Document:

Exhibit 4.1

	
   

  

 

 

DINEEQUITY, INC.

 

 

and

 

 

[                                        ],
as Trustee

 

 

Indenture

 

Dated as of
[                    ]

 

 

Debt Securities

 

	
   

  

 

 

CROSS REFERENCE SHEET*

 

Between

 

Provisions of Trust
Indenture Act (as defined herein) and Indenture, dated as of
[                ],
between DINEEQUITY, INC. and
[                      ],
as Trustee:

 

	
  SECTION OF
  THE ACT

  	
   

  	
  SECTION OF INDENTURE

  	
   

  
	
  310(a)(1) and
  (2)

  	
   

  	
  6.9

  	
   

  
	
  310(a)(3) and
  (4)

  	
   

  	
  Inapplicable

  	
   

  
	
  310(b)

  	
   

  	
  6.8 and 6.10(a), (b) and (d)

  	
   

  
	
  310(c)

  	
   

  	
  Inapplicable

  	
   

  
	
  311(a)

  	
   

  	
  6.14

  	
   

  
	
  311(b)

  	
   

  	
  6.14

  	
   

  
	
  311(c)

  	
   

  	
  Inapplicable

  	
   

  
	
  312(a)

  	
   

  	
  4.1 and 4.2

  	
   

  
	
  312(b)

  	
   

  	
  4.2

  	
   

  
	
  312(c)

  	
   

  	
  4.2

  	
   

  
	
  313(a)

  	
   

  	
  4.3

  	
   

  
	
  313(b)(1)

  	
   

  	
  Inapplicable

  	
   

  
	
  313(b)(2)

  	
   

  	
  4.3

  	
   

  
	
  313(c)
  

  	
   

  	
  4.3, 5.11, 6.10, 6.11, 8.2 and 12.2

  	
   

  
	
  313(d)

  	
   

  	
  4.3

  	
   

  
	
  314(a)

  	
   

  	
  3.5 and 4.2

  	
   

  
	
  314(b)

  	
   

  	
  Inapplicable

  	
   

  
	
  314(c)(1) and
  (2)

  	
   

  	
  11.5

  	
   

  
	
  314(c)(3)

  	
   

  	
  Inapplicable

  	
   

  
	
  314(d)

  	
   

  	
  Inapplicable

  	
   

  
	
  314(e)

  	
   

  	
  11.5

  	
   

  
	
  314(f)

  	
   

  	
  Inapplicable

  	
   

  
	
  315(a),
  (c) and (d)

  	
   

  	
  6.1

  	
   

  
	
  315(b)

  	
   

  	
  5.11

  	
   

  
	
  315(e)

  	
   

  	
  5.12

  	
   

  
	
  316(a)(1)

  	
   

  	
  5.9 and 5.10

  	
   

  
	
  316(a)(2)

  	
   

  	
  Not required

  	
   

  
	
  316(a) (last
  sentence)

  	
   

  	
  7.4

  	
   

  
	
  316(b)

  	
   

  	
  5.7

  	
   

  
	
  317(a)

  	
   

  	
  5.2

  	
   

  
	
  317(b)

  	
   

  	
  3.4(a) and (b)

  	
   

  
	
  318(a)

  	
   

  	
  11.7

  	
   

  

 

*This
Cross Reference Sheet is not part of the Indenture.

 

2

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 1.1 CERTAIN TERMS DEFINED

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II SECURITIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 2.1 FORMS GENERALLY

  	
   

  	
  7

  
	
   

  	
  SECTION 2.2 FORM OF TRUSTEE’S
  CERTIFICATE OF AUTHENTICATION

  	
   

  	
  7

  
	
   

  	
  SECTION 2.3 AMOUNT UNLIMITED; ISSUABLE IN
  SERIES

  	
   

  	
  8

  
	
   

  	
  SECTION 2.4 AUTHENTICATION AND DELIVERY OF
  SECURITIES

  	
   

  	
  10

  
	
   

  	
  SECTION 2.5 EXECUTION OF SECURITIES

  	
   

  	
  13

  
	
   

  	
  SECTION 2.6 CERTIFICATE OF AUTHENTICATION

  	
   

  	
  13

  
	
   

  	
  SECTION 2.7 DENOMINATION AND DATE OF
  SECURITIES; PAYMENT OF INTEREST

  	
   

  	
  13

  
	
   

  	
  SECTION 2.8 REGISTRATION, TRANSFER AND EXCHANGE

  	
   

  	
  14

  
	
   

  	
  SECTION 2.9 MUTILATED, DEFACED, DESTROYED,
  LOST AND STOLEN SECURITIES

  	
   

  	
  18

  
	
   

  	
  SECTION 2.10 CANCELLATION OF SECURITIES;
  DISPOSAL THEREOF

  	
   

  	
  19

  
	
   

  	
  SECTION 2.11 TEMPORARY SECURITIES

  	
   

  	
  19

  
	
   

  	
  SECTION 2.12 CUSIP NUMBERS

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III COVENANTS OF THE ISSUER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST

  	
   

  	
  20

  
	
   

  	
  SECTION 3.2 OFFICES FOR PAYMENTS, ETC

  	
   

  	
  20

  
	
   

  	
  SECTION 3.3 APPOINTMENT TO FILL A VACANCY IN
  OFFICE OF TRUSTEE

  	
   

  	
  21

  
	
   

  	
  SECTION 3.4 PAYING AGENTS

  	
   

  	
  21

  
	
   

  	
  SECTION 3.5 COMPLIANCE CERTIFICATES

  	
   

  	
  23

  
	
   

  	
  SECTION 3.6 CORPORATE EXISTENCE

  	
   

  	
  23

  
	
   

  	
  SECTION 3.7 LUXEMBOURG PUBLICATIONS

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV SECURITYHOLDER LISTS AND REPORTS BY THE
  ISSUER AND THE TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 4.1 ISSUER TO FURNISH TRUSTEE
  INFORMATION AS TO NAMES AND ADDRESSES OF SECURITYHOLDERS

  	
   

  	
  23

  
	
   

  	
  SECTION 4.2 REPORTS BY THE ISSUER

  	
   

  	
  24

  
	
   

  	
  SECTION 4.3 REPORTS BY THE TRUSTEE

  	
   

  	
  24

  

 

i

 

	
  ARTICLE
  V REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION 5.1 EVENT OF DEFAULT DEFINED,
  ACCELERATION OF MATURITY; WAIVER OF DEFAULT

  	
   

  	
  24

  
	
   

  	
  SECTION 5.2 COLLECTION OF INDEBTEDNESS BY
  TRUSTEE; TRUSTEE MAY PROVE DEBT

  	
   

  	
  28

  
	
   

  	
  SECTION 5.3 APPLICATION OF PROCEEDS

  	
   

  	
  30

  
	
   

  	
  SECTION 5.4 SUITS FOR ENFORCEMENT

  	
   

  	
  31

  
	
   

  	
  SECTION 5.5 RESTORATION OF RIGHTS ON
  ABANDONMENT OF PROCEEDINGS

  	
   

  	
  31

  
	
   

  	
  SECTION 5.6 LIMITATIONS ON SUITS BY
  SECURITYHOLDERS

  	
   

  	
  31

  
	
   

  	
  SECTION 5.7 UNCONDITIONAL RIGHT OF
  SECURITYHOLDERS TO INSTITUTE CERTAIN SUITS

  	
   

  	
  32

  
	
   

  	
  SECTION 5.8 POWERS AND REMEDIES CUMULATIVE;
  DELAY OR OMISSION NOT WAIVER OF DEFAULT

  	
   

  	
  32

  
	
   

  	
  SECTION 5.9 CONTROL BY HOLDERS OF SECURITIES

  	
   

  	
  33

  
	
   

  	
  SECTION 5.10 WAIVER OF PAST DEFAULTS

  	
   

  	
  33

  
	
   

  	
  SECTION 5.11 TRUSTEE TO GIVE NOTICE OF
  DEFAULT, BUT MAY WITHHOLD IN CERTAIN CIRCUMSTANCES

  	
   

  	
  33

  
	
   

  	
  SECTION 5.12 RIGHT OF COURT TO REQUIRE FILING
  OF UNDERTAKING TO PAY COSTS

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI CONCERNING THE TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 6.1 DUTIES AND RESPONSIBILITIES OF
  THE TRUSTEE; DURING DEFAULT; PRIOR TO DEFAULT

  	
   

  	
  34

  
	
   

  	
  SECTION 6.2 CERTAIN RIGHTS OF THE TRUSTEE

  	
   

  	
  35

  
	
   

  	
  SECTION 6.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS,
  DISPOSITION OF SECURITIES OR APPLICATION OF PROCEEDS THEREOF

  	
   

  	
  37

  
	
   

  	
  SECTION 6.4 TRUSTEE AND AGENTS MAY HOLD
  SECURITIES OR COUPONS; COLLECTIONS, ETC.

  	
   

  	
  37

  
	
   

  	
  SECTION 6.5 MONEYS HELD BY TRUSTEE

  	
   

  	
  37

  
	
   

  	
  SECTION 6.6 COMPENSATION AND INDEMNIFICATION
  OF TRUSTEE AND ITS PRIOR CLAIM

  	
   

  	
  37

  
	
   

  	
  SECTION 6.7 RIGHT OF TRUSTEE TO RELY ON
  OFFICER’S CERTIFICATE, ETC.

  	
   

  	
  38

  
	
   

  	
  SECTION 6.8 INDENTURES NOT CREATING POTENTIAL
  CONFLICTING INTERESTS FOR THE TRUSTEE

  	
   

  	
  38

  
	
   

  	
  SECTION 6.9 QUALIFICATION OF TRUSTEE:
  CONFLICTING INTERESTS

  	
   

  	
  38

  
	
   

  	
  SECTION 6.10 PERSONS ELIGIBLE FOR APPOINTMENT
  AS TRUSTEE

  	
   

  	
  38

  
	
   

  	
  SECTION 6.11 RESIGNATION AND REMOVAL;
  APPOINTMENT OF SUCCESSOR TRUSTEE

  	
   

  	
  39

  
	
   

  	
  SECTION 6.12 ACCEPTANCE OF APPOINTMENT BY
  SUCCESSOR TRUSTEE

  	
   

  	
  41

  

 

ii

 

	
   

  	
  SECTION 6.13 MERGER, CONVERSION,
  CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

  	
   

  	
  42

  
	
   

  	
  SECTION 6.14 PREFERENTIAL COLLECTION OF
  CLAIMS AGAINST THE ISSUER

  	
   

  	
  42

  
	
   

  	
  SECTION 6.15 APPOINTMENT OF AUTHENTICATING
  AGENT

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VII CONCERNING THE SECURITYHOLDERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 7.1 EVIDENCE OF ACTION TAKEN BY
  SECURITYHOLDERS

  	
   

  	
  43

  
	
   

  	
  SECTION 7.2 PROOF OF EXECUTION OF INSTRUMENTS
  AND OF HOLDING OF SECURITIES

  	
   

  	
  43

  
	
   

  	
  SECTION 7.3 HOLDERS TO BE TREATED AS OWNERS

  	
   

  	
  44

  
	
   

  	
  SECTION 7.4 SECURITIES OWNED BY ISSUER DEEMED
  NOT OUTSTANDING

  	
   

  	
  44

  
	
   

  	
  SECTION 7.5 RIGHT OF REVOCATION OF ACTION
  TAKEN

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII SUPPLEMENTAL INDENTURES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 8.1 SUPPLEMENTAL INDENTURES WITHOUT
  CONSENT OF SECURITYHOLDERS

  	
   

  	
  45

  
	
   

  	
  SECTION 8.2 SUPPLEMENTAL INDENTURES WITH
  CONSENT OF SECURITYHOLDERS

  	
   

  	
  46

  
	
   

  	
  SECTION 8.3 EFFECT OF SUPPLEMENTAL INDENTURE

  	
   

  	
  48

  
	
   

  	
  SECTION 8.4 DOCUMENTS TO BE GIVEN TO TRUSTEE

  	
   

  	
  48

  
	
   

  	
  SECTION 8.5 NOTATION ON SECURITIES IN RESPECT
  OF SUPPLEMENTAL INDENTURES

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IX CONSOLIDATION, MERGER, SALE OR CONVEYANCE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 9.1 ISSUER MAY CONSOLIDATE,
  ETC., ONLY ON CERTAIN TERMS

  	
   

  	
  49

  
	
   

  	
  SECTION 9.2 SUCCESSOR CORPORATION SUBSTITUTED

  	
   

  	
  50

  
	
   

  	
  SECTION 9.3 OPINION OF COUNSEL TO BE GIVEN TO
  TRUSTEE

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  X SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 10.1 SATISFACTION AND DISCHARGE OF
  INDENTURE

  	
   

  	
  50

  
	
   

  	
  SECTION 10.2 APPLICATION BY TRUSTEE OF FUNDS
  DEPOSITED FOR PAYMENT OF SECURITIES

  	
   

  	
  53

  
	
   

  	
  SECTION 10.3 REPAYMENT OF MONEYS HELD BY
  PAYING AGENT

  	
   

  	
  54

  
	
   

  	
  SECTION 10.4 RETURN OF MONEYS HELD BY TRUSTEE
  AND PAYING AGENT UNCLAIMED FOR TWO YEARS

  	
   

  	
  54

  
	
   

  	
  SECTION 10.5 INDEMNITY FOR U.S. GOVERNMENT OF
  OBLIGATIONS

  	
   

  	
  54

  
	
   

  	
  SECTION 10.6 EFFECT ON SUBORDINATION
  PROVISIONS

  	
   

  	
  54

  

 

iii

 

	
  ARTICLE
  XI MISCELLANEOUS PROVISIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 11.1 INCORPORATORS, STOCKHOLDERS,
  OFFICERS AND DIRECTORS OF ISSUER EXEMPT FROM INDIVIDUAL LIABILITY

  	
   

  	
  55

  
	
   

  	
  SECTION 11.2 PROVISIONS OF INDENTURE FOR THE
  SOLE BENEFIT OF PARTIES AND HOLDERS OF SECURITIES AND COUPONS

  	
   

  	
  55

  
	
   

  	
  SECTION 11.3 SUCCESSORS AND ASSIGNS OF ISSUER
  BOUND BY INDENTURE

  	
   

  	
  55

  
	
   

  	
  SECTION 11.4 NOTICES AND DEMANDS ON ISSUER,
  TRUSTEE AND HOLDERS OF SECURITIES AND COUPONS

  	
   

  	
  55

  
	
   

  	
  SECTION 11.5 OFFICER’S CERTIFICATES AND
  OPINIONS OF COUNSEL; STATEMENTS TO BE CONTAINED THEREIN

  	
   

  	
  56

  
	
   

  	
  SECTION 11.6 PAYMENTS DUE ON SATURDAYS,
  SUNDAYS AND HOLIDAYS

  	
   

  	
  57

  
	
   

  	
  SECTION 11.7 CONFLICT OF ANY PROVISION OF
  INDENTURE WITH TRUST INDENTURE ACT

  	
   

  	
  58

  
	
   

  	
  SECTION 11.8 NEW YORK LAW TO GOVERN; WAIVER
  OF JURY TRIAL

  	
   

  	
  58

  
	
   

  	
  SECTION 11.9 COUNTERPARTS

  	
   

  	
  58

  
	
   

  	
  SECTION 11.10 EFFECT OF HEADINGS

  	
   

  	
  58

  
	
   

  	
  SECTION 11.11 SECURITIES IN A FOREIGN
  CURRENCY

  	
   

  	
  58

  
	
   

  	
  SECTION 11.12 JUDGMENT CURRENCY

  	
   

  	
  60

  
	
   

  	
  SECTION 11.13 AGREEMENT TO SUBORDINATE

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XII REDEMPTION OF SECURITIES AND SINKING FUNDS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECTION 12.1 APPLICABILITY OF ARTICLE

  	
   

  	
  60

  
	
   

  	
  SECTION 12.2 NOTICE OF REDEMPTION; PARTIAL
  REDEMPTIONS

  	
   

  	
  60

  
	
   

  	
  SECTION 12.3 PAYMENT OF SECURITIES CALLED FOR
  REDEMPTION

  	
   

  	
  62

  
	
   

  	
  SECTION 12.4 EXCLUSION OF CERTAIN SECURITIES
  FROM ELIGIBILITY FOR SELECTION FOR REDEMPTION

  	
   

  	
  63

  
	
   

  	
  SECTION 12.5
  MANDATORY AND OPTIONAL SINKING FUNDS

  	
   

  	
  63

  

 

iv

 

THIS INDENTURE, dated as of
[                    ],
by and between DINEEQUITY, INC., a Delaware corporation (the “Issuer”), and
[                              ],
as trustee (the “Trustee”),

 

W I T N E S S E T H:

 

WHEREAS, the Issuer has duly authorized the issue from time to time of
its unsecured debentures, notes or other evidences of indebtedness to be issued
in one or more series (the “Securities”) up to such principal amount or amounts
as may from time to time be authorized in accordance with the terms of this
Indenture;

 

WHEREAS, the Issuer has duly authorized the execution and delivery of
this Indenture to provide, among other things, for the authentication, delivery
and administration of the Securities; and

 

WHEREAS, all things necessary to make this Indenture a valid indenture
and agreement according to its terms have been done;

 

NOW, THEREFORE:

 

In consideration of the premises and the purchases of the Securities by
the holders thereof, the Issuer and the Trustee mutually covenant and agree for
the equal and proportionate benefit of the respective holders from time to time
of the Securities and of the coupons, if any, appertaining thereto as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.1 CERTAIN TERMS DEFINED.  The
following terms (except as otherwise expressly provided or unless the context
otherwise clearly requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Section.  All other terms used in
this Indenture that are defined in the Trust Indenture Act of 1939, as amended
(the “Trust Indenture Act”), or the definitions of which in the Securities Act
of 1933, as amended (the “Securities Act”), are referred to in the Trust
Indenture Act, including terms defined therein by reference to the Securities
Act (except as herein otherwise expressly provided or unless the context
otherwise requires), shall have the meaning assigned to such terms in the Trust
Indenture Act and in the Securities Act as in effect from time to time.  All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with generally accepted accounting principles, and the term “generally accepted
accounting principles” means such accounting principles as are generally
accepted at the time of any computation unless a different time shall be
specified with respect to such series of Securities as provided for in
Section 2.3.  The words “herein,”
“hereof” and “hereunder” and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.  The terms defined in this
Article have the meanings assigned to them in this Article and
include the plural as well as the singular.

 

“Affiliate” has the same meaning as given to that term in Rule 405
of the Securities Act or any successor provision.

 

1

 

“Authenticating Agent” shall have the meaning set forth in
Section 6.15.

 

“Authorized Newspaper” means a newspaper (which, in the case of The City
of New York, will, if practicable, be The
Wall Street Journal (Eastern Edition), in the case of the United
Kingdom of Great Britain and Northern Ireland (the “United Kingdom”), will, if
practicable, be The Financial Times
(London Edition) and, in the case of the Grand Duchy of Luxembourg
(“Luxembourg”), will, if practicable, be the Luxemburger
Wort) published in an official or common language of the country of
publication customarily published at least once a day for at least five days in
each calendar week and of general circulation in The City of New York, the
United Kingdom or Luxembourg, as applicable. 
If it shall be impractical in the opinion of the Trustee to make any
publication of any notice required hereby in an Authorized Newspaper, any
publication or other notice in lieu thereof which is made or given with the
approval of the Trustee shall constitute a sufficient publication of such
notice.

 

“Board of Directors” means either the Board of Directors of the Issuer
or any committee of such Board duly authorized to act on its behalf.

 

“Board Resolution” means a copy of one or more resolutions, certified by
the secretary or an assistant secretary of the Issuer to have been duly adopted
or consented to by the Board of Directors and to be in full force and effect,
and delivered to the Trustee.

 

“Business Day” means, with respect to any Security, a day that is not a
day on which banking institutions in the city (or in any of the cities, if more
than one) in which amounts are payable, as specified in the form of such
Security, are authorized or required by any applicable law or regulation to be
closed.

 

“Capital Stock” means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.

 

“Commission” means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after
the execution and delivery of this Indenture such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act,
then the body performing such duties on such date.

 

“Corporate Trust Office” means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, as of the date of this Indenture,
located at
[                          ].

 

“Coupon” means any interest coupon appertaining to an Unregistered
Security.

 

“Covenant Defeasance” shall have the meaning set forth in
Section 10.1(C).

 

“Depositary” means, with respect to the Securities of any series
issuable or issued in the form of one or more Registered Global Securities, the
Person designated as Depositary by the Issuer pursuant to Section 2.3
until a successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter “Depositary” shall mean or include

 

2

 

each Person who is then a Depositary hereunder, and if at any time there
is more than one such Person, “Depositary” as used with respect to the
Securities of any such series shall mean the Depositary with respect to the
Registered Global Securities of that series.

 

“Dollar” or “$” means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.

 

“Equity Interests” means Capital Stock or partnership, participation or
membership interests and all warrants, options or other rights to acquire
Capital Stock or partnership, participation or membership interests (but
excluding any debt security that is convertible into, or exchangeable for,
Capital Stock or partnership, participation or membership interests).

 

“Event of Default” means any event or condition specified as such in
Section 5.1.

 

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

 

“Fair Value” when used with respect to any Voting Equity Interests of
the Issuer means the fair value as determined in good faith by the Board of
Directors of the Issuer.

 

“Foreign Currency” means any coin, currency, currency unit or composite
currency, including, without limitation, the euro, issued by the government of
one or more countries,  other than the
United States of America or by any internationally recognized union,
confederation or association of such governments.

 

“Holder,” “Holder of Securities,” “Securityholder” or any other similar
terms mean (a) in the case of any Registered Security, the person in whose
name such Security is registered in the security register kept by the Issuer
for that purpose in accordance with the terms hereof, and (b) in the case
of any Unregistered Security, the bearer of such Security, or any Coupon
appertaining thereto, as the case may be.

 

“Indenture” means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or
supplemented or both, and shall include the forms and terms of particular
series of Securities established as contemplated hereunder, provided, that, if at any time more than
one Person is acting as Trustee under this instrument, “Indenture” shall mean,
with respect to one or more series of Securities for which such person is
trustee, this instrument as originally executed and delivered or, if amended or
supplemented as herein provided, as so amended or supplemented or both, and
shall include the forms and terms of those particular series of Securities for
which such Person is Trustee established as contemplated hereunder, exclusive,
however, of any provisions or terms which relate solely to other series of
Securities for which such person is not Trustee, regardless of when such terms
or provisions were adopted.

 

“IRS” means the Internal Revenue Service of the United States Department
of the Treasury, or any successor entity.

 

“Issuer” means (except as otherwise provided in Article IX)
DineEquity, Inc., a Delaware corporation, and, subject to Article IX,
its successors and assigns.

 

3

 

“Issuer Order” means a written statement, request or order of the Issuer
signed in its name by the chairman of the Board of Directors, the president,
any vice president or the treasurer of the Issuer.

 

“Judgment Currency” has the meaning set forth in Section 11.12.

 

“Market Exchange Rate” has the meaning set forth in Section 11.11.

 

“New York Banking Day” has the meaning set forth in Section 11.12.

 

“Non-U.S. Person” means any person that is not a “U.S. person” as such
term is defined in Rule 902 of the Securities Act.

 

“Officer’s Certificate” means a certificate signed by the chairman of
the Board of Directors, the president or any vice president or the treasurer of
the Issuer and delivered to the Trustee. 
Each such certificate shall comply with Section 314 of the Trust
Indenture Act and include the statements provided for in Section 11.5.

 

“Opinion of Counsel” means an opinion in writing signed by legal counsel
who may be an employee of the Issuer or other counsel reasonably satisfactory
to the Trustee.  Each such opinion shall
comply with Section 314 of the Trust Indenture Act and include the
statements provided for in Section 11.5.

 

“Original Issue Date” of any Security (or portion thereof) means the
earlier of (a) the date of such Security or (b) the date of any
Security (or portion thereof) for which such Security was issued (directly or
indirectly) on registration of transfer, exchange or substitution.

 

“Original Issue Discount Security” means any Security that provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to
Section 5.1.

 

“Outstanding” (except as otherwise provided in Section 7.4), when
used with reference to Securities, means, subject to the provisions of
Section 7.4, as of any particular time, all Securities authenticated and
delivered by the Trustee under this Indenture, except:

 

(a)                                  Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;

 

(b)                                 Securities, or portions thereof, for the payment or
redemption of which moneys or U.S. Government Obligations (as provided for in
Section 10.1) in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Issuer) or shall have
been set aside, segregated and held in trust by the Issuer for the Holders of
such Securities (if the Issuer shall act as its own paying agent), provided,
that if such Securities, or portions thereof, are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as herein provided,
or provisions satisfactory to the Trustee shall have been made for giving such
notice; and

 

4

 

(c)                                  Securities which shall have been paid or in
substitution for which other Securities shall have been authenticated and
delivered pursuant to the terms of Section 2.9 (except with respect to any
such Security as to which proof satisfactory to the Trustee is presented that
such Security is held by a person in whose hands such Security is a legal, valid
and binding obligation of the Issuer).

 

In determining whether the Holders of the requisite principal amount of
Outstanding Securities of any or all series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a
declaration of acceleration of the maturity thereof pursuant to
Section 5.1.

 

“Periodic Offering” means an offering of Securities of a series from
time to time, the specific terms of which Securities, including, without
limitation, the rate or rates of interest, if any, thereon, the stated maturity
or maturities thereof and the redemption provisions, if any, with respect
thereto, are to be determined by the Issuer or its agents upon the issuance of
such Securities.

 

“Person” means any individual, corporation, business trust, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

 

“principal” whenever used with reference to the Securities or any
Security or any portion thereof, shall be deemed to include “and premium, if
any,” provided, however, that such inclusion of premium, if any, shall under no
circumstances result in the double counting of such premium for the purpose of
any calculation required hereunder.

 

“record date” shall have the meaning set forth in Section 2.7.

 

“Registered Global Security” means a Security evidencing all or a part
of a series of Registered Securities, issued to the Depositary for such series
in accordance with Section 2.4, and bearing the legend prescribed in
Section 2.4 and any other legend required by the Depositary for such
series.

 

“Registered Security” means any Security registered on the Security
register of the Issuer.

 

“Required Currency” shall have the meaning set forth in
Section 11.12.

 

“Responsible Officer” when used with respect to the Trustee means any
vice president (whether or not designated by numbers or words added before or
after the title “Vice President”), any assistant trust officer, any assistant
vice president, any assistant treasurer, or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of his or her
knowledge of and familiarity with the particular subject and who shall have
direct responsibility for the administration of this Indenture.

 

5

 

“Security” or “Securities” (except as otherwise provided in
Section 7.4) has the meaning stated in the first recital of this
Indenture, or, as the case may be, Securities that have been authenticated and
delivered under this Indenture.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Senior Indebtedness”, when used with respect to the Subordinated
Securities of any series, shall have the meaning established pursuant to
Subsection 2.3(9) with respect to the Subordinated Securities of such
series.

 

“Senior Securities” means Securities other than Subordinated Securities.

 

“Subordinated Securities” means Securities that by the terms established
pursuant to Subsection 2.3(9) are subordinated in right of payment to
Senior Indebtedness of the Issuer.

 

“Subordination Provisions”, when used with respect to the
Subordinated  Securities of any series,
shall have the meaning established pursuant to Subsection 2.3(9)  with
respect to the Subordinated Securities of such series.

 

“Subsidiary,” with respect to any Person, means (i) a corporation a
majority of whose Voting Equity Interests is at the time, directly or
indirectly, owned by such Person, by such Person and one or more Subsidiaries
of such Person or by one or more Subsidiaries of such Person, (ii) any
other Person (other than a corporation) in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has
at least majority ownership interest, or (iii) a partnership in which such
Person or a Subsidiary of such Person is, at the time, a general partner.

 

“Trustee” means the Person identified as “Trustee” in the first
paragraph hereof and, subject to the provisions of Article VI, shall also
include any successor trustee.  “Trustee”
shall also mean or include each Person who is then a trustee hereunder, and, if
at any time there is more than one such Person, “Trustee” as used with respect
to the Securities of any series shall mean the trustee with respect to the
Securities of such series.

 

“Unregistered Security” means any Security other than a Registered
Security.

 

“U.S. Government Obligations” shall have the meaning set forth in
Section 10.1(A).

 

“Voting Equity Interests” means Equity Interests which at the time are entitled
to vote in the election of, as applicable, directors, members or partners
generally; provided, that, for
the purposes hereof, Equity Interests that carry only the right to vote
conditionally on the happening of an event shall not be considered Voting
Equity Interests whether or not such event shall have happened.

 

“Yield to Maturity” means the yield to maturity on a series of
securities, calculated at the time of issuance of such series, or, if
applicable, at the most recent

 

6

 

redetermination of interest on such series, and calculated in accordance
with accepted financial practice.

 

ARTICLE II

 

SECURITIES

 

SECTION 2.1  FORMS GENERALLY.  The
Securities of each series and the Coupons, if any, to be attached thereto shall
be substantially in such form (not inconsistent with this Indenture) as shall
be established by or pursuant to one or more Board Resolutions (as set forth in
a Board Resolution or, to the extent established pursuant to but not set forth in
a Board Resolution, an Officer’s Certificate detailing such establishment) or
in one or more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have imprinted or otherwise
reproduced thereon such legend or legends or endorsements, not inconsistent
with the provisions of this Indenture, as may be required to comply with any
law or with any rules or regulations pursuant thereto, or with any
rules of any securities exchange or to conform to general usage, all as
may be determined by the officers executing such Securities and Coupons, if
any, as evidenced by their execution of such Securities and Coupons.

 

The definitive Securities and Coupons, if any, shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Securities and
Coupons, if any, as evidenced by their execution of such Securities and
Coupons, if any.

 

SECTION 2.2 FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION.  The Trustee’s certificate of authentication
on all Securities shall be in substantially the following form:

 

“This is one of the Securities
referred to in the within-mentioned Indenture.

 

	
   

  	
  [                            ],
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
  ”

  

 

If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Trustee’s Certificate of
Authentication to be borne by the Securities of each such series shall be
substantially as follows:

 

7

 

“This is one of the Securities
referred to in the within-mentioned Indenture.

 

	
   

  	
   

  	 

	
   

  	
  as Authenticating Agent

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	 
	
   

  	
  By

  
	
   

  	
   

  	 

	
   

  	
  Authorized Signatory”

  	 

				

 

SECTION 2.3 AMOUNT UNLIMITED; ISSUABLE IN
SERIES. 
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.

 

The Securities may be issued in one or more series.  There shall be established in or pursuant to
one or more Board Resolutions (and to the extent established pursuant to but
not set forth in a Board Resolution, in an Officer’s Certificate detailing such
establishment) or established in one or more indentures supplemental hereto,
prior to the initial issuance of Securities of any series,

 

(1)                                  the designation of the Securities of the series,
which shall distinguish the Securities of the series from the Securities of all
other series, and which may be part of a series of Securities previously
issued;

 

(2)                                  any limit upon the aggregate principal amount of
the Securities of the series that may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of, transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3);

 

(3)                                  if other than Dollars, the Foreign Currency or
Foreign Currencies in which the Securities of the series are denominated;

 

(4)                                  the date or dates on which the principal of the
Securities of the series is payable or the method of determination thereof;

 

(5)                                  the rate or rates at which the Securities of the
series shall bear interest, if any, the date or dates from which such interest
shall accrue, on which such interest shall be payable, the terms and conditions
of any deferral of interest and the additional interest, if any, thereon, the
right, if any, of the Issuer to extend the interest payment periods and the
duration of the extensions and (in the case of Registered Securities) the date
or dates on which a record shall be taken for the determination of Holders to
whom interest is payable and/or the method by which such rate or rates or date
or dates shall be determined;

 

(6)                                  the place or places where and the manner in which,
the principal of and any interest on Securities of the series shall be payable,
if other than as provided in Section 3.2;

 

8

 

(7)                                  the right, if any, of the Issuer to redeem
Securities, in whole or in part, at its option and the period or periods within
which, or the date or dates on which, the price or prices at which and any
terms and conditions upon which Securities of the series may be so redeemed,
pursuant to any sinking fund or otherwise;

 

(8)                                  the obligation, if any, of the Issuer to redeem,
purchase or repay Securities of the series pursuant to any mandatory
redemption, sinking fund or analogous provisions or at the option of a Holder thereof
and the price or prices at which and the period or periods within which or the
date or dates on which, and any terms and conditions upon which Securities of
the series shall be redeemed, purchased or repaid, in whole or in part,
pursuant to such obligation;

 

(9)                                  if the Securities of such series are Subordinated
Securities, the terms pursuant to which the Securities of such series will be
made subordinate in right of payment to Senior Indebtedness and the definition
of such Senior Indebtedness with respect to such series (in the absence of an
express statement to the effect that the Securities of such series are
subordinate in right of payment to all such Senior Indebtedness, the Securities
of such series shall not be subordinate to Senior Indebtedness and shall not
constitute Subordinated Securities); and, in the event that the Securities of
such series are Subordinated Securities, such Board Resolution, Officer’s
Certificate or supplemental indenture, as the case may be, establishing the
terms of such series shall expressly state which articles, sections or other
provisions thereof constitute the “Subordination Provisions” with respect to
the Securities of such series;

 

(10)                            if other than denominations of $1,000 and any
integral multiple thereof in the case of Registered Securities, or $1,000 and
$5,000 in the case of Unregistered Securities, the denominations in which
Securities of the series shall be issuable;

 

(11)                            the percentage of the principal amount at which the
Securities will be issued, and, if other than the principal amount thereof, the
portion of the principal amount of Securities of the series which shall be
payable upon declaration of acceleration of the maturity thereof and the terms
and conditions of any acceleration;

 

(12)                            if other than the coin, currency or currencies in
which the Securities of the series are denominated, the coin, currency or
currencies in which payment of the principal of or interest on the Securities
of such series shall be payable, including composite currencies or currency
units;

 

(13)                            if the principal of or interest on the Securities
of the series are to be payable, at the election of the Issuer or a Holder
thereof, in a coin or currency other than that in which the Securities are
denominated, the period or periods within which, and the terms and conditions
upon which, such election may be made;

 

(14)                            if the amount of payments of principal of and
interest on the Securities of the series may be determined with reference to an
index or formula based on a coin, currency, composite currency or currency unit
other than that in which the Securities of the series are denominated, the
manner in which such amounts shall be determined;

 

9

 

(15)                            whether the Securities of the series will be
issuable as Registered Securities (and if so, whether such Securities will be
issuable as Registered Global Securities) or Unregistered Securities (with or
without Coupons), or any combination of the foregoing, any restrictions
applicable to the offer, sale or delivery of Unregistered Securities or the
payment of interest thereon and, if other than as provided in Section 2.8,
the terms upon which Unregistered Securities of any series may be exchanged for
Registered Securities of such series and vice versa;

 

(16)                            whether and under what circumstances the Issuer
will pay additional amounts on the Securities of the series held by a person
who is not a U.S. person in respect of any tax, assessment or governmental
charge withheld or deducted and, if so, whether the Issuer will have the option
to redeem the Securities of the series rather than pay such additional amounts;

 

(17)                            if the Securities of the series are to be issuable
in definitive form (whether upon original issue or upon exchange of a temporary
Security of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, the form and terms of such
certificates, documents or conditions;

 

(18)                            any trustees, depositaries, authenticating or
paying agents, transfer agents or registrars of any other agents with respect
to the Securities of such series;

 

(19)                            any deletion from, modification of or addition to
the Events of Default or covenants with respect to the Securities of such
series;

 

(20)                            if the Securities of the series are to be
convertible into or exchangeable for any other security or property of the
Issuer, including, without limitation, securities of another Person held by the
Issuer or its Affiliates and, if so, the terms thereof; and

 

(21)                            any other terms of the series.

 

All Securities of any one series and Coupons, if any, appertaining
thereto shall be substantially identical, except in the case of Registered
Securities as to denomination and except as may otherwise be provided by or
pursuant to the Board Resolution or Officer’s Certificate referred to above or
as set forth in any indenture supplemental hereto.  All Securities of any one series need not be
issued at the same time and may be issued from time to time without consent of
any Holder, consistent with the terms of this Indenture, if so provided by or
pursuant to such Board Resolution, such Officer’s Certificate or in any
indenture supplemental hereto.

 

SECTION 2.4 AUTHENTICATION AND DELIVERY OF
SECURITIES.  The Issuer may deliver Securities of any
series having attached thereto appropriate Coupons, if any, executed by the
Issuer to the Trustee for authentication together with the applicable documents
referred to below in this Section 2.4, and the Trustee shall thereupon
authenticate and deliver such Securities and Coupons, if any, to or upon the
order of the Issuer (contained in the Issuer Order referred to below in this
Section) or pursuant to such procedures acceptable to the Trustee and to such
recipients as may be specified from time to time by an Issuer Order.  The maturity date, original issue date,
interest rate and any other terms of the Securities of such series and Coupons,
if any, appertaining thereto shall be determined by or pursuant to such Issuer

 

10

 

Order and procedures.  If provided
for in such procedures, such Issuer Order may authorize authentication and
delivery pursuant to oral or electronic instructions from the Issuer or its
duly authorized agent or agents, which instructions, if oral, shall be promptly
confirmed in writing.  In authenticating
such Securities and accepting the additional responsibilities under this
Indenture in relation to such Securities, the Trustee shall be entitled to
receive (in the case of subparagraphs (2), (3) and (4) below only at
or before the time of the first request of the Issuer to the Trustee to
authenticate Securities of such series) and (subject to Section 6.1) shall
be fully protected in relying upon, the following enumerated documents unless
and until such documents have been superseded or revoked:

 

(1)                                  an Issuer Order requesting such authentication and
setting forth delivery instructions if the Securities and Coupons, if any, are
not to be delivered to the Issuer, provided
that, with respect to Securities of a series subject to a Periodic Offering,
(a) such Issuer Order may be delivered by the Issuer to the Trustee prior
to the delivery to the Trustee of such Securities for authentication and
delivery, (b) the Trustee shall authenticate and deliver Securities of
such series for original issue from time to time, in an aggregate principal
amount not exceeding the aggregate principal amount established for such
series, pursuant to an Issuer Order or pursuant to procedures acceptable to the
Trustee as may be specified from time to time by an Issuer Order, (c) the
maturity date or dates, original issue date or dates, interest rate or rates
and any other terms of Securities of such series shall be determined by an
Issuer Order or pursuant to such procedures and (d) if provided for in
such procedures, such Issuer Order may authorize authentication and delivery
pursuant to oral or electronic instructions from the Issuer or its duly
authorized agent or agents, which instructions, if oral, shall be promptly
confirmed in writing;

 

(2)                                  any Board Resolution, Officer’s Certificate and/or
executed supplemental indenture referred to in Section 2.1 and 2.3 by or
pursuant to which the forms and terms of the Securities and Coupons, if any,
were established;

 

(3)                                  an Officer’s Certificate setting forth the form or
forms and terms of the Securities and Coupons, if any, stating that the form or
forms and terms of the Securities and Coupons, if any, have been established
pursuant to Sections 2.1 and 2.3 and comply with this Indenture, and covering
such other matters as the Trustee may reasonably request; and

 

(4)                                  At the option of the Issuer, either one or more
Opinions of Counsel, or a letter addressed to the Trustee permitting it to rely
on one or more Opinions of Counsel, substantially to the effect that:

 

(a)                                  the form or forms of the Securities and Coupons, if
any, have been duly authorized and established in conformity with the
provisions of this Indenture;

 

(b)                                 in the case of an underwritten offering, the terms
of the Securities have been duly authorized and established in conformity with
the provisions of this Indenture, and, in the case of an offering that is not
underwritten, certain

 

11

 

terms of the Securities have been
established pursuant to a Board Resolution, an Officer’s Certificate or a
supplemental indenture in accordance with this Indenture, and when such other
terms as are to be established pursuant to procedures set forth in an Issuer
Order shall have been established, all such terms will have been duly
authorized by the Issuer and will have been established in conformity with the
provisions of this Indenture; and

 

(c)                                  such Securities and Coupons, if any, when executed
by the Issuer and authenticated by the Trustee in accordance with the
provisions of this Indenture and delivered to and duly paid for by the
purchasers thereof, and subject to any conditions specified in such Opinion of
Counsel, will have been duly issued under this Indenture, will be entitled to
the benefits of this Indenture, and will be valid and binding obligations of
the Issuer, enforceable in accordance with their respective terms except as the
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, liquidation, moratorium, fraudulent transfer or similar laws
affecting creditors’ rights generally, (ii) rights of acceleration, if
any, and (iii) the availability of equitable remedies may be limited by
equitable principles of general applicability and such counsel need express no opinion
with regard to the enforceability of Section 6.6 or of a judgment
denominated in a currency other than Dollars.

