer Benefit Plans are in compliance with the applicable terms of ERISA, the
      Internal Revenue Code, and any other applicable Laws, except as could not
      reasonably be expected to have a Material Adverse Effect on the
      Buyer.

     

     

    
      
        
        

      

      
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    (c)           Neither
      the Buyer nor any of its subsidiaries has an “obligation to contribute” (as
      defined in ERISA Section 4212) to a “multiemployer plan” (as defined in ERISA
      Sections 4001(a)(3) and 3(37)(A)).  Each “employee pension benefit
      plan,” as defined in Section 3(2) of ERISA, ever maintained by the Buyer or its
      subsidiaries that was intended to qualify under Section 401(a) of the Internal
      Revenue Code
      and
      with respect to which the Buyer or any of its subsidiaries has any Liability,
      is
      disclosed as such in Section 5.14 of the Buyer’s
      Disclosure Schedule.

     

    (d)           The
      Buyer has made available to the Company prior to the execution of this Agreement
      correct and complete copies of the following documents: (i) all trust agreements
      or other funding arrangements for such Buyer Benefit Plans (including insurance
      contracts), and all amendments thereto, (ii) with respect to any such Buyer
      Benefit Plans or amendments, all determination letters, Material rulings,
      Material opinion letters, Material information letters, or Material advisory
      opinions issued by the Internal Revenue Service, the United States Department
      of
      Labor, or the Pension Benefit Guaranty Corporation after December 31, 2001,
      (iii) annual reports or returns, audited or unaudited financial statements,
      actuarial valuations and reports, and summary annual reports prepared for any
      Buyer Benefit Plan with respect to the most recent plan year, and (iv) the
      most
      recent summary plan descriptions and any Material modifications
      thereto.

     

    (e)           Each
      Buyer ERISA Plan that is intended to be qualified under Section 401(a) of the
      Internal Revenue Code has received a favorable determination letter from the
      Internal Revenue Service, and, to the Knowledge of the Buyer, there is no
      circumstance that will or could reasonably be expected to result in revocation
      of any such favorable determination letter.  Each trust created under
      any Buyer ERISA Plan has been determined to be exempt from Tax under Section
      501(a) of the Internal Revenue Code and to the Knowledge of
      the Buyer, there is no circumstance that will or could
      reasonably be expected to result in revocation of such
      exemption.  With respect to each such Buyer Benefit Plan, to the
      Knowledge of the Buyer, no event has occurred that will or could reasonably
      be
      expected to give rise to a loss of any intended Tax consequences under the
      Internal Revenue Code or to any Tax under Section 511 of the Internal Revenue
      Code that could reasonably be expected to have a Material Adverse Effect on
      the
      Buyer.  There is no Material Litigation pending or, to the Knowledge
      of the Buyer, threatened relating to any Buyer ERISA Plan.

     

    (f)           Neither
      the Buyer nor any of its subsidiaries has engaged in a transaction with respect
      to any Buyer Benefit Plan that, assuming the Taxable Period of such transaction
      expired as of the date of this Agreement, would subject the Buyer or any of
      its
      subsidiaries to a Material tax or penalty imposed by either Section 4975 of
      the
      Internal Revenue Code or Section 502(i) of ERISA in amounts
      that  could reasonably be expected to have a Material Adverse Effect
      on the Buyer.  Neither the Buyer or any of its subsidiaries nor any
      administrator or fiduciary of any Buyer Benefit Plan (or any agent of any of
      the
      foregoing) has engaged in any transaction, or acted or failed to act in any
      manner, that could subject the Buyer or any of its subsidiaries to any direct
      or
      indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
      co-fiduciary, or other duty under ERISA, where such Liability could reasonably
      be expected to have a Material Adverse Effect on the Buyer.  No oral
      or written representation or communication with respect to any aspect of the
      Buyer Benefit Plans has been made to employees of the Buyer or any of its
      subsidiaries that is not in accordance with the written or otherwise preexisting
      terms and provisions of such plans, except where any Liability with respect
      to
      such representation or disclosure could not reasonably be expected to have
      a
      Material Adverse Effect on the Buyer.

     

    (g)           Since
      the date of the most recent actuarial valuation, there has been (i) no Material
      change in the financial position or funded status of any Buyer Pension Plan,
      (ii) no Material change in the actuarial assumptions with respect to any Buyer
      Pension Plan, and (iii) no Material increase in benefits under any Buyer Pension
      Plan as a result of plan amendments or changes in applicable Law, except as
      could not reasonably be expected to have a Material Adverse Effect on the
      Buyer.  Neither any Buyer 

    
      
        
        

      

      
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    Pension
      Plan nor any “single-employer plan,” within the meaning of Section 4001(a)(15)
      of ERISA, currently or formerly maintained by the Buyer or its subsidiaries,
      or
      the single-employer plan of any entity that is considered one employer with
      the
      Buyer under Section 4001 of ERISA or Section 414 of the Internal Revenue Code
      or
      Section 302 of ERISA (whether or not waived) (a “Buyer ERISA
      Affiliate”) has an “accumulated funding deficiency” within the meaning
      of Section 412 of the Internal Revenue Code or Section 302 of
      ERISA.  All contributions with respect to a Buyer Pension Plan or any
      single-employer plan of a Buyer ERISA Affiliate have or will be timely made
      and
      there is no Lien or expected to be a Lien under Internal Revenue Code Section
      412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code Section
      4971.  Neither the Buyer nor any of its subsidiaries has provided, or
      is required to provide, security to a Buyer Pension Plan or to any
      single-employer plan of a Buyer ERISA Affiliate pursuant to Section 401(a)(29)
      of the Internal Revenue Code.  All premiums required to be paid under
      ERISA Section 4006 have been timely paid by the Buyer, except to the extent
      any
      failure that could not reasonably be expected to have a Material Adverse Effect
      on the Buyer.

     

    (h)           No
      Liability under Title IV of ERISA has been or is expected to be incurred by
      the
      Buyer or it subsidiaries with respect to any defined benefit plan currently
      or
      formerly maintained by any of them or by any Buyer ERISA Affiliate that has
      not
      been satisfied in full (other than Liability for Pension Benefit Guaranty
      Corporation premiums which have been paid when due), except to the extent any
      failure could not reasonably be expected to have a Material Adverse Effect
      on
      the Buyer.

     

    (i)           Neither
      the Buyer nor any of its subsidiaries has any Material obligation for retiree
      health and retiree life benefits under any of the Buyer Benefit Plans other
      than
      with respect to benefit coverage mandated by applicable Law.

     

    (j)           Neither
      the execution and delivery of this Agreement nor the consummation of the
      transactions contemplated hereby will, by themselves, (i) result in any Material
      payment (including without limitation severance, unemployment compensation,
      golden parachute, or otherwise) becoming due to any director or any employee
      of
      the Buyer or it subsidiaries from the Buyer or any of its subsidiaries under
      any
      Buyer Benefit Plan or otherwise, (ii) Materially increase any benefit otherwise
      payable under any Buyer Benefit Plan, or (iii) result in any acceleration of
      the
      time of any Material payment or vesting of any Material benefit.

     

    5.15           Material
      Contracts.

     

    (a)           Except
      as set forth on Section 5.15 of the Buyer’s Disclosure
      Schedules, none of the Buyer or its subsidiaries, nor any of their respective
      Assets, businesses, or operations, is a party to, or is bound or affected by,
      or
      receives benefits under, (i) any employment, severance, termination, consulting,
      or retirement Contract, (ii) any Contract relating to the borrowing of money
      by
      the Buyer or its subsidiaries or the guarantee by the Buyer or its subsidiaries
      of any such obligation (other than Contracts evidencing deposit liabilities,
      purchases of federal funds, fully secured repurchase agreements, and Federal
      Reserve or Federal Home Loan Bank advances of depository institution
      subsidiaries, trade payables, and Contracts relating to borrowings or guarantees
      made in the ordinary course of business), and (iii) any other Contract or
      amendment thereto that would be required to be filed as an exhibit to a Form
      10-Q filed by the Buyer with the SEC as of the date of this Agreement that
      has
      not been filed as an exhibit to the Buyer’s Form 10-Q filed for the fiscal
      quarter ended March 31, 2007, or in another SEC document (together with all
      Contracts referred to in
Sections 5.8 and 5.14 of
      this Agreement, the “Buyer Contracts”).

     

    (b)           With
      respect to each Buyer Contract: (i) the Contract is in full force and effect;
      (ii) none of the Buyer or its subsidiaries is in Default hereunder, other than
      Defaults that could not reasonably be expected to have a Material Adverse Effect
      on the Buyer; (iii) neither the Buyer nor any of its subsidiaries

    
      
        
        

      

      
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    has
      repudiated or waived any Material provision of any such Contract; and (iv)
      no
      other party to any such Contract is, to the Knowledge of the Buyer, in Default
      in any respect, other than Defaults that could not reasonably be expected to
      have a Material Adverse Effect on the Buyer, or has repudiated or waived any
      Material provision thereunder.  Except for Federal Reserve or Federal
      Home Loan Bank advances, all of the indebtedness of the Buyer and its
      subsidiaries for money borrowed (not including deposit Liabilities) is
      prepayable at any time without penalty or premium.

     

    5.16           Legal
      Proceedings.
      There
      is no Litigation instituted or pending, or, to the Knowledge of the Buyer,
      threatened against the Buyer or any of its subsidiaries, or against any Asset,
      employee benefit plan, interest, or right of any of them, except as could not
      reasonably be expected to have a Material Adverse Effect on the Buyer, nor
      are
      there any Orders of any Regulatory Authorities, other governmental authorities,
      or arbitrators outstanding against any the Buyer or its subsidiaries, except
      as
      could not reasonably be expected to have a Material Adverse Effect on the
      Buyer.  There is no Litigation as of the date of this Agreement to
      which the Buyer or any of its subsidiaries is a party and that names the Buyer
      or any of its subsidiaries as a defendant or cross-defendant and where the
      maximum exposure is estimated to be $250,000 or more.

     

    5.17           Proprietary
      Rights.  

     

    (a)           Ownership
      and Right to Use.  The Buyer owns, has been granted a license to
      use or otherwise has the right to use all of the Intellectual Property that
      it
      uses, or holds for use, in its business (the “Buyer Proprietary
      Rights”).  

     

    (b)           Trade
      Secrets.  The Buyer has taken efforts that are reasonable under
      the circumstances to prevent unauthorized disclosure to any other Person of
      such
      portions of the Buyer’s trade secrets that would enable such Person to compete
      with the Buyer within the scope of the Buyer’s business as now conducted and as
      presently proposed to be conducted.

     

    (c)           No
      Infringement.  The Buyer has not interfered with, infringed upon
      or misappropriated the Intellectual Property of any other Person and the
      continued operation of the Buyer’s business by the Company, in the manner that
      such business is currently conducted or proposed to be conducted, will not
      interfere with, infringe upon or misappropriate the Intellectual Property of
      any
      other Person.  To the Knowledge of the Buyer, no Person is interfering
      with, infringing upon or misappropriating any Buyer Proprietary
      Right.  No claim has been asserted against the Buyer by any
      Person:  (i) that such Person has any right, title or interest in
      or to any of the Buyer Proprietary Rights; (ii) that such Person has the
      right to use any of the Buyer Proprietary Rights; (iii) to the effect that
      any past, present or projected act or omission by the Buyer infringes the
      Intellectual Property of such Person; or (iv) that challenges the Buyer’s
      right to use any of the Buyer Proprietary Rights.  No facts or
      circumstances exist that, with or without the passing of time or the giving
      of
      notice or both, might reasonably serve as the basis for any such
      claim.

     

    5.18           Reports.  Since
      the date of its organization, each of the Buyer and its subsidiaries has timely
      filed all reports and statements, together with any amendments required to
      be
      made with respect thereto, that it was required to file with any Regulatory
      Authorities, except failures to file that could not reasonably be expected
      to
      have a Material Adverse Effect on the Buyer.  As of their respective
      dates, each of such reports and documents, including the financial statements,
      exhibits, and schedules thereto, complied with all applicable Laws, except
      noncompliance that could not reasonably be expected to have a Material Adverse
      Effect on the Buyer.

     

    5.19           Registration
      Statement; Proxy Statement.  Subject
      to the accuracy of the representations contained in Section
      4.19, the Registration Statement covering the shares of the Buyer’s

     

     

    
      
        
        

      

      
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    stock
      to
      be issued pursuant to this Agreement shall not, at the time the Registration
      Statement (including any amendments or supplements thereto) is declared
      effective by the SEC, contain any untrue statement of a Material fact or omit
      to
      state any Material fact required to be stated therein or necessary to make
      the
      statements therein not misleading.  Subject to the accuracy of the
      representations contained in Section 4.19, the Proxy Statement
      to be sent to the shareholders of the Company to consider, at the Shareholder
      Meeting, the Merger, will not, on the date the Proxy Statement is first mailed
      to shareholders, at the time of the Shareholder Meeting and at the Effective
      Time, contain any untrue statement of a Material fact or omit to state any
      Material fact necessary to make the statements therein, in light of
      circumstances under which they were made, not misleading.  If at any
      time prior to the Effective Time any event relating to the Buyer or the Buyer
      Bank or any of their affiliates, officers or directors should be discovered
      by
      the Buyer or the Buyer Bank that should be set forth in an amendment to the
      Registration Statement or a supplement to the Proxy Statement, the Buyer or
      the
      Buyer Bank will promptly inform the Company and prepare an amendment for filing
      with the SEC, subject to review and approval of the Company, which approval
      shall not be unreasonably withheld or delayed.  The Proxy Statement
      shall comply in all Material respects with the requirements of the Securities
      Laws and the rules and regulations thereunder.  Notwithstanding the
      foregoing, the Buyer makes no representation or warranty with respect to any
      information supplied by the Company and its subsidiaries that is contained
      or
      incorporated by reference in, or furnished in connection with the preparation
      of, the Registration Statement or the Proxy Statement.

     

    5.20           Accounting,
      Tax, and Regulatory Matters.  To
      the Knowledge of the Buyer, none of the Buyer or it subsidiaries or any
      Affiliate thereof has taken or agreed to take any action, that could reasonably
      be expected to (i) prevent the Merger from qualifying as a reorganization within
      the meaning of Section 368(a) of the Internal Revenue Code, or (ii) Materially
      impede or delay receipt of any Consents of Regulatory Authorities referred
      to in
Section 8.1(b) of this
      Agreement.

     

    5.21           Derivatives.  All
      interest rate swaps, caps, floors, option agreements, futures and forward
      contracts, and other similar risk management arrangements, whether entered
      into
      for the account of the Buyer or it subsidiaries or their customers were entered
      into (i) in accordance with prudent business practices and all applicable Laws,
      and (ii) with counterparties believed to be financially
      responsible.

     

    5.22           Certain
      Regulated Businesses.  Neither
      the Buyer nor any of its subsidiaries is an “investment company” as defined in
      the Investment Company Act of 1940, as amended.

     

    5.23           Commissions.  Other
      than Raymond James & Associates, Inc., no broker, finder or other Person is
      entitled to any brokerage fees, commissions or finder’s fees in connection with
      the transactions contemplated hereby by reason of any action taken by the Buyer,
      any of its subsidiaries or any of the Buyer’s shareholders.

     

    ARTICLE
      VI

     

    COVENANTS

     

    6.1           Covenants
      of the Company.

     

    (a)           Ordinary
      Conduct of Business.  Except as otherwise expressly permitted by
      this Agreement, the Company will, and will cause each of its subsidiaries to,
      from the date of this Agreement to the Closing, conduct its business in the
      ordinary course in substantially the same manner as presently conducted and
      make
      reasonable commercial efforts consistent with past practices to preserve its
      relationships with other Persons.  Additionally, except as otherwise
      contemplated by this Agreement or as set forth on
Section 6.1(a) of the Company’s Disclosure Schedule, the
      Company will not, and it will not permit its subsidiaries to, do any of the
      following without the prior written consent of the Buyer, which consent will
      not
      be unreasonably withheld or delayed:

     

     

    
      
        
        

      

      
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    (i)           amend
      its governing documents;

     

    (ii)           authorize
      for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
      any stock or stock options (including the grant of reload options in connection
      with the exercise of existing stock options) or other equity equivalents of
      any
      class or any other of its securities, or amend any of the terms of any
      securities outstanding as of the date hereof; provided that nothing in
      this Section 6.1(a)(ii) shall preclude the holders of
      Company stock options that have vested in accordance with their terms and the
      terms of the plan or plans under which such stock options were issued from
      exercising such stock options for the purchase of Company common stock, and
      provided further that any such permitted exercise shall not result
      in the grant of any reload options;

     

    (iii)           (A)
      split, combine or reclassify any shares of its capital stock, (B) declare,
      set
      aside or pay any dividend or other distribution (whether in cash, stock or
      property or any combination thereof) in respect of its capital stock,(except
      for
      regular quarterly cash dividends paid in accordance with past practice at the
      rate of $0.64 per share per annum, including the payment of any quarterly
      portion thereof as is necessary to prevent the Company’s shareholders from
      failing to receive a quarterly dividend from either the Company or the Buyer
      during any particular calendar quarter), or (C) redeem or otherwise acquire
      any of its securities;

     

    (iv)           (A) incur
      or assume any long-term or short-term debt or issue any debt securities other
      than in the ordinary course of business consistent with past practice or
      (B) other than in the ordinary course of business consistent with past
      practice assume, guarantee, endorse or otherwise become liable or responsible
      (whether directly, contingently or otherwise) for the obligations of any other
      Person, (C) make any loans, advances or capital contributions to, or
      investments in, any other Person, other than in the ordinary course and
      consistent with past practice, but in any event not to exceed an amount per
      loan
      of $400,000, pledge or otherwise encumber shares of its capital stock,
      (D) mortgage or pledge any of its assets, tangible or intangible, or create
      or suffer to exist any Lien thereupon, other than Liens permitted by the proviso
      clause in the definition of Liens and Liens created or existing in the ordinary
      course of business consistent with past practice or (E) prepay or accelerate
      amortization of any outstanding Company ESOP indebtedness;

    (v)           except
      as required by Law or as contemplated herein, adopt or amend any Benefit
      Plan;

     

    (vi)           except
      as provided in Section 6.2(c), grant to any director or
      executive officer or employee any stock options or increase in his or her
      compensation or pay or agree to pay to any such person other than in the
      ordinary course of business consistent with past practices any bonus, severance,
      change of control or termination payment, specifically including any such
      payment that becomes payable upon termination of such Person by it after the
      Closing;

     

    (vii)           enter
      into or amend any employment Contract;

     

     

     

    
      
        
        

      

      
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    (viii)           acquire,
      sell, lease or dispose of any assets outside the ordinary course of business,
      or
      any other assets that in the aggregate are Material to it, or acquire any Person
      (or division thereof), any equity interest therein or the assets thereof outside
      the ordinary course of business consistent with past practice;

     

    (ix)           change
      or modify any of the accounting principles or practices used by it
      or  revalue in any Material respect any of its assets, including
      without limitation writing down the value of inventory or writing off notes
      or
      accounts receivable other than in the ordinary course of business or as required
      by GAAP;

     

    (x)           (A)
      enter into, cancel or modify any Contract other than in the ordinary course
      of
      business consistent with past practices, but not in any event involving an
      amount in excess of $10,000;  (B) authorize or make any capital
      expenditure or expenditures that, individually or in the aggregate, are in
      excess of $25,000; or (C) enter into or amend any Contract with respect to
      any
      of the foregoing;

     

    (xi)           pay,
      discharge or satisfy, cancel, waive or modify any claims, liabilities or
      obligations (absolute, accrued, asserted or unasserted, contingent or
      otherwise), other than the payment, discharge or satisfaction in the ordinary
      course of business of liabilities reflected or reserved against in or
      contemplated by the Company Financial Statements, or incurred in the ordinary
      course of business consistent with past practices;

     

    (xii)           settle
      or compromise any pending or threatened suit, action or claim in an amount
      greater than $10,000 per claim or $50,000 in the aggregate;

     

    (xiii)           take,
      or agree in writing or otherwise to take, any action that would make any of
      the
      representations or warranties of the Company contained in this Agreement untrue
      or incorrect or result in any of the conditions set forth in this Agreement
      not
      being satisfied; or

     

    (xiv)           agree,
      whether in writing or otherwise, to do any of the foregoing.

     

    (b)           Consents.  The
      Company will exercise its best efforts to obtain such Consents as may be
      necessary or desirable for the consummation of the transactions contemplated
      hereby, including without limitation from the appropriate Governmental
      Authorities and the parties to those Contracts listed on
Section 4.2 of the Company’s Disclosure Schedule such that
      such Contracts shall survive the Merger and not be breached
      thereby.

     

    (c)           Shareholder
      Approval.  Subject to Section 6.1(d),
the Company will, at the earliest practicable
      date, hold the
      Shareholder Meeting and take all lawful action to solicit the approval and
      adoption of this Agreement (and the related Plan of Merger) and the Merger
      by
      the requisite vote.  In connection with such shareholder meeting,
      subject to Section 6.1(d), the Company’s board of directors
      will recommend to the Company’s shareholders such approvals.  Such
      recommendation shall be contained in the Proxy Statement.

     

    (d)           Acquisition
      Proposals.

     

    (i)           The
      Company shall not, and shall not permit any of its subsidiaries or any of the
      respective Affiliates, representatives, advisers or agents of the Company and
      its subsidiaries to, directly or indirectly, (x) take any action to
      solicit, initiate or encourage any Acquisition Proposal, or (y) participate
      in any discussions or negotiations 

     

     

    
      
        
        

      

      
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    with
      or
      encourage any effort or attempt by any other Person or take any other action
      to
      facilitate an Acquisition Proposal.  From and after the date hereof,
      the Company shall, and shall cause its subsidiaries and the Affiliates,
      representatives, advisers and agents of the Company and its subsidiaries to,
      cease doing any of the foregoing.

     

    (ii)           Notwithstanding
      the foregoing, in the event of the receipt by the Company or any of its
      subsidiaries of an Acquisition Proposal and (x) the Company’s board of directors
      concludes in good faith that there is a reasonably likelihood that such
      Acquisition Proposal constitutes or is reasonably likely to result in a Superior
      Proposal, and (y) neither the Company nor any of its subsidiaries or any of
      the
      respective Affiliates, representatives, advisers or agents of the Company and
      its subsidiaries solicited, initiated or encouraged such Acquisition Proposal,
      the Company may furnish to any party information and access in response to
      a
      request for information or access made incident to such Acquisition Proposal
      and
      may participate in discussions and negotiate with such party concerning its
      Acquisition Proposal to the extent that the Company’s board of directors shall
      have determined, based upon the advice of outside counsel experienced in such
      matters, that failing to take such action would violate the directors’ fiduciary
      duties under applicable Law; provided, however, that prior to
      providing any nonpublic information permitted to be provided by this subsection
      (ii), the Company and its subsidiaries shall have entered into a confidentiality
      agreement with such third party on terms no less favorable to them than
      contained in the Confidentiality Agreements.

     

    (iii)           Unless
      this Agreement has been terminated in accordance with the provisions hereof,
      the
      board of directors of the Company shall notify the Buyer immediately of any
      and
      all communications regarding or in anticipation of an Acquisition Proposal
      and
      of any Acquisition Proposals that are made, and shall in such notice indicate
      in
      reasonable detail, to the extent reasonably possible, the identity of the
      offeror and the terms and conditions of such Acquisition Proposal and shall
      keep
      the Buyer promptly advised of all developments relating thereto or that could
      culminate in the board of directors withdrawing, modifying or amending its
      recommendation of the Merger and the other transactions contemplated by this
      Agreement. Unless this Agreement has been terminated, neither the Company nor
      any of its subsidiaries shall waive or modify any provisions contained in any
      confidentiality agreement entered into relating to a possible acquisition
      (whether by merger, stock purchase, asset purchase or otherwise) or
      recapitalization of the Company or any of its subsidiaries.

     

    (e)           Employee
      Benefit Plans.

     

    (i)           The
      Company shall, prior to the Effective Time, in accordance with applicable law
      and the terms of the relevant plan documents, (A) take all actions as may be
      necessary to satisfy or pay in full all obligations of the Company or its
      subsidiaries under the following plans (to the extent due and payable prior
      to
      the Effective Time) and to terminate such plans: the 1998 Recognition and
      Retention Plan, the 2003 Long-Term Incentive Stock Benefit Plan, and the First
      Federal Savings and Loan Association of Cheraw Non-Qualified Supplemental Plan;
      (B) comply with the applicable provisions of Code Section 409A and the
      regulations promulgated thereunder and IRS Notice 2005-1, including amending
      such plans if required, such that no interest or additional tax is payable
      under
      Section 409A(a)(1)(B) of the Code; (C) with respect to the First Federal Savings
      and Loan Association of Cheraw Non-Qualified Supplemental Plan, obtain from
      each
      participant receiving payment thereunder an acknowledgment acknowledging the
      payment of the amounts due and releasing the Buyer, Buyer Bank, the Company
      and

     

     

    
      
        
        

      

      
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    Company
      Bank from any further obligations thereunder; and (D) provide to the Buyer
      written evidence, in form reasonably acceptable to the Buyer, that the Company
      has complied with the provisions of this paragraph.

     

    (ii)           With
      respect to the First Federal Savings and Loan Association of Cheraw Restated
      Non-Qualified Deferred Compensation Plan, the Company and Company Bank shall,
      prior to the Effective Time, comply with the applicable provisions of Code
      Section 409A and the regulations promulgated thereunder and IRS Notice 2005-1,
      including amending such Plan if required, such that no interest or additional
      tax is payable under Section 409A(a)(1)(B) of the Code.  As of the
      Effective Time, the Buyer shall assume and honor Company and Company Bank’s
      obligations under such Plan.

     

    (iii)           With
      respect to the Great Pee Dee Bancorp, Inc. and First Federal Savings and Loan
      Association of Cheraw Deferred Compensation Plan for Directors (the
“2002 Plan”) and the Great Pee Dee Bancorp and Sentry Bank
& Trust 2005 Deferred Compensation Plan for Directors (the
“2005
      Plan”), Company and Company Bank shall, prior to the Effective Time, in
      accordance with applicable law and the terms of the Plan documents and such
      that
      no interest or additional tax is payable under Section 409A(a)(1)(B) of the
      Code, (A) comply with the applicable provisions of Code Section 409A and the
      regulations promulgated thereunder and IRS Notice 2005-1, including amending
      such Plans if required; and (B) terminate the 2002 Plan and provide for payments
      of Plan benefits due to participants.  As of the Effective Time, the
      Buyer shall assume and honor the Company and Company Bank’s obligations under
      such Plans.  The Plans shall provide for the following benefit
      distributions, which shall not trigger interest or additional tax payable under
      Section 409A(a)(1)(B) of the Code: with respect to the 2005 Plan, Herbert W.
      Watts and H. Malloy Evans, Jr. shall receive distributions under the elections
      described later in this paragraph, and all participants in the 2002 Plan shall
      receive distributions in three equal annual installments commencing at the
      later
      of January 1, 2008 or the Effective Time.  With respect to the 2005
      Plan, prior to the Effective Time and in any event prior to December 31, 2007
      (the end of the transition period under Section 409A of the Code), Mr. Watts
      shall execute and deliver to the Company and to the Buyer an election form
      indicating that he shall receive a single lump sum payment of his account
      balance, and Mr. Evans shall execute and deliver to the Company and to the
      Buyer
      an election form indicating that he shall receive his account balance in equal
      monthly or annual installments over a three (3) year
      period.  Distributions under the 2005 Plan shall commence at the later
      of January 1, 2008, or the Effective
      Time.  Following the distribution of all assets held thereunder, the
      2005 Plan shall be terminated.

     

    (iv)           Concurrently
      with the execution and delivery of this Agreement, the Company and Company
      Bank
      shall prepare an acknowledgement in the form attached as Section
      6.1(e) of the Company Disclosure Schedule (an “Acknowledgement
      Agreement”), which shall, in a manner consistent with the Plans (as
      amended, if applicable) that are the subject of paragraphs (ii) and (iii) above,
      set forth the manner in which each participant’s rights under such Plans will be
      assumed and honored by the Buyer.

     

    (v)           The
      Company and Company Bank may, prior to the Effective Time, amend such rabbi
      trusts that hold assets in the (A) First Federal Savings and Loan Association
      of
      Cheraw Restated Non-Qualified Deferred Compensation Plan, (B) the 2002 Plan,
      (C)
      the 2005 Plan, and (D) the First Federal Savings and Loan Association of

     

     

    
      
        
        

      

      
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    Cheraw
      Non-Qualified Supplemental Plan, in order to consolidate assets from such plans
      within a single rabbi trust or more than one rabbi trust as it deems necessary
      or appropriate to provide for an orderly distribution of benefits to
      participants in such Plans.  Following the distribution of all plan
      assets held thereunder, the rabbi trusts shall be terminated.

     

    (vi)           After
      the date of this Agreement, the 2005 Plan shall be frozen, and neither the
      Company nor the Company Bank shall make or permit to be made any additional
      contributions or deferrals under any plan that is a “nonqualified deferred
      compensation plan” under Treas. Reg. § 1.409A-1(a).

     

    6.2           Covenants
      of the Buyer.

     

    (a)           Reservation
      of Shares of the Buyer’s Stock.  The Buyer shall reserve for
      issuance a sufficient number of shares of the Buyer’s Stock to cover the
      issuances of such stock required hereby.

     

    (b)           Directors.

     

    (i)           Effective
      at the Effective Time, the Buyer shall cause James C. Crawford to be elected
      or
      appointed as a member of the board of directors of the Buyer and the Buyer
      Bank;
      provided that Mr. Crawford meets the independence requirements of the Nasdaq
      Global Select Market.  If Mr. Crawford does not meet the independence
      requirements of the Nasdaq Global Select Market, the Buyer shall cause to
      elected or appointed as a member of the board of directors of the Buyer and
      Buyer Bank another member of the board of directors of the Company and the
      Company Bank who meets the independence requirements of the Nasdaq Global Select
      Market.  The Buyer shall include such designated individual as a
      candidate for election as director and recommend and solicit proxies for his
      or
      her election at such next annual meeting.  After such meeting, such
      designated person shall be subject to the same nomination and election
      procedures as the other directors on the boards of the Buyer and the Buyer
      Bank.

     

    (ii)           The
      Company’s directors at the Effective Time who do not join the Buyer’s board of
      directors will have the option to participate on a local advisory board of
      the
      Buyer (which advisory board the Buyer agrees to establish and maintain for
      at
      least three years).  Each former Company director who joins such
      advisory board shall be paid a fee of $1,000 per month for his or her good
      faith
      service in promoting the Buyer and the Buyer
      Bank as a member of such advisory board for the three year period beginning
      on
      the Effective Date and ending on the third anniversary of the Effective
      Date.  After the third anniversary of the Effective Date, participants
      on the local advisory board shall be paid Buyer’s normal advisory board fee for
      service as a member of such advisory board.

     

    (c)           Employees.

     

    (i)           Except
      as covered by the Employment Agreement and any existing employment agreements
      of
      Company set forth on Section 4.15(a) of the Company Disclosure
      Schedule, any and all of the Company’s employees will be employed on an
“at-will” basis, and nothing in this Agreement shall be deemed to constitute an
      employment agreement with any such person to obligate the Buyer or any Affiliate
      thereof to employ any such person for any specific period of time or in any
      specific position or to restrict the Buyer’s or any of its Affiliates’ right to
      terminate the employment of any such person at any time and for any reason
      satisfactory to it.

     

     

     

    
      
        
        

      

      
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    (ii)           Company
      employees who continue employment with the Buyer or any of its subsidiaries
      will
      be eligible for benefits consistent with those of existing employees of the
      Buyer or such subsidiary, with credit for past service with the Company or
      the
      Company Bank for purposes of participation, eligibility and vesting (but not
      for
      the calculation of any benefit accrual under any defined benefit plan);
provided, however, in the event of any termination or
      consolidation of any Company or Company Bank health plan with any Buyer or
      Buyer
      Bank health plan, the Buyer or Buyer Bank shall make available to employees
      of
      the Company or Company Bank who continue employment with the Buyer or Buyer
      Bank
      (“Continuing Employees”) and their dependents employer-provided
      health coverage on the same basis as it provides such coverage to employees
      of
      the Buyer and Buyer Bank.  Unless a Continuing Employee affirmatively
      terminates coverage under a Company or Company Bank health plan prior to the
      time that such Continuing Employee becomes eligible to participate in the Buyer
      or Buyer Bank health plan, no coverage of any of the Continuing Employees or
      their dependents shall terminate under any of the Company or Company Bank health
      plans prior to the time such Continuing Employees and their dependents become
      eligible to participate in the health plans, programs and benefits common to
      all
      employees of Buyer and Buyer Bank and their dependents.  In the event
      of any termination of any Company or Company Bank health plan, or consolidation
      of any Company or Company Bank health plan with any Buyer Bank health plan,
      any
      coverage limitation under the Buyer Bank health plan due to any pre-existing
      condition shall be waived by the Buyer Bank health plan to the degree that
      such
      condition was covered by the Company or Company Bank health plan and such
      condition would otherwise have been covered by the Buyer Bank health plan in
      the
      absence of such coverage limitation.  All Continuing Employees who
      cease participating in a Company Bank health plan and become participants in
      a
      comparable Buyer Bank health plan (i) shall receive credit for any co-payment
      and deductibles paid under Company Bank’s health plan for purposes of satisfying
      any applicable deductible or out-of-pocket requirements under the Buyer Bank
      health plan, upon substantiation, in a form satisfactory to Buyer Bank that
      such
      co-payment and/or deductible has been satisfied, and (ii) will not be subject
      to
      any exclusion or penalty for preexisting conditions that were covered under
      the
      Company or Company Bank’s health plans as of the Closing Date or any waiting
      period relating to coverage under the Buyer or Buyer Bank’s health
      plans.  There shall be no waiting periods applicable to any Company or
      Company Bank employees to participate in such benefits (including applicable
      insurance benefits).

     

    (iii)           The
      Buyer or one of its subsidiaries shall honor any and all vacation accrued by
      the
      employees of the Company and the Company Bank and any sick leave up to 30
      days.

     

    (iv)           The
      Buyer shall provide severance  to any employees of the Company that
      are terminated in connection with the Merger, at the rate of two (2) weeks
      of
      base salary per year of service with the Company, with a minimum of three (3)
      months of severance.  In addition, the Buyer shall offer outplacement
      services for Company employees terminated in connection with the
      Merger.

     

    (v)           Except
      as otherwise provided herein, the Buyer will honor the existing employment
      agreements and other Company Contracts set forth on
Section 4.15(a) of the Company Disclosure
      Schedule.

     

    (vi)           Immediately
      prior to the Effective Time, the Company shall transfer to Mr. Long the title
      to
      the Company vehicle that Mr. Long currently drives.

     

     

    
      
        
        

      

      
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    (vii)           The
      Company and Company Bank may amend or restate the employment agreement by and
      between Company Bank and John Long and the severance agreements by and between
      Company Bank and each of Johnny Digby and Terry Laughter by no later than the
      earlier of the Closing Date or December 31, 2007, in order to cause a “change in
      control” to be a triggering event for distributions (without the necessity of
      separation from service) and to require the amounts due to John Long and Terry
      Laughter to be paid in a lump sum, and the amounts due to Johnny Digby to be
      paid in three (3) annual installments, in a manner that is consistent with
      Section 409A of the Code.  Company Bank shall pay such amounts, which
      are set forth in Section 6.2(c) of the Company Disclosure
      Schedule (such amounts shall not be increased in the event the Effective Time
      occurs in 2008 rather than 2007), commencing on the later of January 1, 2008
      or
      the Effective Time; provided that in no event will the Company Bank be obligated
      to pay any amounts that would be disallowed as a deduction under Section 280G
      of
      the Internal Revenue Code.  Prior to the Effective Time, Company Bank
      shall obtain an agreement (a “Settlement Agreement”) in the
      form attached to Section 6.2(c) of the Company Disclosure
      Schedule, from each of John Long, Johnny Digby and Terry Laughter, to accept
      in
      full settlement of his or her rights under the employment or severance agreement
      the amounts and benefits set forth in the Settlement Agreements. Section
      6.2(c) of the Company Disclosure Schedule sets forth the maximum safe
      harbor amounts payable to each of John Long, Johnny Digby and Terry Laughter
      within the meaning of Section 280G of the Code.

     

    (viii)           In
      exchange for their willingness to remain in the employ of the Company Bank
      following the Effective Time and provided they do not voluntarily terminate
      their employment prior to the earlier to occur of (A) ninety (90) days following
      the Effective Time or (b) the date of the data processing conversion with
      respect to the merger of Company Bank into Buyer Bank, John Long shall receive
      a
      retention bonus cash payment of $70,000 and Johnny Digby and Terry Laughter
      shall each receive a retention bonus cash payment of $25,000, all upon the
      earlier to occur of ninety (90) days following the Effective Time or the date
      of
      the data processing conversion.

    (d)           Directors
      and Officers Insurance and Indemnification.

     

    (i)           The
      Buyer shall maintain, or shall cause the Buyer Bank to maintain, in effect
      for
      six (6) years from the Closing Date, if available, the current directors’ and
      officers’ liability insurance policies maintained by the Company;
provided, however, that Buyer may substitute therefor policies of
      at least the same coverage containing terms and conditions that are not taken
      as
      a whole Materially less favorable to the insured with respect to matters
      occurring prior to the Effective Time.

     

    (ii)           From
      and after the Effective Time, the Buyer shall, or shall cause the Buyer Bank
      to,
      indemnify (including the advancement of expenses), defend and hold harmless
      each
      person who is now, or who has been at any time before the date hereof or who
      becomes before the Effective Time, an officer or director of the Company or
      Company Bank (the “Indemnified Parties”) against all losses,
      claims, damages, costs, expenses (including reasonable attorneys’ fees),
      liabilities or judgments or amounts that are paid in settlement (which
      settlement shall require the prior written consent of Buyer, which consent
      shall
      not be unreasonably withheld) of or in connection with any claim, action, suit,
      proceeding or investigation, whether civil, criminal, or administrative (each
      a
“Claim”), in which an Indemnified Person is, or is threatened
      to be made, a party or witness arising in whole or in part out of the fact
      that
      such person is or was a director, 

     

     

    
      
        
        

      

      
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    officer
      or employee of the Company Bank or any of its subsidiaries if such Claim
      pertains to any matter or fact arising, existing or occurring before the
      Effective Time (including without limitation the Merger and the other
      transactions contemplated hereby), regardless of whether such Claim is asserted
      or claimed before, at or after the Effective Time (the “Indemnified
      Liabilities”), to the fullest extent required or permitted by the
      Company’s Certificate of Incorporation (or as to the Company Bank, its charter)
      and permitted by applicable Law in effect as of the date hereof or as amended
      applicable to a time before the Effective Time.  Any Indemnified
      Person wishing to claim indemnification under this Section
      6.2(d)(ii), upon learning of any Claim, shall notify the Buyer (but the
      failure so to so notify shall not relieve the Buyer or the Buyer Bank from
      any
      liability that it may have under this Section 6.2(d)(ii),
      except to the extent such failure Materially prejudices the Buyer or its
      Affiliates).  In the event of any such Claim, whether arising before,
      on or after the Effective Time, (i) the Buyer shall have the right to
      assume the defense thereof (in which event the Indemnified Parties will
      cooperate in the defense of any such matter) and upon such assumption, the
      Buyer
      shall not be liable to any Indemnified Person for any legal expenses of other
      counsel or any other expenses subsequently incurred by any Indemnified Person
      in
      connection with the defense therefor, except that if the Buyer elects not to
      assume such defense, or counsel for the Indemnified Parties reasonably advises
      the Indemnified Parties that there are or may be (whether or not any have yet
      actually arisen) issues that raise conflicts of interest between the Buyer
      and
      the Indemnified Parties, the Indemnified Parties may retain counsel reasonably
      satisfactory to them, and the Buyer shall pay the reasonable fees and expenses
      of such counsel for the Indemnified Parties, (ii) the Buyer shall be
      obligated pursuant to this paragraph to pay for only one firm of counsel for
      all
      Indemnified Parties (unless counsel for one or more Indemnified Parties advises
      his or her client that a conflict exists between his or her client and one
      or
      more other Indemnified Parties, in which event the fees and expenses of such
      counsel shall also be paid by the Buyer) whose reasonable fees and expenses
      shall be paid promptly as statements are received, (iii) the Buyer shall
      not be liable for any settlement effected without its prior written consent
      (which consent shall not be unreasonably withheld), and (iv) the Buyer
      shall have no obligation hereunder to any Indemnified Person when and if a
      court
      of competent jurisdiction shall ultimately determine,
      and such determination shall have become final and nonappealable, that
      indemnification of such Indemnified Person in the manner contemplated hereby
      is
      prohibited by applicable Law (it being acknowledged by the parties hereto that
      in the event of any good faith dispute about the lawfulness of such
      indemnification, the Buyer or the Buyer Bank may place the amounts at issue
      in
      escrow pending the final and nonappealable determination of such
      dispute).  The obligations of the Buyer and the Buyer Bank pursuant to
      this Section 6.1(d)(i)(d) are intended to be enforceable
      against the Buyer and the Buyer Bank directly by the Indemnified
      Parties.  The indemnification provided herein shall be in addition to
      any indemnification rights that any Indemnified Parties may have by Law,
      pursuant to the certificate of incorporation or bylaws of the Company or any
      of
      its subsidiaries or pursuant to the terms of any employee benefit plan or trust
      for which any Indemnified Party serves as a fiduciary.

     

    6.3           Covenants
      of All Parties to the Agreement.

     

    (a)           Reorganization
      for Tax Purposes.  Each of the parties hereto undertakes and
      agrees to use its reasonable efforts to cause the Merger to qualify as a
“reorganization” within the meaning of Section 368(a) of the Code and
      agrees that it will not intentionally take any action that would cause the
      Merger to fail to so qualify.

     

     

    
      
        
        

      

      
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    (b)           Notification.  Each
      of the parties hereto agrees to notify promptly the other parties hereto of
      any
      event, fact, or other circumstance arising after the date hereof that would
      have
      caused any representation or warranty herein, including any information on
      any
      schedule hereto, to be untrue or misleading had such event, fact, or
      circumstance arisen prior to the execution of this Agreement.  The
      parties hereto will exercise their reasonable best efforts to ensure that no
      such events, facts, or other circumstances occur, come to pass, or become
      true.

     

    (c)           Consummation
      of Agreement.  The parties hereto each agree to use their
      reasonable efforts to perform or fulfill all conditions and obligations to
      be
      performed or fulfilled by them under this Agreement so that the transactions
      contemplated hereby shall be consummated.  Except for events that are
      the subject of specific provisions of this Agreement, if any event should occur,
      either within or outside the control of the parties hereto, that would
      Materially delay or prevent fulfillment of the conditions upon the obligations
      of any party hereto to consummate the transactions contemplated by this
      Agreement, each party will notify the others of any such event and the parties
      will use their reasonable, diligent and good faith efforts to cure or minimize
      the same as expeditiously as possible.  Each party hereto shall use
      its reasonable efforts to obtain all Consents necessary or desirable for the
      consummation of the transactions contemplated by this Agreement and to assist
      in
      the procuring or providing of all documents that must be procured or provided
      pursuant to the provisions hereof.  Notwithstanding anything to the
      contrary contained in this Agreement, none of the parties hereto will take
      any
      action that would (i) adversely affect or Materially delay receipt of the
      Consents contemplated in Section 8.1(b), (ii) adversely
      affect or Materially delay its ability to perform its covenants and agreements
      made pursuant to this Agreement or (iii) adversely affect the ability of any
      party to obtain a required approval from any Regulatory Authority.

     

    (d)           Corporate
      Action.  Subject to the terms and conditions hereof, each of the
      parties hereto shall, and each of them shall cause their subsidiaries to, take
      all corporate action (including the Company’s recommendation of the Merger by
      its board of directors to its shareholders) and use each of their best efforts
      to cause all corporate and shareholder action to be taken as is necessary to
      consummate and give effect to the Merger.

     

    (e)           Maintenance
      of Corporate Existence.  Each of the parties hereto shall, and
      each of them shall cause their Affiliates to, maintain in full force and effect
      each their respective corporate or legal existences.

     

    (f)           Registration
      Statement and Proxy Statement.  As soon as reasonably practicable
      after the execution of the Agreement and after the furnishing by the Company
      and
      the Company Bank of all information required to be contained therein, the Buyer
      shall file with the SEC the Registration Statement on Form S-4 (or on such
      other
      form as shall be appropriate), which shall contain the Proxy
      Statement.  As soon as reasonably practicable after all consents
      contemplated by Section 8.1(b) have been obtained, the
      Buyer and the Company shall prepare, and the Company shall deliver by mail
      to
      the holders of record of the Company Shares, the Proxy Statement.  The
      Buyer and the Company shall each use their reasonable best efforts to cause
      the
      Proxy Statement to comply in all Material respects with the requirements of
      the
      Securities Laws and the rules and regulations thereunder.  The Buyer
      and the Company shall each use all reasonable efforts to cause the Registration
      Statement to become effective as soon thereafter as
      practicable.  Subject to Section 6.1(d), the Proxy
      Statement shall include the recommendation of the Boards of Directors of the
      Company in favor of the Merger.

     

    (g)           Applications
      and Reports. The Buyer shall prepare and file as soon
      as reasonably practical after the date of this Agreement, and the Company shall
      cooperate in the preparation and, where appropriate, filing of, all
      applications, reports and statements with all Regulatory Authorities having
      jurisdiction over the transactions contemplated by this Agreement seeking the
      requisite Consents necessary to consummate the transactions contemplated by
      this
      Agreement.

     

     

    
      
        
        

      

      
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    (h)           Closing.  Subject
      to the terms and conditions hereof, the parties hereto shall use their
      reasonable best efforts to consummate the Closing within 30 days after all
      conditions to the Closing have been satisfied.

     

    (i)           Affiliate
      Agreements.  Not less than 30 days prior to the Effective Time,
      the Buyer shall deliver to the Company a letter identifying all Persons who,
      in
      the judgment of the Buyer, may be deemed an  “affiliate” of the
      Company for purposes of Rule 145 under the Securities Act and applicable SEC
      rules and regulations, and such list shall be updated as necessary to reflect
      changes from the date of delivery thereof.  The Company shall use
      reasonable best efforts to cause each person identified on such list to deliver
      to the Buyer not less than 10 days prior to the Effective Time, a written
      agreement substantially in the form attached hereto as Exhibit
      C.

     

    (j)           Section
      16(b) Exemption.  Assuming that the Company delivers to the Buyer
      the Company Section 16 Information (as defined below) in a timely fashion
      prior to the Effective Time, the Board of Directors of the Buyer, or a committee
      of non-employee directors thereof (as such term is defined for purposes of
      Rule 16b-3(d) under the Exchange Act), shall reasonably promptly thereafter
      and in any event prior to the Effective Time adopt a resolution providing in
      substance that the receipt by the Company Insiders (as defined below) of the
      Buyer Common Stock in exchange for shares of the Company Common Stock, pursuant
      to the transactions contemplated hereby and to the extent such securities are
      listed in the Company Section 16 Information, are intended to be exempt
      from liability pursuant to Section 16(b) under the Exchange Act to the
      fullest extent permitted by applicable Law.  The “Company
      Section 16 Information” shall mean information accurate in all material
      respects regarding the Company Insiders and the number of shares of the Company
      Common Stock held by each such Company Insider and expected to be exchanged
      for
      the Buyer Common Stock in the Merger.  The “Company Insiders” shall
      mean those officers and directors of the Company who are subject to the
      reporting requirements of Section 16(a) of the Exchange Act and who are
      expected to be subject to Section 16(a) of the Exchange Act with respect to
      the
      Buyer Common Stock subsequent to the Effective Time.

     

    (k)           Company
      ESOP.  The Company ESOP shall be terminated as of, or immediately
      prior to, the Effective Time (all shares held by the Company ESOP shall be
      converted into the right to receive the Merger Consideration), all outstanding
      Company ESOP indebtedness shall be repaid from the Merger Consideration in
      the
      unallocated stock fund, and the balance shall be allocated as earnings of the
      Company ESOP and distributed to Company ESOP participants (subject to the
      receipt of a favorable determination letter from the IRS), as provided for
      in
      the Company ESOP and unless otherwise required by applicable Law.  In
      accordance herewith, the Company and Company Bank shall amend the Company ESOP
      to cause all account balances to be distributed in the form of lump sum
      distributions following the receipt of a favorable determination letter from
      the
      IRS on the termination of the Company ESOP.  Prior to the Effective
      Time, the Company and Company Bank, and following the Effective Time, Buyer
      and
      Buyer Bank shall use their respective best efforts in good faith to obtain
      such
      favorable determination letter (including, but not limited to, making such
      changes to the Company ESOP and the proposed allocations as may be requested
      by
      the IRS as a condition to its issuance of a favorable determination
      letter).  The Company and Company Bank, and following the Effective
      Time, Buyer and Buyer Bank, will adopt such amendments to the Company ESOP
      as
      may be reasonably required by this Section 6.3(k) in order to
      facilitate termination of the Company ESOP or by the IRS as a condition to
      granting such favorable determination letter on termination.  Until
      receipt of a favorable determination letter on termination from the IRS, neither
      the Company nor Company Bank, or following the Effective Time, the Buyer or
      Buyer Bank shall make any distribution from the Company ESOP relating to the
      termination of the Company ESOP except as may be required by applicable
      Law.  In the case of a conflict between the terms of this
Section 6.3(k) and the terms of the Company ESOP, the terms of
      the Company ESOP shall control; however, in the event of any such conflict,
      the
      Company and Company Bank before the Merger, 

     

     

    
      
        
        

      

      
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    and
      Buyer
      and Buyer Bank after the Merger, shall use their best efforts to cause the
      Company ESOP to be amended to conform to the requirements of this
Section 6.3(k).

     

    ARTICLE
      VII

     

    DISCLOSURE
      OF ADDITIONAL INFORMATION

     

    7.1           Access
      to Information.  Prior
      to the Closing Date, the parties hereto shall, and shall cause each of their
      subsidiaries to:

     

    (a)           give
      the other and its authorized representatives reasonable access, during normal
      business hours and upon reasonable notice, to its books, records, offices and
      other facilities and properties; and

     

    (b)           furnish
      the other with such financial and operating data and other information with
      respect to its business, condition (financial or otherwise) and properties,
      as
      it may reasonably request.

     

    7.2           Access
      to Premises.  Prior
      to Closing, the Company shall, and shall cause its subsidiaries to, give the
      Buyer and its authorized representatives reasonable access to all of the
      Company’s and its subsidiaries’ Real Property for the purpose of inspecting such
      property.

     

    7.3           Environmental
      Survey.  At
      its option, the Buyer may cause to be conducted Phase I environmental
      assessments of the Real Property of the Company and its subsidiaries, whether
      owned or leased, or any portion thereof, together with such other studies,
      testing and intrusive sampling and analyses as the Company shall deem
necessary
      or desirable (collectively, the “Environmental
      Survey”).  The Buyer shall complete all such Phase I
      environmental assessments within 45 days following the date of this Agreement
      and thereafter conduct and complete any such additional studies, testing,
      sampling and analyses within 45 days following completion of all Phase I
      environmental assessments.  Subject to the breach of any
      representation or warranty contained herein, the costs of the Environmental
      Survey shall be paid by the Buyer.

     

    7.4           Confidentiality.  The
      parties hereto acknowledge that each of the Buyer and the Company have
      previously executed a separate agreement (the “Confidentiality
      Agreement”) dated May 23, 2007 in contemplation of negotiations
      regarding the Merger and agree that such agreement shall continue in full force
      and effect in accordance with its terms.

     

    7.5           Publicity.  Without
      the prior consent of the other parties, no party hereto shall issue any news
      release or other public announcement or disclosure, or any general public
      announcement to its employees, suppliers or customers, regarding this Agreement
      or the transactions contemplated hereby, except as may be required by Law,
      but
      in which case the disclosing party shall provide the other parties hereto with
      reasonable advance notice of the timing and substance of any such
      disclosure.

     

    ARTICLE
      VIII

     

    CONDITIONS
      TO CLOSING

     

    8.1           Mutual
      Conditions.  The
      respective obligations of each party hereto to perform this Agreement and
      consummate the Merger and the other transactions contemplated hereby are subject
      to the satisfaction of the following conditions, unless waived by all parties
      hereto pursuant to Section 10.4 of this
      Agreement:

     

     

    
      
        
        

      

      
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    (a)           Adverse
      Proceedings.  Neither the Company nor the Buyer nor any
      shareholder thereof shall be subject to any order, decree or injunction of
      a
      court of competent jurisdiction that enjoins or prohibits the consummation
      of
      this Agreement or the Merger, and no Governmental Authority shall have
      instituted a suit or proceeding that is then pending and seeks to enjoin or
      prohibit the transactions contemplated hereby.  Any party who is
      subject to any such order, decree or injunction or the subject of any such
      suit
      or proceeding shall take any reasonable steps within that party’s control to
      cause any such order, decree or injunction to be modified so as to permit the
      Closing and to cause any such suit or proceeding to be dismissed.

     

    (b)           Consents.

     

    (i)           Regulatory
      Approval.  All Consents of, filings and registrations with, and
      notifications to, all Regulatory Authorities required for consummation of the
      Merger shall have been obtained or made and shall be in full force and effect
      and all waiting periods required by Law shall have expired.  No such
      Consent obtained from any Regulatory Authority shall be conditioned or
      restricted in a manner (including requirements relating to the raising of
      additional capital or the disposition of Assets) not reasonably anticipated
      as
      of the date of this Agreement that in the reasonable judgment of the Board
      of
      Directors of the Buyer or the Company would so Materially adversely impact
      the
      economic or business assumptions of the transactions contemplated by this
      Agreement that had such condition or requirement been known, such party would
      not, in its reasonable judgment, have entered into this Agreement.

     

    (ii)           Consents
      and Approvals.  Each party hereto shall have obtained any and all
      Consents required for consummation of the Merger or for the preventing of any
      Default under any Contract, including those Consents listed on
Section 4.2 of the Company’s Disclosure Schedule, except
      to the extent that the failure to obtain such any such Consents would not,
      individually or in the aggregate result in a Material Adverse Effect on such
      Person.

     

    (c)           Effectiveness
      of Registration Statement. The Registration Statement filed with the SEC
      covering the shares of the Buyer’s Stock to be issued pursuant hereto shall have
      been declared effective by the SEC, and no stop order suspending such
      effectiveness shall have been initiated or, to the Knowledge of the Buyer
      Parties, threatened by the SEC.

     

    (d)           Approval.  The
      Company’s shareholders shall have approved this Agreement and the Merger in
      accordance with applicable corporate law.

     

    (e)           Tax
      Opinion.  On the basis of facts, representations and assumptions
      that shall be consistent with the state of facts existing at the Closing Date,
      the Buyer and the Company shall have received an opinion of an acceptable tax
      advisor, reasonably acceptable in form and substance to each of them dated
      as of
      the Closing Date, substantially to the effect that, for federal income tax
      purposes:  (i) the Merger, when consummated in accordance with
      the terms hereof, will constitute a reorganization within the meaning of Section
      368(a) of the Code, (ii) no gain or loss will be recognized by the Buyer or
      the Company by reason of the Merger, (iii) the exchange or cancellation of
      Company Shares in the Merger will not give rise to recognition of gain or loss
      for federal income tax purposes to the shareholders of the Company to the extent
      such shareholders receive Buyer’s Stock in exchange for their Company Shares,
      (iv) the basis of the Buyer’s Stock to be received by a shareholder
      of  the Company will be the same as the basis of the stock of the
      Company surrendered in connection with the Merger, and (v) the holding
      period of the shares of the Buyer’s Stock to be received by a shareholder of the
      Company will include the period during which the shareholder held the Company
      Shares surrendered in connection with the

     

     

    
      
        
        

      

      
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     Merger,
      provided that the Company Shares surrendered in connection with the
      Merger are held as a capital asset at the Effective Time of such
      Merger.  Each of the Buyer and the Company shall provide a letter to
      the tax advisor setting forth the facts, assumptions and representations on
      which such tax advisor may rely in rendering its opinion.

     

    (f)           Blue
      Sky Approvals.  The Buyer shall have received all state securities
      or “Blue Sky” Permits or other authorizations or confirmations as to the
      availability of exemptions from “Blue Sky” registration requirements as may be
      necessary, and no stop orders or proceedings shall be pending, or to the
      Knowledge of the Buyer or the Company, threatened by a state “Blue Sky”
administrator with respect to the issuance of the Buyer’s Stock in the
      Merger.

     

    (g)           Nasdaq
      Listing.  As of the Effective Time, the Buyer shall have satisfied
      all requirements in order for the shares of the Buyer’s Stock to be issued to
      shareholders of the Company in connection with the Merger to be listed on the
      Nasdaq Global Select Market as of the Effective Time.

     

    8.2           Conditions
      to the Obligations of the Company.  The
      obligation of the Company to effect the transactions contemplated hereby shall
      be further subject to the fulfillment of the following conditions, unless waived
      by such parties pursuant to
Section 10.4 of this
      Agreement:

     

    (a)           All
      representations and warranties of the Buyer contained in this Agreement shall
      be
      true and correct in all Material respects as of the Closing Date as though
      made
      as of such date (except for representations and warranties that are made as
      of a
      specific date and except for representations and warranties expressly qualified
      by “Materiality” or that constitute a breach only if they have a “Material
      Adverse Effect” or similar materiality qualifier, which must be accurate in all
      respects as of the Closing Date).  The Buyer shall have performed and
      complied with all covenants and agreements contained in this Agreement required
      to be performed and complied with by it at or prior to the Closing.

     

    (b)           All
      documents required to have been executed and delivered to the Company at or
      prior to the Closing shall have been so executed and delivered, whether or
      not
      such documents have been or will be executed and delivered by the other parties
      contemplated thereby.

     

    (c)           The
      Company shall have received from Howe Barnes Hoefer & Arnett, Inc., a
      letter, dated not more than five Business Days prior to the Proxy Statement,
      that the Merger Consideration is fair, from a financial point of view, to the
      holders of the Company’s Shares.

     

    (d)           As
      of the Closing Date, the Company shall have received the following documents
      with respect to the Buyer:

     

    (i)           a
      certificate of its corporate existence issued by the jurisdiction of its
      incorporation as of a recent date and a certificate of existence or authority
      as
      a foreign corporation issued as of a recent date by each of the jurisdictions
      in
      which it is qualified to do business as a foreign corporation;

     

    (ii)           a
      true and complete copy of its certificate of incorporation and all amendments
      thereto, certified by the jurisdiction of its incorporation as of a recent
      date;

     

    (iii)           a
      true and complete copy of its bylaws, certified by its Secretary or an Assistant
      Secretary;

     

    (iv)           a
      certificate from its Secretary or an Assistant Secretary certifying that its
      articles of incorporation have not been amended since the date of the
      certificate described in subsection (i) above and that nothing has occurred
      since such date that would adversely affect its existence;

     

     

    
      
        
        

      

      
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    (v)           a
      true and complete copy of the resolutions of its board of directors and
      shareholders authorizing the execution, delivery and performance of this
      Agreement, and all instruments and documents to be delivered in connection
      herewith, and the transactions contemplated hereby, certified by its Secretary
      or an Assistant Secretary;

     

    (vi)           a
      certificate from its Secretary or an Assistant Secretary certifying the
      incumbency and signatures of its officers who will execute documents at the
      Closing or who have executed this Agreement; and

     

    (vii)           evidence
      of Buyer’s compliance with Section 6.2(b) and the
      penultimate sentence of Section 2.7(c).

     

    (e)           The
      Exchange Agent shall have delivered to the Company a certificate, dated as
      of
      the Closing Date, to the effect that the Exchange Agent has received from the
      Buyer appropriate instructions and authorization for the Exchange Agent to
      issue
      a sufficient number of shares of Buyer Stock in exchange for all of the Company
      Shares.

     

    8.3           Conditions
      to the Obligations of the Buyer.  The
      obligations of the Buyer to effect the transactions contemplated hereby shall
      be
      further subject to the fulfillment of the following conditions, unless waived
      by
      the Buyer pursuant to Section 10.4 of this
      Agreement:

     

    (a)           All
      representations and warranties of the Company contained in this Agreement shall
      be true and correct in all Material respects as of the Closing Date as though
      made as of such date (except for representations and warranties that are made
      as
      of a specific date and except for representations and warranties expressly
      qualified by “Materiality” or that constitute a breach only if they have a
“Material Adverse Effect” or similar materiality qualifier, which must be
      accurate in all respects as of the Closing Date). The Company shall have
      performed and complied with all covenants and agreements contained in this
      Agreement required to be performed and complied with by it at or prior to the
      Closing.

     

    (b)           Holders
      of Company Shares representing no more than ten percent (10%) of the issued
      and
      outstanding Company Shares immediately prior to the Effective Time shall have
      exercised dissenters’ or similar rights with respect to the Merger.

     

    (c)           Holders
      of Company Options that include “Dividend Equivalent Rights” (as defined in the
      Option Plan) shall have delivered written waivers of such Dividend Equivalent
      Rights, which waivers shall be in form and substance reasonably satisfactory
      to
      the Buyer.

     

    (d)           The
      Buyer shall have received a copy of a favorable determination letter issued
      by
      the Internal Revenue Service with respect to the termination of the Company
      ESOP.

     

    (e)           All
      documents required to have been executed and delivered to the Buyer at or prior
      to the Closing shall have been so executed and delivered, whether or not such
      documents have been or will be executed and delivered by the other parties
      contemplated thereby.

     

    (f)           As
      of the Closing Date, the Buyer shall have received the following documents
      with
      respect to each of the Company and its subsidiaries:

     

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    (i)           a
      certificate of its corporate existence issued by the jurisdiction of its
      incorporation as of a recent date and a certificate of existence or authority
      as
      a foreign corporation issued as of a recent date by each of the jurisdictions
      in
      which it is qualified to do business as a foreign corporation;

     

    (ii)           a
      true and complete copy of its articles of incorporation or charter and all
      amendments thereto, certified by the jurisdiction of its incorporation as of
      a
      recent date;

     

    (iii)           a
      true and complete copy of its bylaws, certified by its Secretary or an Assistant
      Secretary;

     

    (iv)           a
      certificate from its Secretary or an Assistant Secretary certifying that its
      articles of incorporation or charter have not been amended since the date of
      the
      certificate described in subsection (ii) above, and that nothing has
      occurred since the date of issuance of the certificate of existence specified
      in
      subsection (i) above that would adversely affect its
      existence;

     

    (v)           with
      respect to the Company only, a true and complete copy of the resolutions of
      its
      Board of Directors and shareholders authorizing the execution, delivery and
      performance of this Agreement, and all instruments and documents to be delivered
      in connection herewith, and the transactions contemplated hereby, certified
      by
      its Secretary or an Assistant Secretary; and

     

    (vi)           with
      respect to the Company only, a certificate from its Secretary or an Assistant
      Secretary certifying the incumbency and signatures of its officers who will
      execute documents at the Closing or who have executed this
      Agreement.

     

    ARTICLE
      IX

     

    TERMINATION

     

    9.1           Termination.  The
      obligations of the parties hereunder may be terminated and the transactions
      contemplated hereby abandoned at any time prior to the Closing
      Date:

     

    (a)           By
      mutual written consent of the Company and the Buyer;

     

    (b)           By
      either the Buyer or the Company, if there shall be any law or regulation that
      makes consummation of this Agreement illegal or otherwise prohibited or if
      any
      judgment, injunction, order or decree enjoining the Company or the Buyer from
      consummating the Merger is entered and such judgment, injunction, order or
      decree shall become final and nonappealable; provided, however,
      that the right to terminate this Agreement under this
Section 9.1(b) shall not be available to the party whose
      failure to fulfill its obligations hereunder shall have been the cause of or
      resulted in such law, regulation, judgment, injunction, order or
      decree;

     

    (c)           By
      either the Buyer or the Company if the Effective Time shall not have occurred
      on
      or before June 30, 2008; provided, however, that the right to
      terminate this Agreement under this
Section 9.1(c) shall not be
      available to any party whose failure to fulfill in any Material respect any
      obligation under this Agreement has been the cause of or resulted in the failure
      of the Effective Time to occur on or before June 30, 2008;

     

     

    
      
        
        

      

      
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    (d)           By
      either the Buyer or the Company, if a condition to the obligation to effect
      the
      transactions contemplated hereby of the party seeking termination shall have
      become incapable of fulfillment (notwithstanding the efforts of the party
      seeking to terminate as set forth in Section 6.3(c)), and
      has not been waived;

     

    (e)           At
      any time on or prior to the Closing Date, by the Buyer in writing, if the
      Company has, or by the Company, if the Buyer has, in any Material respect,
      breached (i) any covenant or agreement contained herein or (ii) any
      representation or warranty contained herein, and in either case if such breach
      has not been cured by the earlier of 10 Business Days after the date on which
      written notice of such breach is given to the party committing such breach
      or
      the Closing Date;

     

    (f)           By
      either the Buyer or the Company if the approval by the Company’s shareholders
      required for the consummation of the Merger shall not have been obtained by
      reason of the failure to obtain the required vote upon the taking of such vote
      at a duly held meeting of the Company’s shareholders or at any adjournment
      thereof;

     

    (g)           By
      the Buyer, if:

     

    (i)           the
      Company’s board of directors shall have failed to recommend the Merger to its
      shareholders at the Shareholder Meeting, (ii) withdrawn its recommendation
      of
      the Merger to its shareholders or (iii) modified or qualified its recommendation
      of the Merger in any manner adverse to the consummation of the
      Merger;

     

    (ii)           the
      Company shall have breached its obligation under this Agreement by reason of
      a
      failure to timely call and hold the Shareholder Meeting in accordance with
      Section 6.1(c); or

     

    (iii)           a
      tender or exchange offer relating to securities of the Company or any of its
      subsidiaries shall have been commenced by a Person unaffiliated with the Company
      or its subsidiaries, and the Company shall not have sent to its shareholders
      within 10 Business Days after such tender or exchange offer is first published,
      sent or given, a statement that the Company’s board of directors recommends
      rejection of such tender or exchange offer;

     

    (h)           by
      the Company, by written notice to the Buyer within five Business Days of the
      Measurement Date (as hereinafter defined), if the Average Closing Price of
      the
      Buyer’s Stock is less than $16.50 per share (adjusted for any Stock Adjustments)
      as of the Measurement Date; provided, however, that upon receipt
      of notice of termination pursuant to this Section
      9.1(h) from the Company, the Buyer shall have five Business Days
      to provide written notice to the Company of the Buyer’s agreement to increase
      the Exchange Ratio and/or pay cash to the shareholders of the Company, such
      that
      the sum of the increased Exchange Ratio multiplied by the Average Closing Price
      of the Buyer’s Stock, plus any cash paid per share, is at least
      $18.975.  If the Buyer so provides timely written notice that it
      agrees to increase the Merger Consideration as described above, the Company’s
      notice of termination shall be void and of no further force and
      effect.

     

    For
      purposes of this subclause (h): “Measurement Date” means the
      later to occur of (i) the date of shareholder approval of this Agreement by
      the
      Company’s shareholders, or (ii) the date of the last Consent from a Regulatory
      Authority required for consummation of the Merger (without giving effect to
      any
      required waiting periods in such Consent).

     

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    For
      purposes of this subclause (h):  “Average Closing
      Price” means, with respect to the Buyer’s Stock, the average of the
      daily closing sales price thereof on the Nasdaq Global Select Market, as
      reported in The Wall Street Journal, for the 20 trading days ending
      three Business Days prior to the Measurement Date.

     

    (i)           by
      the Company, if (i) the board of directors of the Company shall have determined,
      based upon the advice of outside counsel experienced in such matters, that
      an
      Acquisition Proposal constitutes a Superior Proposal; provided,
however, that the Company may not terminate this Agreement pursuant
      to
      this Section 9.1(i) unless, after giving the Buyer at
      least five Business Days notice to respond to such Acquisition Proposal (and
      after giving the Buyer notice of the latest Material terms and conditions
      comprising such Acquisition Proposal), and then taking into account any
      amendment or modification to this Agreement proposed by the Buyer, the Company’s
      board of directors believes, based upon the advice of outside counsel
      experienced in such matters, that such Acquisition Proposal constitutes a
      Superior Proposal, and (ii) the Company thereafter executes a definitive,
      binding transaction agreement to consummate an Acquisition Transaction in
      furtherance of such Acquisition Proposal.

     

    9.2           Procedure
      and Effect of Termination.

     

    (a)           In
      the event of a termination contemplated hereby by either party pursuant to
      Section 9.1, the party seeking to terminate this Agreement
      shall give prompt written notice thereof to the other party, and the
      transactions contemplated hereby shall be abandoned, without further action
      by
      either party hereto.  In such event:

     

    (i)           the
      parties hereto shall continue to be bound by (a) their obligations of
      confidentiality set forth in the Confidentiality Agreements,
      and all copies of the information provided by the a party hereto to the other
      party will be returned or destroyed immediately upon its request therefor,
      (b) the provisions set forth in Section 7.5 relating
      to publicity, and (c) the provisions set forth in
Section 10.1 relating to expenses;

     

    (ii)           all
      filings, applications and other submissions relating to the transactions
      contemplated hereby shall, to the extent practicable, be withdrawn from the
      Person to which made; and

     

    (iii)           if
      the termination is pursuant to
Section 9.1(e) or Section
      9.1(g), the terminating party shall be entitled to seek any remedy to
      which such party may be entitled at law or in equity for the violation or breach
      of any agreement, covenant, representation or warranty contained in this
      Agreement.

     

    9.3           Termination
      Fee; Expenses.

     

    (a)           If
      (i) this Agreement is terminated by the Company pursuant to Section
      9.1(i), or (ii) the Company or any of its subsidiaries receives an
      Acquisition Proposal and the Company’s board of directors fails to recommend or
      continue recommending approval of the Merger to the Company’s shareholders or
      amends or withdraws its recommendation of the Merger to the Company’s
      shareholders, and the Company’s shareholders do not approve the Merger at the
      Shareholder Meeting, then the Company shall pay to the Buyer, within one
      Business Day following the termination of this Agreement or the Shareholder
      Meeting, as applicable, the amount of $1,200,000 (the “Termination
      Fee”).  Notwithstanding anything in this Agreement to the
      contrary, if the Termination Fee is paid pursuant to this Section
      9.3(a), then the Buyer will not have any other rights or claims against
      the Company, Company Bank, their Affiliates or their respective officers and
      directors arising from the termination of 

     

     

    
      
        
        

      

      
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    this
      Agreement, it being agreed that the acceptance of the Termination Fee will
      constitute the Buyer’s sole and exclusive remedy for such termination.

     

    (b)           If
      this Agreement is terminated by the Company pursuant to Section
      9.1(e), the Buyer shall reimburse the Company’s Costs within one
      Business Day of the date of termination.

     

    (c)           If
      this Agreement is terminated by the Buyer pursuant to Section
      9.1(e), the Company shall reimburse the Buyer’s Costs within one
      Business Day of the date of termination.

     

    (d)           All
      amounts payable pursuant to this
Section 9.3 shall be payable by wire
      transfer of immediately available funds to an account designated by the
      recipient.

     

    ARTICLE
      X

     

    MISCELLANEOUS
      PROVISIONS

     

    10.1           Expenses.  Except
      as provided in Section 9.3, whether or not the transactions
      contemplated hereby are consummated, (i) the Buyer shall pay all costs and
      expenses incurred by it in connection with this Agreement and the Merger and
      (ii) the Company shall pay all costs and expenses incurred by it in
      connection with this Agreement and the Merger.

     

    10.2           Survival
      of Representations.  The
      representations and warranties made by the parties hereto will not survive
      the
      Closing, and no party shall make or be entitled to make any claim based upon
      such representations and warranties after the Closing Date.  No
      warranty or representation shall be deemed to be waived or otherwise diminished
      as a result of any due diligence investigation by the party to whom the warranty
      or representation was made or as a result of any actual or constructive
      knowledge by such party with respect to any facts, circumstances or claims
      or by
      the actual or constructive knowledge of such person that any warranty or
      representation is false at the time of signing or Closing.

     

    10.3           Amendment
      and Modification.  This
      Agreement may be amended, modified or supplemented only by written agreement
      of
      both parties hereto.