 

In rendering such opinions, any counsel may qualify any opinions as to
enforceability by stating that such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium, fraudulent
transfer and other similar laws affecting the rights and remedies of creditors
and is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).  Any counsel may state that such opinions are
limited to matters arising under the laws of the State of New York and the
General Corporation Law of the State of Delaware.  Such counsel may rely upon opinions of other
counsel (copies of which shall be delivered to the Trustee) reasonably
satisfactory to the Trustee, in which case the opinion shall state that such
counsel believes he and the Trustee are entitled so to rely.  Such counsel may also state that, insofar as
such opinion involves factual matters, he has relied, to the extent he deems
proper, upon certificates of officers of the Issuer and its subsidiaries and
certificates of public officials.

 

The Trustee shall have the right to decline to authenticate and deliver
any Securities under this section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken by the Issuer or if the
Trustee in good faith by a trust committee of Responsible Officers shall
determine that such action would expose the Trustee to personal liability to
existing Holders or would affect the Trustee’s own rights, duties or immunities
under the Securities, this Indenture or otherwise.

 

If the Issuer shall establish pursuant to Section 2.3 that the Securities
of a series are to be issued in the form of one or more Registered Global
Securities, then the Issuer shall execute and the Trustee shall, in accordance
with this Section and the Issuer Order with respect to such series,
authenticate and deliver one or more Registered Global Securities that
(i) shall represent and shall be denominated in an amount equal to the
aggregate principal amount of all of the Securities of such series issued and
not yet cancelled, (ii) shall be registered in the name of

 

12

 

the Depositary for such Registered Global Security or Securities or the
nominee of such Depositary, (iii) shall be delivered by the Trustee to
such Depositary or delivered or held pursuant to such Depositary’s instructions
and (iv) shall bear a legend substantially to the following effect:  “Unless and until it is exchanged in whole or
in part for Securities in definitive registered form, this Security may not be transferred
except as a whole by the Depositary to the nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.”

 

Each Depositary designated pursuant to Section 2.3 must, at the
time of its designation and at all times while it serves as Depositary, be a
clearing agency registered under the Exchange Act and any other applicable
statute or regulation.

 

SECTION 2.5 EXECUTION OF SECURITIES.  The
Securities and each Coupon appertaining thereto, if any, shall be signed on
behalf of the Issuer by the chairman or vice chairman of its Board of Directors
or its president, or any executive (senior or other), a vice president or its
treasurer, which may, but need not, be attested.  Such signatures may be the manual or
facsimile signatures of the present or any future such officers.  The seal of the Issuer may be in the form of
a facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Securities. 
Typographical and other minor errors or defects in any such reproduction
of the seal or any such signature shall not affect the validity or
enforceability of any Security that has been duly authenticated and delivered
by the Trustee.

 

In case any officer of the Issuer who shall have signed any of the
Securities or Coupons, if any, shall cease to be such officer before the
Security or Coupon so signed (or the Security to which the Coupon so signed
appertains) shall be authenticated and delivered by the Trustee or disposed of
by the Issuer, such Security or Coupon nevertheless may be authenticated and
delivered or disposed of as though the person who signed such Security or
Coupon had not ceased to be such officer of the Issuer; and any Security or
Coupon may be signed on behalf of the Issuer by such persons as, at the actual
date of the execution of such Security or Coupon, shall be the proper officers
of the Issuer, although at the date of the execution and delivery of this Indenture
any such person was not such an officer.

 

SECTION 2.6 CERTIFICATE OF AUTHENTICATION.  Only such
Securities as shall bear thereon a certificate of authentication substantially
in the form hereinbefore recited, executed by the Trustee by the manual signature
of one of its authorized signatories, shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose.  No Coupon shall be entitled to the benefits
of this Indenture or shall be valid and obligatory for any purpose until the
certificate of authentication on the Security to which such Coupon appertains
shall have been duly executed by the Trustee. 
The execution of such certificate by the Trustee upon any Security
executed by the Issuer shall be conclusive evidence that the Security so
authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture.

 

SECTION 2.7 DENOMINATION AND DATE OF
SECURITIES; PAYMENT OF INTEREST.  The Securities of each series
shall be issuable as Registered Securities or Unregistered Securities in
denominations established as contemplated by Section 2.3

 

13

 

or, with respect to the Registered Securities of any series, if not so
established, in denominations of $1,000 and any integral multiple thereof.  If denominations of Unregistered Securities
of any series are not so established, such Securities shall be issuable in
denominations of $1,000 and $5,000.  The
Securities of each series shall be numbered, lettered or otherwise
distinguished in such manner or in accordance with such plan as the officers of
the Issuer executing the same may determine with the approval of the Trustee,
as evidenced by the execution and authentication thereof.

 

Each Registered Security shall be dated the date of its
authentication.  Each Unregistered
Security shall be dated as provided in the Board Resolution referred to in
Section 2.3.  The Securities of each
series shall bear interest, if any, from the date, and such interest shall be
payable on the dates, established as contemplated by Section 2.3.

 

The person in whose name any Registered Security of any series is
registered at the close of business on any record date applicable to a
particular series with respect to any interest payment date for such series
shall be entitled to receive the interest, if any, payable on such interest
payment date notwithstanding any transfer or exchange of such Registered
Security subsequent to the record date and prior to such interest payment date,
except if and to the extent the Issuer shall default in the payment of the
interest due on such interest payment date for such series, in which case such
defaulted interest shall be paid to the persons in whose names Outstanding Registered
Securities for such series are registered at the close of business on a
subsequent record date (which shall be not less than five Business Days prior
to the date of payment of such defaulted interest) established by notice given
by mail by or on behalf of the Issuer to the Holders of Registered Securities
not less than 15 days preceding such subsequent record date.  The term “record date” as used with respect
to any interest payment date (except a date for payment of defaulted interest)
for the Securities of any series shall mean the date specified as such in the
terms of the Registered Securities of such series established as contemplated
by Section 2.3, or, if no such date is so established, if such interest
payment date is the first day of a calendar month, the fifteenth day of the
preceding calendar month or, if such interest payment date is the fifteenth day
of a calendar month, the first day of such calendar month, whether or not such
record date is a Business Day.

 

SECTION 2.8 REGISTRATION, TRANSFER AND
EXCHANGE.  The Issuer will keep at each office or agency
to be maintained for the purpose as provided in Section 3.2 for each
series of Securities a register or registers in which, subject to such
reasonable regulations as the Issuer may prescribe, it will provide for the
registration of Registered Securities of such series and the registration of
transfer of Registered Securities of such series.  Such register shall be in written form in the
English language or in any other form capable of being converted into such form
within a reasonable time.  At all
reasonable times such register or registers shall be open for inspection by the
Trustee.

 

Upon due presentation for registration of transfer of any Registered
Security of any series at any such office or agency to be maintained for the
purpose as provided in Section 3.2, the Issuer shall execute and the
Trustee shall authenticate and deliver in the name of the transferee or
transferees a new Registered Security or Registered Securities of the same series,
maturity date, interest rate and original issue date in authorized
denominations for a like aggregate principal amount.

 

14

 

Unregistered Securities (except for any temporary global Unregistered
Securities) and Coupons (except for Coupons attached to any temporary global
Unregistered Securities) shall be transferable by delivery.

 

At the option of the Holder thereof, Registered Securities of any series
(other than a Registered Global Security, except as set forth below) may be
exchanged for a Registered Security or Registered Securities of such series
having authorized denominations and an equal aggregate principal amount, upon
surrender of such Registered Securities to be exchanged at the agency of the Issuer
that shall be maintained for such purpose in accordance with Section 3.2
and upon payment, if the Issuer shall so require, of the charges hereinafter
provided.  If the Securities of any
series are issued in both registered and unregistered form, at the option of
the Holder thereof, except as otherwise specified pursuant to Section 2.3,
Unregistered Securities of any series may be exchanged for Registered
Securities of such series having authorized denominations and an equal
aggregate principal amount, upon surrender of such Unregistered Securities to
be exchanged at the agency of the Issuer that shall be maintained for such
purpose in accordance with Section 3.2, with, in the case of Unregistered
Securities that have Coupons attached, all unmatured Coupons and all matured
Coupons in default thereto appertaining, and upon payment, if the Issuer shall
so require, of the charges hereinafter provided.  At the option of the Holder thereof, if
Unregistered Securities of any series, maturity date, interest rate and
original issue date are issued in more than one authorized denomination, except
as otherwise specified pursuant to Section 2.3, such Unregistered
Securities may be exchanged for Unregistered Securities of such series having
authorized denominations and an equal aggregate principal amount, upon
surrender of such Unregistered Securities to be exchanged at the agency of the
Issuer that shall be maintained for such purpose in accordance with
Section 3.2 or as specified pursuant to Section 2.3, with, in the
case of Unregistered Securities that have Coupons attached, all unmatured
Coupons and all matured Coupons in default thereto appertaining, and upon
payment, if the Issuer shall so require, of the charges hereinafter provided.  Registered Securities of any series may not
be exchanged for Unregistered Securities of such series unless
(1) otherwise specified pursuant to Section 2.3 and (2) the
Issuer has delivered to the Trustee an Opinion of Counsel that (x) the
Issuer has received from the IRS a ruling or (y) since the date hereof,
there has been a change in the applicable United States Federal income tax law,
in either case to the effect that the inclusion of terms permitting Registered
Securities to be exchanged for Unregistered Securities would result in no
United States Federal income tax effect adverse to the Issuer or to any
Holder.  Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange
is entitled to receive.  All Securities
and Coupons, if any, surrendered upon any exchange or transfer provided for in
this Indenture shall be promptly cancelled and disposed of by the Trustee in
accordance with its regular procedures, and the Trustee shall deliver a
certificate of disposition thereof to the Issuer.

 

All Registered Securities presented for registration of transfer,
exchange, redemption or payment shall (if so required by the Issuer or the
Trustee) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Issuer and the Trustee duly
executed, by the Holder or his attorney duly authorized in writing.

 

15

 

The Issuer or the registrar may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any exchange or registration of transfer of Securities.  No service charge shall be made for any such
transaction.

 

The Issuer shall not be required to exchange or register a transfer of
(a) any Securities of any series for a period of 15 days preceding the
first mailing of notice of redemption of Securities of such series to be
redeemed or (b) any Securities selected, called or being called for
redemption, in whole or in part, except, in the case of any Security to be
redeemed in part, the portion thereof not so to be redeemed.

 

Notwithstanding any other provision of this Section 2.8, unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, a Registered Global Security representing all or a portion of
the Securities of a series may not be transferred except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary for such series
or a nominee of such successor Depositary.

 

If at any time the Depositary for any Registered Securities of a series
represented by one or more Registered Global Securities notifies the Issuer
that it is unwilling or unable to continue as Depositary for such Registered
Securities or if at any time the Depositary for such Registered Securities
shall no longer be eligible under Section 2.4, the Issuer shall appoint a
successor Depositary eligible under Section 2.4 with respect to such
Registered Securities.  If a successor
Depositary eligible under Section 2.4 for such Registered Securities is not
appointed by the Issuer within 90 days after the Issuer receives such notice or
becomes aware of such ineligibility, the Issuer’s election pursuant to
Section 2.3 that such Registered Securities be represented by one or more
Registered Global Securities shall no longer be effective and the Issuer will
execute, and the Trustee, upon receipt of an Officer’s Certificate for the
authentication and delivery of definitive Securities of such series, will
authenticate and deliver, Securities of such series in definitive registered
form without coupons, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of the Registered Global
Security or Securities representing such Registered Securities in exchange for
such Registered Global Security or Securities.

 

The Issuer may at any time and in its sole discretion determine that the
Registered Securities of any series issued in the form of one or more
Registered Global Securities shall no longer be represented by a Registered Global
Security or Securities.  In such event
the Issuer will execute, and the Trustee, upon receipt of any Officer’s
Certificate for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver, Securities of such series in
definitive registered form without coupons, in any authorized denominations, in
an aggregate principal amount equal to the principal amount of the Registered
Global Security or Securities representing such Registered Securities, in
exchange for such Registered Global Security or Securities.

 

If specified by the Issuer pursuant to Section 2.3 with respect to
Securities represented by a Registered Global Security, the Depositary for such
Registered Global Security may surrender such Registered Global Security in
exchange in whole or in part for Securities of 

 

16

 

the same series in definitive registered form on such terms as are
acceptable to the Issuer and such Depositary. 
Thereupon, the Issuer shall execute, and the Trustee shall authenticate
and deliver, without service charge,

 

(i)                                                             to the Person specified by such Depositary a new
Registered Security or Securities of the same series, of any authorized
denominations as requested by such Person, in an aggregate principal amount
equal to and in exchange for such Person’s beneficial interest in the
Registered Global Security; and

 

(ii)                                  to such Depositary a new Registered Global Security
in a denomination equal to the difference, if any, between the principal amount
of the surrendered Registered Global Security and the aggregate principal
amount of Registered Securities authenticated and delivered pursuant to clause
(i) above.

 

Upon the exchange of a Registered Global Security for Securities in
definitive registered form without coupons, in authorized denominations, such
Registered Global Security shall be cancelled by the Trustee or an agent of the
Issuer or the Trustee.  Securities in
definitive registered form without coupons issued in exchange for a Registered
Global Security pursuant to this Section 2.8 shall be registered in such
names and in such authorized denominations as the Depositary for such
Registered Global Security, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee or an agent of
the Issuer or the Trustee.  The Trustee
or such agent shall deliver such Securities to or as directed by the Persons in
whose names such Securities are so registered.

 

All Securities issued upon any transfer or exchange of Securities shall
be valid obligations of the Issuer, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.

 

Notwithstanding anything herein or in the terms of any series of
Securities to the contrary, none of the Issuer, the Trustee or any agent of the
Issuer or the Trustee (any of which, other than the Issuer, shall rely on an
Officer’s Certificate and an Opinion of Counsel) shall be required to exchange any
Unregistered Security for a Registered Security if such exchange would result
in United States Federal income tax consequences adverse to the Issuer (such
as, for example, the inability of the Issuer to deduct from its income, as
computed for United States Federal income tax purposes, the interest payable on
the Unregistered Securities) under then applicable United States Federal income
tax laws.

 

The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Depositary
participants or beneficial owners of interests in any Registered Global
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and
when expressly required by the terms of, this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.

 

17

 

SECTION 2.9 MUTILATED, DEFACED, DESTROYED,
LOST AND STOLEN SECURITIES.  In case any temporary or
definitive Security or any Coupon appertaining to any Security shall be
mutilated, defaced, destroyed, lost or stolen, the Issuer in its discretion may
execute and, upon the written request of any officer of the Issuer, the Trustee
shall authenticate and deliver, a new Security of the same series, maturity
date, interest rate and original issue date, bearing a number or other
distinguishing symbol not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Security, or in lieu of and in
substitution for the Security so destroyed, lost or stolen with Coupons
corresponding to the Coupons appertaining to the Securities so mutilated,
defaced, destroyed, lost or stolen, or in exchange or substitution for the
Security to which such mutilated, defaced, destroyed, lost or stolen Coupon
appertained, with Coupons appertaining thereto corresponding to the Coupons so
mutilated, defaced, destroyed, lost or stolen. 
In every case, the applicant for a substitute Security or Coupon shall
furnish to the Issuer and to the Trustee and any agent of the Issuer or the
Trustee such security or indemnity as may be required by them to indemnify and
defend and to save each of them harmless and, in every case of destruction,
loss or theft, evidence to their satisfaction of the destruction, loss or theft
of such Security or Coupon and of the ownership thereof, and in the case of
mutilation or defacement shall surrender the Security and related Coupons to
the Trustee or such agent.

 

Upon the issuance of any substitute Security or Coupon, the Issuer or
the registrar 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) or its agent
connected therewith.  In case any
Security or Coupon which has matured or is about to mature or has been called
for redemption in full shall become mutilated or defaced or be destroyed, lost
or stolen, the Issuer may, instead of issuing a substitute Security, pay or
authorize the payment of the same or the relevant Coupon (without surrender
thereof except in the case of a mutilated or defaced Security or Coupon), if
the applicant for such payment shall furnish to the Issuer and to the Trustee
and any agent of the Issuer or the Trustee such security or indemnity as any of
them may require to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Issuer and
the Trustee and any agent of the Issuer or the Trustee evidence to their
satisfaction of the destruction, loss or theft of such Security or Coupons and
of the ownership thereof.

 

Every substitute Security or Coupon of any series issued pursuant to the
provisions of this Section by virtue of the fact that any such Security or
Coupon is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Issuer, whether or not the destroyed, lost or stolen Security
or Coupon shall be at any time enforceable by anyone and shall be entitled to
all the benefits of (but shall be subject to all the limitations of rights set
forth in) this Indenture equally and proportionately with any and all other
Securities or Coupons of such series duly authenticated and delivered
hereunder.  All Securities and Coupons
shall be held and owned upon the express condition that, to the extent
permitted by law, the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, defaced or destroyed, lost or stolen
Securities and Coupons and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments
or other securities without their surrender.

 

18

 

SECTION 2.10 CANCELLATION OF SECURITIES;
DISPOSAL THEREOF.  All Securities and Coupons surrendered for
payment, redemption, registration of transfer or exchange, or for credit
against any payment in respect of a sinking or analogous fund, if any, if
surrendered to the Issuer or any agent of the Issuer or the Trustee or any
agent of the Trustee, shall be delivered to the Trustee or its agent for
cancellation or, if surrendered to the Trustee, shall be cancelled by it; and
no Securities or Coupons shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture.  The Trustee or its agent shall dispose of
cancelled Securities and Coupons held by it in accordance with its regular
procedures and deliver a certificate of disposition to the Issuer.  If the Issuer or its agent shall acquire any
of the Securities or Coupons, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
or Coupons unless and until the same are delivered to the Trustee or its agent
for cancellation.

 

SECTION 2.11 TEMPORARY SECURITIES.  Pending the
preparation of definitive Securities for any series, the Issuer may execute and
the Trustee shall authenticate and deliver temporary Securities for such series
(printed, lithographed, typewritten or otherwise reproduced, in each case in
form satisfactory to the Trustee). 
Temporary Securities of any series shall be issuable as Registered
Securities without coupons, or as Unregistered Securities with or without
coupons attached thereto, of any authorized denomination, and substantially in
the form of the definitive Securities of such series but with such omissions,
insertions and variations as may be appropriate for temporary Securities, all
as may be determined by the Issuer with the concurrence of the Trustee as
evidenced by the execution and authentication thereof.  Temporary Securities may contain such
references to any provisions of this Indenture as may be appropriate.  Every temporary Security shall be executed by
the Issuer and be authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with like effect, as the definitive
Securities.  Without unreasonable delay
the Issuer shall execute and shall furnish definitive Securities of such series
and thereupon temporary Registered Securities of such series may be surrendered
in exchange therefor without charge at each office or agency to be maintained
by the Issuer for that purpose pursuant to Section 3.2 and, in the case of
Unregistered Securities, at any agency maintained by the Issuer for such
purpose as specified pursuant to Section 2.3, and the Trustee shall
authenticate and deliver in exchange for such temporary Securities of such series
an equal aggregate principal amount of definitive Securities of the same series
having authorized denominations and, in the case of Unregistered Securities,
having attached thereto any appropriate Coupons.  Until so exchanged, the temporary Securities
of any series shall be entitled to the same benefits under this Indenture as
definitive Securities of such series, unless otherwise established pursuant to
Section 2.3.  The provisions of this
Section are subject to any restrictions or limitations on the issue and
delivery of temporary Unregistered Securities of any series that may be
established pursuant to Section 2.3 (including any provision that
Unregistered Securities of such series initially be issued in the form of a
single global Unregistered Security to be delivered to a depositary or agency
located outside the United States and the procedures pursuant to which
definitive or global Unregistered Securities of such series would be issued in
exchange for such temporary global Unregistered Security).

 

SECTION 2.12 CUSIP NUMBERS.  The Issuer
in issuing the Securities may use “CUSIP” numbers (if then generally in use),
and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed

 

19

 

on the Securities or as contained in any notice of a redemption and that
reliance may be place only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.  The Issuer
will promptly notify the Trustee in writing of any change in the “CUSIP”
numbers.

 

ARTICLE III

 

COVENANTS OF THE
ISSUER

 

SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST.  The Issuer
covenants and agrees for the benefit of each series of Securities that it will
duly and punctually pay or cause to be paid the principal of, and interest on,
if any, each of the Securities of such series (together with any additional
amounts payable pursuant to the terms of such Securities) at the place or
places, at the respective time or times and in the manner provided in such
Securities and in the Coupons, if any, appertaining thereto and in this
Indenture.  The interest on Securities
with Coupons attached (together with any additional amounts payable pursuant to
the terms of such Securities) shall be payable only upon presentation and
surrender of the several Coupons for such interest installments as are
evidenced thereby as they severally mature. 
If any temporary Unregistered Security provides that interest thereon
may be paid while such Security is in temporary form, the interest on any such
temporary Unregistered Security (together with any additional amounts payable
pursuant to the terms of such Security) shall be paid, as to the installments
of interest evidenced by Coupons attached thereto, if any, only upon
presentation and surrender thereof, and, as to the other installments of
interest, if any, only upon presentation of such Securities for notation
thereon of the payment of such interest, in each case subject to any
restrictions that may be established pursuant to Section 2.3.  The interest, if any, on Registered Securities
(together with any additional amounts payable pursuant to the terms of such
Securities) shall be payable only to or upon the written order of the Holders
thereof and, at the option of the Issuer, may be paid by wire transfer or by
mailing checks for such interest payable to or upon the written order of such
Holders at their last addresses as they appear on the Securities register of
the Issuer.

 

SECTION 3.2 OFFICES FOR PAYMENTS, ETC.  So long as
any Registered Securities are authorized for issuance pursuant to this
Indenture or are outstanding hereunder, the Issuer will maintain in the Borough
of Manhattan, The City of New York, an office or agency where the Registered
Securities of each series may be presented for payment, where the Securities of
each series may be presented for exchange as is provided in this Indenture and,
if applicable, pursuant to Section 2.3 and where the Registered Securities
of each series may be presented for registration of transfer as in this
Indenture provided.

 

The Issuer will maintain one or more offices or agencies in a city or
cities located outside the United States (including any city in which such an
agency is required to be maintained under the rules of any stock exchange
on which the Securities of such series are listed) where the Unregistered
Securities, if any, of each series and Coupons, if any, appertaining thereto
may be presented for payment.  No payment
on any Unregistered Security or Coupon will be made upon presentation of such
Unregistered Security or Coupon at an agency of the

 

20

 

Issuer within the United States, nor will any payment be made by
transfer to an account in, or by mail to an address in, the United States,
unless pursuant to applicable United States laws and regulations then in effect
such payment can be made without tax consequences adverse to the Issuer.  Notwithstanding the foregoing, payments in
Dollars of Unregistered Securities of any series and Coupons appertaining
thereto which are payable in Dollars may be made at an agency of the Issuer
maintained in the Borough of Manhattan, The City of New York if such payment in
Dollars at each agency maintained by the Issuer outside the United States for
payment on such Unregistered Securities is illegal or effectively precluded by
exchange controls or other similar restrictions.

 

The Issuer will maintain in the Borough of Manhattan, The City of New
York, an office or agency where notices and demands to or upon the Issuer in
respect of the Securities of any series, the Coupons appertaining thereto or
this Indenture may be served.

 

The Issuer will give to the Trustee written notice of the location of
each such office or agency and of any change of location thereof.  In case the Issuer shall fail to maintain any
agency required by this Section to be located in the Borough of Manhattan,
The City of New York, or shall fail to give such notice of the location or for
any change in the location of any of the above agencies, presentations and
demands may be made and notices may be served at the designated office of the
Trustee.

 

The Issuer may from time to time designate one or more additional
offices or agencies where the Securities of a series and any Coupons
appertaining thereto may be presented for payment, where the Securities of that
series may be presented for exchange as provided in this Indenture and pursuant
to Section 2.3 and where the Registered Securities of that series may be
presented for registration of transfer as in this Indenture provided, and the
Issuer may from time to time rescind any such designation, as the Issuer may
deem desirable or expedient; provided, that no such designation or rescission
shall in any manner relieve the Issuer of its obligations to maintain the
agencies provided for in this Section. 
The Issuer shall give to the Trustee prompt written notice of any such
designation or rescission thereof.

 

SECTION 3.3 APPOINTMENT TO FILL A VACANCY IN
OFFICE OF TRUSTEE.  The Issuer, whenever necessary to avoid or
fill a vacancy in the office of Trustee, will appoint, in the manner provided
in Section 6.10, a Trustee, so that there shall at all times be a Trustee
with respect to each series of Securities hereunder.

 

SECTION 3.4 PAYING AGENTS.  Whenever
the Issuer shall appoint a paying agent other than the Trustee with respect to
the Securities of any series, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section,

 

(a)           that it will hold all sums received by it as such agent
for the payment of the principal of or interest on the Securities of such
series (whether such sums have been paid to it by the Issuer or by any other
obligor on the Securities of such series) in trust for the benefit of the
Holders of the Securities of such series, or Coupons appertaining thereto, if
any, or of the Trustee;

 

21

 

(b)           that it will give the Trustee notice of any failure by the
Issuer (or by any other obligor on the Securities of such series) to make any
payment of the principal of or interest on the Securities of such series when
the same shall be due and payable; and

 

(c)           that it will pay any such sums so held in trust by it to
the Trustee upon the Trustee’s written request at any time during the
continuance of the failure referred to in the foregoing clause (b).

 

The Issuer will, on or prior to each due date of the principal of or
interest on the Securities of such series, deposit with the paying agent a sum
sufficient to pay such principal or interest so becoming due, and (unless such
paying agent is the Trustee) the Issuer will promptly notify the Trustee of any
failure to take such action.

 

If the Issuer shall act as its own paying agent with respect to the
Securities of any series, it will, on or before each due date of the principal
of or interest on the Securities of such series, set aside, segregate and hold
in trust for the benefit of the Holders of the Securities of such series or the
Coupons appertaining thereto a sum sufficient to pay such principal or interest
so becoming due.  The Issuer will
promptly notify the Trustee of any failure to take such action.

 

Anything in this Section to the contrary notwithstanding, but
subject to Section 10.1, the Issuer may at any time, for the purpose of
obtaining a satisfaction and discharge with respect to one or more or all
series of Securities hereunder, or for any other reason, pay or cause to be
paid to the Trustee all sums held in trust for any such series by the Issuer or
any paying agent hereunder, as required by this Section, such sums to be held
by the Trustee upon the trusts herein contained.

 

Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section is subject to
the provisions of Sections 10.3 and 10.4.

 

22

 

SECTION 3.5 COMPLIANCE CERTIFICATES.  The Issuer
will furnish to the Trustee within 90 days following the end of each fiscal
year a brief certificate (which need not comply with Section 11.5) from
the principal executive, financial or accounting officer of the Issuer stating
that in the course of the performance by the signer of his or her duties as an
officer of the Issuer he or she would normally have knowledge of any default or
non-compliance by the Issuer in the performance of any covenants or conditions
contained in this Indenture, stating whether or not he or she has knowledge of
any such default or non-compliance and, if so, describing each such default or
non-compliance of which the signer has knowledge and the nature thereof.

 

SECTION 3.6 CORPORATE EXISTENCE.  Subject to
Article IX, the Issuer will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
rights (charter and statutory), licenses and franchises of the Issuer and its
Subsidiaries; provided, that the
Issuer shall not be required to preserve any such right, license or franchise,
if, in the judgment of the Issuer, the preservation thereof is no longer
desirable in the conduct of the business of the Issuer and its Subsidiaries
taken as a whole and the loss thereof is not disadvantageous in any material
respect to the Securityholders.

 

SECTION 3.7 LUXEMBOURG PUBLICATIONS.  In the
event of the publication of any notice pursuant to Section 5.11, 6.11,
6.12, 8.2, 10.4, 11.4 or 12.2, the party making such publication in the Borough
of Manhattan, The City of New York and London shall also, to the extent that
notice is required to be given to Holders of Securities of any series by
applicable Luxembourg law or stock exchange regulation, as evidenced by an
Officer’s Certificate delivered to such party, make a similar publication in
Luxembourg.

 

ARTICLE IV

SECURITYHOLDER LISTS AND REPORTS BY THE

ISSUER AND THE TRUSTEE

 

SECTION 4.1 ISSUER TO FURNISH TRUSTEE INFORMATION
AS TO NAMES AND ADDRESSES OF SECURITYHOLDERS.  If and so long as the Trustee
shall not be the Security registrar for the Securities of any series, the
Issuer and any other obligor on the Securities will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the Holders of the Registered Securities
of such series pursuant to Section 312 of the Trust Indenture Act:

 

(a)           semi-annually not more than 5 days after each record date
for the payment of interest on such Registered Securities, as hereinabove
specified, as of such record date and on dates to be determined pursuant to
Section 2.3 for non-interest bearing Registered Securities in each year;
and

 

(b)           at such other times as the Trustee may reasonably request
in writing, within thirty days after receipt by the Issuer of any such request
as of a date not more than 15 days prior to the time such information is
furnished.

 

23

 

SECTION 4.2 REPORTS BY THE ISSUER.  The Issuer
covenants to file with the Trustee, within 15 days after the Issuer is required
to file the same with the Commission, copies of the annual reports and of the
information, documents, and other reports that the Issuer may be required to
file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act or pursuant to Section 314 of
the Trust Indenture Act.

 

Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee’s receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuer’s
compliance with any covenants hereunder (as to which the Trustee is entitled to
rely exclusively on Officer’s Certificates).

 

SECTION 4.3
REPORTS BY THE TRUSTEE.

 

(a)           The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.  If required by
Section 313(a) of the Trust Indenture Act, the Trustee shall, within
sixty days after each May 15 following the date of the initial issuance of
Securities under this Indenture deliver to Holders a brief report, dated as of
such May 15, which complies with the provisions of such
Section 313(a).

 

(b)           A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange, if
any, upon which the Securities are listed, with the Commission and with the
Issuer.  The Issuer will promptly notify
the Trustee in writing when the Securities are listed on any stock exchange and
of any delisting thereof.

 

ARTICLE V

REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT

 

SECTION 5.1 EVENT OF DEFAULT DEFINED, ACCELERATION
OF MATURITY; WAIVER OF DEFAULT.  “Event of Default” with respect
to Securities of any series, wherever used herein, means any one of the
following events which shall have occurred and be continuing (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

 

(a)           default in the payment of any installment of interest upon
any of the Securities of such series as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; provided that
a valid extension of an interest payment period by the Issuer in accordance
with the terms of such Securities shall not constitute a failure to pay
interest; or

 

24

 

(b)           default in the payment of all or any part of the principal
on any of the Securities of such series as and when the same shall become due
and payable either at maturity, upon any redemption, by declaration or
otherwise; or

 

(c)           default in the payment of any sinking fund installment as
and when the same shall become due and payable by the terms of the Securities
of such series; or

 

(d)           failure on the part of the Issuer duly to observe or
perform any other of the covenants or agreements on the part of the Issuer in
the Securities of such series or contained in this Indenture (other than a
covenant or agreement included in this Indenture solely for the benefit of a
series of Securities other than such series) for a period of 90 days after the
date on which written notice specifying such failure, stating that such notice
is a “Notice of Default” hereunder and demanding that the Issuer remedy the
same, shall have been given by registered or certified mail, return receipt
requested, to the Issuer by the Trustee, or to the Issuer and the Trustee by
the holders of at least 25% in aggregate principal amount of the Outstanding
Securities of the series to which such covenant or agreement relates; or

 

(e)           a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Issuer in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Issuer for any substantial
part of its property or ordering the winding up or liquidation of its affairs,
and such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or

 

(f)            the Issuer shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Issuer or for any substantial part of its or their property,
or make any general assignment for the benefit of creditors; or

 

(g)           any other Event of Default provided in the supplemental
indenture, Officer’s Certificate or Board Resolution under which such series of
Securities is issued or in the form of Security for such series.

 

If an Event of Default described in clause (a), (b) or
(c) occurs and is continuing, then, and in each and every such case,
except for any series of Securities the principal of which shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of each such affected series
then Outstanding hereunder (each such series voting as a separate class) by
notice in writing to the Issuer (and to the Trustee if given by
Securityholders), may declare the entire principal (or, if the Securities of such
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of such series) of all Securities of
such series, and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration, the same shall become immediately
due and payable.

 

25

 

Except as otherwise provided in the terms of any series of Senior
Securities pursuant to Section 2.3, if an Event of Default described in
clause (d) or (g) above with respect to all series of the Senior
Securities then Outstanding, occurs and is continuing, then, and in each and
every such case, unless the principal of all of the Senior Securities shall
have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate principal amount of all of the Senior Securities
then Outstanding hereunder (treated as one class) by notice in writing to the
Issuer (and to the Trustee if given by Securityholders), may declare the entire
principal (or, if the Senior Securities of any series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of such series) of all of the Senior Securities then Outstanding, and
the interest accrued thereon, if any, to be due and payable immediately, and
upon such declaration, the same shall become immediately due and payable.  If an Event of Default described in clause
(e) or (f) above occurs and is continuing, then the principal amount
of all the Senior Securities then Outstanding, and the interest accrued
thereon, if any, shall become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.

 

Except as otherwise provided in the terms of any series of Subordinated
Securities pursuant to Section 2.3, if an Event of Default described in
clause (d) or (g) above with respect to all series of Subordinated
Securities then Outstanding, occurs and is continuing, then, and in each and
every such case, unless the principal of all of the Subordinated Securities
shall have already become due and payable, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of all of the Subordinated
Securities then Outstanding hereunder (treated as one class) by notice in
writing to the Issuer (and to the Trustee if given by Securityholders), may
declare the entire principal (or, if the Subordinated Securities of any series
are Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of such series) of all of the Subordinated
Securities then Outstanding, and the interest accrued thereon, if any, to be
due and payable immediately, and upon such declaration, the same shall become
immediately due and payable.  If an Event
of Default described in clause (e) or (f) above occurs and is
continuing, then the principal amount of all of the Subordinated Securities
then Outstanding, and the interest accrued thereon, if any, shall become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.

 

If an Event of Default described in clause (d) or (g) occurs
and is continuing, which Event of Default is with respect to less than all
series of Senior Securities then Outstanding, then, and in each and every such
case, except for any series of Senior Securities the principal of which shall
have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Senior Securities of each
such affected series then Outstanding hereunder (each such series voting as a
separate class) by notice in writing to the Issuer (and to the Trustee if given
by Securityholders), may declare the entire principal (or, if the Securities of
such series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of such series) of all
Securities of such series, and the interest accrued thereon, if any, to be due
and payable immediately, and upon any such declaration, the same shall become
immediately due and payable.

 

If an Event of Default described in clause (d) or (g) occurs
and is continuing, which Event of Default is with respect to less than all
series of Subordinated Securities then

 

26

 

Outstanding, then, and in each and every such case, except for any
series of Subordinated Securities the principal of which shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Subordinated Securities of each such
affected series then Outstanding hereunder (each such series voting as a
separate class) by notice in writing to the Issuer (and to the Trustee if given
by Securityholders), may declare the entire principal (or, if the Securities of
such series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of such series) of all
Securities of such series, and the interest accrued thereon, if any, to be due
and payable immediately, and upon any such declaration, the same shall become
immediately due and payable.

 

The foregoing provisions are subject to the condition that if, at any
time after the principal (or, if the Securities are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms
thereof) of the Securities of any series (or of all the Securities, as the case
may be) shall have been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been obtained or entered as
hereinafter provided,

 

(A) the Issuer shall pay or
shall deposit with the Trustee a sum sufficient to pay

 

(i)            all matured installments of interest upon all the
Securities of such series (or all the Securities, as the case may be); and

 

(ii)           the principal of any and all Securities of such series (or
of all the Securities, as the case may be) which shall have become due
otherwise than by acceleration; and

 

(iii)          interest upon such principal and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
installments of interest, at the same rate as the rate of interest or Yield to
Maturity (in the case of Original Issue Discount Securities) specified in the
Securities of such series (or at the respective rates of interest or Yields to
Maturity of all the Securities, as the case may be) to the date of such payment
or deposit; and

 

(iv)          all amounts payable to the Trustee pursuant to
Section 6.6; and

 

(B) all Events of Default
under the Indenture, other than the non-payment of the principal of Securities
which shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein,

 

then and in every such case the Holders of a majority in aggregate
principal amount of all the Securities of such series voting as a separate
class (or of all the Securities, as the case may be, voting as a single class),
then Outstanding, by written notice to the Issuer and to the Trustee, may waive
all defaults with respect to such series (or with respect to all the
Securities, as the case may be) and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereon.

 

27

 

For all purposes under this Indenture, if a portion of the principal of
any Original Issue Discount Securities shall have been accelerated and declared
due and payable pursuant to the provisions hereof, then, from and after such
declaration, unless such declaration has been rescinded and annulled, the
principal amount of such Original Issue Discount Securities shall be deemed,
for all purposes hereunder, to be such portion of the principal thereof as
shall be due and payable as a result of such acceleration, and payment of such
portion of the principal thereof as shall be due and payable as a result of
such acceleration, together with interest, if any, thereon and all other
amounts owing thereunder, shall constitute payment in full of such Original
Issue Discount Securities.

 

SECTION 5.2 COLLECTION OF INDEBTEDNESS BY TRUSTEE;
TRUSTEE MAY PROVE DEBT.  The Issuer covenants that
(a) in case default shall be made in the payment of any installment of
interest on any of the Securities of any series when such interest shall have
become due and payable, and such default shall have continued for a period of 30
days, or (b) in case default shall be made in the payment of all or any
part of the principal of any of the Securities of any series when the same
shall have become due and payable, whether upon maturity of the Securities of
such series or upon any redemption or by declaration or otherwise, then upon
demand of the Trustee, the Issuer will pay to the Trustee for the benefit of
the Holders of the Securities of such series the whole amount that then shall
have become due and payable on all Securities of such series, and such Coupons,
for principal and interest, as the case may be (with interest to the date of
such payment upon the overdue principal and, to the extent that payment of such
interest is enforceable under applicable law, on overdue installments of
interest at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Securities) specified in the Securities of such
series); and in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, and such other amount due the
Trustee under Section 6.6 in respect of Securities of such series.

 

Until such demand is made by the Trustee, the Issuer may pay the
principal of and interest on the Securities of any series to the registered
Holders, whether or not the Securities of such series be overdue.

 

In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name as trustee of an express trust, shall be
entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any
such judgment or final decree against the Issuer or other obligor upon the
Securities and collect in the manner provided by law out of the property of the
Issuer or other obligor upon the Securities, wherever situated, all the moneys
adjudged or decreed to be payable.

 

In case there shall be pending proceedings relative to the Issuer or any
other obligor upon the Securities under Title 11 of the United States Code or
any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor, or in
case of any other comparable judicial proceedings relative to the Issuer or
other obligor upon the Securities, or to the creditors or property of the
Issuer or such other obligor, the Trustee, irrespective of whether the
principal of the Securities shall then be due and payable as therein

 

28

 

expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand pursuant to the provisions of this Section,
shall be entitled and empowered, by intervention in such proceedings or
otherwise:

 

(a)           to file and prove a claim or claims for the whole amount
of principal and interest (or, if the Securities of any series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of such series) owing and unpaid in respect of the
Securities of any series, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for amounts payable to the Trustee under Section 6.6) and of the
Securityholders allowed in any judicial proceedings relative to the Issuer or
other obligor upon the Securities, or to the creditors or property of the
Issuer or such other obligor; and

 

(b)           unless prohibited by applicable law and regulations, to
vote on behalf of the holders of the Securities of any series in any election
of a receiver, assignee, trustee or a standby trustee in arrangement,
reorganization, liquidation or other bankruptcy or insolvency proceedings,
custodian or other person performing similar functions in respect of any such
proceedings; and

 

(c)           to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all amounts
received with respect to the claims of the Securityholders and of the Trustee
on their behalf; and any trustee, receiver, or liquidator, custodian or other
similar official performing similar functions in respect of any such
proceedings is hereby authorized by each of the Securityholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to
the making of payments directly to the Securityholders, to pay to the Trustee
its costs and expenses of collection and all other amounts due to it pursuant
to Section 6.6.

 

Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities of any series or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding, except as aforesaid in clause (b).

 

All rights of action and of asserting claims under this Indenture, or
under any of the Securities of any series or Coupons appertaining to such
Securities, may be enforced by the Trustee without the possession of any of the
Securities of such series or Coupons appertaining to such Securities or the
production thereof in any trial or other proceedings relative thereto, and any
such action or proceedings instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment shall be
awarded to the Trustee for ratable distribution to the Holders of the
Securities or Coupons appertaining to such Securities in respect of which such
action was taken, after payment of all sums due to the Trustee under
Section 6.6 in respect of such Securities.

 

In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the
Holders of the Securities or Coupons appertaining to

 

29

 

such Securities in respect to which such action was taken, and it shall
not be necessary to make any Holders of such Securities or Coupons appertaining
to such Securities parties to any such proceedings.

 

SECTION 5.3 APPLICATION OF PROCEEDS.  Any moneys
collected by the Trustee pursuant to this Article in respect of any series
shall be applied in the following order at the date or dates fixed by the
Trustee and, in case of the distribution of such moneys on account of principal
or interest, upon presentation of the several Securities and Coupons
appertaining to such Securities in respect of which monies have been collected
and stamping (or otherwise noting) thereon the payment, or issuing Securities
of such series in reduced principal amounts in exchange for the presented
Securities of like series if only partially paid, or upon surrender thereof if
fully paid:

 

FIRST: To the payment of costs
and expenses applicable to such series of Securities in respect of which monies
have been collected, including all amounts due to the Trustee and each
predecessor Trustee pursuant to Section 6.6 in respect to such series of
Securities;

 

SECOND: If the Securities of such
series are Subordinated Securities, to the payment of amounts then due and
unpaid to the holders of Senior Indebtedness with respect to such series, to
the extent required pursuant to the Subordination Provisions established with
respect to the Securities of such series pursuant to Section 2.3(9).

 

THIRD: In case the principal of
the Securities of such series in respect of which moneys have been collected
shall not have become and be then due and payable, to the payment of interest
on the Securities of such series in default in the order of the maturity of the
installments on such interest, with interest (to the extent that such interest has
been collected by the Trustee and is permitted by applicable law) upon the
overdue installments of interest at the same rate as the rate of interest or
Yield to Maturity (in the case of Original Issue Discount Securities) specified
in such Securities, such payments to be made ratably to the persons entitled
thereto, without discrimination or preference;

 

FOURTH: In case the principal of
the Securities of such series in respect of which moneys have been collected
shall have become and shall be then due and payable, to the payment of the
whole amount then owing and unpaid upon all the Securities of such series for
principal and interest, with interest upon the overdue principal, and (to the
extent that such interest has been collected by the Trustee and is permitted by
applicable law) upon the overdue installations of interest at the same rate as
the rate of interest or Yield to Maturity (in the case of Original Issue
Discount Securities) specified in the Securities of such series; and in case
such moneys shall be insufficient to pay in full the whole amount so due and
unpaid upon the Securities of such series, then to the payment of such
principal and interest or Yield to Maturity, without preference or priority of
principal over interest or Yield to Maturity, or of interest or Yield to
Maturity over principal, or of any installment of interest over any other
installment of

 

30

 

interest or of any Security of such series over any
other Security of such series, ratably to the aggregate of such principal and
accrued and unpaid interest or Yield to Maturity; and

 

FIFTH: To
the payment of the remainder, if any, to the Issuer or to such party as a court
of competent jurisdiction shall direct.

 

SECTION 5.4 SUITS FOR
ENFORCEMENT.  In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.

 

SECTION 5.5 RESTORATION OF
RIGHTS ON ABANDONMENT OF PROCEEDINGS.  In case
the Trustee shall have proceeded to enforce any right under this Indenture and
such proceedings shall have been discontinued or abandoned for any reason, or
shall have been determined adversely to the Trustee, then and in every such
case the Issuer and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the Securityholders shall continue as though no such
proceedings had been taken.

 

SECTION 5.6 LIMITATIONS ON
SUITS BY SECURITYHOLDERS.  No Holder
of any Security of any series or of any Coupon appertaining thereto shall have
any right by virtue or by availing of any provision of this Indenture to
institute any action or proceeding at law or in equity or in bankruptcy or
otherwise upon or under or with respect to this Indenture or such Security, or
for the appointment of a trustee, receiver, liquidator, custodian or other
similar official or for any other remedy hereunder or thereunder, unless (a) such
Holder previously shall have given to a Responsible Officer of the Trustee
written notice of an Event of Default with respect to Securities of such series
and of the continuance thereof, as hereinbefore provided, and (b) the Holders
of not less than 25% in aggregate principal amount of the Securities of such
affected series then Outstanding (treated as a single class) shall have made
written request upon the Trustee to institute such action or proceedings in its
own name as Trustee hereunder and shall have offered to the Trustee reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred therein or thereby, and (c) the Trustee for 60
days after its receipt of such notice, request and offer of indemnity shall
have failed to institute any such action or proceeding, and (d) no
direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 5.9; it being understood and intended, and
being expressly covenanted by the taker and Holder of every Security or Coupon
with every other taker and Holder and the Trustee, that no one or more Holders
of Securities of any series or Coupons appertaining to such Securities shall
have any right in any manner whatever by virtue or by availing of any provision
of this Indenture or any Security to affect, disturb or prejudice the rights of
any other such taker or Holder of Securities or Coupons appertaining to such
Securities, or to obtain or seek to obtain priority over or preference to any
other such taker or Holder or to enforce any right under this Indenture or any
Security, except in the manner herein provided and

 

31

 

for the equal, ratable and common benefit of all
Holders of Securities of the applicable series and Coupons appertaining to such
Securities.  For the protection and
enforcement of the provisions of this Section, each and every Securityholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.

 

SECTION 5.7 UNCONDITIONAL
RIGHT OF SECURITYHOLDERS TO INSTITUTE CERTAIN SUITS. 
Notwithstanding any other provision in this Indenture and any provision
of any Security, the right of any Holder of any Security or Coupon to receive
payment of the principal of and interest on such Security or Coupon on or after
the respective due dates expressed in such Security or Coupon or the applicable
redemption dates provided for in such Security, or to institute suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.

 

SECTION 5.8 POWERS AND
REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF DEFAULT. 
Except as provided in Section 5.6, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders of Securities or
Coupons is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise.  The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.

 

No delay or omission of the Trustee or of any
Holder of Securities or Coupons to exercise any right or power accruing upon
any Event of Default occurring and continuing as aforesaid shall impair any
such right or power or shall be construed to be a waiver of any such Event of
Default or an acquiescence therein. 
Every power and remedy given by this Indenture, any Security or law to
the Trustee or to the Holders of Securities or Coupons may be exercised from
time to time, and as often as shall be deemed expedient, by the Trustee or,
subject to Section 5.6, by the Holders of Securities or Coupons.

 

32

 

SECTION 5.9 CONTROL BY
HOLDERS OF SECURITIES.  The
Holders of a majority in aggregate principal amount of the Securities of each
series affected (with each such series voting as a separate class) at the time
Outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to the
Securities of such series by this Indenture; provided, that such direction
shall not be otherwise than in accordance with law and the provisions of this
Indenture; and provided, further, that (subject to the provisions of Section 6.1)
the Trustee shall have the right to decline to follow any such direction if (a) the
Trustee, being advised by counsel, shall determine that the action or
proceeding so directed may not lawfully be taken; or (b) if the Trustee by
its trust committee of directors or Responsible Officers of the Trustee shall
determine in good faith that the action or proceedings so directed would
involve the Trustee in personal liability; or (c) if the Trustee in good
faith shall so determine that the actions or forbearances specified in or
pursuant to such direction would be unduly prejudicial to the interests of
Holders of the Securities of all affected series not joining in the giving of
said direction, it being understood that (subject to Section 6.1) the
Trustee shall have no duty to ascertain whether or not such actions or
forbearances are unduly prejudicial to such Holders.

 

Nothing in this Indenture shall impair the right of
the Trustee in its discretion to take any action deemed proper by the Trustee
and which is not inconsistent with such direction or directions by
Securityholders.

 

SECTION 5.10 WAIVER OF PAST
DEFAULTS.  Prior to the declaration of
acceleration of the maturity of the Securities of any series as provided in Section 5.1,
the Holders of a majority in aggregate principal amount of the Securities of
such series at the time Outstanding (voting as a single class) may on behalf of
the Holders of all such Securities waive any past default or Event of Default
described in Section 5.1 and its consequences, except a default in respect
of a covenant or provision hereof which cannot be modified or amended without
the consent of the Holder of each Security affected.  In the case of any such waiver, the Issuer,
the Trustee and the Holders of all such Securities shall be restored to their
former positions and rights hereunder, respectively, and such default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.

 

SECTION 5.11 TRUSTEE TO GIVE
NOTICE OF DEFAULT, BUT MAY WITHHOLD IN CERTAIN CIRCUMSTANCES. 
The Trustee shall, within ninety days after the occurrence of a default
with respect to the Securities of any series, give notice of all defaults with
respect to that series known to the Trustee (i) if any Unregistered
Securities of that series are then Outstanding, to the Holders thereof, by
publication at least once in an Authorized Newspaper in the Borough of
Manhattan, The City of New York and at least once in an Authorized Newspaper in
London (and, if required by Section 3.7, at least once in an Authorized
Newspaper in Luxembourg) and (ii) to all Holders of Securities of such
series in the manner and to the extent provided in Section 313(c) of
the Trust Indenture Act, unless in each case such defaults shall have been
cured before the mailing or publication of such notice (the term “default” for
the purpose of this Section being hereby defined to mean any event or
condition which is, or with notice or lapse of time or both would become, an
Event of Default); provided,

 

33

 

that, except in the case of default in the payment
of the principal of or interest on any of the Securities of such series, or in
the payment of any sinking fund installment on such series, the Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors or
trustees and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Securityholders
of such series.

 

SECTION 5.12 RIGHT OF COURT
TO REQUIRE FILING OF UNDERTAKING TO PAY COSTS.  All
parties to this Indenture agree, and each Holder of any Security or Coupon by
his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys’
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder or group of
Securityholders of any series holding in the aggregate more than 10% in
aggregate principal amount of the Securities of such series, or, in the case of
any suit relating to or arising under clause (d) or (g) of Section 5.1
(if the suit relates to Securities of more than one but less than all series),
10% in aggregate principal amount of Securities then Outstanding and affected
thereby, or in the case of any suit relating to or arising under clause (d) or
(g) (if the suit under clause (d) or (g) relates to all the
Securities then Outstanding), or (e) or (f) of Section 5.1, 10%
in aggregate principal amount of all Securities then Outstanding, or to any
suit instituted by any Securityholder for the enforcement of the payment of the
principal of or interest on any Security on or after the due date expressed in
such Security or any date fixed for redemption.

 

ARTICLE VI

 

CONCERNING THE TRUSTEE

 

SECTION 6.1 DUTIES AND
RESPONSIBILITIES OF THE TRUSTEE; DURING DEFAULT; PRIOR TO DEFAULT. 
Prior to the occurrence of an Event of Default with respect to the
Securities of a particular series and after the curing or waiving of all Events
of Default which may have occurred with respect to such series, the Trustee
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture with respect to such series of Securities.  In case an Event of Default with respect to
the Securities of a series has occurred and has not been cured or waived, the
Trustee shall exercise with respect to such series of Securities such of the
rights and powers vested in it by this Indenture with respect to such series of
Securities, 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
his or her own affairs.

 

No provision of this Indenture 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, except that

 

34

 

(a)           prior to the occurrence of an Event
of Default with respect to the Securities of any series and after the curing or
waiving of all such Events of Default with respect to such series which may
have occurred:

 

(i)            the duties and obligations of the
Trustee with respect to the Securities of any series shall be determined solely
by the express provisions of this Indenture, and the Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and

 

(ii)           in the absence of bad faith on the
part of the Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
statements, certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but in the case of any such statements,
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements
of this Indenture;

 

(b)           the Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and

 

(c)           the Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders pursuant to Section 5.9
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 Indenture.

 

None of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if there shall be reasonable ground
for believing that the repayment of such funds or adequate indemnity against
such liability is not reasonably assured to it.

 

The provisions of this Section 6.1 are in
furtherance of and subject to Section 315 of the Trust Indenture Act.

 

SECTION 6.2 CERTAIN RIGHTS
OF THE TRUSTEE.  In furtherance of and subject
to the Trust Indenture Act, and subject to Section 6.1:

 

(a)           the Trustee may conclusively rely and
shall be protected in acting or refraining from acting upon any Board
Resolution, Officer’s Certificate or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
note, coupon, security or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;

 

35

 

(b)           any request, direction, order or
demand of the Issuer mentioned herein shall be sufficiently evidenced by an
Officer’s Certificate or Issuer Order (unless other evidence in respect thereof
is specifically prescribed herein or in the terms established in respect of any
series); and any resolution of the Board of Directors may be evidenced to the
Trustee by a copy thereof certified by the secretary or an assistant secretary
of the Issuer;

 

(c)           the Trustee may consult with counsel
of its selection, and any written advice or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted to be taken by it hereunder in good faith and in reliance
thereon in accordance with such advice or Opinion of Counsel;

 

(d)           the Trustee shall be under no
obligation to exercise any of the trusts or powers vested in it by this
Indenture at the request, order or direction of any of the Securityholders
pursuant to the provisions of this Indenture, unless such Securityholders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred therein or thereby;

 

(e)           the Trustee shall not be liable for
any action taken or omitted by it in good faith and believed by it to be
authorized or within the discretion, rights or powers conferred upon it by this
Indenture;

 

(f)            prior to the occurrence of an Event
of Default hereunder and after the curing or waiving of all Events of Default,
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, appraisal, bond, debenture,
note, coupon, security, or other paper or document unless (i) requested in
writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Securities of all series affected then Outstanding
(treated as one class) or (ii) otherwise provided in the terms of any
series of Securities pursuant to Section 2.3; provided, 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 reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable security or indemnity against such expenses or liabilities as a
condition to proceeding; the reasonable expenses of every such investigation
shall be paid by the Issuer or, if paid by the Trustee or any predecessor
trustee, shall be repaid by the Issuer upon demand;

 

(g)           the Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or
by or through agents or attorneys not regularly in its employ and the Trustee
shall not be responsible for any misconduct or negligence on the part of any
such agent or attorney appointed with due care by it hereunder;

 

(h)           the Trustee shall not be deemed to
have notice of any Event of Default unless a Responsible Officer of the Trustee
has actual knowledge thereof or unless written notice of any event which is in
fact an Event of Default is received by the Trustee

 

36

 

at the
Corporate Trust Office and such notice references the Securities, the Issuer or
this Indenture;

 

(i)            the rights, privileges, protections,
immunities and benefits given to the Trustee, including, without limitation,
its right to be indemnified, are extended to, and shall be enforceable by, the
Trustee in each of its capacities hereunder, and each agent, custodian and
other Person employed to act hereunder; and

 

(j)            the Trustee may request that the
Issuer deliver a certificate setting forth the names of individuals and/or
titles of officers authorized at such time to take specified actions pursuant
to this Indenture, which certificate may be signed by any person authorized to
sign an Officer’s Certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded.

 

SECTION 6.3 TRUSTEE NOT
RESPONSIBLE FOR RECITALS, DISPOSITION OF SECURITIES OR APPLICATION OF PROCEEDS
THEREOF.  The recitals contained herein and in the
Securities, except the Trustee’s certificates of authentication, shall be taken
as the statements of the Issuer, and the Trustee assumes no responsibility for
the correctness of the same.  The Trustee
makes no representation as to the validity or sufficiency of this Indenture or
of the Securities or Coupons.  The
Trustee shall not be accountable for the use or application by the Issuer of
any of the Securities or of the proceeds thereof.

 

SECTION 6.4 TRUSTEE AND
AGENTS MAY HOLD SECURITIES OR COUPONS; COLLECTIONS, ETC. 
The Trustee or any agent of the Issuer or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
or Coupons with the same rights it would have if it were not the Trustee or
such agent and may otherwise deal with the Issuer and receive, collect, hold
and retain collections from the Issuer with the same rights it would have if it
were not the Trustee or such agent.

 

SECTION 6.5 MONEYS HELD BY
TRUSTEE.  Subject to the provisions of Section 10.4
hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. 
Neither the Trustee nor any agent of the Issuer or the Trustee shall be
under any liability for interest on any moneys received by it hereunder.

 

SECTION 6.6 COMPENSATION
AND INDEMNIFICATION OF TRUSTEE AND ITS PRIOR CLAIM. 
The Issuer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, such compensation as the Issuer and the
Trustee shall agree in writing (which shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust), and the Issuer
covenants and agrees to pay or reimburse the Trustee and each predecessor
trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by or on behalf of it in accordance with any of the
provisions of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all agents and other persons
not regularly in its employ) except any such expense, disbursement or advance
as may arise from its own negligence, bad faith or willful misconduct.  The Issuer also covenants to indemnify each
of the Trustee or any

 

37

 

predecessor Trustee and their agents for, and to
hold them harmless against, any and all loss, damage, claims, liability or
expense, including taxes (other than taxes based upon, measured by or
determined by the income of the Trustee), arising out of or in connection with
the acceptance or administration of the trust or trusts hereunder, including
the costs and expenses of defending itself against any claim (whether asserted
by the Issuer, or any Holder or any other Person) or liability in connection
with the exercise or performance of any of its powers or duties hereunder, or
in connection with enforcing the provisions of this Section, except to the
extent that such loss, damage, claim, liability or expense is due to its own
negligence, bad faith or willful misconduct. 
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 5.1(e) or Section 5.1(f),
the expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable bankruptcy, insolvency or other similar
law.  The obligations of the Issuer under
this Section to compensate and indemnify the Trustee and each predecessor
trustee and to pay or reimburse the Trustee and each predecessor trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of this
Indenture.  Such additional indebtedness
shall be a senior claim to that of the Securities upon all property and funds
held or collected by the Trustee as such, except funds held in trust for the
benefit of the Holders of particular Securities or Coupons, and the Securities
are hereby subordinated to such senior claim.

 

SECTION 6.7 RIGHT OF
TRUSTEE TO RELY ON OFFICER’S CERTIFICATE, ETC.  Subject to
Sections 6.1 and 6.2, whenever in the administration of the trusts of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence, bad faith or
willful misconduct on the part of the Trustee, be deemed to be conclusively proved
and established by an Officer’s Certificate delivered to the Trustee, and such
certificate, in the absence of negligence, bad faith or willful misconduct on
the part of the Trustee, shall be full warrant to the Trustee for any action
taken, suffered or omitted by it under the provisions of this Indenture upon
the faith thereof.

 

SECTION 6.8 INDENTURES NOT
CREATING POTENTIAL CONFLICTING INTERESTS FOR THE TRUSTEE. 
The following indenture is hereby specifically described for the
purposes of Section 310(b)(1) of the Trust Indenture Act:  this Indenture with respect to series of
Securities that are of an equal priority.

 

SECTION 6.9 QUALIFICATION
OF TRUSTEE: CONFLICTING INTERESTS.  The
Trustee shall comply with Section 310(b) of the Trust Indenture Act.

 

SECTION 6.10 PERSONS
ELIGIBLE FOR APPOINTMENT AS TRUSTEE.  The
Trustee for each series of Securities hereunder shall at all times be a
corporation or banking association organized and doing business under the laws
of the United States of America, any State thereof or the District of Columbia,
having a combined capital and surplus of at least $50,000,000, and which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by Federal, state or District of Columbia
authority.  If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then

 

38

 

for the purposes of this Section, the combined
capital and surplus of such corporation 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,
the Trustee shall resign immediately in the manner and with the effect
specified in Section 6.11.

 

The provisions of this Section 6.10 are in
furtherance of and subject to Section 310(a) of the Trust Indenture
Act.

 

SECTION 6.11 RESIGNATION AND
REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE.  (a) The
Trustee, or any trustee or trustees hereafter appointed, may at any time resign
with respect to one or more or all series of Securities by giving written
notice of resignation to the Issuer and (i) if any Unregistered Securities
of a series affected are then Outstanding, by giving notice of such resignation
to the Holders thereof, by publication at least once in an Authorized Newspaper
in the Borough of Manhattan, The City of New York, and at least once in an
Authorized Newspaper in London (and, if required by Section 3.7, at least
once in an Authorized Newspaper in Luxembourg), (ii) if any Unregistered
Securities of a series affected are then Outstanding, by mailing notice of such
resignation to the Holders thereof who have filed their names and addresses
with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture
Act at such addresses as were so furnished to the Trustee and (iii) by
mailing notice of such resignation to the Holders of then Outstanding
Registered Securities of each series affected at their addresses as they shall
appear on the registry books.  Upon
receiving such notice of resignation, the Issuer shall promptly appoint a
successor trustee or trustees with respect to the applicable series by written
instrument in duplicate, executed by authority of the Board of Directors, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee or trustees. 
If no successor trustee shall have been so appointed with respect to any
series and have accepted appointment within 30 days after the mailing of such
notice of resignation, the resigning trustee (at no expense to itself) may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been a bona fide Holder of a Security or
Securities of the applicable series for at least six months may, subject to the
provisions of Section 5.12, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor
trustee.  Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.

 

(b)           In case at any time any of the following
shall occur:

 

(i)            the Trustee shall fail to comply
with the provisions of Section 310(b) of the Trust Indenture Act with
respect to any series of Securities after written request therefor by the
Issuer or by any Securityholder who has been a bona fide Holder of a Security
or Securities of such series for at least six months; or

 

(ii)           the Trustee shall cease to be
eligible in accordance with the provisions of Section 6.10 and Section 310(a) of
the Trust Indenture Act and shall fail to resign after written request therefor
by the Issuer or by any Securityholder; or

 

39

 

(iii)          the Trustee shall become incapable of
acting with respect to any series of Securities, or shall be adjudged bankrupt
or insolvent, or a receiver or liquidator 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;

 

then, in any such case, the Issuer may remove the
Trustee with respect to the applicable series of Securities and appoint a
successor trustee for such series by written instrument, in duplicate, executed
by order of the Board of Directors of the Issuer, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the successor
trustee, or, subject to the provisions of Section 315(e) of the Trust
Indenture Act, any Securityholder who has been a bona fide Holder of a Security
or Securities of such series for at least six months may on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor trustee with
respect to such series.  Such court may
thereupon, after such notice, if any, as it may deem proper and so prescribe,
remove the Trustee and appoint a successor trustee.

 

(c)           The Holders of a majority in
aggregate principal amount of the Securities of each series at the time
outstanding may at any time remove the Trustee with respect to Securities of
such series and appoint a successor trustee with respect to the Securities of
such series by delivering to the Trustee so removed, to the successor trustee
so appointed and to the Issuer the evidence provided for in Section 7.1 of
the action in that regard taken by the Securityholders.

 

(d)           Any resignation or removal of the
Trustee with respect to any series and any appointment of a successor trustee
with respect to such series pursuant to any of the provisions of this Section 6.11
shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 6.12.

 

40

 

SECTION 6.12 ACCEPTANCE OF
APPOINTMENT BY SUCCESSOR TRUSTEE.  Any
successor trustee appointed as provided in Section 6.11 shall execute and
deliver to the Issuer and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to all or any applicable series shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all rights, powers, duties and obligations
with respect to such series of its predecessor hereunder, with like effect as
if originally named as trustee for such series hereunder; but, nevertheless, on
the written request of the Issuer or of the successor trustee, upon payment of
its charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4,
pay over to the successor trustee all moneys at the time held by it hereunder
and shall execute and deliver an instrument transferring to such successor
trustee all such rights, powers, duties and obligations.  Upon request of any such successor trustee,
the Issuer shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers.  Any trustee ceasing to act
shall, nevertheless, retain a prior claim upon all property or funds held or
collected by such trustee to secure any amounts then due it pursuant to the
provisions of Section 6.6.

 

If a successor trustee is appointed with respect to
the Securities of one or more (but not all) series, the Issuer, the predecessor
trustee and each successor trustee with respect to the Securities of any
applicable series shall execute and deliver an indenture supplemental hereto
which shall contain such provisions as shall be deemed necessary or desirable
to confirm that all the rights, powers, trusts and duties of the predecessor
trustee with respect to the Securities of any series as to which the
predecessor trustee is not retiring shall continue to be vested in the
predecessor trustee, and shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such trustees
co-trustees of the same trust and that each such trustee shall be trustee of a
trust or trusts under separate indentures.

 

No successor trustee with respect to any series of
Securities shall accept appointment as provided in this Section 6.12
unless at the time of such acceptance such successor trustee shall be qualified
under Section 310(b) of the Trust Indenture Act and eligible under
the provisions of Section 6.10.

 

Upon acceptance of appointment by any successor
trustee as provided in this Section 6.12, the Issuer shall give notice
thereof (a) if any Unregistered Securities of a series affected are then
Outstanding, to the Holders thereof, by publication of such notice at least
once in an Authorized Newspaper in the Borough of Manhattan, The City of New
York and at least once in an Authorized Newspaper in London (and, if required
by Section 3.7, at least once in an Authorized Newspaper in Luxembourg), (b) if
any Unregistered Securities of a series affected are then Outstanding, to the
Holders thereof who have filed their names and addresses with the Trustee
pursuant to Section 313(c)(2) of the Trust Indenture Act, by mailing
such notice to such Holders at such addresses as were so furnished to the
Trustee (and the Trustee shall make such information available to the Issuer
for such purpose) and (c) to the Holders of Registered Securities of each
series affected, by mailing such notice to such Holders at their addresses as
they shall appear on the registry books. 
If the acceptance of appointment is substantially contemporaneous with
the resignation, then the notice called for by the preceding sentence may

 

41

 

be combined with the notice called for by Section 6.11.  If the Issuer fails to give such notice
within ten days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be given at the expense of the
Issuer.

 

SECTION 6.13 MERGER,
CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE. 
Any corporation or banking association into which the Trustee may be
merged or converted or with which it may be consolidated, or any corporation or
banking association resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any corporation or banking association
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided, that such corporation or banking
association shall be qualified under Section 310(b) of the Trust
Indenture Act and eligible under the provisions of Section 6.10, 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.

 

In case at the time such successor to the Trustee
shall succeed to the trusts created by this Indenture any of the Securities of
any series shall have been authenticated but not delivered, any such successor
to the Trustee may adopt the certificate of authentication of any predecessor
trustee and deliver such Securities so authenticated; and, in case at that time
any of the Securities of any series shall not have been authenticated, any such
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor Trustee; and in all
such cases such certificate of authentication shall have the full force which
under this Indenture or the Securities of such series it is provided that the
certificate of authentication of the Trustee shall have; provided, that the
right to adopt the certificate of authentication of any predecessor trustee or
to authenticate Securities of any series in the name of any predecessor trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.

 

SECTION 6.14 PREFERENTIAL
COLLECTION OF CLAIMS AGAINST THE ISSUER.  The
Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship listed in Section 311(b) of the
Trust Indenture Act.  A Trustee who has
resigned or been removed shall be subject to Section 311(a) of the
Trust Indenture Act to the extent indicated.

 

SECTION 6.15 APPOINTMENT OF
AUTHENTICATING AGENT.  As long as any Securities of a
series remain Outstanding, the Trustee may, by an instrument in writing,
appoint with the approval of the Issuer an authenticating agent (the
“Authenticating Agent”) which shall be authorized to act on behalf of the
Trustee to authenticate Securities, including Securities issued upon exchange,
registration of transfer, partial redemption or pursuant to Section 2.9.  Securities of each such series authenticated
by such Authenticating Agent shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee.  Whenever reference is made in
this Indenture to the authentication and delivery of Securities of any series
by the Trustee or to the Trustee’s Certificate of Authentication, such
reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent for such series and a Certificate of
Authentication executed on behalf of the Trustee by such Authenticating Agent.  Such Authenticating Agent shall at all times
be a corporation organized and doing business under the

 

42

 

laws of the United States of America or of any
State, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $45,000,000 (determined as provided in
Section 6.10 with respect to the Trustee) and subject to supervision or
examination by Federal or state authority.

 

Any corporation into which any Authenticating Agent
may be merged or converted, or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which any
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency business of any Authenticating Agent, shall continue to be the
Authenticating Agent with respect to all series of Securities for which it
served as Authenticating Agent without the execution or filing of any paper or
any further act on the part of the Trustee or such Authenticating Agent.  Any Authenticating Agent may at any time, and
if it shall cease to be eligible shall, resign by giving written notice of
resignation to the Trustee and to the Issuer.

 

Upon receiving such a notice of resignation or upon
such a termination, or in case at any time any Authenticating Agent shall cease
to be eligible in accordance with the provisions of this Section 6.15 with
respect to one or more series of Securities, the Trustee shall upon receipt of
an Issuer Order appoint a successor Authenticating Agent, and the Issuer shall
provide notice of such appointment to all Holders of Securities of such series
in the manner and to the extent provided in Section 11.4.  Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent.  The Issuer agrees to pay to the
Authenticating Agent for such series from time to time reasonable
compensation.  The Authenticating Agent
for the Securities of any series shall have no responsibility or liability for
any action taken by it as such at the direction of the Trustee.

 

Sections 6.2, 6.3, 6.4, 6.6 and 7.3 shall be
applicable to any Authenticating Agent.

 

ARTICLE VII

 

CONCERNING THE SECURITYHOLDERS

 

SECTION 7.1 EVIDENCE OF
ACTION TAKEN BY SECURITYHOLDERS.  Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by a specified
percentage in principal amount of the Securityholders of any or all series may
be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such specified percentage of Securityholders in person
or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee. 
Proof of execution of any instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Sections 6.1 and 6.2) conclusive in favor of the Trustee and the Issuer, if
made in the manner provided in this Article.

 

SECTION 7.2 PROOF OF
EXECUTION OF INSTRUMENTS AND OF HOLDING OF SECURITIES. 
Subject to Sections 6.1 and 6.2, the execution of any

 

43

 

instrument by a Securityholder or his agent or
proxy may be proved in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee.  The holding
of Registered Securities shall be proved by the Security register or by a
certificate of the registrar thereof.

 

SECTION 7.3 HOLDERS TO BE
TREATED AS OWNERS.  The Issuer, the Trustee and any
agent of the Issuer or the Trustee may deem and treat the person in whose name
any Security shall be registered upon the Security register for such series as
the absolute owner of such Security (whether or not such Security shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest on such Security and for
all other purposes; and neither the Issuer nor the Trustee nor any agent of the
Issuer or the Trustee shall be affected by any notice to the contrary.  The Issuer, the Trustee and any agent of the
Issuer or the Trustee may treat the Holder of any Unregistered Security and the
Holder of any Coupon as the absolute owner of such Unregistered Security or
Coupon (whether or not such Unregistered Security or Coupon shall be overdue)
for the purpose of receiving payment thereof or on account thereof and for all
other purposes, and neither the Issuer, the Trustee, nor any agent of the
Issuer or the Trustee shall be affected by any notice to the contrary.  All such payments so made to any such person,
or upon his order, shall be valid, and, to the extent of the sum or sums so
paid, effectual to satisfy and discharge the liability for moneys payable upon
any such Unregistered Security or Coupon.

 

SECTION 7.4 SECURITIES
OWNED BY ISSUER DEEMED NOT OUTSTANDING.  In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of any or all series have concurred in any request,
demand, authorization, direction, notice, consent, waiver or other action by
Securityholders under this Indenture, Securities which are owned by the Issuer
or any other obligor on the Securities with respect to which such determination
is being made or by any person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Issuer or any other obligor
on the Securities with respect to which such determination is being made shall
be disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such action only Securities which a
Responsible Officer of the Trustee actually knows are so owned shall be so
disregarded.  Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee’s right so to act
with respect to such Securities and that the pledgee is not the Issuer or any
other obligor upon the Securities or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Issuer or any other obligor on the Securities.  In case of a dispute as to such right, the
advice of counsel shall be full protection in respect of any decision made by
the Trustee in accordance with such advice. 
Upon request of the Trustee, the Issuer shall furnish to the Trustee
promptly an Officer’s Certificate listing and identifying all Securities, if
any, known by the Issuer to be owned or held by or for the account of any of
the above-described persons; and, subject to Sections 6.1 and 6.2, the Trustee
shall be entitled to accept such Officer’s Certificate as conclusive evidence
of the facts therein set forth and of the fact that all Securities not listed
therein are Outstanding for the purpose of any such determination.

 

44

 

SECTION 7.5 RIGHT OF
REVOCATION OF ACTION TAKEN.  At any
time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1,
of the taking of any action by the Holders of the percentage in aggregate
principal amount of the Securities of any or all series, as the case may be,
specified in this Indenture in connection with such action, any Holder of a
Security the serial number of which is shown by the evidence to be included
among the serial numbers of the Securities the Holders of which have consented
to such action may, by filing written notice at the Corporate Trust Office and
upon proof of holding as provided in this Article, revoke such action so far as
concerns such Security.  Except as
aforesaid, any such action taken by the Holder of any Security shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of such Security and of any Securities issued in exchange or substitution
therefor or on registration of transfer thereof, irrespective of whether or not
any notation in regard thereto is made upon any such Security.  Any action taken by the Holders of the
percentage in aggregate principal amount of the Securities of any or all
series, as the case may be, specified in this Indenture in connection with such
action shall be conclusively binding upon the Issuer, the Trustee and the
Holders of all the Securities affected by such action.

 

ARTICLE VIII

 

SUPPLEMENTAL INDENTURES

 

SECTION 8.1 SUPPLEMENTAL
INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS.  The
Issuer, when authorized by a Board Resolution (which resolution may provide
general terms or parameters for such action and may provide that the specific
terms of such action may be determined in accordance with or pursuant to an
Issuer Order), and the Trustee may from time to time and at any time enter into
an indenture or indentures supplemental hereto for one or more of the following
purposes:

 

(a)           to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Securities of one or more
series any property or assets;

 

(b)           to evidence the succession of
another corporation to the Issuer, or successive successions, and the
assumption by the successor corporation of the covenants, agreements and
obligations of the Issuer pursuant to Article IX;

 

(c)           to add to the covenants of the
Issuer such further covenants, restrictions, conditions or provisions as the
Issuer and the Trustee shall consider to be for the protection of the Holders of
Securities or Coupons, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants, restrictions,
conditions or provisions an Event of Default permitting the enforcement of all
or any of the several remedies provided in this Indenture as herein set forth;
provided, that in respect of any such additional covenant, restriction,
condition or provision such supplemental indenture may provide for a particular
period of grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an immediate
enforcement upon such an Event of Default or may limit the remedies available
to the Trustee upon such an Event of Default or may limit the right of the Holders
of a majority in aggregate principal amount of the Securities of such series to
waive such an Event of Default;

 

45

 

(d)           to cure any ambiguity or to
correct or supplement any provision contained herein or in any supplemental
indenture which may be defective or inconsistent with any other provision
contained herein or in any supplemental indenture, or to make any other
provisions as the Issuer may deem necessary or desirable, provided, that no
such action shall adversely affect the interests of the Holders of the
Securities or Coupons;

 

(e)           to establish the forms or terms
of Securities of any series or of the Coupons appertaining to such Securities
as permitted by Sections 2.1 and 2.3;

 

(f)            to evidence and provide for the
acceptance of appointment hereunder by a successor trustee with respect to the
Securities of one or more series and to add to or change any of the provisions
of this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one trustee, pursuant to
the requirements of Section 6.12; and

 

(g)           to change or eliminate any of the
provisions of this Indenture, or to add any new provision to this Indenture, in
respect of one or more series of Securities; provided, however, that any such
change, elimination or addition shall not apply to any Security Outstanding on
the date of such indenture supplemental hereto.

 

The Trustee is hereby authorized to join with the
Issuer in the execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be therein contained and to
accept the conveyance, transfer, assignment, mortgage or pledge of any property
thereunder, but the Trustee shall not be obligated to enter into any such
supplemental indenture which affects the Trustee’s own rights, duties or
immunities under this Indenture or otherwise.

 

Any supplemental indenture authorized by the
provisions of this Section may be executed without the consent of the
Holders of any of the Securities at the time outstanding, notwithstanding any
of the provisions of Section 8.2.

 

SECTION 8.2 SUPPLEMENTAL
INDENTURES WITH CONSENT OF SECURITYHOLDERS.

 

(A) Except
as set forth in paragraph (C) below, with the consent (evidenced as
provided in Article VII) of the Holders of not less than a majority in
aggregate principal amount of the Securities at the time Outstanding of all
series of Senior Securities affected by such supplemental indenture (voting as
one class), the Issuer, when authorized by a Board Resolution (which resolution
may provide general terms or parameters for such action and may provide that
the specific terms of such action may be determined in accordance with or
pursuant to an Issuer Order), and the Trustee may, from time to time and at any
time, enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as in force and effect at
the date of execution thereof) for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of any supplemental indenture or of modifying in any manner the rights of
the Holders of the Securities of each such series or of the Coupons
appertaining to such Securities.

 

46

 

(B) Except
as set forth in paragraph (C) below, with the consent (evidenced as
provided in Article VII) of the Holders of not less than a majority in
aggregate principal amount of the Securities at the time Outstanding of all
series of Subordinated Securities affected by such supplemental indenture
(voting as one class), the Issuer, when authorized by a Board Resolution (which
resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to an Issuer Order), and the Trustee may, from time to time
and at any time, enter into an indenture or indentures supplemental hereto
(which shall conform to the provisions of the Trust Indenture Act as in force
and effect at the date of execution thereof) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders of the Securities of each such series or of the
Coupons appertaining to such Securities.

 

(C) No
such supplemental indenture shall (i) extend the final maturity of any
Security, or reduce the principal amount thereof, or premium thereon, if any,
or reduce the rate or extend the time of payment of interest thereon, or reduce
any amount payable on redemption thereof, or make the principal thereof
(including any amount in respect of original issue discount), or premium
thereon, if any, or interest thereon payable in any coin or currency other than
that provided in the Securities and Coupons or in accordance with the terms
thereof, or reduce the amount of the principal of an Original Issue Discount Security
that would be due and payable upon an acceleration of the maturity thereof
pursuant to Section 5.1 or the amount thereof provable in bankruptcy
pursuant to Section 5.2, or in the case of Subordinated Securities of any
series, modify any of the Subordination Provisions or the definition of “Senior
Indebtedness” relating to such series in a manner adverse to the holders of
such Subordinated Securities, or alter the provisions of Section 11.11 or
11.12 or impair or affect the right of any Securityholder to institute suit for
the payment thereof when due or, if the Securities provide therefor, any right
of repayment at the option of the Securityholder, in each case without the
consent of the Holder of each Security so affected, or (ii) reduce the
aforesaid percentage of Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, without the consent of
the Holders of each Security so affected.

 

(D) A
supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of Holders of Securities of such series, or of Coupons appertaining to
such Securities, with respect to such covenant or provision, shall be deemed
not to affect the rights under this Indenture of the Holders of Securities of
any other series or of the Coupons appertaining to such Securities.

 

Upon the request of the Issuer, accompanied by a
copy of a resolution of the Board of Directors (which resolution may provide
general terms or parameters for such action and may provide that the specific
terms of such action may be determined in accordance with or pursuant to an
Issuer Order) certified by the secretary or an assistant secretary of the
Issuer authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of the Holders of the
Securities as aforesaid and other

 

47

 

documents, if any, required by Section 7.1,
the Trustee shall join with the Issuer in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee’s own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.

 

It shall not be necessary for the consent of the
Securityholders under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.

 

Promptly after the execution by the Issuer and the
Trustee of any supplemental indenture pursuant to the provisions of this
Section, the Trustee shall give notice thereof (i) to the Holders of then
Outstanding Registered Securities of each series affected thereby, by mailing a
notice thereof by first-class mail to such Holders at their addresses as they
shall appear on the Security register, (ii) if any Unregistered Securities
of a series affected thereby are then Outstanding, to the Holders thereof who
have filed their names and addresses with the Trustee pursuant to Section 313(c)(2) of
the Trust Indenture Act, by mailing a notice thereof by first-class mail to
such Holders at such addresses as were so furnished to the Trustee and (iii) if
any Unregistered Securities of a series affected thereby are then Outstanding,
to all Holders thereof, by publication of a notice thereof at least once in an
Authorized Newspaper in the Borough of Manhattan, The City of New York and at
least once in an Authorized Newspaper in London (and, if required by Section 3.7,
at least once in an Authorized Newspaper in Luxembourg), and in each case such
notice shall set forth in general terms the substance of such supplemental
indenture.  Any failure of the Issuer to
give such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture.

 

SECTION 8.3 EFFECT OF
SUPPLEMENTAL INDENTURE.  Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Issuer and the Holders
of Securities of each series affected thereby shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.

 

SECTION 8.4 DOCUMENTS TO BE
GIVEN TO TRUSTEE.  The Trustee, subject to the
provisions of Sections 6.1 and 6.2, may receive an Officer’s Certificate and an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article VIII complies with the applicable
provisions of this Indenture.