     

    10.4           Waiver
      of Compliance; Consents.  Except
      as otherwise provided in this Agreement, any failure of the Buyer, on one hand,
      and the Company, on the other, to comply with any obligation, representation,
      warranty, covenant, agreement or condition herein may be waived by the other
      party or parties only by a written instrument signed by the party or parties
      granting such waiver, but such waiver or failure to insist upon strict
      compliance with such obligation, representation, warranty, covenant, agreement
      or condition shall not operate as a waiver of, or estoppel with respect to,
      any
      subsequent or other failure.  Whenever this Agreement requires or
      permits consent by or on behalf of any party hereto, such consent shall be
      given
      in writing in a manner consistent with the requirements for a waiver of
      compliance as set forth in this Section 10.4.

     

    10.5           Notices.  All
      notices and other communications hereunder shall be in writing and shall be
      deemed given when delivered by hand or by facsimile transmission, one Business
      Day after sending by a reputable national over-night courier service or three
      Business Days after mailing when mailed by registered or certified mail (return
      receipt requested), postage prepaid, to the parties in the manner provided
      below:

     

    (a)           Any
      notice to any of the Company shall be delivered to the following
      addresses:

     

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    Great
      Pee
      Dee Bancorp, Inc.

    901
      Chesterfield Highway

    Cheraw,
      South Carolina  29520

    Attention:   
        John S. Long

    President
      and Chief Executive
      Officer

    Telephone:    (843)
      537-7656

    Facsimile:       (843)
      537-4436

     

    with
      a
      copy to:

     

    Luse
      Gorman Pomerenk & Schick, P.C.

    5335
      Wisconsin Ave., NW

    Suite
      400

    Washington,
      DC  20015

    Attention:   John
      J. Gorman

    Telephone: (202)
      274-2001

    Facsimile:    (202)
      362-2902

    

     

    (b)           Any
      notice to the Buyer shall be delivered to the following addresses:

     

    First
      Bancorp

    341
      North
      Main Street

    Post
      Office Box 508

    Troy,
      North Carolina 27371-0508

    Attention:     Chief
      Executive Officer

    Telephone:   (910)
      576-6171

    Facsimile:      (910)
      576-1070

     

    with
      a
      copy to:

     

    Robinson,
      Bradshaw & Hinson, P.A.

    101
      North
      Tryon Street, Suite 1900

    Charlotte,
      North Carolina  28246

    Attention:     Henry
      H. Ralston

    Telephone:   (704)
      377-2536

    Facsimile:   
        (704) 378-4000

     

    Any
      party
      may change the address to which notice is to be given by notice given in the
      manner set forth above.

     

    10.6           Assignment;
      Third Party Beneficiaries.  This
      Agreement and all of the provisions hereof shall be binding upon and inure
      to
      the benefit of the parties hereto and their respective heirs, legal
      representatives, successors and permitted assigns.  Neither this
      Agreement nor any of the rights, interests or obligations hereunder shall be
      assigned by any party hereto without the prior written consent of the other
      parties.  This Agreement shall not be deemed to confer upon any third
      party beneficiaries or other Persons, including any employees of the Company,
      any rights or remedies hereunder, except as expressly set forth
      herein.

     

    10.7           Separable
      Provisions.  If
      any provision of this Agreement shall be held invalid or unenforceable, the
      remainder nevertheless shall remain in full force and effect.

     

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    10.8           Governing
      Law.  The
      execution, interpretation and performance of this Agreement shall be governed
      by
      the internal laws and judicial decisions of the State of North
      Carolina.

     

    10.9           Counterparts.  This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

    10.10          Interpretation.  The
      article and section headings contained in this Agreement are solely for the
      purpose of reference, are not part of the agreement of the parties and shall
      not
      in any way affect the meaning or interpretation of this Agreement.

     

    10.11          Entire
      Agreement.  This
      Agreement, including the agreements and documents that are Schedules and
      Exhibits hereto, embodies the entire agreement and understanding of the parties
      with respect of the subject matter of this Agreement.  This Agreement
      supersedes all prior agreements and understandings between the parties with
      respect to the transactions contemplated hereby and subject matter hereof,
      except as explicitly provided herein.

     

    

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

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

     

    
      
        	 	 	 	 
	 	
                COMPANY: 

              	 
	 	 	 	 
	 	
                GREAT
                  PEE DEE BANCORP, INC.  

              
	 	 	 	 
	 	 	 	 
	 	
                By:

              	/s/
                John S. Long  
	 	 	
                Name:

              	John
                S. Long 
	 	 	
                Title:

              	President
                & CEO 
	 	 	 	 
	 	 	 	 
	 	
                BUYER:

              	 	 
	 	 	 	 
	 	
                FIRST
                  BANCORP  

              
	 	 	 	 
	 	 	 	 
	 	
                By:

              	/s/
                Jerry L. Ocheltree  
	 	 	
                Name:

              	Jerry
                L. Ocheltree 
	 	 	
                Title:

              	President
                & CEO 

      

    

    

    

    
      
              

                  [Signature
            Page to Merger
            Agreement]      
    

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Appendix
      1

    

    

    “Acquisition
      Proposal” means any offer or proposal by any Person concerning any
      tender or exchange offer, proposal for a merger, share exchange,
      recapitalization, consolidation or other business combination involving the
      Company or any of its subsidiaries or any divisions of any of the foregoing,
      or
      any proposal or offer to acquire in any manner, directly or indirectly, a 10%
      or
      more equity interest in, or 10% or more of the assets, business or deposits
      of,
      the Company or any of its subsidiaries, other than pursuant to the transactions
      contemplated by this Agreement.

     

    “Acquisition
      Transaction” means the consummation of any merger, share exchange,
      recapitalization, consolidation or other business combination involving the
      Company or any of its subsidiaries or any divisions of the foregoing, or the
      acquisition in any manner, directly or indirectly, of a 10% or more equity
      interest in, or 10% or more of the assets, business or deposits of, the Company
      or any of its subsidiaries, other than pursuant to the transactions contemplated
      by this Agreement.

     

    “Affiliate”
      means, with respect to any Person, each of the Persons that directly or
      indirectly, through one or more intermediaries, owns or controls, or is
      controlled by or under common control with, such Person.  For the
      purpose of this Agreement, “control” means the possession,
      directly or indirectly, of the power to direct or cause the direction of
      management and policies, whether through the ownership of voting securities,
      by
      contract or otherwise.  Without limiting the foregoing, as used with
      respect to the Company, the term “Affiliates” includes its
      subsidiaries.

     

    “Agreement”
      means this Merger Agreement.

     

    “Assets”
      means all of the assets, properties, businesses and rights of a Person of every
      kind, nature, character and description, whether real, personal or mixed,
      tangible or intangible, accrued or contingent, whether or not carried on any
      books and records of such Person, whether or not owned in such Person’s name and
      wherever located.

     

    “Average
      Closing Price” has the meaning given to it
      in Section 9.1(h).

     

    “Benefit
      Plans” means all pension, retirement, profit-sharing, deferred
      compensation, stock option, employee stock ownership, restricted stock,
      severance pay, vacation, bonus, or other incentive plan, all other written
      employee programs or agreements, all medical, vision, dental, or other health
      plans, all life insurance plans, and all other employee benefit plans or fringe
      benefit plans, including without limitation “employee benefit plans” as that
      term is defined in Section 3(3) of ERISA maintained by, sponsored in whole
      or in
      part by, or contributed to by, a Person or any of its subsidiaries for the
      benefit of employees, retirees, dependents, spouses, directors, independent
      contractors, or other beneficiaries and under which employees, retirees,
      dependents, spouses, directors, independent contractors, or other beneficiaries
      are eligible to participate.

     

    “Business
      Day” means any day excluding Saturday, Sunday and any day that shall be
      a legal holiday in the State of North Carolina.

     

    “Buyer”
      has the meaning given to it in the introductory paragraph hereof.

     

    “Buyer
      Bank” means First Bank, a North Carolina bank and a wholly owned
      subsidiary of the Buyer.

     

    “Buyer
      Contracts” has the meaning given to it in Section
      5.15.

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Buyer
      ERISA Affiliate” has the meaning given to it in Section
      5.14.

     

    “Buyer
      Financial Statements” means, with respect to the Buyer and its
      subsidiaries, the consolidated audited statements of income and stockholder’s
      equity and cash flows for the years ended December 31, 2006, 2005 and 2004
      and consolidated audited balance sheets as of December 31, 2006 and 2005, as
      well as the interim unaudited consolidated statements of income and
      stockholders’ equity and cash flows for the fiscal quarter ended March 31, 2007
      and the consolidated interim balance sheet as of March 31, 2007.

     

    “Buyer
      Improvements” has the meaning given to it in Section
      5.9(b).

     

    “Buyer
      Proprietary Rights” has the meaning given to it in Section
      5.17(a).

     

    “Buyer
      Real Property” has the meaning given to it in Section
      5.9(a).

     

    “Buyer
      SEC Reports” has the meaning given to it in Section
      5.4.

     

     “Buyer’s
      Stock” means the common stock of First Bancorp, no par value, as traded
      on the Nasdaq Global Select Market.

     

    “Claim”
      has the meaning given to it in Section 6.2(d)(ii).

     

    “Closing”
      means the closing of the Merger, as identified more specifically in
Article III.

     

    “Closing
      Date” has the meaning given to it in Section
      3.1.

     

    “Code”
      means the Internal Revenue Code of 1986, as amended, and any successor statute
      of similar import, together with the regulations thereunder, in each case as
      in
      effect from time to time.  References to sections of the Code shall be
      construed also to refer to any successor sections.

     

    “Company”
      has the meaning given to it in the introductory paragraph hereof.

     

    “Company
      Bank” means Sentry Bank & Trust, a federal savings association and
      a wholly owned subsidiary of the Company.

     

    “Company
      Contracts” has the meaning given to it in Section
      4.15.

     

    “Company
      ERISA Affiliate” has the meaning given to it in Section
      4.14.

     

    “Company
      ESOP” means the Company’s Employee Stock Ownership Plan and
      Trust.

     

    “Company
      Financial Statements” means, with respect to the Company and its
      subsidiaries, the consolidated audited statements of operations, stockholders’
equity and cash flows for the years ended June 30, 2006, 2005 and 2004 and
      consolidated audited statements of financial condition as of June 30, 2006
      and
      2005, as well as the interim unaudited consolidated statements of operations
      and
      stockholders’ equity and cash flows for the periods ended September 30, 2006,
      December 31, 2006 and March 31, 2007 and the consolidated interim statements
      of
      financial condition as of September 30, 2006, December 31, 2006 and March 31,
      2007.

     

    “Company
      Improvements” has the meaning given to it in Section
      4.9(b).

     

    “Company
      Options” has the meaning given to it in Section
      2.7.

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Company
      Pension Plan” means any Pension Plan operated or maintained at any time
      by the Company, the Company Bank, or any of their subsidiaries.

     

    “Company
      Proprietary Rights” has the meaning given to it in Section
      4.17.

     

    “Company
      Real Property” has the meaning given to it in Section
      4.9(a).

     

    “Company
      Shares” has the meaning given to it in Section
      2.2(a).

     

    “Confidentiality
      Agreements” has the meaning given to it in Section
      7.4.

     

    “Consent”
      means any consent, approval, authorization, clearance, exemption, waiver, or
      similar affirmation by any Person given or granted with respect to any Contract,
      Law, Order, or Permit.

     

    “Continuing
      Employees” has the meaning given to it in Section
      6.2(c).

     

    “Contract”
      means any agreement, warranty, indenture, mortgage, guaranty, lease, license
      or
      other contract, agreement, arrangement, commitment or understanding, written
      or
      oral, to which a Person is a party.

     

    “Costs”
      means the legal, accounting, investment banking, printing, mailing and other
      out-of-pocket fees and expenses incurred by the Company and it subsidiaries
      or
      the Buyer and its subsidiaries, as the case may be, in connection with this
      Agreement and the transactions contemplated herein.

     

    “Default”
      means (i) any breach or violation of or default under any Contract, Order
      or Permit (including any noncompliance with restrictions on assignment, where
      assignment is defined to include a change of control of the parties to this
      agreement or any of their subsidiaries or the merger or consolidation of any
      of
      them with another Person), (ii) any occurrence of any event that with the
      passage of time or the giving of notice or both would constitute such a breach
      or violation of or default under any Contract, Order or Permit, or
      (iii) any occurrence of any event that with or without the passage of time
      or the giving of notice would give rise to a right to terminate or revoke,
      change the current terms of, or renegotiate, or to accelerate, increase, or
      impose any Liability under, any Contract, Order or Permit.

     

    “Dissenting
      Shares” has the meaning given to it in Section
      2.6.

     

    “Effective
      Time” has the meaning given to it in
Section 2.1(e).

     

    “Employment
      Agreement” means that certain Employment Agreement to be entered into
      between the Buyer and John Long in connection with the
      transactions contemplated hereby, substantially in the form of Exhibit
      B.

     

    “Environmental
      Assessment” means any and all soil and groundwater tests, surveys,
      environmental assessments and other inspections, tests and inquiries conducted
      by the Buyer or any agent of the Buyer and related to the Real Property of
      the
      Company and its subsidiaries.

     

    “Environmental
      Laws” means any federal, state or local law, statute, ordinance, rule,
      regulation, permit, directive, license, approval, guidance, interpretation,
      order or other legal requirement relating to the protection of human health
      or
      the environment, including but not limited to any requirement pertaining to
      the
      manufacture, processing, distribution, use, treatment, storage, disposal,
      transportation, handling, reporting, licensing, permitting, investigation or
      remediation of materials that are or may constitute a threat to human health
      or
      the environment.  Without limiting the foregoing, each of
      the

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    following
      is an Environmental Law:  the Comprehensive Environmental Response,
      Compensation, and Liability Act (42 U.S.C. § 9601 et seq.) (“CERCLA”), the
      Hazardous Material Transportation Act (49 U.S.C. § 1801 et seq.),
      the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et
      seq.) (“RCRA”), the Federal Water Pollution Control Act (33 U.S.C.
§ 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et
      seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
      seq.), the Safe Drinking Water Act (42 U.S.C. § 300 et seq.) and the
      Occupational Safety and Health Act (29 U.S.C. § 651 et seq.)
      (“OSHA”), as such laws and regulations have been or are in the future amended or
      supplemented, and each similar federal, state or local statute, and each rule
      and regulation promulgated under such federal, state and local
      laws.

     

    “Environmental
      Survey” has the meaning given to it in Section
      7.3.

     

    “ERISA”
      means the Employee Retirement Income Security Act of 1974, as amended, and
      any
      successor statute of similar import, together with the regulations thereunder,
      in each case as in effect from time to time.  References to sections
      of ERISA shall be construed also to refer to any successor
      sections.

     

    “ERISA
      Plan” means any Benefit Plan that is an “employee welfare benefit
      plan,” as that term is defined in Section 3(l) of ERISA, or an “employee pension
      benefit plan,” as that term is defined in Section 3(2) of ERISA.

     

    “Exchange
      Act” means the Securities Exchange Act of 1934, as
      amended.

     

    “Exchange
      Agent” has the meaning given to it in Section
      2.4.

     

    “Exchange
      Ratio” means 1.15 shares of the Buyer’s Stock for each Company Share,
      subject to adjustment pursuant to Section 9.1(h).

     

    “FDIC”
      means the Federal Deposit Insurance Corporation.

     

    “FHLB”
      means the Federal Home Loan Bank of Atlanta.

     

    “Generally
      Accepted Accounting Principles” or “GAAP” means
      generally accepted accounting principles as recognized by the American Institute
      of Certified Public Accountants, as in effect from time to time, consistently
      applied and maintained on a consistent basis for a Person throughout the period
      indicated and consistent with such Person’s prior financial
      practice.

     

    “Governmental
      Authority” means any nation, province or state, or any political
      subdivision thereof, and any agency, department, natural person or other entity
      exercising executive, legislative, regulatory or administrative functions of
      or
      pertaining to government, including Regulatory Authorities.

     

    “Hazardous
      Material” means any substance or material that either is or contains a
      substance designated as a hazardous waste, hazardous substance, hazardous
      material, pollutant, contaminant or toxic substance under any Environmental
      Law
      or is otherwise regulated under any Environmental Law, or the presence of which
      in some quantity requires investigation, notification or remediation under
      any
      Environmental Law.

     

    “Indemnified
      Parties” has the meaning given to it in Section
      6.2(d)(ii).

     

    “Indemnified
      Liabilities” has the meaning given to it in Section
      6.2(d)(ii).

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     “Intellectual
      Property” means (i) all inventions and discoveries (whether
      patentable or unpatentable and whether or not reduced to practice), all
      improvements thereto, and all patents, patent applications and patent
      disclosures, together with all reissuances, continuations,
      continuations-in-part, revisions, extensions and reexaminations thereof,
      (ii) all trademarks, service marks, trade dress, logos, trade names and
      corporate names, together with all translations, adaptations, derivations and
      combinations thereof and including all goodwill associated therewith, and all
      applications, registrations and renewals in connection therewith, (iii) all
      copyrights and all applications, registrations and renewals in connection
      therewith, (iv) all know-how, trade secrets, whether patentable or
      unpatentable and whether or not reduced to practice (including ideas, research
      and development, know-how, formulas, compositions, manufacturing and production
      process and techniques, technical data, designs, drawings, specifications,
      pricing and cost information and business and marketing plans and proposals),
      (v) all computer software (including data and related documentation) and
      (vi) all other proprietary rights.

     

    “Knowledge
      of the Buyer” means the actual personal knowledge of any of the
      directors and officers of the Buyer and any of its subsidiaries.

     

    “Knowledge
      of the Company” means the actual personal knowledge of any of the
      directors and officers of the Company and any of its subsidiaries.

     

    “Law”
      means any code, law, ordinance, rule, regulation, reporting or licensing
      requirement, rule, or statute applicable to a Person or its Assets, Liabilities,
      business or operations promulgated, interpreted or enforced by any Governmental
      Authority.

     

    “Liability”
      means any direct or indirect, primary or secondary, liability, indebtedness,
      obligation, penalty, cost or expense (including costs of investigation,
      collection and defense), claim, deficiency, guaranty or endorsement of or by
      any
      Person (other than endorsements of notes, bills, checks, and drafts presented
      for collection or deposit in the ordinary course of business) of any type,
      whether accrued, absolute or contingent, liquidated or unliquidated, matured
      or
      unmatured or otherwise.

     

    “Lien”
      means, whether contractual or statutory, any conditional sale agreement,
      participation or repurchase agreement, assignment, default of title, easement,
      encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge,
      reservation, restriction, security interest, title retention or other security
      arrangement, or any adverse right or interest, charge or claim of any nature
      whatsoever of, on, or with respect to any property or property interest, other
      than (i) Liens for current property Taxes not yet due and payable, (ii)
      easements, restrictions of record and title exceptions that could not reasonably
      be expected to have a Material Adverse Effect, and (iii) Liens to secure
      advances and other borrowings from Regulatory Authorities incurred in the
      ordinary course of the banking business.

     

    “Litigation”
      means any action, arbitration, cause of action, complaint, criminal prosecution,
      governmental investigation, hearing, or administrative or other proceeding,
      but
      shall not include regular, periodic examinations of depository institutions
      and
      their Affiliates by Regulatory Authorities.

     

    “Loan
      Collateral” means all of the assets, properties, businesses and rights
      of every kind, nature, character and description, whether real, personal, or
      mixed, tangible or intangible, accrued or contingent, owned by whomever and
      wherever located, in which the Company or any of its subsidiaries has taken
      a
      security interest with respect to, on which the Company or any of it
      subsidiaries has placed a Lien with respect to, or which is otherwise used
      to
      secure, any loan made by the Company or any of its subsidiaries or any note,
      account, or other receivable payable to the Company or any of its
      subsidiaries.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Market
      Value” of the Buyer’s Stock on any date shall be the closing price of
      such stock on the Nasdaq Global Select Market (as reported by The Wall
      Street Journal or, if not reported thereby, any other authoritative
      source), or if such date is not a trading day, on the last trading day preceding
      that date.

     

    “Material”
      for purposes of this Agreement shall be determined in light of the facts and
      circumstances of the matter in question; provided that any specific monetary
      amount stated in this Agreement shall determine materiality in that
      instance.

     

    “Material
      Adverse Effect” on a Person shall mean an event, change, or occurrence
      that, individually or together with any other event, change, or occurrence,
      has
      a Material adverse impact on (i) the financial condition, results of
      operations, or business of such Person and its subsidiaries, taken as a whole,
      or (ii) the ability of such Person to perform its obligations under this
      Agreement or to consummate the Merger or the other transactions contemplated
      by
      this Agreement, provided that “Material Adverse Effect” shall not be deemed to
      include the impact of (a) changes in banking and similar Laws of general
      applicability or interpretations thereof by courts or governmental authorities,
      (b) changes in market interest rates, real estate markets or other market
      conditions applicable to banks or thrift institutions generally, (c) changes
      in
      GAAP or regulatory accounting principles generally applicable to banks or
      thrifts and their holding companies, (d) actions and omissions of a Person
      (or
      any of its subsidiaries) taken with the prior informed consent of the other
      Person in contemplation of the transactions contemplated hereby, or (e) the
      Merger (and the reasonable expenses incurred in connection therewith) and
      compliance with the provisions of this Agreement on the operating performance
      of
      the Persons.

     

    “Measurement
      Date” has the meaning given to it in
Section 9.1(h).

     

    “Merger”
      has the meaning given to it in the Background Statement hereof.

     

    “Merger
      Consideration” has the meaning given to it in Section
      2.3(a).

     

    “Option
      Plan” means the 2003 Long-Term Incentive Stock Benefit
      Plan.

     

    “Order”
      means any administrative decision or award, decree, injunction, judgment, order,
      quasi-judicial decision or award, ruling, or writ of any federal, state, local,
      foreign or other court, arbitrator, mediator, tribunal, administrative agency
      or
      Governmental Authority.

     

    “Participation
      Facility” shall mean any facility or property in which the Person in
      question or any of its subsidiaries participates in the management (including
      but not limited to participating in a fiduciary capacity) and, where required
      by
      the context, said term means the owner or operator of such facility or property,
      but only with respect to such facility or property.

     

    “Pension
      Plan” means any ERISA Plan that also is a “defined benefit plan” (as
      defined in Section 414(j) of the Internal Revenue Code or Section 3(35) of
      ERISA).

     

    “Permit”
      means any approval, authorization, certificate, easement, filing, franchise,
      license, notice, permit, or right given by a Governmental Authority to which
      any
      Person is a party or that is or may be binding upon or inure to the benefit
      of
      any Person or its securities, Assets or business.

     

    “Permitted
      Real Property Encumbrances” means (i) minor imperfections of
      title, if any, none of which materially detracts from the value or impairs
      the
      present or anticipated use of the Real Property subject thereto, or impairs
      the
      present or anticipated operations of the Company and (ii) zoning laws and
      other land use restrictions that do not impair the present or anticipated use
      of
      the Real Property subject thereto.

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Person”
      means a corporation, a company, an association, a joint venture, a partnership,
      an organization, a business, an individual, a trust, a Governmental Authority
      or
      any other legal entity.

     

    “Per
      Share Stock Consideration” has the meaning given to in Section
      2.3(a).

     

    “Plan
      of Merger” means a Plan of Merger to give effect to the Merger, which
      shall be substantially in the form of Exhibit A
      hereto.

     

    “Proxy
      Statement” has the meaning given to it in Section
      4.19.

     

    “Real
      Property” means all of the land, buildings, premises, or other real
      property in which a Person has ownership or possessory rights, whether by title,
      lease or otherwise (including banking facilities and any foreclosed
      properties).  Notwithstanding the foregoing, “Real Property,” as used
      with respect to any of the Company and its subsidiaries, does not include any
      Loan Collateral not yet foreclosed and conveyed to the Company or one of its
      subsidiaries as of the date with respect to which the term “Real Property” is
      being used.

     

    “Registration
      Statement” has the meaning given to it in Section
      4.19.

     

    “Regulatory
      Authorities” means, collectively, the Federal Trade Commission, the
      United States Department of Justice, the Federal Reserve Board, the Office
      of
      the Comptroller of the Currency, the Office of Thrift Supervision, the North
      Carolina Commissioner of Banks, the South Carolina Board of Financial
      Institutions, the FDIC, the FHLB, the National Association of Securities Dealers
      and the SEC, and all other regulatory agencies having jurisdiction over the
      Parties and their respective subsidiaries.

     

    “Rights”
      shall mean all arrangements, calls, commitments, Contracts, options, rights
      to
      subscribe to, scrip, understandings, warrants, or other binding obligations
      of
      any character whatsoever relating to, or securities or rights convertible into
      or exchangeable for, shares of the capital stock of a Person or by which a
      Person is or may be bound to issue additional shares of its capital stock or
      other Rights.

     

    “SEC”
      means the Securities and Exchange Commission.

     

     “Securities
      Laws” means the Securities Act of 1933, the Securities Exchange Act of
      1934, the Investment Company Act of 1940, the Investment Advisors Act of 1940
      and the Trust Indenture Act of 1939, each as amended, and the rules and
      regulations of any Governmental Authority promulgated under each.

     

    “Settlement
      Agreement” has the meaning given to it in Section
      6.2(c).

     

    “Shareholder
      Meeting” has the meaning given to it in Section
      4.19.

     

    “Stock
      Adjustment” has the meaning given to it in Section
      2.3(b).

     

    “Superior
      Proposal” means a bona fide written unsolicited Acquisition Proposal
      (including a new or solicited proposal received by the Company or any of its
      subsidiaries after execution of this Agreement from a party whose initial
      contact with the Company may have been solicited prior to the execution of
      this
      Agreement) that the Company’s board of directors concludes in good faith to be
      more favorable from a financial point of view to the Company’s shareholders than
      the Merger and the other transactions contemplated hereby, (i) based on the
      advice of its financial advisors (which shall be reasonably acceptable to the
      Buyer), (ii) after taking into account the likelihood of consummation of such
      transaction on the terms set forth therein (as compared to, and with due regard
      for, the terms herein), and (iii) after taking into account all legal (with
      the
      advice of outside counsel reasonably acceptable to the Buyer), financial
      (including the financing terms of any such proposal), regulatory and other
      aspects of such proposal and any other relevant factors permitted under
      applicable Law.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    “Surviving
      Company” has the meaning given to it in Section
      2.1(a).

     

    “Tax”
      or “Taxes” means any and all taxes, charges, fees, levies or
      other assessments (whether federal, state, local or foreign), including without
      limitation income, gross receipts, excise, property, estate, sales, use, value
      added, transfer, license, payroll, franchise, ad valorem, withholding, Social
      Security and unemployment taxes, as well as any interest, penalties and other
      additions to such taxes, charges, fees, levies or other
      assessments.

     

    “Tax
      Return” means any report, return or other information required to be
      supplied to a taxing authority in connection with Taxes.

     

    “Taxable
      Period” shall mean any period prescribed by any Governmental Authority,
      including the United States or any state, local, or foreign government or
      subdivision or agency thereof for which a Tax Return is required to be filed
      or
      Tax is required to be paid.

     

    “Termination
      Fee” has the meaning given to it in Section
      9.3(a).

     

    “Transmittal
      Letter” has the meaning given to it in Section
      2.5(a).

     

    

    
8c49242_ex4-1.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EX-4.l

FIRST HORIZON ASSET SECURITIES INC.

 Depositor

FIRST HORIZON
    HOME LOANS 

     Master Servicer

and

THE BANK
    OF NEW YORK

     Trustee 
_____________________________________________________

 POOLING AND SERVICING AGREEMENT 

     Dated as of June 1, 2007 
_____________________________________________________

FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2007-4

MORTGAGE PASS-THROUGH CERTIFICATES,
  SERIES 2007-4

TABLE OF CONTENTS 

	Page 
	 
	ARTICLE I DEFINITIONS 	 	7 
	 	 	 
	ARTICLE II CONVEYANCE OF MORTGAGE
        LOANS; REPRESENTATIONS AND WARRANTIES 	 	44 
	    SECTION
        2.1 Conveyance of Mortgage Loans 	 	44 
	    SECTION
        2.2 Acceptance by Trustee of the Mortgage Loans 	 	48 
	    SECTION
        2.3 Representations and Warranties of the Master Servicer; Covenants
        of the Seller 	 	50 
	    SECTION
        2.4 Representations and Warranties of the Depositor as to the Mortgage
        Loans 	 	52 
	    SECTION
        2.5 Delivery of Opinion of Counsel in Connection with Substitutions 	 	53 
	    SECTION
        2.6 Execution and Delivery of Certificates 	 	53 
	    SECTION
        2.7 REMIC Matters 	 	54 
	    SECTION
        2.8 Covenants of the Master Servicer 	 	58 
	 	 	 
	ARTICLE III ADMINISTRATION AND SERVICING
        OF MORTGAGE LOANS 	 	58 
	    SECTION
        3.1 Master Servicer to Service Mortgage Loans 	 	58 
	    SECTION
        3.2 Subservicing; Enforcement of the Obligations of Servicers 	 	59 
	    SECTION
        3.3 Rights of the Depositor and the Trustee in Respect of the Master
        Servicer 	 	60 
	    SECTION
        3.4 Trustee to Act as Master Servicer 	 	60 
	    SECTION
        3.5 Collection of Mortgage Loan Payments; Certificate Account; Distribution
        Account 	 	61 
	    SECTION
        3.6 Collection of Taxes, Assessments and Similar Items; Escrow Accounts 	 	64 
	    SECTION
        3.7 Access to Certain Documentation and Information Regarding the Mortgage
        Loans 	 	65 
	    SECTION
        3.8 Permitted Withdrawals from the Certificate Account and Distribution
        Account	 	65 
	    SECTION
        3.9 Maintenance of Hazard Insurance; Maintenance of Primary Insurance
        Policies 	 	67 
	    SECTION
        3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements 	 	69 
	    SECTION
        3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of Certain
        Mortgage Loans 	 	70 
	    SECTION
        3.12 Trustee to Cooperate; Release of Mortgage Files 	 	73 
	    SECTION
        3.13 Documents Records and Funds in Possession of Master Servicer to
        be Held for the Trustee 	 	73 
	    SECTION
        3.14 Master Servicing Compensation 	 	74 
	    SECTION
        3.15 Access to Certain Documentation 	 	74 
	    SECTION
        3.16 Annual Statement as to Compliance 	 	75 
	    SECTION
        3.17 Errors and Omissions Insurance; Fidelity Bonds 	 	75 
	 	 	 
	ARTICLE IV DISTRIBUTIONS AND ADVANCES
        BY THE MASTER SERVICER 	 	75 
	    SECTION
        4.1 Advances 	 	75 
	    SECTION
        4.2 Priorities of Distribution 	 	76 
	    SECTION
        4.3 Method of Distribution 	 	85 
	    SECTION
        4.4 Allocation of Losses 	 	86 

i 

	    SECTION
        4.5 Reserved 	 	89 
	    SECTION
        4.6 Monthly Statements to Certificateholders 	 	89 
	    SECTION
        4.7 Reserve Fund 	 	91 
	    SECTION
        4.8 Separate Interest Trust 	 	93 
	    SECTION
        4.9 Determination of Pass-Through Rates for LIBOR Certificates 	 	93 
	    SECTION
        4.10 Grantor Trust Administration 	 	95 
	    SECTION
        4.11 Distributions on the Exchangeable Certificates 	 	96 
	 	 	 
	ARTICLE V THE CERTIFICATES 	 	97 
	    SECTION
        5.1 The Certificates 	 	97 
	    SECTION
        5.2 Certificate Register; Registration of Transfer and Exchange of Certificates 	 	98 
	    SECTION
        5.3 Mutilated, Destroyed, Lost or Stolen Certificates 	 	105 
	    SECTION
        5.4 Persons Deemed Owners 	 	105 
	    SECTION
        5.5 Access to List of Certificateholders’ Names and Addresses 	 	105 
	    SECTION
        5.6 Maintenance of Office or Agency 	 	106 
	    SECTION 5.7 Transfer
        of Exchangeable REMIC Certificates and Exchangeable Certificates 	 	106 
	    SECTION 5.8 Exchanges
        of Exchangeable REMIC Certificates and Exchangeable Certificates 	 	106 
	 	 	 
	ARTICLE VI THE DEPOSITOR AND THE
        MASTER SERVICER 	 	108 
	    SECTION
        6.1 Respective Liabilities of the Depositor and the Master Servicer 	 	108 
	    SECTION
        6.2 Merger or Consolidation of the Depositor or the Master Servicer 	 	108 
	    SECTION
        6.3 Limitation on Liability of the Depositor, the Master Servicer and
        Others 	 	108 
	    SECTION
        6.4 Limitation on Resignation of Master Servicer 	 	109 
	 	 	 
	ARTICLE VII DEFAULT 	 	109 
	    SECTION
        7.1 Events of Default 	 	109 
	    SECTION
        7.2 Trustee to Act; Appointment of Successor 	 	112 
	    SECTION
        7.3 Notification to Certificateholders 	 	113 
	 	 	 
	ARTICLE VIII CONCERNING THE TRUSTEE 	 	114 
	    SECTION
        8.1 Duties of Trustee 	 	114 
	    SECTION
        8.2 Certain Matters Affecting the Trustee 	 	116 
	    SECTION
        8.3 Trustee Not Liable for Certificates or Mortgage Loans 	 	117 
	    SECTION
        8.4 Trustee May Own Certificates 	 	118 
	    SECTION
        8.5 Trustee’s Fees and Expenses 	 	118 
	    SECTION
        8.6 Eligibility Requirements for Trustee 	 	118 
	    SECTION
        8.7 Resignation and Removal of Trustee 	 	119 
	    SECTION
        8.8 Successor Trustee 	 	120 
	    SECTION
        8.9 Merger or Consolidation of Trustee 	 	120 
	    SECTION
        8.10 Appointment of Co-Trustee or Separate Trustee 	 	121 
	    SECTION
        8.11 Tax Matters 	 	122 
	 	 	 
	ARTICLE IX TERMINATION 	 	124 
	    SECTION
        9.1 Termination upon Liquidation or Purchase of all Mortgage Loans 	 	124 
	    SECTION
        9.2 Final Distribution on the Certificates 	 	125 
	    SECTION
        9.3 Additional Termination Requirements 	 	126 

ii

	ARTICLE X EXCHANGE ACT
        REPORTING 	 	127 
	    SECTION
        10.1 Filing Obligations 	 	127 
	    SECTION
        10.2 Form 10-D Filings 	 	127 
	    SECTION
        10.3 Form 8-K Filings 	 	128 
	    SECTION
        10.4 Form 10-K Filings 	 	128 
	    SECTION
        10.5 Sarbanes-Oxley Certification 	 	129 
	    SECTION
        10.6 Form 15 Filing 	 	130 
	    SECTION
        10.7 Report on Assessment of Compliance and Attestation 	 	130 
	    SECTION
        10.8 Use of Subservicers and Subcontractors 	 	131 
	    SECTION
        10.9 Amendments 	 	132 
	 	 	 
	ARTICLE XI MISCELLANEOUS
        PROVISIONS 	 	132 
	    SECTION
        11.1 Amendment 	 	132 
	    SECTION
        11.2 Recordation of Agreement; Counterparts 	 	134 
	    SECTION
        11.3 Governing Law 	 	134 
	    SECTION
        11.4 Intention of Parties 	 	135 
	    SECTION
        11.5 Notices 	 	135 
	    SECTION
        11.6 Severability of Provisions 	 	136 
	    SECTION
        11.7 Assignment 	 	136 
	    SECTION
        11.8 Limitation on Rights of Certificateholders 	 	136 
	    SECTION
        11.9 Inspection and Audit Rights 	 	137 
	    SECTION
        11.10 Certificates Nonassessable and Fully Paid 	 	137 
	    SECTION
        11.11 Limitations on Actions; No Proceedings 	 	138 
	    SECTION
        11.12 Acknowledgment of Seller 	 	138 
	 
	SCHEDULES 
	 
	Schedule I: 	 	Mortgage Loan Schedule 	 	S-I-1 
	Schedule II: 	 	Representations and Warranties of
        the Master Servicer 	 	S-II-1 
	Schedule III: 	 	Form of Monthly Master Servicer
        Report 	 	S-III-1 
	 
	EXHIBITS 
	 
	Exhibit A-1: 	 	Form of Senior Certificate 	 	A-1-1 
	Exhibit A-2: 	 	Form of Senior Certificate/Class
        I-A-PO Certificate 	 	A-2-1 
	Exhibit B: 	 	Form of Subordinated Certificate 	 	B-1 
	Exhibit C: 	 	Form of Residual Certificate 	 	C-1 
	Exhibit D: 	 	Form of Reverse of Certificates 	 	D-1 
	Exhibit E: 	 	Form of Initial Certification 	 	E-1 
	Exhibit F: 	 	Form of Delay Delivery Certification 	 	F-1 
	Exhibit G: 	 	Form of Subsequent Certification
        of Custodian 	 	G-1 
	Exhibit H: 	 	Transfer Affidavit 	 	H-1 
	Exhibit I: 	 	Form of Transferor Certificate 	 	I-1 
	Exhibit J: 	 	Form of Investment Letter [Non-Rule
        144A] 	 	J-1 
	Exhibit K: 	 	Form of Rule 144A Letter 	 	K-1 
	Exhibit L: 	 	Request for Release (for Trustee) 	 	L-1 
	Exhibit M: 	 	Request for Release (Mortgage Loan) 	 	M-1 

iii 

	Exhibit N-1: 	 	Form of Annual Certification
        (Subservicer) 	 	N-1-1 
	Exhibit N-2: 	 	Form of Annual Certification (Trustee) 	 	N-2-1 
	Exhibit O: 	 	Form of Servicing Criteria
        to be Addressed in Assessment of Compliance O-1 
	Exhibit P: 	 	List of Item 1119 Parties 	 	P-1 
	Exhibit Q: 	 	Form of Sarbanes-Oxley Certification 	 	Q-1 
	Exhibit R: 	 	Principal Balance Schedules 	 	R-1 
	Exhibit S: 	 	Available Combinations 	 	S-1 

iv

          THIS POOLING AND SERVICING AGREEMENT, dated as of June 1, 2007, among FIRST HORIZON ASSET SECURITIES INC., a Delaware corporation, as depositor (the “Depositor”), FIRST HORIZON HOME LOANS, a
division of First Tennessee Bank National Association, as master servicer (the “Master Servicer”), and THE BANK OF NEW YORK, a banking corporation organized under the laws of the State of New York, as trustee (the “Trustee”).

          WITNESSETH THAT

          In consideration of the mutual agreements herein contained, the parties hereto agree as follows: 

          PRELIMINARY STATEMENT

          The Depositor is the owner of the Trust Fund that is hereby conveyed to the Trustee in return for the Certificates. The Trust Fund for federal income tax purposes will consist of three separate
REMICs, each having assets as provided herein.  The Certificates will represent the entire beneficial ownership interest in the Trust Fund. The Regular Certificates will represent “regular interests” in the Upper REMIC. The Class I-A-R
Certificates will represent the residual interests in the Lower REMIC, Middle REMIC and Upper REMIC, as described in Section 2.7. The “latest possible maturity date” for federal income tax purposes of each REMIC regular interest created
hereby will be the Latest Possible Maturity Date. 

          The following table sets forth characteristics of the Certificates, together with the minimum denominations and integral multiples in excess thereof in which such Classes shall be issuable (except
that one Certificate of each Class of Certificates may be issued in a different amount and, in addition, one Residual Certificate representing the Tax Matters Person Certificate may be issued in a different amount): 

          [Remainder of Page Intentionally Left Blank]

1

		 	 	Initial Class 	 	 	 	 	 	 	 	 	Integral 	 	Final 	 
	 	 	 	Certificate 	 	Pass- 	 	 	 	Multiples in 	 	Scheduled 	 
	 	 	 	Balance / 	 	Through 	Minimum 	 	Excess 	 	Distribution 	 
	 	Class
        Designation 	 	Notional
        Amount 	 	Rate 	Denominations 	 	Minimum 	 	Date(1) 	 
	 
	 	Class
        I-A-1 	 	$ 	22,522,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-2 	 	$ 	673,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-3 	 	$ 	31,558,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-4(2) 	 	$ 	4,704,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-5 	 	$ 	62,422,000.00 	 	 	5.5000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-6 	 	$ 	33,163,000.00 	 	 	5.6500 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-7 	 	$ 	24,424,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-8 	 	$ 	23,685,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-9 	 	$ 	6,262,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-10(3) 	 	$ 	98,321,000.00 	 	 	6.0000 	%(4) 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-11 	 	$ 	10,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A12 	 	$ 	10,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-13(2) 	 	$ 	2,856,000.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-14(2) 	 	$ 	7,136,341.00 	(5) 	 	6.0000 	% 	 	$ 	500,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-15 	 	$ 	3,894,900.00 	 	 	6.0000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-16(3) 	 	$ 	98,321,000.00 	 	 	5.9200 	%(6) 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-17(3) 	 	$ 	98,321,000.00 	(7) 	 	0.0800 	%(8) 	 	$ 	500,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-PO 	 	$ 	1,073,137.00 	 	 	N/A 	   (9) 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        I-A-R 	 	$ 	100.00 	 	 	6.0000 	% 	 	$ 	100 	 	 	N/A 	 	August
        2037 	 
	 	Class
        II-A-1 	 	$ 	18,958,000.00 	 	 	5.5000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2022 	 
	 	Class
        II-A-2 	 	$ 	1,449,000.00 	 	 	5.5000 	% 	 	$ 	25,000 	 	$ 	1,000 	 	August
        2022 	 
	 	 	 	$ 	5,363,000.00 	 	 	5.9696 	%(10) 	 	 	 	 	 	 	 	 	 
	 	Class
        B-1 	 	 	 	 	 	 	 	 	$ 	100,000 	 	$ 	1,000 	 	August
        2037 	 
	 	 	 	$ 	1,903,000.00 	 	 	5.9696 	%(10) 	 	 	 	 	 	 	 	 	 
	 	Class
        B-2 	 	 	 	 	 	 	 	 	$ 	100,000 	 	$ 	1,000 	 	August
        2037 	 
	 	 	 	$ 	1,038,000.00 	 	 	5.9696 	%(10) 	 	 	 	 	 	 	 	 	 
	 	Class
        B-3 	 	 	 	 	 	 	 	 	$ 	100,000 	 	$ 	1,000 	 	August
        2037 	 
	 	 	 	$ 	692,000.00 	 	 	5.9696 	%(10) 	 	 	 	 	 	 	 	 	 
	 	Class
        B-4 	 	 	 	 	 	 	 	 	$ 	100,000 	 	$ 	1,000 	 	August
        2037 	 
	 	 	 	$ 	519,000.00 	 	 	5.9696 	%(10) 	 	 	 	 	 	 	 	 	 
	 	Class
        B-5 	 	 	 	 	 	 	 	 	$ 	100,000 	 	$ 	1,000 	 	August
        2037 	 
	 	Class
        B-6 	 	$ 	519,759.86 	 	 	5.9696 	%(10) 	 	$ 	100,000 	 	$ 	1,000 	 	August
        2037 	 

(1)  The actual final payment on the Certificates could occur earlier or later than the Final Scheduled Distribution Date. 

(2)  The Class I-A-4, Class I-A-13 and Class I-A-14 Certificates will each consist of individual payment components, as described in this Preliminary Statement. 

(3)  The Class I-A-16 and Class I-A-17 Certificates are exchangeable for the Class I-A-10 Certificates in the combination identified in Exhibit S to this Agreement. 

(4)  If the Class I-A-16 and Class I-A-17 Certificates are exchanged for the Class I-A-10 Certificates on or prior to the Distribution Date in June 2012, the Class I-A-10
Certificates will have the benefit of the Corridor Contract initially assigned to the Class I-A-16 Certificates. If such an exchange occurs, as of the first Distribution Date thereafter, the holders of the Class I-A-10 Certificates will receive the
per annum initial annual 

2

Pass-Through Rate of 6.00% plus interest payments payable from the Corridor Contract, to the extent that LIBOR is greater than 5.40% . In addition, for any Distribution Date on or prior to the Distribution Date in June
2012, interest will accrue on the Class I-A-10 Certificates at a per annum rate equal to (i) LIBOR plus (ii) 0.60%, subject to a maximum and minimum rate of 6.00% per annum. For any Distribution Date on or prior to the Distribution Date in June
2012, any interest payments on the Class I-A-10 Certificates in excess of the maximum Pass-Through Rate of 6.00% per annum will be payable solely from the Corridor Contract. For any Distribution Date after the Distribution Date in June 2012,
interest will accrue on the Class I-A-10 Certificates at a per annum rate equal to 6.00% per annum. There will be no extra interest payments from the Corridor Contract after the Distribution Date in June
2012. 

(5)  The Class I-A-14 Certificates are Notional Amount Certificates and will accrue interest during each Interest Accrual Period on a Notional Amount. The Notional Amount of the
Class I-A-14(1) Component for any Distribution Date will equal 8.33333333% multiplied by the Class Certificate Balance of the Class I-A-5 Certificates for such Distribution Date and the Notional Amount of the Class I-A-14(2) Component for any
Distribution Date will equal 5.83333333% multiplied by the Class Certificate Balance of the Class I-A-6 Certificates for such Distribution Date. 
(6)  On the first
Distribution Date, the holders of the Class I-A-16 Certificates will receive the per annum initial annual Pass-Through Rate of 5.92% plus interest payments payable from the Corridor Contract, to the extent that LIBOR is greater than 5.40% . For any
Distribution Date after the first Distribution Date, interest will accrue on the Class I-A-16 Certificates at a per annum rate equal to (i) LIBOR plus (ii) 0.60%, subject to a maximum rate of 6.00% per annum and a minimum rate of 0.60% per annum.
For any Distribution Date on or prior to the Distribution Date in June 2012, any interest payments on the Class I-A-16 Certificates in excess of the maximum Pass-Through Rate of 6.00% per annum will be payable solely from the Corridor Contract.
There will be no extra interest payments from the Corridor Contract after the Distribution Date in June 2012. 

(7)  The Class I-A-17 Certificates are Notional Amount Certificates and will accrue interest during each Interest Accrual Period on a Notional Amount. The Notional Amount of the
Class I-A-17 Certificates for any Distribution Date will equal the Class Certificate Balance of the Class I-A-16 Certificates for such Distribution Date. 

(8)  On the first Distribution Date, the holders of the Class I-A-17 Certificates will receive the per annum initial annual Pass-Through Rate of 0.08% . For any Distribution Date
after the initial Distribution Date, interest will accrue on the Class I-A-17 Certificates at a per annum rate equal to (i) 5.40% minus (i) LIBOR, subject to a maximum rate of 5.40% per annum and minimum rate of 0.00% per annum. 

(9) The Class I-A-PO Certificates are Principal Only Certificates and will not accrue interest. 

(10) The Pass-Through Rate on each Class of Subordinated Certificates is variable and will be equal to the weighted average of the Designated Mortgage Pool Rates, weighted on the
basis of the Group Subordinate Amount for each Mortgage Pool. The initial Pass-Through Rate on each Class of Subordinated Certificates for the first Interest Accrual Period will be 5.9696% per annum. 

3

	Accretion Directed Certificates 	 	The Class I-A-11, Class
        I-A-15 and Class I-A-16 Certificates. 
	 
	 
	 

	Accrual Certificates 	 	The Class I-A-11 and
        Class I-A-12 Certificates. 
	 
	 
	 

	Accrual Components 	 	None. 
	 
	 
	 

	Book-Entry Certificates 	 	All Classes of Certificates
        other than the Physical Certificates. 
	 
	     
	 

	Certificate
        Group 	 	With respect to Pool I, the
        Group I Senior Certificates, and with respect to Pool II, the Group II
        Senior Certificates. The Subordinated Certificates correspond to both
        of the Mortgage Pools. 
	 
	 
	 

	COFI Certificates 	 	None. 
	 
	 
	 

	Component Certificates 	 	The Class I-A-4, Class
        I-A-13 and Class I-A-14 Certificates. 
	 
	 
	 

	Components 	 	For purposes of calculating
        distributions, the Component Certificates will be comprised of multiple
        payment components having the designations, Initial Component Balances
        and Pass-Through Rates set forth below: 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Initial 	 	 	 	 
	 	 	 	 	Component 	 	 	 	 
	 	 	 	 	(Notional) 	 	 	 	 
	 	 	Designation 	Balance (Amount) 	 	Pass-Through Rate 	 
	 	 	 Class I-A-4(1) 	 	$ 	943,000 	 	 	 	6.000% 	 
	 	 	 Class I-A-4(2) 	 	$ 	3,761,000 	 	 	 	6.000% 	 
	 	 	 Class I-A-13(1) 	 	$ 	1,865,000 	 	 	 	6.000% 	 
	 	 	 Class I-A-13(2) 	 	$ 	991,000 	 	 	 	6.000% 	 
	 	 	 Class I-A-14(1) 	 	$ 	5,201,833 	(1) 	 	 	6.000% 	 
	 	 	 Class I-A-14(2) 	 	$ 	1,934,508 	(1) 	 	 	6.000% 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 
	 

	Delay Certificates 	 	All interest-bearing Classes
        of Certificates other than the Non- Delay Certificates, if any. 
	 
	 
	 
	 

	ERISA-Restricted
        Certificates 	 	The Residual Certificates,
        Private Certificates and Certificates of any Class that no longer satisfy
        the applicable rating requirement of the Underwriter’s Exemption. 
	 
	 
	 

	ERISA-Restricted Yield 	 	 
	Supplemented Certificates 	 	The Class I-A-16 and
        Class I-A-10 Certificates. 
	 
	 
	 

	Floating Rate Certificates 	 	The Class I-A-16 Certificates. 
	 
	 
	 

	Group I
        Senior Certificates 	 	The Class I-A-1, Class I-A-2,
        Class I-A-3, Class I-A-4, Class I-A-5, Class I-A-6, Class I-A-7, Class
        I-A-8, Class I-A-9, Class I-A-10, Class I-A-11, Class I-A-12, Class I-A-13, Class
        I-A-14, Class I-A-15, Class I-A-16, Class I-A-17, Class I-A- PO and Class
        I-A-R Certificates. 

(1)  The Class I-A-14(1) and Class I-A-14(2) Components do not have Component Balances, but have Component Notional Amounts. 

4

	 
	 
	 

	Group II
        Senior Certificates 	 	The Class II-A-1 and Class II-A-2 Certificates. 
	 
	 
	 

	Inverse Floating
        Rate 	 	 
	Certificates 	 	The Class I-A-17 Certificates. 
	 
	 
	 

	LIBOR Certificates 	 	The Class I-A-16 and Class I-A-17 Certificates. 
	 
	 
	 

	NAS Certificates 	 	The Class I-A-3 Certificates. 
	 
	 
	 

	NAS Components 	 	The Class I-A-4(1) Component. 
	 
	 
	 

	Non-Delay
        Certificates 	 	The LIBOR Certificates. 
	 
	 
	 

	Notional
        Amount Certificates 	 	The Class I-A-14 and Class I-A-17 Certificates. 
	 
	 
	 

	Notional
        Amount Components . 	 	The Class I-A-14(1) and Class I-A-14(2)
        Components. 
	 
	 
	 

	Offered Certificates 	 	All Classes of Certificates other than
        the Private Certificates. 
	 
	 
	 

	Physical
        Certificates 	 	The I-A-PO and Class I-A-R Certificates. 
	 
	 
	 

	PAC Certificates 	 	The Class I-A-1, Class I-A-2, Class I-A-5,
        Class I-A-6, Class I-A-7, Class I-A-8, Class I-A-9 and Class I-A-13 Certificates. 
	 
	 
	 

	PAC Components 	 	The Class I-A-4(2), Class I-A-13(1) and
        Class I-A-13(2) Components. 
	 
	 
	 

	Principal
        Only Certificates 	 	The Class I-A-PO Certificates. 
	 
	 
	 

	Private Certificates 	 	The Class I-A-PO, Class B-4, Class B-5
        and Class B-6 Certificates. 
	 
	 
	 

	Rating Agencies 	 	With respect to the Senior Certificates
        and the Class B-5 Certificates, Fitch and S&P; except that the Class
        I-A-10, Class I-A-16 and Class I-A-17 Certificates will also be rated
        by Moody’s. With respect to the Class B-1, Class B-2, Class B-3
        and Class B-4 Certificates, Fitch. The Class B-6 Certificates will not
        be rated. 
	 
	 
	 

	Regular Certificates 	 	All Classes of Certificates, other than
        the Residual Certificates and the Exchangeable Certificates. 
	 
	 
	 

	Residual
        Certificates 	 	The Class I-A-R Certificates. 
	 
	 
	 

	Retail/Lottery
        Certificates 	 	None. 
	 
	 
	 

	Scheduled
        Certificates 	 	None. 
	 
	 
	 

	Senior Certificates 	 	The Group I Senior Certificates and Group
        II Senior Certificates, collectively. 
	 
	 
	 

	Senior Mezzanine
        Certificates 	 	The Class I-A-2, Class I-A-4, Class I-A-13,
        Class I-A-15 and Class II-A-2 Certificates. 
	 
	 
	 

	Subordinated
        Certificates 	 	The Class B-1, Class B-2, Class B-3, Class
        B-4, Class B-5 and Class B-6 Certificates. 
	 
	 
	 

	Super Senior
        Certificates 	 	The Class I-A-1, Class I-A-3, Class I-A-5,
        Class I-A-6, Class I-A-8, Class I-A-16 and Class II-A-1 Certificates. 

5

	Support Classes 	 	The Class I-A-11, Class I-A-12,
        Class I-A-15 and Class I-A-16 Certificates. 
	 
	 
	 

	TAC Certificates 	 	The Class I-A-11, Class I-A-15 and
        Class I-A-16 Certificates. 
	 
	 
	 

	Underwriter 	 	Banc of America Securities LLC. 

          With respect to any of the foregoing designations as to which the corresponding reference is “None,” all defined terms and provisions herein relating solely to such designations shall be of
no force or effect, and any calculations herein incorporating references to such designations shall be interpreted without reference to such designations and amounts. Defined terms and provisions herein relating to statistical rating agencies not
designated above as Rating Agencies shall be of no force or effect. 

6

ARTICLE I 

DEFINITIONS

          Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: 

          Accretion Directed Certificates: As specified in the Preliminary Statement.

          Accretion Termination Date: For the classes of Accrual Certificates, the earlier of (x) the Cross-over Date and (y) the Distribution Date on which (i) the Class Certificate Balances of the Class
I-A-15 and Class I-A-16 Certificates have each been reduced to zero (in the case of the Class I-A-11 Certificates) or (ii) the Class Certificate Balances of the Class I-A-11, Class I-A-15 and Class I-A-16 Certificates have each been reduced to zero
(in the case of the Class I-A-12 Certificates). 

          Accrual Amount: For each Distribution Date through the Accretion Termination Date and each class of Accrual Certificates, an amount equal to the sum of (x) Accrued Certificate Interest in respect of
such class of Accrual Certificates in accordance with clause (i) of Section 4.2(a), and (y) amounts allocable to such class of Accrual Certificates in accordance with clause (ii) of Section 4.2(a), in each case on such Distribution Date. 

          Accrual Certificates: As specified in the Preliminary Statement.

          Accrued Certificate Interest:  For any Class of Certificates entitled to distributions of interest for any Distribution Date, the interest accrued during the related Interest Accrual Period at the
applicable Pass-Through Rate on the Class Certificate Balance (or Notional Amount, in the case of the Notional Amount Certificates) of such Class of Certificates immediately prior to such Distribution Date, less such Class’ share of any Net
Interest Shortfall allocable between the outstanding Classes of Certificates based on the Accrued Certificate Interest otherwise distributable thereto. 

          Additional Designated Information: As defined in Section 10.2.

          Adjusted Mortgage Rate: As to each Mortgage Loan, and at any time, the per annum rate equal to the Mortgage Rate less the Master Servicing Fee Rate. 

          Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any time, the per annum rate equal to the Mortgage Rate less the related Expense Fee Rate. 

          Advance: The payment required to be made by the Master Servicer with respect to any Distribution Date pursuant to Section 4.1, the amount of any such payment being equal to the aggregate of payments
of principal and interest (net of the Master Servicing Fee and net of any net income in the case of any REO Property) on the Mortgage Loans that were due on the related Due Date and not received as of the close of business on the related
Determination Date, less the aggregate amount of any such delinquent payments that the Master Servicer has determined would constitute a Nonrecoverable Advance if advanced. 

7

          Aggregate Senior Percentage: For any Distribution Date, the percentage equal to (x) the sum of the Class Certificate Balances of the Senior Certificates of all Certificate Groups (other than the Class
PO Certificates and the Notional Amount Certificates) immediately prior to such Distribution Date, divided by (y) the aggregate Pool Principal Balance for both Mortgage Pools (excluding the aggregate of the PO Percentage of the Stated Principal
Balances of the Discount Mortgage Loans) on such Distribution Date. 

          Aggregate Subordinated Percentage: For any Distribution Date, the percentage equal to (x) the sum of the Class Certificate Balances of the Subordinated Certificates immediately prior to such
Distribution Date, divided by (y) the aggregate Pool Principal Balance for both Mortgage Pools (excluding the aggregate of the PO Percentage of the Stated Principal Balances of the Discount Mortgage Loans) on such Distribution Date. 

          Agreement: This Pooling and Servicing Agreement and all amendments or supplements hereto.

          Allocable Share:  With respect to any Class of Subordinated Certificates on any Distribution Date, such Class’ pro rata share (based on the Class Certificate Balance of each Class entitled
thereto) of each of the components of the Subordinated Optimal Principal Amount for each Mortgage Pool; provided that, solely for purposes of this definition, the applicable Subordinated Optimal Principal Amount for each Mortgage Pool will be
reduced by the amounts required to be distributed to the Class PO Certificates in respect of the Class PO Deferred Amount on such Distribution Date, and any such reduction in the applicable Subordinate Optimal Principal Amount for a Mortgage Pool
shall reduce the amounts calculated pursuant to clauses (1), (4), (2), (3) and (5) of the definition thereof, in that order, and the Class Certificate Balances of each Class of Subordinated Certificates will be reduced by such amounts in reverse
order of priority until the respective Class Certificate Balances of each Class of Subordinated Certificates has been reduced to zero; provided further, that, except as provided in this Agreement, no Subordinated Certificates (other than the Class
of Subordinated Certificates with the highest priority of distribution) shall be entitled on any Distribution Date to receive distributions pursuant to clauses (2), (3) and (5) of the definition of Subordinated Optimal Principal Amount unless the
Class Prepayment Distribution Trigger for such Class is satisfied for such Distribution Date. 

          Alternative Title Product: Any one of the following: (i) Lien Protection Insurance issued by Integrated Loan Services or ATM Corporation of America, (ii) a Mortgage Lien Report issued by EPN
Solutions/ACRAnet, (iii) a Property Plus Report issued by Rapid Refinance Service through SharperLending.com, or (iv) such other alternative title insurance product that the Seller utilizes in connection with its then current underwriting criteria.

          Amount Held for Future Distribution: As to any Distribution Date, the aggregate amount held in the applicable subaccount of the Certificate Account at the close of business on the related
Determination Date on account of (i) Principal Prepayments on the related Mortgage Pool received after the related Prepayment Period and Liquidation Proceeds in respect of the related Mortgage Pool received in the month of such Distribution Date and
(ii) all Scheduled Payments in the related Mortgage Pool due after the related Due Date. 

8

          Apportioned Principal Balance:  For any Class of Subordinated Certificates and any Distribution Date, an amount equal to the Class Certificate Balance of such Class immediately prior to that
Distribution Date multiplied by a fraction, the numerator of which is the applicable Group Subordinate Amount for such Distribution Date and the denominator of which is the sum of the Group Subordinate Amounts for such Distribution Date. 

          Appraised Value:  With respect to any Mortgage Loan, the Appraised Value of the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan other than a Refinancing Mortgage Loan, the
lesser of (a) the value of the Mortgaged Property based upon the appraisal made at the time of the origination of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the time of the origination of such Mortgage Loan; (ii) with
respect to a Refinancing Mortgage Loan other than a Streamlined Documentation Mortgage Loan, the value of the Mortgaged Property based upon the appraisal made at the time of the origination of such Refinancing Mortgage Loan; and (iii) with respect
to a Streamlined Documentation Mortgage Loan, (a) if the loan-to-value ratio with respect to the Original Mortgage Loan at the time of the origination thereof was 90% or less, the value of the Mortgaged Property based upon the appraisal made at the
time of the origination of the Original Mortgage Loan and (b) if the loan-to-value ratio with respect to the Original Mortgage Loan at the time of the origination thereof was greater than 90%, the value of the Mortgaged Property based upon the
appraisal (which may be a drive-by appraisal) made at the time of the origination of such Streamlined Documentation Mortgage Loan. 

          Available Funds:  For each Mortgage Pool, with respect to any Distribution Date, an amount equal to the sum of: 

	          	
(a)   	
all scheduled installments of interest, net of the Master Servicing Fee, the Trustee Fee, any expenses, reimbursements and indemnities payable to the Master Servicer, and any Retained Yield on such Distribution Date, and all
scheduled installments of principal due in respect of the Mortgage Loans in such Mortgage Pool on the Due Date in the month in which the Distribution Date occurs and received before the related Determination Date, together with any Advances in
respect thereof;	
	 	          	 
	 	
(b)   	
all Insurance Proceeds, Liquidation Proceeds and Unanticipated Recoveries received in respect of the Mortgage Loans in such Mortgage Pool during the calendar month before the Distribution Date, which in each case is net of
unreimbursed expenses incurred in connection with a liquidation or foreclosure and unreimbursed Advances, if any;	
	 
	 	
(c)   	
all Principal Prepayments received in respect of the Mortgage Loans in such Mortgage Pool during the related Prepayment Period, plus interest received thereon, net of any Prepayment Interest Excess;	
	 
	 	
(d)   	
any Compensating Interest in respect of Principal Prepayments in Full received in respect of the Mortgage Loans during the related Prepayment Period (or, in the case of the first Distribution Date, from the Cut-off Date);
and	
	 

9

	          	          	 
	 	
(e)   	
any Substitution Adjustment Amount or the Purchase Price for any Deleted Mortgage Loan in the related Mortgage Pool or a Mortgage Loan in the related Mortgage Pool repurchased by the Seller or the Master Servicer as of such
Distribution Date, reduced by amounts in reimbursement for Advances previously made and other amounts that the Master Servicer is entitled to be reimbursed for out of the Certificate Account pursuant to this Agreement.	

          Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as amended. 

          Bankruptcy Coverage Termination Date:  The date on which the Bankruptcy Loss Coverage Amount is reduced to zero. 

          Bankruptcy Loss:  With respect to any Mortgage Loan, a Deficient Valuation or Debt Service Reduction; provided, however, that a Bankruptcy Loss shall not be deemed a Bankruptcy Loss hereunder so long
as the Master Servicer has notified the Trustee in writing that the Master Servicer is diligently pursuing any remedies that may exist in connection with 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 related escrow payments in respect of such Mortgage Loan are being advanced on a current basis by the Master Servicer, in
either case without giving effect to any Debt Service Reduction or Deficient Valuation. 

          Bankruptcy Loss Coverage Amount:  As of any Determination Date, the Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy Coverage Amount as reduced by (i) the aggregate amount of
Bankruptcy Losses allocated to the Certificates since the Cut-off Date and (ii) any permissible reductions in the Bankruptcy Loss Coverage Amount as evidenced by a letter of each Rating Agency to the Trustee to the effect that any such reduction
will not result in a downgrading of the then current ratings assigned to the Classes of Certificates rated by it. As of any Distribution Date on or after the Cross-over Date, the Bankruptcy Loss Coverage Amount will be zero. 

          Basis Risk Shortfall:  With respect to any Distribution Date and the Class I-A-16 Certificates, the excess, if any, of (a) the amount of interest that such Class of Certificates would have been
entitled to receive if the Pass-Through Rate for such Class was calculated without regard to the maximum per annum Pass-Through Rate for such Class as described in the Preliminary Statement, over (b) the actual amount of interest such Class of
Certificates is entitled to receive for such Distribution Date. 

          Blanket Mortgage: The mortgage or mortgages encumbering the Cooperative Property. 

          Book-Entry Certificates: As specified in the Preliminary Statement. 

          Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in the City of Dallas, or the State of Texas or the city in which the Corporate Trust Office of
the Trustee is located are authorized or obligated by law or executive order to be closed. 

10

          Carryover Unpaid Basis Risk Shortfall: With respect to any Distribution Date and the Class I-A-16 Certificates, the aggregate amount of Unpaid Basis Risk Shortfalls in respect of such Class of
Certificates that remain unpaid, if any, from previous Distribution Dates. 

          Certificate: Any one of the Certificates executed by the Trustee in substantially the forms attached hereto as exhibits. 

          Certificate Account: The separate Eligible Account or Accounts created and maintained by the Master Servicer pursuant to Section 3.5 with a depository institution in the name of the Master Servicer
for the benefit of the Trustee on behalf of Certificateholders and designated “First Horizon Home Loans in trust for the registered holders of First Horizon Asset Securities Inc. Mortgage Pass-Through Certificates, Series 2007-4.”

          Certificate Group: As specified in the Preliminary Statement.

          Certificate Owner:  With respect to a Book-Entry Certificate, the Person who is the beneficial owner of such Book-Entry Certificate. 

          Certificate Principal Balance:  With respect to any Certificate  (other than a Notional Amount Certificate) and as of any Distribution Date, the principal balance of such Certificate on the date of
the initial issuance of such Certificate, as reduced by: 

	 	
(a)   	
all amounts distributed on previous Distribution Dates on such Certificate on account of principal,	
	          	          	 
	 	
(b)   	
the principal portion of all Realized Losses previously allocated to such Certificate, and	
	 
	 	
(c)   	
in the case of a Subordinated Certificate, such Certificate’s pro rata share, if any, of the Subordinated Certificate Writedown Amount for previous Distribution Dates.	
	 

          Certificate Register: The register maintained pursuant to Section 5.2 hereof. 

          Certificateholder or Holder: The person in whose name a Certificate is registered in the Certificate Register, except that, solely for the purpose of giving any consent pursuant to this Agreement, any
Certificate registered in the name of the Depositor or the Seller or any affiliate or agent of the Depositor or the Seller shall be deemed not to be Outstanding and the Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary to effect such consent has been obtained; provided, however, that if any such Person (including the Depositor) owns 100% of the Percentage Interests evidenced by a Class of
Certificates, such Certificates shall be deemed to be Outstanding for purposes of any provision hereof that requires the consent of the Holders of Certificates of a particular Class as a condition to the taking of any action hereunder. The Trustee
is entitled to rely conclusively on a certification of the Depositor or any affiliate of the Depositor in determining which Certificates are registered in the name of an affiliate of the Depositor. 

          Certification Party: As defined in Section 10.5. 

11

          Certifying Person: As defined in Section 10.5.

          Class: All Certificates bearing the same class designation as set forth in the Preliminary Statement. 

          Class Certificate Balance:  With respect to any Class of Certificates and as of any Distribution Date the aggregate of the Certificate Principal Balances of all Certificates of such Class as of such
date, plus the amount of any Unanticipated Recoveries added to the Class Certificate Balance of such Class of Certificates pursuant to Section 4.2(j) . 

          Class PO Certificates: The Class I-A-PO Certificates.

          Class PO Deferred Amount:  With respect to the Class PO Certificates and any Distribution Date through the Cross-over Date, the sum of (1) the PO Percentage of the principal portion of Non-Excess
Losses on a Discount Mortgage Loan in Pool I allocated to the Class PO Certificates on such date, and (2) all amounts previously allocated to the Class PO Certificates in respect of such losses and not distributed to the Class PO Certificates on
prior Distribution Dates.

          Class PO Deferred Payment Writedown Amount:  For any Distribution Date and any Class PO Certificates, the amount, if any, distributed on such date in respect of the Class PO Deferred Amount pursuant
to Section 4.2(a)(iv) herein. The Subordinated Certificate Writedown Amount and the Class PO Deferred Payment Writedown Amount will be allocated to the Classes of Subordinated Certificates in inverse order of priority, until the Class Certificate
Balance of each such Class has been reduced to zero.

          Class PO Principal Distribution Amount: With respect to each Distribution Date and the Class PO Certificates, an amount equal to the sum of: 

 

	          	          (1)
               the PO Percentage of all Scheduled Payments of principal due on each
          Mortgage Loan in the related Mortgage Pool on the first day of the
          month in which the Distribution Date occurs, as specified in the amortization
          schedule at the time applicable thereto, after adjustment for previous
          principal prepayments and the principal portion of Debt Service Reductions
          after the Bankruptcy Loss Coverage Amount has been reduced to zero,
          but before any adjustment to such amortization schedule by reason of
          any other bankruptcy or similar proceeding or any moratorium or similar
          waiver or grace period; 

                 (2)
               the PO Percentage of the Stated Principal Balance of each Mortgage
          Loan in the related Mortgage Pool which was the subject of a Principal
          Prepayment in Full received by the Master Servicer during the related
          Prepayment Period; 

                 (3)
               the PO Percentage of the sum of (a) all partial Principal Prepayments
          for each Mortgage Loan in the related Mortgage Pool received by the
          Master Servicer during the related Prepayment Period and (b) all Unanticipated
          Recoveries in respect of each Mortgage Loan in the related Mortgage
          Pool received by the Master Servicer during the calendar month preceding
          such Distribution Date; 

                 (4)
               the PO Percentage of the sum of (a) the net Liquidation Proceeds allocable
          to principal on each Mortgage Loan in the related Mortgage Pool which
          became a 

    

          12

	          	Liquidated
          Mortgage Loan during the related Prepayment Period, other than Mortgage
          Loans described in clause (b), and (b) the principal balance of each
          Mortgage Loan in the related Mortgage Pool that was purchased by a
          private mortgage insurer during the related Prepayment Period as an
          alternative to paying a claim under the related mortgage insurance
          policy; and 

                 (5)
               the PO Percentage, of the sum of (a)
          the Stated Principal Balance of each Mortgage Loan in the related Mortgage
          Pool which was repurchased by the Seller in connection with such Distribution
          Date, and (b) the difference, if any, between the Stated Principal
          Balance of a Mortgage Loan in the related Mortgage Pool that has been
          replaced by the Seller with a Substitute Mortgage Loan pursuant to
          this Agreement in connection with such Distribution Date and the Stated
          Principal Balance of such Substitute Mortgage Loan. 

    

          For purposes of clauses (2) and (5) above, the Stated Principal Balance of a Mortgage Loan will be reduced by the amount of any Deficient Valuation that occurred prior to the reduction of the
Bankruptcy Loss Coverage Amount to zero. 

          Class Prepayment Distribution Trigger: For a Class of Subordinated Certificates (other than the Class of Subordinated Certificates with the highest priority of distribution), a trigger that is
satisfied on any Distribution Date on which a fraction (expressed as a percentage), the numerator of which is the aggregate of the Class Certificate Balance of such Class and each Class subordinate thereto, if any, and the denominator of which is
the aggregate Pool Principal Balance for both Mortgage Pools with respect to such Distribution Date, equals or exceeds such percentage calculated as of the Closing Date. 

          Closing Date: June 29, 2007.

          Code:  The Internal Revenue Code of 1986, including any successor or amendatory provisions. 

          COFI: Not applicable. 

          COFI Certificates: Not applicable.

          Compensating Interest:  As to any Distribution Date and any Principal Prepayment in respect of a Mortgage Loan that is received during the period from the sixteenth day of the month (or, in the case
of the first Distribution Date, from the Cut-off Date) prior to the month of such Distribution Date through the last day of such month, an additional payment to the related Mortgage Pool made by the Master Servicer, to the extent funds are available
from the Master Servicing Fee, equal to the amount of interest at the Adjusted Net Mortgage Rate for that Mortgage Loan from the date of the prepayment to the related Due Date; provided that the aggregate of all such payments as to the Mortgage
Loans in a Mortgage Pool shall not exceed 0.0083% of the Pool Principal Balance of such Mortgage Pool as of the related Determination Date, and provided further that if a partial Principal Prepayment is applied on or after the first day of the month
following the month of receipt, no additional payment is required for such Principal Prepayment. 

13

          Components: As specified in the Preliminary Statement.

          Component Balance:  With respect to any Component and any Distribution Date, the Initial Component Balance thereof on the Closing Date less all amounts applied in reduction of the principal balance of
such Component and Realized Losses allocated thereto on previous Distribution Dates 

          Component Certificates: As specified in the Preliminary Statement.