 

SECTION 8.5 NOTATION ON
SECURITIES IN RESPECT OF SUPPLEMENTAL INDENTURES.  Securities
of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article may bear
a notation in form approved by the Trustee for such series as to any matter
provided for by such supplemental indenture or as to any action taken by
Securityholders.  If the Issuer or the
Trustee shall so determine, new Securities of any series so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such

 

48

 

supplemental indenture may be prepared by the
Issuer, authenticated by the Trustee and delivered in exchange for the
Securities of such series then Outstanding.

 

ARTICLE IX

 

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

 

SECTION 9.1 ISSUER MAY CONSOLIDATE,
ETC., ONLY ON CERTAIN TERMS.  The Issuer
shall not consolidate with or merge into any other Person or transfer or lease
its properties and assets substantially as an entirety to any Person, and the
Issuer shall not permit any other Person to consolidate with or merge into the
Issuer, unless:

 

(a)           either the Issuer shall be the
continuing corporation, or the successor corporation (if other than the Issuer)
formed by such consolidation or into which the Issuer is merged or to which the
properties and assets of the Issuer substantially as an entirety are
transferred or leased shall be a corporation organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Issuer under the Securities and this Indenture; and

 

(b)           immediately after giving effect
to such transaction and treating any indebtedness which becomes an obligation
of the Issuer or a Subsidiary as a result of such transaction as having been
incurred by the Issuer or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing.

 

49

 

SECTION 9.2 SUCCESSOR
CORPORATION SUBSTITUTED.  The
successor corporation formed by such consolidation or into which the Issuer is
merged or to which such transfer or lease is made shall succeed to and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such successor corporation had been
named as the Issuer herein, and thereafter (except in the case of a lease to
another Person) the predecessor corporation shall be relieved of all obligations
and covenants under the Indenture and the Securities and, in the event of such
conveyance or transfer, any such predecessor corporation may be dissolved and
liquidated.

 

SECTION 9.3 OPINION OF
COUNSEL TO BE GIVEN TO TRUSTEE.  The
Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale or conveyance, and any such assumption, complies with the provisions of
this Article IX.

 

ARTICLE X

 

SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

 

SECTION 10.1 SATISFACTION
AND DISCHARGE OF INDENTURE.

 

(A)          If at any time (i) the
Issuer shall have paid or caused to be paid the principal of and interest on
all the Securities of any series Outstanding hereunder and all unmatured
Coupons appertaining thereto (other than Securities of such series and Coupons
appertaining thereto which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.9) as and when the same
shall have become due and payable, or (ii) the Issuer shall have delivered
to the Trustee for cancellation all Securities of any series theretofore
authenticated and all unmatured Coupons appertaining thereto (other than any
Securities of such series and Coupons appertaining thereto which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.9) or (iii) in the case of any series of
Securities where the exact amount (including the currency of payment) of principal
of and interest due on which can be determined at the time of making the
deposit referred to in clause (b) below, (a) all the Securities of
such series and all unmatured Coupons appertaining thereto not theretofore
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption, and (b) the Issuer shall
have irrevocably deposited or caused to be deposited with the Trustee as trust
funds in trust the entire amount, if any, in (i) cash (other than moneys
repaid by the Trustee or any paying agent to the Issuer in accordance with Section 10.4),
(ii) in the case of any series of Securities the payments on which may
only be made in Dollars, direct obligations of the United States of America,
backed by its full faith and credit (“U.S. Government Obligations”), maturing
as to principal and interest at such times and in such amounts as will insure
the availability of cash sufficient to pay at such maturity or upon such
redemption, as the case may be, or (iii) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay (x) the principal and interest on all Securities of such
series and Coupons appertaining thereto on each date that such principal or
interest is due and payable and (y) any mandatory sinking fund payments on
the dates on which such payments are

 

50

 

due and payable in accordance with the terms of the
Indenture and the Securities of such series; and if, in any such case, the
Issuer shall also pay or cause to be paid all other sums payable hereunder by
the Issuer, then this Indenture shall cease to be of further effect (except as
to (i) rights of registration of transfer and exchange of Securities of
such Series and of Coupons appertaining thereto pursuant to Section 2.8
and the Issuer’s right of optional redemption, if any, (ii) substitution
of mutilated, defaced, destroyed, lost or stolen Securities or Coupons, (iii) rights
of holders of Securities and Coupons appertaining thereto to receive payments
of principal thereof and interest thereon, upon the original stated due dates
therefor (but not upon acceleration), and remaining rights of the Holders to
receive mandatory sinking fund payments, if any, (iv) any optional
redemption rights of such series of Securities to the extent to be exercised to
make such call for redemption within one year, (v) the rights,
obligations, duties and immunities of the Trustee hereunder, including those
under Section 6.6, (vi) the rights of the Holders of Securities of
such series and Coupons appertaining thereto as beneficiaries hereof with
respect to the property so deposited with the Trustee payable to all or any of
them, and (vii) the obligations of the Issuer under Section 3.2) and
the Trustee, on demand of the Issuer accompanied by an Officer’s Certificate
and an Opinion of Counsel and at the cost and expense of the Issuer, shall
execute proper instruments acknowledging such satisfaction of and discharging
this Indenture; provided, that the rights of Holders of the Securities and
Coupons to receive amounts in respect of principal of and interest on the
Securities and Coupons held by them shall not be delayed longer than required
by then-applicable mandatory rules or policies of any securities exchange
upon which the Securities are listed. 
The Issuer agrees to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred and to compensate the Trustee for
any services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Securities of such series.

 

(B)           The following provisions shall
apply to the Securities of each series unless specifically otherwise provided
in a Board Resolution, Officer’s Certificate or indenture supplemental hereto
provided pursuant to Section 2.3. 
In addition to discharge of the Indenture pursuant to the next preceding
paragraph, in the case of any series of Securities the exact amounts (including
the currency of payment) of principal of and interest due on which can be
determined at the time of making the deposit referred to in clause (a) below,
the Issuer shall be deemed to have paid and discharged the entire indebtedness
on all the Securities of such a series and the Coupons appertaining thereto on
the date of the deposit referred to in clause (a) below, and the
provisions of this Indenture with respect to the Securities of such series and
Coupons appertaining thereto shall no longer be in effect (except as to (i) rights
of registration of transfer and exchange of Securities of such series and of
Coupons appertaining thereto pursuant to Section 2.8 and the Issuer’s
right of optional redemption, if any, (ii) substitution of mutilated,
defaced, destroyed, lost or stolen Securities or Coupons, (iii) rights of
Holders of Securities and Coupons appertaining thereto to receive payments of
principal thereof and interest thereon, upon the original stated due dates
therefor (but not upon acceleration), and remaining rights of the Holders to
receive mandatory sinking fund payments, if any, (iv) any optional
redemption rights of such series of Securities to the extent to be exercised to
make such call for redemption within one year, (v) the rights,
obligations, duties and immunities of the Trustee hereunder, (vi) the
rights of the Holders of Securities of such series and Coupons appertaining
thereto as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them and (vii) the obligations of the
Issuer under Section 3.2) and the Trustee, at the

 

51

 

expense of the Issuer, shall at the Issuer’s
request, execute proper instruments acknowledging the same, if

 

(a)           with reference to this provision
the Issuer has irrevocably deposited or caused to be irrevocably deposited with
the Trustee as trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Securities of such
series and Coupons appertaining thereto (i) cash in an amount, or (ii) in
the case of any series of Securities the payments on which may only be made in
Dollars, U.S. Government Obligations, maturing as to principal and interest at
such times and in such amounts as will insure the availability of cash or (iii) a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay (A) the principal and interest on all
Securities of such series and Coupons appertaining thereto on each date that
such principal or interest is due and payable and (b) any mandatory
sinking fund payments on the dates on which such payments are due and payable
in accordance with the terms of the Indenture and the Securities of such
series;

 

(b)           such deposit will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Issuer is a party or by which it is bound;

 

(c)           the Issuer has delivered to the Trustee
an Opinion of Counsel based on the fact that (x) the Issuer has received
from, or there has been published by, the IRS a ruling or (y) since the
date hereof, there has been a change in the applicable United States Federal
income tax law, in either case to the effect that, and such opinion shall
confirm that, the Holders of the Securities of such series and Coupons
appertaining thereto will not recognize income, gain or loss for United States
Federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to United States Federal income tax on the same
amount and in the same manner and at the same times, as would have been the
case if such deposit, defeasance and discharge had not occurred; and

 

(d)           the Issuer has delivered to the
Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for relating to the defeasance contemplated
by this provision have been complied with.

 

(C)           The Issuer shall be released from
its obligations under Sections 3.6 and 9.1 and unless otherwise provided for in
the Board Resolution, Officer’s Certificate or Indenture supplemental hereto
establishing such series of Securities, from all covenants and other
obligations referred to in Section 2.3(19) or 2.3(21) with respect to such
series of Securities, and any Coupons appertaining thereto, outstanding on and
after the date the conditions set forth below are satisfied (hereinafter,
“covenant defeasance”).  For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Securities of any series, the Issuer may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in such
Section, whether directly or indirectly by reason of any reference elsewhere
herein to such Section or by reason of any reference in such Section to
any other provision herein or in any other document and such omission to comply
shall not constitute an Event of Default under Section 5.1, but the remainder
of this Indenture and such Securities and Coupons shall be

 

52

 

unaffected thereby. 
The following shall be the conditions to application of this subsection
C of this Section 10.1:

 

(a)           The Issuer has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust
for the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the holders of the
Securities of such series and coupons appertaining thereto, (i) cash in an
amount, or (ii) in the case of any series of Securities the payments on
which may only be made in Dollars, U.S. Government Obligations maturing as to
principal and interest at such times and in such amounts as will insure the
availability of cash or (iii) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay (A) the
principal and interest on all Securities of such series and Coupons
appertaining thereof and (B) any mandatory sinking fund payments on the
day on which such payments are due and payable in accordance with the terms of
the Indenture and the Securities of such series;

 

(b)           No Event of Default or event
which with notice or lapse of time or both would become an Event of Default
with respect to the Securities shall have occurred and be continuing on the
date of such deposit;

 

(c)           Such covenant defeasance shall not
cause the Trustee to have a conflicting interest as defined in Section 6.9
and for purposes of the Trust Indenture Act with respect to any securities of
the Issuer;

 

(d)           Such covenant defeasance shall
not result in a breach or violation of, or constitute a default under any
agreement or instrument to which the Issuer is a party or by which it is bound;

 

(e)           Such covenant defeasance shall
not cause any Securities then listed on any registered national securities
exchange under the Exchange Act to be delisted;

 

(f)            The Issuer shall have delivered
to the Trustee an Officer’s Certificate and Opinion of Counsel to the effect
that the Holders of the Securities of such series and Coupons appertaining
thereto will not recognize income, gain or loss for United States Federal
income tax purposes as a result of such covenant defeasance and will be subject
to United States Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance had
not occurred; and

 

(g)           The Issuer shall have delivered
to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for relating to the covenant defeasance
contemplated by this provision have been complied with.

 

SECTION 10.2 APPLICATION BY
TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT OF SECURITIES. 
Subject to Section 10.4, all moneys deposited with the Trustee (or
other trustee) pursuant to Section 10.1 shall be held in trust and applied
by it to the payment, either directly or through any paying agent (including
the Issuer acting as its own

 

53

 

paying agent), to the Holders of the particular
Securities of such series and of Coupons appertaining thereto for the payment
or redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such money
need not be segregated from other funds except to the extent required by law.

 

SECTION 10.3 REPAYMENT OF
MONEYS HELD BY PAYING AGENT.  In
connection with the satisfaction and discharge of this Indenture with respect
to Securities of any series, all moneys then held by any paying agent under the
provisions of this Indenture with respect to such series of Securities shall,
upon demand of the Issuer, be repaid to it or paid to the Trustee and thereupon
such paying agent shall be released from all further liability with respect to
such moneys.

 

SECTION 10.4 RETURN OF
MONEYS HELD BY TRUSTEE AND PAYING AGENT UNCLAIMED FOR TWO YEARS. 
Any moneys deposited with or paid to the Trustee or any paying agent for
the payment of the principal of or interest on any Security of any series and
of any Coupons attached thereto and not applied but remaining unclaimed for two
years after the date upon which such principal or interest shall have become
due and payable, shall, upon the written request of the Issuer and unless
otherwise required by mandatory provisions of applicable escheat or abandoned
or unclaimed property law, be repaid to the Issuer by the Trustee for such
series or such paying agent, and the Holder of the Securities of such series
and of any Coupons appertaining thereto shall, unless otherwise required by
mandatory provisions of applicable escheat or abandoned or unclaimed property
laws, thereafter look only to the Issuer for any payment which such Holder may
be entitled to collect, and all liability of the Trustee or any paying agent
with respect to such moneys shall thereupon cease; provided, that the Trustee
or such paying agent, before being required to make any such repayment with
respect to moneys deposited with it for any payment (a) in respect of
Registered Securities of any series, shall at the expense of the Issuer, mail
by first-class mail to Holders of such Securities at their addresses as they
shall appear on the Security register, and (b) in respect of Unregistered
Securities of any series, shall at the expense of the Issuer cause to the
published once, in an Authorized Newspaper in the Borough of Manhattan, The
City of New York and once in an Authorized Newspaper in London (and, if
required by Section 3.7, once in an Authorized Newspaper in Luxembourg),
notice, that such moneys remain and that, after 
a date specified therein, which shall not be less than thirty days from
the date of such mailing or publication, any unclaimed balance of such money
then remaining will be repaid to the Issuer.

 

SECTION 10.5 INDEMNITY FOR
U.S. GOVERNMENT OF OBLIGATIONS.  The Issuer
shall pay and indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 10.1 or the principal or interest received in respect
of such obligations.

 

SECTION 10.6 EFFECT ON
SUBORDINATION PROVISIONS.  Unless
otherwise expressly established pursuant to Section 2.3 with respect to
the Subordinated Securities of any series, the provisions of Section 11.13
hereof, insofar as they pertain to the Subordinated Securities of such series,
and the Subordination Provisions established pursuant to Section 2.3(9) with
respect to such series, are hereby expressly made subject to the provisions for
satisfaction and discharge and defeasance and covenant defeasance set forth in Section 10.1
hereof and, anything herein to the contrary notwithstanding, upon the
effectiveness of such

 

54

 

satisfaction and discharge and defeasance and
covenant  defeasance pursuant to Section 10.1
with respect to the Securities of such series, such Securities shall thereupon
cease to be so subordinated and shall no longer be subject to the provisions
of  Section 11.13 or the
Subordination Provisions established pursuant to Section 2.3(9) with
respect to such series and, without limitation to the foregoing, all moneys,
U.S. Government Obligations and other securities or property deposited with the
Trustee (or other qualifying trustee) in trust in connection with such
satisfaction and discharge, defeasance or covenant defeasance, as the case may
be, and all proceeds therefrom may be applied to pay the principal of, premium,
if any, and interest, if any, on, and mandatory sinking fund payments, if any,
with respect to the Securities of such series as and when the same shall become
due and payable notwithstanding the provisions of Section 11.13 or such
Subordination Provisions.

 

ARTICLE XI

 

MISCELLANEOUS PROVISIONS

 

SECTION 11.1 INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS OF ISSUER EXEMPT FROM INDIVIDUAL LIABILITY. 
No recourse under or upon any obligation, covenant or agreement
contained in this Indenture, or in any Security, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, as such, or against
any past, present or future stockholder, officer or director, as such, of the
Issuer or of any successor, either directly or through the Issuer or any
successor, under any rule of law, statute or constitutional provision or
by the enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of the Securities and the Coupons, if any, appertaining thereto by
the Holders thereof and as part of the consideration for the issue of the
Securities and the Coupons appertaining thereto.

 

SECTION 11.2 PROVISIONS OF
INDENTURE FOR THE SOLE BENEFIT OF PARTIES AND HOLDERS OF SECURITIES AND COUPONS. 
Nothing in this Indenture, in the Securities or in the Coupons
appertaining thereto, expressed or implied, shall give or be construed to give
to any person, firm or corporation, other than the parties thereto and their
successors and the Holders of the Securities or Coupons, if any and, in the
case of the Subordinated Securities of any series, the holders of Senior
Indebtedness with respect to such series, any legal or equitable right, remedy
or claim under this Indenture or under any covenant or provision herein
contained, all such covenants and provisions being for the sole benefit of the
parties hereto and their successors and of the Holders of the Securities or
Coupons, if any and, in the case of the Subordinated Securities of any series,
the holders of Senior Indebtedness with respect to such series.

 

SECTION 11.3 SUCCESSORS AND
ASSIGNS OF ISSUER BOUND BY INDENTURE.  All the
covenants, stipulations, promises and agreements in this Indenture contained by
or in behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.

 

SECTION 11.4 NOTICES AND
DEMANDS ON ISSUER, TRUSTEE AND HOLDERS OF SECURITIES AND COUPONS. 
Any notice or demand which by any

 

55

 

provision of this Indenture is required or
permitted to be given or served by the Trustee or by the Holders of Securities
or Coupons, if any, to or on the Issuer may be given or served by being
deposited postage prepaid, first-class mail (except as otherwise specifically
provided herein) addressed (until another address of the Issuer is filed by the
Issuer with the Trustee) to DineEquity, Inc., 450 North Brand Boulevard,
Glendale, California 91203, Attention: 
Secretary.  Any notice, direction,
request or demand by the Issuer or any Holder of Securities or Coupons, if any,
to or upon the Trustee shall be deemed to have been sufficiently given or
served by being deposited postage prepaid, first-class mail (except as
otherwise specifically provided herein) addressed (until another address of the
Trustee is filed by the Trustee with the Issuer) to
[                            ].

 

Where this Indenture provides for notice to Holders
of Registered Securities, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
mail, postage prepaid, to each Holder entitled thereto, at his last address as
it appears in the Security register.

 

Where this Indenture provides for notice to holders
of Unregistered Securities, such notice shall be sufficiently given (unless
otherwise expressly provided herein) by giving notice to such Holders (a) by
publication of such notice at least once in an Authorized Newspaper in the
Borough of Manhattan, The City of New York, and at least once in an Authorized
Newspaper in London (and, if required by Section 3.7, once in an
Authorized Newspaper in Luxembourg), and (b) by mailing such notice to the
Holders of Unregistered Securities who have filed their names and addresses
with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture
Act at such addresses as were so furnished to the Trustee.

 

In any case where notice to such Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders.  Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.

 

The Trustee agrees to accept and act upon facsimile
transmission of written instructions and/or directions pursuant to this
Indenture given by the Company, provided, however that (i) the Company,
subsequent to such facsimile transmission of written instructions and/or
directions, shall provide the originally executed instructions and/or
directions to the Trustee in a timely manner and (ii) such originally
executed instructions and/or directions shall be signed by an authorized
officer of the Company.

 

In case, by reason of the suspension of or
irregularities in regular mail service, it shall be impracticable to mail
notice to the Issuer when such notice is required to the given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
reasonably satisfactory to the Trustee shall be deemed to be a sufficient
giving of such notice.

 

SECTION 11.5 OFFICER’S
CERTIFICATES AND OPINIONS OF COUNSEL; STATEMENTS TO BE CONTAINED THEREIN. 
Upon any application or

 

56

 

demand by the Issuer to the Trustee to take any
action under any of the provisions of this Indenture, the Issuer shall furnish
to the Trustee an Officer’s Certificate stating that all conditions precedent
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.

 

Each certificate or opinion provided for in this
Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (a) a
statement that the person making such certificate or opinion has read such
covenant or condition, (b) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based, (c) a statement that,
in the opinion of such person, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as to whether or not
such covenant or condition has been complied with and (d) a statement as
to whether or not, in the opinion of such person, such condition or covenant
has been complied with.

 

Any certificate, statement or opinion of an officer
of the Issuer may be based, insofar as it relates to legal matters, upon a
certificate or opinion of or representations by counsel, unless such officer
knows that the certificate or opinion or representations with respect to the
matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous.  Any certificate,
statement or opinion of counsel may be based, insofar as it relates to factual
matters or information with respect to which is in the possession of the Issuer,
upon the certificate, statement or opinion of or representations by an officer
or officers of the Issuer, unless such counsel knows that the certificate,
statement or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.

 

Any certificate, statement or opinion of an officer
of the Issuer or of counsel may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of or representations by an accountant
or firm of accountants in the employ of the Issuer, unless such officer or
counsel, as the case may be, knows that the certificate or opinion of or
representations with respect to the accounting matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or
in the exercise of reasonable care should know that  the same are erroneous.

 

Any certificate or opinion of any independent firm
of public accountants filed with and directed to the Trustee shall contain a
statement that such firm is independent.

 

SECTION 11.6 PAYMENTS DUE ON
SATURDAYS, SUNDAYS AND HOLIDAYS.  If the
date of maturity of interest on or principal of the Securities of any series or
any Coupons appertaining thereto or the date fixed for redemption or repayment
of any such Security or Coupon shall not be a Business Day, then payment of
interest or principal need not be made on such date, but may be made on the
next succeeding Business Day with the same

 

57

 

force and effect as if made on the date of maturity
or the date fixed for redemption, and no interest shall accrue for the period
after such date.

 

SECTION 11.7 CONFLICT OF ANY
PROVISION OF INDENTURE WITH TRUST INDENTURE ACT.  If and to
the extent that any provision of this Indenture limits, qualifies or conflicts
with duties imposed by, or with another provision (an “incorporated provision”)
included in this Indenture by operation of Sections 310 to 318, inclusive, of
the Trust Indenture Act, such imposed duties or incorporated provision shall
control.

 

SECTION 11.8 NEW YORK LAW TO
GOVERN; WAIVER OF JURY TRIAL.  THIS INDENTURE AND EACH SECURITY AND COUPON SHALL BE
DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH
STATE, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b).

 

EACH OF THE ISSUER AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE,
THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.

 

SECTION 11.9 COUNTERPARTS. 
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.

 

SECTION 11.10 EFFECT OF
HEADINGS.  The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.

 

SECTION 11.11 SECURITIES IN A
FOREIGN CURRENCY.  Unless otherwise specified in
an Officer’s Certificate delivered pursuant to Section 2.3 of this
Indenture with respect to a particular series of Securities, whenever for
purposes of this Indenture any action may be taken by the Holders of a
specified percentage in aggregate principal amount of Securities of all series
or all series affected by a particular action at the time Outstanding and, at
such time, there are Outstanding Securities of any series which are denominated
in a Foreign Currency, then the principal amount of Securities of such series
which shall be deemed to be Outstanding for the purpose of taking such action
shall be that amount of Dollars that could be obtained for such amount at the
Market Exchange Rate.  For purposes of
this Section 11.11, “Market Exchange Rate” shall mean the noon Dollar buying
rate in The City of New York for cable transfers of such currency or currencies
as published by the Federal Reserve Bank of New York as of the most recent
available date.  If such Market Exchange
Rate is not available for any reason with respect to such currency, the Trustee
shall use, in its sole discretion and without liability on its part, such
quotation of the Federal Reserve Bank of New York or quotations from one or
more major banks in The City of New York or in the country of issue of the currency
in question, which for purposes of the euro shall be any member state of the
European Union that

 

58

 

has adopted the euro, as the Trustee shall deem
appropriate.  The provisions of this
paragraph shall apply in determining the equivalent principal amount in respect
of Securities of a series denominated in a currency other than Dollars in
connection with any action taken by Holders of Securities pursuant to the terms
of this Indenture.

 

All decisions and determinations of the Trustee
regarding the Market Exchange Rate or any alternative determination provided
for in the preceding paragraph shall be in its sole discretion and shall, in
the absence of manifest error, be conclusive to the extent permitted by law for
all purposes and irrevocably binding upon the Issuer and all Holders.

 

59

 

SECTION 11.12 JUDGMENT
CURRENCY.  The Issuer agrees, to the
fullest extent that it may effectively do so under applicable law, that (a) if
for the purpose of obtaining judgment in any court it is necessary to convert
the sum due in respect of the principal of or interest on the Securities of any
series (the “Required Currency”) into a currency in which a judgment will be
rendered (the “Judgment Currency”), the rate of exchange used shall be the rate
at which in accordance with normal banking procedures the Trustee could
purchase in The City of New York the Required Currency with the Judgment
Currency on the day on which final unappealable judgment is entered, unless
such day is not a New York Banking Day, then, to the extent permitted by
applicable law, the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the Trustee could purchase in The
City of New York the Required Currency with the Judgment Currency on the New
York Banking Day preceding the day on which final unappealable judgment is
entered and (b) its obligations under this Indenture to make payments in
the Required Currency (i) shall not be discharged or satisfied by any
tender, or any recovery pursuant to any judgment (whether or not entered in
accordance with subsection (a)), in any currency other than the Required
Currency, except to the extent that such tender or recovery shall result in the
actual receipt, by the payee, of the full amount of the Required Currency
expressed to be payable in respect of such payments, (ii) shall be
enforceable as an alternative or additional cause of action for the purpose of
recovering in the Required Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Required Currency so expressed
to be payable and (iii) shall not be affected by judgment being obtained
for any other sum due under this Indenture. 
For purposes of the foregoing, “New York Banking Day” means any day
except a Saturday, Sunday or a legal holiday in The City of New York or a day
on which banking institutions in The City of New York are authorized or
required by law or executive order to close.

 

SECTION 11.13 AGREEMENT TO
SUBORDINATE.  The Issuer, for itself, its
successors and assigns, covenants and agrees, and each Holder of Subordinated
Securities of any series by his acceptance thereof, likewise covenants and
agrees, that the payment of the principal of (and premium, if any) and
interest, if any, on, and mandatory sinking fund payments, if any, in respect
of each and all of the Subordinated Securities of such series shall be
expressly subordinated, to the extent and in the manner provided in the
Subordination Provisions established with respect to the Subordinated
Securities of such series pursuant to Section 2.3(9) hereof, in right
of payment to the prior payment in full of all Senior Indebtedness with respect
to such series.

 

ARTICLE XII

 

REDEMPTION OF SECURITIES AND SINKING FUNDS

 

SECTION 12.1 APPLICABILITY
OF ARTICLE.  The provisions of this Article shall
be applicable to the Securities of any series which are redeemable before their
maturity or to any sinking fund for the retirement of Securities of a series
except as otherwise specified as contemplated by Section 2.3 for
Securities of such series.

 

SECTION 12.2 NOTICE OF
REDEMPTION; PARTIAL REDEMPTIONS.  Notice of
redemption to the Holders of Registered Securities of any series to be redeemed
as a whole or in part at the option of the Issuer shall be given by mailing
notice of such redemption

 

60

 

by first-class mail, postage prepaid, at least 30
days and not more than 60 days prior to the date fixed for redemption to such
Holders of Securities of such series at their last addresses as they shall
appear upon the registry books.  Notice
of redemption to the Holders of Unregistered Securities to be redeemed as a
whole or in part, who have filed their names and addresses with the Trustee
pursuant to Section 313(c)(2) of the Trust Indenture Act shall be
given by mailing notice of such redemption, by first-class mail, postage
prepaid, at least 30 days and not more than 60 prior to the date fixed for
redemption, to such Holders at such addresses as were so furnished to the
Trustee (and, in the case of any such notice given by the Issuer, the Trustee
shall make such information available to the Issuer for such purpose).  Notice of redemption to all other Holders of
Unregistered Securities shall be published in an Authorized Newspaper in the
Borough of Manhattan, The City of New York and in an Authorized Newspaper in
London (and, if required by Section 3.7, in an Authorized Newspaper in
Luxembourg), in each case, once in each of three successive calendar weeks, the
first publication to be not less than 30 nor more than 60 days prior to the
date fixed for redemption.  Any notice
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the Holder receives the notice.  Failure to give notice by mail, or any defect
in the notice to the Holder of any Security of a series designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of such Security of such series.

 

The notice of redemption to each such Holder shall
identify the Securities to be redeemed (including CUSIP number(s), if any) and
specify the aggregate principal amount of Securities of such series to be
redeemed, the date fixed for redemption, the redemption price, the place or
places of payment, that payment will be made upon presentation and surrender of
such Securities and, in the case of Securities with Coupons attached thereto,
of all Coupons appertaining thereto maturing after the date fixed for
redemption, that such redemption is pursuant to the mandatory or optional
sinking fund, or both, if such be the case, that interest accrued to the date
fixed for redemption will be paid as specified in such notice and that on and
after said date interest thereon or on the portions thereof to be redeemed will
cease to accrue.  In case any Security of
a series is to be redeemed in part only, the notice of redemption to Holders of
Securities of the series shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Security, a new Security or Securities of
such series in principal amount equal to the unredeemed portion thereof will be
issued.

 

The notice of redemption of Securities of any
series to be redeemed at the option of the Issuer shall be given by the Issuer
or, at the Issuer’s request, by the Trustee in the name and at the expense of
the Issuer.

 

On or before the redemption date specified in the
notice of redemption given as provided in this Section, the Issuer will deposit
with the Trustee or with one or more paying agents (or, if the Issuer is acting
as its own paying agent, set aside, segregate and hold in trust as provided in Section 3.4)
an amount of money sufficient to redeem on the redemption date all the Securities
of such series so called for redemption at the appropriate redemption price,
together with accrued interest to the date fixed for redemption.  The Issuer will deliver to the Trustee at
least 70 days prior to the date fixed for redemption, or such shorter period as
shall be acceptable to the Trustee, an Officer’s Certificate stating the
aggregate principal amount of Securities to be redeemed.  In case of a redemption at the election of
the Issuer prior to the expiration of any

 

61

 

restriction on such redemption, the Issuer shall
deliver to the Trustee, prior to the giving of any notice of redemption to
Holders pursuant to this Section, an Officer’s Certificate stating that such
restriction has been complied with.

 

If less than all the Securities of a series are to
be redeemed, the Trustee shall select, in such manner as it shall deemed
appropriate and fair, in its sole discretion, Securities of such series to be
redeemed in whole or in part.  Securities
may be redeemed in part in multiples equal to the minimum authorized
denomination for Securities of such series or any multiple thereof.  The Trustee shall promptly notify the Issuer
in writing of the Securities of such series selected for redemption and, in the
case of any Securities of such series selected for partial redemption, the
principal amount thereof to be redeemed. 
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities of any series
shall relate, in the case of any Security redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has been or
is to be redeemed.

 

SECTION 12.3 PAYMENT OF
SECURITIES CALLED FOR REDEMPTION.  If notice
of redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date
and at the place stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption, and on and
after said date (unless the Issuer shall default in the payment of such
Securities at the redemption price, together with interest accrued to said
date) interest on the Securities or portions of Securities so called for
redemption shall cease to accrue, and the unmatured Coupons, if any,
appertaining thereto shall be void, and, except as provided in Sections 6.5 and
10.4, such Securities shall cease from and after the date fixed for redemption
to be entitled to any benefit or security under this Indenture, and the Holders
thereof shall have no right in respect of such Securities except the right to
receive the redemption price thereof and unpaid interest to the date fixed for
redemption.  On presentation and
surrender of such Securities at a place of payment specified in said notice,
together with all Coupons, if any, appertaining thereto maturing after the date
fixed for redemption, said Securities or the specified portions thereof shall
be paid and redeemed by the Issuer at the applicable redemption price, together
with interest accrued thereon to the date fixed for redemption; provided, that
payment of interest becoming due on or prior to the date fixed for redemption
shall be payable in the case of Securities with Coupons attached thereto, to
the Holders of the Coupons for such interest upon surrender thereof, and in the
case of Registered Securities, to the Holder of such Registered Securities
registered as such on the relevant record date, subject to the terms and
provisions of Section 2.3 and 2.7 hereof.

 

If any Security called for redemption shall not be
so paid upon surrender thereof for redemption, the principal shall, until paid
or duly provided for, bear interest from the date fixed for redemption at the
rate of interest or Yield to Maturity (in the case of an Original Issue
Discount Security) borne by such Security.

 

If any Security with Coupons attached thereto is
surrendered for redemption and is not accompanied by all appurtenant Coupons
maturing after the date fixed for redemption, the surrender of such missing
Coupon or Coupons may be waived by the Issuer and the Trustee, if there be
furnished to each of them such security or indemnity as they may require to
save each of them harmless.

 

62

 

Upon presentation of any Security redeemed in part
only, the Issuer shall execute and the Trustee shall authenticate and deliver
to or on the order of the Holder thereof, at the expense of the Issuer, a new
Security or Securities of such series, of authorized denominations, in
principal amount equal to the unredeemed portion of the Security so presented.

 

SECTION 12.4 EXCLUSION OF
CERTAIN SECURITIES FROM ELIGIBILITY FOR SELECTION FOR REDEMPTION. 
Securities shall be excluded from eligibility for selection for
redemption if they are identified by registration and certificate number in an
Officer’s Certificate delivered to the Trustee at least 40 days prior to the
last date on which notice of redemption may be given as being owned of record
and beneficially by, and not pledged or hypothecated by, either (a) the
Issuer or (b) an entity specifically identified in such written statement
as directly or indirectly controlling or controlled by or under direct or
indirect common control with the Issuer.

 

SECTION 12.5 MANDATORY AND
OPTIONAL SINKING FUNDS.  The
minimum amount of any sinking fund payment provided for by the terms of the
Securities of any series is herein referred to as a “mandatory sinking fund
payment,” and any payment in excess of such minimum amount provided for by the
terms of the Securities of any series is herein referred to as an “optional
sinking fund payment.”  The date on which
a sinking fund payment is to be made is herein referred to as the “sinking fund
payment date.”

 

In lieu of making all or any part of any mandatory
sinking fund payment with respect to any series of Securities in cash, the
Issuer may at its option (a) deliver to the Trustee Securities of such
series theretofore purchased or otherwise acquired (except upon redemption
pursuant to the mandatory sinking fund) by the Issuer or receive credit for
Securities of such series (not previously so credited) theretofore purchased or
otherwise acquired (except as aforesaid) by the Issuer and delivered to the
Trustee for cancellation pursuant to Section 2.10, (b) receive credit
for optional sinking fund payments (not previously so credited) made pursuant
to this Section, or (c) receive credit for Securities of such series (not
previously so credited) redeemed by the Issuer through any optional redemption
provision contained in the terms of such series.  Securities so delivered or credited shall be
received or credited by the Trustee at the sinking fund redemption price
specified in such Securities.

 

On or before the 60th day next preceding each
sinking fund payment date for any series, the Issuer will deliver to the
Trustee an Officer’s Certificate (which need not contain the statements
required by Section 11.5) (a) specifying the portion of the mandatory
sinking fund payment to be satisfied by payment of cash and the portion to be
satisfied by credit of Securities of such series and the basis for such credit,
(b) stating that none of the Securities of such series has theretofore
been so credited, (c) stating that no defaults in the payment of interest
or Events of Default with respect to such series have occurred (which have not
been waived or cured) and are continuing and (d) stating whether or not
the Issuer intends to exercise its right to make an optional sinking fund
payment with respect to such series and, if so, specifying the amount of such
optional sinking fund payment which the Issuer intends to pay on or before the
next succeeding sinking fund payment date. 
Any Securities of such series to be credited and required to be
delivered to the Trustee in order for the Issuer to be entitled to credit
therefor as aforesaid which have not theretofore been delivered to the Trustee
shall be delivered for cancellation pursuant to Section 2.10 to the Trustee
with such Officer’s Certificate (or reasonably promptly

 

63

 

thereafter if acceptable to the Trustee).  Such Officer’s Certificate shall be
irrevocable and upon its receipt by the Trustee, the Issuer shall become
unconditionally obligated to make all the cash payments or payments therein
referred to, if any, on or before the next succeeding sinking fund payment
date.  Failure of the Issuer, on or
before any such 60th day, to deliver such Officer’s Certificate and Securities
specified in this paragraph, if any, shall not constitute a default but shall
constitute, on and as of such date, the irrevocable election of the Issuer (i) that
the mandatory sinking fund payment for such series due on the next succeeding
sinking fund payment date shall be paid entirely in cash without the option to
deliver or credit Securities of such series in respect thereof and (ii) that
the Issuer will make no optional sinking fund payment with respect to such
series as provided in this Section.

 

If the sinking fund payment or payments (mandatory
or optional or both) to be made in cash on the next succeeding sinking fund
payment date plus any unused balance of any preceding sinking fund payments
made in cash shall exceed $50,000 (or the equivalent thereof in any Foreign
Currency) or a lesser sum in Dollars (or the equivalent thereof in any Foreign
Currency) if the Issuer shall so request with respect to the Securities of any
particular series, such cash shall be applied on the next succeeding sinking
fund payment date to the redemption of Securities of such series at the sinking
fund redemption price together with accrued interest to the date fixed for
redemption.  If such amount shall be
$50,000 (or the equivalent thereof in any Foreign Currency) or less and the
Issuer makes no such request then it shall be carried over until a sum in
excess of $50,000 (or the equivalent thereof in any Foreign Currency) is
available.  The Trustee shall select, in
the manner provided in Section 12.2, for redemption on such sinking fund
payment date a sufficient principal amount of Securities of such series to
absorb said cash, as nearly as may be, and shall (if requested in writing by
the Issuer) inform the Issuer of the serial numbers of the Securities of such
series (or portions thereof) so selected. 
Securities shall be excluded from eligibility for redemption under this Section if
they are identified by registration and certificate number in an Officer’s
Certificate delivered to the Trustee at least 40 days prior to the sinking fund
payment date as being owned of record and beneficially by, and not pledged or
hypothecated by, either (a) the Issuer or (b) an entity specifically
identified in such Officer’s Certificate as directly or indirectly controlling
or controlled by or under direct or indirect common control with the
Issuer.  The Trustee, in the name and at
the expense of the Issuer (or the Issuer, if it shall so request the Trustee in
writing) shall cause notice of redemption of the Securities of such series to
be given in substantially the manner provided in Section 12.2 (and with
the effect provided in Section 12.3) for the redemption of Securities of
such series in part at the option of the Issuer.  The amount of any sinking fund payments not so
applied or allocated to the redemption of Securities of such series shall be
added to the next cash sinking fund payment for such series and, together with
such payment, shall be applied in accordance with the provisions of this
Section.  Any and all sinking fund moneys
held on the stated maturity date of the Securities of any particular series (or
earlier, if such maturity is accelerated), which are not held for the payment
or redemption of particular Securities of such series shall be applied, together
with other moneys, if necessary, sufficient for the purpose, to the payment of
the principal of, and interest on, the Securities of such series at maturity.

 

On or before each sinking fund payment date, the
Issuer shall pay to the Trustee in cash or shall otherwise provide for the
payment of all interest accrued to the date fixed for redemption on Securities
to be redeemed on the next following sinking fund payment date.

 

64

 

The Trustee shall not redeem or cause to be
redeemed any Securities of a series with sinking fund moneys or give any notice
of redemption of Securities for such series by operation of the sinking fund
during the continuance of a default in payment of interest on such Securities
or of any Event of Default except that, where the giving of notice of
redemption of any Securities shall theretofore have been made, the Trustee
shall redeem or cause to be redeemed such Securities, provided that it shall
have received from the Issuer a sum sufficient for such redemption.  Except as aforesaid, any moneys in the
sinking fund for such series at the time when any such default or Event of
Default shall occur, and any moneys thereafter paid into the sinking fund, shall,
during the continuance of such default or Event of Default be deemed to have
been collected under Article Five and held for the payment of all such
Securities.  In case such Event of
Default shall have been waived as provided in Section 5.10 or the default
cured on or before the sixtieth day preceding the sinking fund payment date in
any year, such moneys shall thereafter be applied on the next succeeding
sinking fund payment date in accordance with this Section to the
redemption of such Securities.

 

65

 

IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed as of the date first written above.

 

	
   

  	
  DINEEQUITY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [                              ],
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:Exhibit 10.4

 

 

FLOW SERVICING AGREEMENT

 

between

 

PENNYMAC OPERATING PARTNERSHIP, L.P.,

as Owner

 

and

 

PENNYMAC LOAN SERVICES, LLC,

as Servicer

 

Dated as of                  
   , 2009

 

FIXED- AND ADJUSTABLE-RATE RESIDENTIAL
MORTGAGE LOANS

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  SERVICING

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  Servicer to Act as Servicer

  	
   

  	
  18

  
	
  Section 2.02

  	
   

  	
  Liquidation of Mortgage Loans

  	
   

  	
  20

  
	
  Section 2.03

  	
   

  	
  Collection of Mortgage Loan Payments; Payment Clearing Account

  	
   

  	
  20

  
	
  Section 2.04

  	
   

  	
  Establishment of and Deposits to Custodial Account

  	
   

  	
  21

  
	
  Section 2.05

  	
   

  	
  Permitted Withdrawals From Custodial Account

  	
   

  	
  22

  
	
  Section 2.06

  	
   

  	
  Establishment of and Deposits to Escrow Account

  	
   

  	
  23

  
	
  Section 2.07

  	
   

  	
  Permitted Withdrawals From Escrow Account

  	
   

  	
  24

  
	
  Section 2.08

  	
   

  	
  Payment of Taxes, Insurance and Other Charges

  	
   

  	
  25

  
	
  Section 2.09

  	
   

  	
  Protection of Accounts

  	
   

  	
  25

  
	
  Section 2.10

  	
   

  	
  Maintenance of Hazard Insurance

  	
   

  	
  26

  
	
  Section 2.11

  	
   

  	
  Maintenance of Mortgage Impairment Insurance Policy

  	
   

  	
  27

  
	
  Section 2.12

  	
   

  	
  Maintenance of Fidelity Bond and Errors and Omissions Insurance

  	
   

  	
  28

  
	
  Section 2.13

  	
   

  	
  Inspections

  	
   

  	
  28

  
	
  Section 2.14

  	
   

  	
  Restoration of Mortgaged Property

  	
   

  	
  29

  
	
  Section 2.15

  	
   

  	
  Title, Management and Disposition of REO Property

  	
   

  	
  29

  
	
  Section 2.16

  	
   

  	
  Costs and Expenses

  	
   

  	
  30

  
	
  Section 2.17

  	
   

  	
  Liquidity and Litigation Reserves

  	
   

  	
  31

  
	
  Section 2.18

  	
   

  	
  [Reserved]

  	
   

  	
  32

  
	
  Section 2.19

  	
   

  	
  [Reserved]

  	
   

  	
  32

  
	
  Section 2.20

  	
   

  	
  Notification of Adjustments

  	
   

  	
  32

  
	
  Section 2.21

  	
   

  	
  Recordation of Assignments of Mortgage

  	
   

  	
  32

  
	
  Section 2.22

  	
   

  	
  [Reserved]

  	
   

  	
  32

  
	
  Section 2.23

  	
   

  	
  Credit Reporting

  	
   

  	
  32

  
	
  Section 2.24

  	
   

  	
  Superior Liens

  	
   

  	
  32

  
	
  Section 2.25

  	
   

  	
  Prepayments in Full

  	
   

  	
  33

  
	
  Section 2.26

  	
   

  	
  Tax and Flood Service Contracts

  	
   

  	
  33

  
	
  Section 2.27

  	
   

  	
  Maintenance of PMI Policies and LPMI Policies; Collections Thereunder

  	
   

  	
  34

  
	
  Section 2.28

  	
   

  	
  Obligations of the Owner and the Servicer Related to Servicing
  Transfers

  	
   

  	
  34

  
	
  Section 2.29

  	
   

  	
  Reliability of Information/Exceptional Expenses

  	
   

  	
  36

  
	
  Section 2.30

  	
   

  	
  Escrow Obligations

  	
   

  	
  36

  
	
  Section 2.31

  	
   

  	
  [Reserved]

  	
   

  	
  37

  
	
  Section 2.32

  	
   

  	
  Additional Activities of the Servicer

  	
   

  	
  37

  
	
  Section 2.33

  	
   

  	
  No Obligation to Advance Delinquent Payments

  	
   

  	
  37

  

 

i

 

	
  ARTICLE III

  	
  PAYMENTS; REPORTS

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Remittances

  	
   

  	
  38

  
	
  Section 3.02

  	
   

  	
  Monthly Reports to the Owner

  	
   

  	
  38

  
	
  Section 3.03

  	
   

  	
  [Reserved]

  	
   

  	
  39

  
	
  Section 3.04

  	
   

  	
  Cost of Funds

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  GENERAL SERVICING PROCEDURES

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Transfers of Mortgaged Property

  	
   

  	
  40

  
	
  Section 4.02

  	
   

  	
  Satisfaction of Mortgages and Release of Mortgage Files

  	
   

  	
  41

  
	
  Section 4.03

  	
   

  	
  Servicing Compensation

  	
   

  	
  42

  
	
  Section 4.04

  	
   

  	
  Annual Statement as to Compliance

  	
   

  	
  43

  
	
  Section 4.05

  	
   

  	
  Annual Independent Public Accountants’ Servicing Report

  	
   

  	
  43

  
	
  Section 4.06

  	
   

  	
  [Reserved]

  	
   

  	
  43

  
	
  Section 4.07

  	
   

  	
  Right to Examine Servicer Records

  	
   

  	
  44

  
	
  Section 4.08

  	
   

  	
  Compliance with Gramm-Leach-Bliley Act of 1999

  	
   

  	
  44

  
	
  Section 4.09

  	
   

  	
  On-Line Access

  	
   

  	
  44

  
	
  Section 4.10

  	
   

  	
  [Reserved]

  	
   

  	
  45

  
	
  Section 4.11

  	
   

  	
  Use of Subservicers

  	
   

  	
  45

  
	
  Section 4.12

  	
   

  	
  Mortgage Loans Held by Wholly Owned Subsidiaries of Owner

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  SERVICER TO COOPERATE

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  Provision of Information

  	
   

  	
  46

  
	
  Section 5.02

  	
   

  	
  Financial Statements; Servicing Facilities

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  TERMINATION

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01

  	
   

  	
  Termination

  	
   

  	
  47

  
	
  Section 6.02

  	
   

  	
  Transfer of Servicing

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  BOOKS AND RECORDS

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Possession of Servicing Files Prior to the Related Servicing Transfer
  Date

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  INDEMNIFICATION AND ASSIGNMENT

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  Indemnification; Remedies

  	
   

  	
  52

  
	
  Section 8.02

  	
   

  	
  Limitation on Liability of Servicer and Others

  	
   

  	
  53

  
	
  Section 8.03

  	
   

  	
  Limitation on Resignation and Assignment by Servicer

  	
   

  	
  54

  
	
  Section 8.04

  	
   

  	
  Assignment by Owner

  	
   

  	
  55

  
	
  Section 8.05

  	
   

  	
  Merger or Consolidation of the Servicer

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS OF OWNER

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01

  	
   

  	
  Organization and Good Standing; Licensing

  	
   

  	
  56

  
	
  Section 9.02

  	
   

  	
  Authorization; Binding Obligations

  	
   

  	
  56

  
	
  Section 9.03

  	
   

  	
  No Consent Required

  	
   

  	
  56

  
	
  Section 9.04

  	
   

  	
  No Violations

  	
   

  	
  56

  
	
  Section 9.05

  	
   

  	
  Litigation

  	
   

  	
  56

  

 

ii

 

	
  ARTICLE X

  	
  REPRESENTATIONS AND WARRANTIES OF SERVICER

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01

  	
   

  	
  Due Organization and Authority

  	
   

  	
  58

  
	
  Section 10.02

  	
   

  	
  Ordinary Course of Business

  	
   

  	
  58

  
	
  Section 10.03

  	
   

  	
  No Conflicts

  	
   

  	
  58

  
	
  Section 10.04

  	
   

  	
  Ability to Service

  	
   

  	
  58

  
	
  Section 10.05

  	
   

  	
  Ability to Perform

  	
   

  	
  59

  
	
  Section 10.06

  	
   

  	
  No Litigation Pending

  	
   

  	
  59

  
	
  Section 10.07

  	
   

  	
  No Consent Required

  	
   

  	
  59

  
	
  Section 10.08

  	
   

  	
  No Untrue Information

  	
   

  	
  59

  
	
  Section 10.09

  	
   

  	
  [Reserved]

  	
   

  	
  59

  
	
  Section 10.10

  	
   

  	
  MERS

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  DEFAULT

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01

  	
   

  	
  Events of Default

  	
   

  	
  61

  
	
  Section 11.02

  	
   

  	
  Waiver of Defaults

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  	
  CLOSING

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.01

  	
   

  	
  Closing Documents

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  MISCELLANEOUS PROVISIONS

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.01

  	
   

  	
  Notices

  	
   

  	
  65

  
	
  Section 13.02

  	
   

  	
  Waivers

  	
   

  	
  65

  
	
  Section 13.03

  	
   

  	
  Entire Agreement; Amendment

  	
   

  	
  66

  
	
  Section 13.04

  	
   

  	
  Execution; Binding Effect

  	
   

  	
  66

  
	
  Section 13.05

  	
   

  	
  Headings

  	
   

  	
  66

  
	
  Section 13.06

  	
   

  	
  Applicable Law

  	
   

  	
  66

  
	
  Section 13.07

  	
   

  	
  Relationship of Parties

  	
   

  	
  66

  
	
  Section 13.08

  	
   

  	
  Severability of Provisions

  	
   

  	
  67

  
	
  Section 13.09

  	
   

  	
  Recordation of Assignments of Mortgage

  	
   

  	
  67

  
	
  Section 13.10

  	
   

  	
  Exhibits

  	
   

  	
  67

  
	
  Section 13.11

  	
   

  	
  Counterparts

  	
   

  	
  67

  
	
  Section 13.12

  	
   

  	
  Cooperation of Servicer with a Reconstitution

  	
   

  	
  67

  
	
  Section 13.13

  	
   

  	
  Trademarks

  	
   

  	
  69

  
	
  Section 13.14

  	
   

  	
  Confidentiality of Information

  	
   

  	
  70

  
	
  Section 13.15

  	
   

  	
  [Reserved]

  	
   

  	
  70

  
	
  Section 13.16

  	
   

  	
  WAIVER OF TRIAL BY JURY

  	
   

  	
  70

  
	
  Section 13.17

  	
   

  	
  LIMITATION OF DAMAGES

  	
   

  	
  70

  
	
  Section 13.18

  	
   

  	
  SUBMISSION TO JURISDICTION; WAIVERS

  	
   

  	
  70

  

 

iii

 

EXHIBITS

 

	
  EXHIBIT 1

  	
   

  	
  LIST OF
  MONTHLY AND DAILY REPORTS

  
	
  EXHIBIT 2

  	
   

  	
  FORM OF
  CUSTODIAL ACCOUNT CERTIFICATION

  
	
  EXHIBIT 3

  	
   

  	
  FORM OF
  CUSTODIAL ACCOUNT LETTER AGREEMENT

  
	
  EXHIBIT 4

  	
   

  	
  FORM OF
  ESCROW ACCOUNT CERTIFICATION

  
	
  EXHIBIT 5

  	
   

  	
  FORM OF
  ESCROW ACCOUNT LETTER AGREEMENT

  
	
  EXHIBIT 6

  	
   

  	
  FORM OF
  OFFICER’S CERTIFICATE

  
	
  EXHIBIT 7

  	
   

  	
  MORTGAGE
  LOAN DOCUMENTS

  
	
  EXHIBIT 8

  	
   

  	
  FORM OF
  LIMITED POWER OF ATTORNEY

  
	
  EXHIBIT 9

  	
   

  	
  TERM SHEET

  
	
  EXHIBIT 10

  	
   

  	
  DELEGATION OF AUTHORITY MATRIX

  

 

iv

 

FLOW SERVICING AGREEMENT

 

This Flow
Servicing Agreement (this “Servicing Agreement”) is entered into as
of 
                    
    , 2009, by and between PennyMac Loan Services, LLC, a
Delaware limited liability company (the “Servicer”), and PennyMac
Operating Partnership, L.P., a Delaware limited partnership (the “Owner”).

 

WHEREAS, the
Servicer is in the business of servicing residential mortgage loans similar to
the Mortgage Loans; and

 

WHEREAS, the
Owner may from time to time desire that some or all of the Mortgage Loans be
serviced pursuant to the terms of this Agreement, and the Servicer has agreed
to service and administer the Mortgage Loans that become subject to this
Agreement, and the parties desire to provide the terms and conditions of such
servicing by the Servicer.

 

NOW,
THEREFORE, in consideration of the mutual premises and agreements set forth
herein and for other good and valuable consideration, the receipt and the
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

 

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01           Definitions.

 

The following terms are defined as follows:

 

Accepted
Servicing Practices: 
With respect to any Mortgage Loan (including any related REO Property),
each of those mortgage servicing practices (including collection procedures) of
prudent mortgage lending institutions which service mortgage loans of the same
type as such Mortgage Loan in the jurisdiction where the related Mortgaged
Property is located, which servicing practices (i) are in compliance with
all federal, state and local laws and regulations, (ii) shall be in
accordance with the Servicer’s policies and procedures as amended from time to
time for mortgage loans of the same type, (iii) are in accordance with the
terms of the related Mortgage and Mortgage Note and (iv) are at a minimum
based on the requirements set forth from time to time by Fannie Mae.

 

Actual/Actual
Basis: 
Remittance to the Owner or its designee which requires the Servicer to
remit to the Owner or such designee the actual interest and actual principal
collected from each Mortgagor.

 

Adjustable-Rate
Mortgage Loan: 
A Mortgage Loan which provides for the adjustment of the Mortgage
Interest Rate payable in respect thereto.

 

Affiliate:  With respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person.  For the purposes of
this definition, “control” when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

 

Ancillary
Income:  All
income derived from the Mortgage Loans (other than payments or other
collections in respect of principal, interest, Escrow Payments and Prepayment
Penalties attributable to the Mortgage Loans) including, but not limited to,
the Servicer’s share of all late charges, all interest received on funds deposited
in the Custodial Account or any Escrow Account (subject to applicable law),
assumption fees, reconveyance fees, subordination fees, speedpay fees, mortgage
pay on the web fees, automatic clearing house fees, demand statement fees,
modification fees, if any, fees received with respect to checks on bank drafts
returned by the related bank for insufficient funds, assumption fees and other
similar types of fees arising from or in connection with any Mortgage Loan to
the extent not otherwise payable to the Mortgagor under applicable law or
pursuant to the terms of the related Mortgage Note.  In no event shall the Servicer be entitled to
any Prepayment Penalties.

 

Appraised
Value:  With
respect to any Mortgaged Property, the lesser of (i) the value thereof as
determined by an appraisal made for the originator of the Mortgage Loan at the
time of origination of the Mortgage Loan and (ii) the purchase price for
the related Mortgaged Property paid by the Mortgagor with the proceeds of the
Mortgage Loan; provided, however, in 

 

2

 

the case of a Refinanced Mortgage Loan, such value of the Mortgaged
Property is based solely upon the value determined by an appraisal made for the
originator of such Refinanced Mortgage Loan at the time of origination of such
Refinanced Mortgage Loan.

 

Asset Balance:  On any day for any Mortgage Loan, other than
a liquidated Mortgage Loan, the total unpaid outstanding principal balance of
such Mortgage Loan on such date.

 

Assignment of
Mortgage:  An
assignment of the Mortgage, notice of transfer or equivalent instrument in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect the sale of the Mortgage to
the Owner.

 

Base Servicing
Fee Percentage: 
The Base Servicing Fee Percentage set forth in Exhibit 9
hereto.

 

BPO:  A broker price opinion.

 

Business Day:  Any day other than (i) a Saturday or
Sunday, or (ii) a day on which banking and savings and loan institutions
in the States of New York or California are authorized or obligated by law or
executive authority to be closed.

 

Combined
Loan-to-Value Ratio or CLTV:  With respect to any Second Lien Mortgage
Loan, the ratio (expressed as a percentage) of the sum
of the outstanding principal amount of such Second Lien Mortgage Loan plus the outstanding principal amount of the related First
Lien Mortgage Loan to the lesser of (a) the Appraised Value of the
Mortgaged Property at origination or (b) if such Second Lien Mortgage Loan
was made to finance part of the acquisition of the related Mortgaged Property,
the purchase price of the Mortgaged Property.

 

Code:  The Internal Revenue Code of 1986, as
amended.

 

Competitors:
Any entity whose business includes, as a primary strategy, acquiring and
modifying distressed mortgage loans.

 

Condemnation
Proceeds:  All
awards or settlements in respect of a Mortgaged Property, whether permanent or
temporary, partial or entire, by exercise of the power of eminent domain or
condemnation, to the extent not required to be released to a Mortgagor in
accordance with the terms of the related Mortgage Loan Documents.

 

Cost of Funds:  The amount payable by the Owner to the
Servicer pursuant to Section 3.04, which amount shall be equal to
one-twelfth of the product of (x) the
average daily balance of Servicing Advances and (y) the sum of (i) the Cost of Funds Index plus
0 basis points.

 

Cost of Funds
Index:  A per
annum rate equal to the London interbank offered rate for one-month United
States dollar deposits as such rate appears, in The Wall
Street Journal (West Coast edition), as of the first Business Day of
such calendar month.  If the rate above
is unavailable, the Servicer shall select a comparable source mutually
agreeable to the Servicer and the Owner from which to determine such rate.

 

3

 

Custodial
Account:  The
separate trust account or accounts created and maintained pursuant to Section 2.04
at a Qualified Depository.

 

Custodial
Agreement:  The
agreement governing the retention of the originals of each Mortgage Note,
Mortgage, Assignment of Mortgage and other Mortgage Loan Documents.

 

Custodian:  The custodian of the Mortgage Loan Documents
as specified under the related Custodial Agreement.

 

Cut-off Date:  The date set forth in the related Purchase
Agreement, if applicable.

 

Delinquent
Mortgage Loan: 
As defined in Section 6.01(c).

 

Due Date:  The day of the month on which the Monthly
Payment is due on a Mortgage Loan, exclusive of any days of grace.

 

Due Period:  With respect to amounts collected by the
Servicer and required to be remitted to the Owner (or as otherwise directed in
writing by the Owner) on each Remittance Date, the period commencing on the
first day of the month and ending on the last day of the month preceding the
month of the Remittance Date.

 

Eligible Investments:  Any one or more of the obligations or
securities listed below, acquired at a purchase price of not greater than par
which investment provides for a date of maturity not later than one day prior
to the Remittance Date in each month (or such other date as permitted under
this Servicing Agreement):

 

(i)            direct obligations of, and
obligations fully guaranteed as to timely payment of principal and interest by,
the United States of America or any agency or instrumentality thereof,  provided such the obligations are backed by
the full faith and credit of the United States of America (“Direct
Obligations”);

 

(ii)           (A) federal funds, demand and
time deposits in, certificates of deposits of, or bankers’ acceptances issued
by, any depository institution or trust company (including U.S. subsidiaries of
foreign depositories) incorporated or organized under the laws of the United
States of America or any state thereof and subject to supervision and
examination by federal and/or state authorities, so long as at the time of such
investment or the contractual commitment providing for such investment, such
depository institution or trust company has a short-term uninsured debt rating
in the highest available rating category of Moody’s and S&P  and provided that each such investment has an
original maturity of no more than 365 days; and (B) any other demand or
time deposit or deposit which is fully insured by the FDIC;

 

(iii)          repurchase obligations with a term not
to exceed 30 days with respect to any security described in clause (i) above
and entered into with a depository institution or trust company (acting as
principal) rated A-1+ or higher by S&P, and A2 or higher by Moody’s,
provided, however, that collateral transferred pursuant to such repurchase
obligation must be of the type described 

 

4

 

in clause (i) above and must (A) be valued daily at current
market prices plus accrued interest, (B) pursuant to such valuation, be
equal, at all times, to 105% of the cash transferred by a party in exchange for
such collateral and (C) be delivered to such party or, if such party is
supplying the collateral, an agent for such party, in such a manner as to
accomplish perfection of a security interest in the collateral by possession of
certificated securities;

 

(iv)          securities bearing interest or sold at
a discount issued by any corporation incorporated under the laws of the United
States of America or any state thereof which have a credit rating from each
Rating Agency, that rates such securities in its highest long-term unsecured
rating categories at the time of investment or the contractual commitment
providing for such investment;

 

(v)           commercial paper (including both non
interest bearing discount obligations and interest bearing obligations payable
on demand or on a specified date not more than thirty (30) days after the date
of issuance thereof) that is rated by each Rating Agency that rates such
securities in its highest short term rating category available at the time of
such investment;

 

(vi)          certificates or receipts representing
direct ownership interests in future interest or principal payments on
obligations of the United States of America or its agencies or
instrumentalities (which obligations are backed by the full faith and credit of
the United States of America) held by a custodian in safekeeping on behalf of
the holders of such receipts; and

 

(vii)         any other demand, money market, common
trust fund or time deposit or obligation, or interest bearing or other security
or investment rated in the highest rating category by each Rating Agency;

 

provided, however,
that no such instrument shall be an Eligible Investment if such instrument
evidences either (i) a right to receive only interest payments with
respect to the obligations underlying such instrument, or (ii) both
principal and interest payments derived from obligations underlying such
instrument and the principal and interest payments with respect to such
instrument provide a yield to maturity of greater than 120% of the yield to
maturity at par of such underlying obligations.

 

Eligible
Mortgage Loan: 
A mortgage loan that is a fixed-rate or Adjustable-Rate Mortgage Loan
that is secured by either a 1st lien or 2nd lien Mortgage on a single family (i.e., one- to four-unit) residential Mortgaged Property
located in any of the 50 states of the United States or in the District of
Columbia; provided, however, that such mortgage
loan shall not be a High Cost Loan or a HOEPA Loan.  Notwithstanding  the foregoing, an Eligible Mortgage Loan
shall be one of the types of mortgage loans that the Servicer currently
services on its servicing platform.

 

Errors and
Omissions Insurance Policy:  An errors and omissions insurance policy to
be maintained by the Servicer pursuant to Section 2.12.

 

5

 

Escrow Account:  The separate trust account or accounts
created and maintained pursuant to Section 2.06 at a Qualified
Depository.

 

Escrow Payment:  With respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer
rents, municipal charges, mortgage insurance premiums, flood insurance
premiums, fire and hazard insurance premiums, condominium charges, and any
other payments required to be escrowed by the Mortgagor with the mortgagee
pursuant to the related Mortgage or any other document.

 

Event of
Default:  Any
one of the conditions or circumstances enumerated in Section 11.01.

 

Fannie Mae:  The Federal National Mortgage Association, or
any successor thereto.

 

Fannie Mae
Guides:  The
Fannie Mae Sellers’ Guide and the Fannie Mae Servicers’ Guide and all
amendments or additions thereto.

 

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

 

Fidelity Bond:  A fidelity bond to be maintained by the
Servicer pursuant to Section 2.12.

 

First Lien
Mortgage Loan: 
A Mortgage Loan secured by a Mortgage in first lien position on the
related Mortgaged Property.

 

Fitch:  Fitch, Inc., or any successor thereto.

 

Fixed-Rate
Mortgage Loan: 
A fixed-rate mortgage loan serviced pursuant to this Servicing
Agreement.

 

Flood Zone
Service Contract: 
A transferable contract maintained for a Mortgaged Property with a
nationally recognized flood zone service provider for the purpose of obtaining
the current flood zone status relating to such Mortgaged Property.

 

Foreclosure
Commencement: 
With respect to any Mortgage Loan, the delivery of the applicable file
to the Servicer’s foreclosure counsel for initiation of foreclosure
proceedings.

 

Freddie Mac:  The Federal Home Loan Mortgage Corporation,
or any successor thereto.

 

Gross Margin:  With respect to each Adjustable-Rate Mortgage
Loan, the fixed percentage amount set forth in the related Mortgage Note which
amount is added to the Index in accordance with the terms of such Mortgage Note
to determine on each Interest Rate Adjustment Date the Mortgage Interest Rate
for such Mortgage Loan.

 

High Cost Loan:  A Mortgage Loan (a) covered by HOEPA or (b) classified
as a “high cost,” “threshold,” “covered,” “predatory” or similar loan under any
other applicable state, 

 

6

 

federal or local law (or a similarly classified loan using different
terminology under a law imposing heightened regulatory scrutiny or additional
legal liability for residential mortgage loans having high interest rates,
points and/or fees).

 

HOEPA:  The Federal Home Ownership and Equity
Protection Act of 1994, as amended.

 

HOEPA Loan:  A Mortgage Loan which (a) is subject to
HOEPA or (b) which the Servicer discovers is subject to HOEPA.

 

Index:  With respect to each Adjustable-Rate Mortgage
Loan, the index set forth in the related Mortgage Note.

 

Insurance
Proceeds:  With
respect to each Mortgage Loan, proceeds of insurance policies insuring such
Mortgage Loan or the related Mortgaged Property.

 

Interest Rate
Adjustment Date: 
With respect to each Adjustable-Rate Mortgage Loan, the date specified
in the related Mortgage Note on which the Mortgage Interest Rate is adjusted.

 

Interim
Servicing Period: 
With respect to any Mortgage Loan, the period commencing on the related
Servicing Transfer Date and ending on the Reconstitution Date.

 

Lender Paid
Mortgage Insurance Policy or LPMI Policy:  A policy of mortgage guaranty insurance
issued by an insurer which meets the requirements of Fannie Mae and Freddie Mac
in which the owner or servicer of the Mortgage Loan is responsible for the
premiums associated with such mortgage insurance policy.

 

Lifetime Rate
Cap:  With
respect to each Adjustable-Rate Mortgage Loan, the provision of the related
Mortgage Note that provides for an absolute maximum Mortgage Interest Rate
thereunder.  The Mortgage Interest Rate
during the terms of each Adjustable-Rate Mortgage Loan shall not at any time
exceed the Mortgage Interest Rate at the time of origination of such
Adjustable-Rate Mortgage Loan by more than the amount per annum set forth on
the Mortgage Loan Schedule.

 

Liquidation
Proceeds: 
Amounts, other than Condemnation Proceeds and Insurance Proceeds,
received in connection with the liquidation of a defaulted Mortgage Loan,
whether through the sale or assignment of such Mortgage Loan, trustee’s sale,
foreclosure sale or otherwise, or the sale of the related Mortgaged Property if
the Mortgaged Property is acquired in satisfaction of the Mortgage Loan, other
than amounts received following the acquisition of an REO Property pursuant to Section 2.15
and prior to such liquidation.

 

Liquidity
Reserve:  As
defined in Section 2.17.

 

Liquidity
Reserve Account: 
The separate trust account or accounts to be created and maintained
under the circumstances described in Section 2.17.

 

Litigation
Reserve:  As
defined in Section 2.17.

 

7

 

Litigation
Reserve Account: 
The separate trust account or accounts to be created and maintained
under the circumstances described in Section 2.17.

 

Loan-to-Value
Ratio or LTV: 
With respect to any First Lien Mortgage Loan, the ratio (expressed as a
percentage) of the outstanding principal amount of such First Lien Mortgage
Loan to the lesser of (a) the Appraised Value of the related Mortgaged
Property at origination or (b) if such First Lien Mortgage Loan was made
to finance the acquisition of the related Mortgaged Property, the purchase
price of such Mortgaged Property.

 

Management
Agreement:  The
Management Agreement dated as of
                
    , 2009 by and among PennyMac Mortgage Investment Trust,
PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, as such
agreement may be amended from time to time.

 

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 as to which the related Mortgage or Assignment of Mortgage has
been recorded in the name of MERS, as agent for the holder from time to time of
the Mortgage Note and which is identified as a MERS Mortgage Loan on the
related Mortgage Loan Schedule.

 

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

 

MOM Loan:  Any Mortgage Loan as to which MERS acts as
the mortgagee of record of such Mortgage Loan, solely as nominee for the
originator of such Mortgage Loan and its successors and assigns, at the
origination thereof.

 

Monthly
Payment:  The
scheduled monthly payment of principal and interest on a Mortgage Loan.

 

Moody’s:  Moody’s Investors Service, Inc., and any
successor thereto.

 

Mortgage:  The mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a first or second lien, as
applicable, on an unsubordinated estate in fee simple in real property securing
such Mortgage Note; except that with respect to real property located in
jurisdictions in which the use of leasehold estates for residential properties
is a widely accepted practice, the mortgage, deed of trust or other instrument
securing the Mortgage Note may secure and create a first or second lien, as
applicable, upon a leasehold estate of the Mortgagor.

 

Mortgage File:  The items pertaining to a particular Mortgage
Loan referred to as the Mortgage File in Exhibit 7 annexed hereto,
and any additional documents required to be added to the Mortgage File pursuant
to this Servicing Agreement.

 

Mortgage
Impairment Insurance Policy:  A mortgage impairment or blanket hazard
insurance policy as described in Section 2.11.

 

8

 

Mortgage
Interest Rate: 
With respect to each Mortgage Loan, the annual rate of interest borne on
the related Mortgage Note.

 

Mortgage Loan:  An individual mortgage loan to be serviced
pursuant to this Servicing Agreement, as identified on the Mortgage Loan
Schedule, which mortgage loan shall be an Eligible Mortgage Loan and includes
without limitation the Mortgage File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds,
Servicing Rights and all other rights, benefits, proceeds and obligations
arising from or in connection with such mortgage loan, excluding replaced or
repurchased mortgage loans.

 

Mortgage Loan
Documents:  The
documents listed on Exhibit 7 attached hereto pertaining to any
Mortgage Loan.

 

Mortgage Loan
Remittance Rate: 
With respect to each Mortgage Loan, the annual rate of interest remitted
to the Owner (or as otherwise directed in writing by the Owner), which shall be
equal to the related Mortgage Interest Rate.

 

Mortgage Loan Schedule:  The schedule of Mortgage Loans in the form
attached as a schedule to the Notice of Transfer of Mortgage Loans, to be
delivered from time to time by the Owner to the Servicer, which schedule shall
include, but not be limited to, the following information with respect to each
Mortgage Loan:

 

(1)                                  the name of the Seller and
the Seller’s Mortgage Loan identifying number;

 

(2)                                  the
Mortgagor’s name;

 

(3)                                  the
street address of the Mortgaged Property including the city, state and ZIP
code;

 

(4)                                  a
code indicating whether the Mortgaged Property is owner-occupied, a second home
or investment property;

 

(5)                                  the
number and type of residential units constituting the Mortgaged Property (i.e., a one-family residence, a two- to four-family
residence, a unit in a condominium project or a unit in a planned unit
development);

 

(6)                                  the
original months to maturity or the remaining months to maturity from the
related Cut-off Date, in any case based on the original amortization schedule
and, if different, the maturity expressed in the same manner but based on the
actual amortization schedule;

 

(7)                                  the
LTV at origination in the case of a First Lien Mortgage Loan;

 

(8)                                  the
CLTV at origination in the case of a Second Lien Mortgage Loan;

 

(9)                                  the
Mortgage Interest Rate as of the related Cut-off Date;

 

(10)                            the
date on which the Monthly Payment was due on the Mortgage Loan and, if such
date is not consistent with the Due Date currently in effect, such Due Date;

 

(11)                            the
stated maturity date;

 

9

 

(12)                            the
amount of the Monthly Payment as of the related Cut-off Date;

 

(13)                            the
last payment date on which a Monthly Payment was actually applied to pay
interest and the outstanding principal balance;

 

(14)                            the
original principal amount of the Mortgage Loan;

 

(15)                            the
principal balance of the Mortgage Loan as of the close of business on the
related Cut-off Date, after deduction of payments of principal due and
collected on or before the related Cut-off Date;

 

(16)                            in the
case of an Adjustable-Rate Mortgage Loan, the next Interest Rate Adjustment
Date;

 

(17)                            in the
case of an Adjustable-Rate Mortgage Loan, the Gross Margin;

 

(18)                            in the
case of an Adjustable-Rate Mortgage Loan, the Lifetime Rate Cap under the terms
of the Mortgage Note;

 

(19)                            in the
case of an Adjustable-Rate Mortgage Loan, a code indicating the type of Index;

 

(20)                            in the
case of an Adjustable-Rate Mortgage Loan, the Periodic Rate Cap under the terms
of the Mortgage Note;

 

(21)                            in the
case of an Adjustable-Rate Mortgage Loan, the Periodic Rate Floor under the
terms of the Mortgage Note;

 

(22)                            the
type of Mortgage Loan (i.e.,
Fixed-Rate, Adjustable-Rate, First Lien, Second Lien);

 

(23)                            a code
indicating the purpose of the loan (i.e., purchase,
rate and term refinance, equity take-out refinance);

 

(24)                            a code
indicating the related documentation program (i.e.
full, alternative or reduced);

 

(25)                            the
loan credit classification (as described in the related Underwriting
Guidelines);

 

(26)                            whether
the Mortgage Loan provides for a Prepayment Penalty;

 

(27)                            the
Prepayment Penalty period of the Mortgage Loan, if applicable;

 

(28)                            a
description of the Prepayment Penalty, if applicable;

 

(29)                            the
Mortgage Interest Rate as of origination;

 

(30)                            the
credit risk score (FICO score) of the related Mortgagor at origination;

 

(31)                            the
date of origination;

 

(32)                            in the
case of an Adjustable-Rate Mortgage Loan, the Mortgage Interest Rate adjustment
period;

 

(33)                            in the
case of an Adjustable-Rate Mortgage Loan, the Mortgage Interest Rate adjustment
percentage;

 

10

 

(34)                            in the
case of an Adjustable-Rate Mortgage Loan, the Mortgage Interest Rate floor;

 

(35)                            the
Mortgage Interest Rate calculation method (i.e., 30/360,
simple interest, other);

 

(36)                            a code
indicating whether the Mortgage Loan is assumable;

 

(37)                            a code
indicating whether the Mortgage Loan has been modified;

 

(38)                            the
one year payment history;

 

(39)                            the
Due Date for the first Monthly Payment;

 

(40)                            the
original Monthly Payment due;

 

(41)                            with
respect to the related Mortgagor, the debt-to-income ratio;

 

(42)                            the
Appraised Value of the Mortgaged Property;

 

(43)                            the
sales price of the Mortgaged Property if the Mortgage Loan was originated in
connection with the purchase of the Mortgaged Property;

 

(44)                            the
MERS identification number;

 

(45)                            a code
indicating whether the Mortgage Loan has borrower paid, lender paid or deep
primary mortgage insurance coverage and, if so, (i) the insurer’s name, (ii) the
policy or certification number, (iii) the premium rate and (iv) the
coverage percentage;

 

(46)                            in the
case of a Second Lien Mortgage Loan, the outstanding principal balance of the
superior lien;

 

(47)                            a code
indicating whether the Mortgage Loan is a HOEPA Loan;

 

(48)                            a code
indicating whether the Mortgage Loan is a High Cost Loan;

 

(49)                            a code
indicating whether the Mortgage Loan is a subject to a buydown;

 

(50)                            flood
zone and flood insurance coverage information with respect to the Mortgage Loan
(to the extent known by the Owner);

 

(51)                            whether
the Mortgage Loan is subject to a repurchase agreement;

 

(52)                            if the
Mortgage Loan is subject to a repurchase agreement, the name of the
counterparty; and

 

(53)                            in the
case of a negative amortization Mortgage Loan, the next payment adjustment date
and the maximum negative amortization.

 

With respect
to the Mortgage Loans in the aggregate, the Mortgage Loan Schedule shall set
forth the following information, as of the related Cut-off Date:

 

(a)                                  the number of Mortgage
Loans;

 

(b)                                 the current aggregate
outstanding principal balance of the Mortgage Loans;

 

(c)                                  the weighted average
Mortgage Interest Rate of the Mortgage Loans; and

 

(d)                                 the weighted
average maturity of the Mortgage Loans.

 

11

 

Mortgage Note:  The note or other evidence of the
indebtedness of a Mortgagor under a Mortgage Loan secured by a Mortgage.

 

Mortgaged
Property:  The
real property (or leasehold estate, if applicable) securing repayment of the
debt evidenced by a Mortgage Note.

 

Mortgagor:  The obligor on a Mortgage Note.

 

Nonrecoverable
Advance:  Any
Servicing Advance previously made or proposed to be made in respect of a
Mortgage Loan or REO Property which, in the good faith judgment of the
Servicer, will not or, in the case of a proposed advance, would not, be
ultimately recoverable from related Insurance Proceeds, Liquidation Proceeds or
otherwise from such Mortgage Loan or REO Property.  The determination by the Servicer that it has
made a Nonrecoverable Advance or that any proposed Servicing Advance or advance
of principal and interest, if made, would constitute a Nonrecoverable Advance
shall be evidenced by an Officer’s Certificate delivered to the Owner.

 

Notice of
Transfer of Mortgage Loans:  A written instrument in the form mutually
agreed upon by the Owner and the Servicer prior to a pending transfer whereby
the Owner notifies the Servicer of the addition of the Mortgage Loans specified
therein to the coverage of this Servicing Agreement.

 

Notice Date:
As defined in Section 11.01(b).

 

Officer’s
Certificate:  A
certificate signed by the Chairman of the Board or the Vice Chairman of the
Board or a President or Vice President or the Treasurer or the Secretary or one
of the Assistant Treasurers or Assistant Secretaries of the Servicer, and
delivered to the Owner.

 

Opinion of
Counsel:  A
written opinion of counsel, who may be counsel for the Servicer, reasonably
acceptable to the Owner; provided, however,
that any Opinion of Counsel relating to the qualification of any account
required to be maintained pursuant to this Servicing Agreement at a Qualified
Depository must be (unless otherwise stated in such Opinion of Counsel) an
opinion of counsel who (i) is in fact independent of the Servicer, (ii) does
not have any material direct or indirect financial interest in the related
Servicer or is an Affiliate of either of them and (iii) is not connected
with the Servicer as an officer, employee, director or person performing
similar functions.

 

Originator:  With respect to a Mortgage Loan, the
originator of such Mortgage Loan.

 

Other Fees:  With respect to each Mortgage Loan, those
fees set forth in Exhibit 9 for the specific services described
therein.

 

Outstanding
Owner Servicing Advances:  As defined in Section 2.28(f).

 

Parent:  As defined in Section 13.14.

 

12

 

Payment
Clearing Account: 
The account established and maintained pursuant to the second paragraph
of Section 2.03.

 

PennyMac
Property Preservation Program:  The proprietary property preservation
programs designed by PNMAC Capital Management, LLC to modify and enhance the
value of Mortgage Loans or mitigate losses to Mortgage Loans, as amended from
time to time, and presented to the Servicer by the program technology and other
documentation administered and provided by the PennyMac REIT Manager.

 

PennyMac REIT:  PennyMac Mortgage Investment Trust, a
Maryland real estate investment trust.

 

PennyMac REIT
Manager:  PNMAC
Capital Management, LLC, a Delaware corporation.

 

Periodic Rate
Cap:  With
respect to each Adjustable-Rate Mortgage Loan, the provision of the Mortgage
Note which provides for an absolute maximum amount by which the Mortgage
Interest Rate specified therein may increase on an Interest Rate Adjustment
Date above the Mortgage Interest Rate previously in effect.

 

Periodic Rate
Floor:  With
respect to each Adjustable-Rate Mortgage Loan, the provision of the related
Mortgage Note which provides for an absolute maximum amount by which the
related Mortgage Interest Rate may decrease on an Interest Rate Adjustment Date
below the Mortgage Interest Rate previously in effect.

 

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

 

PMI Policy:  A policy of primary mortgage guaranty
insurance issued by a Qualified Insurer.

 

Prepayment
Penalty:  Any
prepayment premium, penalty or charge collected by the Servicer with respect to
a Mortgage Loan from a Mortgagor in connection with any Principal Prepayment
pursuant to the terms of such Mortgage Loan.

 

Prime Rate:  The prime rate in effect from time to time as
published as the average rate in The Wall Street Journal
(West Coast edition).

 

Principal
Prepayment:  Any
payment or other recovery of principal on a Mortgage Loan which is received in
advance of its scheduled Due Date, including any Prepayment Penalty thereon,
and which is not accompanied by an amount of interest representing scheduled
interest due on any date or dates in any month or months subsequent to the
month of prepayment.

 

Private
Securitization Transaction:  Any transaction involving either (1) a
sale of some or all of the Mortgage Loans directly or indirectly to an entity
that issues privately offered, rated mortgage-backed securities or (2) an
entity that issues privately offered, rated securities, 

 

13

 

the payments of which are determined primarily by reference to one or
more portfolios of mortgage loans consisting, in whole or in part, of some or
all of the Mortgage Loans.

 

Public
Securitization Transaction:  Any transaction subject to Regulation AB
involving either (1) a sale or other transfer of some or all of the
Mortgage Loans directly or indirectly to an issuing entity in connection with
an issuance of publicly offered, rated mortgage-backed securities or (2) an
issuance of publicly offered, rated securities, the payments on which are
determined primarily by reference to one or more portfolios of residential
mortgage loans consisting, in whole or in part, of some or all of the Mortgage
Loans.

 

Purchase
Agreement:  The
agreement pursuant to which the Owner purchased Mortgage Loans from the related
Seller, if applicable.

 

Qualified
Depository: 
Either (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 of a holding company, the
short-term unsecured debt obligations of such holding company of which) are
rated A-2 by S&P or Prime-2 by Moody’s (or a comparable rating if another
rating agency is specified by the Owner by written notice to the Servicer) at
the time any amounts are held on deposit therein, (ii) an account or
accounts the deposits in which are fully insured by the FDIC or (iii) a
trust account or accounts maintained with a federal or state chartered
depository institution or trust company acting in its fiduciary capacity.