          Cooperative Corporation:  The entity that holds title (fee or an acceptable leasehold estate) to the real property and improvements constituting the Cooperative Property and which governs the
Cooperative Property, which Cooperative Corporation must qualify as a Cooperative Housing Corporation under Section 216 of the Code. 

          Coop Shares: Shares issued by a Cooperative Corporation. 

          Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a Proprietary Lease.

          Cooperative Property: The real property and improvements owned by the Cooperative Corporation, including the allocation of individual dwelling units to the holders of the Coop Shares of the
Cooperative Corporation. 

          Cooperative Unit: A single family dwelling located in a Cooperative Property.

          Corporate Trust Office: The designated office of the Trustee in the State of New York at which at any particular time its corporate trust business with respect to this Agreement shall be administered,
which office at the date of the execution of this Agreement is located at The Bank of New York, 101 Barclay Street, 4W, New York, New York 10286 (Attn: Corporate Trust Administration—First Horizon Asset Securities Inc. Series 2007-4), facsimile
no. (212) 815-3986, and which is the address to which notices to and correspondence with the Trustee should be directed. 

          Corresponding Classes: As to any Middle REMIC Interest identified in Section 2.7, the Class or Classes that are identified in Section 2.7 as corresponding to such Middle REMIC Interest. 

          Corresponding Classes of Middle REMIC Interests: As to any Lower REMIC Interest identified in Section 2.7, the Middle REMIC Interest or Middle REMIC Interests that are identified in Section 2.7
corresponding to such Lower REMIC Interest. 

          Corridor Contract: The transaction evidenced by that certain Confirmation between the Separate Interest Trust and the Corridor Contract Counterparty with a Trade Date of May 23, 2007 and a reference
number of 2885474 / 2885479. 

          Corridor Contract Counterparty: Bank of America, N.A..

          Corridor Contract Termination Date: The Distribution Date in June 2012.

14

          Corridor
Contract Notional Balance: With respect to the Corridor Contract, the “Notional
Amount” specified therein.           

          Corridor Residual Owner: Bank of America Securities LLC.

          Cross-over Date: The Distribution Date on which the Class Certificate Balance of each Class of Subordinated Certificates has been reduced to zero. 

          Custodial Agreement: The Custodial Agreement dated as of June 29, 2007 by and among the Trustee, the Master Servicer and the Custodian. 

          Custodian: First Tennessee Bank National Association, a national banking association, and its successors and assigns, as custodian under the Custodial Agreement. 

          Cut-off Date: June 1, 2007.

          Cut-off Date Pool Principal Balance: With respect to Pool I, $325,003,275.40, and with respect to Pool II, $21,016,621.98. 

          Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated Principal Balance thereof as of the close of business on the Cut-off Date. 

          Debt Service Reduction: With respect to any Mortgage Loan, a reduction by a court of competent jurisdiction in a proceeding under the Bankruptcy Code in the Scheduled Payment for such Mortgage Loan
which became final and non-appealable, except such a reduction resulting from a Deficient Valuation or any reduction that results in a permanent forgiveness of principal. 

          Defective Mortgage Loan:  Any Mortgage Loan which is required to be repurchased pursuant to Section 2.2 or 2.3. 

          Deficient Valuation:  With respect to any 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 any reduction in the amount of principal to be paid in connection with any Scheduled Payment that results in a permanent forgiveness of principal, which valuation or reduction results from an order of such court which is final and
non-appealable in a proceeding under the Bankruptcy Code. 

          Definitive Certificates:  Any Certificate evidenced by a Physical Certificate and any Certificate issued in lieu of a Book-Entry Certificate pursuant to Section 5.2(e) . 

          Delay Certificates: As specified in the Preliminary Statement.

          Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a portion of a related Mortgage File is not delivered to the Trustee on the Closing Date. The number of Delay Delivery Mortgage Loans
shall not exceed 25% of the aggregate number of Mortgage Loans as of the Closing Date. 

          Deleted Mortgage Loan: As defined in Section 2.3(b) hereof.

15

          Denomination: With respect to each Certificate, the amount set forth on the face thereof as the “Initial Certificate Balance of this Certificate” or the Percentage Interest appearing on the
face thereof. 

          Depositor: First Horizon Asset Securities Inc., a Delaware corporation, or its successor in interest. 

          Depository: The initial Depository shall be The Depository Trust Company, the nominee of which is CEDE & Co., as the registered Holder of the Book-Entry Certificates. The Depository shall at all
times be a “clearing corporation” as defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of New York. 

          Depository Participant:  A broker, dealer, bank or other financial institution or other Person for whom from time to time a Depository effects book-entry transfers and pledges of securities deposited
with the Depository. 

          Designated Mortgage Pool Rates: With respect to Pool I, 6.00%, and with respect to Pool II, 5.50% . 

          Determination Date: As to any Distribution Date, the earlier of (i) the third Business Day after the 15th day of each month, and (ii) the second Business Day prior to the related Distribution Date.

          Discount Mortgage Loan: Any Mortgage Loan in Pool I with an Adjusted Net Mortgage Rate of less than 6.00% . 

          Distribution Account:  The separate Eligible Account created and maintained by the Trustee pursuant to Section 3.5 in the name of the Trustee for the benefit of the Certificateholders and designated
“The Bank of New York, in trust for registered Holders of First Horizon Asset Securities Inc. Mortgage Pass-Through Certificates, Series 2007-4.” Funds in the Distribution Account shall be held in trust for the Certificateholders for the
uses and purposes set forth in this Agreement. 

          Distribution Account Deposit Date: As to any Distribution Date, 1:30 p.m. Central time on the Business Day immediately preceding such Distribution Date. 

          Distribution Date: The 25th day of each calendar month after the initial issuance of the Certificates, or if such 25th day is not a Business Day, the next succeeding Business Day, commencing in July
2007. 

          Due Date: With respect to any Distribution Date, the first day of the month in which the related Distribution Date occurs. 

          EDGAR: The SEC’s Electronic Data Gathering, Analysis and Retrieval system.

          Eligible Account: Any of (i) an account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the
case of a depository institution or trust company that is the principal subsidiary

16

of a holding company, the debt obligations of such holding company) are rated at least “A-2” by S&P (in the case of the Certificate Account or the Distribution Account), “P 1” by Moody’s and
“F1+” by Fitch (or a comparable rating if another Rating Agency is specified by the Depositor by written notice to each of the Master Servicer and the Trustee) with respect to such account or accounts at the time any amounts are held on
deposit therein, or (ii) a trust account or accounts maintained with (a) the trust department of a federal or state chartered depository institution or (b) a trust company, acting in its fiduciary capacity or (iii) any other account acceptable to
each Rating Agency.  Eligible Accounts may bear interest, and may include, if otherwise qualified under this definition, accounts maintained with the Trustee. In the event the depository institution no longer meets the applicable S&P rating
requirement specified above, the funds on deposit therein in connection with this transaction shall be transferred to an Eligible Account within 30 days. 

          ERISA: The Employee Retirement Income Security Act of 1974, as amended.

          ERISA-Qualifying Underwriting:  With respect to any ERISA-Restricted Certificate, a best efforts or firm commitment underwriting or private placement that meets the requirements of the
Underwriter’s Exemption. 

          ERISA-Restricted Certificate: As specified in the Preliminary Statement.

          ERISA Restricted Yield Supplemented Certificates:  As specified in the Preliminary Statement. 

          Escrow Account: The Eligible Account or Accounts established and maintained pursuant to Section 3.6(a) hereof. 

          Event of Default: As defined in Section 7.1 hereof.

          Excess Loss: The amount of any (i) Fraud Loss realized after the Fraud Loss Coverage Termination Date, (ii) Special Hazard Loss realized after the Special Hazard Coverage Termination Date or (iii)
Deficient Valuation realized after the Bankruptcy Coverage Termination Date. 

          Excess Proceeds: With respect to any Liquidated Mortgage Loan, the amount, if any, by which the sum of any Liquidation Proceeds, Insurance Proceeds and/or Unanticipated Recoveries in respect of such
Mortgage Loan received in the calendar month in which such Mortgage Loan became a Liquidated Mortgage Loan, net of any amounts previously reimbursed to the Master Servicer as Nonrecoverable Advance(s) with respect to such Mortgage Loan pursuant to
Section 3.8(a)(iii), exceeds (i) the unpaid principal balance of such Liquidated Mortgage Loan as of the Due Date in the month in which such Mortgage Loan became a Liquidated Mortgage Loan plus (ii) accrued interest at the Mortgage Rate from the Due
Date as to which interest was last paid or advanced (and not reimbursed) to Certificateholders up to the Due Date applicable to the Distribution Date immediately following the calendar month during which such liquidation occurred. 

          Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 

17

          Exchange Act Reports: Any reports on Form 10-D, Form 8-K and Form 10-K required to be filed by the Depositor with respect to the Trust Fund under the Exchange Act. 

          Exchange Fee: As defined in Section 5.8(d) .

          Exchangeable Certificates: The Class I-A-10 Certificates.

          Exchangeable Certificates Grantor Trust: That portion of the trust created hereunder exclusive of the REMIC Pools consisting of any interests in the Exchangeable REMIC Certificates beneficially owned
in the form of the Exchangeable Certificates  and rights with respect thereto. 

          Exchangeable REMIC Certificates: The Class I-A-16 and Class I-A-17 Certificates.

          Expense Fee Rate: As to each Mortgage Loan, the sum of the related Master Servicing Fee Rate and the Trustee Fee Rate. 

          FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.

          FHLMC: The Federal Home Loan Mortgage Corporation, a corporate instrumentality of the United States created and existing under Title III of the Emergency Home Finance Act of 1970, as amended, or any
successor thereto. 

          Final Scheduled Distribution Date: For each Certificate, as specified in the Preliminary Statement. 

          FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

          First Horizon: First Horizon Home Loans, a division of First Tennessee Bank National Association, which is a wholly-owned subsidiary of First Horizon National Corporation, a Tennessee corporation.

          Fitch: Fitch Ratings and its successors and/or assigns. If Fitch is designated as a Rating Agency in the Preliminary Statement, for purposes of Section 11.5(b) the address for notices to Fitch shall
be Fitch, Inc., One State Street Plaza, New York, New York 10004, Attention: Residential Mortgage Surveillance Group, or such other address as Fitch may hereafter furnish to the Depositor and the Master Servicer. 

          Floating Rate Certificates: As specified in the Preliminary Statement.

          FNMA: The Federal National Mortgage Association, a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act, or any
successor thereto. 

          Form 10-D Disclosure Item: With respect to any Person, any material litigation or governmental proceedings pending against such Person, or against any of the Trust Fund, the Depositor, the Trustee,
any co-trustee, the Master Servicer or any Subservicer that is material to the Certificateholders if such Person, as applicable, has actual knowledge thereof. 

18

          Form 10-K Disclosure Item: With respect to any Person, (a) any Form 10-D Disclosure Item, and (b) any affiliations or relationships between such Person and any Item 1119 Party other than the
Depositor, the Master Servicer or any affiliate of either. 

          Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss has occurred.

          Fraud Loss Coverage Amount:  As of the Closing Date, $10,380,597.  As of any Distribution Date from the first anniversary of the Cut-off Date and prior to the third anniversary of the Cut-off
Date, the Fraud Loss Coverage Amount will equal $6,920,398 minus the aggregate amount of Fraud Losses that would have been allocated to the Subordinated Certificates in the absence of the Loss Allocation Limitation since the Cut-off Date. As of
any Distribution Date from the third anniversary of the Cut-off Date and prior to the fifth anniversary of the Cut-off Date, the Fraud Loss Coverage Amount will equal $3,460,199 minus the aggregate amount of Fraud Losses that would have been
allocated to the Subordinated Certificates in the absence of the Loss Allocation Limitation since the Cut-off Date. As of any Distribution Date on or after the earlier of the Cross-over Date or the fifth anniversary of the Cut-off Date, the Fraud
Loss Coverage Amount shall be zero. 

          Fraud Loss Coverage Termination Date: The date on which the Fraud Loss Coverage Amount is reduced to zero. 

          Fraud Losses: Realized Losses on Mortgage Loans as to which a loss is sustained by reason of a default arising from fraud, dishonesty or misrepresentation in connection with the related Mortgage Loan,
including a loss by reason of the denial of coverage under any related Primary Insurance Policy because of such fraud, dishonesty or misrepresentation. 

          Group I Senior Certificates: As specified in the Preliminary Statement. 

          Group II Senior Certificates: As specified in the Preliminary Statement.

          Group Subordinate Amount: For a Mortgage Pool and any Distribution Date, the excess of (a) the Pool Principal Balance of such Mortgage Pool for such Distribution Date, over (b) the aggregate Class
Certificate Balance of the Senior Certificates of the related Certificate Group immediately prior to that Distribution Date. 

          Index: LIBOR.

          Indirect Participant: A broker, dealer, bank or other financial institution or other Person that clears through or maintains a custodial relationship with a Depository Participant. 

          Initial Bankruptcy Coverage Amount: $150,000.

          Initial Component Balance:  With respect to any Component, the Component Balance thereof as of the Closing Date.. 

          Initial LIBOR Rate: With respect to the calculation of the initial Pass-Through Rate for the LIBOR Certificates, 5.32% per annum. 

19

          Insurance Policy: With respect to any Mortgage Loan included in the Trust Fund, any insurance policy, including all riders and endorsements thereto in effect, including any replacement policy or
policies for any Insurance Policies. 

          Insurance Proceeds:  Proceeds paid by an insurer pursuant to any Insurance Policy, in each case other than any amount included in such Insurance Proceeds (a) in respect of Insured Expenses, (b) that
is applied to the restoration of the related Mortgaged Property, or (c) that is released to the Mortgagor in accordance with the Master Servicer’s normal servicing procedures. 

          Insured Expenses:  Expenses covered by an Insurance Policy or any other insurance policy with respect to the Mortgage Loans. 

          Interest Accrual Period:  With respect to each Class of Delay Certificates and any Distribution Date, the calendar month prior to the month of such Distribution Date. With respect to any Non-Delay
Certificates and any Distribution Date, the one month period commencing on the 25th day of the month preceding the month in which such Distribution Date occurs and ending on the 24th day of the month in which such Distribution Date occurs.

          Inverse Floating Rate Certificates: As specified in the Preliminary Statement.

          Item 1119 Party: The Depositor, the Seller, the Master Servicer, the Trustee, any Subservicer, any originator identified in the Prospectus Supplement and any other material transaction party, as
identified in Exhibit P hereto, as updated pursuant to Section 10.4. 

          Latest Possible Maturity Date:  As to the Group I Senior Certificates, each Class of Subordinated Certificates, and each Lower REMIC Interest and each Middle REMIC Interest, the Distribution Date
following the third anniversary of the scheduled maturity date of the Mortgage Loan in Pool I having the latest scheduled maturity date as of the Cut-off Date. As to the Group II Senior Certificates, the Distribution Date following the third
anniversary of the scheduled maturity date of the Mortgage Loan in Pool II having the latest scheduled maturity date as of the Cut-off Date. 

          Lender PMI Mortgage Loan: Not applicable.

          LIBOR: The London interbank offered rate for one month United States dollar deposits calculated in the manner described in Section 4.9. 

          LIBOR Business Day: Any day on which banks in London, England and The City of New York are open and conducting transactions in foreign currency and exchange. 

          LIBOR Certificates: As specified in the Preliminary Statement.

          LIBOR Determination Date: For the LIBOR Certificates, the second LIBOR Business Day immediately preceding the commencement of each Interest Accrual Period for each LIBOR Certificate.

20

          Limited Exchange Act Reporting Obligations: The obligations of the Master Servicer under Section 3.16(b), Section 8.7 and Section 8.9 with respect to notice and information to be provided to the
Depositor and Article X (except Section 10.7(a)(i) and (ii)). 

          Liquidated Mortgage Loan: With respect to any Distribution Date, a defaulted Mortgage Loan (including any REO Property) which was liquidated in the calendar month preceding the month of such
Distribution Date and as to which the Master Servicer has determined (in accordance with this Agreement) that it has received all amounts it expects to receive in connection with the liquidation of such Mortgage Loan, including the final disposition
of an REO Property. 

          Liquidation Proceeds:  All cash amounts, other than Insurance Proceeds and Unanticipated Recoveries, received in connection with the partial or complete liquidation of defaulted Mortgage Loans,
whether through trustee’s sale, foreclosure sale or otherwise or amounts received in connection with any condemnation or partial release of a Mortgaged Property and any other proceeds received in connection with an REO Property, less the sum of
related unreimbursed Master Servicing Fees, Servicing Advances and Advances. 

          Loan-to-Value Ratio:  With respect to any Mortgage Loan and as of any date of determination, the fraction (expressed as a percentage) the numerator of which is the principal balance of the related
Mortgage Loan at such date of determination and the denominator of which is the Appraised Value of the related Mortgaged Property. 

          Loss Allocation Limitation: As defined in Section 4.4(i) .

          Lost Mortgage Note: Any Mortgage Note, the original of which was permanently lost or destroyed and has not been replaced. 

          Lower REMIC: The segregated pool of assets consisting of the Trust Fund but excluding the Retained Yield, the Middle REMIC Interests, the Lower REMIC Interests, the RL Interest, the RM Interest, the
RU Interest, the Separate Interest Trust, the Corridor Contract, the Reserve Fund, and the Exchangeable Certificates Grantor Trust and all assets therein.

          Lower REMIC Interests:  The REMIC regular interests, within the meaning of the REMIC Provisions, issued by the Lower REMIC as set forth in Section 2.7. 

          Maintenance: With respect to any Cooperative Unit, the rent paid by the Mortgagor to the Cooperative Corporation pursuant to the Proprietary Lease. 

          Majority in Interest: As to any Class of Regular Certificates, the Holders of Certificates of such Class evidencing, in the aggregate, at least 51% of the Percentage Interests evidenced by all
Certificates of such Class. 

          Master Servicer: First Horizon Home Loans, a division of First Tennessee Bank National Association, and its successors and assigns, in its capacity as master servicer hereunder. 

          Master Servicer Advance Date: As to any Distribution Date, 1:30 p.m. Central time on the Business Day immediately preceding such Distribution Date. 

21

          Master Servicing Fee: As to each Mortgage Loan and any Distribution Date, an amount payable out of each full payment of interest received on such Mortgage Loan and equal to one-twelfth of the Master
Servicing Fee Rate multiplied by the Stated Principal Balance of such Mortgage Loan as of the Due Date in the month of such Distribution Date (prior to giving effect to any Scheduled Payments due on such Mortgage Loan on such Due Date), subject to
reduction as provided in Section 3.14. 

          Master Servicing Fee Rate: For each Mortgage Loan a per annum rate equal to 0.244% .

          Maximum Initial Class Certificate Balance: As to each Class of Exchangeable Certificates or Exchangeable REMIC Certificates (other than the Class I-A-17 Certificates), the Class Certificate Balance
set forth in the Preliminary Statement. The Class I-A-17 Certificates are Notional Amount Certificates and have no Maximum Initial Class Certificate Balance. 

          Maximum Initial Notional Amount: As to each Class of Exchangeable Certificates or REMIC Exchangeable Certificates that is a Class of Notional Amount Certificates, the Notional Amount set forth in the
Preliminary Statement. 

          MERS:  Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto. 

          MERS Mortgage Loan:  Any Mortgage Loan registered with MERS on the MERS System. 

          MERS® System:  The system of recording transfers of mortgages electronically maintained by MERS. 

          Middle REMIC: The segregated pool of assets consisting of the Lower REMIC Interests.

          Middle REMIC Interests:  The REMIC regular interests, within the meaning of the REMIC Provisions, issued by the Middle REMIC as set forth in Section  2.7. 

          MIN: The Mortgage Identification Number for any MERS Mortgage Loan.

          MLPA:  The Mortgage Loan Purchase Agreement dated as of June 29, 2007, by and between First Horizon Home Loans, as seller, and First Horizon Asset Securities Inc., as purchaser, as related to the
transfer, sale and conveyance of the Mortgage Loans. 

          MOM Loan: Any Mortgage Loan as to which MERS is acting as mortgagee, solely as nominee for the originator of such Mortgage Loan and its successors and assigns. 

          Monthly Statement: The statement delivered to the Certificateholders pursuant to Section 4.6.

          Moody’s: Moody’s Investors Service, Inc. and its successors and/or assigns. If Moody’s is designated as a Rating Agency in the Preliminary Statement, for purposes of Section 11.5(b) the
address for notices to Moody’s shall be Moody’s Investors Service, Inc., 99 Church Street,

22

          New York, New York 10007, Attention: Residential Pass-Through Monitoring, or such other address as Moody’s may hereafter furnish to the Depositor or the Master Servicer. 

          Mortgage:  The mortgage, deed of trust or other instrument creating a first lien on an estate in fee simple or leasehold interest in real property securing a Mortgage Note. 

          Mortgage File: The mortgage documents listed in Section 2.1(b) hereof pertaining to a particular Mortgage Loan and any additional documents delivered to the Trustee to be added to the Mortgage File
pursuant to this Agreement. 

          Mortgage Loan Schedule: The list of Mortgage Loans (as from time to time amended by the Master Servicer to reflect the addition of Substitute Mortgage Loans and the deletion of Deleted Mortgage Loans
pursuant to the provisions of this Agreement) transferred to the Trustee as part of the Trust Fund and from time to time subject to this Agreement, attached hereto as Schedule I, setting forth the following information with respect to each Mortgage
Loan: 

	          	          	          	
(1)   	
the loan number;	
	 	 	 	          	 
	 	 	 	
(2)   	
the Mortgagor’s name and the street address of the Mortgaged Property, including the zip code;	
	 
	 	 	 	
(3)   	
the maturity date;	
	 
	 	 	 	
(4)   	
the original principal balance;	
	 
	 	 	 	
(5)   	
the Cut-off Date Principal Balance;	
	 
	 	 	 	
(6)   	
the first payment date of the Mortgage Loan;	
	 
	 	 	 	
(7)   	
the Scheduled Payment in effect as of the Cut-off Date;	
	 
	 	 	 	
(8)   	
the Loan-to-Value Ratio at origination;	
	 
	 	 	 	
(9)   	
a code indicating whether the residential dwelling at the time of origination was represented to be owner-occupied;	
	 
	 	 	 	
(10)   	
a code indicating whether the residential dwelling is either (a) a detached single family dwelling (b) a dwelling in a de minimis PUD, (c) a condominium unit or PUD (other than a de minimis PUD), (d) a two-to-four unit residential
property or (e) a Cooperative Unit;	
	 
	 	 	 	
(11)   	
the Mortgage Rate;	
	 
	 	 	 	
(12)   	
the purpose for the Mortgage Loan;	
	 
	 	 	 	
(13)   	
the type of documentation program pursuant to which the Mortgage Loan was originated;	
	 

23

	 	 	          	
(14)   	
the Master Servicing Fee for the Mortgage Loan; and	
	          	          	 	          	 
	 	 	 	
(15)   	
a code indicating whether the Mortgage Loan is a MERS Mortgage Loan.	

          Such schedule shall also set forth the total of the amounts described under (4) and (5) above for all of the Mortgage Loans. 

          Mortgage Loans:  Such of the mortgage loans transferred and assigned to the Trustee pursuant to the provisions hereof as from time to time are held as a part of the Trust Fund (including any REO
Property), the mortgage loans so held being identified in the Mortgage Loan Schedule, notwithstanding foreclosure or other acquisition of title of the related Mortgaged Property. 

          Mortgage Note: The original executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan. 

          Mortgage Pool: Any of Pool I or Pool II.

          Mortgage Rate: The annual rate of interest borne by a Mortgage Note from time to time, net of any insurance premium charged by the mortgagee to obtain or maintain any Primary Insurance Policy.

          Mortgaged Property: The underlying property securing a Mortgage Loan, which, with respect to a Cooperative Loan, is the related Coop Shares and Proprietary Lease. 

          Mortgagor: The obligor(s) on a Mortgage Note.

          NAS Certificates: As specified in the Preliminary Statement. 

          NAS Components: As specified in the Preliminary Statement.

          NAS Distribution Percentage: 0% through the Distribution Date in June 2012; 30% of the applicable NAS Percentage thereafter through the Distribution Date in June 2013; 40% of the applicable NAS
Percentage thereafter through the Distribution Date in June 2014; 60% of the applicable NAS Percentage thereafter through the Distribution Date in June 2015; 80% of the applicable NAS Percentage thereafter through the Distribution Date in June 2016;
and 100% of the applicable NAS Percentage thereafter. 

          NAS Percentage:  0% through the Distribution Date in June 2012, and for any Distribution Date thereafter, the lesser of (x) 100% and (y) the percentage (rounded to six decimal places) obtained by
dividing (1) the aggregate Class Certificate Balance and Component Balance of the NAS Certificates and NAS Component immediately preceding such Distribution Date by (2) the Pool Principal Balance of Pool I (excluding the aggregate of the PO
Percentage of the principal balance of each Discount Mortgage Loan in Pool I). 

          NAS Principal Distribution Amount: For any Distribution Date, the amounts described in clauses (1) through (5) of the definition of Senior Optimal Principal Amount for such date

24

(without taking into account the related Senior Percentage and Senior Prepayment Percentage) multiplied by the NAS Distribution Percentage for such date.

          National Cost of Funds Index:  The National Monthly Median Cost of Funds Ratio to SAIF-Insured Institutions published by the Office of Thrift Supervision. 

          Net Interest Shortfall: For any Distribution Date and each Mortgage Pool, the sum of (a) the amount of interest which would otherwise have been received for any Mortgage Loan in such Mortgage Pool
that was the subject of (x) a Relief Act Reduction or (y) a Special Hazard Loss, Fraud Loss, or Deficient Valuation, after the exhaustion of the respective amounts of coverage for those types of losses provided by the Subordinated Certificates; and
(b) any Net Prepayment Interest Shortfalls in respect of such Mortgage Pool. 

          Net Prepayment Interest Shortfalls: As to any Distribution Date and each Mortgage Pool, the amount by which the aggregate of Prepayment Interest Shortfalls in respect of the Mortgage Loans in such
Mortgage Pool during the related Prepayment Period exceeds an amount equal to the Compensating Interest paid in respect of such Mortgage Loans, if any, for such Distribution Date. 

          Non-Delay Certificates: As specified in the Preliminary Statement.

          Non-Discount Mortgage Loan:  Any Mortgage Loan in Pool I with an Adjusted Net Mortgage Rate that is equal to or greater than 6.00% per annum, and all the Mortgage Loans in Pool II.

          Non-Excess Loss: Any Realized Loss other than an Excess Loss.

          Non-PO Percentage:  (a) With respect to a Discount Mortgage Loan, the fraction, expressed as a percentage, equal to the NMR divided by 6.00%, and (b) with respect to each Non-Discount Mortgage Loan,
100%. 

          Nonrecoverable Advance: Any portion of an Advance previously made or proposed to be made by the Master Servicer that, in the good faith judgment of the Master Servicer, will not be ultimately
recoverable by the Master Servicer from the related Mortgagor, related Liquidation Proceeds or otherwise. 

          Notice of Final Distribution: The notice to be provided pursuant to Section 9.2 to the effect that final distribution on any of the Certificates shall be made only upon presentation and surrender
thereof. 

          Notional Amount: As specified in the Preliminary Statement. 

          Notional Amount Certificates: As specified in the Preliminary Statement.

          Notional Amount Component: As specified in the Preliminary Statement. 

          Offered Certificates: As specified in the Preliminary Statement. 

25

          Officer’s Certificate:  A Certificate (i) signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a Managing Director, a Vice President (however denominated), an
Assistant Vice President, the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant Secretaries of the Depositor or the Master Servicer, or (ii), if provided for in this Agreement, signed by a Servicing Officer, as the case may
be, and delivered to the Depositor and the Trustee, as the case may be, as required by this Agreement. 

          Opinion of Counsel: A written opinion of counsel, who may be counsel for the Depositor or the Master Servicer, including, in-house counsel, reasonably acceptable to the Trustee; provided, however,
that with respect to the interpretation or application of the REMIC Provisions, such counsel must (i) in fact be independent of the Depositor and the Master Servicer, (ii) not have any direct financial interest in the Depositor or the Master
Servicer or in any affiliate of either, and (iii) not be connected with the Depositor or the Master Servicer as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. 

          Optional Termination: The termination of the trust created hereunder in connection with the purchase of the Mortgage Loans pursuant to Section 9.1(a) hereof. 

          Original Mortgage Loan:  The Mortgage Loan refinanced in connection with the origination of a Refinancing Mortgage Loan. 

          Original Subordinated Principal Balance: The aggregate of  the Class Certificate Balances of the Subordinated Certificates as of the Closing Date. 

          OTS: The Office of Thrift Supervision. 

          Outside Reference Date: Not applicable. 

          Outstanding:  With respect to the Certificates as of any date of determination, all Certificates theretofore executed and authenticated under this Agreement except: 

	 	
(a)   	
Certificates theretofore canceled by the Trustee or delivered to the Trustee for cancellation; and	
	          	          	 
	 	
(b)   	
Certificates in exchange for which or in lieu of which other Certificates have been executed and delivered by the Trustee pursuant to this Agreement.	

          Outstanding Mortgage Loan:  As of any Due Date, a Mortgage Loan with a Stated Principal Balance greater than zero which was not the subject of a Principal Prepayment in Full prior to such Due Date and
which did not become a Liquidated Mortgage Loan prior to such Due Date. 

          Ownership Interest:  As to any Residual Certificate, any ownership interest in such Certificate including any interest in such Certificate as the Holder thereof and any other interest therein, whether
direct or indirect, legal or beneficial. 

          PAC Certificates: As specified in the Preliminary Statement.

26

          PAC Component: As specified in the Preliminary Statement. 

          PAC Schedule: The schedule designated as such in Exhibit R.

          Pass-Through Rate: For any interest bearing Class of Certificates, the per annum rate set forth or calculated in the manner described in the Preliminary Statement. 

          Percentage Interest: As to any Certificate, the percentage interest evidenced thereby in distributions required to be made on the related Class, such percentage interest being set forth on the face
thereof or equal to the percentage obtained by dividing the Denomination of such Certificate by the aggregate of the Denominations of all Certificates of the same Class. 

          Performance Certification: As defined in Section 10.5.

          Permitted Investments: At any time, any one or more of the following obligations and securities: 

     
	 	 	(a)   	obligations of the United States or any
        agency thereof, provided such obligations are backed by the full faith
        and credit of the United States; 
	          	          	          	 
	 	 	(b)   	general obligations of or obligations guaranteed
        by any state of the United States or the District of Columbia receiving
        the highest long-term debt rating of each Rating Agency; 
	 
	 	 	(c)   	commercial or finance company paper which
        is then receiving the highest commercial or finance company paper rating
        of each Rating Agency; 
	 
	 	 	(d)   	certificates of deposit, demand or time
        deposits, or bankers’ acceptances issued by any depository institution
        or trust company incorporated under the laws of the United States or
        of any state thereof and subject to supervision and examination by federal
        and/or state banking authorities, provided that the commercial paper
        and/or long term unsecured debt obligations of such depository institution
        or trust company (or in the case of the principal depository institution
        in a holding company system, the commercial paper or long-term unsecured
        debt obligations of such holding company, but only if Moody’s is
        not a Rating Agency) are then rated one of the two highest long-term
        and/or the highest short-term ratings of each Rating Agency for such
        securities; 
	 
	 	 	(e)   	demand or time deposits or certificates
        of deposit issued by any bank or trust company or savings institution
        to the extent that such deposits are fully insured by the FDIC and receiving
        the highest short-term debt rating of each Rating Agency; 
	 
	 	 	(f)   	guaranteed reinvestment agreements issued
        by any bank, insurance company or other corporation and receiving the
        highest short-term debt rating of each Rating Agency and containing,
        at the time of the issuance of such agreements, such terms and conditions
        as will not result in the 
	 

27

	 	 	 	
downgrading or withdrawal of the rating then assigned to the Certificates by either Rating Agency;	
	          	          	          	 
	 	 	
(g)   	
repurchase obligations with respect to any security described in clauses (a) and (b) above, in either case entered into with a depository institution or trust company (acting as principal) described in clause (d)
above;	
	 
	 	 	
(h)   	
securities (other than stripped bonds, stripped coupons or instruments sold at a purchase price in excess of 115% of the face amount thereof) bearing interest or sold at a discount issued by any corporation incorporated under the
laws of the United States or any state thereof which, at the time of such investment, have one of the two highest ratings of each Rating Agency (except if the Rating Agency is Moody’s or S&P, such rating shall be the highest commercial
paper rating of Moody’s or S&P, as applicable, for any such securities);	
	 
	 	 	
(i)   	
units of a taxable money-market portfolio having the highest rating assigned by each Rating Agency (except if Fitch is a Rating Agency and has not rated the portfolio, the highest rating assigned by Moody’s) and restricted to
obligations issued or guaranteed by the United States of America or entities whose obligations are backed by the full faith and credit of the United States of America and repurchase agreements collateralized by such obligations; and	
	 
	 	 	
(j)   	
such other investments bearing interest or sold at a discount as will not result in the downgrading or withdrawal of the rating then assigned to the Certificates by either Rating Agency, as evidenced by a signed writing delivered
by each Rating Agency;	
	 

provided that no such instrument shall be a Permitted Investment if such instrument evidences the right to receive interest only payments
with respect to the obligations underlying such instrument. 

          Permitted Transferee: Any person other than (i) the United States, any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing, (ii) a foreign government,
International Organization or any agency or instrumentality of either of the foregoing, (iii) an organization (except certain farmers’ cooperatives described in section 521 of the Code) which is exempt from tax imposed by Chapter 1 of the Code
(including the tax imposed by section 511 of the Code on unrelated business taxable income) on any excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to any Residual Certificate, (iv) rural electric and telephone
cooperatives described in section 1381(a)(2)(C) of the Code, (v) an “electing large partnership” as defined in section 775 of the Code, (vi) a Person that is not (a) a citizen or resident of the United States, (b) a corporation,
partnership, or other entity created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate whose income from sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States or (d) a trust if a court within the United States is able

28

to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, unless such Person has furnished the transferor and
the Trustee with a duly completed Internal Revenue Service Form W-8ECI or any applicable successor form, and (vii) any other Person so designated by the Depositor based upon an Opinion of Counsel that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may cause any REMIC created hereunder to fail to qualify as a REMIC at any time that the Certificates are outstanding; provided, however, that if a person is classified as a partnership under the Code, such person
shall only be a Permitted Transferee if all of its beneficial owners are described in subclauses (a), (b), (c) or (d) of clause (vi) and the governing documents of such person prohibits a transfer of any interest in such person to any person
described in clause (vi). The terms “United States,” “State” and “International Organization” shall have the meanings set forth in section 7701 of the Code or successor provisions. A corporation will not be treated as
an instrumentality of the United States or of any State or political subdivision thereof for these purposes if all of its activities are subject to tax and, with the exception of the Federal Home Loan Mortgage Corporation, a majority of its board of
directors is not selected by such government unit. 

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

          Physical Certificates: As specified in the Preliminary Statement.

          Plan:  An employee benefit plan or other retirement arrangement which is subject to Section 406 of ERISA and/or Section 4975 of the Code or any entity whose underlying assets include such plan’s
or arrangement’s assets by reason of their investment in the entity. 

          Planned Balance:  With respect to the PAC Certificates and a Distribution Date, the aggregate Principal Balance for the PAC Certificates for such Distribution Date as reflected in the Principal
Balance Schedules annexed hereto as Exhibit R. 

          PO Percentage: (a) With respect to any Discount Mortgage Loan in Pool I, the fraction, expressed as a percentage, equal to (6.00% - NMR) divided by 6.00%, and (b) with respect to any Non-Discount
Mortgage Loan in Pool I, 0%. 

          Pool I: The aggregate of the Mortgage Loans identified on the Mortgage Loan Schedule as being included in Pool I. 

          Pool II: The aggregate of the Mortgage Loans identified on the Mortgage Loan Schedule as being included in Pool II.

          Pool Principal Balance: For a Mortgage Pool, with respect to any Distribution Date, the aggregate of the Stated Principal Balances of the Mortgage Loans in such Mortgage Pool which were Outstanding
Mortgage Loans on the Due Date in the month preceding the month of such Distribution Date, and for the first Distribution Date, as of the Closing Date, less any Principal Prepayments received on or after such Due Date and distributed to
Certificateholders on the prior Distribution Date. 

29

          Prepayment Interest Excess:  As to any Principal Prepayment received by the Master Servicer from the first day through the fifteenth day of any calendar month (other than the calendar month in which
the Cut-off Date occurs), all amounts paid by the related Mortgagor in respect of interest on such Principal Prepayment. All Prepayment Interest Excess shall be paid to the Master Servicer as additional master servicing compensation. 

          Prepayment Interest Shortfall: As to any Distribution Date, Mortgage Loan and Principal Prepayment received (a) during the period from the sixteenth day of the month preceding the month of such
Distribution Date (or, in the case of the first Distribution Date, from the Cut-off Date) through the last day of such month, in the case of a Principal Prepayment in Full, or (b) during the month preceding the month of such Distribution Date, in
the case of a partial Principal Prepayment, the amount, if any, by which one month’s interest at the related Adjusted Mortgage Rate on such Principal Prepayment exceeds the amount of interest actually paid by the Mortgagor in connection with
such Principal Prepayment. 

          Prepayment Period:  (a) With respect to any Principal Prepayments in Full and any Distribution Date, the period from the sixteenth day of the month preceding the month of such Distribution Date (or,
in the case of the first Distribution Date, from the Cut-off Date) through the fifteenth day of the month of such Distribution Date, and (b) with respect to any other Principal Prepayments and any Distribution Date, the month preceding the month of
such Distribution Date. 

          Primary Insurance Policy: Each policy of primary mortgage guaranty insurance or any replacement policy therefor with respect to any Mortgage Loan. 

          Principal Balance Schedules: The PAC Schedule and the TAC Schedule.

          Principal Only Certificates: As specified in the Preliminary Statement. 

          Principal Prepayment: Any payment of principal by a Mortgagor on a Mortgage Loan that is received in advance of its scheduled Due Date and is not accompanied by an amount representing scheduled
interest due on any date or dates in any month or months subsequent to the month of prepayment. Partial Principal Prepayments shall be applied by the Master Servicer in accordance with the terms of the related Mortgage Note. 

          Principal Prepayment in Full: Any Principal Prepayment made by a Mortgagor of the entire principal balance of a Mortgage Loan. 

          Private Certificates: As specified in the Preliminary Statement.

          Proprietary Lease:  With respect to any Cooperative Unit, a lease or occupancy agreement between a Cooperative Corporation and a holder of related Coop Shares. 

          Prospectus: The Prospectus dated June 14, 2007 generally relating to mortgage pass-through certificates to be sold by the Depositor. 

          Prospectus Supplement: The Prospectus Supplement, dated June 27, 2007, relating to the Offered Certificates. 

30

          PUD: Planned Unit Development.

          Purchase Price:  With respect to any Mortgage Loan required to be purchased by the Seller pursuant to Section 2.2 or 2.3 hereof or purchased at the option of the Master Servicer pursuant to Section
3.11, an amount equal to the sum of (i) 100% of the unpaid principal balance of the Mortgage Loan on the date of such purchase, (ii) accrued interest thereon at the applicable Mortgage Rate (or at the applicable Adjusted Mortgage Rate if the
purchaser is the Master Servicer) from the date through which interest was last paid by the Mortgagor to the Due Date in the month in which the Purchase Price is to be distributed to Certificateholders, and (iii) any costs and damages incurred by
the Trust in connection with the noncompliance of such Mortgage Loan with any specifically applicable predatory or abusive lending law. 

          Qualified Insurer: A mortgage guaranty insurance company duly qualified as such under the laws of the state of its principal place of business and each state having jurisdiction over such insurer in
connection with the insurance policy issued by such insurer, duly authorized and licensed in such states to transact a mortgage guaranty insurance business in such states and to write the insurance provided by the insurance policy issued by it,
approved as a FNMA-approved mortgage insurer and having a claims paying ability rating of at least “AA” or equivalent rating by a nationally recognized statistical rating organization. Any replacement insurer with respect to a Mortgage
Loan must have at least as high a claims paying ability rating as the insurer it replaces had on the Closing Date. 

          Rating Agency: Each of the Rating Agencies specified in the Preliminary Statement. If any such organization or a successor is no longer in existence, “Rating Agency” shall be such nationally
recognized statistical rating organization, or other comparable Person, as is designated by the Depositor, notice of which designation shall be given to the Trustee. References herein to a given rating category of a Rating Agency shall mean such
rating category without giving effect to any modifiers. 

          Realized Loss: With respect to each Liquidated Mortgage Loan, an amount (not less than zero or more than the Stated Principal Balance of the Mortgage Loan) as of the date of such liquidation, equal to
(i) the Stated Principal Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus (ii) interest at the Adjusted Net Mortgage Rate from the Due Date as to which interest was last paid or advanced (and not reimbursed) to
Certificateholders up to the Due Date in the month in which Liquidation Proceeds are required to be distributed on the Stated Principal Balance of such Liquidated Mortgage Loan from time to time, minus (iii) any Liquidation Proceeds, Insurance
Proceeds and/or Unanticipated Recoveries received during the month in which such liquidation occurred (or during the calendar month preceding the related Distribution Date, as applicable), to the extent applied as recoveries of interest at the
Adjusted Net Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect to each Mortgage Loan, other than a Liquidated Mortgage Loan, which has become the subject of a Deficient Valuation, if the principal amount due under the
related Mortgage Note has been reduced, the difference between the principal balance of the Mortgage Loan outstanding immediately prior to such Deficient Valuation and the principal balance of the Mortgage Loan as reduced by the Deficient Valuation.

31

          Recognition Agreement: With respect to any Cooperative Loan, an agreement between the Cooperative Corporation and the originator of such Mortgage Loan which establishes the rights of such originator
in the Cooperative Property. 

          Record Date:  With respect to any Distribution Date, the close of business on the last Business Day of the month preceding the month in which such Distribution Date occurs. 

          Reference Bank:  A leading bank with an established place of business in London engaged in transactions in Eurodollar deposits in the international Eurocurrency market, not controlled by, or under the
common control with, the Trustee. 

          Refinancing Mortgage Loan:  Any Mortgage Loan originated in connection with the refinancing of an existing mortgage loan. 

          Regular Certificates: As specified in the Preliminary Statement.

          Regulation AB: Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100 -229.1123, as such may be amended from time to time, and subject to such clarification and
interpretation as have been provided by the SEC in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the SEC, or as may be provided by the SEC or its staff
from time to time. 

          Relief Act: The Servicemembers Civil Relief Act, as amended, or any similar state or local legislation or regulations. 

          Relief Act Reductions: With respect to any Distribution Date and any Mortgage Loan as to which there has been a reduction in the amount of interest collectible thereon for the most recently ended
calendar month as a result of the application of the Relief Act, the amount, if any, by which interest collectible on such Mortgage Loan for the most recently ended calendar month is less than interest accrued thereon for such month pursuant to the
Mortgage Note. 

          REMIC:  A “real estate mortgage investment conduit” within the meaning of section 860D of the Code. 

          REMIC Change of Law: Any proposed, temporary or final regulation, revenue ruling, revenue procedure or other official announcement or interpretation relating to REMICs and the REMIC Provisions issued
after the Closing Date. 

          REMIC Combination: The Class I-A-16 and Class I-A-17 Certificates. 

          REMIC Pool: Either of the Lower REMIC, Middle REMIC or Upper REMIC.

          REMIC Provisions:  Provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at sections 860A through 860G of Subchapter M of Chapter 1 of the Code,
and related provisions, and regulations promulgated thereunder, as the foregoing may be in effect from time to time as well as provisions of applicable state laws. 

32

          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. 

          Reportable Event: Any event required to be reported on Form 8-K, and in any event, the following: 

	          	          (a)
               entry into a definitive agreement related to the Trust Fund, the Certificates
          or the Mortgage Loans, or an amendment to a Transaction Document, even
          if the Depositor is not a party to such agreement (e.g., a servicing
          agreement with a servicer contemplated by Item 1108(a)(3) of Regulation
          AB); 

                 (b)
               termination of this Agreement or any other document entered into in
          connection with the Trust Fund, the Certificates or the Mortgage Loans
          (other than by expiration of the applicable agreement on its stated
          termination date or as a result of all parties completing their obligations
          under such agreement), even if the Depositor is not a party to such
          agreement (e.g., a servicing agreement with a servicer contemplated
          by Item 1108(a)(3) of Regulation AB); 

                 (c)             with respect to the Master Servicer only, if the Master Servicer becomes
        aware of any bankruptcy or receivership with respect to First Horizon,
        the Depositor, the Master Servicer, any Subservicer, the Trustee, any
        co-trustee, any enhancement or support provider contemplated by Items
        1114(b) or 1115 of Regulation AB, or any other material party contemplated
        by Item 1101(d)(1) of Regulation AB; 

                 (d)             with respect to the Trustee, the Master Servicer and the Depositor
        only, the occurrence of an early amortization, performance trigger
        or other event, including an Event of Default under this Agreement; 

                 (e)
               the resignation, removal, replacement, substitution of the Trustee,
          the Master Servicer, any Subservicer, the Trustee or any co-trustee; 

                 (f)             with respect to the Master Servicer only, if the Master Servicer becomes
        aware that (i) any material enhancement or support specified in Item
        1114(a)(1) through (3) of Regulation AB or Item 1115 of Regulation
        AB that was previously applicable regarding one or more classes of
        the Certificates has terminated other than by expiration of the contract
        on its stated termination date or as a result of all parties completing
        their obligations under such agreement; (ii) any material enhancement
        specified in Item 1114(a)(1) through (3) of Regulation AB or Item 1115
        of Regulation AB has been added with respect to one or more classes
        of the Certificates; or (iii) any existing material enhancement or
        support specified in Item 1114(a)(1) through (3) of Regulation AB or
        Item 1115 of Regulation AB with respect to one or more classes of the
        Certificates has been materially amended or modified; and

                 (g)             with respect to the Trustee, the Master Servicer and the Depositor
        only, a required distribution to Holders of the Certificates is not
        made as of the required Distribution Date under this Agreement. 

    

           33

          Reporting Subcontractor:  With respect to the Master Servicer or the Trustee, any Subcontractor determined by such Person pursuant to Section 10.8(b) to be materially “participating in the
servicing function” within the meaning of Item 1122 of Regulation AB. References to a Reporting Subcontractor shall refer only to the Subcontractor of such Person and shall not refer to Subcontractors generally. 

          Request for Release: The Request for Release submitted by the Master Servicer to the Trustee, substantially in the form of Exhibits L and M, as appropriate. 

          Required Coupon: With respect to Pool I, 6.250% per annum, and with respect to Pool II, 5.750% per annum. 

          Required Insurance Policy:  With respect to any Mortgage Loan, any insurance policy that is required to be maintained from time to time under this Agreement. 

          Required Recordation States: The states of Florida, Maryland and Mississippi.

          Residual Certificates: As specified in the Preliminary Statement. 

          Responsible Officer:  When used with respect to the Trustee, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, any Trust Officer or any other officer of the
Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Agreement and also to whom, with respect to a particular matter, such matter
is referred because of such officer’s knowledge of and familiarity with the particular subject. 

          Retail/Lottery Certificates: Not applicable.

          Retained Yield:  As to each Mortgage Loan and any Distribution Date, an amount payable to (i) First Horizon Home Loans, in its individual capacity as Seller, or (ii) the subsequent owner of such
amount though Seller’s sale, assignment, or certification of its rights to such amount, out of each full payment of interest received on such Mortgage Loan and equal to one-twelfth of the Retained Yield Rate multiplied by the Stated Principal
Balance of such Mortgage Loan as of the Due Date in the month of such Distribution Date (prior to giving effect to any Scheduled Payments due on such Mortgage Loan on such Due Date).

          Retained Yield Rate: For any Non-Discount Mortgage Loan, a per annum rate equal to the excess of (a) the applicable Mortgage Rate over (b) the Required Coupon. For any Discount Mortgage Loan, 0%.

          RL Interest: The REMIC residual interest, within the meaning of the REMIC Provisions, issued by the Lower REMIC, which shall be represented by the Class I-A-R Certificate. 

          RM Interest:  The REMIC residual interest, within the meaning of the REMIC Provisions, issued by the Middle REMIC, which shall be represented by the Class I-A-R Certificate. 

34

          RU Interest: The REMIC residual interest, within the meaning of the REMIC Provisions, issued by the Upper REMIC, which shall be represented by the Class I-A-R Certificate. 

          Sarbanes-Oxley Certification: As defined in Section 10.5.

          Scheduled Balances: Not applicable. 

          Scheduled Certificates: Not applicable.

          Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on any Due Date allocable to principal and/or interest on such Mortgage Loan which, unless otherwise specified herein, shall
give effect to any related Debt Service Reduction and any Deficient Valuation that affects the amount of the monthly payment due on such Mortgage Loan. 

          SEC: The U.S. Securities and Exchange Commission. 

          Securities Act: The Securities Act of 1933, as amended. 

          Security Agreement: The security agreement with respect to a Cooperative Loan.

          Seller:  First Horizon Home Loans, a division of First Tennessee Bank National Association, and its successors and assigns, in its capacity as seller of the Mortgage Loans pursuant to the MLPA.

          Senior Certificates: As specified in the Preliminary Statement.

          Senior Final Distribution Date:  For each Certificate Group, the Distribution Date on which the Class Certificate Balance of each Class of related Senior Certificates has been reduced to zero.

          Senior Mezzanine Certificates: As specified in the Preliminary Statement.

          Senior Optimal Principal Amount:  As to a Mortgage Pool and with respect to each Distribution Date, an amount equal to the sum of: 

                     (1)      the related Senior Percentage of the Non-PO Percentage of all Scheduled Payments of principal due on each Mortgage Loan in such Mortgage Pool on the first day of the month in which the
Distribution Date occurs, as specified in the amortization schedule at the time applicable thereto after adjustment for previous principal prepayments and the principal portion of Debt Service Reductions after the Bankruptcy Loss Coverage Amount has
been reduced to zero, but before any adjustment to such amortization schedule by reason of any other bankruptcy or similar proceeding or any moratorium or similar waiver or grace period; 

                     (2)      the related Senior Prepayment Percentage of the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in such Mortgage Pool which was the subject of a Principal Prepayment in
Full received by the Master Servicer during the applicable Prepayment Period; 

35

                     (3)      the related Senior Prepayment Percentage of the Non-PO Percentage of the sum of (a) all partial Principal Prepayments in respect of each Mortgage Loan in such Mortgage Pool received during the
applicable Prepayment Period and (b) all Unanticipated Recoveries in respect of each Mortgage Loan in such Mortgage Pool received during the calendar month preceding such Distribution Date; 

                    (4)      the lesser of:

	          	 	
(a)   	
the related Senior Prepayment Percentage of the sum of (x) the Non-PO Percentage of the Liquidation Proceeds allocable to principal on each Mortgage Loan in such Mortgage Pool which became a Liquidated Mortgage Loan during the
related Prepayment Period, other than Mortgage Loans described in clause (y), and (y) the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in such Mortgage Pool that was purchased by a private mortgage insurer during the
related Prepayment Period as an alternative to paying a claim under the related Insurance Policy; and	
	 	          	          	 
	 	 	
(b)   	
(i) the related Senior Percentage of the sum of (x) the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in such Mortgage Pool which became a Liquidated Mortgage Loan during the related Prepayment Period,
other than Mortgage Loans described in clause (y), and (y) the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in such Mortgage Pool that was purchased by a private mortgage insurer during the related Prepayment Period as an
alternative to paying a claim under the related Insurance Policy minus (ii) the Non-PO	
	 
	 	 	 	
Percentage of the related Senior Percentage of the principal portion of the related Senior Percentage of the principal portion of Excess Losses (other than Debt Service Reductions) for such Mortgage Pool during the related
Prepayment Period; and	
	 

                     (5)      the related Senior Prepayment Percentage of the sum of (a) the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in such Mortgage Pool which was repurchased by the seller in
connection with such Distribution Date and (b) the difference, if any, between the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in such Mortgage Pool that has been replaced by the seller with a Substitute Mortgage Loan
pursuant to this Agreement in connection with such Distribution Date and the Stated Principal Balance of such Substitute Mortgage Loan. 

          Senior Percentage: On any Distribution Date for a Certificate Group, the lesser of 100% and the percentage obtained by dividing the aggregate Class Certificate Balances of all Classes of Senior
Certificates of such Certificate Group (other than the Notional Amount Certificates and the Class PO Certificates) immediately preceding such Distribution Date by the Pool Principal Balance of the related Mortgage Pool (excluding the aggregate of
the PO Percentage of the principal balance of each Discount Mortgage Loan in Pool I) for the immediately preceding Distribution Date. 

36

          Senior Prepayment Percentage: On any Distribution Date occurring during the periods set forth below, and as to each Certificate Group, the Senior Prepayment Percentages described below: 

	  Period
            (Dates Inclusive) 
	 	Senior
          Prepayment Percentage 
	   July
          2007 – June 2012 
	 	100% 
	   July
          2012 – June 2013 
	 	The
        related Senior Percentage plus 70% of the related Subordinated Percentage. 
	   July
          2013 – June 2014 
	 	The
        related Senior Percentage plus 60% of the related Subordinated Percentage. 
	   July
          2014 – June 2015 
	 	The
        related Senior Percentage plus 40% of the related Subordinated Percentage. 
	   July
          2015 – June 2016 
	 	The
        related Senior Percentage plus 20% of the related Subordinated Percentage. 
	   July
          2016 and thereafter 
	 	The
        related Senior Percentage. 

          provided, however, if on any Distribution Date, the Aggregate Senior Percentage exceeds such percentage calculated as of the Closing Date, then the Senior Prepayment
Percentage for both Certificate Groups for such Distribution Date will equal 100%. 

          The reductions in the Senior Prepayment Percentage for each Certificate Group described above will not occur and will remain at the level in effect for the most recent prior period specified in the
table above, unless both of the following step-down conditions are satisfied with respect to each Mortgage Pool, as of the last day of the month preceding the Distribution Date: 

                     (1)      the aggregate Stated Principal Balance of Mortgage Loans in both Mortgage Pools delinquent 60 days or more (including for this purpose any Mortgage Loans in foreclosure or subject to bankruptcy
proceedings and Mortgage Loans with respect to which the related Mortgaged Property, including REO Property, has been acquired by the Trust) does not exceed 50% of the aggregate Class Certificate Balances of the Subordinated Certificates as of that
date; and 

                     (2)      cumulative Realized Losses in both Mortgage Pools do not exceed: 

	 	 	 	
(a)   	
30% of the Original Subordinated Principal Balance if such Distribution Date occurs between and including July 2012 and June 2013;	
	          	          	          	          	 
	 	 	 	
(b)   	
35% of the Original Subordinated Principal Balance if such Distribution Date occurs between and including July 2013 and June 2014;	
	 
	 	 	 	
(c)   	
40% of the Original Subordinated Principal Balance if such Distribution Date occurs between and including July 2014 and June 2015;	
	 
	 	 	 	
(d)   	
45% of the Original Subordinated Principal Balance if such Distribution Date occurs between and including July 2015 and June 2016; and	
	 

37

 

	          	          	          	          	 
	 	 	 	(e)	 50%
        of the related Original Subordinated Principal Balance if such Distribution
    Date occurs during or after July 2016. 

          Servicing Advances: All customary, reasonable and necessary “out of pocket” costs and expenses incurred in the performance by the Master Servicer of its servicing obligations, including, but
not limited to, the cost of (i) the preservation, restoration and protection of a Mortgaged Property, (ii) any expenses reimbursable to the Master Servicer pursuant to Section 3.11 and any enforcement or judicial proceedings, including foreclosures,
(iii) the management and liquidation of any REO Property and (iv) compliance with the obligations under Section 3.9. 

          Servicing Agreement: The servicing agreement, dated as of November 26, 2002 by and between First Horizon Asset Securities Inc. and its assigns, as owner, and First Tennessee Mortgage Services, Inc.,
as servicer, as the same may be amended from time to time in accordance with its terms. 

          Servicing Criteria: The “servicing criteria” set forth in Item 1122(d) of Regulation AB.

          Servicing Officer: Any officer of the Master Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and facsimile signature appear on a list of
servicing officers furnished to the Trustee by the Master Servicer on the Closing Date pursuant to this Agreement, as such list may from time to time be amended. 

          Servicing Rights Transfer and Subservicing Agreement: The servicing rights transfer and subservicing agreement, dated as of November 26, 2002, by and between First Horizon Home Loans (as successor in
interest to First Horizon Home Loan Corporation), as transferor and subservicer, and First Tennessee Mortgage Services, Inc., as transferee and servicer, as the same may be amended from time to time in accordance with its terms. 

          Special Hazard Coverage Termination Date: The date on which the Special Hazard Loss Coverage Amount is reduced to zero. 

          Special Hazard Loss: Any Realized Loss suffered by a Mortgaged Property on account of direct physical loss but not including (i) any loss of a type covered by a hazard insurance policy or a flood
insurance policy required to be maintained with respect to such Mortgaged Property pursuant to Section 3.9 to the extent of the amount of such loss covered thereby, (ii) any shortfall in Insurance Proceeds for partial damage due to the application
of the co-insurance clauses contained in a hazard insurance policy, or (iii) any loss caused by or resulting from: 

                    (1)      normal wear and tear;

                    (2)      fraud, conversion or other dishonest act on the part of the Trustee, the Master Servicer or any of their agents or employees (without regard to any portion of the loss not covered by any errors
and omissions policy); 

                    (3)      errors in design, faulty workmanship or faulty materials, unless the collapse of the property or a part thereof ensues and then only for the ensuing loss; 

38

                    (4)      nuclear or chemical reaction or nuclear radiation or radioactive or chemical contamination, all whether controlled or uncontrolled, and whether such loss be direct or indirect, proximate or
remote or be in whole or in part caused by, contributed to or aggravated by a peril covered by the definition of the term “Special Hazard Loss”; 

                    (5)      hostile or warlike action in time of peace and war, including action in hindering, combating or defending against an actual, impending or expected attack: 

	 	 	
(i)   	
by any government or sovereign power, de jure or de facto, or by any authority maintaining or using military, naval or air forces;	
	          	          	          	 
	 	 	
(ii)   	
by military, naval or air forces; or	
	 
	 	 	
(iii)   	
by an agent of any such government, power, authority or forces;	
	 

                    (6)      any weapon of war employing nuclear fission, fusion or other radioactive force, whether in time of peace or war; or 

                    (7)      insurrection, rebellion, revolution, civil war, usurped power or action taken by governmental authority in hindering, combating or defending against such an occurrence, seizure or destruction
under quarantine or customs regulations, confiscation by order of any government or public authority or risks of contraband or illegal transportation or trade. 

          Special Hazard Loss Coverage Amount:  Upon the initial issuance of the Certificates, $4,000,000. As of any Distribution Date, the Special Hazard Loss Coverage Amount will equal the greater of

                    (a)      1.00% (or if greater than 1.00%, the highest percentage of Mortgage Loans by principal balance secured by Mortgaged Properties in any single California zip code) of the outstanding principal
balance of all the Mortgage Loans as of the related Determination Date; and 

                    (b)      twice the outstanding principal balance of the Mortgage Loan which has the largest outstanding principal balance as of the related Determination Date, 

less, in each case, the aggregate amount of Special Hazard Losses that would have been previously allocated to the Subordinated Certificates in the absence of the Loss Allocation Limitation. As of any Distribution Date on or after
the Cross-over Date, the Special Hazard Loss Coverage Amount will be zero. 

          Special Hazard Mortgage Loan:  A Liquidated Mortgage Loan as to which a Special Hazard Loss has occurred. 

          S&P:  Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and its successors and/or assigns.  If S&P is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 11.5(b) the address for notices to S&P shall be Standard & Poor’s, 55 Water Street, 41st Floor, New York, New York 10041, Attention: Mortgage 

39

Surveillance Monitoring, or such other address as S&P may hereafter furnish to the Depositor and the Master Servicer. 

          Startup Day: The Closing Date.

          Stated Principal Balance: As to any Mortgage Loan and Due Date, the unpaid principal balance of such Mortgage Loan as of such Due Date as specified in the amortization schedule at the time relating
thereto (before any adjustment to such amortization schedule by reason of any moratorium or similar waiver or grace period) after giving effect to any previous partial Principal Prepayments and Liquidation Proceeds allocable to principal (other than
with respect to any Liquidated Mortgage Loan) and to the payment of principal due on such Due Date and irrespective of any delinquency in payment by the related Mortgagor. 

          Streamlined Documentation Mortgage Loan: Any Mortgage Loan originated pursuant to the Seller’s Streamlined Loan Documentation Program then in effect. 

          Subcontractor: Any vendor, subcontractor or other Person that is not responsible for the overall servicing (as “servicing” is commonly understood by participants in the mortgage-backed
securities market) of Mortgage Loans but performs one or more discrete functions identified in Item 1122(d) of Regulation AB with respect to the Mortgage Loans under the direction or authority of the Master Servicer, a Subservicer or the Trustee, as
the case may be. 

          Subordinated Certificates: As specified in the Preliminary Statement.

          Subordinated Certificate Writedown Amount: As of any Distribution Date, the amount by which (a) the sum of the Class Certificate Balances of all the Certificates, after giving effect to the
distribution of principal and the allocation of Realized Losses in reduction of the Class Certificate Balances of all of the Certificates on such Distribution Date, exceeds (b) the aggregate of the Pool Principal Balances of both Mortgage Pools on
the first day of the month of such Distribution Date, less any Deficient Valuations occurring before the Bankruptcy Loss Coverage Amount has been reduced to zero. 

          Subordinated Optimal Principal Amount: With respect to each Mortgage Pool and each Distribution Date, an amount equal to the sum of the following (but in no event greater than the aggregate Class
Certificate Balances of the Subordinated Certificates immediately prior to such Distribution Date): 

                     (1)      the related Subordinated Percentage of the Non-PO Percentage of all Scheduled Payments of principal due on each outstanding Mortgage Loan in the related Mortgage Pool on the first day of the
month in which the Distribution Date occurs, as specified in the amortization schedule at the time applicable thereto, after adjustment for previous principal prepayments and the principal portion of Debt Service Reductions after the Bankruptcy Loss
Coverage Amount has been reduced to zero, but before any adjustment to such amortization schedule by reason of any other bankruptcy or similar proceeding or any moratorium or similar waiver or grace period; 

                     (2)      the related Subordinated Prepayment Percentage of the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in the related Mortgage Pool

40

which was the subject of a Principal Prepayment in Full received by the Master Servicer during the related Prepayment Period; 

                     (3)      the related Subordinated Prepayment Percentage of the Non-PO Percentage of the sum of (a) all partial Principal Prepayments received in respect of each Mortgage Loan in the related Mortgage Pool
during the related Prepayment Period, (b) all Unanticipated Recoveries received in respect of each Mortgage Loan in the related Mortgage Pool during the calendar month prior to such Distribution Date, and (c) on the Senior Final Distribution Date,
100% of any related Senior Optimal Principal Amount remaining undistributed on such date; 

                     (4)      the amount, if any, by which the sum of (a) the Non-PO Percentage of the net Liquidation Proceeds allocable to principal received during the related Prepayment Period in respect of each
Liquidated Mortgage Loan in the related Mortgage Pool, other than Mortgage Loans described in clause (b), and (b) the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in the related Mortgage Pool that was purchased by a
private mortgage insurer during the related Prepayment Period as an alternative to paying a claim under the related Insurance Policy exceeds (c) the sum of the amounts distributable to the Senior Certificateholders (other than the holders of the
Class PO Certificates) under clause (4) of the definition of applicable Senior Optimal Principal Amount on such Distribution Date; and 

                     (5)      the related Subordinated Prepayment Percentage of the sum of (a) the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in the related Mortgage Pool which was repurchased by
the seller in connection with such Distribution Date and (b) the difference, if any, between the Non-PO Percentage of the Stated Principal Balance of each Mortgage Loan in the related Mortgage Pool that has been replaced by the seller with a
Substitute Mortgage Loan pursuant to this Agreement in connection with such Distribution Date and the Stated Principal Balance of each such Substitute Mortgage Loan. 

          Subordinated Percentage: For any Distribution Date and each Certificate Group, 100% minus the related Senior Percentage. 

          Subordinated Prepayment Percentage:  For any Distribution Date and each Certificate Group, 100% minus the related Senior Prepayment Percentage 

          Subservicer: Any person to whom the Master Servicer has contracted for the servicing of all or a portion of the Mortgage Loans pursuant to Section 3.2 hereof. 

          Substitute Mortgage Loan:  A Mortgage Loan substituted by the Seller for a Deleted Mortgage Loan which must, on the date of such substitution, as confirmed in a Request for Release, substantially in
the form of Exhibit L, (i) have a Stated Principal Balance, after deduction of the principal portion of the Scheduled Payment due in the month of substitution, not in excess of, and not more than 10% less than the Stated Principal Balance of the
Deleted Mortgage Loan; (ii) have an Adjusted Net Mortgage Rate not lower than the lower of (a) the Adjusted Net Mortgage Rate of the Deleted Mortgage Loan or (b) 6.25% in the case of a Deleted Mortgage Loan from Pool I, or 5.75% in the case of a
Deleted Mortgage Loan from Pool II, provided that the Master Servicing Fee for the Substitute Mortgage Loan shall be equal to or

41

greater than that of the Deleted Mortgage Loan; (iii) be accruing interest at a rate no lower than and not more than 1% per annum higher than, that of the Deleted Mortgage Loan; (iv) have a Loan-to-Value Ratio no higher than that
of the Deleted Mortgage Loan; (v) have a remaining term to maturity no greater than (and not more than one year less than that of) the Deleted Mortgage Loan; (vi) not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan and
(vii) comply with each representation and warranty set forth in Section 2.3 hereof. 

          Substitution Adjustment Amount:  The meaning ascribed to such term pursuant to Section 2.3. 

          Super Senior Certificates: As specified in the Preliminary Statement.

          Support Classes: As specified in the Preliminary Statement. 

          TAC Certificates: As specified in the Preliminary Statement. 

          TAC Schedule: The schedule designated as such in Exhibit R. 

          Targeted Balance: With respect to the Class of TAC Certificates and any Distribution Date, the balance for such Distribution Date as reflected in the Principal Balance Schedules annexed hereto as
Exhibit R. 

          Tax
Matters Person: The person designated as “tax matters person” in the
manner provided under Treasury regulation §1.860F-4(d) and Treasury regulation § 301.6231(a)(7)
-1. Initially, the Tax Matters Person shall be the Trustee. 

          Tax Matters Person Certificate:  The Class I-A-R Certificates with a Denomination of $0.01.

          Transfer: Any direct or indirect transfer or sale of any Ownership Interest in a Residual Certificate. 

          Trust Fund:  The corpus of the trust created hereunder consisting of (i) the Mortgage Loans and all interest and principal received on or with respect thereto after the Cut-off Date to the extent not
applied in computing the Cut-off Date Principal Balance thereof; (ii) all of the Depositor’s rights as purchaser under the MLPA; (iii) the Certificate Account and the Distribution Account and all amounts deposited therein pursuant to the
applicable provisions of this Agreement; (iv) property that secured a Mortgage Loan and has been acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; and (v) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing; provided that the Trust Fund shall exclude the Retained Yield. 

          Trustee:  The Bank of New York and its successors and, if a successor trustee is appointed hereunder, such successor. 

42

          Trustee Fee: As to any Distribution Date and a Mortgage Pool, an amount equal to one-twelfth of the Trustee Fee Rate multiplied by the applicable Pool Principal Balance with respect to such
Distribution Date. 

          Trustee Fee Rate:  With respect to each Mortgage Loan, the per annum rate equal to 0.006% . 

          Unanticipated Recovery: As defined in Section 4.2(j) . 

          Undercollateralization Distribution: As defined in Section 4.2(k) .

          Undercollateralized Group: With respect to any Distribution Date, the Senior Certificates of any Certificate Group (other than the Principal Only Certificates) as to which the aggregate Certificate
Principal Balance thereof, after giving effect to distributions pursuant to Section 4.2(a) on such date, is greater than the Non-PO Percentage of the Pool Principal Balance of Pool I for such Distribution Date. 

          Underwriter: As specified in the Preliminary Statement.

          Underwriter’s Exemption: An individual administrative exemption granted by the U.S. Department of Labor to the Underwriter providing exceptions from some of the prohibited transaction rules of
ERISA with respect to the initial purchase, the holding and the subsequent resale by employee benefit plans in certificates in pass-through trusts having assets and meeting conditions described therein, as amended by Prohibited Transaction Exemption
2000-58 (65 Fed. Reg. 67765, November 13, 2000), as amended, and Prohibited Transaction Exemption 2002-41 (67 Fed. Reg. 54487, August 22, 2002), as amended (or any successor thereto), or any substantially similar administrative exemption granted by
the U.S. Department of Labor. 

          Unpaid Basis Risk Shortfall: With respect to any Distribution Date and the Class I-A-16 Certificates, the excess, if any, of (x) the Basis Risk Shortfall for such Class of Certificates for such
Distribution Date, over (y) the Yield Supplement Amount, if any, distributed in respect of such Class of Certificates on such Distribution Date. 

          Upper REMIC: The segregated pool of assets consisting of the Middle REMIC Interests.

          Voting Rights:  The portion of the voting rights of all of the Certificates which is allocated to any Certificate. As of any date of determination, (a) 98% of all Voting Rights will be allocated among
all Holders of the Certificates, other than the Notional Amount Certificates and the Class I-A-R Certificates, in proportion to their then outstanding Class Certificate Balance; and (b) 1.0% of all Voting Rights will be allocated among the Holders
of the Notional Amount Certificates; and (c) 1.0% of all Voting Rights will be allocated to the Holders of the Class I-A-R Certificates (such Voting Rights to be allocated among the Holders of Certificates of such Class in accordance with their
respective Percentage Interests). 

          Yield Supplement Amount:  For any Distribution Date on or prior to the Corridor Contract Termination Date on which the LIBOR exceeds 5.40%, the lesser of (a) the Class Certificate Balance of the Class
I-A-16 Certificates immediately prior to such Distribution Date

43

and (b) the Corridor Contract Notional Amount for such Distribution Date, multiplied by a rate equal to one twelfth of the excess of (i) the lesser of (A) LIBOR and (B) 8.90%, over (ii) 5.40% . 

ARTICLE II 

CONVEYANCE OF MORTGAGE LOANS;

REPRESENTATIONS AND WARRANTIES

          SECTION
2.1    Conveyance of Mortgage Loans.