 

Qualified
Insurer:  Any
insurer which meets the requirements of Fannie Mae and Freddie Mac.

 

Rating Agency:  Any of Fitch, Moody’s or S&P, or their
respective successors, designated by the Owner.

 

Reconstitution:  A Whole Loan Transfer, a Private
Securitization Transaction or a Public Securitization Transaction, as the case
may be.

 

Reconstitution
Date:  As
defined in Section 13.12.

 

Refinanced
Mortgage Loan: 
A Mortgage Loan the proceeds of which were not used to purchase the
related Mortgaged Property.

 

Remittance
Date:  With
respect to each Mortgage Loan, not later than the 20th day of the month
following the month in which payments in respect of such Mortgage Loan are received
and credited.

 

REO Marketing
Fee:  With
respect to each REO Property being managed by the Servicer, that fee set forth
in Exhibit 9.

 

REO Property:  A Mortgaged Property acquired by the Servicer
on behalf of the Owner through foreclosure or by deed in lieu of foreclosure,
as described in Section 2.15.

 

RESPA:  Real Estate Settlement Procedures Act, as
amended from time to time.

 

14

 

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

 

Second Lien
Mortgage Loan: 
A Mortgage Loan secured by a Mortgage in second lien position on the
related Mortgaged Property.

 

Seller:  With respect to each Mortgage Loan, the
Seller set forth in the related Mortgage Loan Schedule, if applicable.

 

Service
Release Fee: 
With respect to each Mortgage Loan, the fee set forth in Exhibit 9
hereto payable by the Owner to the Servicer upon the release of such Mortgage
Loan from the Servicer’s loan administration system; provided,
however, that no such fee shall be payable by the Owner if the
Mortgage Loan is transferred (i) to the Servicer or an Affiliate of the
Servicer or (ii) pursuant to an Event of Default.

 

Servicer:
PennyMac Loan Services, LLC or its successor in interest or any permitted
assignee or designee of under this Servicing Agreement as herein provided and
as provided in Section 6.02. 
Unless the context requires otherwise, all references to “Servicer” in
this Servicing Agreement shall be deemed to include such Servicer’s successors
in interest or permitted assignees or designees.

 

Servicer
Employees:  As
defined in Section 2.12.

 

Servicer
Information:  As
defined in Section 13.12(b)(ii)(A).

 

Servicing
Advances:  All
customary, reasonable and necessary “out-of-pocket” costs and expenses
(including reasonable attorneys’ fees and disbursements) incurred (regardless
if any such advance is not, in the reasonable determination of the Servicer, a
Nonrecoverable Advance when made but, thereafter, becomes a Nonrecoverable
Advance) in the performance by the Servicer of its servicing obligations,
including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property or REO Property, (b) any
fees relating to any enforcement or judicial proceedings, excluding
foreclosures, (c) amounts advanced to correct defaults on any mortgage
loan which is senior to the Mortgage Loan and amounts advanced to keep current
or pay off a mortgage loan that is senior to the Mortgage Loan, (d) any appraisals,
valuations, broker price opinions, inspections, or environmental assessments, (e) the
management and liquidation of the Mortgaged Property if the Mortgaged Property
is acquired in satisfaction of the Mortgage, (f) taxes, assessments, water
rates, sewer rents, mortgage insurance premiums, fire and hazard insurance
premiums, flood insurance premiums and other charges which are or may become a
lien upon the Mortgaged Property, and (g) executing and recording
instruments of satisfaction, deeds of reconveyance.

 

Servicing Fee:  With respect to each Mortgage Loan, the
product of (i) the Base Servicing Fee Percentage and (ii) the unpaid
principal balance of such Mortgage Loan as of the first day of each month for
which the Mortgage Loan is serviced.  With
respect to each newly boarded Mortgage Loan, boarded on or before the 15th day
of month, the Servicer shall be entitled to receive the full monthly Servicing
Fee for each newly boarded Mortgage Loan. 
With respect to each newly boarded Mortgage Loan boarded after the 15th
day of the month, the Servicer shall be entitled to one-half of the monthly
Servicing Fee for each newly boarded 

 

15

 

Mortgage Loan.  With respect to
each Mortgage Loan released from servicing, Servicer shall be entitled to
receive the full monthly Servicing Fee irrespective of the applicable release
date.

 

Servicing File:  With respect to each Mortgage Loan, the file
retained by the Servicer consisting of originals, if provided, or copies of all
documents in the related Mortgage File which are not delivered to the Owner,
its designee or the Custodian and copies of the related Mortgage Loan
Documents.

 

Servicing
Officer:  Any
officer of the Servicer involved in or responsible for, the administration and
servicing of the Mortgage Loans whose name appears on a list of servicing
officers that is required to be furnished by the Servicer to the Owner, as such
list may from time to time be amended.

 

Servicing
Rights:  Any and
all of the following:  (a) any and
all rights to service the Mortgage Loans; (b) any payments to or monies
received by the Servicer for servicing the Mortgage Loans; (c) any
Ancillary Income with respect to the Mortgage Loans; (d) all agreements or
documents creating, defining or evidencing any such servicing rights to the
extent they relate to such servicing rights and all rights of the Servicer
thereunder; (e) any and all rights to and in the Escrow Payments or other
similar payments with respect to the Mortgage Loans and any amounts actually
collected by the Servicer with respect thereto; (f) all accounts and other
rights to payment related to any of the property described in this paragraph;
and (g) any and all documents, files, records, servicing files, servicing
documents, servicing records, data tapes, computer records, or other
information pertaining to the Mortgage Loans or pertaining to the past, present
or prospective servicing of the Mortgage Loans.

 

Servicing
Transfer Date: 
The date on which the Servicer begins servicing the related Mortgage
Loans pursuant to this Servicing Agreement.

 

Special
Deposit Account: 
An account which the Owner and the Servicer agree shall be a special
deposit account for the benefit of the Owner under applicable law.

 

Subservicer:  Any Person that services Mortgage Loans on
behalf of the Servicer or any Subservicer and is responsible for the
performance (whether directly or through Subservicers) of a substantial portion
of the material servicing functions required to be performed by the Servicer
under this Servicing Agreement.

 

Tax Service
Contract:  A
life of loan tax service contract maintained for a Mortgaged Property with a
tax service provider for the purpose of obtaining current information from
local taxing authorities relating to such Mortgaged Property.

 

Transfer Date:  With respect to a Mortgage Loan, the date on
which the physical servicing of such Mortgage Loan is transferred from the
Servicer pursuant to this Servicing Agreement to a successor servicer.

 

Underwriting
Guidelines:  The
underwriting guidelines of the applicable Originator, as identified or
specified in the related Purchase Agreement, if applicable.

 

16

 

Whole Loan
Transfer:  The
sale or transfer by Owner of some or all of the Mortgage Loans in a whole loan
or participation format other than a Private Securitization Transaction or a
Public Securitization Transaction.

 

[THE REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

17

 

ARTICLE II

 

SERVICING

 

Section 2.01                                Servicer
to Act as Servicer.

 

The Servicer
shall service the Mortgage Loans in accordance with the provisions of this
Servicing Agreement and its obligations in respect of the Mortgage Loans shall
be limited to those set forth in this Servicing Agreement.  In accordance with and subject to the
Delegation of Authority Matrix attached as Exhibit 10 hereto, the
Owner shall delegate authority to the Servicer to carry out the Servicer’s
servicing and administration duties without obtaining the Owner’s prior written
approval.

 

Consistent
with the terms of this Servicing Agreement, the PennyMac Property Preservation
Program, and Accepted Servicing Practices, the Servicer may (i) waive any
late payment charge or, if applicable, any penalty interest, or (ii) extend
the due dates for the Monthly Payments due on a Mortgage Note, or waive, in
whole or in part, a Prepayment Penalty. 
Unless in compliance with the PennyMac Property Preservation Program,
the terms of any Mortgage Loan may only be modified, varied or forgiven with
the prior written consent of the Owner while the Mortgage Loan remains
outstanding.  The Servicer’s analysis
supporting any forbearance and the conclusion that any forbearance meets the
standards of this section shall be reflected in writing or electronically in
the Servicing File.  The Servicer is
hereby authorized and empowered to execute and deliver on behalf of itself and
the Owner, all instruments of satisfaction or cancellation, or of partial or
full release, discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the Mortgaged Properties.  If reasonably required by the Servicer, the
Owner shall furnish the Servicer with a fully executed Power of Attorney and
other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties under this Servicing Agreement.  The Servicer may request the consent of the
Owner in writing by certified mail, overnight courier or such other means as
may be agreed to by the parties to a course of action that the Servicer
proposes to take under this Servicing Agreement.  Unless the Owner shall give written notice to
the Servicer that it objects to any recommended course of action within ten (10) Business
Days immediately following the day on which the Owner received the Servicer’s
written consent request (together with its recommended course of action and
relevant supporting documentation), the Owner shall be deemed to have consented
to such recommended course of action, and Servicer may take the action
recommended to the Owner, unless the Servicer determines, in its reasonable
discretion, that such action is no longer prudent or applicable and the
Servicer notifies the Owner of such decision not to act.  In the event that the Owner shall object to
the Servicer’s recommended course of action, Servicer shall take such action as
is required by the Owner, and the Servicer shall have no liability therefor if
it is not negligent in performing such action. 
Further, to the extent the Servicer has provided the Owner with
reasonably timely notice, the Owner shall indemnify and hold harmless the
Servicer from and against any penalty, fine or damages that may result from the
Owner’s decision to wait for any period of time up to ten (10) Business
Days before providing Servicer with direction as to the course of action to be
taken as permitted in the second immediately preceding sentence.  In addition, except in accordance with the
PennyMac Property Preservation Program, notwithstanding the foregoing, the
Servicer may not waive any Prepayment Penalty or portion thereof required by
the terms of the related Mortgage Note unless 

 

18

 

(i) the Servicer determines that such waiver would maximize
recovery of Liquidation Proceeds for such Mortgage Loan, taking into account
the value of such Prepayment Penalty and such Mortgage Loan, and the waiver of
such Prepayment Penalty is standard and customary in servicing similar Mortgage
Loans (including the waiver of a Prepayment Penalty in connection with a
refinancing of the Mortgage Loan related to a default or a reasonably
foreseeable default) or (ii) the enforceability thereof is limited (1) by
bankruptcy, insolvency, moratorium, receivership or other similar laws relating
to creditor’s rights or (2) due to acceleration in connection with a
foreclosure or other involuntary payment, or (iii) in the Servicer’s
reasonable judgment, (1) the waiver of such prepayment penalty relates to
a default or a reasonably foreseeable default, (2) such waiver would
maximize recovery of total proceeds taking into account the value of such
Prepayment Penalty and such Mortgage Loan and (3) such waiver is standard
and customary in servicing similar mortgage loans similar to such Mortgage Loan
(including any waiver of a prepayment penalty in connection with a refinancing
of a Mortgage Loan that is related to a default or a reasonably foreseeable
default). In no event will the Servicer waive a Prepayment Penalty in
connection with a refinancing of a Mortgage Loan that is not related to a
default or a reasonably foreseeable default. 
In servicing and administering the Mortgage Loans, the Servicer shall
employ procedures (including collection procedures) and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account, where such procedures do not conflict with
the requirements of this Servicing Agreement, and the Owner’s reliance on the
Servicer.  In addition, the Servicer
shall retain adequate personnel to effect such servicing and administration of
the Mortgage Loans.  Servicer shall have
no obligation to collect a Prepayment Penalty with respect to a Mortgage Loan
unless the Servicer is provided with such information electronically; provided, however, that the Servicer shall compare the
Notice of Transfer of Mortgage Loans provided by the Owner and any electronic
data regarding the Mortgage Loans provided by the previous servicer of such
Mortgage Loans and provide the Owner with prompt written notice of any
discrepancies with respect to information regarding Prepayment Penalties.

 

The Owner may
sell and transfer, in whole or in part, some or all of the Mortgage Loans at
any time and from time to time (including, without limitation, in connection
with a Private Securitization Transaction or a Public Securitization
Transaction). Upon such execution, the Servicer shall mark its books and
records to reflect the ownership of the Mortgage Loans by such transferee.

 

The Servicer
shall notify MERS of the ownership interest of Owner in each MOM Loan.  At any time during the term of this Servicing
Agreement, Owner may direct the Servicer to cause any MOM Loan to be
deactivated from the MERS System.

 

The Servicing
File maintained by the Servicer pursuant to this Servicing Agreement shall be
appropriately marked and identified in the Servicer’s computer system to
clearly reflect the ownership of the related Mortgage Loan by the Owner.  The Servicer shall release from its custody
the contents of any Servicing File maintained by it only in accordance with
this Servicing Agreement.

 

The Servicer
shall be responsible for the actions of any vendors which the Servicer utilizes
to carry out its obligations hereunder. 
The Owner shall promptly reimburse the Servicer for any fees paid to
such vendors by the Servicer.

 

19

 

The Servicer
shall maintain adequate capacity to service the Mortgage Loans, as well as other
mortgage loans that it may service (including mortgage loans held by other
entities managed by the PennyMac REIT Manager or any of it Affiliates).

 

Section 2.02                                Liquidation
of Mortgage Loans.

 

In the event
that any payment due under any Mortgage Loan and not postponed pursuant to Section 2.01
is not paid when the same becomes due and payable, or in the event the
Mortgagor fails to perform any other covenant or obligation under the Mortgage
Loan and such failure continues beyond any applicable grace period, the
Servicer shall take such action as the Servicer shall determine reasonably to
be in the best interest of the Owner in accordance with Accepted Servicing
Practices.  In the event that any payment
due under any Mortgage Loan is not postponed pursuant to Section 2.01
and remains delinquent for a period of ninety (90) days or any other default
continues for a period of ninety (90) days beyond the expiration of any grace
or cure period (or such other period as is required by law in the jurisdiction
where the related Mortgaged Property is located) or earlier as determined by
the Servicer, the Servicer is granted authority to effect Foreclosure
Commencement in accordance with and subject to Exhibit 10 hereto
and Accepted Servicing Practices.  In
such connection, the Servicer shall, acting in accordance with Accepted
Servicing Practices, advance on behalf of the Owner such funds as are necessary
and proper in connection with any foreclosure or towards the restoration or
preservation of any Mortgaged Property. Notwithstanding anything herein to the
contrary, no Servicing Advance shall be required to be made hereunder if such
Servicing Advance would, if made, constitute a Nonrecoverable Advance.  The determination by the Servicer that it has
made a Nonrecoverable Advance or that any proposed Servicing Advance would
constitute a Nonrecoverable Advance shall be evidenced by an Officers’
Certificate of the Servicer, delivered to the Owner, which details the reasons
for such determination.

 

The Servicer
acknowledges and agrees that it shall take and initiate any legal actions with
respect to any Mortgage Loans and REO Properties, including, without
limitation, any foreclosure actions, acceptance of deeds in lieu of
foreclosure, and any collection actions with respect to any Mortgage Loans or
REO Properties on behalf of the Owner, but only in the name of the Servicer or
its nominee and without reference to the Owner. 
Except as otherwise required by law or with the consent of the Owner,
under no circumstances shall any such action be taken in the name of, or with
any reference to, the Owner.  The
Servicer shall provide prior written notice to the Owner, if the Servicer is
required by applicable law to take any legal actions with respect to the
Mortgage Loan or REO Properties in the name of, or with reference to, the
Owner.

 

Section 2.03                                Collection
of Mortgage Loan Payments; Payment Clearing Account.

 

Continuously
from the related Servicing Transfer Date until the principal and interest on
all Mortgage Loans are paid in full (unless otherwise provided herein), the
Servicer shall proceed diligently to collect all payments due under each of the
Mortgage Loans when the same shall become due and payable and shall take
special care in ascertaining and estimating Escrow Payments, to the extent
applicable, and all other charges that will become due and payable with respect
to the Mortgage Loans and each related Mortgaged Property, to the end that 

 

20

 

the installments payable by the Mortgagors will be sufficient to pay
such charges as and when they become due and payable.  Notwithstanding anything herein to the
contrary, the Servicer shall not be required to institute or join in litigation
with respect to collection of any payment (whether under a Mortgage, Mortgage
Note, PMI Policy or otherwise or against any public or governmental authority
with respect to a taking or condemnation) if in its reasonable judgment it
believes that it will be unable to enforce the provision of the Mortgage or
other instrument pursuant to which payment is required.  Further, the Servicer shall take special care
in ascertaining and estimating annual ground rents, taxes, assessments, water
rates, flood insurance premiums, fire and hazard insurance premiums, mortgage
insurance premiums, and all other charges that, as provided in the Mortgage,
will become due and payable to the end that the installments payable by the
Mortgagors will be sufficient to pay such charges as and when they become due
and payable.

 

The Servicer
shall establish and maintain a Payment Clearing Account into which it shall
deposit on a daily basis all payments received in respect of mortgage loans
serviced by the Servicer (whether or not serviced pursuant to this Servicing
Agreement).  Not later than the second
Business Day following the receipt of a payment in respect of a Mortgage Loan
subject to this Servicing Agreement, the Servicer shall withdraw the amount
such payment form the Payment Clearing Account and shall immediately deposit (1) in
the Custodial Account, the portion of such payment required to be deposited
therein pursuant to Section 2.04, and (2) in the Escrow
Account, the portion of such payment required to be deposited therein pursuant
to Section 2.06.

 

Section 2.04                                Establishment
of and Deposits to Custodial Account.

 

The Servicer
shall establish one or more Custodial Accounts, in the form of time deposit or
demand accounts, titled “PNMAC Loan Svc LLC ITF
PennyMac Operating Partnership, L.P. ttee and/or bailee for PNMAC LLC  - and/or pmnts of var mtgrs and/or other
owners of int in loans- P&I” 
The Custodial Account shall be established with a Qualified Depository
acceptable to the Owner as a Special Deposit Account.  Any funds deposited in the Custodial Account
shall at all times be fully insured to the full extent permitted by the FDIC
and any amounts therein may be invested in Eligible Investments.  The creation of any Custodial Account shall
be evidenced by a certification in the form of Exhibit 2 hereto, in
the case of an account established with the Servicer (provided the Servicer
qualifies as a Qualified Depository), or by a letter agreement in the form of Exhibit 3
hereto, in the case of an account held by a depository other than the
Servicer.  A copy of such certification or
letter agreement shall be furnished to the Owner on or prior to the execution
of this Servicing Agreement.  The
Servicer shall segregate and hold all funds in the Custodial Account separate
and apart from the Servicer’s own funds and general assets.

 

The Servicer shall deposit in the Custodial Account and retain therein
the following collections received by the Servicer, together with any payments
made by the Servicer subsequent to the Servicing Transfer Date pursuant to this
Servicing Agreement:

 

(i)            all payments on account of principal on the Mortgage
Loans, including all Principal Prepayments;

 

21

 

(ii)           all
payments on account of interest on the Mortgage adjusted to the Mortgage Loan
Remittance Rate;

 

(iii)          all
Liquidation Proceeds and any amount received with respect to REO Property;

 

(iv)          all
Insurance Proceeds including amounts required to be deposited pursuant to Section 2.10
(other than proceeds to be held in the Escrow Account and applied to the
restoration or repair of the Mortgaged Property or released to the Mortgagor in
accordance with Section 2.14), and Section 2.11;

 

(v)           all
Condemnation Proceeds affecting any Mortgaged Property that are not applied to
the restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with Section 2.14;

 

(vi)          any
amount required to be deposited in the Custodial Account pursuant to Section 2.15
or 4.02;

 

(vii)         [reserved];

 

(viii)        [reserved];

 

(ix)           any
Prepayment Penalties received with respect to any Mortgage Loan; and

 

(x)            any
amounts required to be deposited by the Servicer pursuant to Section 2.11
in connection with the deductible clause in any blanket hazard insurance
policy.  Such deposit shall be made from
Servicer’s own funds, without reimbursement therefor.

 

The foregoing requirements
for deposit into the Custodial Account shall be exclusive, it being understood
and agreed that, without limiting the generality of the foregoing, Ancillary
Income and Prepayment Penalties need not be deposited by the Servicer into the
Custodial Account.  Any interest paid by
the depository institution on funds deposited in the Custodial Account shall
accrue to the benefit of the Servicer and the Servicer may retain any such
interest.

 

Section 2.05                   Permitted Withdrawals From
Custodial Account.

 

Subject to Section 3.01,
the Servicer shall be entitled to withdraw funds from the Custodial Account for
the following purposes:

 

(i)            to
make payments to the Owner (or as otherwise directed by the Owner in writing)
in the amounts and in the manner provided in Section 3.01;

 

(ii)           to
fund any Liquidity Reserve Account or any Litigation Reserve Account as and to
the extent required by Section 2.17;

 

22

 

(iii)          [reserved];

 

(iv)          following
the liquidation of a Mortgage Loan, to reimburse itself for (a) any unpaid
Servicing Advances to the extent recoverable from Liquidation Proceeds,
Insurance Proceeds or other amounts received with respect to the related
Mortgage Loan plus (b) unreimbursed Nonrecoverable Advances made by the
Servicer in accordance with this Agreement;

 

(v)           [reserved];

 

(vi)          [reserved];

 

(vii)         to
invest funds in Eligible Investments in accordance with Section 2.09;

 

(viii)        to
withdraw funds deposited in the Custodial Account in error;

 

(ix)           to
pay to itself any interest earned on funds deposited in the Custodial Account
(all such interest to be withdrawn monthly not later than each Remittance
Date);

 

(x)            [reserved];

 

(xi)           [reserved];
and

 

(xii)          to
clear and terminate the Custodial Account upon the termination of the Servicing
Agreement.

 

The Servicer shall keep and
maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for
the purpose of justifying any withdrawal from the Custodial Account pursuant to
such subclause (iv) above.

 

Section 2.06                   Establishment of and
Deposits to Escrow Account.

 

The Servicer shall establish
and maintain one or more Escrow Accounts, in the form of time deposit or demand
accounts, titled “PNMAC Loan Svc LLC ttee
and/or bailee for PNMAC LLC and/or pmts of var mtgrs and/or other owners of int
in loans- T&I”.  The
Escrow Account shall be established with a Qualified Depository as a Special
Deposit Account.  Funds deposited in the
Escrow Accounts may be drawn on by the Servicer in accordance with Section 2.07.  The creation of any Escrow Account shall be
evidenced by a certification in the form of Exhibit 4 hereto, in
the case of an account established with the Servicer (provided the Servicer
qualifies as a Qualified Depository), or by a letter agreement in the form of Exhibit 5
hereto, in the case of an account held by a depository other than the
Servicer.  A copy of such certification
shall be furnished to the Owner on or prior to the execution of this Servicing
Agreement.  The Servicer shall segregate
and hold all funds in any Escrow Account separate and apart from the Servicer’s
own funds and general assets.

 

The Servicer shall deposit
in the Escrow Account or Accounts and retain therein the following collections
received by the Servicer:

 

23

 

(i)            all
Escrow Payments collected on account of the Mortgage Loans, for the purpose of
effecting timely payment of any such items as required under the terms of this
Servicing Agreement;  and

 

(ii)           all
amounts representing Insurance Proceeds or Condemnation Proceeds which are to
be applied to the restoration or repair of any Mortgaged Property.

 

The Servicer shall make
withdrawals from the Escrow Account only to effect such payments as are
required under this Servicing Agreement, as set forth in Section 2.07.  Any interest paid on funds deposited in the
Escrow Account by the depository institution shall accrue to the benefit of the
Servicer, other than interest on escrowed funds required by law to be paid to
the Mortgagor.  To the extent required by
law, the Servicer shall be responsible to pay from its own funds interest on escrowed
funds to the Mortgagor notwithstanding that the Escrow Account may be non
interest bearing or that interest paid thereon is insufficient for such
purposes.

 

Section 2.07                   Permitted Withdrawals From
Escrow Account.

 

Withdrawals from the Escrow
Account or Accounts may be made by the Servicer only:

 

(i)            to
effect timely payments of ground rents, taxes, assessments, water rates,
mortgage insurance premiums, condominium charges, flood insurance, fire and
hazard insurance, premiums or other items constituting Escrow Payments for the
related Mortgage;

 

(ii)           to
reimburse the Servicer for any Servicing Advance made by the Servicer pursuant
to Section 2.08 with respect to a Mortgage Loan, but only from
amounts received on the related Mortgage Loan which represent late payments or
collections of Escrow Payments thereunder;

 

(iii)          to
refund to any Mortgagor any funds found to be in excess of the amounts required
under the terms of the related Mortgage Loan or applicable federal or state law
or judicial or administrative ruling;

 

(iv)          for
transfer to the Custodial Account in accordance with the terms of the related
Mortgage and Mortgage Note or this Servicing Agreement;

 

(v)           for
application to restoration or repair of the Mortgaged Property in accordance
with the procedures outlined in Section 2.14;

 

(vi)          to
pay the Servicer, or any Mortgagors to the extent required by law, any interest
paid on the funds deposited in the Escrow Account;

 

(vii)         to
reimburse itself for any amounts deposited in the Escrow Account in error; and

 

(viii)        to
clear and terminate the Escrow Account on the termination of this Servicing
Agreement.

 

24

 

Section 2.08                   Payment of Taxes,
Insurance and Other Charges.

 

With respect to each First
Lien Mortgage Loan that provides for Escrow Payments to be made, the Servicer
shall maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property and the status of PMI Policy premiums, flood insurance,
and fire and hazard insurance coverage and shall obtain, from time to time, all
bills for the payment of such charges (including renewal premiums) and shall
effect payment thereof prior to the applicable penalty or termination date and
at a time appropriate for securing maximum discounts allowable, employing for
such purpose deposits of the Mortgagor in the Escrow Account which shall have
been estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the related Mortgage.

 

To the extent that any First
Lien Mortgage Loan does not provide for Escrow Payments, the Servicer shall
determine that any such payments are made by the related Mortgagor when
due.  With respect to each First Lien
Mortgage Loan that provides for Escrow Payments, subject to Accepted Servicing
Practices, the Servicer assumes full responsibility for the payment of all such
bills and shall effect payments of all such bills irrespective of the Mortgagor’s
faithful performance in the payment of same or the making of the Escrow
Payments and shall make Servicing Advances from its own funds to effect such
payments within the time period required to avoid penalties and interest and
avoid the loss of the related Mortgaged Property by foreclosure from a tax or
other lien. Notwithstanding the foregoing, if Servicer reasonably determines
that such Servicing Advance would be a Nonrecoverable Advance, Servicer shall
have no obligation to make such Servicing Advance.  Solely with respect to Mortgage Loans that
require escrow payments, if Servicer fails to make a Servicing Advance with
respect to any payment prior to the date on which late payment penalties or
costs related to protecting the lien accrue, the Servicer shall pay any such
penalties or costs which accrued.

 

Section 2.09                   Protection of Accounts.

 

The Servicer may transfer
the Custodial Account, the Escrow Account, any Liquidity Reserve Account or any
Litigation Reserve Account to a different Qualified Depository from time to
time.  Such transfer shall be made only
upon obtaining consent of the Owner, which shall not be unreasonably
withheld.  The Servicer shall notify the
Owner in writing of any such transfer fifteen (15) Business Days prior to such transfer.

 

Amounts on deposit in the
Custodial Account, the Escrow Account, any Liquidity Reserve Account or any
Litigation Reserve Account may at the option of the Servicer be invested in
Eligible Investments.  Any such Eligible
Investment shall mature no later than one day prior to the Remittance Date in
each month; provided, however, that if such Eligible
Investment is an obligation of a Qualified Depository (other than the Servicer)
that maintains the Custodial Account, the Escrow Account, any Liquidity Reserve
Account or any Litigation Reserve Account, then such Eligible Investment may
mature on the related Remittance Date. 
Any such Eligible Investment shall be made in the name of the Servicer
in trust for the benefit of the Owner. 
All income on or gain realized from any such Eligible Investment shall
be for the benefit of the Servicer and may be withdrawn at any time by the
Servicer.  Any losses incurred in respect
of any such investment shall be deposited in the Custodial Account, the Escrow 

 

25

 

Account,
any Liquidity Reserve Account or any Litigation Reserve Account, by the
Servicer out of its own funds immediately as realized with no right to
reimbursement.

 

Section 2.10                   Maintenance of Hazard
Insurance.

 

The Servicer shall cause to
be maintained for each First Lien Mortgage Loan, hazard insurance (with
extended coverage as is customary in the area where the Mortgaged Property is
located) such that all buildings upon the Mortgaged Property are insured by a
generally acceptable insurer acceptable under the Fannie Mae Guides against
loss by fire, hazards of extended coverage and such other hazards as are
required to be insured pursuant to the Fannie Mae Guides, in an amount which is
at least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan and (ii) the greater of (a) the
outstanding principal balance of the Mortgage Loan or (b) an amount such
that the proceeds thereof shall be sufficient to prevent the Mortgagor or the
loss payee from becoming a co-insurer (or, in the case of REO Property,
the fair market value of such REO Property).

 

If required by the National
Flood Insurance Act of 1968 or Flood Disaster Prevention Act of 1973, as
amended, each Mortgage Loan is, and shall continue to be, covered by a flood
insurance policy meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable insurance carrier
acceptable under the Fannie Mae Guides in an amount representing coverage not
less than the least of (i) the aggregate unpaid principal balance of the
Mortgage Loan (or, in the case of REO Property, the fair market value of
such REO Property), (ii) maximum amount of insurance which is
available under the National Flood Insurance Act of 1968 or Flood Disaster
Prevention Act of 1973, as amended (regardless of whether the area in which
such Mortgaged Property is located is participating in such program), or (iii) the
full replacement value of the improvements which are part of such Mortgaged
Property.  If a Mortgaged Property is
located in a special flood hazard area and is not covered by flood insurance or
is covered in an amount less than the amount required by the National Flood
Insurance Act of 1968 or Flood Disaster Prevention Act of 1973, as amended, the
Servicer shall notify the related Mortgagor that the Mortgagor must obtain such
flood insurance coverage, and if said Mortgagor fails to obtain the required
flood insurance coverage within forty-five (45) days after such notification,
the Servicer shall immediately force place the required flood insurance on the
Mortgagor’s behalf.  Notwithstanding the
foregoing, Servicer shall have no liability to Owner or any third party for any
penalties or fines imposed based on Servicer’s failure to timely notify the
Director of FEMA and the flood insurance provider related to a servicing
transfer if Servicer is not provided with flood insurance information; provided
that, the Servicer shall have promptly provided Owner with notice of such
missing flood insurance information. 
Notwithstanding the foregoing, the Servicer shall maintain a blanket
insurance policy in sufficient amounts to cover any uninsured loss due to any
gap in Mortgagor provided coverage.

 

If a First Lien Mortgage
Loan is secured by a unit in a condominium project, the Servicer shall verify
that the coverage required of the homeowners’ association, including hazard,
flood, liability, and fidelity coverage, is being maintained in accordance with
then current Fannie Mae requirements, and secure from the homeowners’
association its agreement to notify the Servicer promptly of any change in the
insurance coverage or of any condemnation or casualty loss that may have a
material effect on the value of the Mortgaged Property as security.

 

26

 

The Servicer shall cause to
be maintained on each Mortgaged Property such other or additional insurance as
may be required pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance, or
pursuant to the requirements of any private mortgage guaranty insurer, or as
may be required to conform with Accepted Servicing Practices.

 

In the event that the Owner
or the Servicer shall determine that the Mortgaged Property should be insured
against loss or damage by hazards and risks not covered by the insurance
required to be maintained by the Mortgagor pursuant to the terms of the
Mortgage, the Servicer shall in accordance with the Fannie Mae Guides make
commercially reasonable efforts to communicate and consult with the Mortgagor
with respect to the need for such insurance and bring to the Mortgagor’s
attention the desirability of protection of the Mortgaged Property.

 

All policies required
hereunder shall name the Servicer and its successors and assigns as a mortgagee
and loss payee and shall be endorsed with non contributory standard or New York
mortgagee clauses which shall provide for at least thirty (30) days prior
written notice of any cancellation, reduction in amount or material change in
coverage.

 

The Servicer shall not
interfere with the Mortgagor’s freedom of choice in selecting either his
insurance carrier or agent, provided, however,
that the Servicer shall not accept any such insurance policies from insurance
companies unless such companies currently reflect a General Policy Rating of
A:VI or better under Best’s Key Rating Guides, are acceptable under the Fannie
Mae Guides and are licensed to do business in the jurisdiction in which the
Mortgaged Property is located.  The
Servicer shall determine that such policies provide sufficient risk coverage
and amounts as required pursuant to the Fannie Mae Guides, that they insure the
property owner, and that they properly describe the property address.  The Servicer shall furnish to the Mortgagor a
formal notice of expiration of any such insurance in sufficient time for the
Mortgagor to arrange for renewal coverage by the expiration date; provided, however, that in the event that no such notice is
furnished by the Servicer, the Servicer shall ensure that replacement insurance
policies are in place in the required coverages and the Servicer shall be
solely liable for any losses in the event coverage is not provided.

 

Pursuant to Section 2.04,
any amounts collected by the Servicer under any such policies (other than
amounts to be deposited in the Escrow Account and applied to the restoration or
repair of the related Mortgaged Property, or property acquired in liquidation
of the Mortgage Loan, or to be released to the Mortgagor, in accordance with
the Servicer’s normal servicing procedures as specified in Section 2.14)
shall be deposited in the Custodial Account subject to withdrawal pursuant to Section 2.05.

 

Section 2.11                   Maintenance of Mortgage
Impairment Insurance Policy.

 

In the event that the
Servicer shall obtain and maintain a blanket policy insuring against losses
arising from flood, fire and hazards covered under extended coverage on all of
the Mortgage Loans, then, to the extent such policy provides coverage in an
amount equal to the amount required pursuant to Section 2.10 and
otherwise complies with all other requirements of Section 2.10, it
shall conclusively be deemed to have satisfied its obligations as set forth in Section 2.10.  Any amounts collected by the Servicer under
any such policy relating to a 

 

27

 

Mortgage
Loan shall be deposited in the Custodial Account subject to withdrawal pursuant
to Section 2.05.  Such policy
may contain a deductible clause, in which case, in the event that there shall
not have been maintained on the related Mortgaged Property a policy complying
with Section 2.10, and there shall have been a loss which would
have been covered by such policy, the Servicer shall deposit in the Custodial
Account at the time of such loss the amount not otherwise payable under the
blanket policy because of such deductible clause, such amount to be deposited
from the Servicer’s funds, without reimbursement therefor.  The Servicer may seek reimbursement from the
Owner for the costs and premiums associated with obtaining and maintaining any
such blanket policy.

 

Section 2.12                   Maintenance of Fidelity
Bond and Errors and Omissions Insurance.

 

The Servicer shall maintain
with responsible companies that would meet the requirements of Fannie Mae, at
its own expense, a blanket Fidelity Bond and an Errors and Omissions Insurance
Policy, with broad coverage on all officers, employees or other persons acting
in any capacity requiring such persons to handle funds, money, documents or
papers relating to the Mortgage Loans (“Servicer Employees”).  Any such Fidelity Bond and Errors and
Omissions Insurance Policy shall be in the form of the Mortgage Banker’s
Blanket Bond and shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Servicer Employees. 
Such Fidelity Bond and Errors and Omissions Insurance Policy also shall
protect and insure the Servicer against losses in connection with the failure
to maintain any insurance policies required pursuant to this agreement and the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. 
No provision of this Section 2.12 requiring such Fidelity
Bond and Errors and Omissions Insurance Policy shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Servicing
Agreement.  Any such Fidelity Bond and
Errors and Omissions Insurance Policy shall be comply with the applicable
requirements from time to time of Fannie Mae. Upon request, the Servicer shall
cause to be delivered to the Owner a certified true copy of such Fidelity Bond
and Errors and Omissions Insurance Policy and shall obtain a statement from the
surety and insurer that such Fidelity Bond and Errors and Omissions Insurance
Policy shall in no event be terminated or materially modified without thirty
(30) days’ prior written notice to the Owner.

 

Section 2.13                   Inspections.

 

The Servicer shall order an
inspection of the Mortgaged Property when the related Mortgage Loan becomes 45
days delinquent and every 30 days thereafter so long as such Mortgage Loan
remains delinquent to assure itself that the value of the Mortgaged Property is
being preserved, provided that
the Servicer shall be required to take such action only if it determines that
the proceeds to the Owner (after giving effect to the recovery of the Servicer’s
out-of-pocket expenses) from payment on, or disposition of, the related
Mortgage Loan or REO Property would be increased as a result of the taking
of such action.  The Servicer shall
document on its servicing system each such inspection.  The costs of such inspections shall be
treated as Servicing Advances for which the Servicer shall be entitled to full
reimbursement for in accordance with Section 2.05(iv).

 

28

 

Section 2.14                   Restoration of Mortgaged
Property.

 

The
Servicer need not obtain the approval of the Owner prior to releasing any
Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be applied to
the restoration or repair of the Mortgaged Property if such release is in
accordance with Accepted Servicing Practices and the terms of this Servicing
Agreement.  At a minimum, the Servicer
shall comply with the following conditions in connection with any such release
of Insurance Proceeds or Condemnation Proceeds:

 

(i)            the
Servicer shall receive satisfactory independent verification of completion in
all material respects of repairs and issuance of any required approvals with
respect thereto;

 

(ii)           the
Servicer shall take all steps necessary to preserve the priority of the lien of
the Mortgage, including, but not limited to requiring waivers with respect to
mechanics’ and materialmen’s liens;

 

(iii)          the
Servicer shall verify that the Mortgage Loan is not in default; and

 

(iv)          pending
repairs or restoration, the Servicer shall place the Insurance Proceeds or
Condemnation Proceeds in the Escrow Account.

 

If the Owner is named as an
additional loss payee, the Servicer is hereby empowered to endorse any loss
draft issued in respect of such a claim in the name of the Owner.

 

Section 2.15                   Title, Management and
Disposition of REO Property.

 

In the event that title to
any Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be taken in the name of the
Servicer on behalf of the Owner and without reference to the Owner except as otherwise
required by law, or in the event the Servicer is not authorized or permitted to
hold title to real property in the state where the REO Property is located, or
would be adversely affected under the “doing business” or tax laws of such
state by so holding title, the deed or certificate of sale shall be taken in
the name of such Person(s) as shall be consistent with an Opinion of
Counsel obtained by Servicer from an attorney duly licensed to practice law in
the state where the REO Property is located. 
The Person or Persons holding such title other than the Owner shall
acknowledge in writing that such title is being held as nominee for the Owner.

 

Upon approval by Owner, the
Servicer shall manage, conserve, protect and operate each REO Property for the
Owner solely for the purpose of its prompt disposition and sale.  In consideration therefor, the Owner shall
pay the Servicer the REO Marketing Fee per month as set forth in Exhibit 9.  The Servicer, either itself or through an
agent selected by the Servicer, shall manage, conserve, protect and operate the
REO Property in accordance with Accepted Servicing Practices and in the same
manner that similar property in the same locality as the REO Property is
managed.  The Servicer shall attempt to
sell the same (and may temporarily rent the same, except as otherwise provided
below) on such terms and conditions as the Servicer deems to be in the best
interest of the Owner in accordance with Accepted Servicing 

 

29

 

Practices.  The Servicer shall provide the Owner on a
monthly basis with a report on the status of each REO Property.

 

In consideration therefor,
the Owner shall pay the Servicer the REO Marketing Fee per month as set forth
in Exhibit 9.

 

The Servicer shall also
maintain on each REO Property fire and hazard insurance with extended coverage
in an amount which is at least equal to the maximum insurable value of the
improvements which are a part of such property, liability insurance and, to the
extent required and available under the National Flood Insurance Act of 1968 or
Flood Disaster Prevention Act of 1973, as amended, flood insurance in the
amount required in Section 2.10 hereof, provided that the Servicer shall be required to maintain
such insurance only if it determines that the proceeds to the Owner (after
giving effect to the recovery of the Servicer’s out-of-pocket expenses) from
payment on, or disposition of, the related REO Property would be increased
as a result of the maintenance of such insurance.  Such costs to maintain appropriate insurance
coverage shall be treated as Servicing Advances for which the Servicer shall be
entitled to full reimbursement in accordance with Section 2.05(iv).

 

The disposition of REO
Property shall be carried out by the Servicer at such price, and upon such
terms and conditions, as the Servicer deems to be in the best interests of the
Owner in accordance with Accepted Servicing Practices.  The proceeds of sale of the REO Property shall
be promptly deposited in the Custodial Account pursuant to the terms of this
Servicing Agreement but not later than the second Business Day following
receipt thereof.  As soon as practical
thereafter, the expenses of such sale shall be paid and the Servicer shall
reimburse itself for any related unreimbursed Servicing Advances and unpaid
Servicing Fees made pursuant to this Section.