	 	
(a)   	
The Depositor, concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Certificateholders, without recourse, all the right, title
and interest of the Depositor in and to the Trust Fund together with (i) the Depositor’s right to (A) require the Seller to cure any breach of a representation or warranty made by the Seller pursuant to the MLPA, or (B) repurchase or substitute
for any affected Mortgage Loan in accordance herewith, and (ii) all right, title and interest of the Depositor in, to and under the Servicing Agreement, which right has been assigned to the Depositor pursuant to the MLPA.	
	          	          	          	          	 
	 	
(b)   	
In connection with the transfer and assignment set forth in clause (a) above, the Depositor has delivered or caused to be delivered to the Trustee or the Custodian on its behalf (or, in the case of the Delay Delivery Mortgage
Loans, will deliver or cause to be delivered to the Trustee or the Custodian on its behalf within thirty
(30) days following the Closing Date) for the benefit of the Certificateholders the
following documents or instruments with respect to each Mortgage Loan so assigned:	
	 
	 	 	 	(i) 	
(A) the original Mortgage Note endorsed by manual or facsimile
signature in blank in the following form: “Pay to the order of ________________, without recourse,” with all intervening endorsements showing a
complete chain of endorsement from the originator to the Person endorsing the Mortgage Note (each such endorsement being sufficient to transfer all right, title and interest of the party so endorsing, as noteholder or assignee thereof, in and to
that Mortgage Note); or	
	 
	 	 	 	 	
(B) with respect to any Lost Mortgage Note, a lost note affidavit from the Seller stating that the original Mortgage Note was lost or destroyed, together with a copy of such Mortgage Note;	
	 
	 	 	 	(ii) 	
except as provided below and for each Mortgage Loan that is
not a MERS Mortgage Loan, the original recorded Mortgage or a copy of such Mortgage
certified by the Seller as being a true and complete copy of the Mortgage, and
in the case of each MERS Mortgage Loan, the original recorded Mortgage, noting the presence of the MIN of the Mortgage Loans and either language	
	 

44

	 	 	 	 	
indicating that the Mortgage Loan is a MOM Loan if the Mortgage Loan is a MOM Loan or if the Mortgage Loan was not a MOM Loan at origination, the original Mortgage and the assignment thereof to MERS, with evidence of recording
indicated thereon, or
a copy of the Mortgage certified by the Seller as being a true and
complete copy of the Mortgage;	
	          	          	          	          	 	 
	 	 	 	
(iii)   	
in the case of a Mortgage Loan that is not a MERS Mortgage Loan, a duly executed assignment of the Mortgage, or a copy of such
 assignment certified by the Seller as being a true and complete copy of the assignment, in blank (which may be included in a blanket assignment or assignments), together with, except as provided below, all interim recorded
assignments, or copies of such interim assignments certified by the Seller as being true and complete copies of the interim assignments, of such Mortgage (each such assignment, when duly and validly completed, to be in recordable form and sufficient
to effect the assignment of and transfer to the assignee thereof, under the Mortgage to which the assignment relates); provided that, if the related Mortgage has not been returned from the applicable public recording office, such assignment of the
Mortgage may exclude the information to be provided by the recording office;	
	 
	 	 	 	
(iv)   	
the original or copies of each assumption, modification, written assurance or substitution agreement, if any;	
	 
	 	 	 	
(v)   	
either the original or duplicate original title policy, or a copy of such title policy certified by the Seller as being a true and complete copy of the title policy (including all riders thereto), with respect to the related
Mortgaged Property, if available, provided that the title policy (including all riders thereto) will be delivered as soon as it becomes available, and if the title policy is not available, and to the extent required pursuant to the second paragraph
below or otherwise in connection with the rating of the Certificates, a written commitment or interim binder or preliminary report of the title issued by the title insurance or escrow company with respect to the Mortgaged Property, or in lieu
thereof, an Alternative Title Product or a copy of such Alternative Title Product certified by the Seller as being a true and complete copy of the Alternative Title Product; and	
	 
	 	 	 	
(vi)   	
in the case of a Cooperative Loan, the originals of the following documents or instruments:	
	 
	 	 	 	 	
(A)      The Coop Shares, together with a stock power in blank;	
	 
	 	 	 	 	
(B)      The executed Security Agreement;	
	 

45

	          	          	          	          	(C)
               The executed Proprietary Lease; 

      (D)
               The executed Recognition Agreement; 

      (E)
               The executed UCC-1 financing statement with evidence of recording thereon
          which have been filed in all places required to perfect the Seller’s
          interest in the Coop Shares and the Proprietary Lease; and 

      (F)
               Executed UCC-3 financing statements or
          other appropriate UCC financing statements required by state law, evidencing
          a complete and unbroken line from the mortgagee to the Trustee with
          evidence of recording thereon (or in a form suitable for recordation) 

    

           In
    the event that in connection with any Mortgage Loan that is not a MERS Mortgage
    Loan the Depositor cannot deliver (a) the original recorded Mortgage or (b)
    all interim recorded assignments satisfying the requirements of clause (ii)
    or (iii) above, respectively, concurrently with the execution and delivery
    hereof because such document or documents have not been returned from the
    applicable public recording office, the Depositor shall promptly deliver
    or cause to be delivered to the Trustee or the Custodian on its behalf such
    original Mortgage or such interim assignment, as the case may be, with evidence
    of recording indicated thereon upon receipt thereof from the public recording
    office, or a copy thereof, certified, if appropriate, by the relevant recording
    office, but in no event shall any such delivery of the original Mortgage
    and each such interim assignment or a copy thereof, certified, if appropriate,
    by the relevant recording office, be made later than one year following the
    Closing Date; provided, however, in the event the Depositor is unable to
    deliver or cause to be delivered by such date each Mortgage and each such
    interim assignment by reason of the fact that any such documents have not
    been returned by the appropriate recording office, or, in the case of each
    such interim assignment, because the related Mortgage has not been returned
    by the appropriate recording office, the Depositor shall deliver or cause
    to be delivered such documents to the Trustee or the Custodian on its behalf
    as promptly as possible upon receipt thereof and, in any event, within 720
    days following the Closing Date. The Depositor shall forward or cause to
    be forwarded to the Trustee or the Custodian on its behalf (a) from time
    to time additional original documents evidencing an assumption or modification
    of a Mortgage Loan and (b) any other documents required to be delivered by
    the Depositor or the Master Servicer to the Trustee. In the event that the
    original Mortgage is not delivered and in connection with the payment in
    full of the related Mortgage Loan and the public recording office requires
    the presentation of a “lost instruments
affidavit and indemnity” or any equivalent document, because only a copy
of the Mortgage can be delivered with the instrument of satisfaction or reconveyance,
the Master Servicer shall execute and deliver or cause to be executed and delivered
such a document to the public recording office. In the case where a public recording
office retains the original recorded Mortgage or in the case where a Mortgage
is lost after recordation in a public recording office, the Depositor shall deliver
or cause to be delivered to the Trustee or the Custodian on its behalf a copy
of such Mortgage certified by such public recording office to be a true and complete
copy of the original recorded Mortgage. 

46

          In addition, in the event that in connection with any Mortgage Loan the Depositor cannot deliver or cause to be delivered the original or duplicate original lender’s title policy (together with
all riders thereto), satisfying the requirements of clause (v) above, concurrently with the execution and delivery hereof because the related Mortgage has not been returned from the applicable public recording office, the Depositor shall promptly
deliver or cause to be delivered to the Trustee or the Custodian on its behalf such original or duplicate original lender’s title policy (together with all riders thereto) upon receipt thereof from the applicable title insurer, but in no event
shall any such delivery of the original or duplicate original lender’s title policy be made later than one year following the Closing Date; provided, however, in the event the Depositor is unable to deliver or cause to be delivered by such date
the original or duplicate original lender’s title policy (together with all riders thereto) because the related Mortgage has not been returned by the appropriate recording office, the Depositor shall deliver or cause to be delivered such
documents to the Trustee or the Custodian on its behalf as promptly as possible upon receipt thereof and, in any event, within 720 days following the Closing Date; provided further, however, that the Depositor shall not be required to deliver an
original or duplicate lender’s title policy (together with all riders thereto) if the Depositor delivers an Alternative Title Product in lieu thereof. Notwithstanding the preceding, in connection with any Mortgage Loan for which either the
original or duplicate original title policy has not been delivered to the Trust, if at any time during the term of this Agreement the parent company of the Seller does not have a long term senior debt rating of A- or higher from S&P and A- or
higher from Fitch (if rated by Fitch), then the Depositor shall within 30 days deliver or cause to be delivered to the Trustee or the Custodian on its behalf (if it has not previously done so) a written commitment or interim binder or preliminary
report of the title issued by the title insurance or escrow company with respect to the Mortgaged Property. 

          Subject to the immediately following sentence, as promptly as practicable subsequent to such transfer and assignment, and in any event, within thirty (30) days thereafter, the Master Servicer shall
(i) complete each assignment of Mortgage, as follows: “First Horizon Mortgage Pass-Through Certificates, Series 2007-4, The Bank of New York, as trustee for the holders of the Certificates”, (ii) cause such assignment to be in proper form
for recording in the appropriate public office for real property records and (iii) cause to be delivered for recording in the appropriate public office for real property records the assignments of the Mortgages to the Trustee, except that, with
respect to any assignments of Mortgage as to which the Master Servicer has not received the information required to prepare such assignment in recordable form, the Master Servicer’s obligation to do so and to deliver the same for such recording
shall be as soon as practicable after receipt of such information and in any event within thirty (30) days after receipt thereof. Notwithstanding the foregoing, the Master Servicer need not cause to be recorded any assignment which relates to a
Mortgage Loan in any state other than  the Required Recordation States. 

          In the case of Mortgage Loans that have been prepaid in full as of the Closing Date, the Depositor, in lieu of delivering the above documents to the Trustee or the Custodian on its behalf, will
deposit in the Certificate Account the portion of such payment that is required to be deposited in the Certificate Account pursuant to Section 3.8 hereof. 

          Notwithstanding anything to the contrary in this Agreement, within thirty days after the Closing Date, the Depositor shall either (i) deliver or cause to be delivered to the Trustee or the

47

Custodian on its behalf the Mortgage File as required pursuant to this Section 2.1 for each Delay Delivery Mortgage Loan or (ii) (A) substitute or cause to be substituted a Substitute Mortgage Loan for the Delay Delivery Mortgage
Loan or (B) repurchase or cause to be repurchased the Delay Delivery Mortgage Loan, which substitution or repurchase shall be accomplished in the manner and subject to the conditions set forth in Section 2.3 (treating each Delay Delivery Mortgage
Loan as a Deleted Mortgage Loan for purposes of such Section 2.3), provided, however, that if the Depositor fails to deliver a Mortgage File for any Delay Delivery Mortgage Loan within the thirty-day period provided in the prior sentence, the
Depositor shall use its best reasonable efforts to effect or cause to be effected a substitution, rather than a repurchase of, such Deleted Mortgage Loan and provided further that the cure period provided for in Section 2.2 or in Section 2.3 shall
not apply to the initial delivery of the Mortgage File for such Delay Delivery Mortgage Loan, but rather the Depositor shall have five (5) Business Days to cure or cause to be cured such failure to deliver. At the end of such thirty-day period, the
Trustee or the Custodian, on its behalf shall send a Delay Delivery Certification for the Delay Delivery Mortgage Loans delivered during such thirty-day period in accordance with the provisions of Section 2.2. Notwithstanding anything to the
contrary contained in this Agreement, none of the Mortgage Loans in the Trust Fund is or will be Delay Delivery Mortgage Loans. 

                    SECTION 2.2     Acceptance by Trustee of the Mortgage Loans.

          The Trustee or the Custodian, on behalf of the Trustee, acknowledges receipt of the documents identified in the Initial Certification in the form annexed hereto as Exhibit E and declares that it or
the Custodian holds and will hold such documents and the other documents delivered to it or the Custodian, as applicable, constituting the Mortgage Files, and that it or the Custodian, as applicable, holds or will hold such other assets as are
included in the Trust Fund, in trust for the exclusive use and benefit of all present and future Certificateholders. The Trustee acknowledges that the Custodian will maintain possession of the Mortgage Notes in the State of Texas, unless otherwise
permitted by the Rating Agencies. 

          The Trustee agrees to execute and deliver or to cause the Custodian to execute and deliver on the Closing Date to the Depositor and the Master Servicer an Initial Certification in the form annexed
hereto as Exhibit E. Based on its or the Custodian’s review and examination, and only as to the documents identified in such Initial Certification, the Custodian, on behalf of the Trustee, acknowledges that such documents appear regular on
their face and relate to such Mortgage Loan. Neither the Trustee nor the Custodian shall be under any duty or obligation to inspect, review or examine said documents, instruments, certificates or other papers to determine that the same are genuine,
enforceable or appropriate for the represented purpose or that they have actually been recorded in the real estate records or that they are other than what they purport to be on their face. 

          On or about the thirtieth (30th) day after the Closing Date, the Trustee shall deliver or shall cause the Custodian to deliver to the Depositor and the Master Servicer a Delay Delivery Certification
in the form annexed hereto as Exhibit F, with any applicable exceptions noted thereon.  Notwithstanding anything to the contrary contained in this Agreement, none of the Mortgage Loans in the Trust Fund is or will be Delay Delivery Mortgage Loans.

48

          Not later than 90 days after the Closing Date, the Trustee shall deliver or shall cause the Custodian to deliver to the Depositor and the Master Servicer a Subsequent Certification in the form annexed
hereto as Exhibit G, with any applicable exceptions noted thereon. 

          If, in the course of such review, the Trustee or the Custodian, on behalf of the Trustee, finds any document constituting a part of a Mortgage File which does not meet the requirements of Section 2.1,
the Trustee shall list or shall cause the Custodian to list such as an exception in the Subsequent Certification; provided, however that neither the Trustee nor the Custodian shall make any determination as to whether (i) any endorsement is
sufficient to transfer all right, title and interest of the party so endorsing, as noteholder or assignee thereof, in and to that Mortgage Note or (ii) any assignment is in recordable form or is sufficient to effect the assignment of and transfer to
the assignee thereof under the mortgage to which the assignment relates. The Seller shall promptly correct or cure such defect within 90 days from the date it was so notified of such defect and, if the Seller does not correct or cure such defect
within such period, the Seller shall either (a) substitute for the related Mortgage Loan a Substitute Mortgage Loan, which substitution shall be accomplished in the manner and subject to the conditions set forth in Section 2.3, or (b) purchase such
Mortgage Loan from the Trustee within 90 days from the date the Seller was notified of such defect in writing at the Purchase Price of such Mortgage Loan; provided, however, that in no event shall such substitution or purchase occur more than 540
days from the Closing Date, except that if the substitution or purchase of a Mortgage Loan pursuant to this provision is required by reason of a delay in delivery of any documents by the appropriate recording office, and there is a dispute between
either the Master Servicer or the Seller and the Trustee over the location or status of the recorded document, then such substitution or purchase shall occur within 720 days from the Closing Date. The Trustee shall deliver or shall cause the
Custodian to deliver written notice to each Rating Agency within 270 days from the Closing Date indicating each Mortgage Loan (a) which has not been returned by the appropriate recording office or (b) as to which there is a dispute as to location or
status of such Mortgage Loan. Such notice shall be delivered every 90 days thereafter until the related Mortgage Loan is returned to the Trustee or the Custodian on its behalf. Any such substitution pursuant to (a) above or purchase pursuant to (b)
above shall not be effected prior to the delivery to the Trustee of the Opinion of Counsel required by Section 2.5 hereof, if any, and any substitution pursuant to (a) above shall not be effected prior to the additional delivery to the Trustee of a
Request for Release substantially in the form of Exhibit L. No substitution is permitted to be made in any calendar month after the Determination Date for such month. The Purchase Price for any such Mortgage Loan shall be deposited by the Seller in
the Certificate Account on or prior to the Distribution Account Deposit Date for the Distribution Date in the month following the month of repurchase and, upon receipt of such deposit and certification with respect thereto in the form of Exhibit M
hereto (delivery of which to the Custodian will be by electronic data transmission or email), the Trustee shall cause the Custodian to release the related Mortgage File to the Seller and shall execute and deliver at the Seller’s request such
instruments of transfer or assignment prepared by the Seller, in each case without recourse, as shall be necessary to vest in the Seller, or a designee, the Trustee’s interest in any Mortgage Loan released pursuant hereto. If pursuant to the
foregoing provisions the Seller repurchases a Mortgage Loan that is a MERS Mortgage Loan, the Master Servicer shall either (i) cause MERS to execute and deliver an assignment of the Mortgage in recordable form to transfer the Mortgage from MERS to
the Seller and shall cause such Mortgage to be removed from registration on the MERS® System in accordance with

49

MERS’ rules and regulations or (ii) cause MERS to designate on the MERS® System the Seller as the beneficial holder of such Mortgage Loan. 

          The Trustee shall retain or shall cause the Custodian to retain possession and custody of each Mortgage File in accordance with and subject to the terms and conditions set forth herein. The Master
Servicer shall promptly deliver to the Trustee or the Custodian on its behalf, upon the execution or receipt thereof, the originals of such other documents or instruments constituting the Mortgage File as come into the possession of the Master
Servicer from time to time. 

          It is understood and agreed that the obligation of the Seller to substitute for or to purchase any Mortgage Loan which does not meet the requirements of Section 2.1 above shall constitute the sole
remedy respecting such defect available to the Trustee, the Depositor and any Certificateholder against the Seller. 

          The mortgage loans permitted by the terms of this Agreement to be included in the Trust Fund are limited to (i) the Mortgage Loans (which the Depositor acquired pursuant to the MLPA, which contains,
among other representations and warranties, a representation and warranty of the Seller that no Mortgage Loan is a “high cost loan” as defined by the specific applicable local, state or federal predatory and abusive lending laws, and (ii)
Substitute Mortgage Loans (which, by definition as set forth in this Agreement and referred to in the MLPA, are required to conform to, among other representations and warranties, a representation and warranty of the Seller set forth in the MLPA
that no Substitute Mortgage Loan is a “high cost loan” as defined by the specific applicable local, state or federal predatory and abusive lending laws).  It is therefore understood and agreed by the parties hereto that it is not intended
that any Mortgage Loan be included in the Trust Fund that is a “high cost loan” as defined by the specific applicable local, state or federal predatory and abusive lending laws. 

	 	          SECTION
      2.3   Representations
    and Warranties of the Master Servicer; Covenants of the Seller.
	          	          	 
	 	
(a)   	
The Master Servicer hereby makes the representations and warranties set forth in Schedule II hereto and by this reference incorporated herein, to the Depositor and the Trustee, as of the Closing Date, or if so specified therein,
as of the Cut-off Date.	
	 
	 	
(b)   	
Upon discovery by any of the parties hereto of a breach of a representation or warranty made pursuant to Schedule B to the MLPA that materially and adversely affects the interests of the Certificateholders in any Mortgage Loan,
the party discovering such breach shall give prompt notice thereof to the other parties. The Seller hereby covenants that within 90 days of the earlier of its discovery or its receipt of written notice from any party of a breach of any
representation or warranty made pursuant to Schedule B to the MLPA which materially and adversely affects the interests of the Certificateholders in any Mortgage Loan, it shall cure such breach in all material respects, and if such breach is not so
cured, shall, (i) if such 90-day period expires prior to the second anniversary of the Closing Date, remove such Mortgage Loan (a “Deleted Mortgage Loan”) from the Trust Fund and substitute in its place a Substitute Mortgage Loan, in the
manner	
	 

50

	          	          	and subject to the conditions set forth in this Section;
        or (ii) repurchase the affected Mortgage Loan or Mortgage Loans from
        the Trustee at the Purchase Price in the manner set forth below; provided,
        however, that any such substitution pursuant to (i) above shall not be
        effected prior to the delivery to the Trustee of the Opinion of Counsel
        required by Section 2.5 hereof, if any, and any such substitution pursuant
        to (i) above shall not be effected prior to the additional delivery to
        the Trustee or the Custodian on its behalf of a Request for Release substantially
        in the form of Exhibit M (delivery of which to the Custodian will be
        by electronic data transmission or email) and the Mortgage File for any
        such Substitute Mortgage Loan. The Seller shall promptly reimburse the
        Master Servicer and the Trustee for any expenses reasonably incurred
        by the Master Servicer or the Trustee in respect of enforcing the remedies
        for such breach. With respect to the representations and warranties described
        in this Section which are made to the best of the Seller’s knowledge,
        if it is discovered by either the Depositor, the Seller or the Trustee
        that the substance of such representation and warranty is inaccurate
        and such inaccuracy materially and adversely affects the value of the
        related Mortgage Loan or the interests of the Certificateholders therein,
        notwithstanding the Seller’s lack of knowledge with respect to the
        substance of such representation or warranty, such inaccuracy shall be
    deemed a breach of the applicable representation or warranty. 

          With respect to any Substitute Mortgage Loan or Loans, the Seller shall deliver to the Trustee or the Custodian on its behalf for the benefit of the Certificateholders the Mortgage Note, the Mortgage,
the related assignment of the Mortgage, and such other documents and agreements as are required by Section 2.1, with the Mortgage Note endorsed and the Mortgage assigned as required by Section 2.1. No substitution is permitted to be made in any
calendar month after the Determination Date for such month. Scheduled Payments due with respect to Substitute Mortgage Loans in the month of substitution shall not be part of the Trust Fund and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to Certificateholders will include the monthly payment due on any Deleted Mortgage Loan for such month and thereafter the Seller shall be entitled to retain all amounts received in
respect of such Deleted Mortgage Loan. The Master Servicer shall amend the Mortgage Loan Schedule for the benefit of the Certificateholders to reflect the removal of such Deleted Mortgage Loan and the substitution of the Substitute Mortgage Loan or
Loans and the Master Servicer shall deliver the amended Mortgage Loan Schedule to the Trustee. Upon such substitution, the Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects, and the Seller shall be
deemed to have made with respect to such Substitute Mortgage Loan or Loans, as of the date of substitution, the representations and warranties made pursuant to Schedule B to the MLPA with respect to such Mortgage Loan. Upon any such substitution and
the deposit to the Certificate Account of the amount required to be deposited therein in connection with such substitution as described in the following paragraph, the Trustee shall upon the delivery to the Trustee of a Request for Release in the
form of Exhibit L, release or shall cause the Custodian to release the Mortgage File held for the benefit of the Certificateholders relating to such Deleted Mortgage Loan to the Seller and shall execute and deliver at the Seller’s direction
such instruments of transfer or assignment prepared by the Seller, in each case without recourse, as shall be necessary to vest title in the Seller, or its

51

designee, the Trustee’s interest in any Deleted Mortgage Loan substituted for pursuant to this Section 2.3. 

          For any month in which the Seller substitutes one or more Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will determine the amount (if any) by which the
aggregate principal balance of all such Substitute Mortgage Loans as of the date of substitution is less than the aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after application of the scheduled principal portion of the
monthly payments due in the month of substitution). The amount of such shortage (the “Substitution Adjustment Amount”) plus an amount equal to the aggregate of any unreimbursed Advances with respect to such Deleted Mortgage Loans shall be
deposited in the Certificate Account by the Seller on or before the Distribution Account Deposit Date for the Distribution Date in the month succeeding the calendar month during which the related Mortgage Loan became required to be purchased or
replaced hereunder. 

          In the event that the Seller shall have repurchased a Mortgage Loan, the Purchase Price therefor shall be deposited in the Certificate Account pursuant to Section 3.5 on or before the Distribution
Account Deposit Date for the Distribution Date in the month following the month during which the Seller became obligated hereunder to repurchase or replace such Mortgage Loan and upon such deposit of the Purchase Price, the delivery of the Opinion
of Counsel required by Section 2.5 and receipt of a Request for Release in the form of Exhibit M hereto, the Trustee shall release or shall cause the Custodian to release the related Mortgage File held for the benefit of the Certificateholders to
such Person, and the Trustee shall execute and deliver or shall cause the Custodian to execute and deliver at such Person’s direction such instruments of transfer or assignment prepared by such Person, in each case without recourse, as shall be
necessary to transfer title from the Trustee. It is understood and agreed that the obligation under this Agreement of the Seller to cure, repurchase or replace any Mortgage Loan as to which a breach has occurred and is continuing shall constitute
the sole remedy against the Seller respecting such breach available to Certificateholders, the Depositor or the Trustee on their behalf. 

          After giving effect to the sale of the Certificates by the Depositor to the Underwriter, and thereafter, so long as any Certificates remain outstanding, the Seller, its affiliates and agents,
collectively, shall not beneficially own Certificates the aggregate fair value of which would represent 90% or more of the beneficial interests in the Trust Fund. 

          The representations and warranties made pursuant to this Section 2.3 shall survive delivery of the respective Mortgage Files to the Trustee or the Custodian for the benefit of the Certificateholders.

	          	          SECTION
        2.4   Representations
    and Warranties of the Depositor as to the Mortgage Loans. 

          The Depositor hereby represents and warrants to the Trustee with respect to each Mortgage Loan as of the date hereof or such other date set forth herein that as of the Closing Date, and following the
transfer of the Mortgage Loans to it pursuant to the MLPA and immediately prior to the conveyance of the Mortgage Loans by it to the Trustee pursuant to

52

Section 2.1(a) hereof, the Depositor had good title to the Mortgage Loans and the Mortgage Notes were subject to no offsets, defenses or counterclaims. 

          It is understood and agreed that the representations and warranties set forth in this Section 2.4 shall survive delivery of the Mortgage Files to the Trustee. Upon discovery by the Depositor or the
Trustee of a breach of any of the foregoing representations and warranties set forth in this Section 2.4 (referred to herein as a “breach”), which breach materially and adversely affects the interest of the Certificateholders, the party
discovering such breach shall give prompt written notice to the others and to each Rating Agency. 

	 	          SECTION
      2.5   Delivery
    of Opinion of Counsel in Connection with Substitutions.
	          	          	 
	 	
(a)   	
Notwithstanding any contrary provision of this Agreement, no substitution pursuant to Section 2.2 or Section 2.3 shall be made more than 90 days after the Closing Date unless the Depositor delivers to the Trustee an Opinion of
Counsel, which Opinion of Counsel shall not be at the expense of either the Trustee or the Trust Fund, addressed to the Trustee, to the effect that such substitution will not (i) result in the imposition of the tax on “prohibited
transactions” on the Trust Fund or contributions after the Startup Date, as defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively, or (ii) cause any REMIC created hereunder to fail to qualify as a REMIC at any time that any
Certificates are outstanding.	
	 
	 	
(b)   	
Upon discovery by the Depositor, the Master Servicer or the Trustee that any Mortgage Loan does not constitute a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code, the party discovering such fact
shall promptly (and in any event within five (5) Business Days of discovery) give written notice thereof to the other parties. In connection therewith, the Trustee shall require the Depositor to cause the Seller, pursuant to the MLPA and at the
Seller’s option, to either (i) substitute, if the conditions in Section 2.3(b) with respect to substitutions are satisfied, a Substitute Mortgage Loan for the affected Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within 90 days
of such discovery in the same manner as it would a Mortgage Loan for a breach of representation or warranty made pursuant to Section 2.3. The Trustee shall reconvey or shall cause the Custodian to reconvey to the Seller the Mortgage Loan to be
released pursuant hereto in the same manner, and on the same terms and conditions, as it would a Mortgage Loan repurchased for breach of a representation or warranty contained in Section 2.3.	
	 
	 	 	
SECTION 2.6    Execution and Delivery of Certificates.	

          The Trustee acknowledges the transfer and assignment to it of the Trust Fund and, concurrently with such transfer and assignment, has executed and delivered to or upon the order of the Depositor, the
Certificates in authorized denominations evidencing directly or indirectly the entire ownership of the Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights referred to above for the benefit of all present and future Holders
of the Certificates

53

and to perform the duties set forth in this Agreement to the best of its ability, to the end that the interests of the Holders of the Certificates may be adequately and effectively protected. 

                    SECTION 2.7     REMIC Matters.

          The Preliminary Statement sets forth the “latest possible maturity date” for federal income tax purposes of all REMIC regular interests created hereby.

          The assets of the Lower REMIC shall be as set forth in the definition thereof.  Each interest identified in the first table below by a designation beginning with “L” shall be a “regular
interest” in the Lower REMIC and a Lower REMIC Interest, and the RL Interest shall be the sole class of residual interest in the Lower REMIC.  The Lower REMIC Interests shall be uncertificated and shall be held by the Trustee as assets of the
Middle REMIC.

          The assets of the Middle REMIC shall be as set forth in the definition thereof.  Each interest identified in the second table below by a designation beginning with “M” shall be a
“regular interest” in the Middle REMIC and a Middle REMIC Interest, and the RM Interest shall be the sole class of residual interest in the Middle REMIC. The Middle REMIC Interests shall be uncertificated and shall be held by the Trustee
as assets of the Upper REMIC.

          The assets of the Upper REMIC shall be as set forth in the definition thereof.  The “regular interests” in the Upper REMIC are represented by the Regular Certificates. The Class I-A-16
Certificates shall also represent the right to receive the Class I-A-16 Yield Supplement Amount, which shall not be a part of any REMIC hereunder but shall constitute contractual rights coupled with a regular interest within the meaning of Treasury
regulations section 1.860G -2(i). Each component of the Class I-A-14 Certificate shall represent a separate REMIC regular interest. The RU Interest shall be the sole class of residual interest in the Upper REMIC. The Class I-A-R Certificate shall
represent ownership of the RL Interest, RM Interest and RU Interest.

          The “Startup Day” for purposes of the REMIC Provisions for each REMIC hereunder shall be the Closing Date. The Tax Matters Person with respect to each REMIC hereunder shall be the Trustee
and the Trustee shall hold the Tax Matters Person Certificate. Each REMIC’s taxable year shall be the calendar year and its accounts shall be maintained using the accrual method. 

	 	Lower 	 	 	 	 	 	 	Corresponding Class
        of Middle 
	 	REMIC 	 	 	 	 	 	 	REMIC
        Interests 
	 	Interest or 	 	Lower REMIC 	 	Lower REMIC 	 	 	 
	 	Residual 	 	Interest
        Balance 	 	Interest
        Rate 	 	Interest 	Principal 
	 	L-I-A-1 	 	$ 	84,826.24 	 	6.00% 	 	(1) 	(1) 
	 	L-I-A-2 	 	$ 	9,425.14 	 	6.00% 	 	(1) 	(1) 
	 	L-I-ZZZ 	 	$ 	323,835,886.50 	 	6.00% 	 	(1) 	(1) 
	 	L-I-PO 	 	$ 	1,073,137.52 	 	N/A 	 	(1) 	(1) 
	 	RL 	 	$ 	0.00 	 	N/A 	 	N/A 	N/A 
	 	L-II-A-1 	 	$ 	5,486.60 	 	5.50% 	 	(1) 	(1) 
	 	L-II-A-2 	 	$ 	609.62 	 	5.50% 	 	(1) 	(1) 
	 	L-II-ZZZ 	 
	$ 	 21,010,525.76 	 
	5.50% 	 
	(1) 	(1) 
	 	Total 	 	$ 	 346,019,897.38 	 	 	 	 	 

54

	
(1)   	
The Lower REMIC Interest L-I-A-1, Lower REMIC Interest L-I-A-2 and Lower REMIC Interest L-I-ZZZ shall be Corresponding Classes to these classes of Middle REMIC Interests: M-I-A-1, M-I-A-2, M-I-A-3, M-I-A-4, M-I-A-5,
M-I-A-6, M-I-A-7, M-I-A-8, M-I-A-9, M-I-A-11, M-I-A-12, M-I-A-13, M-I-A-15, M-I-A-16, M- I-A-RU, M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6 (provided that with respect to M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6, such Lower REMIC Interests shall only correspond to the portion supported by Pool I). The Lower REMIC Interest L-I-PO corresponds to the Middle REMIC Interest M-I-PO. The Lower REMIC Interest L-II-A-1, Lower REMIC L-II-A-2 and Lower REMIC
Interest L-II-ZZZ shall be Corresponding Classes to these classes of Middle REMIC Interests: M-II-A-1, M-II-A-2, M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6 (provided that with respect to M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6, such Lower REMIC
Interests shall only correspond to the portion supported by Pool II).
	 	 

          “L1 Interests” refers to the L-I-A-1 Lower REMIC Interest and the L-II-A-1 Lower REMIC Interest. “L2 Interests” refers to the L-I-A-2 Lower REMIC Interest and the L-II-A-2 Lower
REMIC Interest. “LZZZ Interests” refers to L-I-ZZZ Lower REMIC Interest and L-II-ZZZ Lower REMIC Interest. “LPO Interests” refer to the L-I-PO Lower REMIC Interest. Each L1 Interest shall have a principal balance initially equal
to 0.9% of the Group Subordinate Amount of its corresponding Mortgage Pool. Each L2 Interest shall have a principal balance initially equal to 0.1% of the Group Subordinate Amount of its corresponding Mortgage Pool. The initial principal balance of
each LZZZ Interest shall equal the excess of the Pool Principal Balance of its corresponding Mortgage Pool over the sum of (i) the initial principal balances of the L1 Interests and L2 Interests corresponding to such Mortgage Pool, and (ii) the
portion of the LPO Interest attributable to the Discount Mortgage Loans in the Mortgage Pool corresponding to such LZZZ Interest. 

          Unless a Cross-over Situation (as defined below) exists, principal and Realized Losses arising with respect to each Mortgage Pool shall be allocated first to cause the L1 and L2 Interests
corresponding to such Mortgage Pool to equal 0.9% and 0.1% of the Group Subordinate Amount of such Mortgage Pool as of such Distribution Date (after distributions of principal and allocation of Realized Losses are made) and all excess principal and
Realized Losses shall be allocated to the LZZZ Interest corresponding to such Mortgage Pool. A L1, L2 or LZZZ Interest that is allocated principal on any Distribution Date shall receive such principal, and have its principal balance reduced by the
amount of such principal, on such Distribution Date. Similarly, a L1, L2 or LZZZ Interest that is allocated a Realized Loss on any Distribution Date shall have its principal balance reduced by the amount of such Realized Loss on such Distribution
Date.

          A “Cross-over Situation” exists if on any Distribution Date (after taking into account distributions of principal and allocations of Realized Losses on such Distribution Date) the L1 and L2
Interests corresponding to any Mortgage Pool are in the aggregate less than 1% of the Group Subordinate Amount of the corresponding Mortgage Pool.  If a Cross-over Situation exists on any Distribution Date, and the weighted average interest rate of
the outstanding L1 and L2 Interests is less than the Pass-Through Rate for any Class of Subordinate Certificates for the following Distribution Date, a Principal Reallocation Payment (as defined below) shall be made proportionately to the
outstanding L1 Interests prior to any other distributions of principal from each such Mortgage Pool so that the Calculation Rate equals the Pass-Through Rate for each Class of Subordinate Certificates. If a Cross-over Situation exists on any
Distribution Date, and the weighted average rate of the outstanding L1 and L2 Interests is greater than the Pass-Through Rate for any Class of Subordinate Certificates for the following Distribution Date, a Principal Reallocation Payment shall be
made proportionately to the outstanding L2 Interests prior to any other distributions of principal from each such Mortgage Pool so that the Calculation Rate equals

55

the Pass-Through Rate for each Class of Subordinate Certificates.  A “Principal Reallocation Payment” is a distribution of the minimum amount of principal that causes the Calculation Rate (as defined below) with respect
to the outstanding L1 and L2 Interests to equal the Pass-Through Rate for each Class of Subordinate Certificates. The “Calculation Rate” shall equal the product of (i) 10 and (ii) the weighted average interest rate of the outstanding L1
and L2 Interests, treating each L1 Interest as capped at zero or reduced by a fixed percentage of 100% of the interest accruing on such class. Principal Reallocation Payments shall be made from principal received on the Mortgage Loans from a
Mortgage Pool and shall also consist of a proportionate allocation of Realized Losses from the Mortgage Loans of a Mortgage Pool. For purposes of making Principal Reallocation Payments, to the extent that the principal received during the applicable
collection period from the related Mortgage Pool and related Realized Losses are insufficient to make the necessary reduction of principal, then interest shall accrue on the LZZZ Interest (and be added to its principal balance) of the related
Mortgage Pool to allow the necessary Principal Reallocation Payment to be made.  The Calculation Rate is designed to always equal the Pass-Through Rate of each Class of Subordinated Certificates. 

          If a Cross-over Situation exists, the aggregate principal balances of the outstanding L1 and L2 Interests of all of the Mortgage Pools shall not be reduced below one percent of the aggregate Pool
Principal Balance of all of the Mortgage Pools for the following Distribution Date in excess of the Senior Certificates as of the related Distribution Date (after taking into account distributions of principal and allocations of Realized Losses on
such Distribution Date). To the extent this limitation prevents the distribution of principal to the L1 and L2 Interests of a Mortgage Pool and the related LZZZ Interest has already been reduced to zero, such excess principal from such Mortgage Pool
shall be paid proportionately to the LZZZ Interests of the Mortgage Pool whose aggregate L1 and L2 Interests are less than one percent of the related Group Subordinate Amount. Any such shortfall as a result of the Mortgage Pool receiving the extra
payment having a Designated Mortgage Pool Rate (as defined below) lower than the Designated Mortgage Pool Rate of the Mortgage Pool from which the payment was reallocated shall be treated as a Realized Loss and if excess arises as a result of the
Mortgage Pool receiving the extra payment having a Designated Mortgage Pool Rate higher than the Mortgage Pool from which the payment was reallocated it shall reimburse the Middle REMIC for prior Realized Losses.

	 	 	 	 	 	 	 	 	Corresponding 
	 	Middle REMIC 	 	Middle REMIC 	 	Middle REMIC 	 	Class
        or Interest 
	 	Interest
        or Residual 	 	Interest
        Balance 	 	Interest
        Rate 	 	Interest 	Principal 
	 	M-I-A-1 	 	$ 	22,522,000.00 	 	6.00% 	 	I-A-1 	I-A-1 
	 	M-I-A-2 	 	$ 	673,000.00 	 	6.00% 	 	I-A-2 	I-A-2 
	 	M-I-A-3 	 	$ 	31,558,000.00 	 	6.00% 	 	I-A-3 	I-A-3 
	 	M-I-A-4 	 	$ 	4,704,000.00 	 	6.00% 	 	I-A-4 	I-A-4 
	 	M-I-A-5 	 	$ 	62,422,000.00 	 	6.00% 	 	I-A-5,
        (2) 	I-A-5 
	 	M-I-A-6 	 	$ 	33,163,000.00 	 	6.00% 	 	I-A-6,
        (3) 	I-A-6 
	 	M-I-A-7 	 	$ 	24,424,000.00 	 	6.00% 	 	I-A-7 	I-A-7 
	 	M-I-A-8 	 	$ 	23,685,000.00 	 	6.00% 	 	I-A-8 	I-A-8 
	 	M-I-A-9 	 	$ 	6,262,000.00 	 	6.00% 	 	I-A-9 	I-A-9 
	 	M-I-A-11 	 	$ 	10,000.00 	 	6.00% 	 	I-A-11 	I-A-11 

56

	 	 	 	 	 	 	 	 	Corresponding 
	 	Middle REMIC 	 	Middle REMIC 	 	Middle REMIC 	 	Class
        or Interest 
	 	Interest
        or Residual 	 	Interest
    Balance 	 	Interest
        Rate 	 	Interest 	Principal 
	 	M-I-A-12 	 	$ 	10,000.00 	 	6.00% 	 	I-A-12 	I-A-12 
	 	M-I-A-13 	 	$ 	2,856,000.00 	 	6.00% 	 	I-A-13 	I-A-13 
	 	M-I-A-15 	 	$ 	3,894,900.00 	 	6.00% 	 	I-A-15 	I-A-15 
	 	M-I-A-16 	 	$ 	98,321,000.00 	 	6.00% 	 	I-A-16,
        I-A-17 	I-A-16 
	 	M-I-A-RU 	 	$ 	100.00 	 	6.00% 	 	RU
        Interest 	RU
        Interest 
	 	M-I-PO 	 	$ 	1,073,137.52 	 	N/A 	 	N/A 	I-A-PO 
	 	M-II-A-1 	 	$ 	18,958,000.00 	 	5.50 	 	II-A-1 	II-A-1 
	 	M-II-A-2 	 	$ 	1,449,000.00 	 	5.50 	 	II-A-2 	II-A-2 
	 	M-B-1 	 	$ 	5,363,000.00 	 	(1) 	 	B-1 	B-1 
	 	M-B-2 	 	$ 	1,903,000.00 	 	(1) 	 	B-2 	B-2 
	 	M-B-3 	 	$ 	1,038,000.00 	 	(1) 	 	B-3 	B-3 
	 	M-B-4 	 	$ 	692,000.00 	 	(1) 	 	B-4 	B-4 
	 	M-B-5 	 	$ 	519,000.00 	 	(1) 	 	B-5 	B-5 
	 	M-B-6 	 	$ 	519,759.86 	 	(1) 	 	B-6 	B-6 
	 	RM 	 	$ 	0.00 	 	N/A 	 	N/A 	N/A 
	 	Total 	 	$ 	346,019,897.38 	 	 	 	 	 

	
(1)     	
The Middle REMIC Interest Rate for the Middle REMIC Interest M-B-1, Middle REMIC Interest M-B-2, Middle REMIC Interest M-B-3, Middle REMIC Interest M- B-4, Middle REMIC Interest M-B-5, Middle REMIC Interest M-B-6 shall
equal the Calculation Rate as defined in this Section 2.7. The Pass-Through Rate on each Class of Subordinated Certificates is variable and will be equal to the weighted average of the Middle REMIC Interest Rates on Middle REMIC Interest M-B-1,
Middle REMIC Interest M-B-2, Middle REMIC Interest M-B-3, Middle REMIC Interest M-B-4, Middle REMIC Interest M-B-5, Middle REMIC Interest M-B-6, weighted on the basis of the principal balance of each such Middle REMIC Interest.
	 
	
(2)   	
The Class I-A-14(1) Component.	
	 
	
(3)   	
The Class I-A-14(2) Component.	
	 

          On each Distribution Date Available Funds shall be distributed with respect to the Middle REMIC Interests in a manner such that: 

	 	
(a)   	
interest accrued, if any, on each Middle REMIC Interest is distributed with respect to each such Middle REMIC Interest in the same manner that Accrued Certificate Interest is distributed with respect to the Corresponding Class or
Classes of Certificates pursuant to Section 4.2; and	
	          	          	 
	 	
(b)   	
principal is distributed (and Realized Losses shall be allocated) with respect to each such Middle REMIC Interest in the same manner that principal is distributed (and Realized Losses is allocated) with respect to the
Corresponding Class or Classes of Certificates pursuant to Section 4.2 and Section 4.4.	

          The Class L-I-PO Interest shall be entitled to receive the Class PO Principal Distribution Amount for Pool I. 

          The foregoing REMIC structure is intended to cause all of the cash from the Mortgage Loans to flow through to the Upper REMIC as cash flow on a REMIC regular interest, without creating any
shortfall-actual or potential (other than for credit losses) to any REMIC regular interest. To the extent that the structure is believed to diverge from such intention the Trustee shall resolve ambiguities to accomplish such result and shall to the
extent necessary rectify any

57

drafting errors or seek clarification to the structure without Certificateholder approval (but with guidance of counsel) to accomplish such intention. 

                    SECTION
2.8    Covenants of the Master Servicer.

          The Master Servicer hereby covenants to the Depositor and the Trustee as follows:

	 	
(a)   	
the Master Servicer shall comply in the performance of its obligations under this Agreement with all reasonable rules and requirements of the insurer under each Required Insurance Policy; and	
	          	          	 
	 	
(b)   	
no written information, certificate of an officer, statement furnished in writing or written report delivered to the Depositor, any affiliate of the Depositor or the Trustee and prepared by the Master Servicer pursuant to this
Agreement will contain any untrue statement of a material fact or omit to state a material fact necessary to make such information, certificate, statement or report not misleading.	
	 

ARTICLE III 

ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

                    SECTION 3.1     Master Servicer to Service Mortgage Loans. 

          For and on behalf of the Certificateholders, the Master Servicer shall service and administer the Mortgage Loans in accordance with the terms of (i) the Servicing Rights Transfer and Subservicing Agreement, pursuant to which First Tennessee Mortgage Services, Inc. engaged the Master Servicer to subservice the Mortgage Loans, (ii) this Agreement and (iii) the customary and usual
standards of practice of prudent mortgage loan servicers; provided that if there is a conflict between the terms of the Servicing Agreement and the Servicing Rights Transfer and Subservicing Agreement, on the one hand, and this Agreement, on the
other hand, the terms of this Agreement shall prevail. In connection with such servicing and administration, the Master Servicer shall have full power and authority, acting alone and/or through Subservicers as provided in Section 3.2 hereof, to do
or cause to be done any and all things that it may deem necessary or desirable in connection with such servicing and administration, including but not limited to, the power and authority, subject to the terms hereof (i) to execute and deliver, on
behalf of the Certificateholders and the Trustee, customary consents or waivers and other instruments and documents, (ii) to consent to transfers of any Mortgaged Property and assumptions of the Mortgage Notes and related Mortgages (but only in the
manner provided in this Agreement), (iii) to collect any Insurance Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or other conversion of the ownership of the Mortgaged Property securing any Mortgage Loan; provided that
the Master Servicer shall not take any action that is inconsistent with or prejudices the interests of the Trust Fund or the Certificateholders in any Mortgage Loan or the rights and interests of the Depositor, the Trustee and the Certificateholders
under this Agreement. The Master Servicer shall represent and protect the interests of the Trust Fund in the same manner as it protects its own interests in mortgage loans in its own portfolio in any claim, proceeding or litigation regarding a
Mortgage Loan, and shall not make or permit any modification, waiver or amendment of any Mortgage Loan which would cause any REMIC

58

created hereunder to fail to qualify as a REMIC or result in the imposition of any tax under Section 860F(a) or Section 860G(d) of the Code. Without limiting the generality of the foregoing, the Master Servicer, in its own name or
in the name of the Depositor and the Trustee, is hereby authorized and empowered by the Depositor and the Trustee, when the Master Servicer believes it appropriate in its reasonable judgment, to execute and deliver, on behalf of the Trustee, the
Depositor, the Certificateholders or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge and all other comparable instruments, with respect to the Mortgage Loans, and with respect to the
Mortgaged Properties held for the benefit of the Certificateholders. The Master Servicer shall prepare and deliver to the Depositor and/or the Trustee such documents requiring execution and delivery by either or both of them as are necessary or
appropriate to enable the Master Servicer to service and administer the Mortgage Loans to the extent that the Master Servicer is not permitted to execute and deliver such documents pursuant to the preceding sentence. Upon receipt of such documents,
the Depositor and/or the Trustee shall execute such documents and deliver them to the Master Servicer. The Master Servicer further is authorized and empowered by the Trustee, on behalf of the Certificateholders and the Trustee, in its own name or in
the name of the Subservicer, when the Master Servicer or the Subservicer as the case may be, believes it appropriate in its best judgment to register any Mortgage Loan on the MERS® System, or cause the removal from the registration of any
Mortgage Loan on the MERS® System, to execute and deliver, on behalf of the Trustee and the Certificateholders or any of them, any and all instruments of assignment and other comparable instruments with respect to such assignment or
re-recording of a Mortgage in the name of MERS, solely as nominee for the Trustee and its successors and assigns. 

          In accordance with the standards of the preceding paragraph, the Master Servicer shall advance or cause to be advanced funds as necessary for the purpose of effecting the payment of taxes and
assessments on the Mortgaged Properties, which advances shall be reimbursable in the first instance from related collections from the Mortgagors pursuant to Section 3.6, and further as provided in Section 3.8. The costs incurred by the Master
Servicer, if any, in effecting the timely payments of taxes and assessments on the Mortgaged Properties and related insurance premiums shall not, for the purpose of calculating monthly distributions to the Certificateholders, be added to the Stated
Principal Balances of the related Mortgage Loans, notwithstanding that the terms of such Mortgage Loans so permit. 

                    SECTION 3.2     Subservicing; Enforcement of the Obligations of Servicers.

	 	
(a)   	
The Master Servicer may arrange for the subservicing of any Mortgage Loan by a Subservicer pursuant to a subservicing agreement; provided, however, that such subservicing arrangement and the terms of the related subservicing
agreement must provide for the servicing of such Mortgage Loans in a manner consistent with the servicing arrangements contemplated hereunder. Unless the context otherwise requires, references in this Agreement to actions taken or to be taken by the
Master Servicer in servicing the Mortgage Loans include actions taken or to be taken by a Subservicer on behalf of the Master Servicer. Notwithstanding the provisions of any subservicing agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a Subservicer or reference to actions taken through a Subservicer or otherwise, the Master Servicer shall remain obligated and liable to the Depositor,	
	          	          	 

59

	 	 	
the Trustee and the Certificateholders for the servicing and administration of the Mortgage Loans in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from the Subservicer and to the same extent and under the same terms and conditions as if the Master Servicer alone were servicing and administering the Mortgage Loans. All
actions of each Subservicer performed pursuant to the related subservicing agreement shall be performed as an agent of the Master Servicer with the same force and effect as if performed directly by the Master Servicer.	
	          	          	 
	 	
(b)   	
For purposes of this Agreement, the Master Servicer shall be deemed to have received any collections, recoveries or payments with respect to the Mortgage Loans that are received by a Subservicer regardless of whether such payments
are remitted by the Subservicer to the Master Servicer.	
	 	 	 
	 	          SECTION
      3.3   Rights
    of the Depositor and the Trustee in Respect of the Master Servicer. 

          The Depositor may, but is not obligated to, enforce the obligations of the Master Servicer hereunder and may, but is not obligated to, perform, or cause a designee to perform, any defaulted obligation
of the Master Servicer hereunder and in connection with any such defaulted obligation to exercise the related rights of the Master Servicer hereunder; provided that the Master Servicer shall not be relieved of any of its obligations hereunder by
virtue of such performance by the Depositor or its designee. Neither the Trustee nor the Depositor shall have any responsibility or liability for any action or failure to act by the Master Servicer nor shall the Trustee or the Depositor be obligated
to supervise the performance of the Master Servicer hereunder or otherwise. 

                    SECTION 3.4     Trustee to Act as Master Servicer.

          In the event that the Master Servicer shall for any reason no longer be the Master Servicer hereunder (including by reason of an Event of Default), the Trustee or its successor shall thereupon assume
all of the rights and obligations of the Master Servicer hereunder arising thereafter (except that the Trustee shall not be (i) liable for losses of the Master Servicer pursuant to Section 3.9 hereof or any acts or omissions of the predecessor
Master Servicer hereunder), (ii) obligated to make Advances if it is prohibited from doing so by applicable law, (iii) obligated to effectuate repurchases or substitutions of Mortgage Loans hereunder including, but not limited to, repurchases or
substitutions of Mortgage Loans pursuant to Section 2.2 or 2.3 hereof, (iv) responsible for expenses of the Master Servicer pursuant to Section 2.3 or (v) deemed to have made any representations and warranties of the Master Servicer hereunder). Any
such assumption shall be subject to Section 7.2 hereof. If the Master Servicer shall for any reason no longer be the Master Servicer (including by reason of any Event of Default), the Trustee or its successor shall succeed to any rights and
obligations of the Master Servicer under each subservicing agreement. 

          The Master Servicer shall, upon request of the Trustee, but at the expense of the Master Servicer, deliver to the assuming party all documents and records relating to each subservicing

60

          agreement or substitute subservicing agreement and the Mortgage Loans then being serviced thereunder and an accounting of amounts collected or held by it and otherwise use its best efforts to effect the orderly and efficient
transfer of the substitute subservicing agreement to the assuming party. 

	 	          SECTION
      3.5   Collection
    of Mortgage Loan Payments; Certificate Account; Distribution Account. 
	          	          	 	          	 
	 	
(a)   	
The Master Servicer shall make reasonable efforts in accordance with the customary and usual standards of practice of prudent mortgage servicers to collect all payments called for under the terms and provisions of the Mortgage
Loans to the extent such procedures shall be consistent with this Agreement and the terms and provisions of any related Required Insurance Policy. Consistent with the foregoing, the Master Servicer may in its discretion (i) waive any late payment
charge or any prepayment charge or penalty interest in connection with the prepayment of a Mortgage Loan and (ii) extend the due dates for payments due on a Mortgage Note for a period not greater than 180 days; provided, however, that the Master Servicer cannot extend the maturity of any such Mortgage Loan past the date on which the final payment is due on the latest maturing Mortgage Loan as of the Cut-off Date. In the event of any such arrangement, the Master
Servicer shall make Advances on the related Mortgage Loan in accordance with the provisions of Section 4.1 during the scheduled period in accordance with the amortization schedule of such Mortgage Loan without modification thereof by reason of such
arrangements. The Master Servicer shall not be required to institute or join in litigation with respect to collection of any payment (whether under a Mortgage, Mortgage Note or otherwise or against any public or governmental authority with respect
to a taking or condemnation) if it reasonably believes that enforcing the provision of the Mortgage or other instrument pursuant to which such payment is required is prohibited by applicable law.	
	 
	 	
(b)   	
The Master Servicer shall establish and maintain the Certificate Account. The Certificate Account shall consist of two separate subaccounts, each of which shall relate to a particular Mortgage Pool. The Master Servicer shall
deposit or cause to be deposited into the appropriate subaccount of the Certificate Account no later than two Business Days after receipt, except as otherwise specifically provided herein, the following payments and collections remitted by
Subservicers or received by it in respect of the Mortgage Loans subsequent to the Cut-off Date (other than in respect of principal and interest due on the Mortgage Loans on or before the Cut-off Date) and the following amounts required to be
deposited hereunder:	
	 
	 	 	          	
(i) 	all payments on account of principal on the
    Mortgage Loans in the related Mortgage Pool, including Principal Prepayments; 
	 

61

	 	 	 	
(ii)   	
all payments on account of interest on the Mortgage Loans in the related Mortgage Pool, net of the related Master Servicing Fee, any Prepayment Interest Excess and any Retained Yield;	
	          	          	          	          	 
	 	 	 	
(iii)   	
all Insurance Proceeds and Liquidation Proceeds in respect of the related Mortgage Loans in the related Mortgage Pool, other than proceeds to be applied to the restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with the Master Servicer’s normal servicing procedures;	
	 
	 	 	 	
(iv)   	
any amount required to be deposited by the Master Servicer in respect of the related Mortgage Pool pursuant to Section 3.5(c) in connection with any losses on Permitted Investments;	
	 
	 	 	 	
(v)   	
any amounts required to be deposited by the Master Servicer in respect of the related Mortgage Pool pursuant to Sections 3.9(b) and 3.9(d);	
	 
	 	 	 	
(vi)   	
any Substitution Adjustment Amounts or the Purchase Price for any Deleted Mortgage Loan in the related Mortgage Pool;	
	 
	 	 	 	
(vii)   	
all Advances in respect of the related Mortgage Pool made by the Master Servicer pursuant to Section 4.1; and	
	 
	 	 	 	
(viii)   	
any other amounts required to be deposited hereunder in respect of the related Mortgage Pool.	
	 	 	 	 	 
	 	          In
        addition, with respect to any Mortgage Loan that is subject to a buydown
        agreement, on each Due Date for such Mortgage Loan, in addition to the
        monthly payment remitted by the Mortgagor, the Master Servicer shall
        cause funds to be deposited into the applicable subaccount of the Certificate
        Account in an amount required to cause an amount of interest to be paid
        with respect to such Mortgage Loan equal to the amount of interest that
        has accrued on such Mortgage Loan from the preceding Due Date at the
        related Adjusted Mortgage Rate on such date. 

               The
        foregoing requirements for remittance by the Master Servicer shall be
        exclusive, it being understood and agreed that, without limiting the
        generality of the foregoing, payments in the nature of prepayment penalties,
        late payment charges, assumption fees or amounts attributable to reimbursements
        of Advances, if collected, need not be remitted by the Master Servicer.
        In the event that the Master Servicer shall remit any amount not required
        to be remitted, it may at any time withdraw or direct the institution
        maintaining the Certificate Account to withdraw such amount from the
        Certificate Account, any provision herein to the contrary notwithstanding.
        Such withdrawal or direction may be accomplished by delivering written
        notice thereof to the Trustee or such other institution maintaining the
        Certificate Account which describes the amounts deposited in error in
        the Certificate Account. The Master Servicer shall maintain

    

           62

 

	 	adequate records with respect to all withdrawals made
      pursuant to this Section. All funds deposited in the Certificate Account
      shall be held in trust for the Certificateholders until withdrawn in accordance
    with Section 3.8. 
	          	          	          	          	 
	 	
(c)   	
The Trustee shall establish and maintain, on behalf of the Certificateholders, the Distribution Account. The Distribution Account shall consist of two separate subaccounts, each of which shall relate to a particular Mortgage Pool.
The Trustee shall, promptly upon receipt, deposit in the Distribution Account and retain therein the following:	
	 	 	 	 	 
	 	 	 	(i)	 the aggregate amount remitted by the Master Servicer
    to the Trustee in respect of a Mortgage Pool pursuant to Section 3.8(a)(ix); 
	 	 	 	 	 
	 	 	 	(ii)	 any amount deposited by the Master Servicer pursuant
      to this Section 3.5(c) in connection with any losses on Permitted Investments;
    and 
	 	 	 	 	 
	 	 	 	(iii)	 any other amounts deposited hereunder which are required
    to be deposited in the Distribution Account. 
	 	 	 
	 	         In
        the event that the Master Servicer shall remit any amount not required
        to be remitted, it may at any time direct the Trustee to withdraw such
        amount from the applicable subaccount of the Distribution Account, any
        provision herein to the contrary notwithstanding. Such direction may
        be accomplished by delivering an Officer’s Certificate to the Trustee
        which describes the amounts deposited in error in the Distribution Account.
        All funds deposited in the Distribution Account shall be held by the
        Trustee in trust for the related Certificateholders until disbursed in
        accordance with this Agreement or withdrawn in accordance with Section
        3.8. In no event shall the Trustee incur liability for withdrawals from
    the Distribution Account at the direction of the Master Servicer. 

	 	 	 
	 	 	 	(iv)	The institution at which the Certificate Account is
      maintained shall invest funds as directed by the Master Servicer in Permitted
      Investments which shall mature not later than the second Business Day next
      preceding the related Distribution Account Deposit Date (except that if
      such Permitted Investment is an obligation of the institution that maintains
      such account, then such Permitted Investment shall mature not later than
      the Business Day next preceding such Distribution Account Deposit Date)
      and, shall not be sold or disposed of prior to its maturity. If the Master
      Servicer does not provide such prior written investment direction, the
      funds in the Certificate Account will be held uninvested. All such Permitted
      Investments shall be made in the name of the Trustee, for the benefit of
      the Certificateholders. All income and gain net of any losses realized
    from any such investment 

           63

	 	 	 	
of funds on deposit in the Certificate Account shall be for the benefit of the Master Servicer as servicing compensation. The amount of any losses in the Certificate Account in respect of any such investments shall promptly be
deposited by the Master Servicer in the Certificate Account. The funds in the Distribution Account shall be held uninvested. The Trustee in its fiduciary capacity shall not be liable for the amount of any loss incurred in respect of any investment
or lack of investment of funds held in the Certificate Account or the Distribution Account and made in accordance with this Section 3.5.	
	          	          	          	 
	 	 	
(v)   	
The Master Servicer shall give notice to the Trustee, the Seller, each Rating Agency and the Depositor of any proposed change of the location of the Certificate Account prior to any change thereof. The Trustee shall give notice to
the Master Servicer, the Seller, each Rating Agency and the Depositor of any proposed change of the location of the Distribution Account prior to any change thereof.	
	 
	 	          SECTION
      3.6   Collection
    of Taxes, Assessments and Similar Items; Escrow Accounts. 
	 	 	 	 
	 	(a)   	To the extent required by the related Mortgage
        Note and not violative of current law, the Master Servicer shall establish
        and maintain one or more accounts (each, an “Escrow Account”)
        and deposit and retain therein all collections from the Mortgagors (or
        advances by the Master Servicer) for the payment of taxes, assessments,
        hazard insurance premiums or comparable items for the account of the
        Mortgagors. Nothing herein shall require the Master Servicer to compel
        a Mortgagor to establish an Escrow Account in violation of applicable
        law. 
	 	 	 	 
	 	(b)   	Withdrawals of amounts so collected from
        the Escrow Accounts may be made only to effect timely payment of taxes,
        assessments, hazard insurance premiums, condominium or PUD association
        dues, or comparable items, to reimburse the Master Servicer out of related
        collections for any payments made pursuant to Sections 3.1 hereof (with
        respect to taxes and assessments and insurance premiums) and 3.9 hereof
        (with respect to hazard insurance), to refund to any Mortgagors any sums
        determined to be overages, to pay interest, if required by law or the
        terms of the related Mortgage or Mortgage Note, to Mortgagors on balances
        in the Escrow Account or to clear and terminate the Escrow Account at
        the termination of this Agreement in accordance with Section 9.1 hereof.
        The Escrow Accounts shall not be a part of the Trust Fund. 
	 
	 	(c)   	The Master Servicer shall advance any payments
        referred to in Section 3.6(a) that are not timely paid by the Mortgagors
        on the date when the tax, premium or other cost for which such payment
        is intended is due, but the Master Servicer shall be required so to advance
        only to the extent that such advances, in the good faith 
	 

64

	          	          	judgment
        of the Master Servicer, will be recoverable by the Master Servicer out
    of Insurance Proceeds, Liquidation Proceeds or otherwise. 
	 	 	 
	 	          SECTION
        3.7   Access
    to Certain Documentation and Information Regarding the Mortgage Loans. 

          The Master Servicer shall afford the Depositor and the Trustee reasonable access to all records and documentation regarding the Mortgage Loans and all accounts, insurance information and other matters
relating to this Agreement, such access being afforded without charge, but only upon reasonable request and during normal business hours at the office designated by the Master Servicer. 

          Upon
reasonable advance notice in writing, the Master Servicer will provide to each
Certificateholder or Certificate Owner which is a savings and loan association,
bank or insurance company certain  reports and reasonable access to information
and documentation regarding the Mortgage Loans sufficient to permit such Certificateholder
or Certificate Owner to comply with applicable regulations of the OTS or other
regulatory authorities with  respect to investment in the Certificates; provided
that the Master Servicer shall be entitled to be reimbursed by each such Certificateholder
or Certificate Owner for actual expenses incurred by the Master Servicer in providing
such reports and  access. 

	 	          SECTION
      3.8   Permitted
    Withdrawals from the Certificate Account and Distribution Account. 
	          	          	 
	 	
(a)   	
The Master Servicer may from time to time, or shall (in the case of Section 3.8(a)(ix)), make withdrawals from the applicable subaccount of the Certificate Account for the following purposes:	
	 	 	          	 	 
	 	 	 	(i)	 to the extent not previously retained by the Master
      Servicer, to pay the Retained Yield to (a) First Horizon, in its individual
      capacity as Seller, or (b) a subsequent owner of such Retained Yield through
      Seller’s sale, assignment, or certification of its rights to such
      Retained Yield, and to pay to the Master Servicer the master servicing
      compensation to which it is entitled pursuant to Section 3.14, and earnings
      on or investment income with respect to funds in or credited to the Certificate
    Account as additional master servicing compensation; 
	 	 	 	 	 
	 	 	 	(ii)	 to the extent not previously retained by the Master
      Servicer, to reimburse the Master Servicer for unreimbursed Advances made
      by it in respect of the related Mortgage Pool, such right of reimbursement
      pursuant to this subclause (ii) being limited to amounts received on the
    Mortgage Loan(s) in respect of which any such Advance was made; 

65

	 	 	 	
(iii)   	
to reimburse the Master Servicer for any Nonrecoverable Advance previously made in respect of the related Mortgage Pool;	
	          	          	          	          	 
	 	 	 	
(iv)   	
to reimburse the Master Servicer for Insured Expenses from the related Insurance Proceeds in respect of the related Mortgage Pool;	
	 
	 	 	 	
(v)   	
to reimburse the Master Servicer for (a) unreimbursed Servicing Advances in respect of the related Mortgage Pool, the Master Servicer’s right to reimbursement pursuant to this clause (a) with respect to any Mortgage Loan
being limited to amounts received on such Mortgage Loan(s) which represent late recoveries of the payments for which such advances were made pursuant to Section 3.1 or Section 3.6 and (b) for unpaid Master Servicing Fees as provided in Section 3.11
hereof;	
	 
	 	 	 	
(vi)   	
to pay to the Seller or Master Servicer, as applicable, with respect to each Mortgage Loan in respect of the related Mortgage Pool or property acquired in respect thereof that has been purchased pursuant to Section 2.2, 2.3 or
3.11, all amounts received thereon after the date of such purchase;	
	 
	 	 	 	
(vii)   	
to reimburse the Seller, the Master Servicer or the Depositor for expenses incurred by any of them and reimbursable pursuant to Section 6.3 hereof;	
	 
	 	 	 	
(viii)   	
to withdraw any amount deposited in the Certificate Account and not required to be deposited therein;	
	 
	 	 	 	
(ix)   	
on or prior to the Distribution Account Deposit Date, to withdraw an amount equal to the related Available Funds and the Trustee Fee for such Distribution Date and remit such amount to the Trustee for deposit in the Distribution
Account; and	
	 
	 	 	 	
(x)   	
to clear and terminate the Certificate Account upon termination of this Agreement pursuant to Section 9.1 hereof.	
	 
	 	          The
      Master Servicer shall keep and maintain separate accounting, on a Mortgage
      Loan-by-Mortgage Loan basis and on a Mortgage Pool-by-Mortgage Pool basis,
      for the purpose of justifying any withdrawal from the Certificate Account
      pursuant to such subclauses (i), (ii), (iv), (v) and (vi). Prior to making
      any withdrawal from the Certificate Account pursuant to subclause (iii),
      the Master Servicer shall deliver to the Trustee an Officer’s Certificate
      of a Servicing Officer indicating the amount of any previous Advance determined
      by the Master Servicer to be a Nonrecoverable Advance and identifying the
      related Mortgage Loans(s), and their respective portions of such Nonrecoverable
    Advance. 

66

	 	          The
      Master Servicer shall distribute the Retained Yield, if any, to (i) First
      Horizon, in its individual capacity as Seller, or (ii) a subsequent owner
      of the Retained Yield through Seller’s sale, assignment, or certification
      of its rights to such Retained Yield, on each Distribution Account Deposit
    Date during the term of this Agreement.
	          	          	          	          	 
	 	
(b)   	
The Trustee shall withdraw funds from the applicable subaccount of the Distribution Account for distributions to the related Certificateholders in the manner specified in this Agreement (and to withhold from the amounts so
withdrawn, the amount of any taxes that it is authorized to withhold pursuant to the last paragraph of Section 8.11). In addition, the Trustee may (and with respect to clauses (i) and (ii) below, shall), prior to making the distribution pursuant to
Section 4.2 from time to time make withdrawals from the Distribution Account for the following purposes:	
	 	 	 	 
	 	 	 	(i)	 to pay to itself the Trustee Fee for the related Distribution
    Date; 
	 	 	 	 	 
	 	 	 	(ii)	 to withdraw and return to the Master Servicer any amount
      deposited in the Distribution Account and not required to be deposited
    therein; and 
	 	 	 	 	 
	 	 	 	(iii) 	to clear and terminate the Distribution Account upon
    termination of the Agreement pursuant to Section 9.1 hereof. 
	 	 	 	 
	 	          SECTION
    3.9   Maintenance
    of Hazard Insurance; Maintenance of Primary Insurance Policies. 
	 	 
	 	
(a)   	
The Master Servicer shall cause to be maintained, for each Mortgage Loan, hazard insurance with extended coverage in an amount not to exceed the highest value placed by the insurer on the improvements securing such Mortgage
Loan. The required coverage under any such hazard insurance policy will be equal to the lesser of (i) the aggregate principal amount of all liens against the related Mortgaged Property, including the proposed loan/line amount as long as
it equals at least 80% of the value of the improvements/replacement cost of the structure, and (ii) the replacement cost of the insurable improvements securing such Mortgage Loan. Each such policy of standard hazard insurance shall contain, or have
an accompanying endorsement that contains, a standard mortgagee clause. Any amounts collected by the Master Servicer under any such policies (other than the amounts to be applied to the restoration or repair of the related Mortgaged Property or
amounts released to the Mortgagor in accordance with the Master Servicer’s normal servicing procedures) shall be deposited in the applicable subaccount of the Certificate Account. Any cost incurred by the Master Servicer in maintaining any such
insurance shall not, for the purpose of calculating monthly distributions to the Certificateholders or remittances to the Trustee for their benefit, be added to the principal balance of the Mortgage Loan, notwithstanding that the terms of the
Mortgage Loan so permit. Such costs shall be recoverable by the Master Servicer out of late payments by the related	

67

	 	 	
Mortgagor or out of Liquidation Proceeds to the extent permitted by Section 3.8 hereof. It is understood and agreed that no earthquake or other additional insurance is to be required of any Mortgagor or maintained on property
acquired in respect of a Mortgage other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance. If the Mortgaged Property is located at the time of origination of the
Mortgage Loan in a federally designated special flood hazard area and such area is participating in the national flood insurance program, the Master Servicer shall cause flood insurance to be maintained with respect to such Mortgage Loan. Such flood
insurance shall be in an amount equal to the least of (i) the original principal balance of the related Mortgage Loan, (ii) the replacement value of the improvements which are part of such Mortgaged Property, and (iii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood insurance program.	
	          	          	 
	 	
(b)   	
In the event that the Master Servicer shall obtain and maintain a blanket policy insuring against hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to have satisfied its obligations as set forth in the
first sentence of this Section, it being understood and agreed that such policy may contain a deductible clause on terms substantially equivalent to those commercially available and maintained by comparable servicers. If such policy contains a
deductible clause, the Master Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with the first sentence of this Section, and there shall have been a loss that would have been
covered by such policy, deposit in the applicable subaccount of the Certificate Account the amount not otherwise payable under the blanket policy because of such deductible clause. In connection with its activities as Master Servicer of the Mortgage
Loans, the Master Servicer agrees to present, on behalf of itself, the Depositor, and the Trustee for the benefit of the Certificateholders, claims under any such blanket policy.	
	 
	 	
(c)   	
The Master Servicer shall not take any action which would result in non-coverage under any applicable Primary Insurance Policy of any loss which, but for the actions of the Master Servicer, would have been covered thereunder. The
Master Servicer shall not cancel or refuse to renew any such Primary Insurance Policy that is in effect at the date of the initial issuance of the Certificates and is required to be kept in force hereunder unless the replacement Primary Insurance
Policy for such canceled or non-renewed policy is maintained with a Qualified Insurer.	

          The Master Servicer shall not be required to maintain any Primary Insurance Policy (i) with respect to any Mortgage Loan with a Loan-to-Value Ratio less than or equal to 80% as of any date of
determination or, based on a new appraisal, the principal balance of such Mortgage Loan represents 80% or less of the new appraised value or (ii) if maintaining such Primary Insurance Policy is prohibited by applicable law. 

68

          The Master Servicer agrees to effect the timely payment of the premiums on each Primary Insurance Policy, and such costs not otherwise recoverable shall be recoverable by the Master Servicer from the
related liquidation proceeds. 

	 	
(d)   	
In connection with its activities as Master Servicer of the Mortgage Loans, the Master Servicer agrees to present on behalf of itself, the Trustee and Certificateholders, claims to the insurer under any Primary Insurance Policies
and, in this regard, to take such reasonable action as shall be necessary to permit recovery under any Primary Insurance Policies respecting defaulted Mortgage Loans. Any amounts collected by the Master Servicer under any Primary Insurance Policies
shall be deposited in the applicable subaccount of the Certificate Account.	
	          	          	 
	 	
            SECTION 3.10    Enforcement of Due-on-Sale Clauses; Assumption Agreements.	
	 
	 	
(a)   	
Except as otherwise provided in this Section, when any property subject to a Mortgage has been conveyed by the Mortgagor, the Master Servicer shall to the extent that it has knowledge of such conveyance, enforce any due-on-sale
clause contained in any Mortgage Note or Mortgage, to the extent permitted under applicable law and governmental regulations, but only to the extent that such enforcement will not adversely affect or jeopardize coverage under any Required Insurance
Policy. Notwithstanding the foregoing, the Master Servicer is not required to exercise such rights with respect to a Mortgage Loan if the Person to whom the related Mortgaged Property has been conveyed or is proposed to be conveyed satisfies the
terms and conditions contained in the Mortgage Note and Mortgage related thereto and the consent of the mortgagee under such Mortgage Note or Mortgage is not otherwise so required under such Mortgage Note or Mortgage as a condition to such transfer.
In the event that the Master Servicer is prohibited by law from enforcing any such due-on-sale clause, or if coverage under any Required Insurance Policy would be adversely affected, or if nonenforcement is otherwise permitted hereunder, the Master
Servicer is authorized, subject to Section 3.10(b), to take or enter into an assumption and modification agreement from or with the person to whom such property has been or is about to be conveyed, pursuant to which such person becomes liable under
the Mortgage Note and, unless prohibited by applicable state law, the Mortgagor remains liable thereon, provided that the Mortgage Loan shall continue to be covered (if so covered before the Master Servicer enters such agreement) by the applicable
Required Insurance Policies. The Master Servicer, subject to Section 3.10(b), is also authorized with the prior approval of the insurers under any Required Insurance Policies to enter into a substitution of liability agreement with such Person,
pursuant to which the original Mortgagor is released from liability and such Person is substituted as Mortgagor and becomes liable under the Mortgage Note. Notwithstanding the foregoing, the Master Servicer shall not be deemed to be in default under
this Section by reason of any transfer or assumption which the Master Servicer reasonably believes it is restricted by law from preventing, for any reason whatsoever.	

69

	 	
(b)   	
Subject to the Master Servicer’s duty to enforce any due-on-sale clause to the extent set forth in Section 3.10(a) hereof, in any case in which a Mortgaged Property has been conveyed to a Person by a Mortgagor, and such
Person is to enter into an assumption agreement or modification agreement or supplement to the Mortgage Note or Mortgage that requires the signature of the Trustee, or if an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the Mortgage Loan, the Master Servicer shall prepare and deliver or cause to be prepared and delivered to the Trustee for signature and shall direct, in writing, the Trustee to execute the assumption agreement with the
Person to whom the Mortgaged Property is to be conveyed and such modification agreement or supplement to the Mortgage Note or Mortgage or other instruments as are reasonable or necessary to carry out the terms of the Mortgage Note or Mortgage or
otherwise to comply with any applicable laws regarding assumptions or the transfer of the Mortgaged Property to such Person. In connection with any such assumption, no material term of the Mortgage Note may be changed. In addition, the substitute
Mortgagor and the Mortgaged Property must be acceptable to the Master Servicer in accordance with its underwriting standards as then in effect. Together with each such substitution, assumption or other agreement or instrument delivered to the
Trustee for execution by it, the Master Servicer shall deliver an Officer’s Certificate signed by a Servicing Officer stating that the requirements of this subsection have been met in connection therewith. The Master Servicer shall notify the
Trustee that any such substitution or assumption agreement has been completed by forwarding to the Trustee the original of such substitution or assumption agreement, which in the case of the original shall be added to the related Mortgage File and
shall, for all purposes, be considered a part of such Mortgage File to the same extent as all other documents and instruments constituting a part thereof. Any fee collected by the Master Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer as additional servicing compensation.	
	          	          	 
	 	          SECTION
      3.11   Realization
    Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans. 

          The Master Servicer shall use reasonable efforts to foreclose upon or otherwise comparably convert the ownership of properties securing such of the Mortgage Loans as come into and continue in default
and as to which no satisfactory arrangements can be made for collection of delinquent payments. In connection with such foreclosure or other conversion, the Master Servicer shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing activities and meet the requirements of the insurer under any Required Insurance Policy; provided, however, that the Master Servicer shall not be required to expend its own
funds in connection with any foreclosure or towards the restoration of any property unless it shall determine (i) that such restoration and/or foreclosure will increase the proceeds of liquidation of the Mortgage Loan after reimbursement to itself
of such expenses and (ii) that such expenses will be recoverable to it through Liquidation Proceeds (respecting which it shall have priority for purposes of withdrawals from the Certificate Account). The Master Servicer shall be responsible for all
other costs and expenses incurred by it in any such proceedings; provided, however, that it shall be entitled to reimbursement thereof

70

from the liquidation proceeds with respect to the related Mortgaged Property, as provided in the definition of Liquidation Proceeds. If the Master Servicer has knowledge that a Mortgaged Property which the Master Servicer is
contemplating acquiring in foreclosure or by deed in lieu of foreclosure is located within a 1 mile radius of any site listed in the Expenditure Plan for the Hazardous Substance Clean Up Bond Act of 1984 or other site with environmental or hazardous
waste risks known to the Master Servicer, the Master Servicer will, prior to acquiring the Mortgaged Property, consider such risks and only take action in accordance with its established environmental review procedures. 

          With respect to any REO Property, the deed or certificate of sale shall be taken in the name of the Trust Fund for the benefit of the Certificateholders, or its nominee, on behalf of the
Certificateholders. The Master Servicer shall ensure that the title to such REO Property references the Pooling and Servicing Agreement and the Trust Fund’s capacity thereunder. Pursuant to its efforts to sell such REO Property, the Master
Servicer shall either itself or through an agent selected by the Master Servicer protect and conserve such REO Property in the same manner and to such extent as is customary in the locality where such REO Property is located. The Master Servicer
shall perform the tax reporting and withholding required by Sections 1445 and 6050J of the Code with respect to foreclosures and abandonments, the tax reporting required by Section 6050H of the Code with respect to the receipt of mortgage interest
from individuals and any tax reporting required by Section 6050P of the Code with respect to the cancellation of indebtedness by certain financial entities, by preparing such tax and information returns as may be required, in the form required, and
delivering the same to the Trustee for filing. 

          In the event that the Trust Fund acquires any Mortgaged Property as aforesaid or otherwise in connection with a default or imminent default on a Mortgage Loan, the Master Servicer shall dispose of
such Mortgaged Property prior to the close of the third taxable year after the taxable year of its acquisition by the Trust Fund unless the Trustee shall have been supplied with an Opinion of Counsel to the effect that the holding by the Trust Fund
of such Mortgaged Property subsequent to such three-year period will not result in the imposition of taxes on “prohibited transactions” of any REMIC created hereunder as defined in Section 860F of the Code or cause any REMIC created
hereunder to fail to qualify as a REMIC at any time that any Certificates are outstanding, in which case the Trust Fund may continue to hold such Mortgaged Property (subject to any conditions contained in such Opinion of Counsel). Notwithstanding
any other provision of this Agreement, no Mortgaged Property acquired by the Trust Fund shall be rented (or allowed to continue to be rented) or otherwise used for the production of income by or on behalf of the Trust Fund in such a manner or
pursuant to any terms that would (i) cause such Mortgaged Property to fail to qualify as “foreclosure property” within the meaning of Section 860G(a)(8) of the Code or (ii) subject any REMIC created hereunder to the imposition of any
federal, state or local income taxes on the income earned from such Mortgaged Property under Section 860G(c) of the Code or otherwise, unless the Master Servicer has agreed to indemnify and hold harmless the Trust Fund with respect to the imposition
of any such taxes. 

          In the event of a default on a Mortgage Loan one or more of whose obligor is not a United States Person, as that term is defined in Section 7701(a)(30) of the Code, in connection with any foreclosure
or acquisition of a deed in lieu of foreclosure (together, “foreclosure”) in respect of such Mortgage Loan, the Master Servicer will cause compliance with the provisions of

71

Treasury Regulation Section 1.1445 -2(d)(3) (or any successor thereto) necessary to assure that no withholding tax obligation arises with respect to the proceeds of such foreclosure except to the extent, if any, that proceeds of
such foreclosure are required to be remitted to the obligors on such Mortgage Loan. 

          The decision of the Master Servicer to foreclose on a defaulted Mortgage Loan shall be subject to a determination by the Master Servicer that the proceeds of such foreclosure would exceed the costs
and expenses of bringing such a proceeding.  The income earned from the management of any REO Properties, net of reimbursement to the Master Servicer for expenses incurred (including any property or other taxes) in connection with such management
and net of unreimbursed Master Servicing Fees, Advances and Servicing Advances, shall be applied to the payment of principal of and interest on the related defaulted Mortgage Loans (with interest accruing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this Agreement, to be payments on account of principal and interest on the related Mortgage Notes and shall be deposited into the applicable subaccount of the Certificate Account. To
the extent the net income received during any calendar month is in excess of the amount attributable to amortizing principal and accrued interest at the related Mortgage Rate on the related Mortgage Loan for such calendar month, such excess shall be
considered to be a partial prepayment of principal of the related Mortgage Loan. 

          The proceeds from any liquidation of a Mortgage Loan, as well as any income from an REO Property, will be applied in the following order of priority: first, to reimburse the Master Servicer for any
related unreimbursed Servicing Advances and Master Servicing Fees; second, to reimburse the Master Servicer for any unreimbursed Advances; third, to reimburse the applicable subaccount of the Certificate Account for any Nonrecoverable Advances (or
portions thereof) that were previously withdrawn by the Master Servicer pursuant to Section 3.8(a)(iii) that related to such Mortgage Loan; fourth, to accrued and unpaid interest (to the extent no Advance has been made for such amount or any such
Advance has been reimbursed) on the Mortgage Loan or related REO Property, at the Adjusted Net Mortgage Rate to the Due Date occurring in the month in which such amounts are required to be distributed; and fifth, as a recovery of principal of the
Mortgage Loan. Excess Proceeds, if any, from the liquidation of a Liquidated Mortgage Loan will be retained by the Master Servicer as additional servicing compensation pursuant to Section 3.14. 

          The Master Servicer, with the consent of the Trustee, shall have the right to purchase for its own account from the Trust Fund any Mortgage Loan which is 91 days or more delinquent at a price equal to
the Purchase Price. The Purchase Price for any Mortgage Loan purchased hereunder shall be deposited in the applicable subaccount of the Certificate Account and the Trustee, upon receipt of a certificate from the Master Servicer in the form of
Exhibit M hereto, shall release or cause to be released to the purchaser of such Mortgage Loan the related Mortgage File and shall execute and deliver such instruments of transfer or assignment prepared by the purchaser of such Mortgage Loan, in
each case without recourse, as shall be necessary to vest in the purchaser of such Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of such Mortgage Loan shall succeed to all the Trustee’s right, title and interest in
and to such Mortgage Loan and all security and documents related thereto. Such assignment shall be an assignment outright and not for security. The purchaser of such Mortgage Loan shall

72

thereupon own such Mortgage Loan, and all security and documents, free of any further obligation to the Trustee or the Certificateholders with respect thereto. 

                    SECTION 3.12    Trustee to Cooperate; Release of Mortgage Files.

          Upon the payment in full of any Mortgage Loan, or the receipt by the Master Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes, the Master
Servicer will immediately notify the Trustee by delivering, or causing to be delivered a “Request for Release” substantially in the form of Exhibit M. Upon receipt of such request, the Trustee shall or shall cause the Custodian to promptly
release the related Mortgage File to the Master Servicer, and the Trustee shall at the Master Servicer’s direction execute and deliver to the Master Servicer the request for reconveyance, deed of reconveyance or release or satisfaction of
mortgage or such instrument releasing the lien of the Mortgage in each case provided by the Master Servicer, together with the Mortgage Note with written evidence of cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the related Mortgagor. From time to time and as shall be appropriate for the servicing or foreclosure of any Mortgage Loan, including for such purpose, collection under any policy of flood
insurance, any fidelity bond or errors or omissions policy, or for the purposes of effecting a partial release of any Mortgaged Property from the lien of the Mortgage or the making of any corrections to the Mortgage Note or the Mortgage or any of
the other documents included in the Mortgage File, the Trustee shall, upon delivery to the Trustee of a Request for Release in the form of Exhibit L signed by a Servicing Officer, release the Mortgage File to the Master Servicer. Subject to the
further limitations set forth below, the Master Servicer shall cause the Mortgage File or documents so released to be returned to the Trustee or its Custodian when the need therefor by the Master Servicer no longer exists, unless the Mortgage Loan
is liquidated and the proceeds thereof are deposited in the applicable subaccount of the Certificate Account, in which case the Master Servicer shall deliver to the Trustee a Request for Release in the form of Exhibit M, signed by a Servicing
Officer. 

          If the Master Servicer at any time seeks to initiate a foreclosure proceeding in respect of any Mortgaged Property as authorized by this Agreement, the Master Servicer shall deliver or cause to be
delivered to the Trustee, for signature, as appropriate, any court pleadings, requests for trustee’s sale or other documents necessary to effectuate such foreclosure or any legal action brought to obtain judgment against the Mortgagor on the
Mortgage Note or the Mortgage or to obtain a deficiency judgment or to enforce any other remedies or rights provided by the Mortgage Note or the Mortgage or otherwise available at law or in equity. 

	          	          SECTION
        3.13    Documents
        Records and Funds in Possession of Master Servicer to be Held for the
    Trustee.

          Notwithstanding any other provisions of this Agreement, the Master Servicer shall transmit to the Trustee as required by this Agreement all documents and instruments in respect of a Mortgage Loan
coming into the possession of the Master Servicer from time to time and shall account fully to the Trustee for any funds received by the Master Servicer or which otherwise are collected by the Master Servicer as Liquidation Proceeds or Insurance
Proceeds in respect of any Mortgage Loan. All Mortgage Files and funds collected or held by, or under the control of, the Master Servicer in respect of any Mortgage Loans, whether from the collection of principal and

73

interest payments or from Liquidation Proceeds, including but not limited to, any funds on deposit in the Certificate Account, shall be held by the Master Servicer for and on behalf of the Trustee and shall be and remain the sole
and exclusive property of the Trustee, subject to the applicable provisions of this Agreement. The Master Servicer also agrees that it shall not create, incur or subject any Mortgage File or any funds that are deposited in the Certificate Account,
Distribution Account or any Escrow Account, or any funds that otherwise are or may become due or payable to the Trustee for the benefit of the Certificateholders, to any claim, lien, security interest, judgment, levy, writ of attachment or other
encumbrance, or assert by legal action or otherwise any claim or right of setoff against any Mortgage File or any funds collected on, or in connection with, a Mortgage Loan, except, however, that the Master Servicer shall be entitled to set off
against and deduct from any such funds any amounts that are properly due and payable to the Master Servicer under this Agreement. 

                    SECTION
3.14    Master Servicing Compensation.

          As compensation for its activities as Master Servicer hereunder and as a subservicer pursuant to the Servicing Rights Transfer and Subservicing Agreement, the Master Servicer shall be entitled to
retain or withdraw from the Certificate Account an amount equal to the Master Servicing Fee for each Mortgage Loan, provided that the aggregate Master Servicing Fee with respect to any Distribution Date shall be reduced (i) by the amount of any
Compensating Interest paid by the Master Servicer with respect to such Distribution Date, and (ii) with respect to the first Distribution Date, an amount equal to any amount to be deposited into the Distribution Account by the Depositor pursuant to
Section 2.1(a) and not so deposited. 

          Additional servicing compensation in the form of (i) Excess Proceeds, Prepayment Interest Excess and all income and gain net of any losses realized from Permitted Investments and (ii) prepayment
penalties, assumption fees and late payment charges in each case under the circumstances and in the manner set forth in the applicable Mortgage Note or Mortgage shall be retained by the Master Servicer to the extent not required to be deposited in
the Certificate Account pursuant to Section 3.5 hereof. The Master Servicer shall be required to pay all expenses incurred by it in connection with its master servicing activities hereunder (including payment of any premiums for hazard insurance and
any Primary Insurance Policy and maintenance of the other forms of insurance coverage required by this Agreement) and shall not be entitled to reimbursement therefor except as specifically provided in this Agreement. 

                    SECTION
3.15    Access to Certain Documentation.

          The Master Servicer shall provide to the OTS and the FDIC and to comparable regulatory authorities supervising Holders of Certificates or Certificate Owners and the examiners and supervisory agents of
the OTS, the FDIC and such other authorities, access to the documentation regarding the Mortgage Loans required by applicable regulations of the OTS and the FDIC. Such access shall be afforded without charge, but only upon reasonable and prior
written request and during normal business hours at the offices designated by the Master Servicer. Nothing in this Section shall limit the obligation of the Master Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors and the failure of the Master Servicer to provide access as provided in this Section as a result of such obligation shall not constitute a breach of this Section. 

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	 	 	SECTION 3.16    Annual Statement as to Compliance. 
	          	          	 
	 	(a)   	The Master Servicer shall deliver to the
        Depositor and the Trustee on or before March 15th of
        each year, commencing in 2008, an Officer’s Certificate stating,
        as to the signer thereof, that (i) a review of the activities of the
        Master Servicer during the preceding calendar year (or applicable portion
        thereof) and of the performance of the Master Servicer under this Agreement
        has been made under such officer’s supervision and (ii) to the best
        of such officer’s knowledge, based on such review, the Master Servicer
        has fulfilled all its obligations under this Agreement in all material
        respects throughout such year (or applicable portion thereof), or, if
        there has been a failure to fulfill any such obligation in any material
        respect, specifying each such failure known to such officer and the status
        thereof. 
	 
	 	(b)   	The Master Servicer shall cause each Subservicer
        that is a Reporting Subcontractor to deliver to the Depositor and the
        Trustee on or before March 15th of
        each year, commencing in 2008, an Officer’s Certificate stating,
        as to the signer thereof, that (i) a review of the activities of such
        Subservicer during the preceding calendar year (or applicable portion
        thereof) and of the performance of the Subservicer under the applicable
        Subservicing Agreement or primary servicing agreement, has been made
        under such officer’s supervision and (ii) to the best of such officer’s
        knowledge, based on such review, such Subservicer has fulfilled all its
        obligations under the applicable Subservicing Agreement or primary servicing
        agreement, in all material respects throughout such year (or applicable
        portion thereof), or, if there has been a failure to fulfill any such
        obligation in any material respect, specifying each such failure known
        to such officer and the nature and status thereof. 
	 
	 	 	SECTION 3.17    Errors and Omissions Insurance;
        Fidelity Bonds. 

           The Master Servicer shall for so long as it acts as master servicer under this Agreement, obtain and maintain in force (a) a policy or policies of insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and (b) a fidelity bond in respect of its officers, employees and agents. Each such policy or policies and bond shall, together, comply with the requirements from time to time of FNMA or FHLMC for persons performing
servicing for mortgage loans purchased by FNMA or FHLMC. In the event that any such policy or bond ceases to be in effect, the Master Servicer shall obtain a comparable replacement policy or bond from an insurer or issuer, meeting the requirements
set forth above as of the date of such replacement. 

ARTICLE IV 

DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER

                    SECTION 4.1     Advances.

          The Master Servicer shall determine on the Business Day prior to each Master Servicer Advance Date
whether it is required to make an Advance pursuant to the definition thereof. If the

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Master Servicer determines it is required to make an Advance, it shall, on or before the Master Servicer Advance Date, either (i) deposit into the applicable subaccount of the Certificate Account an amount equal to the Advance or
(ii) make an appropriate entry in its records relating to the applicable subaccount of the Certificate Account that any Amount Held for Future Distribution has been used by the Master Servicer in discharge of its obligation to make any such Advance.
 Any funds so applied shall be replaced by the Master Servicer by deposit in the applicable subaccount of the Certificate Account no later than the close of business on the Business Day preceding the next Master Servicer Advance Date. The Master
Servicer shall be entitled to be reimbursed from the applicable subaccount of the Certificate Account for all Advances of its own funds made pursuant to this Section as provided in Section 3.8.  The obligation to make Advances with respect to any
Mortgage Loan shall continue until the ultimate disposition of the REO Property or Mortgaged Property relating to such Mortgage Loan. As to any Distribution Date, the Master Servicer shall inform the Trustee in writing of the amount of the Advance
to be made by the Master Servicer on each Master Servicer Advance Date no later 1:30 p.m. Central time on the second Business Day immediately preceding such Distribution Date. 

          The Master Servicer shall deliver to the Trustee on the related Master Servicer Advance Date an Officer’s Certificate of a Servicing Officer indicating the amount of any proposed Advance
determined by the Master Servicer to be a Nonrecoverable Advance. 

	 	          SECTION
      4.2   Priorities
    of Distribution.
	          	          	 
	 	
(a)   	
On each Distribution Date, the Trustee shall withdraw the Available Funds for each Certificate Group from the applicable subaccount of the Distribution Account and apply such funds to distributions on the Certificates of the
related Certificate Group in the following order and priority and, in each case, to the extent of Available Funds remaining:	
	 	 	          	          	 
	 	 	 	(i) 	to the Classes of Senior Certificates of the related
      Certificate Group entitled to distributions of interest, the Accrued Certificate
      Interest on each such Class for such Distribution Date, any shortfall in
      available amounts being allocated among such Classes in proportion to the
      amount of Accrued Certificate Interest otherwise distributable thereon
      (or added to the balance thereof); provided,
      however, that on each Distribution Date through
      the applicable Accretion Termination Date, such amounts with respect to
      the Accrual Certificates will not be distributed to such Certificates under
      this priority (i) but will instead be added to the Class Certificate Balance
      thereof and distributed in the manner described below in subsections (d)
    and (e); 
	 	 	 	 	 
	 	 	 	(ii)	 to the Classes of Senior Certificates of the related
      Certificate Group entitled to distributions of interest, any Accrued Certificate
      Interest thereon remaining undistributed from previous Distribution Dates,
    to the extent of remaining 

76

	 	 	 	 	
Available Funds from the related Mortgage Pool, any shortfall in available amounts being allocated among such Classes in proportion to the amount of such Accrued Certificate Interest remaining undistributed for each such Class for
such Distribution Date; provided, however, that on each Distribution Date through the applicable Accretion Termination Date, such
amounts with respect to the Accrual Certificates will not be distributed to such Certificates under this priority (ii) but will instead be added to the Class Certificate Balance thereof, to the extent not previously added pursuant to priority first
above, and distributed in the manner described below in subsections (d) and (e);	
	          	          	          	          	 
	 	 	 	
(iii)   	
(1) to the Classes of Senior Certificates of the related Certificate Group entitled to distributions of principal, other than the Class PO Certificates, in reduction of the Class Certificate Balances thereof, to the extent of
remaining Available Funds from the related Mortgage Pool, the related Senior Optimal Principal Amount for such Distribution Date, in the order of priority set forth below in Sections 4.2(b) through (f), as applicable, until the respective Class
Certificate Balances thereof have been reduced to zero, and (2) concurrently with the Group I Senior Certificates, from the Available Funds for Pool I, to the Class PO Certificates, the Class PO Principal Distribution Amount for such Distribution
Date;	
	 
	 	 	 	
(iv)   	
to the Class PO Certificates, the Class PO Deferred Amount for such Distribution Date, until the Class Certificate Balance thereof has been reduced to zero; provided that, (1) on any Distribution Date, distributions pursuant to
this Section 4.2(a)(iv) shall not exceed the related Subordinated Optimal Principal Amount for the Mortgage Pools for such Distribution Date, (2) such distributions shall not reduce the Class Certificate Balances of the Class PO Certificates and (3)
no distribution will be made in respect of the Class PO Deferred Amount after the Cross-over Date;	
	 
	 	 	 	
(v)   	
to the Class B-1 Certificates, to the extent of remaining Available Funds for the Mortgage Pools, but subject to the prior payment of amounts described under Section 4.2(k), in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous Distribution Dates and (3) such Class’ Allocable Share for such Distribution Date;	
	 

77

	 	 	 	
(vi)   	
to the Class B-2 Certificates, to the extent of remaining Available Funds for the Mortgage Pools, but subject to the prior payment of amounts described under Section 4.2(k), in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous Distribution Dates and (3) such Class’ Allocable Share for such Distribution Date;	
	          	          	          	          	 
	 	 	 	
(vii)   	
to the Class B-3 Certificates, to the extent of remaining Available Funds for the Mortgage Pools, but subject to the prior payment of amounts described under Section 4.2(k), in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous Distribution Dates and (3) such Class’ Allocable Share for such Distribution Date;	
	 
	 	 	 	
(viii)   	
to the Class B-4 Certificates, to the extent of remaining Available Funds for the Mortgage Pools, but subject to the prior payment of amounts described under Section 4.2(k), in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous Distribution Dates and (3) such Class’ Allocable Share for such Distribution Date;	
	 
	 	 	 	
(ix)   	
to the Class B-5 Certificates, to the extent of remaining Available Funds for the Mortgage Pools, but subject to the prior payment of amounts described under Section 4.2(k), in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous Distribution Dates and (3) such Class’ Allocable Share for such Distribution Date; and	
	 
	 	 	 	
(x)   	
to the Class B-6 Certificates, to the extent of remaining Available Funds for the Mortgage Pools, but subject to the prior payment of amounts described under Section 4.2(k), in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate Interest thereon remaining undistributed from previous Distribution Dates and (3) such Class’ Allocable Share for such Distribution Date.	

78

	 	(b) 	
Amounts allocated to the Group I Senior Certificates pursuant to clause (1) of Section 4.2(a)(iii) above will be distributed sequentially, in the following order of priority:	
	          	          	          	          	          
	 	 	 	(i)	 to the Class I-A-R Certificates, until the Class Certificate
    Balance thereof has been reduced to zero; 
	 	 	 	 	 
	 	 	 	(ii)	 concurrently, to the Class I-A-3 Certificates and Class
      I-A- 4(1) Component, pro rata,
    in an amount up to the NAS Principal Distribution Amount for such Distribution Date, until the respective Class Certificate Balance and Component Balance thereof have each been reduced to zero;	
	 	 	 	 	 
	 	 	 	(iii)	 to the Class I-A-1, Class I-A-2, Class I-A-5, Class
      I-A-6, Class I-A-7, Class I-A-8, Class I-A-9 and Class I-A-13 Certificates
      and the Class I-A-4(2) Component, until the aggregate Class Certificate
      Balance and Component Balance thereof has been reduced to the Planned Balance
      as set forth in the PAC Schedule for such classes and such Distribution
    Date, in the following order of priority: 
	 	 	 	 	 
	 	 	 	 	(A)	 while the Class I-A-5 Certificates or Class
      I-A- 13(1) Component is still outstanding on such Distribution Date, to
      the Class I-A-5 and Class I-A- 6 Certificates and the Class I-A-13(1) and
    Class I- A-13(2) Components, concurrently, as follows: 
	 	 	 	 	 	 
	 	 	 	 	 	(1)	 84.881893922389324% of the remaining Senior
      Optimal Principal Amount for Pool I for such Distribution Date, concurrently,
      to the Class I-A-5 Certificates and Class I-A- 13(1) Component, pro
      rata, until the respective Class Certificate
    Balance and Component Balance thereof have each been reduced to zero; and 
	 	 	 	 	          	          	 
	 	 	 	 	 	(2)	 15.118106077610676% of the remaining Senior Optimal
      Principal Amount for Pool I for such Distribution Date, concurrently, to
      the Class I-A-6 Certificates and Class I-A- 13(2) Component, pro
      rata, until the respective Class Certificate
    Balance and Component Balance thereof have each been reduced to zero; 
	 	 	 	 	 	 	 
	 	 	 	 	(B)	 concurrently, to the Class I-A-6 Certificates and the
      Class I-A-13(2) Component, pro rata,
    until the 

79

	 	 	 	 	 	respective Class Certificate Balance and Component Balance
    thereof have each been reduced to zero; 
	          	          	          	          	          	 
	 	 	 	 	
(C)   	
to the Class I-A-7 Certificates, until the Class Certificate Balance thereof has been reduced to zero;	
	 
	 	 	 	 	
(D)   	
concurrently, to the Class I-A-1 and Class I-A-2 Certificates, pro rata, until the respective Class Certificate Balances thereof have each been reduced to
zero;	
	 
	 	 	 	 	
(E)   	
concurrently, to the Class I-A-8 Certificates and Class I-A-4(2) Component, pro rata, until the respective Class Certificate Balance and Component Balance thereof have
each been reduced to zero; and	
	 
	 	 	 	 	
(F)   	
to the Class I-A-9 Certificates, until the Class Certificate Balance thereof has been reduced to zero;	
	 
	 	 	 	
(iv)   	
to the Class I-A-11, Class I-A-15 and Class I-A-16 Certificates, until the aggregate Class Certificate Balance thereof has been reduced to the Targeted Balance as set forth in the TAC Schedule for such classes and such
Distribution Date, in the following order of priority:	
	 
	 	 	 	 	
(A)   	
concurrently, to the Class I-A-15 and Class I-A-16 Certificates, pro rata, until the respective Class Certificate Balances thereof have each been reduced to zero;
and	
	 
	 	 	 	 	
(B)   	
to the Class I-A-11 Certificates, until the Class Certificate Balance thereof has been reduced to zero;	
	 
	 	 	 	
(v)   	
to the Class I-A-12 Certificates, until the Class Certificate Balance thereof has been reduced to zero;	
	 
	 	 	 	
(vi)   	
to the Class I-A-11, Class I-A-15 and Class I-A-16 Certificates, as described in clauses (iv)(A) and (B) above, without regard to the Targeted Balance as set forth in the TAC Schedule for such classes and such Distribution Date until the respective Class Certificate Balances thereof have each been reduced to zero; and	

80

	 	 	 	
(vii)   	
to the Class I-A-1, Class I-A-2, Class I-A-5, Class I-A-6, Class I-A-7, Class I-A-8, Class I-A-9 and Class I-A-13 Certificates and the Class I-A-4(2) Component, as described in clauses (iii)(A) through (F) above, without regard to
the Planned Balance as set forth in the PAC Schedule for such classes and such Distribution Date until the respective Class Certificate Balances and Component Balance thereof have each been reduced to zero; and	
	          	          	          	          	 
	 	 	 	
(viii)   	
concurrently, to the Class I-A-3 Certificates and Class I-A- 4(1) Component, pro rata, without regard to the NAS Principal Distribution Amount for such Distribution Date, until the respective Class Certificate Balance and Component Balance thereof have each been reduced to zero.	
	 
	 	(c)   	
Amounts allocated to the Senior Certificates corresponding to Pool II pursuant to clause (1) of Section 4.2(a)(iii) will be distributed concurrently to the Class II-A-1 and Class II-A-2 Certificates, pro rata, until the respective Class Certificate Balances thereof have each been reduced to zero.	
	 	 	 	 	 
	 	(d)   	
    On each Distribution Date prior to the Accretion Termination Date for the Class I- A-11 Certificates, an amount equal to the Accrual Amount related to the Class I- A-11 Certificates on such date will be distributed (prior to
giving effect to the distributions above), in the following order of priority:	
	 
	 	 	 	
(i)   	
concurrently, to the Class I-A-15 and Class I-A-16 Certificates, pro rata, until the respective Class Certificate Balances thereof have each been reduced to zero;
and;	
	 
	 	 	 	
(ii)   	
to the Class I-A-11 Certificates, until the Class Certificate Balance thereof has been reduced to zero;	
	 
	 	 	 	 
	 	(e)  	
 	
On each Distribution Date prior to the Accretion Termination Date for the Class I- A-12 Certificates, an amount equal to the Accrual Amount related to the Class I- A-12 Certificates on such date will be distributed (prior to
giving effect to the distributions above), sequentially, as follows:	
	 
	 	 	 	
(i)   	
to the Class I-A-11, Class I-A-15 and Class I-A-16 Certificates, until the aggregate Class Certificate Balance thereof has been reduced to the Targeted Balance for such Distribution Date, as set forth in the TAC Schedule, in the
following order of priority;	
	 
	 	 	 	 	
(A) 	to the Class I-A-15 and Class I-A-16 Certificates, pro
        rata, until the respective Class Certificate
    Balances thereof have each been reduced to zero; and 
	 

81

	 	 	 	 	(B)	 to the Class I-A-11 Certificates, until the Class Certificate
    Balance thereof has been reduced to zero; and 
	          	          	          	          	          	 
	          	          	          	(ii)    	 to the Class I-A-12 Certificates, until the Class Certificate
    Balance thereof has been reduced to zero. 
	 	 	 	 
	 	
(f)   	
On each Distribution Date on or after the Cross-over Date, distributions of principal on the outstanding Senior Certificates relating to Pool I (other than the Notional Amount Certificates and the Class PO Certificates) will be
made, pro rata, among all such Senior Certificates, regardless of the allocation, or sequential nature, of principal payments described above.	
	 
	 	
(g)   	
On each Distribution Date, the Trustee shall distribute to the Holders of the Class I-A-R Certificates representing the RL Interest, RM Interest and RU Interest, any Available Funds remaining in the related REMIC created hereunder
for such Distribution Date after application of all amounts described in clauses (a) through (f) and (h) of this Section 4.2. Any distributions pursuant to this subsection (g) shall not reduce the Class Certificate Balance of the Class I-A-R Certificates.	
	 
	 	
(h)   	
On and after the Cross-Over Date, the amount distributable to the Senior Certificates of the related Certificate Group pursuant to Section 4.2(a)(iii) for the related Distribution Date shall be allocated among the related Classes
of Senior Certificates(other than the Principal Only Certificates), pro rata, on the basis of their respective Class Certificate Balances immediately prior to such Distribution Date,
regardless of the priorities and amounts set forth in Sections 4.2(a) through (f) above.	
	 
	 	
(i)   	
If on any Distribution Date (i) the Class Certificate Balance of any Class of Subordinated Certificates (other than the Class of Subordinated Certificates with the highest priority of distribution) for which the related Class
Prepayment Distribution Trigger was satisfied on such Distribution Date is reduced to zero and (ii) amounts distributable to such Class or Classes of Subordinated Certificates pursuant to clauses (2), (3) and (5) of the applicable Subordinated
Optimal Principal Amount remain undistributed on such Distribution Date after all amounts otherwise distributable on such date pursuant to clauses (v) through (x) of Section 4.2(a) have been distributed, such amounts, to the extent of such Class’ remaining Allocable Share, shall be distributed on such Distribution Date to the remaining Classes of Subordinated Certificates on a pro rata
basis, subject to the priority of payments described in clauses (v) through (x) of Section 4.2(a).	
	 
	 	
(j)   	
In the event that in any calendar month the Master Servicer recovers an amount, net of reimbursable expenses (an “Unanticipated Recovery”), in respect of principal of a Mortgage Loan which had previously been allocated
as a Realized Loss to any Class of Certificates pursuant to Section 4.4, on the Distribution Date in the next succeeding calendar month, the Trustee shall withdraw the Unanticipated Recovery from the Distribution Account and sequentially
increase,	
	 

82

	          	          	in order of payment priority, the Class Certificate
        Balance of each Class of Certificates to which such Realized Losses were
        previously allocated by the amount of such Unanticipated Recovery, but
        not to exceed the amount of Realized Losses previously allocated to such
        Class pursuant to Section 4.4, and shall distribute the amount of such
        Unanticipated Recovery in the order of payment priority described in
        Section 4.2(a) of this Agreement. Holders of any Class of Certificates
        for which the Class Certificate Balance has been increased by the amount
        of any Unanticipated Recovery will not be entitled to any payment in
        respect of Accrued Certificate Interest on the amount of any such increase
        for any Interest Accrual Period preceding the Distribution Date on which
        such increase occurs. When the Class Certificate Balance of a Class of
        Certificates has been reduced to zero, the Holders of such Class shall
        not be entitled to any share of an Unanticipated Recovery, and such Unanticipated
        Recovery shall be allocated among all outstanding Classes of Certificates
        entitled thereto in accordance with the preceding sentence, subject to
        the remainder of this subsection (j). In the event that (i) any Unanticipated
        Recovery remains undistributed in accordance with the preceding sentence
        or (ii) the amount of an Unanticipated Recovery exceeds the amount of
        the Realized Loss previously allocated to any outstanding Classes with
        respect to the related Mortgage Loan, on the applicable Distribution
        Date the Trustee shall distribute such Unanticipated Recoveries in accordance
    with the priorities set forth in Section 4.2(a)(iii) .
	 	 	 
	 	          For
        purposes of the preceding paragraph, the share of an Unanticipated Recovery
        allocable to any Class of Certificates with respect to a Mortgage Loan
        shall be (i) with respect to the Principal Only Certificates, based on
        the Class PO Percentage of the principal portion of the Realized Loss
        previously allocated thereto with respect to such Mortgage Loan (or all
        Mortgage Loans for purposes of the next to last sentence of the preceding
        paragraph), and (ii) with respect to any other Class of Certificates,
        based on its pro rata share
        (in proportion to the Class Certificate Balances thereof with respect
        to such Distribution Date) of the Non-PO Percentage of the principal
        portion of any such Realized Loss previously allocated with respect to
        such Mortgage Loan (or Loans); provided however, that (i) the share of
        an Unanticipated Recovery allocable to a Principal Only Certificate with
        respect to any Mortgage Loan (or Loans) shall be reduced by the Class
        PO Percentage of the aggregate amount previously distributed to such
        Class in respect of such Mortgage Loan (or Loans) and (ii) the amount
        by which the distributions to the Principal Only Certificates have been
        so reduced shall be distributed to the Classes of Certificates described
        in clause (ii) of the preceding paragraph in the same proportion as described
        in such clause (ii). For purposes of the preceding sentence, any Class
        PO Deferred Amount distributable to a Principal Only Certificate on previous
        Distribution Dates shall be deemed to have been allocated in respect
        of the Mortgage Loans as to which the Class PO Percentage of the principal
        portion of Realized Losses has previously been allocated to such Class
        on a pro rata basis
    (based on the amount of Realized Losses so allocated). 
	 	 
	 	
(k)   	
On any Distribution Date on which any Certificate Group constitutes an Undercollateralized Group, all amounts otherwise distributable as principal on the Subordinated Certificates, in reverse order of priority (or, following the
Cross-	
	 

83

	          	          	over Date, such other amounts described in the immediately
        following sentence), will be distributed as principal to the Senior Certificates
        of such Undercollateralized Group (other than the Principal Only Certificates)
        in accordance with the priorities set forth in Section 4.2(a)(iii), until
        the total Class Certificate Balance of such Senior Certificates equals
        the Pool Principal Balance of the related Mortgage Pool (such distribution,
        an “Undercollateralization Distribution”). If the Senior Certificates
        of a Certificate Group (other than the Principal Only Certificates) constitute
        an Undercollateralized Group on any Distribution Date following the Cross-over
        Date, Undercollateralization Distributions will be made from the excess
        of the Available Funds for the other Mortgage Pool remaining after all
        required amounts for that Distribution Date have been distributed to
        the Senior Certificates of the other Certificate Group (other than the
        Principal Only Certificates). In addition, the amount of any unpaid Accrued
        Certificate Interest with respect to an Undercollateralized Group on
        any Distribution Date (including any Accrued Certificate Interest for
        the related Distribution Date) will be distributed to the Senior Certificates
        of the Undercollateralized Group (other than the Principal Only Certificates)
        prior to the payment of any Undercollateralization Distributions from
        amounts otherwise distributable as principal on the Subordinated Certificates,
        in reverse order of priority (or, following the Cross-over Date, as provided
        in the preceding sentence). Except as provided otherwise in this Section
        4.2(k), no distribution of principal will be made to any Class of Subordinated
    Certificates until each Undercollateralized Group is no longer undercollateralized.
	 	 	 
	 	          In
        addition, if on any Distribution Date the total Class Certificate Balance
        of the Senior Certificates of a Certificate Group (other than the Principal
        Only Certificates) (after giving effect to distributions to be made on
        that Distribution Date) has been reduced to zero, all amounts otherwise
        distributable as prepayments of principal to the Subordinated Certificates,
        in reverse order of priority, will instead be distributed as principal
        to the Senior Certificates of the other Certificate Group (other than
        the Principal Only Certificates) unless (a) the weighted average of the
        Subordinated Percentages for the Mortgage Pools, weighted on the basis
        of the Stated Principal Balance of the Mortgage Loans in the related
        Mortgage Pool (other than the Principal Only Certificates), is at least
        two times the weighted average of the initial Subordinate Percentage
        for the Mortgage Pools (calculated on such basis), (b) the aggregate
        Stated Principal Balance of all the Mortgage Loans in the Mortgage Pools
        delinquent 60 days or more (including for this purpose any Mortgage Loans
        in foreclosure or subject to bankruptcy proceedings and Mortgage Loans
        with respect to which the related Mortgaged Property has been acquired
        by the Trust Fund), averaged over the preceding six month period, as
        a percentage of the then current aggregate Class Certificate Balance
        of the Subordinated Certificates, is less than 50%, and (c) the cumulative
        Realized Losses in both Mortgage Pools do not exceed (i) 20% of the Original
        Subordinated Principal Balance if such Distribution Date occurs between
        and including July 2007 and June 2010, and 30% of the Original Subordinated
        Principal Balance if such Distribution Date occurs on or after July 2010.
        Except as provided otherwise in this Section 4.2(k), all distributions
        described above will be made in accordance with the priorities set forth
    in Section 4.2(a)(iii) . 

          84

 

	 	          SECTION
      4.3   Method
    of Distribution. 
	          	          	 
	 	
(a)   	
All distributions with respect to each Class of Certificates on each Distribution Date shall be made pro rata among the outstanding Certificates of such Class, based on
the Percentage Interest in such Class represented by each Certificate. Payments to the Certificateholders on each Distribution Date will be made by the Trustee to the Certificateholders of record on the related Record Date by check or money order mailed to a Certificateholder at the address appearing
in the Certificate Register, or upon written request by such Certificateholder to the Trustee made not later than the applicable Record Date, by wire transfer to a U.S. depository institution acceptable to the Trustee, or by such other means of
payment as such Certificateholder and the Trustee shall agree.	
	 
	 	
(b)   	
Each distribution with respect to a Book-Entry Certificate shall be paid to the Depository, which shall credit the amount of such distribution to the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such distribution to the Certificate Owners that it represents and to each financial intermediary for which it acts as agent. Each such financial intermediary shall be
responsible for disbursing funds to the Certificate Owners that it represents. All such credits and disbursements with respect to a Book-Entry Certificate are to be made by the Depository and the Depository Participants in accordance with the
provisions of the applicable Certificates. Neither the Trustee nor the Master Servicer shall have any responsibility therefor except as otherwise provided by applicable law.	
	 
	 	
(c)   	
The Trustee shall withhold or cause to be withheld such amounts as it reasonably determines are required by the Code (giving full effect to any exemptions from withholding and related certifications required to be furnished by
Certificateholders or Certificate Owners and any reductions to withholding by virtue of any bilateral tax treaties and any applicable certification required to be furnished by Certificateholders or Certificate Owners with respect thereto) from
distributions to be made to Non-U.S. Persons. If the Trustee reasonably determines that a more accurate determination of the amount required to be withheld for a distribution can be made within a reasonable period after the scheduled date for such
distribution, it may hold such distribution in trust for a Holder of a Residual Certificate until such determination can be made. For the purposes of this paragraph, a “Non-U.S. Person” is (i) an individual other than a citizen or resident
of the United States, (ii) a partnership, corporation or entity treated as a partnership or corporation for U.S. federal income tax purposes not formed under the laws of the United States, any state thereof or the District of Columbia (unless, in
the case of a partnership, Treasury regulations provide otherwise), (iii) any estate, the income of which is not subject to U.S. federal income taxation, regardless of source, and (iv) any trust, other than a trust that a court within the United
States is able to exercise primary supervision over the administration of the trust and one or more U.S. Persons have the authority to control all substantial decisions of the trust.	

85

	 	 	
SECTION 4.4    Allocation of Losses.	
	          	          	 
	 	
(a)   	
On or prior to each Determination Date, the Master Servicer shall determine the amount of any Realized Loss in respect of each Mortgage Loan that occurred during the immediately preceding calendar month.	
	 
	 	
(b)   	
The principal portion of each Realized Loss with respect to a Mortgage Pool shall be allocated as follows:	
	 
	 	 	 	(i)	 with respect to any Distribution Date, the Class PO
      Percentage of the principal portion of any such Realized Loss on a Discount
      Mortgage Loan in such Mortgage Pool shall be allocated to the Class PO
      Certificates until the Class Certificate Balance thereof has been reduced
    to zero; and 
	 	 	          	          	 
	 	 	 	(ii)	 prior to the Cross-over Date, the Non-PO Percentage
      of the principal portion of any such Realized Loss (except Excess Losses)
      (or the Class PO Percentage thereof, in the case of the Class PO Certificates)
    shall be allocated in the following order of priority: 
	 	 	 
	 	 	first, to
        the Class B-6 Certificates until the Class Certificate Balance thereof
        has been reduced to zero; 

     second, to
        the Class B-5 Certificates until the Class Certificate Balance thereof
        has been reduced to zero; 

     third, to
        the Class B-4 Certificates until the Class Certificate Balance thereof
        has been reduced to zero; 

     fourth, to
        the Class B-3 Certificates until the Class Certificate Balance thereof
        has been reduced to zero; 

     fifth,
        to the Class B-2 Certificates until the Class Certificate Balance thereof
        has been reduced to zero; 

     sixth, to
        the Class B-1 Certificates until the Class Certificate Balance thereof
        has been reduced to zero; and 

     seventh,
        to the Classes of Senior Certificates of the related Certificate Group
        (other than the Class PO Certificates), pro
        rata, in accordance with their Class Certificate
    Balances; 

	 
	 	 	 	(iii) 	from and after the Cross-over Date, the Non-PO
    Percentage of the principal portion of any Realized Loss for Pool I will
    be allocated among the outstanding Classes of Senior Certificates of the
    related Certificate Group entitled to principal distributions (other than
    (i) in respect of Realized Losses not 

          86

 

	 	 	 	 	constituting
      Excess Loses, the Super Senior Certificates, as long as the related Senior
      Mezzanine Certificates are outstanding, (ii) the Notional Amount Certificates,
      and (ii) the Class PO Certificates), pro rata,
    based upon their Class Certificate Balances within that Certificate Group. 
	          	          	          	          	 
	 	
(c)   	
From and after the Cross-over Date, the Non-PO Percentage of the principal portion of any Realized Loss shall be allocated pro rata to each Class of Senior Certificates
(other than (i) in respect of Realized Losses not constituting Excess Losses, the Class I-A-1 Certificates, as long as the Class I-A-2 Certificates are outstanding, (ii) in respect of Realized Losses not constituting Excess Losses, the Class I-A-3
Certificates, as long as the Class I-A-4(1) Component is outstanding,  (iii) in respect of Realized Losses not constituting Excess Losses, the Class I-A-8 and Class I-A-16 Certificates, as long as the Class I-A-4(2) Component is outstanding, (iv) in respect of Realized Losses not constituting Excess Losses, the Class I-A-5 Certificates, as long as the Class I-A-13(1) Component is
outstanding, (v) in respect of Realized Losses not constituting Excess Losses, the Class I-A-6 Certificates, as long as the Class I-A-13(2) Component is outstanding, (vi) in respect of Realized Losses not constituting Excess Losses, the Class I-A-16 Certificates, as long as the Class I-A-15 Certificates are outstanding,
(vii) in respect of Realized Losses not constituting Excess Losses, the Class II-A-1 Certificates, as long as the Class II-A-2 Certificates are outstanding, (viii) the Class I-A-14 Certificates, (ix) the Class I-A-17 Certificates and (x) the Class
PO Certificates), pro rata, based upon their Class Certificate Balances.	
	 
	 	
(d)   	
From and after the Cross-over Date, (i) the principal portion of Realized Losses (other than Excess Losses) allocable to the Class I-A-1 Certificates will instead first be allocated to the Class I-A-2 Certificates (in addition to
other Realized Losses allocable to the Class I-A-2 Certificates), and not to the Class I-A-1 Certificates until the Class Certificate Balance of the Class I-A-2 Certificates has been reduced to zero; (ii) the principal portion of Realized Losses
(other than Excess Losses) allocable to the Class I-A-3 Certificates will instead first be allocated to the Class I-A-4(1) Component (in addition to other Realized Losses allocable to the Class I-A-4(1) Component), and not to the Class I-A-3
Certificates until the Component Balance of the Class I-A-4(1) has been reduced to zero; (iii) up to $708,000 of the principal portion of any Realized Loss (other than Excess Losses) allocable to the Class I-A-8 Certificates, and up to
$3,053,000 of the principal portion of any Realized Losses (other than Excess Losses) allocable to the Class I-A-16 Certificates will instead first be allocated pro rata (based on the
respective Class Certificate Balances of the Class I-A-8 and Class I-A-16 Certificates) to the Class I-A-4(2) Component (in addition to other Realized Losses allocable to the Class I-A-4(2) Component), in each case until the Component Balance of the
Class I-A-4(2) Component has been reduced to zero, with the amount of losses otherwise so allocated to the Class I-A-4(2) Component with respect to the Class I-A-16 Certificates further allocated, pro rata
(based upon the respective Component Balance of the Class I-A-4(2) Component and the Class Certificate Balance of the Class I-A-15 Certificates), to	

87

	 	 	
both (I) the Class I-A-4(2) Component (subject to the same $3,053,000 limitation) until the Component Balance of the Class I-A-4(2) Component has been reduced to zero, and (II) the Class I-A-15 Certificates (in addition to
other Realized Losses allocable to the Class I-A-15 Certificates), until the Class Certificate Balance of the Class I-A-15 Certificates has been reduced to zero; (iv) the principal portion of Realized Losses (other than Excess Losses) allocable to
the Class I-A-5 Certificates will instead first be allocated to the Class I-A-13(1) Component (in addition to other Realized Losses allocable to the Class I-A-13(1) Component), and not to the Class I-A-5 Certificates until the Component Balance of
the Class I-A-13(1) Component has been reduced to zero; (v) the principal portion of Realized Losses (other than Excess Losses) allocable to the Class I-A-6 Certificates will instead first be allocated to the Class I-A-13(2) Component (in addition
to other Realized Losses allocable to the Class I-A-13(2) Component), and not to the Class I-A-6 Certificates until the Component Balance of the Class I-A-13(2) Component has been reduced to zero; and (vi) the principal portion of Realized Losses
(other than Excess Losses) allocable to the Class II-A-1 Certificates will instead first be allocated to the Class II-A-2 Certificates (in addition to other Realized Losses allocable to the Class II-A-2 Certificates), and not to the Class II-A-1
Certificates until the Class Certificate Balance of the Class II-A-2 Certificates has been reduced to zero.	
	          	          	 
	 	
(e)   	
With respect to any Distribution Date, the Non-PO Percentage of the principal portion of any Excess Loss with respect to Pool I (other than Excess Bankruptcy Losses attributable to Debt Service Reductions) shall be allocated
pro rata to each Class of Certificates (other than the Class PO Certificates) of the related Certificate Group based on their respective Class Certificate Balances (in the case of the Senior
Certificates) or Apportioned Principal Balances (in the case of the Subordinated Certificates).	
	 
	 	
(f)   	
Any Realized Losses allocated to a Class of Certificates pursuant to Section 4.4(b) through (e) shall be allocated among the Certificates of such Class in proportion to their respective Class Certificate Balances. Any allocation
of Realized Losses pursuant to this paragraph (f) shall be accomplished by reducing the Class Certificate Balances of the related Certificates on the related Distribution Date in accordance with Section 4.4(g).	
	 
	 	
(g)   	
Realized Losses allocated in accordance with this Section 4.4 shall be allocated on the Distribution Date in the month following the month in which such loss was incurred and in the case of the principal portion thereof, after
giving effect to the distributions made on such Distribution Date. The aggregate amount of Realized Losses to be allocated to the Principal Only Certificates on such Distribution Date will be taken into account in determining distributions in
respect of any Class PO Deferred Amount for such Distribution Date.	
	 
	 	
(h)   	
On each Distribution Date, the Master Servicer shall determine the Subordinated Certificate Writedown Amount, if any. Any such Subordinated Certificate Writedown Amount shall effect, without duplication of any other provision in
this	
	 

88

	 	 	
Section 4.4 that provides for a reduction in the Class Certificate Balance of the Subordinated Certificates, a corresponding reduction in the Class Certificate Balance of the Subordinated Certificates, which reduction shall occur
on such Distribution Date after giving effect to distributions made on such Distribution Date.	
	          	          	 
	 	
(i)   	
Notwithstanding the foregoing, no such allocation of any Realized Loss shall be made on a Distribution Date to a Class of Certificates to the extent that such allocation would result in the reduction of the aggregate Class
Certificate Balances of all the Senior Certificates of a related Certificate Group as of such Distribution Date plus the Apportioned Principal Balances of the Subordinated Certificates of such Certificate Group as of such Distribution Date, after
giving effect to all distributions and prior allocations of Realized Losses on such date, to an amount less than the aggregate Stated Principal Balance of the Mortgage Loans in the related Mortgage Pool as of the first day of the month of such
Distribution Date, less any Deficient Valuations occurring on or prior to the Bankruptcy Coverage Termination Date (such limitation, the “Loss Allocation Limitation”).	
	 
	 	
(j)   	
On each Distribution Date on which a Class of Exchangeable Certificates shall be entitled to receive distributions, such Class shall be allocated a proportionate share of the Realized Losses allocable to the Classes of
Exchangeable REMIC	
	 
	 	 	
Certificates in the related REMIC Combination.	
	 

                    SECTION 4.5     Reserved. 

                    SECTION 4.6     Monthly Statements to Certificateholders. 

	 	          (a)       Not
        later than each Distribution Date, the Trustee shall prepare and cause
        to be forwarded by first class mail to each Certificateholder, the Master
        Servicer, the Depositor and each Rating Agency a statement, that complies
        with Item 1121 of Regulation AB, setting forth, among other things, with
        respect to the related distribution and/or may post such statement on
    its website located at www.bnyinvestorreporting.com: 
	          	          	 
	 	 	          (i)        the
          amount thereof allocable to principal, separately identifying the aggregate
          amount of any Principal Prepayments and Liquidation Proceeds included
          therein; 

                (ii)      the
          amount thereof allocable to interest, the amount of any Compensating
          Interest included in such distribution and any remaining Net Interest
          Shortfalls after giving effect to such distribution; 

                (iii)      if
          the distribution to the Holders of such Class of Certificates is less
          than the full amount that would be distributable to such Holders if
          there were sufficient funds available therefor, the amount of the shortfall
          and the allocation thereof as between principal and interest; 

                (iv)      the
          Class Certificate Balance of each Class of Certificates after giving
          effect to the distribution of principal on such Distribution Date; 

    

           89

	          	          	          (v)      the
          Pool Principal Balance for each Mortgage Pool for the following Distribution
          Date; 

                 (vi)      the
          Senior Percentage and Subordinated Percentage for each Certificate
          Group for the following Distribution Date; 

                 (vii)      the
          amount of the Master Servicing Fees paid to or retained by the Master
          Servicer with respect to such Distribution Date; 

                 (viii)     the
          Pass-Through Rate for each such Class of Certificates with respect
          to such Distribution Date; 

                 (ix)       the
          amount of Advances for each Mortgage Pool included in the distribution
          on such Distribution Date and the aggregate amount of Advances for
          each Mortgage Pool outstanding as of the close of business on such
          Distribution Date; 

                 (x)        the
          number and aggregate principal amounts of Mortgage Loans (A) delinquent
          (exclusive of Mortgage Loans in foreclosure) (1) 1 to 30 days (2) 31
          to 60 days (3) 61 to 90 days and (4) 91 or more days and (B) in foreclosure
          and delinquent (1) 1 to 30 days (2) 31 to 60 days (3) 61 to 90 days
          and (4) 91 or more days, as of the close of business on the last day
          of the calendar month preceding such Distribution Date; 

                 (xi)       with
          respect to any Mortgage Loan in a Mortgage Pool that became an REO
          Property during the preceding calendar month, the loan number and Stated
          Principal Balance of such Mortgage Loan as of the close of business
          on the Determination Date preceding such Distribution Date and the
          date of acquisition thereof; 

                 (xii)       the
          total number and principal balance of any REO Properties (and market
          value, if available) in each Mortgage Pool as of the close of business
          on the Determination Date preceding such Distribution Date; 

                 (xiii)      the
          Senior Prepayment Percentage for each Certificate Group for the following
          Distribution Date; 

                 (xiv)      the
          aggregate amount of Realized Losses incurred in respect of each Mortgage
          Pool during the preceding calendar month; 

                 (xv)      the
          cumulative amount of Realized Losses applied in reduction of the principal
          balance of each Class of Certificates since the Closing Date; 

                 (xvi)      the
          Special Hazard Loss Coverage Amount, the Fraud Loss Coverage Amount
          and the Bankruptcy Loss Coverage Amount, in each case as of the related
          Determination Date;

    
	 	 	 

           90

	          	          	          (xvii)      with
          respect to the second Distribution Date, the number and aggregate balance
          of any Delay Delivery Mortgage Loans not delivered within thirty days
          after the Closing Date; and

                 (xviii)      whether
          any exchanges of Exchangeable Certificates or Exchangeable REMIC Certificates
          have taken place since the preceding Distribution Date, and, if applicable,
          the Class designations, Class Certificate Balances, Notional Amounts,
          Pass-Through Rates, and any interest or principal paid, including any
          shortfalls allocated to any Classes of Exchangeable Certificates or
          Exchangeable REMIC Certificates that were received by the Certificateholder
          as a result of such exchange. 

    

          (b)      The
    Trustee’s responsibility for disbursing the above information to the
    Certificateholders is limited to the availability, timeliness and accuracy
of the information provided by the Master Servicer. 

          (c)      On or before the fifth Business Day following the end of each Prepayment Period (but in no event later than the third Business Day prior to
the related Distribution Date), the Master Servicer shall deliver to the Trustee (which delivery may be by electronic data transmission) a report in substantially the form set forth as Schedule III hereto. 

          (d)      Within a reasonable period of time after the end of each calendar year, the Trustee shall cause to be furnished to each Person who at any
time during the calendar year was a Certificateholder, a statement containing the information set forth in clauses (a)(i), (a)(ii) and (a)(vii) of this Section 4.6 aggregated for such calendar year or applicable portion thereof during which such
Person was a Certificateholder. Such obligation of the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Trustee pursuant to any requirements of the Code as from time to
time in effect. 

                    SECTION 4.7     Reserve Fund.

	 	
(a)   	
On the Closing Date, the Trustee shall (1) establish and maintain in its name, in trust for the benefit of the holders of the Class I-A-16 Certificates, the Reserve Fund, and (ii) the Depositor will deposit or cause to be
deposited $1,000 in the Reserve Fund. The Reserve Fund shall be an Eligible Account, and funds on deposit therein shall be held separate and apart from, and shall not be commingled with, any other moneys, including without limitation other
moneys of the Trustee held pursuant to this Agreement. The Corridor Residual Owner will own the residual interest in the Reserve Fund. The Reserve Fund shall be an asset of the Separate Interest Trust.	
	          	          	 
	 	
(b)   	
On each Distribution Date prior to the Corridor Contract Termination Date, the Trustee will deposit any amounts received under the Corridor Contract into the Reserve Fund. Amounts on deposit, if any, in the Reserve Fund shall be
distributed in the following order of priority:	
	 

91

	          	          	          	 
	          	          	(i)   	on any Distribution Date for which a Basis Risk Shortfall
      exists in respect of the Class I-A-16 Certificates, the Trustee shall withdraw
      from the Reserve Fund an amount equal to the lesser of (i) the Yield Supplement
      Amount for such Distribution Date and (ii) the remaining balance in the
      Reserve Fund on such Distribution Date, and distribute such amount to the
    Holders of the Class I-A-16 Certificates; 
	 
	 	 	(ii) 	
on any Distribution Date for which an Unpaid Basis Risk Shortfall
exists on the Class I-A-16 Certificates, the Trustee shall withdraw from the
Reserve Fund an amount equal to the lesser of (i) the amount of such Unpaid Basis
Risk Shortfall for such Distribution Date and (ii) the remaining balance in the
Reserve Fund on such Distribution Date, and distribute such amount to the Holders
of the Class I-A-16 Certificates; and	
	 
	 	 	(iii)	
 on any Distribution Date for which a Carryover Unpaid Basis
Risk Shortfall exists on the Class I-A-16 Certificates, the Trustee shall withdraw
from the Reserve Fund an amount equal to the lesser of (i) the amount of such
Carryover Unpaid Basis Risk Shortfall with interest thereon at the applicable
Pass-Through Rate (calculated without regard to the maximum Pass-Through Rate
limitation) for such Distribution Date and (ii) the remaining balance in the
Reserve Fund on such Distribution Date, and distribute such amount to the Corridor
Residual Owner.	
	 
	 	
(c)   	
Any amounts remaining on deposit in the Reserve Fund after the Trustee has made the foregoing distributions shall remain in the Reserve Fund to be used as necessary to pay the amounts described in clauses (i) through (iii) of
Section 4.7(b) above. On the Distribution Date immediately following the date on which the Class Certificate Balance of the Class I-A-16 Certificates is reduced to zero, the Trustee shall distribute any amounts remaining in the Reserve Fund to the
Corridor Residual Owner and terminate the Reserve Fund.	
	 
	 	
(d)   	
If the Corridor Contract is terminated early and the Corridor Contract Counterparty owes a termination payment thereunder, the Trustee shall allocate the amount of any such termination payment between the Reserve Fund and the
Corridor Residual Owner, as follows, (A) with respect to the Reserve Fund, an amount equal to the product of (i) a fraction, the numerator of which is the lesser of (x) the Corridor Contract Notional Amount for the first Distribution Date on or
after the early termination and (y) the Class Certificate Balance of the Class I-A-16 Certificates immediately prior to the first Distribution Date on or after the early termination, and the denominator of which is the Corridor Contract Notional Amount for the first Distribution Date on or after the early termination and (ii) the termination payment amount, and (B) with respect to the
Corridor Reserve Owner, an amount equal to any excess of the termination payment amount over the amounts payable pursuant to clause (A) above, if any. The Trustee shall apply the portion of any termination payment that is allocated to the Reserve
Fund on future Distribution Dates to pay any Yield Supplement Amounts on the Class I-A-16 Certificates, until the Corridor Contract Termination Date.	

92

	          	
(e)   	
Funds in the Reserve Fund shall be invested in Permitted Investments. Any earnings on amounts in the Reserve Fund shall be for the benefit of the Corridor Residual Owner. The Corridor Residual Owner shall own the Reserve Fund for
federal income tax purposes and the Corridor Residual Owner shall direct the Trustee, in writing, as to investment of amounts on deposit therein. The Corridor Residual Owner shall be liable for any losses incurred on such investments. In the absence
of written instructions from the Corridor Residual Owner as to investment of funds on deposit in the Reserve Fund, such funds shall be held uninvested.	
	 	          	 
	 	 	
SECTION 4.8    Separate Interest Trust.	
	 
	 	
(a)   	
The Depositor hereby creates a trust, separate from the Trust, for the benefit of the holders of the Class I-A-16 (such trust is referred to herein as the “Separate Interest Trust”) and hereby transfers, assigns and
conveys the sum of $1.00 into the Separate Interest Trust. The Corridor Contract and the Reserve Fund will also be assets of the Separate Interest Trust. The Trustee shall be the trustee of the Separate Interest Trust and shall have no
responsibility for the contents, adequacy or sufficiency of the Corridor Contract, including, without limitation, the representations and warranties of the parties contained therein. The Corridor Residual Owner will own the residual interest in the
Separate Interest Trust. The Separate Interest Trust shall not be an asset of the Trust Fund or any REMIC established hereby.	
	 
	 	
(b)   	
In addition to the deposits to be made on each Distribution Date pursuant to Section 4.7(b), the Trustee shall deposit into the Reserve Fund any and all amounts received from time to time from the Corridor Contract Counterparty in
respect of the Corridor Contract.	
	 
	 	
(c)   	
The Trustee will treat the Separate Interest Trust for Federal tax purposes as a grantor trust with the Corridor Residual Owner as the sole beneficiary and will apply for a separate Federal tax identification number for the
Separate Interest Trust.	
	 
	 	
(d)   	
Upon the termination of the Reserve Fund, as provided in Section 4.7(c), the Trustee shall terminate the Separate Interest Trust. Upon termination of the Reserve Fund and the Separate Interest Trust, any amounts remaining in the
Reserve Fund and Separate Interest Trust after payment of the amounts, if any, owed to the holders of the Class I-A-16 Certificates, shall be distributed to the Corridor Residual Owner.	
	 
	 	 	
SECTION 4.9    Determination of Pass-Through Rates for LIBOR Certificates.	
	 
	 	
(a)   	
On each LIBOR Determination Date so long as any LIBOR Certificates are outstanding, the Trustee will determine LIBOR on the basis of the British Bankers’ Association (“BBA”) “Interest Settlement Rate” for
one-month deposits in U.S. dollars as quoted on the Bloomberg Terminal as of each LIBOR	
	 

93

     
	 	 	Determination Date. If on any
        LIBOR Determination Date, LIBOR cannot be determined as provided in the
        preceding sentence, the Trustee shall either (i) request each Reference
        Bank to inform the Trustee of the quotation offered by its principal
        London office for making one-month United States dollar deposits in leading
        banks in the London interbank market, as of 11:00 a.m. (London time)
        on such LIBOR Determination Date or (ii) in lieu of making any such request,
        rely on such Reference Bank quotations that appear at such time on the
        Reuters Screen LIBOR Page (as defined in the International Swap Dealers
        Association Inc. Code of Standard Wording, Assumptions and Provisions
        for Swaps, 1986 Edition), to the extent available. LIBOR for the initial
        LIBOR Determination Date will be equal to the Initial LIBOR Rate. 
	          	          	          	 
	 	(b)   	If LIBOR cannot be determined
        as provided in paragraph (a) of this Section 4.9, the Trustee shall either
        (i) request each Reference Bank inform the Trustee of the quotation offered
        by such Reference Bank’s principal London office for making one-month
        United States dollar deposits in leading banks in the London interbank
        market, as of 11:00 a.m. (London time) on such LIBOR Determination Date
        or (ii) in lieu of making any such request, rely on such Reference Bank
        quotations that appear at such time on the Reuters Screen LIBO Page (as
        defined in the International Swap Dealers Association Inc. Code of Standard
        Wording, Assumptions and Provisions for Swaps, 1986 Edition) to the extent
        available. With respect to clause (i) above, LIBOR for the next Interest
        Accrual Period will be established by the Trustee on each LIBOR Determination
        Date as follows: 
	 
	 	 	 	(i)	 If on any LIBOR Determination Date two or more Reference
        Banks provide such offered quotations, LIBOR for the next Interest Accrual
        Period shall be the arithmetic mean of such offered quotations (rounding
        such arithmetic mean upwards if necessary to the nearest whole multiple
    of 1/32%). 
	 	 	 	          	 
	 	 	 	(ii)	 If on any LIBOR Determination Date only one or none
        of the Reference Banks provides such offered quotations, LIBOR for the
        next Interest Accrual Period shall be whichever is the higher of (i)
    LIBOR as determined on the previous LIBORDetermination Date or (ii) the Reserve
        Interest Rate. The “Reserve Interest Rate” shall be the rate
        per annum which the Trustee determines to be either (i) the arithmetic
        mean (rounded upwards if necessary to the nearest whole multiple of 1/32%)
        of the one-month United States dollar lending rates that New York City
        banks selected by the Trustee are quoting, on the relevant LIBOR Determination
        Date, to the principal London offices of at least two of the Reference
        Banks to which such quotations are, in the opinion of the Trustee, being
        so made, or (ii) in the event that the Trustee can determine no such
        arithmetic mean, the lowest one-month United States dollar lending rate
    which New York City banks selected by 

94

	          	          	          	          	the
        Trustee are quoting on such LIBOR Determination Date to leading European
    banks. 
	 	 	 	 	 
	 	 	 	(iii) 	If
        on any LIBOR Determination Date the trustee is required but is unable
        to determine the Reserve Interest Rate in the manner provided in paragraph
        (b) above, LIBOR shall be LIBOR as determined on the preceding LIBOR
    Determination Date. 

          The
    Master Servicer shall designate at least four Reference Banks. Until all
    of the LIBOR Certificates are paid in full, the Trustee will refer to the
    four Reference Banks designated by the Master Servicer to determine LIBOR
    with respect to each LIBOR Determination Date. Each “Reference Bank” shall
    be a leading bank engaged in transactions in Eurodollar deposits in the international
    Eurocurrency market, shall not control, be controlled by, or be under common
    control with, the Trustee and shall have an established place of business
    in London. If any such Reference Bank should be unwilling or unable to act
    as such, the Master Servicer shall promptly appoint or cause to be appointed
    another Reference Bank. The Trustee shall have no liability or responsibility
    to any Person for (i) the selection of any Reference Bank for purposes of
    determining LIBOR or (ii) any inability of the Master Servicer to designate
at least four Reference Banks.

	 	
(c)   	
The Pass-Through Rate for each Class of LIBOR Certificates for each Interest Accrual Period shall be determined by the Trustee on each LIBOR Determination Date so long as the LIBOR Certificates are outstanding on the basis of
LIBOR and the respective formulae appearing in footnotes corresponding to the LIBOR Certificates in the table relating to the Certificates in the Preliminary Statement.	
	          	          	 

          
In determining LIBOR, any Pass-Through Rate for the LIBOR
Certificates, any Interest Settlement Rate, or any Reserve Interest Rate, the
Trustee may conclusively rely and shall be protected in relying upon the offered
quotations (whether written, oral or on the Bridge Telerate Service) from the
BBA designated banks, the Reference Banks or the New York City banks as to
LIBOR, the Interest Settlement Rate or the Reserve Interest Rate, as
appropriate, in effect from time to time. The Trustee shall not have any
liability or responsibility to any Person for (i) the Trustee’s selection
of New York City banks for purposes of determining any Reserve Interest Rate or
(ii) its inability, following a good-faith reasonable effort, to obtain such
quotations from, the BBA designated banks, the Reference Banks or the New York
City banks or to determine such arithmetic mean, all as provided for in this
Section 4.9. 
	          	          	 
	 	
(d)   	
The establishment of LIBOR and each Pass-Through Rate for the LIBOR Certificates by the Trustee shall (in the absence of manifest error) be final, conclusive and binding upon each Holder of a Certificate and the
Trustee.	
	 
	 	 	
SECTION 4.10    Grantor Trust Administration.	
	 
	 	
(a)   	
The Trustee shall treat any interests in the Exchangeable REMIC Certificates beneficially owned in the form of Exchangeable Certificates and rights with respect thereto as assets of the Exchangeable Certificates Grantor Trust,
and	

95

	          	          	
provisions of this Agreement shall be interpreted consistently with this treatment. Each beneficial owner of Exchangeable REMIC Certificates that elects to hold its interest in the Exchangeable REMIC Certificates in the form of
Exchangeable Certificates pursuant to Sections 5.7 and 5.8 of this Agreement shall be deemed to have instructed the Trustee to deposit the applicable Exchangeable REMIC Certificates into the Exchangeable Certificates Grantor Trust and all
distributions in respect of such Exchangeable REMIC Certificates shall be deemed deposited into the Exchangeable Certificate Grantor Trust. Funds in the Exchangeable Certificates Grantor Trust shall remain uninvested.	
	 
	 	
(b)   	
On each Distribution Date, the Trustee shall be deemed to deposit all distributions in respect of the Exchangeable REMIC Certificates deemed received by it from the Distribution Account pursuant to paragraph (a) of this Section
4.10 in the Exchangeable Certificates Grantor Trust and shall immediately distribute such amounts in respect of the related Exchangeable Certificates.	
	 
	 	
(c)   	
Any beneficial owner of Exchangeable Certificates that exchanges such Exchangeable Certificates for the related Exchangeable REMIC Certificates shall be deemed to have instructed the Trustee to remove such Exchangeable
REMIC Certificates from the Exchangeable Certificates Grantor Trust, so that distributions on such Exchangeable REMIC Certificates are made directly from the Distribution Account to such beneficial owner.	
	 
	 	
(d)   	
The Trustee shall account for the Exchange Certificates Grantor Trust and the assets and rights with respect thereto as, for federal income tax purposes, grantor trusts as described in Subpart E of Part I of Subchapter J of the
Code and the Treasury Regulation §301.7701-4(c)(2) and not as assets of any REMIC created pursuant to this Agreement. The Trustee shall apply for taxpayer identification numbers on IRS Form SS-4 and any similarly required state or local forms
for the Exchangeable Certificates Grantor Trust. The Trustee shall furnish or cause to be furnished to the Holders of the related Exchangeable Certificates and shall file or cause to be filed such forms as may be required by the Code and regulations
promulgated thereunder and any similar state or local laws with respect to the allocable shares of income and expenses with respect to the assets of the grantor trusts at the time and in the manner required by the Code and regulations promulgated
thereunder and any similar state or local laws. The Trustee shall sign any forms required above.	
	 
	 	 	
SECTION 4.11    Distributions on the Exchangeable Certificates.	

          On each Distribution Date, the Trustee shall distribute the amount due to the Holders of each related Class of Exchangeable Certificates (as provided in Section 4.10(b)) .  Amounts related to interest
distributed to the surrendered Exchangeable REMIC Certificates shall be distributed as interest to the related Class of Exchangeable Certificates pursuant to Section 4.2(a)(i) and Section 4.2(a)(ii) . All distributions of principal to the
Exchangeable Certificates shall be made pro rata among the Classes of Exchangeable Certificates within each REMIC Combination unless specifically provided for otherwise in Exhibit S. All
distributions that are

96

made with respect to a particular Class of Exchangeable Certificates shall be made pro rata among all Certificates of such Class in proportion to their respective Class
Certificate Balances. In addition, the Trustee may from time to time make withdrawals from the Exchangeable Certificates Grantor Trust for the following purposes: 

	 	
(a)   	
to withdraw any amount deposited in the Exchangeable Certificates Grantor Trust and not required to be deposited therein; and	
	          	          	 
	 	
(b)   	
to clear and terminate the Exchangeable Certificates Grantor Trust upon the termination of this Agreement.	

ARTICLE V 

THE CERTIFICATES

                    SECTION 5.1     The Certificates.

          The Certificates shall be substantially in the forms attached hereto as exhibits. The Certificates shall be issuable in registered form, in the minimum denominations, integral multiples in excess
thereof (except that one Certificate in each Class may be issued in a different amount which must be in excess of the applicable minimum denomination) and aggregate denominations per Class set forth in the Preliminary Statement. 