 

With respect to each REO
Property, the Servicer shall segregate and hold all funds collected and
received in connection with the operation of the REO Property in the Custodial
Account.  The Servicer shall cause to be
deposited on a daily basis in each Custodial Account all revenues received by
Servicer (such revenues being those received by Servicer within two Business
Days prior to actual deposit into the Escrow Account) with respect to the
conservation and disposition of the related REO Property.  Any advances made to maintain appropriate
insurance coverage shall be treated as Servicing Advances for which the
Servicer shall be entitled to full reimbursement in accordance with Section 2.05(iv).

 

The Servicer shall furnish
to the Owner on a monthly basis the Servicer’s standard REO report on REO
Property then serviced by the Servicer.

 

Section 2.16                   Costs and Expenses.

 

Owner will be responsible
for all losses including but not limited to unrecoverable interest, “out-of-pocket”
costs and expenses from either the Mortgagor or Owner that are normal and
customary that occur as the result of normal business activity associated with
owning the loans.

 

30

 

Section 2.17                   Liquidity and Litigation
Reserves.

 

(a)           Liquidity Reserve. 
The Servicer, in its discretion, may establish a liquidity reserve (the “Liquidity
Reserve”) from which to fund Servicing Advances (other than litigation
costs and expenses (including attorneys’ fees), which may be funded through the
use of a Litigation Reserve pursuant to Section 2.17(b)).  If the Servicer elects to establish a
Liquidity Reserve it shall establish a Liquidity Reserve Account at a Qualified
Depository.  The Liquidity Reserve
Account shall be held in trust for the benefit of the Owner and shall be
established and maintained for the sole purpose of holding and distributing the
Liquidity Reserve funds.  The Servicer
may fund the Liquidity Reserve with such portion of distributions on the
Mortgage Loans as it deems appropriate, in the exercise of its reasonable
discretion.  At the termination of this
Servicing Agreement, all remaining funds held in the Liquidity Reserve shall be
distributed to the Owner.  Amounts on
deposit in the Liquidity Reserve Account shall be invested in Eligible
Investments, shall not be used to pay costs or expenses other than Servicing
Advances (excluding litigation costs and expenses), and shall be used to pay
Servicing Advances (other than litigation costs and expenses) only in any month
in which the distributions on the Mortgage Loans received during that month are
insufficient to provide sufficient cash to pay all Servicing Advances due and
payable (without prepayment) during that month. 
No funds from any other source (other than interest or earnings on the
funds held in the Liquidity Reserve Account) shall be commingled in the
Liquidity Reserve Account.  Amounts on
deposit in the Liquidity Reserve Account (including interest and earnings
thereon) shall be used and may be withdrawn and disbursed only in accordance
with the provisions of this paragraph. 
The Servicer shall be authorized and directed to withdraw funds from the
Liquidity Reserve Account only to make disbursements in accordance with this
Servicing Agreement and not for any other purpose.

 

(b)           Litigation Reserve. 
The Servicer, in its discretion, may establish a litigation reserve (the
“Litigation Reserve”) from which to fund litigation costs and expenses (including
attorneys’ fees) that constitute Servicing Advances.  If the Servicer elects to establish a
Litigation Reserve it shall establish a Litigation Reserve Account at a
Qualified Depository.  The Litigation
Reserve Account shall be held in trust for the benefit of the Owner and shall
be established and maintained for the sole purpose of holding and distributing
the Litigation Reserve funds.  The
Servicer may fund the Litigation Reserve with such portion of distributions on
the Mortgage Loans as it deems appropriate, in the exercise of its reasonable
discretion.  At the termination of this
Servicing Agreement, all remaining funds held in the Litigation Reserve shall
be distributed to the Owner.  Amounts on
deposit in the Litigation Reserve Account shall be invested in Eligible
Investments, shall not be used to pay costs or expenses other than litigation
costs and expenses that constitute Servicing Advances, and shall be used to pay
such litigation costs and expenses only in any month in which distributions on
the Mortgage Loans received during that month are insufficient to provide
sufficient cash to pay all Servicing Advances due and payable (without
prepayment) during that month.  No funds
from any other source (other than interest or earnings on the funds held in the
Litigation Reserve Account) shall be commingled in the Litigation Reserve
Account.  Amounts on deposit in the
Litigation Reserve Account (including interest and earnings thereon) shall be
used and may be withdrawn and disbursed only in accordance with the provisions
of this paragraph.  The Servicer shall be
authorized and directed to withdraw funds from the Litigation Reserve Account
only to make disbursements in accordance with this Servicing Agreement and not
for any other purpose.

 

31

 

Section 2.18                   [Reserved].

 

Section 2.19                   [Reserved].

 

Section 2.20                   Notification of
Adjustments.

 

With respect to each
Adjustable-Rate Mortgage Loan, the Servicer shall adjust the Mortgage Interest
Rate on the related Interest Rate Adjustment Date in compliance with the
requirements of applicable law and the related Mortgage and Mortgage Note. If,
pursuant to the terms of the Mortgage Note, another Index is selected for
determining the Mortgage Interest Rate because the original Index is no longer
available, the same Index will be used with respect to each Mortgage Note which
requires a new Index to be selected provided that such selection does not
conflict with the terms of the related Mortgage Note.  The Servicer shall execute and deliver any
and all necessary notices required under applicable law and the terms of the
related Mortgage Note and Mortgage regarding the Mortgage Interest Rate and the
Monthly Payment adjustments.  The
Servicer shall promptly deliver to the Owner such notifications and any
additional applicable data regarding such adjustments and the methods used to
calculate and implement such adjustments. 
Upon the discovery by the Servicer or the Owner that the Servicer has
failed to adjust a Mortgage Interest Rate or a Monthly Payment pursuant to the
terms of the related Mortgage Note and Mortgage, the Servicer shall immediately
deposit in the Custodial Account from its own funds the amount of any interest
loss caused the Owner thereby without reimbursement therefor.

 

Section 2.21                   Recordation of Assignments
of Mortgage.

 

Except in connection with
Accepted Servicing Practices for defaulted Mortgage Loans, the Servicer shall
not be responsible for the preparation or recording of the Assignments of
Mortgage relating to the Mortgage Loans to the Owner, or any other party; provided, however, that in the event the Servicer agrees
(which agreement shall be in Servicer’s sole discretion) to record any mortgage
assignment, any expense, including the fees of third party service providers,
incurred by the Servicer in connection with the preparation and recordation of
Assignments of Mortgage shall be reimbursable by the Owner, or if not
reimbursed by the Owner, as a Servicing Advance.

 

Section 2.22                   [Reserved].

 

Section 2.23                   Credit Reporting.

 

The Servicer shall fully
furnish, in accordance with the Fair Credit Reporting Act and its implementing
regulations, accurate and complete information (e.g. favorable and unfavorable)
on the Mortgagor credit files to Equifax, Experian and Trans Union Credit
Information Company (or their respective successors) on a monthly basis and in
accordance with applicable federal, state and local laws.

 

Section 2.24                   Superior Liens.

 

If the Servicer is notified
that any superior lienholder has accelerated or intends to accelerate the
obligations secured by the superior lien, or has declared or intends to declare
a 

 

32

 

default
under the superior mortgage or the promissory note secured thereby, or has
filed or intends to file an election to have the Mortgaged Property sold or
foreclosed, the Servicer shall take whatever actions are necessary to protect
the interests of the Owner, and/or to preserve the security of the related
Mortgage Loan, subject to any requirements applicable to real estate mortgage
investment conduits pursuant to the Code. 
The Servicer shall make a Servicing Advance of the funds necessary to
cure the default or reinstate the superior lien if the Servicer determines that
such Servicing Advance is in the best interests of the Owner and would be in
accordance with Accepted Servicing Practices. 
The Servicer shall not make such a Servicing Advance except to the
extent that it determines that such advance would not be a Nonrecoverable
Advance from Liquidation Proceeds on the related Mortgage Loan.  The Servicer shall thereafter take such
action as is necessary to recover the amount so advanced.

 

If
a Mortgage Loan is identified on the Notice of Transfer of Mortgage Loans as a
Second Lien Mortgage Loan, then the Servicer, may consent to the refinancing of
the prior senior lien on the related Mortgaged Property, provided that the
following requirements are met:

 

1.             the resulting CLTV of such Second Lien is no higher than
its CLTV prior to such refinancing; and

 

2.             the interest rate, or, in the case of an adjustable-rate
existing senior lien, the maximum interest rate, for the loan evidencing the
refinanced senior lien is no more than 2.0% (or such higher rate that the
Servicer determines to be in the Owner’s best interest) higher than the
interest rate or the maximum interest rate, as the case may be, on the loan
evidencing the existing senior lien immediately prior to the date of such
refinancing; and

 

3.             the loan evidencing the refinanced senior lien is not
subject to the possibility of negative amortization.

 

Section 2.25                   Prepayments in Full.

 

With respect to each
Mortgage Loan, the Servicer agrees to deliver on or prior to the fifth (5th)
Business Day of each month to the Owner, a report setting forth information
with respect to any prepayments in full with respect to such Mortgage Loan.

 

Section 2.26                   Tax and Flood Service
Contracts.

 

The
Servicer, at the Owner’s expense, shall cause each First Lien Mortgage Loan
that is transferred to the Servicer for servicing to be covered to the extent
not covered by a Tax Service Contract and/or Flood Service Contract, by (a) a
Tax Service Contract and/or (b) a Flood Zone Service Contract.  If any Mortgage Loan is missing a required
Tax Service Contract or if any Mortgage Loan is missing a required Flood Zone
Service Contract at the time of the Servicing Transfer Date, Servicer shall
place such Tax Service Contract or Flood Zone Service Contract, as applicable,
and shall be entitled to the fee associated with acquiring such contracts as
set forth in Exhibit 9.

 

33

 

Section 2.27                   Maintenance of PMI
Policies and LPMI Policies; Collections Thereunder.

 

The Servicer shall maintain
in full force and effect, a PMI Policy, issued by a Qualified Insurer, with
respect to each Mortgage Loan for which such coverage is required, provided that the Servicer’s obligations
to pay premiums in respect of any such Policy shall terminate if the Servicer
determines that the related insurer is unwilling or unable to make all payments
due under such policy.  Such coverage
shall be maintained until the LTV Ratio or CLTV, as applicable, of the related
Mortgage Loan is reduced to that amount for which Fannie Mae no longer requires
such insurance to be maintained. The Servicer will not cancel or refuse to
renew any PMI Policy in effect on the related Servicing Transfer Date that is
required to be kept in force under this Servicing Agreement unless a
replacement PMI Policy or LPMI Policy for such cancelled or non-renewed policy
is obtained from and maintained with a Qualified Insurer.  The Servicer shall not take any action which
would result in non-coverage under any applicable PMI Policy or LPMI Policy of
any loss which, but for the actions of the Servicer, would have been covered
thereunder.  In connection with any
assumption or substitution agreement entered into or to be entered into
pursuant to Section 4.01, the Servicer shall promptly notify the
insurer under the related PMI Policy or LPMI Policy, if any, of such assumption
or substitution of liability in accordance with the terms of such policy and
shall take all actions which may be required by such insurer as a condition to
the continuation of coverage under the PMI Policy or LPMI Policy. If such PMI
Policy is terminated as a result of such assumption or substitution of
liability, the Servicer shall obtain a replacement PMI Policy as provided
above.

 

In connection with its
activities as servicer, the Servicer agrees to prepare and present, on behalf
of itself, and the Owner, claims to the insurer under any PMI Policy or LPMI
Policy in a timely fashion in accordance with the terms of such policies and,
in this regard, to take such action as shall be necessary to permit recovery
under any PMI Policy or LPMI Policy respecting a defaulted Mortgage Loan.  Pursuant to Section 2.04, any
amounts collected by the Servicer under any PMI Policy or LPMI Policy shall be
deposited in the related Custodial Account, subject to withdrawal pursuant to Section 2.05.

 

Section 2.28                   Obligations
of the Owner and the Servicer Related to Servicing Transfers.

 

The Owner and the Servicer
shall take the following actions with respect to each Mortgage Loan that the
Owner desires to have serviced by the Servicer hereunder in order to effect the
transfer of servicing to the Servicer on the related Servicing Transfer Date:

 

(a)           Delivery of Mortgage Loan Data.  With respect to each pool of Mortgage Loans
to be serviced under this Servicing Agreement, no later than thirty (30)
calendar days prior to the Servicing Transfer Date, the Owner shall furnish or
cause to be furnished to the Servicer complete and accurate Mortgage Loan data
reflecting the status of payments, balances and other pertinent information
necessary to service such Mortgage Loans including but not limited to: (i) master
file; (ii) Adjustable-Rate Mortgage Loan master file; (iii) escrow
file; (iv) tax and insurance payee file; (v) Adjustable-Rate Mortgage
Loan history file; (vi) servicing activities; and (vii) any other
pertinent information reasonably required by the Servicer.  Such information shall be provided to the
Servicer in such electronic format as is mutually agreed upon by both 

 

34

 

parties. 
Not later than one (1) Business Day following the Servicing
Transfer Date, the Owner shall provide the Servicer with computer or like
records (final data) reflecting the status of payments, balances and other
pertinent information as set forth above and necessary to service the Mortgage
Loans as of the Servicing Transfer Date.

 

(b)           Delivery of Notification Letter. With respect to
each pool of Mortgage Loans to be serviced under this Servicing Agreement, the
Owner shall use its best efforts to deliver or cause to be delivered to the
Servicer a Notice of Transfer of Mortgage Loans for such Mortgage Loans not
less than forty-five (45) days prior to the related Servicing Transfer Date,
the Servicer shall provide its written approval or denial within five (5) Business
Days of receipt of such Notice, which approval shall not be unreasonably
withheld.

 

(c)           Delivery of Servicing and Other Files.  The Owner shall use its reasonable best
efforts to provide Servicer with hard copies (or imaged copies if available) of
the Servicing File with respect to each Mortgage Loan transferred to Servicer
within fifteen (15) Business Days prior to the applicable Servicing Transfer
Date.  The Owner shall use its reasonable
best efforts to provide Servicer with hard copies (or imaged copies if
available) of any default file with respect to each Mortgage Loan transferred
to Servicer within five (5) Business Days of the applicable Servicing
Transfer Date.  Any costs and expenses to
deliver the aforementioned files shall be borne by the Owner.

 

(d)           Notice to Mortgagors.  The Owner shall cause to be provided to each
Mortgagor a “Notice of assignment, sale or transfer of servicing” to the
Servicer.  Upon boarding of each Mortgage
Loan originated by a third-party originator, the Servicer shall deliver to each
related Mortgagor a “Welcome Letter” in accordance with RESPA and Accepted
Servicing Practices.

 

(e)           Transfer of Escrow Funds and Other Proceeds.  The Owner shall use its best efforts to
transfer or cause to be transferred to the Servicer, within one (1) Business
Day and not later than three (3) Business Days following the Servicing
Transfer Date by wire transfer to the account designated by the Servicer, an
amount equal to the sum of (i) Escrow Payments collected from each
Mortgagor; and if applicable (ii) all undistributed insurance loss draft
funds; (iii) all unapplied funds received by the Owner or any prior
servicer; (iv) all unapplied interest on escrow balances accrued through
the related Servicing Transfer Date; (v) all buydown funds held by the
Owner or any prior servicer as of the related Servicing Transfer Date; and (vi) all
other related amounts held by the respective owner of the Mortgage Loan or any
prior servicer of such Mortgage Loan as of the related Servicing Transfer Date
that the Owner or any prior servicer is not entitled to retain.  The Owner shall be responsible for any
interest on escrow amounts held by the Owner prior to the related Servicing
Transfer Date.  The Servicer shall be
entitled to deduct from Servicer’s monthly remittance to the Owner any
shortfalls in Escrow Payments that result from Owner’s failure to deliver any Escrow
Payment in full to the Servicer.  To the
extent the Custodial Account has insufficient funds to fully fund such
shortfalls in the Escrow Payments plus all other amounts due to the Servicer as
set forth in Section 4.03 herein, the Owner shall wire such
shortfall amount to the Servicer promptly upon receipt of notice of such
shortfalls from the Servicer.

 

35

 

(f)            Outstanding Servicing Advances. Not later than ten
(10) Business Days following the Servicing Transfer Date, the Owner shall
deliver to the Servicer a schedule, certified by an authorized officer of the
Owner as being true and correct and setting forth, in all material respects,
those Servicing Advances made by the Owner with respect to the Mortgage Loans
as of the related Servicing Transfer Date for which the Owner has not been
reimbursed (the “Outstanding Owner Servicing Advances”).  The Servicer agrees to reimburse the prior
servicer within thirty (30) days following the Servicing Transfer Date for all
Outstanding Owner Servicing Advances with which the prior servicer or the Owner
has provided the Servicer with reasonably detailed documentation evidencing
such advances.  The Servicer shall have
no obligation to board Outstanding Owner Servicing Advances or reimburse the
prior servicer unless the Servicer has received reasonably detailed
documentation allowing the Servicer to collect such advances from the
Mortgagor.

 

Section 2.29                   Reliability
of Information/Exceptional Expenses.

 

The Servicer may rely on all
data and materials relating to the Mortgage Loans supplied to it by the Owner
or the Owner’s designee(s) and the authenticity and accuracy of such data
and materials, including any signatures contained therein.  The Servicer shall not be obligated to
conduct an independent investigation of any data materials or audit of any
data, materials or Mortgage File, and may rely on the authenticity and accuracy
of such data and materials as provided, including any signatures contained
therein and shall not be held accountable for data integrity, missing
information or missing documents that prevent the boarding of a Mortgage Loan
to the Servicer’s mortgage loan administration system.  The Servicer shall deliver notification to
the Owner of any material data deficiencies discovered by the Servicer. If such
error was identified prior to the Servicing Transfer Date, the Owner shall have
the ability to correct such errors or provide missing data at no additional
cost to Servicer. Should the Owner decline to provide such data corrections or
provide such missing data, Servicer shall be entitled to charge the Owner a
manual data backfill fee as set forth on Exhibit 9.  If such error was identified after the
Servicing Transfer Date and such error was not the result of Servicer’s
negligence, the Servicer shall provide the Owner with a written cost estimate
to correct such errors, and upon the Owner’s approval, which approval should
not be unreasonably withheld, the Owner shall reimburse the Servicer for all
documented costs and expenses incurred by the Servicer, including but not
limited to, costs and expenses resulting from the Owner’s actions, instructions
or any failure by the Owner to provide the Servicer complete, accurate and
timely Mortgage Loan information.

 

Section 2.30                   Escrow
Obligations.

 

In connection with impounded
Mortgage Loans, the Owner shall (i) cause all taxes and assessments with
respect to which the related tax bill is due within thirty (30) days following
the related Servicing Transfer Date to be paid prior to such Servicing Transfer
Date, and (b) cause all hazard, flood, earthquake, PMI Policy and other
insurance premiums that are due on or prior to the thirtieth (30th) day
following such Servicing Transfer Date to be paid on or prior to such Servicing
Transfer Date.  The Owner shall be
responsible for any losses including but not limited to tax penalties
(including any loss of discount for which any Mortgagor or any third party for
the benefit of the Mortgagor has a legal claim) for the current tax due period
or for any tax period that ends no more than twelve (12) months earlier than
the date of the last paid 

 

36

 

installment
of the Mortgage Loan, as well as for its advances to pay the delinquent taxes
themselves in connection with any Mortgage Loan for which the Owner failed to
pay taxes as required by this Section 2.30 as the result of an
action or inaction of a previous servicer.

 

Section 2.31                   [Reserved].

 

Section 2.32                   Additional
Activities of the Servicer.

 

Subject
to the following paragraph, nothing herein shall prevent the Servicer or any of
its Affiliates from engaging in other businesses of any kind, including the
issuance of mortgage-backed securities, or from rendering services of any kind
to any other person or entity, including the performance of monitoring,
administering or servicing activities for others investing in any type of real
estate investment.

 

The
Servicer shall not (i) act as servicer or subservicer for distressed
residential mortgage loans held by Competitors, and (ii) act as the
servicer or subservicer on a portfolio of distressed mortgage loans acquired in
a competitive bidding process where the Servicer or another entity managed by
the PennyMac REIT Manager or an Affiliate thereof does not have an interest in
any part of the portfolio. 
Notwithstanding the foregoing, the Servicer may act as servicer or
subservicer where a majority of the independent members of the board of
trustees of PennyMac REIT determines that (i) the Servicer has sufficient
capacity to service the loans without negatively affecting the quality of the
services provided by the Servicer hereunder, and (ii) by acting in such
capacity the Servicer will not competitively disadvantage the Owner or PennyMac
REIT.  The Servicer may act as servicer
or subservicer of residential mortgage loans for government-sponsored entities
and other government-related entities and in other circumstances not prohibited
by the limitations set forth in this paragraph.

 

Section 2.33                   No
Obligation to Advance Delinquent Payments.

 

The Servicer shall have no
obligation to advance amounts constituting delinquent principal and interest
payments on any Mortgage Loan.

 

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37

 

ARTICLE III

 

PAYMENTS; REPORTS

 

Section 3.01                   Remittances.

 

On each Remittance Date the
Servicer shall remit by wire transfer of immediately available funds to the
Owner (or as otherwise directed in writing by the Owner) all amounts deposited
in the Custodial Account related to the Due Period (net of charges against or
withdrawals from the Custodial Account pursuant to Section 2.05).  The Servicer shall remit to the Owner (or as
otherwise directed in writing by the Owner) all Principal Prepayments, in full
or in part, on the Remittance Date pursuant to Section 2.05.

 

With respect to any
remittance received by the Owner after the day on which such payment was due,
the Servicer shall pay to the Owner interest on any such late payment at an
annual rate equal to the Prime Rate, adjusted as of the date of each change,
plus one percentage point, but in no event greater than the maximum amount
permitted by applicable law.  Such
interest shall be remitted to the Owner by the Servicer on the date such late
payment is made and shall cover the period commencing with the day such payment
was due and ending with the Business Day on which such payment is made, both
inclusive.  The payment by the Servicer
of any such interest shall not be deemed an extension of time for payment or a
waiver of any Event of Default.

 

All distributions made to
the Owner pursuant to this Section 3.01 in accordance with the
following wire transfer instructions:

 

	
  BANK:

  	
   

  	
  Bank of America

  
	
  ABA:

  	
   

  	
  026009593

  
	
  ACCT #:

  	
   

  	
  1257205359

  
	
  ACCT NAME:

  	
   

  	
  PennyMac Operating Partnership LP

  
	
   

  	
   

  	
  Operating Account

  

 

Section 3.02                   Monthly
Reports to the Owner.

 

Not later than the twentieth
(20th) calendar day of each month or, if the 10th day is not a Business Day,
the next succeeding Business Day, the Servicer shall furnish to the Owner
standard monthly reports as set forth on Exhibit 1 attached hereto
or in a format mutually agreed upon (which shall be provided in Excel format
and be accessible by the Owner via the Servicer’s secured website).  For all purposes of this Servicing Agreement,
delinquency status shall be determined in accordance with standard MBA
methodology, as is appropriate, as determined by the Owner for the applicable
Mortgage Loan type.  At the time when a
Mortgage Loan becomes subject to this Servicing Agreement, the Owner will
include in the related Notice of Transfer of Mortgage Loans a statement of the
related delinquency methodology to be used for such Mortgage Loan.

 

In addition, on or before March 15th
of each calendar year, the Servicer shall furnish to each Person who was an
Owner (or subsequent owner of a Mortgage Loans subject to 

 

38

 

this
Servicing Agreement) at any time during such calendar year an annual statement
in accordance with the requirements of applicable federal income tax law as to
the aggregate of remittances for the applicable portion of such year.

 

Such obligation of the
Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Servicer pursuant
to any requirements of the Code as from time to time are in force.

 

The Servicer shall prepare
and file any and all tax returns, information statements or other filings
required to be delivered to any governmental taxing authority or to the Owner
pursuant to any applicable law with respect to the Mortgage Loans and the
transactions contemplated hereby.  In
addition, the Servicer shall provide the Owner with such information concerning
the Mortgage Loans as is necessary for the Owner to prepare its federal income
tax return as the Owner may reasonably request from time to time and which is
reasonably available to the Servicer.

 

Section 3.03                   [Reserved]

 

Section 3.04                   Cost
of Funds.

 

With respect to Servicing
Advances made by Servicer under the terms of this Servicing Agreement, the
Servicer shall be entitled to collect from the Owner monthly for the Cost of
Funds on such Servicing Advances.

 

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INTENTIONALLY LEFT BLANK]

 

39

 

ARTICLE IV

 

GENERAL SERVICING PROCEDURES

 

Section 4.01                   Transfers
of Mortgaged Property.

 

The Servicer shall enforce
any “due-on-sale” provision contained in any Mortgage or Mortgage Note and deny
assumption by the Person to whom the Mortgaged Property has been or is about to
be sold whether by absolute conveyance or by contract of sale, and whether or
not the Mortgagor remains liable on the Mortgage and the Mortgage Note.  When the Mortgaged Property has been conveyed
by the Mortgagor, the Servicer shall, to the extent it has knowledge of such
conveyance, exercise its rights to accelerate the maturity of such Mortgage
Loan under the “due-on-sale” clause applicable thereto, provided, however, that
the Servicer shall not exercise such rights if prohibited by law from doing so.

 

If the Servicer reasonably
believes it is unable under applicable law to enforce such “due-on-sale”
clause, the Servicer, shall, to the extent permitted by applicable law, enter
into (i) an assumption and modification agreement with the Person to whom
such property has been conveyed, pursuant to which such Person becomes liable
under the Mortgage Note and the original Mortgagor remains liable thereon or (ii) in
the event the Servicer is unable under applicable law to require that the
original Mortgagor remain liable under the Mortgage Note and the Servicer has
the prior consent of the primary mortgage guarantee insurer, a substitution of
liability agreement with the purchaser of the Mortgaged Property pursuant to
which the original Mortgagor is released from liability and the purchaser of
the Mortgaged Property is substituted as Mortgagor and becomes liable under the
Mortgage Note.  If an assumption fee is
collected by the Servicer for entering into an assumption agreement, such fee
will be retained by the Servicer as additional servicing compensation.  In connection with any such assumption,
neither the Mortgage Interest Rate borne by the related Mortgage Note, the term
of the Mortgage Loan nor the outstanding principal amount of the Mortgage Loan
shall be changed. Where an assumption is allowed pursuant to this Section 4.01,
the Servicer, with the prior written consent of the insurer under the PMI
Policy or LPMI Policy, if any, is authorized to enter into a substitution of
liability agreement with the Person to whom the Mortgaged Property has been
conveyed or is proposed to be conveyed pursuant to which the original Mortgagor
is released from liability and such Person is substituted as Mortgagor and
becomes liable under the related Mortgage Note. Any such substitution of
liability agreement shall be in lieu of an assumption agreement.  The Servicer shall notify the Owner that any
such substitution of liability or assumption agreement has been completed by
forwarding to the Owner, or its designee, the original of any such substitution
of liability or assumption agreement, which document 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.

 

To the extent that any
Mortgage Loan is assumable, the Servicer shall inquire diligently into the
creditworthiness of the proposed transferee, and shall follow Accepted
Servicing Practices and the underwriting practices and procedures of prudent
mortgage lenders in the respective states where the Mortgaged Properties are
located including but not limited to Servicer conducting a review of the credit
and financial capacity of the individual receiving the property, and may
approve the assumption if it believes the recipient is capable of assuming the 

 

40

 

mortgage
obligations.  If the credit of the
proposed transferee does not satisfy the relevant underwriting criteria and the
transfer of ownership actually occurs, the Servicer diligently shall, to the
extent permitted by the Mortgage or the Mortgage Note and by applicable law,
accelerate the maturity of the Mortgage Loan.

 

The Servicer shall be
required to take any action otherwise required by this Section 4.01
only if it determines that the proceeds to the Owner (after giving effect to
the recovery of the Servicer’s out-of-pocket expenses) from payment on, or
disposition of the related Mortgage Loan or REO Property would be
increased as a result of the taking of such action.

 

Section 4.02                   Satisfaction
of Mortgages and Release of Mortgage Files.

 

Upon the payment in full of
any Mortgage Loan, or the receipt by the Servicer of a notification that
payment in full will be escrowed in a manner customary for such purposes, the
Servicer shall notify the Owner in the Monthly Remittance Advice as provided in
Section 3.02, and may request the release of any Mortgage Loan
Documents from the Owner in accordance with this Section 4.02.  The Servicer shall obtain discharge of the
related Mortgage Loan as of record within any related time limit required by
applicable law (unless prevented from complying as a result of the failure of
the local recording office to comply with its obligations on a timely basis).

 

In connection with any
instrument of satisfaction or deed of reconveyance, the Servicer shall be
entitled to a reconveyance fee.  Such
reconveyance fee shall only be reimbursable to the Servicer by the Owner to the
extent the reconveyance fee is uncollectible from the Mortgagor based on the
terms of the security instrument or in the Servicer’s reasonable opinion that
such fee is not allowable by statute.

 

Upon receipt of such
request, the Owner or its designee shall within five (5) Business Days
release or cause to be released the related Mortgage Loan Documents to Servicer
and Servicer shall prepare and process any satisfaction or release.  If the Owner or its designee or the Custodian
does not release the related Mortgage Loan Documents to Servicer within five (5) Business
Days of receipt of request to do so, Servicer may retain a third party to
complete the reconveyance and charge the Owner the actual cost of services
provided by such third party.  Except as
set forth in this paragraph, Servicer shall have no liability for third party
delays that may result in assessed penalties.

 

If the Servicer satisfies or
releases a Mortgage without first having obtained payment in full of the indebtedness
secured by the Mortgage (or such lesser amount in connection with a discounted
payoff accepted by the Servicer with respect to a defaulted Mortgage Loan) or
should the Servicer otherwise prejudice any rights the Owner may have under the
mortgage instruments, the Servicer shall deposit the shortfall amount of the
paid indebtedness in the Custodial Account (unless such shortfall is $500 or
less, in which case no deposit shall be required) within five (5) Business
Days of receipt of such demand by the Owner.

 

The Servicer shall maintain
the Fidelity Bond and Errors and Omissions Insurance Policy as provided for in Section 2.12
insuring the Servicer against any loss it may 

 

41

 

sustain
with respect to any Mortgage Loan not satisfied in accordance with the
procedures set forth herein.

 

Section 4.03                   Servicing
Compensation.

 

As consideration for
servicing the Mortgage Loans, the Owner shall pay the Servicer the applicable
Servicing Fee and Other Fees the Servicer is entitled to each month.  The obligation of the Owner to pay the
Servicing Fee and Other Fees with regard to the Mortgage Loans shall be
irrespective of Monthly Payments collected by the Servicer on the Mortgage
Loans.  The Servicer shall deliver to the
Owner on the tenth (10th) calendar day of each month or, if the 10th day is not
a Business Day, the next succeeding Business Day, an invoice setting forth the
Servicing Fees and Other Fees, including accrued and unpaid Servicing Fees and
Other Fees, with respect to the Mortgage Loans serviced by the Servicer during
the preceding calendar month, and the Owner shall pay such invoice via wire
transfer (in accordance with written instructions to be provided by the
Servicer) no later than the related Distribution Date.  With respect to amounts due to the Servicer
that remain unpaid after the Distribution Date pursuant to this section,
interest shall be due on such late payment at an annual rate equal to the Prime
Rate, adjusted as of the date of each change, plus one percentage point, but in
no event greater than the maximum amount permitted by applicable law.  Such interest shall be paid on the date such
late payment is made and shall cover the period commencing with the day
following the Business Day on which such payment was due and ending with the
Business Day on which such payment is made, both inclusive.  The Servicer shall be entitled to deduct such
unpaid amounts due to Servicer on the Remittance Date following the
Distribution Date that such amounts were due if Owner has not already made
payment.

 

Additional servicing
compensation in the form of Ancillary Income shall be retained by the Servicer
to the extent not required to be deposited in the Custodial Account.  The Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement thereof except as specifically
provided for herein.

 

Notwithstanding anything set
forth in this section related to Ancillary Income, the Servicer shall not
collect from the Mortgagor, pass through as an advance or as a liquidation
expense any charges other than bona fide fees, which fees must be in compliance
with local law.  Servicer can not add on
a processing, or review fee or any additional fee, mark up or otherwise
directly make a profit on or from services or activities rendered by a third
party or affiliate (examples include but not limited to:  letters and notices, force placed insurance, BPOs,
appraisals, inspections, property preservation costs).  Servicer may collect any third party fees
which are charged in accordance with Accepted Servicing Practices.  In no event shall Servicer retain the
Prepayment Penalties.

 

In the event of a dispute
arising from any act or omission by the Servicer or the Owner hereunder during
the course of this Servicing Agreement, the Servicer and the Owner shall use
best efforts to work together in good faith to resolve such dispute within a
time period that is reasonable in the context of the cause of the dispute.  Except in the case of a monetary error, the
Owner and the Servicer shall both work together in good faith to resolve the
dispute within thirty (30) days of a formal notice from either party.  In the case of a monetary error, the 

 

42

 

party
holding the amounts due the other party shall use reasonable efforts to submit
the amount in error within ten (10) Business Days from the date the error
was uncovered.  With respect to amounts
due a party after the tenth (10th) Business Day after the date the error was
uncovered, interest shall be due on such late payment at an annual rate equal
to the federal funds rate as is publicly announced from time to time, plus
three hundred basis points (3.00%) but in no event greater than the maximum
amount permitted by applicable law.  Such
interest shall be paid on the date such late payment is made and shall cover
the period commencing with the day following the Business Day on which such
payment was due and ending with the Business Day on which such payment is made,
both inclusive.

 

Section 4.04                   Annual
Statement as to Compliance.

 

(a)           So long as any Mortgage Loans are being serviced
hereunder, or were serviced hereunder during the prior calendar year, the
Servicer shall, at its own expense, deliver to the Owner, on or before March 28th
of each year beginning March 28, 2010 (but in no event later than the next
to the last Business Day of such month), a statement of compliance addressed to
the Owner and signed by a Servicing Officer, to the effect that (i) a
review of the Servicer’s servicing activities during the immediately preceding
calendar year (or applicable portion thereof) and of its performance under the
servicing provisions of this Servicing Agreement during such period has been
made under such officer’s supervision, and (ii) to the best of such
officer’s knowledge, based on such review, the Servicer has fulfilled all of
its servicing obligations under this Servicing Agreement in all material
respects throughout such calendar year (or applicable portion thereof) or, if
there has been a failure to fulfill any such obligation in any material
respect, specifically identifying each such failure known to such officer, the
nature and the status thereof.

 

Section 4.05                   Annual
Independent Public Accountants’ Servicing Report.

 

(a)           So long as any Mortgage Loans are being serviced
hereunder, or were serviced hereunder during the prior calendar year, the
Servicer shall, at its own expense, deliver to the Owner, on or before March 28th
of each year beginning March 28, 2010 (but in no event later than the next
to the last Business Day of such month), a report of a registered public
accounting firm stating that (i) it has obtained a letter of
representation regarding certain matters from the management of the Servicer
which includes an assertion that the Servicer has complied with certain minimum
residential mortgage loan servicing standards, identified in the Uniform Single
Attestation Program for Mortgage Bankers established by the Mortgage Bankers
Association of America, with respect to the servicing of residential mortgage
loans during the most recently completed fiscal year and (ii) on the basis
of an examination conducted by such firm in accordance with standards established
by the American Institute of Certified Public Accountants, such representation
is fairly stated in all material respects, subject to such exceptions and other
qualifications that may be appropriate. 
In rendering its report such firm may rely, as to matters relating to
the direct servicing of residential mortgage loans by Subservicers, upon
comparable reports of firms of independent certified public accountants
rendered on the basis of examinations conducted in accordance with the same
standards (rendered within one year of such report) with respect to those
Subservicers.

 

Section 4.06                   [Reserved].

 

43

 

Section 4.07                   Right
to Examine Servicer Records.

 

The Owner shall have the
right during the term of this Servicing Agreement to examine and audit any and
all of the books, records, or other information of the Servicer, whether held
by the Servicer or by another on its behalf, with respect to or concerning this
Servicing Agreement or the Mortgage Loans, during normal business hours, upon
reasonable advance notice and at the sole cost and expense of the Owner; provided, however, that unless otherwise required by law,
the Servicer shall not be required to provide access to such information if the
provision thereof would violate any law or legal obligation of the Servicer, or
would compromise the Servicer’s information disclosure and security policies,
including the legal right to privacy of any Mortgagor.

 

Section 4.08                   Compliance
with Gramm-Leach-Bliley Act of 1999.

 

With respect to each
Mortgage Loan and the related Mortgagor, each party shall comply with Title V
of the Gramm-Leach-Bliley Act of 1999 and all applicable regulations and
guidelines promulgated thereunder, and shall provide all notices required of
the party thereunder.

 

Section 4.09                   On-Line
Access.

 

Servicer shall provide to
the Owner internet access (via a secure portfolio management website) to
certain computer screens in the Servicer’s loan administration computer system
or view Mortgage Loan information.  In
addition the Servicer shall update such Mortgage Loan information on a “real
time” basis.  The Servicer shall provide
to the Owner internet access (via secure report and data transmission website)
to the Servicer’s loan administration computer system to transmit and receive
Mortgage Loan information relating to new loan boardings, service releases and
to download portfolio management reports. 
With respect to access to Servicer’s portfolio management website, the
Servicer shall provide the Owner with the tools to create and administer log-in
identifications and passwords for each of its authorized users.  In accessing Servicer’s websites, the Owner
agrees that it will: (i) only log-in with the identification assigned by
the Servicer; (ii) correctly and completely log off the system immediately
upon completion of each session of service; (iii) not allow any
unauthorized employee or agent of the Owner, to use the assigned log in
identification or improperly access the Servicer’s computer system; (iv) keep
the assigned log in identification and all other information enabling such
access strictly confidential; (v) not access, or attempt to access any
Servicer systems or data other than that which is specifically authorized; (vi) not
intentionally spread viruses or other malicious computer codes to the Servicer’s
computer systems; (vii) not copy or infringe upon any content contained on
the Servicer’s loan administration computer system; (vii) designate in
writing an administrator who shall maintain on a quarterly basis a current list
of employees or agents of the Owner who have been authorized to access the
Servicer’s loan administration computer system and assigned log in
identifications and passwords pursuant to this Section 4.09 (each
an “Authorized User”); (viii) conduct a quarterly review to ensure
that each Authorized User is currently an employee or agent of the Owner and
whose employment or function as agent of the Owner requires the Authorized User
to have continued access to the Servicer’s loan administration computer system;
(ix) immediately remove from the list of authorized users, and deny access
to, any individual who is not currently an employee or agent of the Owner or
whose employment or function as agent no longer requires such employee or agent
of the Owner to 

 

44

 

remain
an Authorized User and to have access to the Servicer’s loan administration
computer system; and (x) deliver to the Servicer on or before the end of
the month following each anniversary of the date of execution of this Servicing
Agreement, beginning on the first such anniversary following the execution of
this Servicing Agreement, an officer’s certification stating that the Owner has
fully complied and satisfied the obligations as set forth above in clauses (i) through
(ix).

 

Access to the Servicer’s
administration system shall be available 24 hours a day and seven days a
week.  Notwithstanding the foregoing, the
Servicer shall have no liability to the Owner in the event that access to the
Servicer’s loan administration system becomes limited or otherwise unavailable
during periods of heavy use, upgrades, maintenance to address security concerns
or otherwise.  The Owner acknowledges
that Mortgage Loan information may only be accessible for viewing during such
time the Mortgage Loan is being serviced under this Servicing Agreement.  The Servicer shall purge all reports and
files from websites that are aged more than sixty (60) days and the Servicer
shall not be responsible to store, maintain, or archive such reports and files
unless otherwise agreed upon in writing by both parties.

 

Section 4.10                   [Reserved].

 

Section 4.11                   Use
of Subservicers.

 

It shall not be necessary
for the Servicer to seek the consent of the Owner to the utilization of any
Subservicer or Affiliate.  The Servicer
shall be responsible for obtaining from each Subservicer and delivering to the
Owner any servicer compliance statement required to be delivered by such
Subservicer under Section 4.04 and any assessment of compliance and
attestation required to be delivered by such Subservicer under Section 4.05.

 

Section 4.12                   Mortgage
Loans Held by Wholly Owned Subsidiaries of Owner.