          Subject to Section 9.2 hereof respecting the final distribution on the Certificates, on each Distribution Date the Trustee shall make distributions to each Certificateholder of record on the preceding
Record Date either (x) by wire transfer in immediately available funds to the account of such Holder at a bank or other entity having appropriate facilities therefor, if (i) such Holder has so notified the Trustee at least five Business Days prior
to the related Record Date and (ii) such Holder shall hold (A) 100% of the Class Certificate Balance of any Class of Certificates or (B) Certificates of any Class with aggregate principal Denominations of not less than $1,000,000 or (y) by check
mailed by first class mail to such Certificateholder at the address of such Holder appearing in the Certificate Register. 

          The Certificates shall be executed by manual or facsimile signature on behalf of the Trustee by an authorized officer. Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of the Trustee shall bind the Trustee, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the countersignature and delivery of
such Certificates or did not hold such offices at the date of such Certificate. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless countersigned by the Trustee by manual signature, and such
countersignature upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly executed and delivered hereunder. All Certificates shall be dated the date of their countersignature. On the Closing Date,
the Trustee shall countersign the Certificates to be issued at the direction of the Depositor, or any affiliate thereof. 

          The Depositor shall provide, or cause to be provided, to the Trustee on a continuous basis, an adequate inventory of Certificates to facilitate transfers. 

97

 

	 	          SECTION
      5.2   Certificate
    Register; Registration of Transfer and Exchange of Certificates. 
	          	          	 
	          	
(a)   	
The Trustee shall maintain, or cause to be maintained in accordance with the provisions of Section 5.6 hereof, a Certificate Register for the Trust Fund in which, subject to the provisions of subsections (b) and (c) below and to
such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. Upon surrender for registration of transfer of any Certificate, the
Trustee shall execute and deliver, in the name of the designated transferee or transferees, one or more new Certificates of the same Class and aggregate Percentage Interest.	
	 	 	 
	 	 	          At
        the option of a Certificateholder, Certificates may be exchanged for
        other Certificates of the same Class in authorized denominations and
        evidencing the same aggregate Percentage Interest upon surrender of the
        Certificates to be exchanged at the office or agency of the Trustee.
        Whenever any Certificates are so surrendered for exchange, the Trustee
        shall execute, authenticate, and deliver the Certificates which the Certificateholder
        making the exchange is entitled to receive. Every Certificate presented
        or surrendered for registration of transfer or exchange shall be accompanied
        by a written instrument of transfer in form satisfactory to the Trustee
        duly executed by the Holder thereof or his attorney duly authorized in
        writing. 

               No
        service charge to the Certificateholders shall be made for any registration
        of transfer or exchange of Certificates, but payment of a sum sufficient
        to cover any tax or governmental charge that may be imposed in connection
        with any transfer or exchange of Certificates may be required. 

               All
        Certificates surrendered for registration of transfer or exchange shall
        be cancelled and subsequently destroyed by the Trustee in accordance
    with the Trustee’s customary procedures. 

	 	 	 
	 	
(b)   	
No transfer of a Private Certificate shall be made unless such transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities laws or is exempt from the registration
requirements under said Act and such state securities laws. In the event that a transfer is to be made in reliance upon an exemption from the Securities Act and such laws, in order to assure compliance with the Securities Act and such laws, any
Holder of a Private Certificate (other than a Private Certificate that is a Book-Entry Certificate) desiring to effect such transfer and such Certificateholder’s prospective transferee shall each certify to the Trustee in writing the facts
surrounding the transfer in substantially the forms set forth in Exhibit I (the “Transferor Certificate”) and (i) deliver a letter in substantially the form of either Exhibit J (the “Investment Letter”) or Exhibit K (the
“Rule 144A Letter”) or (ii) there shall be delivered to the Trustee at the expense of the transferor an Opinion of Counsel that such transfer may be made pursuant to an exemption from the Securities Act.	
	 

98

	          	          Each
          Holder of a Private Certificate that is a Book-Entry Certificate, by
          its acquisition thereof (or a beneficial interest therein), shall be
          deemed to have represented and warranted for the benefit of the Depositor,
          the Servicer and the Trustee that (a) it understands that the Private
          Certificates are not being registered under the Securities Act, or
          any state securities laws and are being transferred to it in a transaction
          that is exempt from the registration requirements of the Securities
          Act and any such laws, (b) it has such knowledge and experience in
          financial and business matters that it is capable of evaluating the
          merits and risks of investments in the Private Certificates, (c) it
          has had the opportunity to ask questions of and receive answers from
          the Depositor concerning the purchase of the Private Certificates and
          all matters relating thereto or any additional information deemed necessary
          to its decision to purchase the Private Certificates, (d) neither it,
          nor any anyone acting on its behalf, has offered, transferred, pledged,
          sold or otherwise disposed of the Private Certificates or any interest
          therein, or solicited any offer to buy or accept a transfer, pledge
          or other disposition of the Private Certificates or any interest therein
          from, or otherwise approached or negotiated with respect to the Private
          Certificates or any interest therein with, any person in any manner,
          or made any general solicitation by means of general advertising or
          in any other manner, or taken any other action, that would constitute
          a distribution of the Private Certificates under the Securities Act
          or that would render the disposition of the Private Certificates a
          violation of Section 5 of the Securities Act or require registration
          pursuant thereto, nor will it act, nor has it authorized or will authorize
          any person to act, in such manner with respect to the Private Certificates,
          (e) it is a “qualified institutional buyer” as that term
          is defined in Rule 144A under the Securities Act (“Rule 144A”),
          (f) it is aware that the sale of the Private Certificates to it is
          being made in reliance on Rule 144A, (g) it is acquiring the Private
          Certificates for its own account or for resale pursuant to Rule 144A
          and it understands that the Private Certificates may be resold, pledged
          or transferred only (A) to a person whom it reasonably believes to
          be a qualified institutional buyer that purchases for its own account
          or for the account of a qualified institutional buyer to whom notice
          is given that the resale, pledge or transfer is being made in reliance
          on Rule 144A, or (B) pursuant to another exemption from registration
          under the Securities Act; and (h) it understands that no representation
          is made as to the availability of the exemption provided by Rule 144A
          for resales of the Private Certificates. 

                 The
          Depositor shall provide to any Holder of a Private Certificate and
          any prospective transferee designated by any such Holder, information
          regarding the related Certificates and the Mortgage Loans and such
          other information as shall be necessary to satisfy the condition to
          eligibility set forth in Rule 144A(d)(4) for transfer of any such Certificate
          without registration thereof under the Securities Act pursuant to the
          registration exemption provided by Rule 144A. The Trustee and the Master
          Servicer shall cooperate with the Depositor in providing the Rule 144A
          information referenced in the preceding sentence, including providing
          to the Depositor such information regarding the Certificates, the Mortgage
          Loans and other matters regarding the Trust Fund as the Depositor shall
          reasonably request to meet its obligation under the preceding sentence.
          Each Holder of a Private Certificate desiring to effect such transfer
          shall, and by its acceptance of a Private Certificate does hereby agree
          to, indemnify the Trustee and the Depositor, the Seller and the Master
          Servicer against any liability that may result if the transfer is not
          so exempt or is not made in accordance with such federal and state
          laws. 

     

           99

	          	          No
          transfer of an ERISA-Restricted Certificate (in the form of a Definitive
          Certificate) shall be made unless the Trustee shall have received a
          Transferor Certificate from the related transferor and either (i) a
          representation from the transferee of such Certificate acceptable to
          and in form and substance satisfactory to the Trustee (in the event
          such Certificate is a Private Certificate, such requirement is satisfied
          only by the Trustee’s receipt of a representation letter from
          the transferee substantially in the form of Exhibit J or Exhibit K),
          to the effect that such transferee is not an employee benefit plan
          or arrangement subject to Section 406 of ERISA or a plan or arrangement
          subject to Section 4975 of the Code, nor a person acting on behalf
          of any such plan or arrangement, nor using the assets of any such plan
          or arrangement to effect such transfer, (ii) in the case of a Private
          Certificate (that has been subject to an ERISA-Qualified Underwriting)
          or a Residual Certificate, if the purchaser is an insurance company,
          a representation that the purchaser is an insurance company which is
          purchasing such Certificates with funds contained in an “insurance
          company general account” (as such term is defined in Section V(e)
          of Prohibited Transaction Class Exemption 95-60 (“PTCE 95-60”))
          and that the purchase and holding of such Certificates are covered
          under Sections I and III of PTCE 95-60 or (iii) in the case of any
          such ERISA-Restricted Certificate presented for registration in the
          name of an employee benefit plan subject to ERISA, or a plan or arrangement
          subject to Section 4975 of the Code (or comparable provisions of any
          subsequent enactments), or a trustee of any such plan or any other
          person acting on behalf of any such plan or arrangement, or using such
          plan’s or arrangement’s assets, an Opinion of Counsel satisfactory
          to the Trustee, which Opinion of Counsel shall not be an expense of
          either the Trustee, the Depositor, the Master Servicer or the Trust
          Fund, addressed to the Trustee to the effect that the purchase or holding
          of such ERISA-Restricted Certificate will not result in prohibited
          transactions under Title I of ERISA and Section 4975 of the Code and
          will not subject the Trustee, the Depositor or the Master Servicer
          to any obligation in addition to those expressly undertaken in this
          Agreement or to any liability. Notwithstanding anything else to the
          contrary herein, any purported transfer of an ERISA-Restricted Certificate
          to or on behalf of an employee benefit plan subject to ERISA or to
          the Code without the delivery to the Trustee of an Opinion of Counsel
          satisfactory to the Trustee as described above shall be void and of
          no effect. 

                 Each
          Holder of a Private Certificate that is a Book-Entry Certificate, by
          its acquisition thereof (or a beneficial interest therein) shall be
          deemed to have represented and warranted for the benefit of the Depositor,
          the Servicer, the Trustee and the other Certificateholders, that (a)
          it is not an employee benefit plan or arrangement that is subject to
          Section 406 of ERISA, or a plan or arrangement that is subject to Section
          4975 of the Internal Revenue Code of 1986, as amended, nor is it acting
          on behalf of any such plan or arrangement or using the assets of any
          such plan or arrangement to effect such acquisition, or (b) if it is
          an insurance company, in the case of Private Certificates that have
          been the subject of an ERISA-Qualifying Underwriting, it is purchasing
          the Private Certificates with funds contained in an “insurance
          company general account” (as defined in Section V(e) of Prohibited
          Transaction Class Exemption 95-60 (“PTCE 95-60”)) and its
          purchase and holding of the Private Certificates are covered under
          Sections I and III of PTCE 95-60. 

    

           100

          To the extent permitted under applicable law (including, but not limited to, ERISA), the Trustee shall be under no liability to any Person for any registration of transfer of any ERISA-Restricted
Certificate that is in fact not permitted by this Section 5.2(b) or for making any payments due on such Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the
transfer was registered by the Trustee in accordance with the foregoing requirements. The Trustee shall be entitled, but not obligated, to recover from any Holder of any ERISA-Restricted Certificate that was in fact a Plan or a Person acting on
behalf of any such Plan any payments made on such ERISA-Restricted Certificate at and after either such time.  Any such payments so recovered by the Trustee shall be paid and delivered by the Trustee to the last preceding Holder of such Certificate
that is not such a Plan or Person acting on behalf of a Plan.

          No transfer of an ERISA-Restricted Yield Supplemented Certificate in the form of a Definitive Certificate shall be made unless the Trustee shall have received a representation letter from the
transferee of such Certificate to the effect that either (i) such transferee is neither a Plan nor a Person acting on behalf of any such Plan or using the assets of any such Plan to effect such transfer or (ii) the acquisition and holding of the
ERISA-Restricted Yield Supplemented Certificate are eligible for exemptive relief under Prohibited Transaction Class Exemption (“PTCE”) 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60 or PTCE 96-23.  Any purported transfer of an ERISA-Restricted
Yield Supplemented Certificate in the form of a Definitive Certificate on behalf of a Plan without the delivery to the Trustee of a representation letter as described above shall be void and of no effect.  If the ERISA-Restricted Yield Supplemented
Certificate is a Book-Entry Certificate, the transferee will be deemed to have made a representation as provided in clause (i) or (ii) of this paragraph, as applicable. 

          If any ERISA-Restricted Yield Supplemented Certificate, or any interest therein, is acquired or held in violation of the provisions of the preceding paragraph, the next preceding permitted beneficial
owner will be treated as the beneficial owner of that Certificate, retroactive to the date of transfer to the purported beneficial owner.  Any purported beneficial owner whose acquisition or holding of an ERISA-Restricted Yield Supplemented
Certificate, or interest therein, was effected in violation of the provisions of the preceding paragraph shall indemnify to the extent permitted by law and hold harmless the Depositor, Custodian, the Trustee, and the Master Servicer from and against
any and all liabilities, claims, costs or expenses incurred by such parties as a result of such acquisition or holding. 

          To the extent permitted under applicable law (including, but not limited to, ERISA), the Trustee shall be under no liability to any Person for any registration of transfer of any ERISA-Restricted
Yield Supplemented Certificate that is in fact not permitted by this Section 5.2(b) or for making any payments due on such Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this
Agreement so long as the transfer was registered by the Trustee in accordance with the foregoing requirements. 

101

          Notwithstanding the foregoing, no opinion or certificate shall be required for the initial issuance of any ERISA-Restricted Certificate or ERISA-Restricted Yield Supplemented Certificate that is
registered in the name of the Depository or its nominee. 

	 	
(c)   	
Each Person who has or who acquires any Ownership Interest in a Residual Certificate shall be deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the following provisions, and the
rights of each Person acquiring any Ownership Interest in a Residual Certificate are expressly subject to the following provisions:	
	          	          	          	          	 
	 	 	 	(i) 	Each Person holding or acquiring any Ownership Interest
      in a Residual Certificate shall be a Permitted Transferee and shall promptly
      notify the Trustee of any change or impending change in its status as a
    Permitted Transferee. 
	 	 	 	 	 
	 	 	 	(ii) 	No Ownership Interest in a Residual Certificate may
      be registered on the Closing Date or thereafter transferred, and the Trustee
      shall not register the Transfer of any Residual Certificate unless, in
      addition to the certificates required to be delivered to the Trustee under
      subparagraph (b) above, the Trustee shall have been furnished with an affidavit
      (a “Transfer Affidavit”) of the initial owner or the proposed
      transferee in the form attached hereto as Exhibit H and with a certificate
    of the proposed transferor in the form attached hereto as Exhibit I. 
	 	 	 	 	 
	 	 	 	(iii) 	Each Person holding or acquiring any Ownership Interest
      in a Residual Certificate shall agree (A) to obtain a Transfer Affidavit
      from any other Person to whom such Person attempts to Transfer its Ownership
      Interest in a Residual Certificate, (B) to obtain a Transfer Affidavit
      from any Person for whom such Person is acting as nominee, trustee or agent
      in connection with any Transfer of a Residual Certificate and (C) not to
      Transfer its Ownership Interest in a Residual Certificate or to cause the
      Transfer of an Ownership Interest in a Residual Certificate to any other
    Person if it has actual knowledge that such Person is not a Permitted Transferee. 
	 	 	 	 	 
	 	 	 	(iv)	 Any attempted or purported Transfer of any Ownership
      Interest in a Residual Certificate in violation of the provisions of this
      Section 5.2(c) shall be absolutely null and void and shall vest no rights
      in the purported Transferee. If any purported transferee shall become a
      Holder of a Residual Certificate in violation of the provisions of this
      Section 5.2(c), then the last preceding Permitted Transferee shall be restored
      to all rights as Holder thereof retroactive to the date of registration
    of Transfer of such Residual Certificate. The 

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Trustee shall be under no liability to any Person for any registration of Transfer of a Residual Certificate that is in fact not permitted by Section 5.2(b) and this Section 5.2(c) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the Transfer was registered after receipt of the related Transfer Affidavit, Transferor Certificate and, in
the case of a Residual Certificate which is also a Private Certificate, either the Rule 144A Letter or the Investment Letter. The Trustee shall be entitled but not obligated to recover from any Holder of a Residual Certificate that was in fact not a
Permitted Transferee at the time it became a Holder or, at such subsequent time as it became other than a Permitted Transferee, all payments made on such Residual Certificate at and after either such time. Any such payments so recovered by the
Trustee shall be paid and delivered by the Trustee to the last preceding Permitted Transferee of such Certificate.	
	          	          	          	          	 
	 	 	 	
(v)   	
The Depositor shall use its best efforts to make available, upon receipt of written request from the Trustee, all information necessary to compute any tax imposed under Section 860E(e) of the Code as a result of a Transfer of an
Ownership Interest in a Residual Certificate to any Holder who is not a Permitted Transferee.	
	 	 	 	 	 
	          The
      restrictions on Transfers of a Residual Certificate set forth in this Section
      5.2(c) shall cease to apply (and the applicable portions of the legend
      on a Residual Certificate may be deleted) with respect to Transfers occurring
      after delivery to the Trustee of an Opinion of Counsel, which Opinion of
      Counsel shall not be an expense of the Trust Fund, the Trustee, the Seller
      or the Master Servicer, to the effect that the elimination of such restrictions
      will not cause any REMIC created hereunder to fail to qualify as a REMIC
      at any time that the Certificates are outstanding or result in the imposition
      of any tax on the Trust Fund, a Certificateholder or another Person. Each
      Person holding or acquiring any Ownership Interest in a Residual Certificate
      hereby consents to any amendment of this Agreement which, based on an Opinion
      of Counsel furnished to the Trustee, is reasonably necessary (a) to ensure
      that the record ownership of, or any beneficial interest in, a Residual
      Certificate is not transferred, directly or indirectly, to a Person that
      is not a Permitted Transferee and (b) to provide for a means to compel
      the Transfer of a Residual Certificate which is held by a Person that is
    not a Permitted Transferee to a Holder that is a Permitted Transferee. 
	 	 	 	 	 	 
	 	
(d)   	
The preparation and delivery of all certificates and opinions referred to above in this Section 5.2 in connection with transfer shall be at the expense of the parties to such transfers.	

103

	 	
(e)   	
Except as provided below, the Book-Entry Certificates shall at all times remain registered in the name of the Depository or its nominee and at all times: (i) registration of the Certificates may not be transferred by the Trustee
except to another Depository; (ii) the Depository shall maintain book-entry records with respect to the Certificate Owners and with respect to ownership and transfers of such Book-Entry Certificates; (iii) ownership and transfers of registration of
the Book-Entry Certificates on the books of the Depository shall be governed by applicable rules established by the Depository; (iv) the Depository may collect its usual and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository, Depository Participants and indirect participating firms as representatives of the Certificate Owners of the Book-Entry Certificates for purposes of exercising the rights of holders under this Agreement,
and requests and directions for and votes of such representatives shall not be deemed to be inconsistent if they are made with respect to different Certificate Owners; and (vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository Participants and furnished by the Depository Participants with respect to indirect participating firms and persons shown on the books of such indirect participating firms as
direct or indirect Certificate Owners.	
	          	          	 
	 	          All
        transfers by Certificate Owners of Book-Entry Certificates shall be made
        in accordance with the procedures established by the Depository Participant
        or brokerage firm representing such Certificate Owner. Each Depository
        Participant shall only transfer Book-Entry Certificates of Certificate
        Owners it represents or of brokerage firms for which it acts as agent
        in accordance with the Depository’s normal procedures. 

               If
        (x) (i) the Depository or the Depositor advises the Trustee in writing
        that the Depository is no longer willing or able to properly discharge
        its responsibilities as Depository, and (ii) the Trustee or the Depositor
        is unable to locate a qualified successor, (y) the Depositor at its option
        advises the Trustee in writing that it elects to terminate the book-entry
        system through the Depository or (z) after the occurrence of an Event
        of Default, Certificate Owners representing at least 51% of the Class
        Certificate Balance of the Book-Entry Certificates together advise the
        Trustee and the Depository through the Depository Participants in writing
        that the continuation of a book-entry system through the Depository is
        no longer in the best interests of the Certificate Owners, the Trustee
        shall notify all Certificate Owners, through the Depository, of the occurrence
        of any such event and of the availability of definitive, fully-registered
        Certificates (the “Definitive Certificates”) to Certificate
        Owners requesting the same. Upon surrender to the Trustee of the related
        Class of Certificates by the Depository, accompanied by the instructions
        from the Depository for registration, the Trustee shall issue the Definitive
        Certificates. Neither the Master Servicer, the Depositor nor the Trustee
        shall be liable for any delay in delivery of such instruction and each
        may conclusively rely on, and shall be protected in relying on, such
        instructions. The Master Servicer shall provide the Trustee with an adequate
        inventory of certificates to facilitate the issuance and transfer of
        Definitive Certificates. Upon the issuance of Definitive Certificates
        all references herein to obligations imposed upon or to be performed
        by the Depository shall be deemed to be imposed upon and performed by
    the Trustee, to the extent applicable with respect to such
    

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	          	          Definitive
          Certificates and the Trustee shall recognize the Holders of the Definitive
          Certificates as Certificateholders hereunder; provided that the Trustee
          shall not by virtue of its assumption of such obligations become liable
          to any party for any act or failure to act of the Depository. 

                SECTION
          5.3     Mutilated,
    Destroyed, Lost or Stolen Certificates.

          If (a) any mutilated Certificate is surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to
the Master Servicer and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Trustee that such Certificate has been acquired by a bona fide purchaser, the Trustee
shall execute, countersign and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like Class, tenor and Percentage Interest. In connection with the issuance of any new Certificate
under this Section 5.3, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected
therewith. Any replacement Certificate issued pursuant to this Section 5.3 shall constitute complete and indefeasible evidence of ownership, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any
time. 

                    SECTION 5.4     Persons Deemed Owners.

          The Master Servicer, the Trustee and any agent of the Master Servicer or the Trustee may treat the Person in whose name any Certificate is registered as the owner of such Certificate for the purpose
of receiving distributions as provided in this Agreement and for all other purposes whatsoever, and neither the Master Servicer, the Trustee nor any agent of the Master Servicer or the Trustee shall be affected by any notice to the contrary.

                    SECTION 5.5     Access to List of Certificateholders’ Names and Addresses.

          If three or more Certificateholders or Certificate Owners (a) request such information in writing from the Trustee, (b) state that such Certificateholders or Certificate Owners desire to communicate
with other Certificateholders with respect to their rights under this Agreement or under the Certificates, and (c) provide a copy of the communication which such Certificateholders or Certificate Owners propose to transmit, or if the Depositor or
Master Servicer shall request such information in writing from the Trustee, then the Trustee shall, within ten Business Days after the receipt of such request, provide the Depositor, the Master Servicer or such Certificateholders or Certificate
Owners at such recipients’ expense the most recent list of the Certificateholders of such Trust Fund held by the Trustee, if any. The Depositor and every Certificateholder or Certificate Owner, by receiving and holding a Certificate, agree that
the Trustee shall not be held accountable by reason of the disclosure of any such information as to the list of the Certificateholders hereunder, regardless of the source from which such information was derived. 

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                    SECTION
5.6    Maintenance of Office or Agency.

          The Trustee will maintain or cause to be maintained at its expense an office or offices or agency or agencies in New York City where Certificates may be surrendered for registration of transfer or
exchange. The Trustee initially designates its Corporate Trust Office for such purposes. The Trustee will give prompt written notice to the Certificateholders of any change in such location of any such office or agency.  

	 	          SECTION
        5.7      Transfer
        of Exchangeable REMIC Certificates and Exchangeable Certificates. 
	          	          	 
	 	(a)   	Upon the presentation and surrender by
        any Certificateholder of its Exchangeable REMIC Certificates or Exchangeable
        Certificates in the appropriate REMIC Combination as set forth in Exhibit S hereto,
        such Certificateholder shall thereby transfer, assign, set over and otherwise
        convey to the Trustee, all of such Certificateholer’s right, title
        and interest in and to such Exchangeable REMIC Certificates or Exchangeable
        Certificates, including all payments of interest thereon received after
        the date of such presentation and surrender and until such Certificateholder
        informs the Trustee that it wishes to again hold its interest in the
        form of Exchangeable REMIC Certificates or Exchangeable Certificates,
        as applicable. 
	 
	 	(b)   	The Trustee acknowledges any transfer and
        assignment of Exchangeable REMIC Certificates or Exchangeable Certificates
        pursuant to the foregoing paragraph, and hereby declares that it will
        hold the same in trust for the Certificateholders on the terms set forth
        in this Agreement. 
	 
	 	          SECTION
        5.8   Exchanges
    of Exchangeable REMIC Certificates and Exchangeable Certificates. 
	 	 	 
	 	
(a)   	
Exchangeable Certificates shall be exchangeable on the books of DTC for Exchangeable REMIC Certificates and Exchangeable REMIC Certificates shall be exchangeable on the books of DTC for Exchangeable Certificates, on and after the
Closing Date, by notice to the Trustee or under the terms and conditions hereinafter set forth and otherwise in accordance with the procedures specified in this Agreement.	
	 
	 	
(b)   	
In the case of each REMIC Combination, Certificates of the Classes of Exchangeable REMIC Certificates in such REMIC Combination shall be exchangeable for Certificates of the Class of Exchangeable Certificates related to such
Combination in respective Denominations, determined based on the proportion that the Maximum Initial Class Certificate Balances or Maximum Initial Notional Amounts of such Exchangeable REMIC Certificates, bear to the Maximum Initial Notional Amounts
of such Exchangeable REMIC Certificates, as set forth in Exhibit S hereto. Except as provided in Section 4.10 of this Agreement, upon any such exchange, the portions of the Exchangeable REMIC Certificates designated for exchange shall be deemed cancelled and replaced by	

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the Exchangeable Certificates issued in exchange therefor. Correspondingly, Exchangeable Certificates related to a REMIC Combination may be further designated for exchange for Exchangeable REMIC Certificates in such REMIC
Combination in respective Denominations determined based on the proportion that the Maximum Initial Class Certificate Balances or Maximum Initial Notional Amounts of such Exchangeable REMIC Certificates bear to the Maximum Initial Class Certificate
Balance of the related Exchangeable REMIC Certificates, as set forth in Exhibit S hereto. There shall be no limitation on the number of exchanges authorized pursuant to this Section 5.8 and, except as provided below, no fee or other charge shall be
payable to the Trustee or DTC in connection therewith.	
	          	          	 
	 	
(c)   	
Certificateholders may exchange their Certificates according to this Section 5.8(c) by (i) providing notice to the Trustee by email at bnyfhgroup@bankofny.com no later than three (3) Business Days prior to the exchange date, which proposed exchange date is subject to the Trustee’s approval and shall not be the first or last Business Day of the month, (ii) remitting the
Exchange Fee, as determined in the next paragraph, to the Trustee and (iii) remitting the beneficial interest in the REMIC Exchangeable Certificates or the Exchangeable Certificates, as applicable, to the Trustee. In addition, the Certificateholder
must provide notice on the Certificateholder’s letterhead, which notice must carry a medallion stamp guarantee or be signed by an authorized signatory and presented with an incumbency certificate and set forth the following information: the
CUSIP number of each Exchangeable REMIC Certificate or Exchangeable Certificate to be exchanged and to be received; the outstanding portion of the Class Certificate Balances and/or Notional Amounts and the Maximum Initial Class Certificate Balances
and/or Notional Amounts of the Exchangeable REMIC Certificates or Exchangeable Certificates to be exchanged; the Certificateholder’s DTC participant number; and the proposed exchange date. After receiving the notice, the Trustee shall email the
Certificateholder with wire payment instructions relating to the Exchange Fee. The Certificateholder will utilize the “deposit and withdrawal system” at DTC to exchange the Certificates. The Trustee shall verify the proposed exchanges to
ensure that the principal and interest entitlements of the Certificates received equal the entitlements of the Certificates surrendered. If there is an error, the exchange will not occur until such error is corrected. Unless rejected for error, a
notice becomes irrevocable on the second Business Day before the proposed exchange date. The preparation of all Certificates referred to in this Section 5.8(c) in connection with an exchange shall be at the expense of the party requesting such
exchange.	
	 
	 	
(d)   	
Notwithstanding any other provision herein set forth, an Exchange Fee equal to 1/32 of 1% of the current Class Certificate Balance of the Certificates to be exchanged (but in no event shall the Exchange Fee be less
than $2,000 or greater than $25,000) shall be payable to the Trustee in connection with each exchange.	
	 
	 	
(e)   	
The Trustee shall make the first distribution of an Exchangeable REMIC Certificate or Exchangeable Certificate received in an exchange transaction on the	
	 

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	          	          	Distribution
        Date in the month following the month of the exchange to the Certificateholder
        of record as of the close of business on the last day of the month of
    the exchange. 

ARTICLE VI 

THE DEPOSITOR AND THE MASTER SERVICER

                    SECTION 6.1     Respective Liabilities of the Depositor and the Master Servicer.

          The Depositor and the Master Servicer shall each be liable in accordance herewith only to the extent of the obligations specifically and respectively imposed upon and undertaken by them herein.

                    SECTION 6.2     Merger or Consolidation of the Depositor or the Master Servicer.

          The Depositor and the Master Servicer will each keep in full effect its existence, rights and franchises as a corporation under the laws of the United States or under the laws of one of the states
thereof and will each obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its respective duties under this Agreement. 

          Any Person into which the Depositor or the Master Servicer may be merged or consolidated, or any Person resulting from any merger or consolidation to which the Depositor or the Master Servicer shall
be a party, or any person succeeding to the business of the Depositor or the Master Servicer, shall be the successor of the Depositor or the Master Servicer, as the case may be, 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; provided, however, that the successor or surviving Person to the Master Servicer shall be qualified to sell mortgage loans to, and to service mortgage
loans on behalf of, FNMA or FHLMC. 

                    SECTION 6.3     Limitation on Liability of the Depositor, the Master Servicer and Others. 

          None of the Depositor, the Master Servicer or any of the directors, officers, employees or agents of the Depositor or the Master Servicer shall be under any liability to the Certificateholders for any
action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Depositor, the Master Servicer or any such Person against
any breach of representations or warranties made by it herein or protect the Depositor, the Master Servicer or any such Person from any liability which would otherwise be imposed by reasons of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Depositor, the Master Servicer and any director, officer, employee or agent of the Depositor or the Master Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Depositor, the Master Servicer and any director, officer, employee or agent of the Depositor or the Master Servicer shall be
indemnified by the Trust Fund and held harmless against any loss, liability or expense incurred in connection with

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any audit, controversy or judicial proceeding relating to a governmental taxing authority or any legal action relating to this Agreement or the Certificates, other than any loss, liability or expense related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise reimbursable pursuant to this Agreement) and any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties hereunder or by reason of reckless disregard of obligations and duties hereunder. Neither the Depositor nor the Master Servicer shall be under any obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective duties hereunder and which in its opinion may involve it in any expense or liability; provided, however, that either the Depositor or the Master Servicer may in its discretion undertake any such action that it may deem
necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto and interests of the Trustee and the Certificateholders hereunder. In such event, the legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Trust Fund, and the Depositor and the Master Servicer shall be entitled to be reimbursed therefor out of the applicable subaccount of the Certificate Account. 

                    SECTION 6.4     Limitation on Resignation of Master Servicer.

          The Master Servicer shall not resign from the obligations and duties hereby imposed on it except (a) upon appointment of a successor servicer and receipt by the Trustee of a letter from each Rating
Agency that such a resignation and appointment will not result in a downgrading of the rating of any of the Certificates, or (b) upon determination that its duties hereunder are no longer permissible under applicable law. Any such determination
under clause (b) permitting the resignation of the Master Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee.  No such resignation shall become effective until the Trustee or a successor master servicer
shall have assumed the Master Servicer’s responsibilities, duties, liabilities and obligations hereunder. 

ARTICLE VII

DEFAULT 

                    SECTION
7.1    Events of Default.

          “Event of Default,” wherever used herein, means any one of the following events:

	 	 	 	
(i)   	
any failure by the Master Servicer to deposit in the applicable subaccount of the Certificate Account or remit to the Trustee any payment required to be made under the terms of this Agreement, which failure shall continue
unremedied for five days after the date upon which written notice of such failure shall have been given to the Master Servicer by the Trustee or the Depositor or to the Master Servicer and the Trustee by the Holders of Certificates having not less
than 25% of the Voting Rights evidenced by the Certificates; or	
	          	          	          	          	 
	 	 	 	
(ii)   	
any failure by the Master Servicer to observe or perform in any material respect any other of the covenants or agreements	

109

	 	 	 	 	
on the part of the Master Servicer contained in this Agreement (except with respect to failure related to a Limited Exchange Act Reporting Obligation), which failure materially affects the rights of Certificateholders, which
failure continues unremedied for a period of 60 days after the date on which written notice of such failure shall have been given to the Master Servicer by the Trustee or the Depositor, or to the Master Servicer and the Trustee by the Holders of
Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates; provided, however, that the 60-day cure period shall not apply to the initial delivery of the Mortgage File for Delay Delivery Mortgage Loans nor the
failure to substitute or repurchase in lieu thereof; or	
	          	          	          	          	 
	 
	 	 	 	
(iii)   	
a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Master Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 60 consecutive days;
or	
	 
	 	 	 	
(iv)   	
the Master Servicer shall consent to the appointment of a receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Master Servicer or all or
substantially all of the property of the Master Servicer; or	
	 
	 	 	 	
(v)   	
the Master Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of, or commence a voluntary case under, any applicable insolvency or reorganization statute,
make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations; or	
	 
	 	 	 	
(vi)   	
the failure of the Master Servicer to remit any Advance required to be remitted by the Master Servicer pursuant to Section 4.1 which failure continues unremedied at 11:00 a.m., Central time, on the related Distribution
Date.	

          If an Event of Default described in clauses (i) to (v) of this Section shall occur, then, and in each and every such case, so long as such Event of Default shall not have been remedied, the Trustee
may, or at the direction of the Holders of Certificates evidencing not less than 66 2/3% of the Voting Rights evidenced by the Certificates, the Trustee shall by notice in writing to the Master Servicer (with a copy to each Rating Agency), terminate
all of the rights and obligations of the Master Servicer under this Agreement and in and to the Mortgage Loans and the proceeds

110

thereof, other than its rights as a Certificateholder hereunder. If an Event of Default described in clause (vi) of this Section shall occur, the Trustee shall immediately, by notice in writing to the Master Servicer (with a copy
to each Rating Agency), terminate all of the rights and obligations of the Master Servicer under this Agreement and in and to the Mortgage Loans and proceeds thereof, other than its rights as a Certificateholder hereunder. In addition, if during the
period that the Depositor is required to file Exchange Act Reports with respect to the Trust Fund, the Master Servicer shall fail to observe or perform any of the obligations set forth in Section 3.16(a) or Section 10.1(a)(i) and (ii), and such
failure continues for the lesser of ten (10) calendar days or such period in which the applicable Exchange Act Report can be filed timely (without taking into account any extensions), so long as such failure shall not have been remedied, the Trustee
shall, but only at the direction of the Depositor, terminate all of the rights and obligations of the Master Servicer under this Agreement and in and to the Mortgage Loans and the proceeds thereof, other than its rights as a Certificateholder
hereunder. The Depositor shall not be entitled to terminate the rights and obligations of the Master Servicer if a failure of the Master Servicer to identify a Subcontractor “participating in the servicing function” within the meaning of
Item 1122 of Regulation AB was attributable solely to the role or functions of such Subcontractor with respect to mortgage loans other than the Mortgage Loans. On and after the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer hereunder, whether with respect to the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee or another successor to the Master Servicer
appointed by the Trustee pursuant to Section 7.2. The Trustee, in its capacity as successor to the Master Servicer, shall thereupon make any Advance which the Master Servicer failed to make subject to Section 4.1 hereof. The Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and endorsement or assignment of the Mortgage Loans and related documents, or otherwise. Unless expressly provided in such written notice, no such termination shall affect any
obligation of the Master Servicer to pay amounts owed pursuant to Article VIII.  The Master Servicer agrees to cooperate with the Trustee in effecting the termination of the Master Servicer’s responsibilities and rights hereunder, including,
without limitation, the transfer to the Trustee of all cash amounts which shall at the time be credited to the Certificate Account, or thereafter be received with respect to the Mortgage Loans.  All expenses incurred in the transferring of the
servicing duties from the Master Servicer to a Successor Servicer shall be paid by the Master Servicer, and if not paid by the Master Servicer, shall be paid from amounts on deposit in the Certificate Account. 

          Notwithstanding any termination of the activities of the Master Servicer hereunder, the Master Servicer shall be entitled to receive, out of any late collection of a Scheduled Payment on a Mortgage
Loan which was due prior to the notice terminating such Master Servicer’s rights and obligations as Master Servicer hereunder and received after such notice, that portion thereof to which such Master Servicer would have been entitled pursuant
to Sections 3.8(a)(i) through (viii),and any other amounts payable to such Master Servicer hereunder the entitlement to which arose prior to the termination of its activities hereunder. Any termination of the activities of the Master Servicer
hereunder will simultaneously result in the termination of the Master Servicer’s duties as a subservicer pursuant to the Servicing Rights Transfer and Subservicing Agreement. 

111

          If the Master Servicer is terminated, the Trustee shall provide the Depositor in writing and in form and substance reasonably satisfactory to the Depositor, all information reasonably requested by the
Depositor in order to comply with its reporting obligation under Item 6.02 of Form 8-K with respect to a successor master servicer in the event the Trustee should succeed to the duties of the Master Servicer as set forth herein. 

          In the event the Master Servicer is terminated pursuant to this Section 7.1, the Retained Yield shall remain payable to (a) First Horizon, in its individual capacity as Seller, or (b) a subsequent
owner of such Retained Yield through Seller’s sale, assignment, or certification of its rights to such Retained Yield, and shall not be payable to the Trustee or any successor to the Master Servicer. Seller’s exclusive right to receive
payments of Retained Yield or sell, assign, certificate or otherwise dispose of such right to receive such Retained Yield is enforceable against the Master Servicer or its successor thereto.

                    SECTION 7.2     Trustee to Act; Appointment of Successor.

          On and after the time the Master Servicer receives a notice of termination pursuant to Section 7.1 hereof, the Trustee shall, subject to and to the extent provided in Section 3.4, be the successor to
the Master Servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Master Servicer by the terms and provisions hereof
and applicable law including the obligation to make Advances pursuant to Section 4.1. As compensation therefor, the Trustee shall be entitled to all funds relating to the Mortgage Loans that the Master Servicer would have been entitled to charge to
the Certificate Account or Distribution Account if the Master Servicer had continued to act hereunder. Notwithstanding the foregoing, if the Trustee has become the successor to the Master Servicer in accordance with Section 7.1 hereof, the Trustee
may, if it shall be unwilling to so act, or shall, if it is prohibited by applicable law from making Advances pursuant to Section 4.1 hereof or if it is otherwise unable to so act appoint, or petition a court of competent jurisdiction to appoint,
any established mortgage loan servicing institution the appointment of which does not adversely affect the then current rating of the Certificates by each Rating Agency as the successor to the Master Servicer hereunder in the assumption of all or
any part of the responsibilities, duties or liabilities of the Master Servicer hereunder. Any successor to the Master Servicer shall be an institution which is a FNMA and FHLMC approved seller/servicer in good standing, which has a net worth of at
least $10,000,000, and which is willing to service the Mortgage Loans and executes and delivers to the Depositor and the Trustee an agreement accepting such delegation and assignment, which contains an assumption by such Person of the rights,
powers, duties, responsibilities, obligations and liabilities of the Master Servicer (other than liabilities of the Master Servicer under Section 6.3 hereof incurred prior to termination of the Master Servicer under Section 7.1), with like effect as
if originally named as a party to this Agreement; and provided further that each Rating Agency acknowledges that its rating of the Certificates in effect immediately prior to such assignment and delegation will not be qualified or reduced, as a
result of such assignment and delegation. The Trustee shall provide written notice to the Depositor of such successor pursuant to this Section. The successor to the Master Servicer shall provide to the Depositor in writing, fifteen (15) days prior
to the effective date of such appointment, and in form and substance reasonably satisfactory to the Depositor, all information reasonably requested by the Depositor in order to comply with its reporting obligation under Item 6.02 of Form 8-K with
respect to a replacement master servicer. The

112

Trustee shall not resign as servicer until a successor servicer has been appointed and has accepted such appointment. Pending appointment of a successor to the Master Servicer hereunder, the Trustee, unless the Trustee is
prohibited by law from so acting, shall, subject to Section 3.4 hereof, act in such capacity as provided above. In connection with such appointment and assumption, the Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided, however, that no such compensation shall be in excess of the Master Servicing Fee permitted the Master Servicer hereunder. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any such succession. Neither the Trustee nor any other successor master servicer shall be deemed to be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof or any failure to perform, or any delay in performing, any duties or responsibilities hereunder, in either case caused by the failure of the Master Servicer to deliver or provide, or any
delay in delivering or providing, any cash, information, documents or records to it. 

          Any successor to the Master Servicer as master servicer shall give notice to the Mortgagors of such change of servicer and shall, during the term of its service as master servicer maintain in force
the policy or policies that the Master Servicer is required to maintain pursuant to Section 3.17. 

          In connection with the termination or resignation of the Master Servicer hereunder, either (i) the successor Master Servicer, including the Trustee if the Trustee is acting as successor Master
Servicer, shall represent and warrant that it is a member of MERS in good standing and shall agree to comply in all material respects with the rules and procedures of MERS in connection with the servicing of the Mortgage Loans that are registered
with MERS, or (ii) the predecessor Master Servicer shall cooperate with the successor Master Servicer either (x) in causing MERS to execute and deliver an assignment of Mortgage in recordable form to transfer the Mortgage from MERS to the Trustee
and to execute and deliver such other notices, documents and other instruments as may be necessary or desirable to effect a transfer of such Mortgage Loan or servicing of such mortgage Loan on the MERS® System to the successor Master Servicer
or (y) in causing MERS to designate on the MERS® System the successor Master Servicer as the servicer of such Mortgage Loan. The predecessor Master Servicer shall file or cause to be filed any such assignment in the appropriate recording
office. The successor Master Servicer shall cause such assignment to be delivered to the Trustee promptly upon receipt of the original with evidence of recording thereon or a copy certified by the public recording office in which such assignment was
recorded. 

                    SECTION 7.3     Notification to Certificateholders.

	 	
(a)   	
Upon any termination of or appointment of a successor to the Master Servicer, the Trustee shall give prompt written notice thereof to Certificateholders and to each Rating Agency.	
	          	          	 
	 	
(b)   	
Within 60 days after the occurrence of any Event of Default, the Trustee shall transmit by mail to all Certificateholders notice of each such Event of Default hereunder known to the Trustee, unless such Event of Default shall have
been cured or waived.	

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ARTICLE VIII 

CONCERNING THE TRUSTEE

                    SECTION
8.1    Duties of Trustee.

          The Trustee, prior to the occurrence of an Event of Default of which a Responsible Officer of the Trustee has actual knowledge and after the curing of all Events of Default that may have occurred,
shall undertake to perform such duties and only such duties as are specifically set forth in this Agreement. In case an Event of Default of which a Responsible Officer of the Trustee has actual knowledge has occurred and remains uncured, the Trustee
shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own
affairs. 

          The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee that are specifically required to be
furnished pursuant to any provision of this Agreement shall examine them to determine whether they are in the form required by this Agreement; provided, however, that the Trustee shall not be responsible for the accuracy or content of any such
resolution, certificate, statement, opinion, report, document, order or other instrument.  If any such instrument is found not to conform in any material respect to the requirements of this Agreement, the Trustee shall notify the Certificateholders
of such instrument in the event that the Trustee, after so requesting, does not receive a satisfactorily corrected instrument. 

          The Trustee is hereby directed to execute and deliver to The Depository Trust Company the Issuer Letter of Representations dated as of the Closing Date on behalf of the trust created hereunder. The
Depositor and the Master Servicer acknowledge and agree that the Trustee is executing and delivering the Issuer Letter of Representations on behalf of the trust created hereunder and shall do so solely in its capacity as Trustee and not in its
individual capacity. 

          No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; provided, however,
that: 

	 	 	 	
(i)   	
unless an Event of Default of which a Responsible Officer of the Trustee has actual knowledge shall have occurred and be continuing, the duties and obligations of the Trustee shall be determined solely by the express provisions of
this Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and
the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Agreement which it
believed in good faith to be genuine and	
	          	          	          	          	 

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to have been duly executed by the proper authorities respecting any matters arising hereunder;	
	          	          	          	          	 
	 	 	 	
(ii)   	
the Trustee shall not be liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be finally proven that the Trustee was negligent in ascertaining the
pertinent facts;	
	 
	 	 	 	
(iii)   	
the Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of Holders of Certificates evidencing not less than 25% of the Voting Rights 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;	
	 
	 	 	 	
(iv)   	
the Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or the exercise of any of its rights or powers if there is reasonable
ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of the Master Servicer under this Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges
of, the Master Servicer; and	
	 
	 	 	 	
(v)   	
without limiting the generality of this Section 8.1, the Trustee shall have no duty (A) to see to any recording, filing, or depositing of this Agreement or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or deposit or to any rerecording, refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see to the payment or
discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Fund other than from funds available in the Distribution Account (D) to
confirm or verify the contents of any reports or certificates of the Servicer delivered to the Trustee pursuant to this Agreement believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties.	

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                    SECTION 8.2     Certain Matters Affecting the Trustee.

          Except as otherwise provided in Section 8.1: 

	 	 	 	
(i)   	
the Trustee may request and rely upon and shall be protected in acting or refraining from acting upon any resolution, Officers’ Certificate, certificate of auditors or any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties and the Trustee shall have no responsibility to ascertain or confirm
the genuineness of any signature of any such party or parties;	
	          	          	          	          	 
	 	 	 	
(ii)   	
the Trustee may consult with counsel, financial advisers or accountants and the advice of any such counsel, financial advisers or accountants and any Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel;	
	 
	 	 	 	
(iii)   	
the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement;	
	 
	 	 	 	
(iv)   	
the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing so to do by Holders of Certificates evidencing not less than 25% of the Voting Rights allocated to each Class of Certificates; provided, however, that if the payment within a reasonable time to the Trustee of
the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not assured to the Trustee by the security afforded to it by the terms of this Agreement, the Trustee may require
indemnity satisfactory to the Trustee against such cost, expense or liability as a condition to taking any such action. The reasonable expense of every such examination shall be paid by the Master Servicer or, if paid by the Trustee, shall be repaid
by the Master Servicer upon demand from the Servicer’s own funds.	
	 
	 	 	 	
(v)   	
the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or	

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through agents, accountants or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of such agent, accountant or attorney appointed by the Trustee with due care;	
	          	          	          	          	 
	 	 	 	
(vi)   	
the Trustee shall not be required to risk or expend its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of any of its rights or powers hereunder if it shall have
reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not assured to it;	
	 
	 	 	 	
(vii)   	
the Trustee shall not be liable for any loss on any investment of funds pursuant to this Agreement (other than as issuer of the investment security);	
	 
	 	 	 	
(viii)   	
the Trustee shall not be deemed to have knowledge of an Event of Default until a Responsible Officer of the Trustee shall have received written notice thereof and in the absence of such notice, the Trustee may conclusively assume
that there is no Event of Default;	
	 
	 	 	 	
(ix)   	
the Trustee shall be under no obligation to exercise any of the trusts, rights or powers vested in it by this Agreement or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred therein or thereby;	
	 
	 	 	 	
(x)   	
the right of the Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful misconduct in the
performance of such act; and	
	 
	 	 	 	
(xi)   	
the Trustee shall not be required to give any bond or surety in respect of the execution of the Trust Fund created hereby or the powers granted hereunder.	
	 

                    SECTION 8.3     Trustee Not Liable for Certificates or Mortgage Loans.

          The recitals contained herein and in the Certificates shall be taken as the statements of the Depositor and the Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or related document or of MERS or the MERS® System other than with respect

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to the Trustee’s execution and counter-signature of the Certificates.  The Trustee shall not be accountable for the use or application by the Depositor or the Master Servicer of any funds paid to the Depositor or the Master
Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the Certificate Account by the Depositor or the Master Servicer. 

                    SECTION 8.4     Trustee May Own Certificates.

          The Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights as it would have if it were not the Trustee. 

                    SECTION 8.5     Trustee’s Fees and Expenses.

          The Trustee, as compensation for its activities prior to making the distributions pursuant to Section 4.2 hereunder, shall be entitled to withdraw from the Distribution Account on each Distribution
Date an amount equal to the Trustee Fee for such Distribution Date. The Trustee and any director, officer, employee or agent of the Trustee shall be indemnified by the Master Servicer and held harmless against any loss, liability or expense
(including reasonable attorney’s fees) (i) incurred in connection with any claim or legal action relating to (a) this Agreement, (b) the Certificates or (c) in connection with the performance of any of the Trustee’s duties hereunder, other
than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of any of the Trustee’s duties hereunder or incurred by reason of any action of the Trustee taken at the direction of the
Certificateholders and (ii) resulting from any error in any tax or information return prepared by the Master Servicer. Such indemnity shall survive the termination of this Agreement or the resignation or removal of the Trustee hereunder. Without
limiting the foregoing, the Master Servicer covenants and agrees, except as otherwise agreed upon in writing by the Depositor and the Trustee, and except for any such expense, disbursement or advance as may arise from the Trustee’s negligence,
bad faith or willful misconduct, to pay or reimburse the Trustee, for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement with respect to: (A) the reasonable
compensation and the expenses and disbursements of its counsel not associated with the closing of the issuance of the Certificates, (B) the reasonable compensation, expenses and disbursements of any accountant, engineer or appraiser that is not
regularly employed by the Trustee, to the extent that the Trustee must engage such persons to perform acts or services hereunder and (C) printing and engraving expenses in connection with preparing any Definitive Certificates. Except as otherwise
provided herein, the Trustee shall not be entitled to payment or reimbursement for any routine ongoing expenses incurred by the Trustee in the ordinary course of its duties as Trustee, Registrar, Tax Matters Person or Paying Agent hereunder or for
any other expenses. 

                    SECTION
8.6     Eligibility Requirements
for Trustee.

          The Trustee hereunder shall at all times be a corporation or association organized and doing business under the laws of a state or the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by federal or state authority and with a credit rating which would not cause either of the Rating Agencies to reduce
their respective then current ratings of the Certificates (or having provided such security from time to time as is

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sufficient to avoid such reduction). If such corporation or 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 such corporation or association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section 8.6, the Trustee shall resign immediately in the manner and with the effect specified in Section 8.7 hereof. The entity serving as Trustee may have normal banking and trust
relationships with the Depositor and its affiliates or the Master Servicer and its affiliates; provided, however, that such entity cannot be an affiliate of the Master Servicer other than the Trustee in its role as successor to the Master Servicer.

                    SECTION 8.7     Resignation and Removal of Trustee.

          The Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice of resignation to the Depositor and the Master Servicer and each Rating Agency not less
than 60 days before the date specified in such notice when, subject to Section 8.8, such resignation is to take effect, and acceptance by a successor trustee in accordance with Section 8.8 meeting the qualifications set forth in Section 8.6. If no
successor trustee meeting such qualifications shall have been so appointed and have accepted appointment within 30 days after the giving of such notice or resignation, the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee. 

          As a condition to the effectiveness of any such resignation, at least 15 calendar days prior to the effective date of such resignation, the Trustee shall provide (x) written notice to the Depositor of
any successor pursuant to this Section and (y) in writing and in form and substance reasonably satisfactory to the Depositor, all information reasonably requested by the Depositor in order to comply with its reporting obligation under Item 6.02 of
Form 8-K with respect to the resignation of the Trustee. 

          If at any time (i) the Trustee shall cease to be eligible in accordance with the provisions of Section 8.6 hereof and shall fail to resign after written request thereto by the Depositor, (ii) the
Trustee shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, (iii)(A) a tax is imposed with respect to the Trust Fund by any state in which the Trustee or the Trust Fund is located, (B) the imposition of such tax would be avoided by the
appointment of a different trustee and (C) the Trustee fails to indemnify the Trust Fund against such tax, or (iv) during the period that the Depositor is required to file Exchange Act Reports with respect to the Trust Fund, the Trustee fails to
comply with its obligations under the last sentence of Section 7.1, Section 8.9 or Article X and such failure is not remedied within the lesser of ten (10) calendar days or such period in which the applicable Exchange Act Report can be filed timely
(without taking into account any extensions), then, in the case of clauses (i) through (iii), then the Depositor or the Master Servicer may remove the Trustee and appoint a successor trustee by written instrument, in triplicate, one copy of which
instrument shall be delivered to the Trustee, one copy of which shall be delivered to the Master Servicer and one copy to the successor trustee. 

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          The Holders of Certificates entitled to at least 51% of the Voting Rights may at any time remove the Trustee and appoint a successor trustee by written instrument or instruments, in triplicate, signed
by such Holders or their attorneys-in-fact duly authorized, one complete set of which instruments shall be delivered by the successor Trustee to the Master Servicer, one complete set to the Trustee so removed and one complete set to the successor so
appointed. Notice of any removal of the Trustee shall be given to each Rating Agency by the Successor Trustee. 

          Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 8.7 shall become effective upon acceptance of appointment by the
successor trustee as provided in Section 8.8 hereof. 

                    SECTION 8.8     Successor Trustee.

          Any successor trustee appointed as provided in Section 8.7 hereof shall execute, acknowledge and deliver to the Depositor and to its predecessor trustee and the Master Servicer an instrument accepting
such appointment hereunder and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with the like effect as if originally named as trustee herein. The Depositor, the Master Servicer and the predecessor trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties, and obligations. 

          No successor trustee shall accept appointment as provided in this Section 8.8 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 8.6 hereof
and its appointment shall not adversely affect the then current rating of the Certificates. 

          Upon acceptance of appointment by a successor trustee as provided in this Section 8.8, the Depositor shall mail notice of the succession of such trustee hereunder to all Holders of Certificates. If
the Depositor fails to mail such notice within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Depositor. 

                    SECTION 8.9     Merger or Consolidation of Trustee.

          Any corporation into which the Trustee may be merged or converted or with which it may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to the business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be eligible under the provisions of Section 8.6 hereof without the execution or
filing of any paper or further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. 

          The Trustee shall provide (x) written notice to the Depositor of any successor due to merger or consolidation of the trustee pursuant to this Section within five (5) days after the

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effectiveness of such merger or consolidation and (y) in writing and in form and substance reasonably satisfactory to the Depositor, all information reasonably requested by the Depositor in order to comply with its reporting
obligation under Item 6.02 of Form 8-K with respect to a replacement Trustee. 

                    SECTION 8.10     Appointment of Co-Trustee or Separate Trustee.

          Notwithstanding any other provisions of this Agreement, at any time, 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, the Master Servicer and the Trustee acting jointly shall have the power and shall 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 Certificateholders, such title to the Trust Fund
or any part thereof, whichever is applicable, and, subject to the other provisions of this Section 8.10, such powers, duties, obligations, rights and trusts as the Master Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the receipt by it of a request to do so, or in the case an Event of Default shall have occurred and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 8.6 and no notice to Certificateholders of the appointment of any co-trustee or separate trustee shall
be required under Section 8.8. 

          Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: 

	 	 	 	
(i)   	
To the extent necessary to effectuate the purposes of this Section 8.10, all rights, powers, duties and obligations conferred or imposed upon the Trustee shall 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 in 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 the Master Servicer hereunder), the Trustee shall 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 applicable Trust Fund or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the
Trustee;	
	          	          	          	          	 
	 	 	 	
(ii)   	
No trustee hereunder shall be held personally liable by reason of any act or omission of any other trustee hereunder and such	

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appointment shall not, and shall not be deemed to, constitute any such separate trustee or co-trustee as agent of the Trustee;	
	          	          	          	          	 
	 	 	 	
(iii)   	
The Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee; and	
	 
	 	 	 	
(iv)   	
The Master Servicer, and not the Trustee, shall be liable for the payment of reasonable compensation, reimbursement and indemnification to any such separate trustee or co-trustee.	

          Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the separate trustees and co-trustees, when and as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VIII. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall 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 the provisions of this Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Master Servicer and the Depositor. 

          Any separate trustee or co-trustee may, at any time, 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 shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. 

                    SECTION 8.11     Tax Matters.

          It is intended that the assets with respect to which each REMIC election is to be made, as set forth in the preliminary statement shall constitute, and that the conduct of matters relating to such
assets shall be such as to qualify such assets as, a “real estate mortgage investment conduit” as defined in and in accordance with the REMIC Provisions. In furtherance of such intention, the Trustee covenants and agrees that it shall act
as agent (and the Trustee is hereby appointed to act as agent) on behalf of any such REMIC and that in such capacity it shall: (a) prepare and file, or cause to be prepared and filed, in a timely manner, a U.S. Real Estate Mortgage Investment
Conduit Income Tax Return (Form 1066 or any successor form adopted by the Internal Revenue Service) and prepare and file or cause to be prepared and filed with the Internal Revenue Service and applicable state or local tax authorities income tax or
information returns for each taxable year with respect to any such REMIC, containing such information and at the times and in the manner as may be required by the Code or state or local tax laws, regulations, or rules, and furnish or cause to be
furnished to Certificateholders the schedules, statements or information at such times and in such manner as may be required thereby; (b) within thirty days of the Closing Date, furnish or cause to be furnished to the Internal Revenue Service, on
Forms 8811 or as otherwise may be required by the Code, the name, title, address, and telephone number of the person that the Holders of the Certificates may contact for tax information relating thereto,

122

together with such additional information as may be required by such Form, and update such information at the time or times in the manner required by the Code; (c) make or cause to be made elections that such assets be treated as
a REMIC on the federal tax return for its first taxable year (and, if necessary, under applicable state law); (d) prepare and forward, or cause to be prepared and forwarded, to the Certificateholders and to the Internal Revenue Service and, if
necessary, state tax authorities, all information returns and reports as and when required to be provided to them in accordance with the REMIC Provisions, including without limitation, the calculation of any original issue discount using the
prepayment assumption; (e) provide information necessary for the computation of tax imposed on the transfer of a Residual Certificate to a Person that is not a Permitted Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted Transferee is the record holder of an interest (the reasonable cost of computing and furnishing such information may be charged to the Person liable for such tax); (f) to
the extent that they are under its control conduct matters relating to such assets at all times that any Certificates are outstanding so as to maintain the status as a REMIC under the REMIC Provisions; (g) not knowingly or intentionally take any
action or omit to take any action that would cause the termination of any REMIC status; (h) pay, from the sources specified in the last paragraph of this Section 8.11, the amount of any federal or state tax, including prohibited transaction taxes as
described below, imposed on any such REMIC prior to its termination when and as the same shall be due and payable (but such obligation shall not prevent the Trustee or any other appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Trustee from withholding payment of such tax, if permitted by law, pending the outcome of such proceedings); (i) ensure that federal, state or local income tax or information returns shall be signed by the
Trustee or such other person as may be required to sign such returns by the Code or state or local laws, regulations or rules; (j) maintain records relating to any such REMIC, including but not limited to the income, expenses, assets and liabilities
thereof and the fair market value and adjusted basis of the assets determined at such intervals as may be required by the Code, as may be necessary to prepare the foregoing returns, schedules, statements or information; and (k) as and when necessary
and appropriate, represent any such REMIC in any administrative or judicial proceedings relating to an examination or audit by any governmental taxing authority, request an administrative adjustment as to any taxable year of any such REMIC, enter
into settlement agreements with any governmental taxing agency, extend any statute of limitations relating to any tax item of any such REMIC, and otherwise act on behalf of any such REMIC in relation to any tax matter or controversy involving it.

          In order to enable the Trustee to perform its duties as set forth herein, the Depositor shall provide, or cause to be provided, to the Trustee within ten (10) days after the Closing Date all
information or data that the Trustee requests in writing and determines to be relevant for tax purposes to the valuations and offering prices of the Certificates, including, without limitation, the price, yield, prepayment assumption and projected
cash flows of the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide to the Trustee promptly upon written request therefor, any such additional information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The Depositor hereby indemnifies the Trustee for any losses, liabilities, damages, claims or expenses of the Trustee arising from any errors or miscalculations of the Trustee
that result from any failure of the Depositor to provide, or to cause to be provided, accurate information or data to the Trustee on a timely basis. 

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          In the event that any tax is imposed on “prohibited transactions” of any REMIC as defined in Section 860F(a)(2) of the Code, on the “net income from foreclosure property” of any
REMIC as defined in Section 860G(c) of the Code, on any contribution to any REMIC after the Startup Day pursuant to Section 860G(d) of the Code, or any other tax is imposed, if not paid as otherwise provided for herein, such tax shall be paid by (i)
the Trustee, if any such other tax arises out of or results from a breach by the Trustee of any of its obligations under this Agreement which breach was caused by its negligence or willful misconduct, (ii) the Master Servicer, in the case of any
such minimum tax, or if such tax arises out of or results from a breach by the Master Servicer of any of their obligations under this Agreement, (iii) the Seller, if any such tax arises out of or results from the Seller’s obligation to
repurchase a Mortgage Loan pursuant to Section 2.2 or 2.3 or (iv) in all other cases, or in the event that the Trustee, the Master Servicer or the Seller fails to honor its obligations under the preceding clauses (i), (ii) or (iii), any such tax
will be paid with amounts otherwise to be distributed to the Certificateholders, as provided in Section 3.8(b) . 

          Each Class I-A-16 Certificate shall be treated as representing not only ownership of regular interests in the Upper REMIC, but also ownership of an interest in the Corridor Contract. For tax purposes,
the Corridor Contract shall be deemed to have a value $428,700 as of the Closing Date. 

ARTICLE IX 

TERMINATION

                    SECTION 9.1     Termination upon Liquidation or Purchase of all Mortgage Loans.

          Subject to Section 9.3, the obligations and responsibilities of the Depositor, the Master Servicer and the Trustee created hereby with respect to the Trust Fund shall terminate upon the earlier of (a)
the purchase by the Master Servicer of all Mortgage Loans (and REO Properties) remaining in the Trust Fund at the price equal to the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan (other than a Mortgage Loan that has been
foreclosed and subject to clause (ii)) plus one month’s accrued interest thereon at the applicable Adjusted Mortgage Rate, (ii) the lesser of (x) the appraised value of any REO Property as determined by the higher of two appraisals completed by
two independent appraisers selected by the Master Servicer at the expense of the Master Servicer and (y) the Stated Principal Balance of each Mortgage Loan related to any REO Property, plus accrued and unpaid interest thereon at the applicable
Adjusted Mortgage Rate, and (iii) any costs and damages incurred by the Trust in connection with the noncompliance of such Mortgage Loan with any specifically applicable predatory or abusive lending law, and (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 REO Property and (ii) the distribution to Certificateholders of all amounts required to be distributed to them
pursuant to this Agreement. In no event shall the trusts created hereby continue beyond the earlier of (i) the expiration of 21 years from the death of the survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James’s, living on the date hereof, and (ii) the Latest Possible Maturity Date. The right to purchase all Mortgage Loans and REO Properties pursuant to clause (a) above shall be conditioned upon the aggregate of the Pool
Principal Balances of both Mortgage Pools, at the time of any such repurchase, being less than ten percent (10%) of the aggregate Cut-off Date

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Pool Principal Balance of both Mortgage Pools. The Master Servicer will deposit the funds for such purchase into the Certificate Account pursuant to Section 3.5(b)(viii) . 

                    SECTION 9.2     Final Distribution on the Certificates.

          If on any Determination Date, the Master Servicer determines that there are no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund other than the funds in the Certificate
Account, the Master Servicer shall direct the Trustee promptly to send a final distribution notice to each Certificateholder. If the Master Servicer elects to terminate the Trust Fund pursuant to clause (a) of Section 9.1, at least 20 days prior to
the date notice is to be mailed to the affected Certificateholders, the Master Servicer shall notify the Depositor and the Trustee of the date the Master Servicer intends to terminate the Trust Fund and of the applicable repurchase price of the
Mortgage Loans and REO Properties. 

          Notice of any termination of the Trust Fund, specifying the Distribution Date on which Certificateholders may surrender their Certificates for payment of the final distribution and cancellation, shall
be given promptly by the Trustee by letter to Certificateholders mailed not earlier than the 10th day and no later than the 15th day of the month next preceding the month of such final distribution. Any such notice shall specify (a) the Distribution
Date upon which final distribution on the Certificates will be made upon presentation and surrender of Certificates at the office therein designated, (b) the amount of such final distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise applicable to such Distribution Date is not applicable, distributions being made only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at the time such notice is given to Certificateholders. 

          In the event such notice is given, the Master Servicer shall cause all funds in the Certificate Account to be remitted to the Trustee for deposit in the applicable subaccounts of the Distribution
Account on the Business Day prior to the applicable Distribution Date in an amount equal to the final distribution in respect of the Certificates. Upon such final deposit with respect to the Trust Fund and the receipt by the Trustee of a Request for
Release therefor, the Trustee shall promptly release to the Master Servicer the Mortgage Files for the Mortgage Loans. 

          Upon presentation and surrender of the Certificates, the Trustee shall cause to be distributed to the Certificateholders of each Class, in the order set forth in Section 4.2 hereof, on the final
Distribution Date, in the case of the Certificateholders, in proportion to their respective Percentage Interests, with respect to Certificateholders of the same Class, an amount equal to (i) as to each Class of Regular Certificates, the Class
Certificate Balance thereof plus accrued interest thereon in the case of an interest bearing Certificate, and (ii) as to the Residual Certificates, the amount, if any, which remains on deposit in the Distribution Account (other than the amounts
retained to meet claims) after application pursuant to clause (i) above.

          In the event that any affected Certificateholders shall not surrender Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Trustee shall
give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within six

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months after the second notice all the applicable Certificates shall not have been surrendered for cancellation, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds and other assets which remain a part of the Trust Fund. If within one year after the second notice all Certificates shall not have
been surrendered for cancellation, the Holders of each of the Class I-A-R Certificates shall be entitled to all unclaimed funds and other assets of the Trust Fund, held for distribution to such Certificateholders, which remain subject hereto.

                    SECTION 9.3     Additional Termination Requirements.

	 	
(a)   	
In the event the Master Servicer exercises its purchase option as provided in Section 9.1, the Trust Fund and each REMIC created hereunder shall be terminated in accordance with the following additional requirements, unless the
Trustee has been supplied with an Opinion of Counsel, at the expense of the Master Servicer, to the effect that the failure to comply with the requirements of this Section 9.3 will not (i) result in the imposition of taxes on “prohibited
transactions” on any REMIC as defined in Section 860F of the Code, or (ii) cause any REMIC to fail to qualify as a REMIC at any time that any Certificates are outstanding:	
	          	          	          	          	 
	 	 	 	(i)	 Within 90 days prior to the final Distribution Date
      set forth in the notice given by the Master Servicer under Section 9.2,
      the Master Servicer shall prepare and the Trustee, at the expense of the “tax
      matters person,” shall adopt a plan of complete liquidation within
      the meaning of Section 860F(a)(4) of the Code for each REMIC created hereunder
      which, as evidenced by an Opinion of Counsel addressed to the Trustee (which
      opinion shall not be an expense of the Trustee or the Tax Matters Person),
    meets the requirements of a qualified liquidation; and 
	 	 	 	 	 
	 	 	 	(ii) 	Within 90 days after the time of adoption of such plans
      of complete liquidation, the Trustee shall sell all of the assets of the
    Trust Fund to the Master Servicer for cash in accordance with Section 9.1. 
	 
	 	
(b)   	
The Trustee as agent for any REMIC established hereunder hereby agrees to adopt and sign such a plan of complete liquidation upon the written request of the Master Servicer, and the receipt of the Opinion of Counsel referred to in
Section 9.3(a)(1) and to take such other action in connection therewith as may be reasonably requested by the Master Servicer.	
	 
	 	
(c)   	
By their acceptance of the Certificates, the Holders thereof hereby authorize the Master Servicer to prepare and the Trustee to adopt and sign plans of complete liquidation.	
	 

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ARTICLE X 

EXCHANGE ACT REPORTING

                    SECTION 10.1     Filing Obligations.

          The Master Servicer, the Trustee and the Seller shall reasonably cooperate with the Depositor in connection with the satisfaction of the Depositor’s reporting requirements under the Exchange Act
with respect to the Trust Fund. In addition to the information specified below, if so requested by the Depositor for the purpose of satisfying its reporting obligation under the Exchange Act, the Master Servicer, the Trustee and the Seller shall
(and the Master Servicer shall cause each Subservicer to) provide the Depositor with (a) such information which is available to such Person without unreasonable effort or expense and within such timeframe as may be reasonably requested by the
Depositor to comply with the Depositor’s reporting obligations under the Exchange Act and (b) to the extent such Person is a party (and the Depositor is not a party) to any agreement or amendment requested of it by the Depositor and required to
be filed, copies of such agreement or amendment in EDGAR-compatible form. 

                    SECTION 10.2     Form 10-D Filings.

	          	         (a)      Although
          the Depositor is responsible under Regulation AB for filing the Form
          10-D, the Trustee hereby agrees it shall prepare for filing and file
          within fifteen days after each Distribution Date (subject to permitted
          extensions under the Exchange Act) with the SEC with respect to the
          Trust Fund, a Form 10-D with copies of the Monthly Report and, to the
          extent delivered to the Trustee, no later than ten days following the
          Distribution Date, such other information identified by the Depositor
          or the Master Servicer, in writing, to be filed with the SEC (such
          other information, the “Additional Designated Information”).
          If the Depositor or Master Servicer directs that any Additional Designated
          Information is to be filed with any Form 10-D, the Depositor or Master
          Servicer, as the case may be, shall specify the Item on Form 10-D to
          which such information is responsive and, with respect to any Exhibit
          to be filed on Form 10-D, the Exhibit number. Any information to be
          filed on Form 10-D shall be delivered to the Trustee in EDGAR-compatible
          form or as otherwise agreed upon by the Trustee and the Depositor or
          the Master Servicer, as the case may be, at the Depositor’s expense,
          and any necessary conversion to EDGAR-compatible format will be at
          the Depositor’s expense. At the reasonable request of, and in
          accordance with the reasonable directions of, the Depositor or the
          Master Servicer, subject to the two preceding sentences, the Trustee
          shall prepare for filing and file an amendment to any Form 10-D previously
          filed with the SEC with respect to the Trust Fund. The Master Servicer
          shall sign the Form 10-D filed on behalf of the Trust Fund. 

                 (b)      No
          later than each Distribution Date, each of the Master Servicer and
          the Trustee shall notify (and the Master Servicer shall cause any Subservicer
          to notify) the Depositor and the Master Servicer of any Form 10-D Disclosure
          Item relating to it, together with a description of any such Form 10-D
          Disclosure Item in form and substance reasonably acceptable to the
          Depositor. In addition to such information as the Master Servicer and
          the Trustee are obligated to provide pursuant to other provisions of
          this Agreement, if so requested by the Depositor, each of the Master
          Servicer and the Trustee

    

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	          	shall provide such information which
          is available to the Master Servicer and the Trustee, as applicable,
          without unreasonable effort or expense regarding the performance or
          servicing of the Mortgage Loans (in the case of the Trustee, based
          on the information provided by the Master Servicer) as is reasonably
          required of the Depositor to facilitate preparation of distribution
          reports in accordance with Item 1121 of Regulation AB. Such information
          shall be provided concurrently with the delivering of the reports specified
          in Section 4.6 in the case of the Master Servicer and the Monthly Statement
          in the case of the Trustee, commencing with the first such report due
          not less than five (5) Business Days following such request. 

                 (c)      The
          Trustee shall not have any responsibility to file any items (other
          than those generated by it) that have not been received in a format
          suitable (or readily convertible into a format suitable) for electronic
          filing via the EDGAR system and shall not have any responsibility to
          convert any such items to such format (other than those items generated
          by it or that are readily convertible to such format). The Trustee
          shall have no liability to the Certificateholders, the Trust Fund,
          the Master Servicer or the Depositor with respect to any failure to
          properly prepare or file any of Form 10-D to the extent that such failure
          is not the result of any negligence, bad faith or willful misconduct
          on its part. For avoidance of doubt, the Trustee shall have no liability
          whatsoever under the Securities Act or the Exchange Act 

    

                    SECTION 10.3     Form 8-K Filings.

          The Master Servicer shall prepare and file on behalf of the Trust Fund any Form 8-K required by the Exchange Act. Each Form 8-K must be signed by the Master Servicer. Each of the Trustee and the
Master Servicer shall (and the Master Servicer shall cause any Subservicer to), promptly notify the Depositor and the Master Servicer (if the notifying party is not the Master Servicer), but in no event later than one (1) Business Day after its
occurrence, of any Reportable Event related to it, of which it has actual knowledge. The Master Servicer shall notify the Depositor if any material pool characteristic of the actual asset pool at the time of issuance of the Certificates differs by
five percent or more (other than as a result of the pool assets converting into cash in accordance with their terms) from the description of the asset pool in the Prospectus Supplement. 

                    SECTION 10.4     Form 10-K Filings.

          Prior to March 30th of each year, commencing in 2008 (or such earlier date as may be required by the Exchange Act), the Depositor shall
prepare and file on behalf of the Trust Fund a Form 10-K, in form and substance as required by the Exchange Act. A senior officer in charge of the servicing function of the Master Servicer shall sign each Form 10-K filed on behalf of the Trust Fund.
Such Form 10-K shall include as exhibits each (i) annual compliance statement described under Section 3.16(a), (ii) annual report on assessments of compliance with servicing criteria described under Section 10.7 and (iii) accountant’s report
described under Section 10.7. Each Form 10-K shall also include any Sarbanes-Oxley Certification required to be included therewith, as described in Section 10.5. 

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          If the Item 1119 Parties listed on Exhibit P have changed since the Closing Date, no later than March 1st of each year, the Depositor
shall provide each of the Master Servicer (and the Master Servicer shall provide any Subservicer) and the Trustee with an updated Exhibit P setting forth the Item 1119 Parties. No later than March 15th of each year, commencing in 2008, the Master Servicer and the Trustee shall notify (and the Master Servicer shall cause any Subservicer to notify) the Depositor of any Form 10-K Disclosure Item related
to it, together with a description of any such Form 10-K Disclosure Item in form and substance reasonably acceptable to the Depositor. Additionally, each of the Master Servicer and the Trustee shall provide to the Depositor, and shall cause each
Reporting Subcontractor retained by the Master Servicer or the Trustee, as applicable, and in the case of the Master Servicer shall cause each Subservicer that is a Reporting Subcontractor, to provide to the Depositor, the following information no
later than March 15th of each year in which a Form 10-K is required to be filed on behalf of the Trust Fund: (i) if such Person’s report on assessment of compliance with servicing
criteria described under Section 10.7 or related registered public accounting firm attestation report described under Section 10.7 identifies any material instance of noncompliance, notification of such instance of noncompliance and (ii) if any such
Person’s report on assessment of compliance with servicing criteria or related registered public accounting firm attestation report is not provided to be filed as an exhibit to such Form 10-K, information detailing the explanation why such
report is not included. 

                    SECTION 10.5     Sarbanes-Oxley Certification.

          Each Form 10-K shall include a certification (the “Sarbanes-Oxley Certification”) required by Rules 13a-14(d) and 15d-14(d) under the Exchange Act (pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC promulgated thereunder (including any interpretations thereof by the SEC’s staff)). No later than March 15th of each year in which a Form 10-K is required to be filed on behalf
of the Trust Fund, beginning in 2008, the Master Servicer (unless such Person is the Certifying Person) and the Trustee shall, and the Master Servicer shall cause each Subservicer to, provide to the Person who signs the Sarbanes-Oxley Certification
(the “Certifying Person”) a certification (each, a “Performance Certification”), substantially in the form attached hereto as Exhibit N-1 (in the case of a Subservicer) and Exhibit N-2 (in the case of the Trustee), unless such
other form is mutually agreed upon, on which the Certifying Person, the entity for which the Certifying Person acts as an officer, and such entity’s officers, directors and Affiliates (collectively with the Certifying Person,
“Certification Parties”) can reasonably rely. The senior officer in charge of the servicing function of the Master Servicer shall serve as the Certifying Person on behalf of the Trust Fund. Neither the Master Servicer nor the Depositor
will request delivery of a certification under this clause unless the Depositor is required under the Exchange Act to file an annual report on Form 10-K with respect to the Trust Fund. In the event that prior to the filing date of the Form 10-K in
March of each year, a Responsible Officer of the Trustee or the Depositor has actual knowledge of information material to the Sarbanes-Oxley Certification, the Trustee or the Depositor, as the case may be, shall promptly notify the Master Servicer
and the Depositor. The respective parties hereto agree to cooperate with all reasonable requests made by any Certifying Person or Certification Party in connection with such Person’s attempt to conduct any due diligence that such Person
reasonably believes to be appropriate in order to allow it to deliver any Sarbanes-Oxley Certification or portion thereof with respect to the Trust Fund. 

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                    SECTION 10.6     Form 15 Filing.

          Prior to January 31st of the first year in which the Depositor is able to do so under applicable law, the Depositor shall file a Form 15
relating to the automatic suspension of reporting in respect of the Trust Fund under the Exchange Act. 

	          	          SECTION
        10.7   Report
    on Assessment of Compliance and Attestation.
	 	 
	 	          (a)       On
        or before March 15th of
        each calendar year in which a Form 10-K is required to be filed on behalf
    of the Trust Fund, commencing in 2008: 
	          	          	 
	 	 	          (i)      Each
          of the Master Servicer and the Trustee shall deliver to the Depositor
          and the Master Servicer a report (in form and substance reasonably
          satisfactory to the Depositor) regarding the Master Servicer’s
          or the Trustee’s, as applicable, assessment of compliance with
          the Servicing Criteria during the immediately preceding calendar year,
          as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item
          1122 of Regulation AB. Such report shall be signed by an authorized
          officer of such Person and shall address each of the Servicing Criteria
          specified on a certification substantially in the form of Exhibit O
          hereto, unless such other form is mutually agreed upon and delivered
          to the Depositor concurrently with the execution of this Agreement.
          To the extent any of the Servicing Criteria are not applicable to such
          Person, with respect to asset-backed securities transactions taken
          as a whole involving such Person and that are backed by the same asset
          type backing the Certificates, such report shall include such a statement
          to that effect. The Depositor and the Master Servicer, and each of
          their respective officers and directors shall be entitled to rely upon
          each such servicing criteria assessment. 

                 (ii)      Each
          of the Master Servicer and the Trustee shall deliver to the Depositor
          and the Master Servicer a report of a registered public accounting
          firm reasonably acceptable to the Depositor that attests to, and reports
          on, the assessment of compliance made by Master Servicer or the Trustee,
          as applicable, and delivered pursuant to the preceding paragraphs.
          Such attestation shall be in accordance with Rules 1-02(a)(3) and 2-02(g)
          of Regulation S-X under the Securities Act and the Exchange Act, including,
          without limitation that in the event that an overall opinion cannot
          be expressed, such registered public accounting firm shall state in
          such report why it was unable to express such an opinion. Such report
          must be available for general use and not contain restricted use language.
          To the extent any of the Servicing Criteria are not applicable to such
          Person, with respect to asset-backed securities transactions taken
          as a whole involving such Person and that are backed by the same asset
          type backing the Certificates, such report shall include such a statement
          that that effect. 

                 (iii)      The
          Master Servicer shall cause each Subservicer that is a Reporting Subcontractor
          engaged by it to deliver to the Depositor an assessment of compliance
          and accountants’ attestation as and when provided in paragraphs
          (a) and (b) of this Section 10.7. 

    

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	 	 	         (iv)      The
          Trustee shall cause each Reporting Subcontractor engaged by it to deliver
          to the Depositor and the Master Servicer an assessment of compliance
          and accountants’ attestation as and when provided in paragraphs
          (a) and (b) of this Section. 

    
	          	          	 
	 	          (b)       Each
        assessment of compliance provided by a Subservicer pursuant to Section
        10.7(a)(iii) shall address each of the Servicing Criteria specified on
        a certification substantially in the form of Exhibit O hereto delivered
        to the Depositor concurrently with the execution of this Agreement or,
        in the case of a Subservicer subsequently appointed as such, on or prior
        to the date of such appointment. An assessment of compliance provided
        by a Subcontractor pursuant to Section 10.7(a)(iii) or (iv) need not
        address any elements of the Servicing Criteria other than those specified
        by the Master Servicer or the Trustee, as applicable, pursuant to Section
    10.7(a)(i) . 
	 	 	 
	 	          SECTION
        10.8   Use
    of Subservicers and Subcontractors.
	 	 	 
	 	 	 
	 	
(a)   	
The Master Servicer shall cause any Subservicer that is a Reporting Subcontractor used by the Master Servicer (or by any Subservicer) for the benefit of the Depositor to comply with the provisions of Section 3.16 and this Article
X to the same extent as if such Subservicer were the Master Servicer (except with respect to the Master Servicer’s duties with respect to preparing and filing any Exchange Act Reports or as the Certifying Person). The Master Servicer shall be
responsible for obtaining from each Subservicer that is a Reporting Subcontractor and delivering to the Depositor any servicer compliance statement required to be delivered by such Subservicer under Section 3.16, any assessment of compliance and
attestation required to be delivered by such Subservicer under Section 10.7 and any certification required to be delivered to the Certifying Person under Section 10.5 as and when required to be delivered. As a condition to the succession to any
Subservicer as subservicer under this Agreement by any Person (i) into which such Subservicer may be merged or consolidated, or (ii) which may be appointed as a successor to any Subservicer, the Master Servicer shall provide to the Depositor, at
least fifteen (15) calendar days prior to the effective date of such succession or appointment, (x) written notice to the Depositor of such succession or appointment and (y) in writing and in form and substance reasonably satisfactory to the
Depositor, all information reasonably requested by the Depositor in order to comply with its reporting obligation under Item 6.2 of Form 8-K.	
	 
	 	
(b)   	
It shall not be necessary for the Master Servicer or any Subservicer to seek the consent of the Depositor or any other party hereto to the utilization of any Subcontractor. The Master Servicer shall promptly upon request provide
to the Depositor (or any designee of the Depositor, such as the Master Servicer or administrator) a written description (in form and substance satisfactory to the Depositor) of the role and function of each Subcontractor utilized by such Person (or
in the case of the Master Servicer or any Subservicer), specifying (i) the identity of each such Subcontractor, (ii) which (if any) of such Subcontractors are “participating in the servicing function” within the meaning of Item 1122
of	

131

	 	 	
Regulation AB, and (iii) which elements of the Servicing Criteria will be addressed in assessments of compliance provided by each Subcontractor, who is a Reporting Subcontractor, identified pursuant to clause (ii) of this
paragraph.	
	          	          	 
	 	
(c)   	
As a condition to the utilization of any Subcontractor determined to be a Reporting Subcontractor, the Master Servicer shall cause any such Subcontractor used by such Person (or in the case of the Master Servicer or any
Subservicer) for the benefit of the Depositor to comply with the provisions of Sections 10.7 and 10.9 of this Agreement to the same extent as if such Subcontractor were the Master Servicer (except with respect to the Master Servicer’s duties
with respect to preparing and filing any Exchange Act Reports or as the Certifying Person).	
	 
	 	 	
The Master Servicer shall be responsible for obtaining from each Subcontractor and delivering to the Depositor and the Master Servicer, any assessment of compliance and attestation required to be delivered by such Subcontractor
under Section 10.7, in each case as and when required to be delivered.	
	 
	 	 	
SECTION 10.9    Amendments.	
	 

          In the event the parties to this Agreement desire to further clarify or amend any provision of this Article X, this Agreement shall be amended to reflect the new agreement between the parties covering
matters in this Article X pursuant to Section 11.1, which amendment shall not require any Opinion of Counsel or Rating Agency confirmations or the consent of any Certificateholder.  If, during the period that the Depositor is required to file
Exchange Act Reports with respect to the Trust Fund, the Master Servicer is no longer an Affiliate of the Depositor, the Depositor shall assume the obligations and responsibilities of the Master Servicer in this Article X with respect to the
preparation and filing of the Exchange Act Reports and/or acting as the Certifying Person, if the Depositor has received indemnity from such successor Master Servicer satisfactory to the Depositor, and such Master Servicer has agreed to provide a
Sarbanes-Oxley Certification to the Depositor substantially in the form of Exhibit Q. 

ARTICLE XI 

MISCELLANEOUS PROVISIONS

                    SECTION 11.1     Amendment.

          This Agreement may be amended from time to time by the Depositor, the Master Servicer and the Trustee without the consent of any of the Certificateholders (i) to cure any ambiguity or mistake, (ii) to
correct any defective provision herein or to supplement any provision herein which may be inconsistent with any other provision herein, (iii) to add to the duties of the Depositor, the Seller or the Master Servicer, (iv) to add any other provisions
with respect to matters or questions arising hereunder or (v) to modify, alter, amend, add to or rescind any of the terms or provisions contained in this Agreement; provided that any action pursuant to clauses (iv) or (v) above shall not, as
evidenced by an Opinion of Counsel delivered to the Trustee (which Opinion of Counsel shall not be an expense of the Trustee or the Trust Fund), adversely affect in any material respect the interests of any Certificateholder; provided,
however,

132

that the amendment shall not be deemed to adversely affect in any material respect the interests of the Certificateholders if the Person requesting the amendment obtains a letter from each Rating Agency stating that the amendment
would not result in the downgrading or withdrawal of the respective ratings then assigned to the Certificates; it being understood and agreed that any such letter in and of itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues affecting any such rating. The Trustee, the Depositor and the Master Servicer also may at any time and from time to time amend this Agreement without the consent of the
Certificateholders to modify, eliminate or add to any of its provisions to such extent as shall be necessary or helpful to (i) maintain the qualification of any REMIC established hereunder as a REMIC under the Code or the qualification of the
Exchangeable Certificates Grantor Trust as a grantor trust within the meaning of the Code and related regulations at any time that any Exchangeable Certificates or Exchangeable REMIC Certificates are outstanding, (ii) avoid or minimize the risk of
the imposition of any tax on any REMIC established hereunder or the Exchangeable Certificates Grantor Trust pursuant to the Code that would be a claim at any time prior to the final redemption of the Certificates or (iii) comply with any other
requirements of the Code, provided that the Trustee has been provided an Opinion of Counsel, which opinion shall be an expense of the party requesting such opinion but in any case shall not be an expense of the Trustee or the Trust Fund, to the
effect that such action is necessary or helpful to, as applicable, (i) maintain such qualification, (ii) avoid or minimize the risk of the imposition of such a tax or (iii) comply with any such requirements of the Code. 

          This Agreement may also be amended from time to time by the Depositor, the Master Servicer and the Trustee with the consent of the Holders of a Majority in Interest of each Class of Certificates
affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders of Certificates; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of, payments required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) adversely affect in any material respect the interests
of the Holders of any Class of Certificates in a manner other than as described in (i), without the consent of the Holders of Certificates of such Class evidencing, as to such Class, Percentage Interests aggregating 66%, or (iii) reduce the
aforesaid percentages of Certificates the Holders of which are required to consent to any such amendment, without the consent of the Holders of all such Certificates then outstanding.  In addition, the permitted activities of the Trust under this
Agreement cannot be significantly modified without the approval of Holders of Certificates evidencing a Majority in Interest. 

          Notwithstanding any contrary provision of this Agreement, the Trustee shall not consent to any amendment to this Agreement unless it shall have first received an Opinion of Counsel, which opinion
shall not be an expense of the Trustee or the Trust Fund, to the effect that such amendment will not cause the imposition of any tax on any REMIC established hereunder, the Exchangeable Certificates Grantor Trust, or the Certificateholders or cause
any REMIC established hereunder to fail to qualify as a REMIC or fail to qualify as a grantor trust within the meaning of the Code and related regulations at any time that any Certificates are outstanding. 

133

          Promptly after the execution of any amendment to this Agreement requiring the consent of Certificateholders, the Trustee shall furnish written notification of the substance or a copy of such amendment
to each Certificateholder and each Rating Agency. 

          It shall not be necessary for the consent of Certificateholders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable regulations as the Trustee may prescribe. 

          Nothing in this Agreement shall require the Trustee to enter into an amendment without receiving an Opinion of Counsel (which Opinion shall not be an expense of the Trustee or the Trust Fund),
satisfactory to the Trustee that (i) such amendment is permitted and is not prohibited by this Agreement and that all requirements for amending this Agreement have been complied with; and (ii) either (A) the amendment does not adversely affect in
any material respect the interests of any Certificateholder or (B) the conclusion set forth in the immediately preceding clause (A) is not required to be reached pursuant to this Section 11.1. 

                    SECTION 11.2     Recordation of Agreement; Counterparts.

          This Agreement is subject to recordation in all appropriate public offices for real property records in all the counties or other comparable jurisdictions in which any or all of the properties subject
to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Master Servicer at its expense, but only upon direction a majority of the Certificateholders to the effect that
such recordation materially and beneficially affects the interests of the Certificateholders. 

          For the purpose of facilitating the recordation of this Agreement as herein provided and for other purposes, this Agreement may be executed (by facsimile or otherwise) simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument. 

                    SECTION 11.3     Governing Law.

          THIS AGREEMENT (OTHER THAN SECTION 2.1 HEREOF) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN
THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.  SECTION 2.1 OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS UNDER SUCH SECTION SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS. 

134

                    SECTION 11.4     Intention of Parties.

          It is the express intent of the parties hereto that the conveyance of the Trust Fund by the Depositor to the Trustee be, and be construed as, absolute sales thereof to the Trustee. It is, further, not
the intention of the parties that such conveyances be deemed a pledge thereof by the Depositor to the Trustee. However, in the event that, notwithstanding the intent of the parties, such assets are held to be the property of the Depositor, or if for
any other reason this Agreement is held or deemed to create a security interest in such assets, then (i) this Agreement shall be deemed to be a security agreement within the meaning of the Uniform Commercial Code of the State of New York and (ii)
the conveyance provided for in this Agreement shall be deemed to be an assignment and a grant by the Depositor to the Trustee, for the benefit of the Certificateholders, of a security interest in all of the assets that constitute the Trust Fund,
whether now owned or hereafter acquired. 

          The Depositor, for the benefit of the Certificateholders, shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in the Trust Fund, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of the Agreement. The Depositor shall
arrange for filing any Uniform Commercial Code financing and continuation statements in connection with any security interest granted or assigned to the Trustee for the benefit of the Certificateholders. 

                    SECTION 11.5     Notices.

	 	(a)  	The Trustee shall use its best efforts to promptly provide
      notice to each Rating Agency with respect to each of the following of which
    it has actual knowledge: 
	          	          	          	          	 
	 	 	 	
(i)   	
Any material change or amendment to this Agreement;	
	 
	 	 	 	
(ii)   	
The occurrence of any Event of Default that has not been cured;	
	 
	 	 	 	
(iii)   	
The resignation or termination of the Master Servicer or the Trustee and the appointment of any successor;	
	 
	 	 	 	
(iv)   	
The repurchase or substitution of Mortgage Loans pursuant to Section 2.3;	
	 
	 	 	 	
(v)   	
The final payment to Certificateholders; and	
	 
	 	 	 	
(vi)   	
Any rating action involving the long-term credit rating of the Master Servicer, which notice shall be made by first-class mail within two Business Days after the Trustee gains actual knowledge thereof.	

          In addition, the Trustee shall promptly furnish to each Rating Agency copies of the following: 

135

	 	 	 	
(i)   	
Each report to Certificateholders described in Section 4.6;	
	 
	 	 	 	
(ii)   	
Each annual statement as to compliance described in Section 3.16; and	
	 
	 	 	 	
(iii)   	
Any notice of a purchase of a Mortgage Loan pursuant to Section 2.2, 2.3 or 3.11.	
	 	 	 
	 	
(b)   	
All directions, demands, authorizations, consents, waivers, communications and notices hereunder shall be in writing and shall be deemed to have been duly given when delivered to by first class mail, facsimile or courier (a) in
the case of the Depositor, First Horizon Asset Securities Inc., 4000 Horizon Way, Irving, Texas 75063, Attention: Alfred Chang; (b) in the case of the Master Servicer, First Horizon Home Loans, 4000 Horizon Way, Irving, Texas 75063, Attention: Larry
P. Cole or such other address as may be hereafter furnished to the Depositor and the Trustee by the Master Servicer in writing; (c) in the case of the Trustee, The Bank of New York, 101 Barclay Street, 4W, New York, New York 10286, Attention:
Corporate Trust Administration—First Horizon 2007-4, or such other address as the Trustee may hereafter furnish to the Depositor or Master Servicer, and (d) in the case of the Rating Agencies, the address specified therefor in the definition
corresponding to the name of such Rating Agency. Notices to Certificateholders shall be deemed given when mailed, first class postage prepaid, to their respective addresses appearing in the Certificate Register.	
	          	          	          	          	 
	 	 	
SECTION 11.6    Severability of Provisions.	

          If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders
thereof. 

                    SECTION 11.7     Assignment.

          Notwithstanding anything to the contrary contained herein, except as provided in Section 6.2, this Agreement may not be assigned by the Master Servicer without the prior written consent of the Trustee
and Depositor. 

                    SECTION 11.8     Limitation on Rights of Certificateholders.

          The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the trust created hereby, nor entitle such Certificateholder’s legal representative or heirs to
claim an accounting or to take any action or commence any proceeding in any court for a petition or winding up of the trust created hereby, or otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. 

          No Certificateholder shall have any right to vote (except as provided herein) or in any manner otherwise control the operation and management of the Trust Fund, or the obligations of

136

the parties hereto, nor shall anything herein set forth or contained in the terms of the Certificates be construed so as to constitute the Certificateholders from time to time as partners or members of an association; nor shall
any Certificateholder be under any liability to any third party by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. 

          No Certificateholder shall have any right by virtue or by availing itself of any provisions of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with
respect to this Agreement, unless such Holder previously shall have given to the Trustee a written notice of an Event of Default and of the continuance thereof, as herein provided, and unless the Holders of Certificates evidencing not less than 25%
of the Voting Rights evidenced by the Certificates shall also have made written request to the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity
as it may require against the costs, expenses, and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity shall have neglected or refused to institute any such
action, suit or proceeding; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of the Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder or to enforce any right under this Agreement, except in the manner herein provided and for the common benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section 11.8, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. 

                    SECTION 11.9     Inspection and Audit Rights.

          The Master Servicer agrees that, on reasonable prior notice, it will permit and will cause each Subservicer to permit any representative of the Depositor or the Trustee during the Master
Servicer’s normal business hours, to examine all the books of account, records, reports and other papers of the Master Servicer relating to the Mortgage Loans, to make copies and extracts therefrom, to cause such books to be audited by
independent certified public accountants selected by the Depositor or the Trustee and to discuss its affairs, finances and accounts relating to the Mortgage Loans with its officers, employees and independent public accountants (and by this provision
the Master Servicer hereby authorizes said accountants to discuss with such representative such affairs, finances and accounts), all at such reasonable times and as often as may be reasonably requested. Any out-of-pocket expense incident to the
exercise by the Depositor or the Trustee of any right under this Section 11.9 shall be borne by the party requesting such inspection; all other such expenses shall be borne by the Master Servicer or the related Subservicer. 

                    SECTION 11.10     Certificates Nonassessable and Fully Paid.

          It is the intention of the Depositor that Certificateholders shall not be personally liable for obligations of the Trust Fund, that the interests in the Trust Fund represented by the Certificates
shall be nonassessable for any reason whatsoever, and that the Certificates, upon due

137

authentication thereof by the Trustee pursuant to this Agreement, are and shall be deemed fully paid. 

                    SECTION 11.11     Limitations on Actions; No Proceedings.

	 	
(a)   	
Other than pursuant to this Agreement, or in connection with or incidental to the provisions or purposes of this Agreement, the trust created hereunder shall not (i) issue debt or otherwise borrow money, (ii) merge or consolidate
with any other entity reorganize, liquidate or transfer all or substantially all of its assets to any other entity, or (iii) otherwise engage in any activity or exercise any power not provided for in this Agreement.	
	          	          	 
	 	
(b)   	
Notwithstanding any prior termination of this Agreement, the Trustee, the Master Servicer and the Depositor shall not, prior to the date which is one year and one day after the termination of this Agreement, acquiesce, petition or
otherwise invoke or cause any Person to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Depositor or the Trust Fund under any federal or state bankruptcy, insolvency or other
similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Depositor or the Trust Fund or any substantial part of their respective property, or ordering the winding up or liquidation
of the affairs of the Depositor or the Trust Fund.	
	 
	 	 	
SECTION 11.12    Acknowledgment of Seller.	

           Seller hereby acknowledges the provisions of this Agreement, including the obligations under Sections 2.1(a), 2.2, 2.3(b) and 8.11 of this Agreement and further acknowledges the Depositor’s assignment of its rights and
remedies for the breach of the representations and warranties made by the Seller under the MLPA. 

* * * * * *

138

          IN WITNESS WHEREOF, the Depositor, the Trustee and the Master Servicer have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first
above written. 

          

	 	 	FIRST HORIZON ASSET SECURITIES
          INC., 

          as Depositor 

    
	 	 	 
	 	 	 
	 	 	By:	 

	 	 	           Alfred Chang 

                  Vice President
	 	 	 
	 	 	 
	 	 	THE
          BANK OF NEW YORK, 

            not in its individual capacity, but solely as
            Trustee 

             

    
	 	 	 
	 	 	 
	 	 	By:	 

	 	 	Name: 	 

	 	 	Title:	 

	 	 	 
	 	 	 
	 	 	FIRST
          HORIZON HOME LOANS, a division of 

            First Tennessee Bank National Association, in
            its 

              capacity as Master Servicer 

        

    
	 	 	 
	 	 	 
	 	 	By:	 

	 	 	           Terry L. McCoy 

                  Executive Vice President 
	 	 	 
	The foregoing agreement is hereby 

          acknowledged and accepted as of the 

          date first above written: 

        

      FIRST HORIZON HOME LOANS, 

          a division of First Tennessee Bank National 

    Association, in its capacity as Seller 
	 	 
	 	 	 
	By: 	 
	 	 
	           Terry L. McCoy 

               Executive Vice President    	 	 

   

 

SCHEDULE I 

First Horizon Asset Securities Inc. 

Mortgage Pass-Through Certificates Series 2007-4

Mortgage Loan Schedule 

[Available Upon Request from Trustee] 

I-1

SCHEDULE II

First Horizon Asset Securities Inc. 

Mortgage Pass-Through Certificates Series 2007-4 

Representations and Warranties of the Master Servicer

          First Horizon Home Loans (“First Horizon”) hereby makes the representations and warranties set forth in this Schedule II to the Depositor and the Trustee, as of the Closing Date, or if so
specified herein, as of the Cut-off Date. Capitalized terms used but not otherwise defined in this Schedule II shall have the meanings ascribed thereto in the Pooling and Servicing Agreement (the “Pooling and Servicing Agreement”) relating
to the above-referenced Series, among First Horizon, as master servicer, First Horizon Asset Securities Inc., as depositor, and The Bank of New York, as trustee.

	          	          (1)
               First Horizon is duly organized as a national banking association and
          is validly existing and in good standing under the laws of the United
          States of America and is duly authorized and qualified to transact
          any and all business contemplated by the Pooling and Servicing Agreement
          to be conducted by First Horizon in any state in which a Mortgaged
          Property is located or is otherwise not required under applicable law
          to effect such qualification and, in any event, is in compliance with
          the doing business laws of any such state, to the extent necessary
          to ensure its ability to enforce each Mortgage Loan, to service the
          Mortgage Loans in accordance with the terms of the Pooling and Servicing
          Agreement and to perform any of its other obligations under the Pooling
          and Servicing Agreement in accordance with the terms thereof.

                 (2)
               First Horizon has the requisite power and authority to service each
          Mortgage Loan, and to execute, deliver and perform, and to enter into
          and consummate the transactions contemplated by the Pooling and Servicing
          Agreement and has duly authorized by all necessary action on the part
          of First Horizon the execution, delivery and performance of the Pooling
          and Servicing Agreement; and the Pooling and Servicing Agreement, assuming
          the due authorization, execution and delivery thereof by the other
          parties thereto, constitutes a legal, valid and binding obligation
          of First Horizon, enforceable against First Horizon in accordance with
          its terms, except that (a) the enforceability thereof may be limited
          by bankruptcy, insolvency, moratorium, receivership and other similar
          laws relating to creditors’ rights generally and (b) the remedy
          of specific performance and injunctive and other forms of equitable
          relief may be subject to equitable defenses and to the discretion of
          the court before which any proceeding therefor may be brought.

                 (3)             The
          execution and delivery of the Pooling and Servicing Agreement by First
          Horizon, the servicing of the Mortgage Loans by First Horizon under
          the Pooling and Servicing Agreement, the consummation of any other
          of the transactions contemplated by the Pooling and Servicing Agreement,
          and the fulfillment of or compliance with the terms thereof are in
          the ordinary course of business of First Horizon and will not (A) result
          in a material breach of any term or provision of the charter or bylaws
          of First Horizon or (B) materially conflict with, result in a material
          breach, violation or acceleration of, or result in a material default
          under, the terms of any other material

    

II-1

	          	agreement or instrument to which First
          Horizon is a party or by which it may be bound, or (C) constitute a
          material violation of any statute, order or regulation applicable to
          First Horizon of any court, regulatory body, administrative agency
          or governmental body having jurisdiction over First Horizon; and First
          Horizon is not in breach or violation of any material indenture or
          other material agreement or instrument, or in violation of any statute,
          order or regulation of any court, regulatory body, administrative agency
          or governmental body having jurisdiction over it which breach or violation
          may materially impair First Horizon’s ability to perform or meet
          any of its obligations under the Pooling and Servicing Agreement.

                 (4)
               No litigation is pending or, to the best of First Horizon’s knowledge,
          threatened against First Horizon that would prohibit the execution
          or delivery of, or performance under, the Pooling and Servicing Agreement
          by First Horizon.

                 (5)
               First Horizon is a member of MERS in
          good standing, and will comply in all material respects with the rules
          and procedures of MERS in connection with the servicing of the MERS
          Mortgage Loans for as along as such Mortgage Loans are registered with
          MERS. 

    

II-2

SCHEDULE III 

First Horizon Asset Securities Inc. 

Mortgage Pass-Through Certificates Series 2007-4

Form of Monthly Master Servicer Report 

[Begins on Next Page]

III-1

EXHIBIT A-1

[FORM OF SENIOR CERTIFICATE 

OTHER THAN THE CLASS [I-A-PO] CERTIFICATES]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO 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. 

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). 

A-I-1

	
Certificate No.
		
      :
      
	 

	
	
Cut-off Date
		
      :
      
	 

	
	
First Distribution Date
		
      :
      
	 

	
	
Initial Certificate Balance
		     

	  
	 

	
	
of this Certificate
		

	  
	 

	
	
(“Denominations”)
		
      :
      
	
$
	
	
Initial Certificate
		

	  
	 

	
	
Balances of all
		

	  
	 

	
	
Certificate of this
		

	  
	 

	
	
Class
		
      :
      
	
$
	
	
CUSIP
		
      :
      
	 

	

First Horizon Mortgage Pass-Through Trust 2007-4

Mortgage Pass-Through Certificates, Series 2007-4

Class [________] 

  
    evidencing a percentage interest in the distributions allocable to the Certificates of the above-referenced Class with respect to a Trust Fund consisting primarily of one or more pools of conventional mortgage loans (the
“Mortgage Loans”) secured by first liens on one- to four-family residential properties. 

  

First Horizon Asset Securities Inc., as Depositor

          [Principal in respect of this Certificate is distributable monthly as set forth herein. Accordingly, the Certificate Balance at any time may be less than the Certificate Balance as set forth herein.]
This Certificate does not evidence an obligation of, or an interest in, and is not guaranteed by the Depositor, the Master Servicer or the Trustee referred to below or any of their respective affiliates. Neither this Certificate nor the Mortgage
Loans are guaranteed or insured by any governmental agency or instrumentality. 

          This certifies that __________________ is the registered owner of the Percentage Interest evidenced by this Certificate (obtained by dividing the denomination of this Certificate by the
aggregate Initial Certificate Balances of all Certificates of the Class to which this Certificate belongs) in certain monthly distributions with respect to a Trust Fund consisting primarily of the Mortgage Loans deposited by First Horizon Asset
Securities Inc. (the “Depositor”). The Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of the Cut-off Date specified above (the “Agreement”) among the Depositor, First Horizon Home Loans, as master
servicer (the “Master Servicer”), and The Bank of New York, as trustee (the “Trustee”).  To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. 

A-I-2

          Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this
place. 

          This Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose unless manually countersigned by an authorized signatory of the Trustee. 

A-I-3

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.

Dated: June __, 2007

	 	THE BANK OF NEW YORK, 

      not in its individual capacity, but solely as Trustee 
	 	 
	 	 
	 	By:  	 

	 	 	Authorized Signatory of

           THE BANK OF NEW YORK 

           not in its individual capacity, 

           but solely as Trustee 

     

	Countersigned:	 	 
	 	 	 
	By 	 
	 	 
	 	     Authorized Signatory of 

                THE BANK OF NEW YORK, 

                not in its individual capacity, 

                but solely as Trustee 

    	 	 

A-I-4

EXHIBIT A-2

[FORM OF SENIOR CERTIFICATE

[CLASS [I-A-PO] [CERTIFICATE] 

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). 

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR, IF THE CERTIFICATE HAS BEEN SUBJECT TO AN ERISA-QUALIFYING UNDERWRITING, A REPRESENTATION IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT
REFERRED TO HEREIN, OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. SUCH REPRESENTATION SHALL BE DEEMED TO HAVE BEEN MADE TO THE TRUSTEE BY THE TRANSFEREE’S ACCEPTANCE OF A
CERTIFICATE OF THIS CLASS AND BY A BENEFICIAL OWNER’S ACCEPTANCE OF ITS INTEREST IN A CERTIFICATE OF THIS CLASS. 

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES (“BLUE SKY LAWS”), AND SUCH
CERTIFICATE MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE BLUE SKY LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY
RULE 144 FOR RESALES OF THIS CERTIFICATE.

THIS CLASS [I-A-PO] CERTIFICATE SHALL NOT BE ENTITLED TO ANY PAYMENTS IN RESPECT OF INTEREST. 

A-I-5

	
Certificate No.
		
      :
      
	 

	
	
Cut-off Date
		
      :
      
	 

	
	
First Distribution Date
		
      :
      
	 

	
	
Initial Certificate Balance
		

	       
	 

	
	
of this Certificate
		

	  
	 

	
	
(“Denominations”)
		
      :
      
	
$
	
	
Initial Certificate
		

	  
	 

	
	
Balances of all
		

	  
	 

	
	
Certificate of this
		

	  
	 

	
	
Class
		
      :
      
	
$
	
	
CUSIP
		
      :
      
	 

	

First Horizon Mortgage Pass-Through Trust 2007-4

Mortgage Pass-Through Certificates, Series 2007-4

Class [I-A-PO] 

  
    evidencing a percentage interest in the distributions allocable to the Certificates of the above-referenced Class with respect to a Trust Fund consisting primarily of one or more pools of conventional mortgage loans (the
“Mortgage Loans”) secured by first liens on one- to four-family residential properties. 

  

First Horizon Asset Securities Inc., as Depositor

          Principal in respect of this Certificate is distributable monthly as set forth herein. Accordingly, the Certificate Balance at any time may be less than the Certificate Balance as set forth herein.
This Certificate does not evidence an obligation of, or an interest in, and is not guaranteed by the Depositor, the Master Servicer or the Trustee referred to below or any of their respective affiliates. Neither this Certificate nor the Mortgage
Loans are guaranteed or insured by any governmental agency or instrumentality. 

          This certifies that __________________ is the registered owner of the Percentage Interest evidenced by this Certificate (obtained by dividing the denomination of this Certificate by the
aggregate Initial Certificate Balances of all Certificates of the Class to which this Certificate belongs) in certain monthly distributions with respect to a Trust Fund consisting primarily of the Mortgage Loans deposited by First Horizon Asset
Securities Inc. (the “Depositor”). The Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of the Cut-off Date specified above (the “Agreement”) among the Depositor, First Horizon Home Loans, as master
servicer (the “Master Servicer”), and The Bank of New York, as trustee (the “Trustee”).  To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. 

A-I-6

          Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this
place. 

          This Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose unless manually countersigned by an authorized signatory of the Trustee. 

A-I-7

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.

Dated: June __, 2007

 

	 	 	 	THE BANK OF NEW YORK, 

      not in its individual capacity, but solely as Trustee 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	By:  	 

	 	 	 	 	Authorized Signatory of

       THE BANK OF NEW YORK 

       not in its individual capacity, 

       but solely as Trustee 
	 	 	 	 	 
	 	 	 	 	 
	 	Countersigned: 	 	 	 
	 	 	 	 	 
	By  	 
	 	 	 
	 	     Authorized Signatory of 

                THE BANK OF NEW YORK, 

                not in its individual capacity,

                but solely as Trustee 

    	 	 	 

         

          

           A-I-8

EXHIBIT B 

[FORM OF SUBORDINATED CERTIFICATE] 

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO 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.] 

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). 

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO CERTAIN CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. 

[THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES (“BLUE SKY LAWS”), AND
SUCH CERTIFICATE MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE BLUE SKY LAWS.  NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF THE EXEMPTION
PROVIDED BY RULE 144 FOR RESALES OF THIS CERTIFICATE.] 

[NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR A PLAN OR ARRANGEMENT SUBJECT TO SECTION 4975 OF THE CODE, OR, IF SUCH PURCHASER IS AN INSURANCE COMPANY AND THE CERTIFICATE HAS BEEN SUBJECT TO AN ERISA-QUALIFYING UNDERWRITING, A
REPRESENTATION IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT 

B-1

REFERRED TO HEREIN, OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. SUCH REPRESENTATION SHALL BE DEEMED TO HAVE BEEN MADE TO THE TRUSTEE BY THE
TRANSFEREE’S ACCEPTANCE OF A CERTIFICATE OF THIS CLASS AND BY A BENEFICIAL OWNER’S ACCEPTANCE OF ITS INTEREST IN A CERTIFICATE OF THIS CLASS.  NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE
TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.] 

B-2

	
Certificate No.
		
      :
      
	 

	
	
Cut-off Date
		
      :
      
	 

	
	
First Distribution Date
		
      :
      
	 

	
	
Initial Certificate Balance
		     

	  
	 

	
	
of this Certificate
		

	  
	 

	
	
(“Denominations”)
		
      :
      
	
$
	
	
Initial Certificate
		

	  
	 

	
	
Balances of all
		

	  
	 

	
	
Certificate of this
		

	  
	 

	
	
Class
		
      :
      
	
$
	
	
CUSIP
		
      :
      
	 

	

First Horizon Mortgage Pass-Through Trust 2007-4

Mortgage Pass-Through Certificates, Series 2007-4

Class [___] 

  
    
      evidencing a percentage interest in the distributions allocable to the Certificates of the above-referenced Class with respect to a Trust Fund consisting primarily of one or more pools of conventional mortgage loans (the
“Mortgage Loans”) secured by first liens on one- to four-family residential properties. 

  

First Horizon Asset Securities Inc., as Depositor

          Principal in respect of this Certificate is distributable monthly as set forth herein. Accordingly, the Certificate Balance at any time may be less than the Certificate Balance as set forth herein.
This Certificate does not evidence an obligation of, or an interest in, and is not guaranteed by the Depositor, the Master Servicer or the Trustee referred to below or any of their respective affiliates. Neither this Certificate nor the Mortgage
Loans are guaranteed or insured by any governmental agency or instrumentality. 

          This certifies that ___________ is the registered owner of the Percentage Interest evidenced by this Certificate (obtained by dividing the denomination of this Certificate by the aggregate
Initial Certificate Balances of the denominations of all Certificates of the Class to which this Certificate belongs) in certain monthly distributions with respect to a Trust Fund consisting primarily of the Mortgage Loans deposited by First Horizon
Asset Securities Inc. (the “Depositor”). The Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of the Cut-off Date specified above (the “Agreement”) among the Depositor, First Horizon Home Loans, as
master servicer (the “Master Servicer”), and The Bank of New York, as trustee (the “Trustee”).  To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. 

B-3

          [No transfer of a Certificate of this Class shall be made unless such transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities laws
or is exempt from the registration requirements under said Act and such laws. In the event that a transfer is to be made in reliance upon an exemption from the Securities Act and such laws, in order to assure compliance with the Securities Act and
such laws, the Certificateholder desiring to effect such transfer and such Certificateholder’s prospective transferee shall each certify to the Trustee in writing the facts surrounding the transfer. In the event that such a transfer is to be
made within two years from the date of the initial issuance of Certificates pursuant hereto, there shall also be delivered (except in the case of a transfer pursuant to Rule 144A of the Securities Act) to the Trustee an Opinion of Counsel that such
transfer may be made pursuant to an exemption from the Securities Act and such state securities laws, which Opinion of Counsel shall not be obtained at the expense of the Trustee, the Seller, the Master Servicer or the Depositor. The Holder hereof
desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws.]

          [No transfer of a Certificate of this Class shall be made unless the Trustee shall have received either (i) a representation [letter] from the transferee of such Certificate, acceptable to and in form
and substance satisfactory to the Trustee, to the effect that such transferee is not an employee benefit plan or arrangement subject to Section 406 of ERISA or Section 4975 of the Code, nor a person acting on behalf of any such plan, which
representation letter shall not be an expense of the Trustee , the Depositor or the Master Servicer, (ii) if the purchaser is an insurance company and the certificate has been subject to an ERISA-Qualifying Underwriting, a representation that the
purchaser is an insurance company which is purchasing such Certificates with funds contained in an “insurance company general account” (as such term is defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 (“PTCE
95-60”)) and that the purchase and holding of such Certificates are covered under Sections I and III of PTCE 95-60 or (iii) in the case of any such Certificate presented for registration in the name of an employee benefit plan subject to ERISA
or Section 4975 of the Code (or comparable provisions of any subsequent enactments), or a trustee of any such plan or any other person acting on behalf of any such plan, an Opinion of Counsel satisfactory to the Trustee to the effect that the
purchase or holding of such Certificate will not result in prohibited transactions under Section 406 of ERISA and Section 4975 of the Code and will not subject the Trustee, the Depositor or the Master Servicer to any obligation in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of the Trustee, the Depositor or the Master Servicer.  [Such representation shall be deemed to have been made to the Trustee by the Transferee’s acceptance of a
Certificate of this Class and by a beneficial owner’s acceptance of its interest in a Certificate of this Class.] Notwithstanding anything else to the contrary herein, any purported transfer of a Certificate of this Class to or on behalf of an
employee benefit plan subject to ERISA or to the Code without the opinion of counsel satisfactory to the Trustee as described above shall be void and of no effect.]Reference is hereby made to the further provisions of this Certificate set forth on
the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 

B-4

          Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this
place. 

          This Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose unless manually countersigned by an authorized signatory of the Trustee. 

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. 

Dated: June __, 2007 

	 	 	 	THE BANK OF NEW YORK, 

      not in its individual capacity, but solely as Trustee 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	By:  	 

	 	 	 	 	Authorized Signatory of

       THE BANK OF NEW YORK 

       not in its individual capacity, 

       but solely as Trustee
	 	 	 	 	 
	 	 	 	 	 
	 	Countersigned: 	 	 	 
	 	 	 	 	 
	By  	 
	 	 	 
	 	     Authorized Signatory of 

                THE BANK OF NEW YORK, 

                not in its individual capacity,

                but solely as Trustee 

    	 	 	 

B-5

EXHIBIT C

[FORM OF RESIDUAL CERTIFICATE]

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS ONE OR MORE “RESIDUAL INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). 

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. 

[THIS CERTIFICATE REPRESENTS THE “TAX MATTERS PERSON RESIDUAL INTEREST” ISSUED UNDER THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW AND MAY NOT BE TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH THE ASSUMPTION
BY THE TRANSFEREE OF THE DUTIES OF THE SERVICER UNDER SUCH AGREEMENT.] 

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR A PLAN OR ARRANGEMENT SUBJECT TO SECTION 4975 OF THE CODE, OR, IF SUCH PURCHASER IS AN INSURANCE COMPANY, A REPRESENTATION IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO
HEREIN, OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. SUCH REPRESENTATION SHALL BE DEEMED TO HAVE BEEN MADE TO THE TRUSTEE BY THE TRANSFEREE’S ACCEPTANCE OF A CERTIFICATE
OF THIS CLASS AND BY A BENEFICIAL OWNER’S ACCEPTANCE OF ITS INTEREST IN A CERTIFICATE OF THIS CLASS.  NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN
SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT. 

C-1

	
Certificate No.
		
      :
      
	 

	
	
Cut-off Date
		
      :
      
	 

	
	
First Distribution Date
		
      :
      
	 

	
	
Initial Certificate Balance
		     

	  
	 

	
	
of this Certificate
		

	  
	 

	
	
(“Denominations”)
		
      :
      
	
$
	
	
Initial Certificate
		

	  
	 

	
	
Balances of all
		

	  
	 

	
	
Certificate of this
		

	  
	 

	
	
Class
		
      :
      
	
$
	
	
CUSIP
		
      :
      
	 

	

First Horizon Mortgage Pass-Through Trust 2007-4

Mortgage Pass-Through Certificates, Series 2007-4

  
    
       evidencing the distributions allocable to the [Class I-A-R] Certificates with respect to a Trust Fund consisting primarily of one or more pools of conventional mortgage loans (the “Mortgage Loans”) secured by first
      liens on one- to four-family residential properties. 

  

First Horizon Asset Securities Inc., as Depositor

          Principal in respect of this Certificate is distributable monthly as set forth herein. Accordingly, the Certificate Balance at any time may be less than the Certificate Balance as set forth herein.
This Certificate does not evidence an obligation of, or an interest in, and is not guaranteed by the Depositor, the Master Servicer or the Trustee referred to below or any of their respective affiliates. Neither this Certificate nor the Mortgage
Loans are guaranteed or insured by any governmental agency or instrumentality. 

          This certifies that _________________ is the registered owner of the Percentage Interest (obtained by dividing the denomination of this Certificate by the aggregate Initial Certificate
Balances of the denominations of all Certificates of the Class to which this Certificate belongs) in certain monthly distributions with respect to a Trust Fund consisting of the Mortgage Loans deposited by First Horizon Asset Securities Inc. (the
“Depositor”). The Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of the Cut-off Date specified above (the “Agreement”) among the Depositor, First Horizon Home Loans, as master servicer (the
“Master Servicer”), and The Bank of New York, as trustee (the “Trustee”). To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. 

C-2

          Any distribution of the proceeds of any remaining assets of the Trust Fund will be made only upon presentment and surrender of this [Class I-A-R] Certificate at the Corporate Trust Office or the
office or agency maintained by the Trustee in New York, New York. This Class I-A-R Certificate represents an ownership in the RL Interest, RM Interest and RU Interest, as defined in the Agreement 

          No transfer of a [Class I-A-R] Certificate shall be made unless the Trustee shall have received either (i) a representation [letter] from the transferee of such Certificate, acceptable to and in form
and substance satisfactory to the Trustee, to the effect that such transferee is not an employee benefit plan or arrangement subject to Section 406 of ERISA or Section 4975 of the Code, nor a person acting on behalf of any such plan, which
representation letter shall not be an expense of the Trustee, the Depositor or the Master Servicer, (ii) if the purchaser is an insurance company, a representation that the purchaser is an insurance company which is purchasing such Certificate with
funds contained in an “insurance company general account” (as such term is defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 (“PTCE 95-60”)) and that the purchase and holding of such Certificate are covered
under Sections I and III of PTCE 95-60 or (iii) in the case of any such Certificate presented for registration in the name of an employee benefit plan subject to ERISA or Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on behalf of any such plan, an Opinion of Counsel satisfactory to the Trustee to the effect that the purchase or holding of such Class I-A-R Certificate will not result in
prohibited transactions under Section 406 of ERISA and Section 4975 of the Code and will not subject the Trustee, the Depositor and the Master Servicer to any obligation in addition to those undertaken in the Agreement, which Opinion of Counsel
shall not be an expense of the Trustee, the Depositor or the Master Servicer. [Such representation shall be deemed to have been made to the Trustee by the Transferee’s acceptance of this Class I-A-R Certificate and by a beneficial owner’s
acceptance of its interest in such Certificate.] Notwithstanding anything else to the contrary herein, any purported transfer of a Class I-A-R Certificate to or on behalf of an employee benefit plan subject to ERISA or to the Code without the
opinion of counsel satisfactory to the Trustee as described above shall be void and of no effect. 

          Each Holder of this [Class I-A-R] Certificate will be deemed to have agreed to be bound by the restrictions of the Agreement, including but not limited to the restrictions that (i) each person holding
or acquiring any Ownership Interest in this [Class I-A-R] Certificate must be a Permitted Transferee, (ii) no Ownership Interest in this [Class I-A-R] Certificate may be transferred without delivery to the Trustee of (a) a transfer affidavit of the
proposed transferee and (b) a transfer certificate of the transferor, each of such documents to be in the form described in the Agreement, (iii) each person holding or acquiring any Ownership Interest in this [Class I-A-R] Certificate must agree to
require a transfer affidavit and to deliver a transfer certificate to the Trustee as required pursuant to the Agreement, (iv) each person holding or acquiring an Ownership Interest in this [Class I-A-R] Certificate must agree not to transfer an
Ownership Interest in this [Class I-A-R] Certificate if it has actual knowledge that the proposed transferee is not a Permitted Transferee and (v) any attempted or purported transfer of any Ownership Interest in this [Class I-A-R] Certificate in
violation of such restrictions will be absolutely null and void and will vest no rights in the purported transferee. 

C-3

          Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this
place. 

          This Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose unless manually countersigned by an authorized signatory of the Trustee. 

C-4

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.

Dated: June __, 2007

	 	 	 	THE BANK OF NEW YORK, 

    not in its individual capacity, but solely as Trustee 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	By:  	 

	 	 	 	 	Authorized Signatory of

       THE BANK OF NEW YORK 

       not in its individual capacity, 

       but solely as Trustee
	 	 	 	 	 
	 	 	 	 	 
	 	Countersigned: 	 	 	 
	 	 	 	 	 
	By  	 
	 	 	 
	 	     Authorized Signatory of 

                THE BANK OF NEW YORK, 

                not in its individual capacity,

                but solely as Trustee 

    	 	 	 

  C-5

EXHIBIT D

[Form of Reverse of Certificates]

First Horizon Mortgage Pass-Through Trust 2007-4

Mortgage Pass-Through Certificates 

          This Certificate is one of a duly authorized issue of Certificates designated as First Horizon Mortgage Pass-Through Trust 2007-4 Mortgage Pass-Through Certificates, of the Series specified on the
face hereof (herein collectively called the “Certificates”), and representing a beneficial ownership interest in the Trust Fund created by the Agreement. 

          The Certificateholder, by its acceptance of this Certificate, agrees that it will look solely to the funds on deposit in the Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. 

          This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for the interests, rights and limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee. 

          Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (the
“Distribution Date”), commencing on the first Distribution Date specified on the face hereof, to the Person in whose name this Certificate is registered at the close of business on the applicable Record Date in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the amount required to be distributed to Holders of Certificates of the Class to which this Certificate belongs on such Distribution Date pursuant to the Agreement. The Record Date
applicable to each Distribution Date is the last Business Day of the month next preceding the month of such Distribution Date. 

          Distributions on this Certificate shall be made by wire transfer of immediately available funds to the account of the Holder hereof at a bank or other entity having appropriate facilities therefor, if
such Certificateholder shall have so notified the Trustee in writing at least five Business Days prior to the related Record Date and such Certificateholder shall satisfy the conditions to receive such form of payment set forth in the Agreement, or,
if not, by check mailed by first class mail to the address of such Certificateholder appearing in the Certificate Register. The final distribution on each Certificate will be made in like manner, but only upon presentment and surrender of such
Certificate at the Corporate Trust Office or such other location specified in the notice to Certificateholders of such final distribution. 

          The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Trustee and the rights of the Certificateholders under
the Agreement at any time by the Depositor, the Master Servicer and the Trustee with the consent of the Holders of Certificates affected by such amendment evidencing the requisite Percentage Interest, as provided in the Agreement. Any such consent
by the Holder of this Certificate shall be conclusive and binding on such Holder and upon all future Holders of

D-1

this Certificate and of any Certificate issued upon the transfer hereof or in exchange therefor or in lieu hereof whether or not notation of such consent is made upon this Certificate.  The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of any of the Certificates. 

          As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register of the Trustee upon surrender of this
Certificate for registration of transfer at the Corporate Trust Office or the office or agency maintained by the Trustee in New York, New York, accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder’s attorney duly authorized in writing, and thereupon one or more new Certificates of the same Class in authorized denominations and evidencing the same aggregate Percentage Interest in
the Trust Fund will be issued to the designated transferee or transferees. 

          The Certificates are issuable only as registered Certificates without coupons in denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates of the same Class in authorized denominations and evidencing the same aggregate Percentage Interest, as requested by the Holder surrendering the same. 

          No service charge will be made for any such registration of transfer or exchange, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. 

          The Depositor, the Master Servicer and the Trustee and any agent of the Depositor or the Trustee may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Depositor, the Trustee, nor any such agent shall be affected by any notice to the contrary. 

          On any Distribution Date on which the aggregate of the Pool Principal Balances of both Mortgage Pools is less than 10% of the aggregate Cut-off Date Pool Principal Balance of both Mortgage Pools, the
Master Servicer will have the option to repurchase, in whole, from the Trust Fund all remaining Mortgage Loans and all property acquired in respect of the Mortgage Loans in the Mortgage Pools at a purchase price determined as provided in the
Agreement. In the event that no such optional termination occurs, the obligations and responsibilities created by the Agreement will terminate upon the later of the maturity or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan remaining in the Trust Fund or the disposition of all property in respect thereof and the distribution to Certificateholders of all amounts required to be distributed pursuant to the Agreement.  In no event, however, will the trust
created by the Agreement continue beyond the expiration of 21 years from the death of the last survivor of the descendants living at the date of the Agreement of a certain person named in the Agreement. 

Any term used herein that is defined in the Agreement shall
have the meaning assigned in the Agreement,

and nothing herein shall be deemed
inconsistent with that meaning.

D-2

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

______________________________

(Please insert social security or 

other identifying number of assignee)

  _____________________________________________________ 

  

  _____________________________________________________ 

  (Please print or typewrite name and address 

  including postal zip code of assignee) 

________________________________________________________________________ 

the Percentage Interest evidenced by the within
    Certificate and hereby authorizes the transfer of registration of such
    Percentage Interest to assignee on the Certificate Register of the Trust
    Fund. 

          I (We) further direct the Trustee to issue a new Certificate of a like denomination and Class, to the above named assignee and deliver such Certificate to the following address: 

 

 

 

	
Dated:
		 

		 	 

	
	 

		 
		 	
Signature by or on behalf of assignor
	

DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of distribution:

          Distributions shall be made, by wire transfer or otherwise, in immediately available funds to ______________________________________, for the account of _____________________, account
number ___________, or, if mailed by check, to ___________________________. Applicable statements should be mailed to __________________________.

          This information is provided by ________________________________________, the assignee named above, or _________________, as its agent. 

D-3

EXHIBIT E

FORM OF INITIAL CERTIFICATION OF CUSTODIAN

[date]

First Horizon Asset Securities Inc. 

First Horizon Home Loans, a division of

   First Tennessee Bank National Association

4000 Horizon Way 

Irving, Texas 75063 

The Bank of New York 

101 Barclay Street, 4W 

New York, New York 10286 

	          	Re: 	Custodial Agreement dated as of June __, 2007 by and
        among The Bank of New York, as Trustee, First Horizon Home Loans, a division
        of First Tennessee Bank National Association, as Servicer and First Tennessee
    Bank National Association, as Custodian 

Gentlemen: 

          In accordance with Section 2 of the above-captioned Custodial Agreement (the "Custodial Agreement"), the undersigned, as Custodian, hereby certifies that, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan listed in the attached schedule), it has received: 

          (i)      the original Mortgage Note, endorsed as provided in the following form: “Pay to the order of ________, without recourse”; and 

          (ii)     a
duly executed assignment, or a copy of such assignment certified by the Seller
as being a true and complete copy of the assignment, of the Mortgage (which may
be included in a blanket  assignment or assignments); provided, however, that
it has received no assignment with respect to any Mortgage for which the related
Mortgaged Property is located in the Commonwealth of Puerto Rico. 

          Based on its review and examination and only as to the foregoing documents, such documents appear regular on their face and related to such Mortgage Loan. 

          The Custodian has made no independent examination of any documents contained in each Mortgage File beyond the review specifically required in the Custodial Agreement. The Custodian makes no
representations as to: (i) the validity, legality, sufficiency, enforceability or genuineness of any of the documents contained in each Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan. 

E-1

          Capitalized words and phrases used herein shall have the respective meanings assigned to them in the Custodial Agreement. 

	 	
FIRST TENNESSEE BANK NATIONAL
	
	 	
ASSOCIATION,
	
	 	
as Custodian
	
	 	 

	
	 	 

	
	 	
By:
		 

	 	
Name:
		 

	 	
Title:
		 

E-2

EXHIBIT F

FORM OF DELAY DELIVERY CERTIFICATION

[date]

First Horizon Asset Securities Inc. 

First Horizon Home Loans, a division of

   First Tennessee Bank National Association

4000 Horizon Way 

Irving, Texas 75063 

The Bank of New York 

101 Barclay Street, 4W 

New York, New York 10286 

	          	Re: 	Custodial Agreement dated as of June __, 2007 by and
        among The Bank of New York, as Trustee, First Horizon Home Loans, a division
        of First Tennessee Bank National Association, as Servicer and First Tennessee
    Bank National Association, as Custodian 

Ladies and Gentlemen:

          In accordance with Section 3 of the above-captioned Custodial Agreement (the “Custodial Agreement”), the undersigned, as Custodian, hereby certifies that, as to each Delay Delivery Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Delay Delivery Mortgage Loan listed in the attached schedule), it has received: 

          (i)      the original Mortgage Note, endorsed as provided in the following form: “Pay to the order of_______, without recourse”;

          (ii)      in the case of each Mortgage Loan, the original recorded Mortgage, or a copy of such Mortgage certified by the Seller as being a true and complete copy of the Mortgage, [and in the case of each
Mortgage Loan that is a MERS Mortgage Loan, the original Mortgage, or a copy of such Mortgage certified by the Seller as being a true and complete copy of the Mortgage, noting thereon the presence of the MIN of the Mortgage Loan and language
indicating that the Mortgage Loan is a MOM Loan if the Mortgage Loan is a MOM Loan, with evidence of recording indicated thereon]; and 

          (iii)      in the case of each Mortgage Loan, a duly executed assignment, or a copy of such assignment certified by the Seller as a true and complete copy of the assignment, of the Mortgage (which may be
included in a blanket assignment or assignments); provided, however, that it has received no assignment with respect to any Mortgage for which the related Mortgage Property is located in the Commonwealth of Puerto Rico. 

          Based on its review and examination and only as to the foregoing documents, such documents appear regular on their face and related to such Delay Delivery Mortgage Loan. 

F-1 

          The Custodian has made no independent examination of any documents contained in each Mortgage File beyond the review specifically required in the Custodial Agreement. The Custodian makes no
representations as to: (i) the validity, legality, sufficiency, enforceability or genuineness of any of the documents contained in each Mortgage File of any of the Delay Delivery Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Delay Delivery Mortgage Loan. 

          Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Custodial Agreement. 

	 	
FIRST TENNESSEE BANK NATIONAL
	
	 	
ASSOCIATION,
	
	 	
as Custodian
	
	 	 

	
	 	 

	
	 	
By:
		 

	 	
Name:
		 

	 	
Title:
		 

F-2

EXHIBIT G

FORM OF SUBSEQUENT CERTIFICATION OF CUSTODIAN

[date]

First Horizon Asset Securities Inc. 

First Horizon Home Loans, a division of

   First Tennessee Bank National Association

4000 Horizon Way 

Irving, Texas 75063 

The Bank of New York 

101 Barclay Street, 4W 

New York, New York 10286 

	          	Re:    	Custodial Agreement dated as of June __, 2007 by and
        among The Bank of New York, as Trustee, First Horizon Home Loans, a division
        of First Tennessee Bank National Association, as Servicer and First Tennessee
    Bank National Association, as Custodian 

Ladies and Gentlemen:

          In accordance with Section 3 of the above-captioned Custodial Agreement (the “Custodial Agreement”), the undersigned, as Custodian hereby certifies that as to each Mortgage Loan listed in
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on the attached exception report) it has received, unless otherwise provided in Section 2 of the Custodial Agreement: 

	 	
(i)   	
(A) The original Mortgage Note endorsed by manual or facsimile signature in blank in the following form: “Pay to the order of ____________without recourse,” with all intervening endorsements showing a complete
chain of endorsements from the originator to the Person endorsing the Mortgage Note (each such endorsement being sufficient to transfer all right, title and interest of the party so endorsing, as noteholder or assignee thereof, in and to that
Mortgage Note); or	
	          	          	 
	 	 	
(B) with respect to any Lost Mortgage Note, a lost note affidavit from the Seller stating that the original Mortgage Note was lost or destroyed, together with a copy of such Mortgage Note;	
	 
	 	
(ii)   	
except as provided in Section 2(c) of the Custodial Agreement and for each Mortgage Loan that is not a MERS Mortgage Loan, the original recorded Mortgage or a copy of such Mortgage certified by the Seller as being a true and
complete copy of the Mortgage, and in the case of each MERS Mortgage Loan, the original recorded Mortgage, noting the presence of the MIN of the Mortgage	
	 

G-1

	 	 	
Loans and either language indicating that the Mortgage Loan is a MOM Loan if the Mortgage Loan is a MOM Loan or if the Mortgage Loan was not a MOM Loan at origination, the original Mortgage and the assignment thereof to MERS, with
evidence of recording indicated thereon, or a copy of the Mortgage certified by the Seller as being a true and complete copy of the Mortgage;	
	          	          	          	 
	 	
(iii)   	
in the case of each Mortgage Loan that is not a MERS Mortgage Loan, a duly executed assignment of the Mortgage, or a copy of such assignment certified by the Seller as being a true and complete copy of the assignment, in blank
(which may be included in a blanket assignment or assignments), together with, except as provided below, all interim recorded assignments, or copies of such interim assignments certified by the Seller as being true and complete copies of the interim
assignments, of such Mortgage (each such assignment, when duly and validly completed, to be in recordable form and sufficient to effect the assignment of and transfer to the assignee thereof, under the Mortgage to which the assignment relates);
provided that, if the related Mortgage has not been returned from the applicable public recording office, such assignment of the Mortgage may exclude the information to be provided by the recording office;	
	 
	 	
(iv)   	
the original or copies of each assumption, modification, written assurance or substitution agreement, if any;	
	 
	 	
(v)   	
either the original or duplicate original title policy, or a copy of such title policy certified by the Seller as being a true and complete copy of the title policy (including all riders thereto), with respect to the related
Mortgaged Property, if available, provided that the title policy (including all riders thereto) will be delivered as soon as it becomes available, and if the title policy is not available, and to the extent required pursuant to the second paragraph
below or otherwise in connection with the rating of the Certificates, a written commitment or interim binder or preliminary report of the title issued by the title insurance or escrow company with respect to the Mortgaged Property, or in lieu
thereof, an Alternative Title Product or a copy of such Alternative Title Product certified by the Seller as being a true and complete copy of the Alternative Title Product; and	
	 
	 	
(vi)   	
in the case of a Cooperative Loan, the originals of the following documents or instruments:	
	 
	 	 	
(a)   	
The Coop Shares, together with a stock power in blank;	
	 
	 	 	
(b)   	
The executed Security Agreement;	
	 
	 	 	
(c)   	
The executed Proprietary Lease;	
	 
	 	 	
(d)   	
The executed UCC-1 financing statement with evidence of recording thereon which have been filed in all places required to perfect the Seller’s interest in the Coop Shares and the Proprietary Lease; and	
	 

G-2

	 	
(e)   	
Executed UCC-3 financing statements or their appropriate UCC financing statements required by state law, evidencing a complete and unbroken line from the mortgagee to the Trustee with evidence of recording thereon (or in a form
suitable for recordation).	
	          	          	 

          Based on its review and examination and only as to the foregoing documents, (a) such documents appear regular on their face and related to such Mortgage Loan, and (b) the information set forth in
items (i), (ii), (iii), (iv), (vi) and (xi) of the definition of the “Mortgage Loan Schedule” in Article I of the Pooling and Servicing Agreement accurately reflects information set forth in the Mortgage File. 

          The Custodian has made no independent examination of any documents contained in each Mortgage File beyond the review specifically required in the Custodial Agreement. The Custodian makes no
representations as to: (i) the validity, legality, sufficiency, enforceability or genuineness of any of the documents contained in each Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan. Notwithstanding anything herein to the contrary, the Custodian has made no determination and makes no representations as to whether (i) any endorsement is sufficient to transfer
all right, title, and interest of the party so endorsing, as noteholder or assignee thereof, in and to that Mortgage Note or (ii) any assignment is in recordable form or sufficient to effect the assignment of and transfer to the assignee thereof,
under the Mortgage to which the assignment relates. 

          Capitalized words and phrases used herein shall have the respective meanings assigned to them in the Custodial Agreement. 

	 	
FIRST TENNESSEE BANK NATIONAL
	
	 	
ASSOCIATION,
	
	 	
as Custodian
	
	 	 

	
	 	
By:
		 

	 	
Name:
		 

	 	
Title:
		 

G-3

EXHIBIT H 

TRANSFER AFFIDAVIT 

First Horizon Mortgage Pass-Through Trust 2007-4 

Mortgage Pass-Through Certificates 

Series 2007-4 

	
STATE OF
		 
		
)
	
	 

		 
		
) ss.:
	
	
COUNTY OF               
		 
		
)
	

          The undersigned, being first duly sworn, deposes and says as follows:

          1.      The undersigned is an officer of __________, the proposed Transferee of an Ownership Interest in a [Class I-A-R] Certificate (the “Certificate”) issued pursuant to the Pooling and
Servicing Agreement, (the “Agreement”), relating to the above-referenced Series, by and among First Horizon Asset Securities Inc., as depositor (the “Depositor”), First Horizon Home Loans, as master servicer, and The Bank of New
York, as trustee. Capitalized terms used, but not defined herein or in Exhibit 1 hereto, shall have the meanings ascribed to such terms in the Agreement. The Transferee has authorized the undersigned to make this affidavit on behalf of the
Transferee. 

          2.      The Transferee is, as of the date hereof, and will be, as of the date of the Transfer, a Permitted Transferee.  The Transferee is acquiring its Ownership Interest in the Certificate either (i) for
its own account or (ii) as nominee, trustee or agent for another Person and has attached hereto an affidavit from such Person in substantially the same form as this affidavit. The Transferee has no knowledge that any such affidavit is false. The
Transferee does not hold REMIC residual interests as nominee to facilitate the clearance and settlement of such interests through electronic book-entry changes in accounts of participating organizations. 

          3.      The Transferee has been advised of, and understands that (i) a tax may be imposed on Transfers of the Certificate to Persons that are not Permitted Transferees; (ii) such tax will be imposed on the
transferor, or, if such Transfer is through an agent (which includes a broker, nominee or middleman) for a Person that is not a Permitted Transferee, on the agent; and (iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent transferee furnished to such Person an affidavit that such subsequent transferee is a Permitted Transferee and, at the time of Transfer, such Person does not have actual knowledge that the affidavit is false. 

          4.      The Transferee has been advised of, and understands that a tax may be imposed on a “pass-through entity” holding the Certificate if at any time during the taxable year of the pass-through
entity a Person that is not a Permitted Transferee is the record holder of an interest in such entity. The Transferee understands that such tax will not be imposed for any period with respect to which the record holder furnishes to the pass-through
entity an affidavit that such record holder is a Permitted Transferee and the pass-through entity does not have actual knowledge that such affidavit is false.  (For this purpose, a “pass-through entity” includes a regulated investment
company, a real estate investment trust or common trust fund, a

H-1

partnership, trust or estate, and certain cooperatives and, except as may be provided in Treasury Regulations, persons holding interests in pass-through entities as a nominee for another Person.) 

          5.      The Transferee has reviewed the provisions of Section 5.2(c) of the Agreement (attached hereto as Exhibit 2 and incorporated herein by reference) and understands the legal consequences of the
acquisition of an Ownership Interest in the Certificate including, without limitation, the restrictions on subsequent Transfers and the provisions regarding voiding the Transfer and mandatory sales. The Transferee expressly agrees to be bound by and
to abide by the provisions of Section 5.2(c) of the Agreement and the restrictions noted on the face of the Certificate. The Transferee understands and agrees that any breach of any of the representations included herein shall render the Transfer to
the Transferee contemplated hereby null and void. 

          6.      The Transferee agrees to require a Transfer Affidavit from any Person to whom the Transferee attempts to Transfer its Ownership Interest in the Certificate, and in connection with any Transfer by a
Person for whom the Transferee is acting as nominee, trustee or agent, and the Transferee will not Transfer its Ownership Interest or cause any Ownership Interest to be Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the Transferee agrees to deliver to the Trustee a certificate substantially in the form set forth as Exhibit I to the Agreement (a “Transferor Certificate”) to the effect
that such Transferee has no actual knowledge that the Person to which the Transfer is to be made is not a Permitted Transferee. 

          7.      The Transferee does not have the intention to impede the assessment or collection of any tax legally required to be paid with respect to the Certificate. 

          8.      The Transferee’s taxpayer identification number is ______. 

          9.      The Transferee is either a U.S. Person as defined in Code Section 7701(a)(30) or the Transferee has furnished the Transferor a properly completed Internal Revenue Service Form W-8ECI.. 

          10.    The
Transferee is aware that the Certificate may represent one or more interests
in a “noneconomic residual interest” within the meaning of Treasury
regulations promulgated pursuant to  the Code and that the transferor of a noneconomic
residual interest will remain liable for any taxes due with respect to the income
on such residual interest, unless no significant purpose of the transfer was
to impede the assessment or collection  of tax. 

          11.    The
Transferee is not an employee benefit plan or arrangement subject to Section
406 of ERISA or a plan or arrangement subject to Section 4975 of the Code, nor
a person acting on behalf of any  such plan or arrangement, nor using the assets
of any such plan or arrangement to effect such transfer. 

          12.    The
Transferee has historically paid its debts as they came due and the Transferee
will continue to pay its debts as they come due in the future; the Transferee
understands that, as the holder of  the Certificate, the Transferee may incur
tax liabilities in excess of any cash flows generated by the Certificate and
the Transferee intends to pay taxes associated with holding the Certificate as
they become due. 

H-2

          13.      The Transferee is a domestic corporation taxable as a regular corporation for U.S. federal income tax purposes (a “taxable domestic C corporation”) and is not a real estate investment
trust, regulated investment company or REMIC.  The Transferee will not cause income from the Certificate to be attributable, for U.S. federal income tax purposes, to a non-U.S. permanent establishment or fixed base (within the meaning of an
applicable income tax treaty) of the Transferee or another U.S. taxpayer. At the time of the Transfer, and at the close of each of the Transferee’s two fiscal years preceding the year of the Transfer, the Transferee’s gross assets for
financial reporting purposes exceeded $10 million (together, the “Asset Requirements”), and the Transferee hereby covenants that any subsequent Transfer of its Ownership Interest in the Certificate will be to another taxable, domestic
C corporation satisfying the Asset Requirements 

          IN WITNESS WHEREOF, the Transferee has caused this instrument to be executed on its behalf, pursuant to authority of its Board of Directors, by its duly authorized officer and its corporate seal to be
hereunto affixed, duly attested, this ___ day of _________, 20__. 

	 	 

	 	
Print Name of Transferee
	
	 	 

	
	 	
By:_________________________________
	
	 	
Name:
	
	 	
Title:
	

          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
Transferee, and acknowledged that he executed the same as his free act and deed and the free act and deed of the Transferee. 

          Subscribed and sworn before me this _____ day of ___________, 20____.

	 	 

	 	NOTARY PUBLIC 

       My
          Commission expires the ___ day of

          ________________, 20___. 

 

H-3

EXHIBIT 1 to EXHIBIT H

Certain Definitions

          “Ownership Interest”: As to any Certificate, any ownership interest in such Certificate, including any interest in such Certificate as the Holder thereof and any other interest therein,
whether direct or indirect, legal or beneficial. 

          “Permitted Transferee”:  Any Person other than (i) the United States, any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing, (ii) a foreign
government, International Organization or any agency or instrumentality of either of the foregoing, (iii) an organization (except certain farmers’ cooperatives described in section 521 of the Code) which is exempt from tax imposed by Chapter 1
of the Code (including the tax imposed by section 511 of the Code on unrelated business taxable income) on any excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to any Certificate, (iv) rural electric and telephone
cooperatives described in section 1381(a)(2)(C) of the Code, (v) an “electing large partnership” as defined in section 775 of the Code, (vi) a Person that is not (a) a citizen or resident of the United States, (b) a corporation,
partnership, or other entity created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate whose income from sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States or (d) a trust if a court within the United States is able to exercise primary supervision over the administration of
the trust and one or more United States persons have the authority to control all substantial decisions of the trust, unless such Person has furnished the transferor and the Trustee with a duly completed Internal Revenue Service Form W-8ECI or any
applicable successor form, and (vii) any other Person so designated by the Depositor based upon an Opinion of Counsel that the Transfer of an Ownership Interest in a Certificate to such Person may cause any REMIC created pursuant to the Agreement to
fail to qualify as a REMIC at any time that the Certificates (as defined in the Agreement) are outstanding; provided, however, that if a person is classified as a partnership or a disregarded entity under the Code, such person shall only be a
Permitted Transferee if all of its beneficial owners are described in subclauses (a), (b), (c) or (d) of clause (vi) and the governing documents of such person prohibits a transfer of any interest in such person to any person described in clause
(vi). The terms “United States,” “State” and “International Organization” shall have the meanings set forth in section 7701 of the Code or successor provisions. A corporation will not be treated as an instrumentality of
the United States or of any State or political subdivision thereof for these purposes if all of its activities are subject to tax and, with the exception of the Federal Home Loan Mortgage Corporation, a majority of its board of directors is not
selected by such government unit.

          “Person”:  Any individual, corporation, partnership, joint venture, association, bank, joint-stock company, trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof. 

          “Transfer”:  Any direct or indirect transfer or sale of any Ownership Interest in a Certificate, including the acquisition of a Certificate by the Depositor. 

H-4

          “Transferee”:  Any Person who is acquiring by Transfer any Ownership Interest in a Certificate. 

H-5

EXHIBIT 2 to EXHIBIT H

Section 5.2(c) of the Agreement

          (c)      Each Person who has or who acquires any Ownership Interest in a Residual Certificate shall be deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the
following provisions, and the rights of each Person acquiring any Ownership Interest in a Residual Certificate are expressly subject to the following provisions:

	          	          (i)
               Each Person holding or acquiring any Ownership Interest in a Residual
          Certificate shall be a Permitted Transferee and shall promptly notify
          the Trustee of any change or impending change in its status as a Permitted
          Transferee. 

                 (ii)             No Ownership Interest in a Residual Certificate may be registered on
        the Closing Date or thereafter transferred, and the Trustee shall not
        register the Transfer of any Residual Certificate unless, in addition
        to the certificates required to be delivered to the Trustee under subparagraph
        (b) above, the Trustee shall have been furnished with an affidavit
        (a “Transfer Affidavit”) of the initial owner or the proposed
          transferee in the form attached hereto as Exhibit H. The Transferee
          does not hold REMIC residual interests as nominee to facilitate the
          clearance and settlement of such interests through electronic book-entry
          changes in accounts of participating organizations. 

                 (iii)             Each Person holding or acquiring any Ownership Interest in a Residual
        Certificate shall agree (A) to obtain a Transfer Affidavit from any
        other Person to whom such Person attempts to Transfer its Ownership
        Interest in a Residual Certificate, (B) to obtain a Transfer Affidavit
        from any Person for whom such Person is acting as nominee, trustee
        or agent in connection with any Transfer of a Residual Certificate
        and (C) not to Transfer its Ownership Interest in a Residual Certificate
        or to cause the Transfer of an Ownership Interest in a Residual Certificate
        to any other Person if it has actual knowledge that such Person is
        not a Permitted Transferee.

                 (iv)             Any attempted or purported Transfer of any Ownership Interest in a
        Residual Certificate in violation of the provisions of this Section
        5.2(c) shall be absolutely null and void and shall vest no rights in
        the purported Transferee. If any purported transferee shall become
        a Holder of a Residual Certificate in violation of the provisions of
        this Section 5.2(c), then the last preceding Permitted Transferee shall
        be restored to all rights as Holder thereof retroactive to the date
        of registration of Transfer of such Residual Certificate. The Trustee
        shall be under no liability to any Person for any registration of Transfer
        of a Residual Certificate that is in fact not permitted by Section
        5.2(b) and this Section 5.2(c) or for making any payments due on such
        Certificate to the Holder thereof or taking any other action with respect
        to such Holder under the provisions of this Agreement so long as the
        Transfer was registered after receipt of the related Transfer Affidavit,
        Transferor Certificate, and in the case of a Residual Certificate which
        is also a Private Certificate, either the Rule 144A Letter or the Investment
        Letter. The Trustee shall be entitled but not obligated to recover
        from any Holder of a Residual Certificate that was in fact not a Permitted
        Transferee at the time it became a Holder or, at such subsequent time
        as it became other than a Permitted Transferee, all payments made on
        such Residual Certificate at and after either such time. Any such payments
        so

    

H-6

	          	recovered by the Trustee shall be
          paid and delivered by the Trustee to the last preceding Permitted Transferee
          of such Certificate. 

                 (v)
               The Depositor shall use its best efforts
          to make available, upon receipt of written request from the Trustee,
          all information necessary to compute any tax imposed under Section
          860E(e) of the Code as a result of a Transfer of an Ownership Interest
          in a Residual Certificate to any Holder who is not a Permitted Transferee. 

    

          The restrictions on Transfers of a Residual Certificate set forth in this Section 5.2(c) shall cease to apply (and the applicable portions of the legend on a Residual Certificate may be deleted) with
respect to Transfers occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion of Counsel shall not be an expense of the Trust Fund, the Trustee or the Master Servicer, to the effect that the elimination of such restrictions
will not cause any REMIC created hereunder to fail to qualify as a REMIC at any time that the Certificates are outstanding or result in the imposition of any tax on the Trust Fund, a Certificateholder or another Person. Each Person holding or
acquiring any Ownership Interest in a Residual Certificate hereby consents to any amendment of this Agreement which, based on an Opinion of Counsel furnished to the Trustee, is reasonably necessary (a) to ensure that the record ownership of, or any
beneficial interest in, a Residual Certificate is not transferred, directly or indirectly, to a Person that is not a Permitted Transferee and (b) to provide for a means to compel the Transfer of a Residual Certificate which is held by a Person that
is not a Permitted Transferee to a Holder that is a Permitted Transferee.

H-7

EXHIBIT I

FORM OF TRANSFEROR CERTIFICATE

_______________, 20___

First Horizon Asset Securities Inc.

First Horizon Home Loans, 

   a division of First Tennessee

   Bank National Association  

4000 Horizon Way  

Irving, Texas 75063 

The Bank of New York  

101 Barclay Street, 4W  

New York, New York 10286 

	          	Re:   	First Horizon Mortgage Pass-Through Trust 2007-4 Mortgage
        Pass-Through Certificates, Series 2007-4, Class ______
    

Ladies and Gentlemen: 

          In connection with our disposition of the above Certificates we certify that (a) to the extent we are disposing of a Private Certificate, we understand that the Private Certificate has not been
registered under the Securities Act of 1933, as amended (the “Act”), and is being disposed of by us in a transaction that is exempt from the registration requirements of the Act, (b) we have not offered or sold any Certificates to, or
solicited offers to buy any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, in a manner that would be deemed, or taken any other action which would result in, a violation of Section 5 of the
Act, and (c) to the extent we are disposing of a Residual Certificate, we have no knowledge the transferee is not a Permitted Transferee. 

          Capitalized terms used herein shall have the meaning ascribed to such terms in the Pooling and Servicing Agreement dated as of June 1, 2007, by and among First Horizon Asset Securities Inc., as
depositor, First Horizon Home Loans, as master servicer, and The Bank of New York, as trustee, pursuant to which the Residual Certificates were issued.

	 	
Very truly yours,
	
	 	 
	 	 

	 	
Print Name of Transferor
	
	 	 
	 	 
	 	
By:
		 

	 	
               Authorized Officer
	

I-1  

EXHIBIT J

FORM OF INVESTMENT LETTER (NON-RULE 144A)

_____________, 20___

First Horizon Asset Securities Inc. 

4000 Horizon Way 

Irving, Texas 75063 

          The Bank of New York 

101 Barclay Street, 4W 

New York, New York 10286 

Attention: Mortgage-Backed Securities Group

	          	
Re:  
		
First Horizon Mortgage Pass-Through Trust 2007-4 Mortgage Pass-Through Certificates, Series 2007-4,

Class ____ 	
	 	 

		

	

Ladies and Gentlemen: 

          In connection with our acquisition of the above Certificates we certify that (a) we understand that the Certificates are not being registered under the Securities Act of 1933, as amended (the
“Act”), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we are an “accredited investor,” as defined in Regulation D
under the Act, and have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of investments in the Certificates, (c) we have had the opportunity to ask questions of and receive
answers from the Depositor concerning the purchase of the Certificates and all matters relating thereto or any additional information deemed necessary to our decision to purchase the Certificates, (d) either (i) we are not an employee benefit plan
or arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended, or a plan or arrangement that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended, nor are we acting on behalf of any such
plan or arrangement nor are we using the assets of any such plan or arrangement to effect such acquisition or (ii) if, in the case of ERISA-Restricted Certificates that have been the subject of an ERISA-Qualifying Underwriting, we are an insurance
company, a representation that we are an insurance company which is purchasing such Certificates with funds contained in an “insurance company general account” (as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 (“PTCE 95-60”)) and that the purchase and holding of such Certificates are covered under Sections I and III PTCE 95-60, (e) we are acquiring the Certificates for investment for our own account and not with a view to any
distribution of such Certificates (but without prejudice to our right at all times to sell or otherwise dispose of the Certificates in accordance with clause (g) below), (f) we have not offered or sold any Certificates to, or solicited offers to buy
any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, or taken any other action which would result in a violation of Section 5 of the Act, and (g) we will not sell, transfer or otherwise
dispose of any Certificates unless (1) such sale, transfer or other disposition is made pursuant to an effective registration statement under the Act or is exempt from such registration requirements, and if requested, we will at our expense provide
an opinion of counsel satisfactory

J-1

to the addressees of this Certificate that such sale, transfer or other disposition may be made pursuant to an exemption from the Act, (2) the purchaser or transferee of such Certificate has executed and delivered to you a
certificate to substantially the same effect as this certificate, and (3) the purchaser or transferee has otherwise complied with any conditions for transfer set forth in the Pooling and Servicing Agreement. 

	 	
Very truly yours,
	
	 	 
	 	 

	 	
Print Name of Transferee
	
	 	 
	 	 
	 	
By:
		 

	 	
               Authorized
 Officer
	

J-2

EXHIBIT K

FORM OF RULE 144A LETTER

___________, 20__

First Horizon Asset Securities Inc. 

4000 Horizon Way 

Irving, Texas 75063 

The Bank of New York 

101 Barclay Street, 4W 

New York, New York 10286 

Attention: Mortgage-Backed Securities Group

	          
	Re:
	   	
First Horizon Mortgage Pass-Through Trust 2007-4 Mortgage Pass-Through Certificates, Series 2007-4,

Class ____
	

Ladies and Gentlemen: 

          In connection with our acquisition of the above Certificates we certify that (a) we understand that the Certificates are not being registered under the Securities Act of 1933, as amended (the
“Act”), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of investments in the Certificates, (c) we have had the opportunity to ask questions of and receive answers from the Depositor concerning the purchase of the Certificates and all matters
relating thereto or any additional information deemed necessary to our decision to purchase the Certificates, (d) we are not an employee benefit plan or arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended,
or a plan or arrangement that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended, nor are we acting on behalf of any such plan or arrangement nor using the assets of any such plan or arrangement to effect such acquisition,
(e) if an insurance company, in the case of ERISA-restricted Certificates that have been the subject of an ERISA-Qualifying Underwriting, we are purchasing the Certificates with funds contained in an “insurance company general account” (as
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 (“PTCE 95-60”)) and our purchase and holding of the Certificates are covered under Sections I and III of PTCE 95-60, (f) we have not, nor has anyone acting on our
behalf offered, transferred, pledged, sold or otherwise disposed of the Certificates, any interest in the Certificates or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security from, or otherwise approached or negotiated with respect to the Certificates, any interest in the Certificates or any other similar security with, any person in any manner,
or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would constitute a distribution of the Certificates under the Act or that would render the disposition of the Certificates a
violation of Section 5 of the Act or require registration pursuant thereto, nor will

K-1

act, nor has authorized or will authorize any person to act, in such manner with respect to the Certificates, (g) we are a “qualified institutional buyer” as that term is defined in Rule 144A under the Act (“Rule
144A”) and have completed either of the forms of certification to that effect attached hereto as Annex 1 or Annex 2, (h) we are aware that the sale to us is being made in reliance on Rule 144A, and (i) we are acquiring the Certificates for our
own account or for resale pursuant to Rule 144A and further, understand that such Certificates may be resold, pledged or transferred only (A) to a person reasonably believed to be a qualified institutional buyer that purchases for its own account or
for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (B) pursuant to another exemption from registration under the Act. 

	 	
Very truly yours,
	
	 	 
	 	 

	 	
Print Name of Transferee
	
	 	 
	 	 
	 	
By:
		 

	 	
               Authorized
 Officer
	

K-2

ANNEX 1 TO EXHIBIT K

QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

[For Transferees Other Than Registered Investment Companies]

          The undersigned (the “Buyer”) hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates
described therein: 

          1.      As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Buyer. 

          2.      In connection with purchases by the Buyer, the Buyer is a “qualified institutional buyer” as that term is defined in Rule 144A under the Securities Act of 1933, as amended (“Rule
144A”) because (i) the Buyer owned and/or invested on a discretionary basis $ ______1 in securities (except for the excluded securities referred to below) as of the end of
the Buyer’s most recent fiscal year (such amount being calculated in accordance with Rule 144A and (ii) the Buyer satisfies the criteria in the category marked below. 

	          	          ___ Corporation,
            etc. The Buyer is a corporation (other
            than a bank, savings and loan association or similar institution),
            Massachusetts or similar business trust, partnership, or charitable
            organization described in Section 501(c)(3) of the Internal Revenue
            Code of 1986, as amended. 

                 ___ Bank.
          The Buyer (a) is a national bank or banking institution organized under
          the laws of any State, territory or the District of Columbia, the business
          of which is substantially confined to banking and is supervised by
          the State or territorial banking commission or similar official or
          is a foreign bank or equivalent institution, and (b) has an audited
          net worth of at least $25,000,000 as demonstrated in its latest
          annual financial statements, a copy of
          which is attached hereto. 

                 ___ Savings
            and Loan. The Buyer (a) is a savings
            and loan association, building and loan association, cooperative
            bank, homestead association or similar institution, which is supervised
            and examined by a State or Federal authority having supervision over
            any such institutions or is a foreign savings and loan association
            or equivalent institution and (b) has an audited net worth of at
            least $25,000,000 as demonstrated in its latest annual financial
            statements, a copy of which is attached
            hereto. 

                 ___ Broker-dealer.
          The Buyer is a dealer registered pursuant to Section 15 of the Securities
          Exchange Act of 1934. 

    

1 Buyer must own and/or
    invest on a discretionary basis at least $100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary
  basis at least $10,000,000 in securities. 

K-3

	          	          ___ Insurance
            Company. The Buyer is an insurance
            company whose primary and predominant business activity is the writing
            of insurance or the reinsuring of risks underwritten by insurance
            companies and which is subject to supervision by the insurance commissioner
            or a similar official or agency of a State, territory or the District
            of Columbia. 

                 ___ State
            or Local Plan. The Buyer is a plan
            established and maintained by a State, its political subdivisions,
            or any agency or instrumentality of the State or its political subdivisions,
            for the benefit of its employees. 

                 ___ ERISA
            Plan. The Buyer is an employee benefit
            plan within the meaning of Title I of the Employee Retirement Income
            Security Act of 1974. 

                 ___ Investment
            Advisor. The Buyer is an investment
            advisor registered under the Investment Advisors Act of 1940. 

                 ___ Small
            Business Investment Company. Buyer
            is a small business investment company licensed by the U.S. Small
            Business Administration under Section 301(c) or (d) of the Small
            Business Investment Act of 1958. 

                 ___ Business
            Development Company. Buyer is a business
            development company as defined in Section 202(a)(22) of the Investment
            Advisors Act of 1940. 

    

           3.       The term “securities” as
    used herein does not include (i) securities
of issuers that are affiliated with the Buyer, (ii) securities that are part of an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer, (iii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iv)
bank deposit notes and certificates of deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities owned but subject to a repurchase agreement and (viii) currency, interest rate and commodity swaps. 

          4.      For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Buyer, the Buyer used the cost of such securities to the Buyer and did not
include any of the securities referred to in the preceding paragraph, except (i) where the Buyer reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost
of those securities has been published.  If clause (ii) in the preceding sentence applies, the securities may be valued at market. Further, in determining such aggregate amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Buyer’s
direction. However, such securities were not included if the Buyer is a majority-owned, consolidated subsidiary of another enterprise and the Buyer is not itself a reporting company under the Securities Exchange Act of 1934, as amended. 

          5.      The Buyer acknowledges that it is familiar with Rule 144A and understands that the seller to it and other parties related to the Certificates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer may be in reliance on Rule 144A. 

K-4

          6.      Until the date of purchase of the Rule 144A Securities, the Buyer will notify each of the parties to which this certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer’s purchase of the Certificates will constitute a reaffirmation of this certification as of the date of such purchase. In addition, if the Buyer is a bank or savings and loan is provided above, the Buyer
agrees that it will furnish to such parties updated annual financial statements promptly after they become available. 

	 	 

	 	
Print Name of Transferee
	
	 	 

	
	 	 

	
	 	
By:
		 

	 	
Name:
		 

	 	
Title:
		 

	 	 

	
	 	
Date:
		 

K-5

ANNEX 2 TO EXHIBIT K

QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

[For Transferees That are Registered Investment Companies]

          The undersigned (the “Buyer”) hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates
described therein: 

          1.      As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a “qualified institutional buyer” as that term is
defined in Rule 144A under the Securities Act of 1933, as amended (“Rule 144A”) because Buyer is part of a Family of Investment Companies (as defined below), is such an officer of the Adviser. 

          2.      In connection with purchases by Buyer, the Buyer is a “qualified institutional buyer” as defined in SEC Rule 144A because (i) the Buyer is an investment company registered under the
Investment Company Act of 1940, as amended and (ii) as marked below, the Buyer alone, or the Buyer’s Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the
end of the Buyer’s most recent fiscal year. For purposes of determining the amount of securities owned by the Buyer or the Buyer’s Family of Investment Companies, the cost of such securities was used, except (i) where the Buyer or the
Buyer’s Family of Investment Companies reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause
(ii) in the preceding sentence applies, the securities may be valued at market. 

	          	          ___
          The Buyer owned $ in securities (other than the excluded securities
          referred to below) as of the end of the Buyer’s most recent fiscal
          year (such amount being calculated in accordance with Rule 144A). 

                 ___
          The Buyer is part of a Family of Investment Companies which owned in
          the aggregate $ in securities (other than the excluded securities
          referred to below) as of the end of the Buyer’s most recent fiscal
          year (such amount being calculated in accordance with Rule 144A). 

    

           3.
         The term “Family of Investment Companies” as
    used herein means two or more registered investment companies (or series
    thereof) that have the same investment adviser or investment advisers that
    are affiliated (by virtue of being majority owned subsidiaries of the same
    parent or because one investment adviser is a majority owned subsidiary of
the other). 

          4.      The term “securities” as used herein does not include (i) securities of issuers that are affiliated with the Buyer or are part
of the Buyer’s Family of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi)
securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps. 

K-6

          5.      The Buyer is familiar with Rule 144A and understands that the parties listed in the Rule 144A Transferee Certificate to which this certification relates are relying and will continue to rely on the
statements made herein because one or more sales to the Buyer will be in reliance on Rule 144A. In addition, the Buyer will only purchase for the Buyer’s own account. 

          6.      Until the date of purchase of the Certificates, the undersigned will notify the parties listed in the Rule 144A Transferee Certificate to which this certification relates of any changes in the
information and conclusions herein.  Until such notice is given, the Buyer’s purchase of the Certificates will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase. 

	 	 

	 	
Print Name of Transferee
	
	 	 

	
	 	 

	
	 	
By:
		 

	 	
Name:
		 

	 	
Title:
		 

	 	 

	
	 	 
	 	IF AN ADVISER: 
	 	 
	 	 

	 	Print Name of Buyer
	 	 
	 	
Date:
		 

	 	 	 

K-7

EXHIBIT L

REQUEST FOR RELEASE

[Substitution of Deleted Mortgage Loans

or 

Mortgage Loans Paid in Full] 

____________________________________
Mortgage Loan Files 

          _____________________
hereby certifies that he/she is an officer of _____________________, holding
the office set forth beneath his/her signature, and hereby further certifies
as follows: 

(Check One) 

	o          	With respect to the mortgage loans described in the
        attached schedule, each such mortgage loan
        constitutes a “Substitute Mortgage Loan” (as the term is defined
    in the Pooling and Servicing Agreement).
	 	 
	o	With respect to the “Mortgage Loans” (as
        the term is defined in the custodial agreement) described
    in the attached schedule:
	 	 
	 	All payments of principal, premium (if any), and interest
    have been made with respect tothe following:
	 	 
	 	Loan Number: 	 
	 
	 	 
	 	Borrower’s Name: 	 
	 
	 	 	 	 
	 	County:	 
	 
	 	 	 	 
	 	We hereby certify that all amounts to be received
    in connection with such payments havebeen received. 

  Dated: ______________________ 

 / / Vice President 

 / / Assistant Vice President 

L-1

EXHIBIT M

REQUEST FOR RELEASE AND RECEIPT

[For Servicing and Foreclosure]

_____________________________________ Mortgage Loan Files

  LOAN INFORMATION

	          Name
          of Mortgagor:
    	 

	 	 
	          Loan
          No.:
    	 

	 	 

           The
    undersigned hereby acknowledges that it has received from FIRST TENNESSEE
    BANK NATIONAL ASSOCIATION, as Custodian for ____________________ Mortgage
    Loan Files, the documents referred to below (the “Documents”). All capitalized terms not otherwise defined in this Request for Release and Receipt shall have the meanings ascribed to them in the Custodial Agreement dated as of __________________ among
___________________ and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, as Custodian (the “Custodial Agreement”). 

  [complete as necessary]

           The undersigned hereby acknowledges an agrees as follows:

           (1)      The undersigned shall hold and retain possession of the Documents in trust for the benefit of __________________, solely for the purposes provided in the Custodial Agreement. 

           (2)      The undersigned shall not cause or permit the Documents to become subject to, or encumbered by, any claim, liens, security interest, charges, writs of attachment or other impositions nor shall the
  undersigned assert or seek to assert any claims or rights of setoff to or against the Documents or any proceeds thereof. 

           (3)      The undersigned shall return each and every Document previously requested from the Mortgage File to the Custodian when the need therefor no longer exists, unless the Mortgage Loan relating to the
  Documents has been liquidated. 

 Date: ____________________________ 

	 	NAME
	 	 
	 	 
	 	By: 	 

	 	Name: 	 

	 	Title: 	 

M-1

EXHIBIT N-1 

FORM OF ANNUAL CERTIFICATION 

(Subservicer) 

	          	Re: 	First Horizon Mortgage Pass-Through
        Trust 2007-4 (the “Trust”),
        Mortgage Pass-Through Certificates, Series 2007-4, issued pursuant to
        the Pooling and Servicing Agreement, dated as of June 1, 2007 (the “Pooling
        and Servicing Agreement”),
        among First Horizon Asset Securities Inc., as depositor (the “Depositor”),
        First Horizon Home Loans, as master servicer (the “Master Servicer”)
        and The Bank of New York, as trustee (the “Trustee”) 

           I,
    [identify the certifying individual], a [title of certifying individual]
    of [name of company] (the “Company”), hereby certify to the Depositor,
    the Trustee, the Master Servicer, and their officers, directors and affiliates,
    and with the knowledge and intent that they will rely upon this certification,
    that: 

	          	          1.
               I have reviewed the servicer compliance statement of the Company provided
          in accordance with Item 1123 of Regulation AB (the “Compliance
          Statement”), the report on assessment
          of the Company’s compliance with the servicing criteria set forth
          in Item 1122(d) of Regulation AB (the “Servicing
          Criteria”), provided in accordance
          with Rules 13a-18 and 15d-18 under Securities Exchange Act of 1934,
          as amended (the “Exchange Act”)
          and Item 1122 of Regulation AB (the “Servicing
          Assessment”), the registered public
          accounting firm’s attestation report provided in accordance with
          Rules 13a-18 and 15d-18 under the Exchange Act and Section 1122(b)
          of Regulation AB (the “Attestation
          Report”), and all servicing reports,
          officer’s certificates and other information relating to the servicing
          of the Mortgage Loans by the Company during 200[ ] that were delivered
          by the Company to the [Depositor] [Master Servicer] [Trustee] pursuant
          to the Pooling and Servicing Agreement (collectively, the “Company
          Servicing Information”); 

                 2.
               Based upon my knowledge, the Company Servicing Information, taken as
          a whole, does not contain any untrue statement of a material fact or
          omit to state a material fact necessary to make the statements made,
          in light of the circumstances under which such statements were made,
          not misleading with respect to the period of time covered by the Company
          Servicing Information; 

                 3.
               Based on my knowledge, all of the Company Servicing Information required
          to be provided by the Company under the Pooling and Servicing Agreement
          has been provided to the [Depositor] [Master Servicer] [Trustee]; 

                 4.             I
          am responsible for reviewing the activities performed by the Company
        as a servicer under the Pooling and Servicing Agreement, and based
        on my knowledge and the compliance review conducted in preparing the
        Compliance Statement and except as disclosed in the Compliance Statement,
        the Servicing Assessment or the Attestation Report, the Company has
        fulfilled its obligations under the Pooling and Servicing Agreement
        in all material respects; and 

    

N-1-1

	          	          5.           The Compliance Statement required to be delivered by the Company pursuant
      to the Pooling and Servicing Agreement, and the Servicing Assessment
      and Attestation Report required to be provided by the Company and by
      any Subservicer or Subcontractor pursuant to the Pooling and Servicing
      Agreement, have been provided to the [Depositor] [Master Servicer]. Any
      material instances of noncompliance described in such reports have been
      disclosed to the [Depositor] [Master Servicer]. Any material instance
      of noncompliance with the Servicing Criteria has been disclosed in such
  reports. 

 

	 	
          Date:
      	 

	
	 

	
	 

	
	 

	
	 

	
	 	
          By:
      	 

	
	 	 

		
          [Signature]
      
	 	
          Title:
      	 

	

N-1-2

EXHIBIT N-2

FORM OF ANNUAL CERTIFICATION

(Trustee)

	          	Re:      	First Horizon Mortgage Pass-Through Trust
        2007-4 (the “Trust”),
        Mortgage Pass-Through Certificates, Series 2007-4, issued pursuant to
        the Pooling and Servicing Agreement, dated as of June 1, 2007 (the “Pooling
        and Servicing Agreement”), among First
        Horizon Asset Securities Inc., as depositor (the “Depositor”),
        First Horizon Home Loans, as master servicer (the “Master Servicer”)
        and The Bank of New York, as trustee (the “Trustee”) 

           I, [identify the certifying individual], a [title of certifying individual] of the Trustee, hereby certify to the Depositor, the Master Servicer, and their officers, directors and affiliates, and with
  the knowledge and intent that they will rely upon this certification, that: 

	          	          1.
               I have reviewed the report on assessment of the Trustee’s compliance
          with the servicing criteria set forth in Item 1122(d) of Regulation
          AB (the “Servicing Criteria”),
          provided in accordance with Rules 13a-18 and 15d-18 under Securities
          Exchange Act of 1934, as amended (the “Exchange
          Act”) and Item 1122 of Regulation
          AB (the “Servicing Assessment”),
          and the registered public accounting firm’s attestation report
          provided in accordance with Rules 13a-18 and 15d-18 under the Exchange
          Act and Section 1122(b) of Regulation AB (the “Attestation
          Report”) (collectively, the “Trustee
          Information”); 

                 2.             Based upon my knowledge, the Trustee Information, taken as a whole,
        does not contain any untrue statement of a material fact or omit to
        state a material fact necessary to make the statements made, in light
        of the circumstances under which such statements were made, not misleading
        with respect to the period of time covered by the Trustee Information; 

                 3.             Based on my knowledge, all of the Trustee Information required to be
        provided by the Trustee under the Pooling and Servicing Agreement has
        been provided to the [Depositor] [Master Servicer]; 

                 4.
               I am responsible for reviewing the activities
          performed by the Trustee as trustee under the Pooling and Servicing
          Agreement, and based on my knowledge and the compliance review conducted
          in preparing the Compliance Statement and except as disclosed in the
          Servicing Assessment or the Attestation Report, the Trustee has fulfilled
          its obligations under the Pooling and Servicing Agreement in all material
          respects; and 

    

N-2-1

	          	          5.
             The Servicing Assessment and Attestation Report required to be provided
        by the Trustee pursuant to the Pooling and Servicing Agreement have been
        provided to the [Depositor] [Master Servicer]. Any material instances
        of noncompliance described in such reports have been disclosed to the
        [Depositor] [Master Servicer]. Any material instance of noncompliance
    with the Servicing Criteria has been disclosed in such reports. 

 

	 	Date: 	 
	 
	 
	 
	 
	 	By: 	 
	 	 	[Signature] 
	 	Title: 	 

N-2-2

EXHIBIT O

[FORM OF] SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE STATEMENT 

           The
    assessment of compliance to be delivered by [the Master Servicer] [Trustee]
    [Name of Subservicer] shall address, at a minimum, the criteria identified
    as below as “Applicable Servicing
  Criteria”: 

  SERVICING CRITERIA 

	Reference 	 	Criteria 	 	Responsible 
	 	 	 	 	Party * 
	 
	 	 	General Servicing Considerations 	 	 
	 
	1122(d)(1)(i) 	 	Policies and procedures are instituted
        to monitor any 	 	Master 
	 	 	performance or other triggers and
        events of default in 	 	Servicer 
	 	 	accordance with the transaction
        agreements. 	 	Trustee 
	 
	1122(d)(1)(ii) 	 	If any material servicing activities
        are outsourced to third 	 	Master 
	 	 	parties, policies and procedures
        are instituted to monitor the 	 	Servicer 
	 	 	third party’s performance and
        compliance with such 	 	Trustee 
	 	 	servicing activities. 	 	 
	 	 	 	 	 
	1122(d)(1)(iii) 	 	Any requirements in the transaction
        agreements to maintain 	 	N/A 
	 	 	a back-up servicer for the mortgage
        loans are maintained. 	 	 
	 	 	 	 	 
	1122(d)(1)(iv) 	 	A fidelity bond and errors and omissions
        policy is in effect 	 	Master 
	 	 	on the party participating in the
        servicing function 	 	Servicer 
	 	 	throughout the reporting period
        in the amount of coverage 	 	 
	 	 	required by and otherwise in accordance
        with the terms of 	 	 
	 	 	the transaction agreements. 	 	 
	 	 	 	 	 
	 	 	Cash Collection and
          Administration 	 	 
	 
	1122(d)(2)(i) 	 	Payments on mortgage loans are deposited
        into the 	 	Master/Sub 
	 	 	appropriate custodial bank accounts
        and related bank 	 	Servicer 
	 	 	clearing accounts no more than two
        business days following 	 	(Certificate 
	 	 	receipt, or such other number of
        days specified in the 	 	Account) 
	 	 	transaction agreements. 	 	 
	 	 	 	 	 
	1122(d)(2)(ii) 	 	Disbursements made via wire transfer
        on behalf of an 	 	Master 
	 	 	obligor or to an investor are made
        only by authorized 	 	Servicer 
	 	 	personnel. 	 	Trustee 
	 	 	 	 	 
	1122(d)(2)(iii) 	 	Advances of funds or guarantees
        regarding collections, cash 	 	Master/Sub 
	 	 	flows or distributions, and any
        interest or other fees charged 	 	Servicer 
	 	 	for such advances, are made, reviewed
        and approved as 	 	 
	 	 	specified in the transaction agreements. 	 	 

  *Unless otherwise agreed upon by the parties. 

O-1 

	1122(d)(2)(iv) 	 	The related accounts for the transaction,
        such as cash 	 	Master/Sub 
	 	 	reserve accounts or accounts established
        as a form of 	 	Servicer 
	 	 	overcollateralization, are separately
        maintained (e.g., with 	 	Trustee 
	 	 	respect to commingling of cash)
        as set forth in the 	 	 
	 	 	transaction agreements. 	 	 
	 	 	 	 	 
	1122(d)(2)(v) 	 	Each custodial account is maintained
        at a federally insured 	 	Trustee 
	 	 	depository institution as set forth
        in the transaction 	 	(Distribution 
	 	 	agreements. For purposes of this
        criterion, “federally 	 	Account)*; 
	 	 	insured depository institution” with
        respect to a foreign 	 	Master/Sub 
	 	 	financial institution means a foreign
        financial institution 	 	Servicer 
	 	 	that meets the requirements of Rule
        13k-1(b)(1) of the 	 	(Certificate 
	 	 	Securities Exchange Act. 	 	Account) 
	 	 	 	 	 
	1122(d)(2)(vi) 	 	Unissued checks are safeguarded
        so as to prevent 	 	N/A 
	 	 	unauthorized access. 	 	 
	 	 	 	 	 
	1122(d)(2)(vii) 	 	Reconciliations are prepared on
        a monthly basis for all 	 	Master/Sub 
	 	 	asset-backed securities related
        bank accounts, including 	 	Servicer 
	 	 	custodial accounts and related bank
        clearing accounts. 	 	Trustee 
	 	 	These reconciliations are (A) mathematically
        accurate; (B) 	 	 
	 	 	prepared within 30 calendar days
        after the bank statement 	 	 
	 	 	cutoff date, or such other number
        of days specified in the 	 	 
	 	 	transaction agreements; (C) reviewed
        and approved by 	 	 
	 	 	someone other than the person who
        prepared the 	 	 
	 	 	reconciliation; and (D) contain
        explanations for reconciling 	 	 
	 	 	items. These reconciling items are
        resolved within 90 	 	 
	 	 	calendar days of their original
        identification, or such other 	 	 
	 	 	number of days specified in the
        transaction agreements. 	 	 
	 
	 	 	Investor Remittances
          and Reporting 	 	 
	 
	1122(d)(3)(i) 	 	Reports to investors, including
        those to be filed with the 	 	Trustee 
	 	 	Commission, are maintained in accordance
        with the 	 	 
	 	 	transaction agreements and applicable
        Commission 	 	 
	 	 	requirements. Specifically, such
        reports (A) are prepared in 	 	 
	 	 	accordance with timeframes and other
        terms set forth in the 	 	 
	 	 	transaction agreements; (B) provide
        information calculated 	 	 
	 	 	in accordance with the terms specified
        in the transaction 	 	 
	 	 	agreements; (C) are filed with the
        Commission as required 	 	 
	 	 	by its rules and regulations; and
        (D) agree with investors’ or 	 	 
	 	 	the trustee’s records as to
        the total unpaid principal balance 	 	 
	 	 	and number of mortgage loans serviced
        by the Servicer. 	 	 
	 
	1122(d)(3)(ii) 	 	Amounts due to investors are allocated
        and remitted in other 	 	Master 
	 	 	terms set forth in the transaction
        agreements. 	 	Servicer 
	 	 	 	 	Trustee 

  *Pending further clarification from the SEC. 

O-2 

	1122(d)(3)(iii) 	 	Disbursements made to an investor
        are posted within two 	 	Trustee 
	 	 	business days to the Servicer’s
        investor records, or such 	 	 
	 	 	other number of days specified in
        the transaction 	 	 
	 	 	agreements. 	 	 
	 
	 
	1122(d)(3)(iv) 	 	Amounts remitted to investors per
        the investor reports agree 	 	Trustee 
	 	 	with cancelled checks, or other
        form of payment, or 	 	 
	 	 	custodial bank statements. 	 	 
	 	 	 	 	 
	 	 	Pool Asset Administration 	 	 
	 
	1122(d)(4)(i) 	 	Collateral or security on mortgage
        loans is maintained as 	 	Master/Sub 
	 	 	required by the transaction agreements
        or related mortgage 	 	Servicer 
	 	 	loan documents. 	 	 
	 	 	 	 	 
	1122(d)(4)(ii) 	 	Mortgage loan and related documents
        are safeguarded as 	 	Master/Sub 
	 	 	required by the transaction agreements. 	 	Servicer 
	 	 	 	 	 
	1122(d)(4)(iii) 	 	Any additions, removals or substitutions
        to the asset pool 	 	Master/Sub 
	 	 	are made, reviewed and approved
        in accordance with any 	 	Servicer 
	 	 	conditions or requirements in the
        transaction agreements. 	 	 
	 	 	 	 	 
	1122(d)(4)(iv) 	 	Payments on mortgage loans, including
        any payoffs, made 	 	Master/Sub 
	 	 	in accordance with the related mortgage
        loan documents are 	 	Servicer 
	 	 	posted to the Servicer’s obligor
        records maintained no more 	 	 
	 	 	than two business days after receipt,
        or such other number 	 	 
	 	 	of days specified in the transaction
        agreements, and 	 	 
	 	 	allocated to principal, interest
        or other items (e.g., escrow) 	 	 
	 	 	in accordance with the related mortgage
        loan documents. 	 	 
	 
	 	 	 	 	 
	1122(d)(4)(v) 	 	The Servicer’s records regarding
        the mortgage loans agree 	 	Master/Sub 
	 	 	with the Servicer’s records
        with respect to an obligor’s 	 	Servicer 
	 	 	unpaid principal balance. 	 	 
	 	 	 	 	 
	1122(d)(4)(vi) 	 	Changes with respect to the terms
        or status of an obligor’s 	 	Master/Sub 
	 	 	mortgage loans (e.g., loan modifications
        or re-agings) are 	 	Servicer 
	 	 	made, reviewed and approved by authorized
        personnel in 	 	 
	 	 	accordance with the transaction
        agreements and related pool 	 	 
	 	 	asset documents. 	 	 
	 	 	 	 	 
	1122(d)(4)(vii) 	 	Loss mitigation or recovery actions
        (e.g., forbearance plans, 	 	Master/Sub 
	 	 	modifications and deeds in lieu
        of foreclosure, foreclosures 	 	Servicer 
	 	 	and repossessions, as applicable)
        are initiated, conducted 	 	 
	 	 	and concluded in accordance with
        the timeframes or other 	 	 
	 	 	requirements established by the
        transaction agreements 	 	 
	 

O-3

	1122(d) (4)(viii) 	 	Records documenting collection efforts
        are maintained 	 	Master/Sub 
	 	 	during the period a mortgage loan
        is delinquent in 	 	Servicer 
	 	 	accordance with the transaction
        agreements. Such records 	 	 
	 	 	are maintained on at least a monthly
        basis, or such other 	 	 
	 	 	period specified in the transaction
        agreements, and describe 	 	 
	 	 	the entity’s activities in
        monitoring delinquent mortgage 	 	 
	 	 	loans including, for example, phone
        calls, letters and 	 	 
	 	 	payment rescheduling plans in cases
        where delinquency is 	 	 
	 	 	deemed temporary (e.g., illness
        or unemployment). 	 	 
	 	 	 	 	 
	1122(d) (4)(ix) 	 	Adjustments to interest rates or
        rates of return for mortgage 	 	Master/Sub 
	 	 	loans with variable rates are computed
        based on the related 	 	Servicer 
	 	 	mortgage loan documents. 	 	 
	 	 	 	 	 
	1122(d) (4)(x) 	 	Regarding any funds held in trust
        for an obligor (such as 	 	Master/Sub 
	 	 	escrow accounts): (A) such funds
        are analyzed, in 	 	Servicer 
	 	 	accordance with the obligor’s
        mortgage loan documents, on 	 	 
	 	 	at least an annual basis, or such
        other period specified in the 	 	 
	 	 	transaction agreements; (B) interest
        on such funds is paid, 	 	 
	 	 	or credited, to obligors in accordance
        with applicable 	 	 
	 	 	mortgage loan documents and state
        laws; and (C) such 	 	 
	 	 	funds are returned to the obligor
        within 30 calendar days of 	 	 
	 	 	full repayment of the related mortgage
        loans, or such other 	 	 
	 	 	number of days specified in the
        transaction agreements. 	 	 
	 	 	 	 	 
	1122(d) (4)(xi) 	 	Payments made on behalf of an obligor
        (such as tax or 	 	Master/Sub 
	 	 	insurance payments) are made on
        or before the related 	 	Servicer 
	 	 	penalty or expiration dates, as
        indicated on the appropriate 	 	 
	 	 	bills or notices for such payments,
        provided that such 	 	 
	 	 	support has been received by the
        servicer at least 30 	 	 
	 	 	calendar days prior to these dates,
        or such other number of 	 	 
	 	 	days specified in the transaction
        agreements. 	 	 
	 	 	 	 	 
	1122(d) (4)(xii) 	 	Any late payment penalties in connection
        with any payment 	 	Master/Sub 
	 	 	to be made on behalf of an obligor
        are paid from the 	 	Servicer 
	 	 	servicer’s funds and not charged
        to the obligor, unless the 	 	 
	 	 	late payment was due to the obligor’s
        error or omission. 	 	 
	 	 	 	 	 
	1122(d) (4)(xiii) 	 	Disbursements made on behalf of
        an obligor are posted 	 	Master/Sub 
	 	 	within two business days to the
        obligor’s records 	 	Servicer 
	 	 	maintained by the servicer, or such
        other number of days 	 	 
	 	 	specified in the transaction agreements. 	 	 
	 	 	 	 	 
	1122(d) (4)(xiv) 	 	Delinquencies, charge-offs and uncollectible
        accounts are 	 	Master/Sub 
	 	 	recognized and recorded in accordance
        with the transaction 	 	Servicer 
	 	 	agreements. 	 	 
	 	 	 	 	 
	1122(d) (4)(xv) 	 	Any external enhancement or other
        support, identified in 	 	Trustee*; 
	 	 	Item 1114(a)(1) through (3) or Item
        1115 of Regulation AB, 	 	Master/Sub 
	 	 	is maintained as set forth in the
        transaction agreements. 	 	Servicer 

  *Solely with respect to disbursements to the enhancement provider required by the transaction documents.

O-4

	 	
          [NAME OF MASTER SERVICER] [NAME OF
      
	 	
          TRUSTEE] [NAME OF CO-TRUSTEE]
      
	 	
          [SUBSERVICER]
      
	 	 

	
	 	
          Date:
      	 

	 	 

	
	 	
          By:
      	 

	 	
          Name:
      	 

	 	
          Title:
      	 

O-5

EXHIBIT P

FORM OF LIST OF ITEM 1119 PARTIES 

    ___________ MORTGAGE PASS-THROUGH TRUST 200_-___

Mortgage Pass-Through Certificates,

    Series 200__-___ 

	
          Party
      	 
      	
          Contact Information
      

P-1

EXHIBIT Q

FORM OF SARBANES-OXLEY CERTIFICATION

(Replacement of the Master Servicer)

           I,
    [identify the certifying individual], a [title of certifying individual]
    of First Horizon Home Loans (the “Company”),
    hereby certify that: 

	          	          1.             I have reviewed the report on Form 10-K and all reports on Form 10-D
        required to be filed in respect of the period covered by this report
        on Form 10-K of First Horizon Mortgage Pass-Through Trust Series 2007-4
        (the “Exchange Act Reports”); 

                 2.
               Based upon my knowledge, the Exchange Act Reports, taken as a whole,
          do not contain any untrue statement of a material fact or omit to state
          a material fact necessary to make the statements made, in light of
          the circumstances under which such statements were made, not misleading
          with respect to the period covered by this report; 

                 3.             Based on my knowledge, all of the distribution, servicing and other
        information required to be provided under Form 10-D for the period
        covered by this report is included in the Exchange Act Reports; 

                 4.
               I am responsible for reviewing the activities performed by the Company
          as master servicer under the Pooling and Servicing Agreement and, based
          on my knowledge and the compliance review(s) conducted in preparing
          the servicer compliance statement(s) required in this report under
          Item 1123 of Regulation AB (the “Compliance
          Statements”), and except as disclosed
          in the Exchange Act Reports, the Company has fulfilled its obligations
          as master servicer under the Pooling and Servicing Agreement; and

                 5.
               All of the reports on assessment of compliance with servicing criteria
          for asset-backed securities and their related attestation reports on
          assessment of compliance with servicing criteria for asset-backed securities
          required to be included in this report in accordance with Item 1122
          of Regulation AB and Exchange Act Rules 13a-18 and 15d-18 have been
          included as an exhibit to this report, except as otherwise disclosed
          in this report. Any material instances of noncompliance described in
          such reports have been disclosed in this report on Form 10-K. [In giving
          the certifications above, I have reasonably relied on information provided
          to me by the following unaffiliated parties [name of servicer, sub-servicer,
    co-servicer, depositor or trustee]. 

  

	 	
          Date:
      	 
	 	
          [Signature]
      	 
	 	
          [Title]
      	 

Q-1 

EXHIBIT R 

FORM OF SARBANES-OXLEY CERTIFICATION

          The Principal Balance Schedules have been prepared on the basis of the Structuring Assumptions and the assumption that the mortgage loans prepay at the approximate constant rates set forth
  below: 

	 	 	 	 	 	 	Prepayment 
	Principal Balance 	 	Principal Balance 	 	 	 	Assumption 
	Schedules Reference 	 	Schedules Type 	 	Related Classes 	 	Ranges and Rates 
	PAC Schedule 	 	Planned Balance 	 	Class I-A-1, Class I-A-2, 	 	Between 125% and 
	 	 	 	 	Class I-A-5, Class I-A-6, 	 	325% PSA 
	 	 	 	 	Class I-A-7, Class
        I-A-8, 	 	 
	 	 	 	 	Class I-A-9 and Class I-A-13 	 	 
	 	 	 	 	Certificates and Class I-A- 	 	 
	 	 	 	 	4(2) Component 	 	 
	TAC Schedule 	 	Targeted Balance 	 	Class I-A-11, Class I-A-15 	 	350% PSA 
	 	 	 	 	and Class I-A-16 Certificates 	 	 

	Distribution
            Date 	 	PAC Schedule 	 	TAC Schedule 
	Initial Balance 	 	$ 	179,768,000.00 	 	$ 	102,225,900.00 
	July 25, 2007 	 	 	179,494,511.51 	 	 	102,091,871.97 
	August 25, 2007 	 	 	179,152,349.17 	 	 	101,835,222.66 
	September 25,
        2007 	 	 	178,741,657.20 	 	 	101,455,620.13 
	October 25, 2007 	 	 	178,262,523.36 	 	 	100,953,021.97 
	November 25, 2007 	 	 	177,715,079.05 	 	 	100,327,678.96 
	December 25, 2007 	 	 	177,099,499.33 	 	 	99,580,137.90 
	January 25, 2008 	 	 	176,416,002.99 	 	 	98,711,243.40 
	February 25, 2008 	 	 	175,664,852.42 	 	 	97,722,138.99 
	March 25, 2008 	 	 	174,846,353.59 	 	 	96,614,267.04 
	April 25, 2008 	 	 	173,960,855.88 	 	 	95,389,367.89 
	May 25, 2008 	 	 	173,008,751.90 	 	 	94,049,477.90 
	June 25, 2008 	 	 	171,990,477.28 	 	 	92,596,926.58 
	July 25, 2008 	 	 	170,906,510.36 	 	 	91,034,332.79 
	August 25, 2008 	 	 	169,757,371.91 	 	 	89,364,599.76 

R-1

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	September 25, 2008 	 	168,543,624.73 	 	87,590,909.39 
	October 25, 2008 	 	167,265,873.25 	 	85,716,715.37 
	November 25, 2008 	 	165,924,763.07 	 	83,745,735.45 
	December 25, 2008 	 	164,520,980.46 	 	81,681,942.72 
	January 25, 2009 	 	163,055,251.79 	 	79,529,556.01 
	February 25, 2009 	 	161,528,342.97 	 	77,293,029.33 
	March 25, 2009 	 	159,941,058.79 	 	74,977,040.51 
	April 25, 2009 	 	158,294,242.23 	 	72,586,479.00 
	May 25, 2009 	 	156,588,773.78 	 	70,126,432.76 
	June 25, 2009 	 	154,825,570.63 	 	67,602,174.62 
	July 25, 2009 	 	153,005,585.90 	 	65,019,147.68 
	August 25, 2009 	 	151,129,807.78 	 	62,382,950.25 
	September 25, 2009 	 	149,199,258.67 	 	59,699,320.07 
	October 25, 2009 	 	147,214,994.22 	 	56,974,118.01 
	November 25, 2009 	 	145,178,102.41 	 	54,213,311.35 
	December 25, 2009 	 	143,095,971.64 	 	51,433,457.33 
	January 25, 2010 	 	141,027,668.12 	 	48,737,061.96 
	February 25, 2010 	 	138,973,102.43 	 	46,122,286.96 
	March 25, 2010 	 	136,932,185.72 	 	43,587,331.51 
	April 25, 2010 	 	134,904,829.73 	 	41,130,431.47 
	May 25, 2010 	 	132,890,946.76 	 	38,749,858.67 
	June 25, 2010 	 	130,890,449.70 	 	36,443,920.17 
	July 25, 2010 	 	128,903,252.00 	 	34,210,957.59 
	August 25, 2010 	 	126,929,267.65 	 	32,049,346.46 
	September 25, 2010 	 	124,968,411.24 	 	29,957,495.43 
	October 25, 2010 	 	123,020,597.89 	 	27,933,845.71 

R-2

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	November 25, 2010 	 	121,085,743.27 	 	25,976,870.42 
	December 25, 2010 	 	119,163,763.61 	 	24,085,073.91 
	January 25, 2011 	 	117,254,575.68 	 	22,256,991.14 
	February 25, 2011 	 	115,358,096.81 	 	20,491,187.12 
	March 25, 2011 	 	113,474,244.83 	 	18,786,256.27 
	April 25, 2011 	 	111,602,938.14 	 	17,140,821.85 
	May25, 2011 	 	109,744,095.65 	 	15,553,535.39 
	June 25, 2011 	 	107,897,636.81 	 	14,023,076.12 
	July 25, 2011 	 	106,063,481.59 	 	12,548,150.40 
	August 25, 2011 	 	104,241,550.49 	 	11,127,491.22 
	September 25, 2011 	 	102,431,764.51 	 	9,759,857.64 
	October 25, 2011 	 	100,634,045.17 	 	8,444,034.28 
	November 25, 2011 	 	98,848,314.52 	 	7,178,830.81 
	December 25, 2011 	 	97,074,495.09 	 	5,963,081.46 
	January 25, 2012 	 	95,312,509.93 	 	4,795,644.50 
	February 25, 2012 	 	93,562,282.60 	 	3,675,401.78 
	March 25, 2012 	 	91,823,737.13 	 	2,601,258.30 
	April 25, 2012 	 	90,096,798.08 	 	1,572,141.64 
	May 25, 2012 	 	88,381,390.47 	 	587,001.66 
	June 25, 2012 	 	86,677,439.82 	 	0.00 
	July 25, 2012 	 	85,074,318.31 	 	 
	August 25, 2012 	 	83,482,335.70 	 	 
	September 25, 2012 	 	81,901,419.24 	 	 
	October 25, 2012 	 	80,331,496.66 	 	 
	November 25, 2012 	 	78,772,496.16 	 	 
	December 25, 2012 	 	77,224,346.41 	 	 

R-3

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	January 25, 2013 	 	75,686,976.55 	 	 
	February 25, 2013 	 	74,160,316.18 	 	 
	March 25, 2013 	 	72,644,295.35 	 	 
	April 25, 2013 	 	71,138,844.58 	 	 
	May 25, 2013 	 	69,643,894.85 	 	 
	June 25, 2013 	 	68,159,377.57 	 	 
	July 25, 2013 	 	66,714,431.18 	 	 
	August 25, 2013 	 	65,279,641.16 	 	 
	September 25, 2013 	 	63,854,940.66 	 	 
	October 25, 2013 	 	62,440,263.27 	 	 
	November 25, 2013 	 	61,035,543.03 	 	 
	December 25, 2013 	 	59,640,714.40 	 	 
	January 25, 2014 	 	58,255,712.26 	 	 
	February 25, 2014 	 	56,880,471.94 	 	 
	March 25, 2014 	 	55,514,929.17 	 	 
	April 25, 2014 	 	54,159,020.13 	 	 
	May 25, 2014 	 	52,812,681.40 	 	 
	June 25, 2014 	 	51,475,849.97 	 	 
	July 25, 2014 	 	50,235,889.34 	 	 
	August 25, 2014 	 	49,022,054.15 	 	 
	September 25, 2014 	 	47,833,830.46 	 	 
	October 25, 2014 	 	46,670,714.09 	 	 
	November 25, 2014 	 	45,532,210.38 	 	 
	December 25, 2014 	 	44,417,834.10 	 	 
	January 25, 2015 	 	43,327,109.18 	 	 
	February 25, 2015 	 	42,259,568.62 	 	 

R-4

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	March 25, 2015 	 	41,214,754.27 	 	 
	April 25, 2015 	 	40,192,216.68 	 	 
	May 25, 2015 	 	39,191,514.95 	 	 
	June 25, 2015 	 	38,212,216.56 	 	 
	July 25, 2015 	 	37,369,335.42 	 	 
	August 25, 2015 	 	36,543,958.18 	 	 
	September 25, 2015 	 	35,735,736.11 	 	 
	October 25, 2015 	 	34,944,327.23 	 	 
	November 25, 2015 	 	34,169,396.20 	 	 
	December 25, 2015 	 	33,410,614.16 	 	 
	January 25, 2016 	 	32,667,658.63 	 	 
	February 25, 2016 	 	31,940,213.39 	 	 
	March 25, 2016 	 	31,227,968.33 	 	 
	April 25, 2016 	 	30,530,619.39 	 	 
	May 25, 2016 	 	29,847,868.40 	 	 
	June 25, 2016 	 	29,179,422.98 	 	 
	July 25, 2016 	 	28,621,286.60 	 	 
	August 25, 2016 	 	28,073,598.47 	 	 
	September 25, 2016 	 	27,536,165.72 	 	 
	October 25, 2016 	 	27,008,798.99 	 	 
	November 25, 2016 	 	26,491,312.38 	 	 
	December 25, 2016 	 	25,983,523.40 	 	 
	January 25, 2017 	 	25,485,252.90 	 	 
	February 25, 2017 	 	24,996,325.00 	 	 
	March 25, 2017 	 	24,516,567.05 	 	 
	April 25, 2017 	 	24,045,809.55 	 	 

R-5

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	May 25, 2017 	 	23,583,886.11 	 	 
	June 25, 2017 	 	23,129,706.47 	 	 
	July 25, 2017 	 	22,668,188.11 	 	 
	August 25, 2017 	 	22,215,535.60 	 	 
	September 25, 2017 	 	21,771,582.52 	 	 
	October 25, 2017 	 	21,336,165.54 	 	 
	November 25, 2017 	 	20,909,124.34 	 	 
	December 25, 2017 	 	20,490,301.59 	 	 
	January 25, 2018 	 	20,079,542.85 	 	 
	February 25, 2018 	 	19,676,696.53 	 	 
	March 25, 2018 	 	19,281,613.87 	 	 
	April 25, 2018 	 	18,894,148.85 	 	 
	May 25, 2018 	 	18,514,158.16 	 	 
	June 25, 2018 	 	18,141,501.13 	 	 
	July 25, 2018 	 	17,776,039.71 	 	 
	August 25, 2018 	 	17,417,638.41 	 	 
	September 25, 2018 	 	17,066,164.24 	 	 
	October 25, 2018 	 	16,721,486.68 	 	 
	November 25, 2018 	 	16,383,477.63 	 	 
	December 25, 2018 	 	16,052,011.36 	 	 
	January 25, 2019 	 	15,726,964.49 	 	 
	February 25, 2019 	 	15,408,215.90 	 	 
	March 25, 2019 	 	15,095,646.74 	 	 
	April 25, 2019 	 	14,789,140.35 	 	 
	May 25, 2019 	 	14,488,582.25 	 	 
	June 25, 2019 	 	14,193,860.08 	 	 

R-6

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	July 25, 2019 	 	13,904,863.57 	 	 
	August 25, 2019 	 	13,621,484.48 	 	 
	September 25, 2019 	 	13,343,616.60 	 	 
	October 25, 2019 	 	13,071,155.69 	 	 
	November 25, 2019 	 	12,803,999.44 	 	 
	December 25, 2019 	 	12,542,047.45 	 	 
	January 25, 2020 	 	12,285,201.18 	 	 
	February 25, 2020 	 	12,033,363.93 	 	 
	March 25, 2020 	 	11,786,440.79 	 	 
	April 25, 2020 	 	11,544,338.63 	 	 
	May 25, 2020 	 	11,306,966.03 	 	 
	June 25, 2020 	 	11,074,233.30 	 	 
	July 25, 2020 	 	10,846,052.39 	 	 
	August 25, 2020 	 	10,622,336.92 	 	 
	September 25, 2020 	 	10,403,002.09 	 	 
	October 25, 2020 	 	10,187,964.70 	 	 
	November 25, 2020 	 	9,977,143.10 	 	 
	December 25, 2020 	 	9,770,457.14 	 	 
	January 25, 2021 	 	9,567,828.20 	 	 
	February 25, 2021 	 	9,369,179.10 	 	 
	March 25, 2021 	 	9,174,434.09 	 	 
	April 25, 2021 	 	8,983,518.87 	 	 
	May 25, 2021 	 	8,796,360.50 	 	 
	June 25, 2021 	 	8,612,887.41 	 	 
	July 25, 2021 	 	8,433,029.36 	 	 
	August 25, 2021 	 	8,256,717.42 	 	 

R-7

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	September 25, 2021 	 	8,083,883.97 	 	 
	October 25, 2021 	 	7,914,462.62 	 	 
	November 25, 2021 	 	7,748,388.25 	 	 
	December 25, 2021 	 	7,585,596.93 	 	 
	January 25, 2022 	 	7,426,025.96 	 	 
	February 25, 2022 	 	7,269,613.78 	 	 
	March 25, 2022 	 	7,116,300.00 	 	 
	April 25, 2022 	 	6,966,025.35 	 	 
	May 25, 2022 	 	6,818,731.68 	 	 
	June 25, 2022 	 	6,674,361.92 	 	 
	July 25, 2022 	 	6,532,860.08 	 	 
	August 25, 2022 	 	6,394,171.20 	 	 
	September 25, 2022 	 	6,258,241.37 	 	 
	October 25, 2022 	 	6,125,017.67 	 	 
	November 25, 2022 	 	5,994,448.20 	 	 
	December 25, 2022 	 	5,866,482.01 	 	 
	January 25, 2023 	 	5,741,069.10 	 	 
	February 25, 2023 	 	5,618,160.44 	 	 
	March 25, 2023 	 	5,497,707.90 	 	 
	April 25, 2023 	 	5,379,664.24 	 	 
	May 25, 2023 	 	5,263,983.13 	 	 
	June 25, 2023 	 	5,150,619.11 	 	 
	July 25, 2023 	 	5,039,527.55 	 	 
	August 25, 2023 	 	4,930,664.70 	 	 
	September 25, 2023 	 	4,823,987.58 	 	 
	October 25, 2023 	 	4,719,454.07 	 	 

R-8

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	November 25, 2023 	 	4,617,022.81 	 	 
	December 25, 2023 	 	4,516,653.23 	 	 
	January 25, 2024 	 	4,418,305.51 	 	 
	February 25, 2024 	 	4,321,940.60 	 	 
	March 25, 2024 	 	4,227,520.19 	 	 
	April 25, 2024 	 	4,135,006.65 	 	 
	May 25, 2024 	 	4,044,363.11 	 	 
	June 25, 2024 	 	3,955,553.36 	 	 
	July 25, 2024 	 	3,868,541.90 	 	 
	August 25, 2024 	 	3,783,293.87 	 	 
	September 25, 2024 	 	3,699,775.08 	 	 
	October 25, 2024 	 	3,617,952.01 	 	 
	November 25, 2024 	 	3,537,791.74 	 	 
	December 25, 2024 	 	3,459,261.98 	 	 
	January 25, 2025 	 	3,382,331.05 	 	 
	February 25, 2025 	 	3,306,967.89 	 	 
	March 25, 2025 	 	3,233,141.99 	 	 
	April 25, 2025 	 	3,160,823.45 	 	 
	May 25, 2025 	 	3,089,982.92 	 	 
	June 25, 2025 	 	3,020,591.61 	 	 
	July 25, 2025 	 	2,952,621.26 	 	 
	August 25, 2025 	 	2,886,044.18 	 	 
	September 25, 2025 	 	2,820,833.16 	 	 
	October 25, 2025 	 	2,756,961.54 	 	 
	November 25, 2025 	 	2,694,403.16 	 	 
	December 25, 2025 	 	2,633,132.34 	 	 

R-9

	
          Distribution Date
      	 
      	
          PAC Schedule
      	 
      	
          TAC Schedule
      
	
          January 25, 2026
      	 
      	
          2,573,123.91
      	 
      	 

	
	
          February 25, 2026
      	 
      	
          2,514,353.15
      	 
      	 

	
	
          March 25, 2026
      	 
      	
          2,456,795.84
      	 
      	 

	
	
          April 25, 2026
      	 
      	
          2,400,428.19
      	 
      	 

	
	
          May 25, 2026
      	 
      	
          2,345,226.88
      	 
      	 

	
	
          June 25, 2026
      	 
      	
          2,291,169.05
      	 
      	 

	
	
          July 25, 2026
      	 
      	
          2,238,232.23
      	 
      	 

	
	
          August 25, 2026
      	 
      	
          2,186,394.41
      	 
      	 

	
	
          September 25, 2026
      	 
      	
          2,135,633.99
      	 
      	 

	
	
          October 25, 2026
      	 
      	
          2,085,929.79
      	 
      	 

	
	
          November 25, 2026
      	 
      	
          2,037,261.02
      	 
      	 

	
	
          December 25, 2026
      	 
      	
          1,989,607.29
      	 
      	 

	
	
          January 25, 2027
      	 
      	
          1,942,948.61
      	 
      	 

	
	
          February 25, 2027
      	 
      	
          1,897,265.34
      	 
      	 

	
	
          March 25, 2027
      	 
      	
          1,852,538.26
      	 
      	 

	
	
          April 25, 2027
      	 
      	
          1,808,748.48
      	 
      	 

	
	
          May 25, 2027
      	 
      	
          1,765,877.49
      	 
      	 

	
	
          June 25, 2027
      	 
      	
          1,723,907.12
      	 
      	 

	
	
          July 25, 2027
      	 
      	
          1,682,819.55
      	 
      	 

	
	
          August 25, 2027
      	 
      	
          1,642,597.32
      	 
      	 

	
	
          September 25, 2027
      	 
      	
          1,603,223.28
      	 
      	 

	
	
          October 25, 2027
      	 
      	
          1,564,680.61
      	 
      	 

	
	
          November 25, 2027
      	 
      	
          1,526,952.83
      	 
      	 

	
	
          December 25, 2027
      	 
      	
          1,490,023.75
      	 
      	 

	
	
          January 25, 2028
      	 
      	
          1,453,877.52
      	 
      	 

	
	
          February 25, 2028
      	 
      	
          1,418,498.56
      	 
      	 

	

R-10

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	March 25, 2028 	 	1,383,871.62 	 	 
	April 25, 2028 	 	1,349,981.73 	 	 
	May 25, 2028 	 	1,316,814.19 	 	 
	June 25, 2028 	 	1,284,354.61 	 	 
	July 25, 2028 	 	1,252,588.87 	 	 
	August 25, 2028 	 	1,221,503.10 	 	 
	September 25, 2028 	 	1,191,083.72 	 	 
	October 25, 2028 	 	1,161,317.40 	 	 
	November 25, 2028 	 	1,132,191.08 	 	 
	December 25, 2028 	 	1,103,691.92 	 	 
	January 25, 2029 	 	1,075,807.37 	 	 
	February 25, 2029 	 	1,048,525.09 	 	 
	March 25, 2029 	 	1,021,832.98 	 	 
	April 25, 2029 	 	995,719.20 	 	 
	May 25, 2029 	 	970,172.10 	 	 
	June 25, 2029 	 	945,180.29 	 	 
	July 25, 2029 	 	920,732.57 	 	 
	August 25, 2029 	 	896,817.99 	 	 
	September 25, 2029 	 	873,425.77 	 	 
	October 25, 2029 	 	850,545.37 	 	 
	November 25, 2029 	 	828,166.44 	 	 
	December 25, 2029 	 	806,278.85 	 	 
	January 25, 2030 	 	784,872.63 	 	 
	February 25, 2030 	 	763,938.04 	 	 
	March 25, 2030 	 	743,465.51 	 	 
	April 25, 2030 	 	723,445.66 	 	 

R-11

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	May 25, 2030 	 	703,869.28 	 	 
	June 25, 2030 	 	684,727.36 	 	 
	July 25, 2030 	 	666,011.05 	 	 
	August 25, 2030 	 	647,711.68 	 	 
	September 25, 2030 	 	629,820.74 	 	 
	October 25, 2030 	 	612,329.90 	 	 
	November 25, 2030 	 	595,230.97 	 	 
	December 25, 2030 	 	578,515.94 	 	 
	January 25, 2031 	 	562,176.95 	 	 
	February 25, 2031 	 	546,206.29 	 	 
	March 25, 2031 	 	530,596.40 	 	 
	April 25, 2031 	 	515,339.88 	 	 
	May 25, 2031 	 	500,429.45 	 	 
	June 25, 2031 	 	485,858.00 	 	 
	July 25, 2031 	 	471,618.53 	 	 
	August 25, 2031 	 	457,704.21 	 	 
	September 25, 2031 	 	444,108.32 	 	 
	October 25, 2031 	 	430,824.27 	 	 
	November 25, 2031 	 	417,845.62 	 	 
	December 25, 2031 	 	405,166.04 	 	 
	January 25, 2032 	 	392,779.33 	 	 
	February 25, 2032 	 	380,679.40 	 	 
	March 25, 2032 	 	368,860.30 	 	 
	April 25, 2032 	 	357,316.18 	 	 
	May 25, 2032 	 	346,041.32 	 	 
	June 25, 2032 	 	335,030.10 	 	 

R-12

	Distribution Date 	 	PAC Schedule 	 	TAC Schedule 
	July 25, 2032 	 	324,277.01 	 	 
	August 25, 2032 	 	313,776.66 	 	 
	September 25, 2032 	 	303,523.75 	 	 
	October 25, 2032 	 	293,513.11 	 	 
	November 25, 2032 	 	283,739.65 	 	 
	December 25, 2032 	 	274,198.38 	 	 
	January 25, 2033 	 	264,884.43 	 	 
	February 25, 2033 	 	255,793.00 	 	 
	March 25, 2033 	 	246,919.40 	 	 
	April 25, 2033 	 	238,259.04 	 	 
	May 25, 2033 	 	229,807.40 	 	 
	June 25, 2033 	 	221,560.07 	 	 
	July 25, 2033 	 	213,512.72 	 	 
	August 25, 2033 	 	205,661.09 	 	 
	September 25, 2033 	 	198,001.04 	 	 
	October 25, 2033 	 	190,528.47 	 	 
	November 25, 2033 	 	183,239.40 	 	 
	December 25, 2033 	 	176,129.92 	 	 
	January 25, 2034 	 	169,196.17 	 	 
	February 25, 2034 	 	162,434.40 	 	 
	March 25, 2034 	 	155,840.92 	 	 
	April 25, 2034 	 	149,412.13 	 	 
	May 25, 2034 	 	143,144.47 	 	 
	June 25, 2034 	 	137,034.48 	 	 
	July 25, 2034 	 	131,078.76 	 	 
	August 25, 2034 	 	125,273.97 	 	 

R-13

	
          Distribution Date
      	 
      	
          PAC Schedule
      	 
      	
          TAC Schedule
      
	
          September 25, 2034
      	 
      	
          119,616.86
      	 
      	 

	
	
          October 25, 2034
      	 
      	
          114,104.22
      	 
      	 

	
	
          November 25, 2034
      	 
      	
          108,732.91
      	 
      	 

	
	
          December 25, 2034
      	 
      	
          103,499.87
      	 
      	 

	
	
          January 25, 2035
      	 
      	
          98,402.09
      	 
      	 

	
	
          February 25, 2035
      	 
      	
          93,436.61
      	 
      	 

	
	
          March 25, 2035
      	 
      	
          88,600.54
      	 
      	 

	
	
          April 25, 2035
      	 
      	
          83,891.06
      	 
      	 

	
	
          May 25, 2035
      	 
      	
          79,305.39
      	 
      	 

	
	
          June 25, 2035
      	 
      	
          74,840.81
      	 
      	 

	
	
          July 25, 2035
      	 
      	
          70,494.66
      	 
      	 

	
	
          August 25, 2035
      	 
      	
          66,264.32
      	 
      	 

	
	
          September 25, 2035
      	 
      	
          62,147.25
      	 
      	 

	
	
          October 25, 2035
      	 
      	
          58,140.94
      	 
      	 

	
	
          November 25, 2035
      	 
      	
          54,242.93
      	 
      	 

	
	
          December 25, 2035
      	 
      	
          50,450.82
      	 
      	 

	
	
          January 25, 2036
      	 
      	
          46,762.26
      	 
      	 

	
	
          February 25, 2036
      	 
      	
          43,174.94
      	 
      	 

	
	
          March 25, 2036
      	 
      	
          39,686.59
      	 
      	 

	
	
          April 25, 2036
      	 
      	
          36,295.02
      	 
      	 

	
	
          May 25, 2036
      	 
      	
          32,998.04
      	 
      	 

	
	
          June 25, 2036
      	 
      	
          29,793.54
      	 
      	 

	
	
          July 25, 2036
      	 
      	
          26,679.43
      	 
      	 

	
	
          August 25, 2036
      	 
      	
          23,653.68
      	 
      	 

	
	
          September 25, 2036
      	 
      	
          20,714.29
      	 
      	 

	
	
          October 25, 2036
      	 
      	
          17,859.30
      	 
      	 

	

R-14

	
          Distribution Date
      	 
      	
          PAC Schedule
      	 
      	
          TAC Schedule
      
	
          November 25, 2036
      	 
      	
          15,086.81
      	 
      	 

	
	
          December 25, 2036
      	 
      	
          12,394.93
      	 
      	 

	
	
          January 25, 2037
      	 
      	
          9,781.82
      	 
      	 

	
	
          Feburary 25, 2037
      	 
      	
          7,245.70
      	 
      	 

	
	
          March 25, 2037
      	 
      	
          4,784.80
      	 
      	 

	
	
          April 25, 2037
      	 
      	
          2,397.39
      	 
      	 

	
	
          May 25, 2037
      	 
      	
          81.78
      	 
      	 

	
	
          June 25, 2037
      	 
      	
          0
      	 
      	 

	

R-15

EXHIBIT S 

AVAILABLE COMBINATIONS

	 	Exchangeable
        REMIC Certificates	 	Exchangeable
        Certificates 
	 	Exchangeable 	 	Maximum Initial 	 	CUSIP 	 	Exchangeable 	 	Maximum Initial 	 	CUSIP 
	 	REMIC Class 	 	Class Certificate 	 	Number 	 	Class 	 	Class Balance or 	 	Number 
	 	 	 	Balance or Notional 	 	 	 	 	 	Notional Amount (1) 	 	 	 
	 	 	 	Amount 	 	 	 	 	 	 	 	 	 
	 	REMIC 	 	 	 	 	 	 	Exchangeable 	 	 	 	 	 
	 	Combination
        1 	 	 	 	 	 	 	Combination 	 	 	 	 	 
	 	I-A-16 	 	$98,321,000 	 	 	32056C
        AR0 	 	I-A-10 	 	$98,321,000 	 	32056 	C
        AK5 
	 	I-A-17 	 	$98,321,000 	(1) 	 	32056C
        AS8 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 

   (1) Notional Amount

S-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00126-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00126-of-00352.parquet"}]]