 

The Servicer acknowledges
that certain Mortgage Loans may be held by the Owner through one or more of its
wholly owned subsidiaries.  The Servicer
shall service such Mortgage Loans in accordance with the provisions of this
Servicing Agreement in the same manner as it services Mortgage Loans held
directly by the Owner.  The Servicing Fee
and Other Fees in respect of Mortgage Loans held through wholly owned
subsidiaries of the Owner may, at the option of the Owner, be paid directly by
the Owner or by the subsidiary holding the related Mortgage Loan.

 

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45

 

ARTICLE V

 

SERVICER TO COOPERATE

 

Section 5.01                   Provision
of Information.

 

During the term of this
Servicing Agreement, the Servicer shall furnish to the Owner all reports
required hereunder, and such other periodic, special, or other reports or
information, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Owner or the purposes of this
Servicing Agreement to the extent such reports or information are readily
accessible to the Servicer without undue expense.  All such reports or information shall be
provided by and in accordance with all reasonable instructions and directions
which the Owner may give and to the extent the Servicer incurs any material
cost or expense related to this Section 5.01 not otherwise required
to be incurred pursuant to this Servicing Agreement, such expense shall be at
the sole cost and expense of the Owner.

 

The Servicer shall execute
and deliver all such instruments and take all such action as the Owner may
reasonably request from time to time to the extent such action is in accordance
with Accepted Servicing Practices, in order to effectuate the purposes and to
carry out the terms of this Servicing Agreement.

 

Section 5.02                   Financial
Statements; Servicing Facilities.

 

In connection with marketing
the Mortgage Loans or a proposed Reconstitution, the Owner shall make available
to a prospective purchaser audited financial statements of the consolidated
group that includes the Servicer for the most recently completed three fiscal years
for which such statements are available, as well as a “Consolidated Statement
of Condition” at the end of the last two fiscal years for which such statements
are available covered by any “Consolidated Statement of Operations”.  The Servicer also shall make available any
comparable interim statements to the extent any such statements have been
prepared by or on behalf of the corporate group that includes the Servicer (and
are available upon request to the public at large).  The Servicer shall furnish to the Owner or a
prospective purchaser copies of the statements specified above.

 

The Servicer shall make
available to the Owner or any prospective purchaser a knowledgeable
representative for the purpose of answering questions respecting recent
developments affecting the Servicer or the financial statements of the
corporate group that includes the Servicer, and to permit any prospective
purchaser (upon reasonable notice) to inspect the Servicer’s servicing
facilities (no more than 6 times per year unless mutually agreed to between the
parties) for the purpose of satisfying such prospective purchaser that the
Servicer has the ability to service the Mortgage Loans as provided in this
Servicing Agreement provided that
such access is necessary, reasonable, or appropriate with respect to the Owner
or the purposes of this Servicing Agreement to the extent such access or
information are readily accessible to the Servicer without undue expense.

 

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46

 

ARTICLE VI

 

TERMINATION

 

Section 6.01                   Termination.

 

(a)           This Servicing Agreement shall continue in full force and
effect until terminated in accordance with the provisions of this
paragraph.  This Servicing Agreement shall
terminate, without the payment of any termination fee, upon the earlier
of:  (i) the termination of the
Servicer pursuant to this Section 6.01, 8.03 or 11.01
and (ii) the termination of the Management Agreement.

 

(b)           Notwithstanding and in addition to the foregoing, the
Servicer shall have the right to terminate this Servicing Agreement for cause,
after thirty (30) days’ written notice thereof by Servicer, if (i) Owner
fails to remit any compensation due to the Servicer within the time periods
specified pursuant to the terms of this Servicing Agreement, (ii) the
Owner fails to perform any material obligations hereunder or (iii) the
Owner has not transferred any Mortgage Loan to the Servicer upon the expiration
of ninety (90) days after the execution of this Servicing Agreement.

 

(c)           Notwithstanding and in addition to the foregoing, in the
event that (i) a Mortgage Loan becomes delinquent for a period of one
hundred and twenty (120) days or more (a “Delinquent Mortgage Loan”) or (ii) a
Mortgage Loan becomes an REO Property, the Owner may at its election terminate
this Servicing Agreement with respect to such Delinquent Mortgage Loan or REO
Property upon thirty (30) days’ written notice to the Servicer, provided, however, upon such transfer and assignment which
shall be in accordance with all applicable laws, the Owner shall reimburse the
Servicer for its Servicing Fee, any outstanding and unreimbursed Servicing
Advances, and any other outstanding, unreimbursed fees and costs of the
Servicer with respect to such Delinquent Mortgage Loan or REO Property.

 

(d)           In the event that the Servicer’s duties, responsibilities
and liabilities under this Servicing Agreement should be terminated pursuant to
the aforementioned sections, the Servicer shall discharge such duties and
responsibilities during the period from the date it acquires knowledge of such
termination until the Transfer Date with the same degree of diligence and
prudence which it is obligated to exercise under this Servicing Agreement, and
shall take no action whatsoever that might impair or prejudice the rights or
financial condition of its successor. 
Following any such termination, the Owner shall act diligently to
appoint a successor servicer.  The
resignation or removal of the Servicer pursuant to the aforementioned sections
shall not become effective until a successor shall be appointed by the
Owner.  Notwithstanding anything to the
contrary contained herein, in no event shall a termination of this Servicing
Agreement or the Servicer hereunder terminate any indemnification obligations
of the Servicer, which obligations shall survive any such termination.

 

Section 6.02                   Transfer
of Servicing.

 

On the Transfer Date or upon
any termination of the Servicer as Servicer pursuant to Section 6.01,
the Owner or a successor servicer appointed by the Owner, shall assume all 

 

47

 

servicing
responsibilities related to, and the Servicer shall cease all servicing
responsibilities related to the Mortgage Loans. 
Any successor servicer shall have the right to negotiate a new Servicing
Fee with the Owner.

 

Owner shall provide the
Servicer not less than twenty (20) days’ prior written notice of the Transfer
Date.  Any Mortgage Loan service released
by the Servicer shall be released on actual balances as of the Transfer
Date.  Upon receipt of such notification
from Owner the Servicer shall, at its sole cost and expense, take such steps as
may be necessary or appropriate to effectuate and evidence the transfer of the
servicing of the related Mortgage Loans to the successor servicer, including
but not limited to the following:

 

(a)           Notice to Mortgagors.  The Servicer shall mail to the Mortgagor of
each related Mortgage Loan a letter advising such Mortgagor of the transfer of
the servicing of the related Mortgage Loan to the Owner, or its designee, in
accordance with RESPA; provided, however,
such letters shall be in the form mutually agreed upon by the Owner and the
Serciver prior to a pending transfer.

 

(b)           Mortgage Loans in Foreclosure.  The servicing with respect to Mortgage Loans
in foreclosure on or before the related Transfer Date shall not be transferred
from the Servicer to the Owner or the successor servicer, as the case may be,
and such Mortgage Loans shall continue to be serviced by the Servicer pursuant
to the terms of this Servicing Agreement. 
However, if the Owner so elects, the Owner may waive the provisions of
this paragraph (a) and accept transfer of servicing of such Mortgage Loans
and all amounts received by the Servicer thereunder.

 

(c)           Servicing Advances. 
Subject to the limitations set forth in the definition of “Nonrecoverable
Advances”, the Servicer shall be entitled to be reimbursed for all unreimbursed
Servicing Advances and any other advances made by the Servicer pursuant to this
Servicing Agreement with respect to any Mortgage Loan on the related Transfer
Date, but only if the successor servicer after the related Transfer Date is not
the Servicer or an affiliate.  In addition,
the Owner shall cause the Servicer to be reimbursed for any accrued and unpaid
Servicing Fees, unpaid Ancillary Income, Other Fees and for any trailing
expenses representing Servicing Advances for which invoices are received by the
Servicer after the Transfer Date.  The
Owner shall cause the Servicer to be reimbursed for such trailing expenses
within five (5) Business Days of receipt of such invoice.

 

Anything to the contrary in
this Section 6.02(c) notwithstanding, in the event that Servicer is
terminated for cause as a result of the occurrence of an Event of Default under
this Servicing Agreement, the payments required in this Section 6.02(c)
shall be made in the amounts and at the times otherwise provided in this
Servicing Agreement.

 

(d)           Notice to Taxing Authorities and Insurance Companies.  The Servicer shall transmit to the applicable
taxing authorities and insurance companies (including primary mortgage
insurance policy insurers, if applicable) and/or agents, notification of the
transfer of the servicing to the Owner, or its designee, and instructions to
deliver all notices, tax bills and insurance statements, as the case may be, to
the Owner from and after the related Transfer Date.

 

48

 

(e)                                Delivery of
Servicing Records.  The
Servicer shall forward to the Owner, or its designee, all servicing records and
the Servicing File in the Servicer’s possession relating to each related
Mortgage Loan.

 

(f)                                  Escrow Payments.  The Servicer shall provide the Owner, or its
designee, with immediately available funds by wire transfer in the amount of
the net Escrow Payments and suspense balances and all loss draft balances
associated with the related Mortgage Loans. 
The Servicer shall also provide the Owner with an accounting statement
of Escrow Payments and suspense balances and loss draft balances sufficient to
enable the Owner to reconcile the amount of such payment with the accounts of
the Mortgage Loans.  Additionally, the
Servicer shall wire transfer to the Owner the amount of any agency, trustee or
prepaid Mortgage Loan payments and all other similar amounts held by the
Servicer.

 

(g)                               Payoffs and
Assumptions.  The
Servicer shall provide to the Owner, or its designee, copies of all assumption
and payoff statements generated by the Servicer on the related Mortgage Loans
from the related Cut-off Date to the related Transfer Date.

 

(h)                               Mortgage
Payments Received Prior to the Related Transfer Date.  Prior to the related Transfer Date all
payments received by the Servicer on each related Mortgage Loan shall be
properly applied to the account of the particular Mortgagor.

 

(i)                                   Mortgage
Payments Received After Transfer Date.  The amount of any related Monthly Payments
received by the Servicer after the related Transfer Date shall be forwarded to
the Owner or its designee within two (2) Business Days after the date of
receipt.  The Servicer shall notify the
Owner or its designee of the particulars of the payment, which notification
requirement shall be satisfied if the Servicer forwards with its payment
sufficient information to permit appropriate processing of the payment by the
Owner or its designee.  The Servicer
shall assume full responsibility for the necessary and appropriate legal
application of such Monthly Payments received by the Servicer after the related
Transfer Date with respect to related Mortgage Loans then in foreclosure or
bankruptcy; provided, however,
that for purposes of this Servicing Agreement, necessary and appropriate legal
application of such Monthly Payments shall include, but not be limited to,
endorsement of a Monthly Payment to the Owner with the particulars of the
payment such as the account number, dollar amount, date received and any
special Mortgagor application instructions and the Servicer shall comply with
the foregoing requirements with respect to all Monthly Payments received by it.

 

(j)                                   Misapplied
Payments.  Misapplied
payments shall be processed as follows:

 

(i)            All
parties shall cooperate in correcting misapplication errors;

 

(ii)           The
party receiving notice of a misapplied payment occurring prior to the related
Transfer Date and discovered after the related Transfer Date shall immediately
notify the other party;

 

(iii)          If
a misapplied payment which occurred prior to the related Transfer Date cannot
be identified and said misapplied payment has resulted in a shortage in a
Custodial Account or Escrow Account, and such misapplied 

 

49

 

payment was the direct result of the Servicer’s error, the Servicer
shall be liable for the amount of such shortage.  In such case, the Servicer shall reimburse
the Owner for the amount of such shortage within thirty (30) days after receipt
of written demand therefor from the Owner;

 

(iv)          If
a misapplied payment which occurred prior to the related Transfer Date has
created an improper Purchase Price as the result of an inaccurate outstanding
principal balance and such misapplied payment was the direct result of the
Servicer’s error, a check shall be issued to the party shorted by the improper
payment application within thirty (30) days after notice thereof by the other
party; and

 

(v)           Any
check issued under the provisions of this Section 6.02(j) shall be
accompanied by a statement indicating the Owner Mortgage Loan identification
number and an explanation of the allocation of any such payments.

 

(k)           Books and Records. 
On the related Transfer Date, the books, records and accounts of the
Servicer with respect to the related Mortgage Loans shall be in accordance with
all Accepted Servicing Practices.

 

On the related Transfer
Date, the Servicer shall comply with all of the provisions of this Servicing
Agreement to effect a complete transfer of the servicing with respect to the
related Mortgage Loans.  Except as
otherwise provided in this Servicing Agreement, on the related Transfer Date
for each related Mortgage Loan, this Servicing Agreement, except for Articles
VI, VIII, IX, and X, and Sections 13.04, 13.06,
13.07, 13.08, 13.12, 13.13, 13.14, 13.16,
13.17 and 13.18 which shall survive the related Transfer Date,
shall terminate with respect to such Mortgage Loan.

 

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50

 

ARTICLE VII

 

BOOKS AND RECORDS

 

Section 7.01                   Possession
of Servicing Files Prior to the Related Servicing Transfer Date.

 

The contents of each
Servicing File are and shall be held in trust by the Servicer for the benefit
of the Owner as the owner thereof.  The
Servicer shall maintain in the Servicing File a hard or electronic copy, if available,
of each Mortgage Loan Document received by the Owner or its designee and the
originals or copies of documents not delivered to the Owner in the Servicer’s
possession received during the term of this Servicing Agreement.  The possession of the Servicing File by the
Servicer is at the will of the Owner for the sole purpose of servicing the
related Mortgage Loan, pursuant to this Servicing Agreement, and such retention
and possession by the Servicer is in its capacity as Servicer only and at the
election of the Owner.  The Servicer
shall release its custody of the contents of any Servicing File only in
accordance with written instructions from the Owner, unless such release is
required as incidental to the Servicer’s servicing of the Mortgage Loans
pursuant to this Servicing Agreement.

 

The Servicer shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Mortgage Loan which shall be marked clearly to reflect the
ownership of each Mortgage Loan by the Owner. 
In particular, the Servicer shall maintain in its possession, available
for inspection by the Owner, and shall deliver to the Owner if so directed by
the Owner, upon written demand, evidence of compliance with all federal, state
and local laws, rules and regulations, and requirements of Fannie Mae,
including but not limited to documentation as to the method used in determining
the applicability of the provisions of the National Flood Insurance Act of 1968
or Flood Disaster Prevention Act of 1973, as amended, to the Mortgaged
Property, documentation evidencing insurance coverage and eligibility of any
condominium project for approval by Fannie Mae and periodic inspection reports
as required by Section 2.13, as applicable.

 

The Servicer shall keep at
its servicing office books and records in which, subject to such reasonable
regulations as it may prescribe, the Servicer shall note transfers of Mortgage
Loans.

 

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51

 

ARTICLE VIII

 

INDEMNIFICATION AND
ASSIGNMENT

 

Section 8.01                   Indemnification;
Remedies.

 

(a)                                The Servicer
agrees to indemnify and hold the Owner and any successor servicer harmless from
any liability, claim, loss or damage (including, without limitation, any reasonable
legal fees, judgments or expenses relating to such liability, claim, loss or
damage) to the Owner directly or indirectly resulting from the Servicer’s
failure:

 

(i)            to
observe and perform any or all of the Servicer’s duties, obligations, covenants,
agreements, warranties or representations contained in this Servicing
Agreement; or

 

(ii)           to
comply with all applicable requirements with respect to the servicing of the
Mortgage Loans as set forth herein.

 

The Servicer immediately
shall notify the Owner if a claim is made by a third party with respect to this
Servicing Agreement.  For purposes of
this Section 8.01(a), “Owner” shall mean the Person then acting as
the Owner under this Servicing Agreement and any and all Persons who previously
were “Owners” under this Servicing Agreement.

 

(b)           The Owner agrees to indemnify and hold the Servicer
harmless from any liability, claim, loss or damage (including without
limitation, any reasonable legal fees, judgments or expenses relating to such
liability, claim, loss or damage) to the Servicer (a) directly or
indirectly resulting from the Owner’s failure to observe and perform any or all
of the Owner’s duties, obligations, covenants, agreements, warranties or
representations contained in this Servicing Agreement or (b) directly
resulting from the Servicer taking any legal actions with respect to any
Mortgage Loans and/or REO Properties in the name of the Servicer and without
reference to the Owner, or (c) any act or omission on the part of any
prior servicer or (d) directly resulting from any third party act or
omission which occurred in connection with the origination, processing, funding
or servicing of a mortgage loan; but, in each case set forth in subparts (a) - (d)
above, only to the extent such loss does not result from the Servicer’s own
gross negligence, bad faith or willful misconduct or failure of the Servicer (i) to
observe and perform any or all of Servicer’s duties, obligations, covenants,
agreements, warranties or representations contained in this Servicing
Agreement; or (ii) to comply with all applicable requirements with respect
to the servicing of the Mortgage Loans as set forth herein.

 

(c)           (i)            Any
failure by the Servicer or any Subservicer to deliver any information, report,
certification, accountants’ letter or other material when and as required under
Sections 4.04, 4.05, or 5.02, which continues unremedied
for three Business Days after receipt by the Servicer and the applicable
Subservicer or subcontractor, of written notice of such failure from the Owner,
shall, except as provided in clause (ii) of this paragraph, constitute an
Event of Default with respect to the Servicer under this Servicing Agreement,
and shall entitle the Owner in its sole discretion to terminate the rights and
obligations of the Servicer as servicer under this Servicing Agreement without
payment (notwithstanding anything in this Agreement 

 

52

 

related thereto to the contrary) of any
compensation to the Servicer; provided, however, it is understood that the
Servicer shall remain entitled to receive reimbursement for all unreimbursed
Servicing Advances made by the Servicer under this Servicing Agreement.  Notwithstanding anything to the contrary set
forth herein, to the extent that any provision of this Servicing Agreement
expressly provides for the survival of certain rights or obligations following
termination of the Servicer as servicer, such provision shall be given effect.

 

(ii)           Any
failure by the Servicer or any Subservicer to deliver any information, report,
certification or accountants’ letter or other material when and as required
under this Servicing Agreement, which continues unremedied for three (3) Business
Days after receipt by the applicable Subservicer of written notice of such
failure from the Owner shall constitute an Event of Default with respect to the
Servicer under this Servicing Agreement, and shall entitle the Owner in its
sole discretion to terminate the rights and obligations of the Servicer as
servicer under this Servicing Agreement without payment (notwithstanding
anything in this Agreement to the contrary) of any compensation to the
Servicer; provided, however, it is understood that the Servicer shall remain
entitled to receive reimbursement for all unreimbursed Servicing Advances made
by the Servicer under this Servicing Agreement. 
Notwithstanding anything to the contrary set forth herein, to the extent
that any provision of this Servicing Agreement expressly provides for the
survival of certain rights or obligations following termination of the Servicer
as servicer, such provision shall be given effect.

 

(d)           If the indemnification provided for herein is unavailable
or insufficient to hold harmless the indemnified party, then the indemnifying
party agrees that it shall contribute to the amount paid or payable by such
indemnified party as a result of any claims, losses, damages or liabilities
uncured by such indemnified party in such proportion as is appropriate to
reflect the relative fault of such indemnified party on the one hand and the
indemnifying party on the other.

 

(e)           The foregoing indemnifications provided for in this Section
are not intended by the parties to encompass “normal” litigation relating to
servicing operations conducted in accordance with Standard Servicing Practices
including, without limitation, foreclosure litigation.

 

(f)            The indemnifications provided for in this Section shall
survive the termination of Servicing Agreement or the termination of any party
to this Servicing Agreement.

 

Section 8.02                   Limitation
on Liability of Servicer and Others.

 

Neither the Servicer nor any
of the directors, officers, employees or agents of the Servicer shall be under
any liability to the Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Servicing Agreement, or for
errors in judgment, provided, however,
that this provision shall not protect the Servicer or any such person against
any breach of warranties or representations made herein, its own grossly
negligent actions, or failure to perform its obligations in compliance with any
standard of care set forth in this Servicing Agreement, or any liability which
would otherwise be imposed by reason of any 

 

53

 

breach
of the terms and conditions of this Servicing Agreement.  The Servicer and any director, officer,
employee or agent of the 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 Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Mortgage Loans in
accordance with this Servicing Agreement and which in its opinion may involve
it in any expense or liability, provided, however, that
the Servicer may undertake any such action which it may deem necessary or
desirable in respect to this Servicing Agreement and the rights and duties of
the parties hereto.  In such event, the
Servicer shall be entitled to reimbursement from the Owner of the reasonable
legal expenses and costs of such action.

 

Section 8.03                   Limitation
on Resignation and Assignment by Servicer.

 

The Owner has entered into
this Servicing Agreement with the Servicer and subsequent purchasers will
purchase the Mortgage Loans in reliance upon the independent status of the
Servicer, and the representations as to the adequacy of its servicing
facilities, plant, personnel, records and procedures, its integrity, reputation
and financial standing, and the continuance thereof.  Therefore, the Servicer shall not assign this
Servicing Agreement or the servicing hereunder or delegate its rights or duties
hereunder or any portion hereof or sell or otherwise dispose of all or
substantially all of its property or assets without the prior written consent
of the Owner, which consent shall be granted or withheld in the reasonable
discretion of the Owner.

 

The Servicer may, without
the consent of the Owner, retain third party contractors to perform certain
servicing and loan administration functions, including without limitation,
hazard insurance administration, tax payment and administration, flood
certification and administration, collection services and similar functions; provided,  however, that
the retention of such contractors by Servicer shall not limit the obligation of
the Servicer to service the Mortgage Loans pursuant to the terms and conditions
of this Servicing Agreement.

 

The Servicer shall not
resign from the obligations and duties hereby imposed on it except by mutual
consent of the Servicer and the Owner or upon the determination that its duties
hereunder are no longer permissible under applicable law and such incapacity
cannot be cured by the Servicer.  Any
such determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Owner which
Opinion of Counsel shall be in form and substance acceptable to the Owner.  No such resignation shall become effective
until a successor shall have assumed the Servicer’s responsibilities and
obligations hereunder in the manner provided in Section 6.02.

 

Without in any way limiting
the generality of this Section 8.03, in the event that the Servicer
either shall assign this Servicing Agreement or the servicing responsibilities
hereunder or delegate its duties hereunder or any portion thereof or sell or
otherwise dispose of all or substantially all of its property or assets without
the prior written consent of the Owner, then the Owner shall have the right to
terminate this Servicing Agreement upon notice given as set forth in Section 6.01(a),
11.01(g) and 13.01, without any payment of any penalty or damages
and without any liability whatsoever to the Servicer or any third party.

 

54

 

Section 8.04                   Assignment
by Owner.

 

Subject to the limitations
and requirements set forth in the third paragraph of Section 2.01,
the Owner shall have the right, to assign, in whole or in part, its interest
under this Agreement with respect to some or all of the Mortgage Loans, and
designate any Person to exercise any rights of the Owner hereunder.

 

Section 8.05                   Merger
or Consolidation of the Servicer.

 

The Servicer will keep in full
effect its existence, rights and franchises as a limited partnership under the
laws of the state of its filing except as permitted herein, and will 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 Servicing Agreement, or any of the
Mortgage Loans and to perform its duties under this Servicing Agreement.  Any Person into which the Servicer may be
merged or consolidated, or any corporation resulting from any merger,
conversion or consolidation (including by means of the sale of all or
substantially all of the Servicer’s assets to such Person) to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer (whether or not related to loan servicing), shall be the successor of
the Servicer 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

 

The Servicer shall give
ninety (90) days’ prior written notice to the Owner to the extent permitted by
applicable law of any such merger, conversion, consolidation, sale or other
disposition to which the Servicer proposes to be a party.  In the event that any successor entity to the
Servicer fails to meet the requirements set forth in this Section 8.05
and the Owner does not consent to such successor becoming the servicer
hereunder, then the Servicer shall have the right to terminate this Servicing
Agreement with respect to the Servicer and any such successor upon notice given
as set forth in Section 6.01, without any payment of any
termination penalty or termination damages and without any additional liability
whatsoever to the Servicer or any third party, except for liabilities accrued
under this Servicing Agreement prior to the date of termination and for
liabilities resulting from Owner’s obligations hereunder, including the payment
of the Servicing Fee pursuant to Section 4.03.

 

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55

 

ARTICLE IX

 

REPRESENTATIONS, WARRANTIES
AND COVENANTS OF OWNER

 

As of the date hereof and on
each date on which a Mortgage Loan becomes subject to the terms of this
Servicing Agreement, the Owner warrants and represents to, and covenants and
agrees with, the Servicer as follows:

 

Section 9.01           Organization and Good Standing;
Licensing.

 

The Owner is a Delaware
limited partnership, duly organized, validly existing and has the power and
authority to own its assets and to transact the business in which it is currently
engaged.

 

Section 9.02           Authorization; Binding Obligations.

 

The Owner has the power and
authority to make, execute, deliver and perform this Servicing Agreement, and
perform all of the transactions contemplated to be performed by it under this
Servicing Agreement, and has taken all necessary action to authorize the
execution, delivery and performance of this Servicing Agreement.  When executed and delivered, this Servicing
Agreement will constitute the legal, valid and binding obligation of the Owner
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally and by the availability of equitable remedies.

 

Section 9.03           No Consent Required.

 

The Owner is not required to
obtain the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Servicing Agreement, except
such as have been obtained or made or as to which the failure to obtain or make
will not materially adversely affect the ability of the Owner to perform all
obligations hereunder.

 

Section 9.04           No Violations.

 

The execution, delivery and
performance of this Servicing Agreement by the Owner will not violate any
provision of any existing law or regulation or any order or decree of any court
applicable to the Owner, except for violations that will not adversely affect
the Owner’s ability to perform its obligations under this Servicing Agreement
or the certificate of incorporation of the Owner, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which the
Owner is a party or by which the Owner may be bound.

 

Section 9.05           Litigation.

 

No litigation or
administrative proceeding of or before any court, tribunal or governmental body
is currently pending or to the knowledge of the Owner threatened, against the 

 

56

 

Owner
or with respect to this Servicing Agreement, which if adversely determined
would have a material adverse effect on the transactions contemplated by this
Servicing Agreement.

 

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57

 

ARTICLE X

 

REPRESENTATIONS AND
WARRANTIES OF SERVICER

 

As of the date hereof and on
each date on which a Mortgage Loan becomes subject to the terms of this Servicing
Agreement, the Servicer warrants and represents to, and covenants and agrees
with, the Owner as follows:

 

Section 10.01         Due Organization and Authority.

 

The Servicer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware as now being conducted and is licensed,
qualified and in good standing in each state where a Mortgaged Property is
located if the laws of such state require licensing or qualification in order
to conduct business of the type conducted by the Servicer, and in any event the
Servicer is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of the related Mortgage Loan in
accordance with the terms of this Servicing Agreement; the Servicer has the
full power and authority to execute and deliver this Servicing Agreement and to
perform in accordance herewith; the execution, delivery and performance of this
Servicing Agreement (including all instruments or transfer to be delivered
pursuant to this Servicing Agreement) by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized;
this Servicing Agreement evidences the valid, binding and enforceable
obligation of the Servicer; and all requisite action has been taken by the
Servicer to make this Servicing Agreement valid and binding upon the Servicer
in accordance with its terms.

 

Section 10.02         Ordinary Course of Business.

 

The consummation of the
transactions contemplated by this Servicing Agreement are in the ordinary
course of business of the Servicer.

 

Section 10.03         No Conflicts.

 

Neither the execution and
delivery of this Servicing Agreement, nor the fulfillment of or compliance with
the terms and conditions of this Servicing Agreement, will conflict with or
result in a breach of any of the terms, conditions or provisions of the
Servicer’s organizational documents or any legal restriction or any agreement
or instrument to which the Servicer is now a party or by which it is bound, or
constitute a default or result in an acceleration under any of the foregoing,
or result in the violation of any law, rule, regulation, order, judgment or
decree to which the Servicer or its property is subject, or impair the ability
of the Owner to realize on the Mortgage Loans, or impair the value of the
Mortgage Loans.

 

Section 10.04         Ability to Service.

 

The Servicer has the
facilities, procedures, and experienced personnel necessary for the sound
servicing of mortgage loans of the same type as the Mortgage Loans.  The Servicer is in good standing to enforce
and service mortgage loans in the jurisdiction wherein the Mortgaged Properties
are located.

 

58

 

Section 10.05         Ability to Perform.

 

The Servicer does not
believe, nor does it have any reason or cause to believe, that it cannot
perform each and every covenant contained in this Servicing Agreement.

 

Section 10.06         No Litigation Pending.

 

There is no action, suit,
proceeding or investigation pending or to the best of Servicer’s knowledge
threatened against the Servicer, before any court, administrative agency or
other tribunal asserting the invalidity of this Servicing Agreement, seeking to
prevent the consummation of any of the transactions contemplated by this
Servicing Agreement or which, either in any one instance or in the aggregate,
may result in any material adverse change in the business, operations,
financial condition, properties or assets of the Servicer, or in any material
impairment of the right or ability of the Servicer to carry on its business
substantially as now conducted, or in any material liability on the part of the
Servicer, or which would draw into question the validity of this Servicing
Agreement, or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Servicer contemplated herein, or which
would be likely to impair materially the ability of the Servicer to perform
under the terms of this Servicing Agreement.

 

Section 10.07         No Consent Required.

 

No consent, approval,
authorization or order of any court or governmental agency or body is required
for the execution, delivery and performance by the Servicer of or compliance by
the Servicer with this Servicing Agreement, or the servicing of the Mortgage
Loans as evidenced by the consummation of the transactions contemplated by this
Servicing Agreement, or if required, such approval has been obtained prior to
the date hereof.

 

Section 10.08         No Untrue Information.

 

No statement, report or
other document relating to the Servicer furnished or to be furnished by the
Servicer pursuant to this Servicing Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements contained
therein not misleading.

 

Section 10.09         [Reserved].

 

Section 10.10         MERS.

 

The Servicer 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 long as such Mortgage Loans are registered with MERS.

 

To the extent the Owner
requests the Servicer to register or transfer a Mortgage Loan with Mortgage
Electronic Registration System, Inc., the Owner shall transfer or cause to
be transferred to Servicer the required mortgage loan information within five (5) Business
Days of the Servicing Transfer Date.  For
such services, the Owner agrees to pay the Servicer the fee set 

 

59

 

forth
on Exhibit 9 upon the boarding or release of such Mortgage Loan on
the Servicer’s mortgage loan administration system.

 

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60

 

ARTICLE XI

 

DEFAULT

 

Section 11.01         Events of Default.

 

The following shall
constitute an Event of Default under this Agreement on the part of the
Servicer:

 

(a)           any failure by the Servicer to remit to the Owner (or as
otherwise directed by the Owner) any payment required to be made under the
terms of this Servicing Agreement which continues unremedied for a period of
five (5) Business Days after the date upon which notice of such failure is
given to the Servicer, requiring the same to be remedied, shall have been given
to the Servicer by the Owner; or

 

(b)           the failure by the Servicer duly to observe or perform in
any material respect any other of the covenants or agreements on the part of
the Servicer set forth in this Servicing Agreement which continues unremedied
for a period of thirty (30) days (except that such number of days shall be
fifteen (15) in the case of a failure to pay any premium for any insurance
policy under this Servicing Agreement) after the date on which notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Owner (the date of delivery of such notice, the “Notice Date”);
provided, however, that in the case of a
failure that cannot be cured within thirty (30) days after the Notice Date, the
cure period may be extended if the Servicer can demonstrate to the reasonable
satisfaction of the Owner that the failure can be cured and the Servicer is
diligently pursuing remedial action; or

 

(c)           a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force undischarged or unstayed for
a period of 60 days; or

 

(d)           the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, bankruptcy,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to all or
substantially all of its property; or

 

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

 

(f)            the Servicer fails to maintain its license to do business
or service residential mortgage loans in any jurisdiction where the Mortgaged
Properties are located for more than ninety (90) days after receiving notice
from any Person thereof, provided
that such failure shall not constitute an Event of Default if, prior to the
expiration of such ninety (90) day period, that Servicer transfers the
affected Mortgaged Properties to one or more Subservicers that 

 

61

 

satisfy the licensing requirements for the
jurisdiction where such Mortgaged Properties are located;

 

(g)           the Servicer attempts to assign its right to servicing
compensation hereunder or the Servicer attempts, without the consent of the
Owner, to sell or otherwise dispose of all or substantially all of its property
or assets or to assign this Servicing Agreement or the servicing
responsibilities hereunder or to delegate its duties hereunder or any portion
thereof in a manner not permitted under this Servicing Agreement; or

 

(h)           any of those failures specified in Section 8.01(c)(i) or
(ii) as constituting an Event of Default under this Servicing
Agreement.

 

In each and every such case,
so long as an Event of Default shall not have been remedied, in addition to
whatsoever rights the Owner may have at law or equity to damages, including
injunctive relief and specific performance, the Owner, by notice in writing to
the Servicer, may terminate without compensation all the rights and obligations
of the Servicer under this Servicing Agreement and in and to the Mortgage Loans
and the proceeds thereof.

 

In case one or more Events
of Default by Servicer occur and shall not have been remedied, the Owner, by
notice in writing to Servicer may, in addition to whatever rights the Owner may
have at law or equity to damages, including injunctive relieve and specific
performance, terminate all the rights and obligations of Servicer under this
Servicing Agreement and in and to the Mortgage Loans and the proceeds thereof.  The Servicer shall not be entitled to any
Service Release Fees upon such termination; provided, however, that  the Servicer shall be entitled to any accrued and unpaid
Servicing Fees, Servicing Advances, Other Fees and Ancillary Income to the date
of such termination.  Upon receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Servicing Agreement, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the successor appointed pursuant to Section 6.02.  Upon written request from the Owner, the
Servicer shall prepare, execute and deliver any and all documents and other
instruments, place in such successor’s possession all Mortgage Files to the
extent initially provided to the Servicer, and 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, at the Servicer’s sole
expense or as otherwise provided under Accepted Servicing Practices.  The Servicer agrees to cooperate with the
Owner and such successor in effecting the termination of the Servicer’s
responsibilities and rights hereunder, including, without limitation, the
transfer to such successor for administration by it of all cash amounts which
shall at the time be credited by the Servicer to the Custodial Account or
Escrow Account or thereafter received with respect to the Mortgage Loans.

 

Section 11.02         Waiver of Defaults.

 

The Owner may waive any
default by the Servicer in the performance of its obligations hereunder and its
consequences.  Upon any such waiver of a
past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Servicing Agreement.  No such waiver
shall extend to 

 

62

 

any
subsequent or other default or impair any right consequent thereon except to
the extent expressly so waived.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

63

 

ARTICLE XII

 

CLOSING

 

Section 12.01         Closing Documents.

 

The Closing Documents shall
consist of fully executed originals of the following documents:

 

1.                                       this Servicing
Agreement;

 

2.                                       a Custodial
Account Certification or a Custodial Account Letter Agreement, as applicable,
as required hereunder, in the form of either Exhibit 2 or Exhibit 3;

 

3.                                       an Escrow
Account Certification or an Escrow Account Letter Agreement, as applicable, as
required hereunder, in the form of either Exhibit 4 or Exhibit 5;

 

4.                                       an Officer’s
Certificate, in the form of Exhibit 6, with respect to the
Servicer, including all attachments thereto.

 

[THE REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]

 

64

 

ARTICLE XIII

 

MISCELLANEOUS PROVISIONS

 

Section 13.01         Notices.

 

All notices, requests,
demands and other communications which are required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given upon the delivery or mailing thereof, as the case may be, sent by
registered or certified mail, return receipt requested:

 

(a)                                  If to the Owner
to:

 

PennyMac Operating
Partnership L.P.

Attn: Chief Operating
Officer

27001 Agoura Road

Calabasas, CA 91301

 

With a copy to:

 

PennyMac Operating
Partnership L.P.

Attn:  General Counsel

27001 Agoura Road

Calabasas, CA 91301

 

(b)                                 If to the
Servicer:

 

PennyMac Loan Services, LLC

Attn: Director, Servicing
Operations

27001 Agoura Road

Calabasas, CA 91301

 

With a copy to:

 

PennyMac Loan Services, LLC

Attn: General Counsel

27001 Agoura Road

Calabasas, CA 91301

 

Section 13.02         Waivers.

 

Any
of the Servicer or the Owner may upon consent of all parties, by written notice
to the others:

 

(a)           Waive compliance with any of the terms, conditions or
covenants required to be complied with by the others hereunder; and

 

65

 

(b)           Waive or modify performance of any of the obligations of
the others hereunder.

 

The waiver by any party
hereto of a breach of any provision of this Servicing Agreement shall not
operate or be construed as a waiver of any other subsequent breach.

 

Section 13.03                          Entire
Agreement; Amendment.

 

This Servicing Agreement,
including all documents and exhibits incorporated by reference herein,
constitutes the entire agreement between the parties with respect to servicing
of the Mortgage Loans.  This Servicing Agreement
may be amended and any provision hereof waived, but, only in writing signed by
the party against whom such enforcement is sought.

 

Section 13.04                          Execution;
Binding Effect.

 

This Servicing Agreement may
be executed in one or more counterparts and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed to be
an original; such counterparts, together, shall constitute one and the same
agreement.  Subject to Sections 8.02
and 8.03, this Servicing Agreement shall inure to the benefit of and be
binding upon the Servicer and the Owner and their respective permitted
successors and assigns.

 

Section 13.05                          Headings.

 

Headings of the Articles and
Sections in this Servicing Agreement are for reference purposes only and shall
not be deemed to have any substantive effect.

 

Section 13.06                          Applicable Law.

 

THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW), EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW.

 

Section 13.07                          Relationship of
Parties.

 

Nothing herein contained
shall be deemed or construed to create a partnership or joint venture between
the parties.  The duties and
responsibilities of the Servicer shall be rendered by it as an independent
contractor and not as an agent of the Owner. 
The Servicer shall have full control of all of its acts, doings,
proceedings, relating to or requisite in connection with the discharge of its
duties and responsibilities under this Servicing Agreement.

 

66

 

Section 13.08                                                  Severability of
Provisions.

 

If any one or more of the
covenants, agreements, provisions or terms of this Servicing Agreement shall be
held invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement.

 

Section 13.09                                                  Recordation of
Assignments of Mortgage.

 

To the extent permitted by
applicable law, each of the Assignments of Mortgage 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 Mortgaged
Properties are situated, and in any other appropriate public recording office
or elsewhere, such recordation to be effected by the Owner or the Owner’s
designee.

 

Section 13.10                                                  Exhibits.

 

The exhibits to this
Servicing Agreement are hereby incorporated and made a part hereof and are
integral parts of this Servicing Agreement.

 

Section 13.11                                                  Counterparts.

 

This Agreement may be
executed simultaneously in any number of counterparts.  Each counterpart shall be deemed to be an original,
and all such counterparts shall constitute one and the same instrument.

 

Section 13.12                                                  Cooperation of
Servicer with a Reconstitution.

 

(a)           The Servicer and the Owner agree that with respect to some
or all of the Mortgage Loans, on one or more dates (each a “Reconstitution
Date”), at the Owner’s sole option, the Owner may effect a sale (each, a “Reconstitution”)
of some or all of the Mortgage Loans then subject to this Servicing Agreement,
without recourse, to:

 

(i)            Fannie
Mae or Freddie Mac in one or more Whole Loan Transfers;

 

(ii)           one
or more other third-party purchasers in one or more Whole Loan Transfers;

 

(iii)          one
or more trusts or other entities to be formed as part of one or more Private
Securitization Transactions; or

 

(iv)          one
or more trusts or other entities to be formed as part of one or more Public
Securitization Transactions.

 

(b)           With respect to each Whole Loan Transfer, Private
Securitization Transaction or Public Securitization Transaction, as the case
may be, entered into by the Owner, the Servicer shall:

 

67

 

(i)                                     upon request of
the Owner, service the Mortgage Loans included in such Reconstitution pursuant
to a security servicing agreement or other agreement;

 

(ii)                                  if the Servicer
will continue servicing the Mortgage Loans included in the Reconstitution,
provide as applicable:

 

(A)          information pertaining to the Servicer of the type and
scope customarily included in offering documents for residential
mortgage-backed securities transactions involving single or multiple loan
originators including information regarding financial condition and mortgage
loan delinquency, foreclosure and loss experience or other information as is
otherwise reasonably requested by the Owner, and to deliver to the Owner any
non-public, unaudited financial information, in which case the Owner shall bear
the cost of having such information audited by certified public accountants if
the Owner desires such an audit, or as is otherwise reasonably requested by the
Owner and which the Servicer is capable of providing without unreasonable
effort or expense (collectively “Servicer Information”), and to
indemnify the Owner and its affiliates for material misstatements or omissions
contained in the Servicer Information; provided, however, Owner shall indemnify
and hold harmless Servicer and its affiliates for material misstatements or
omissions contained in all other information in any offering document, other
than Servicer Information; and

 

(B)           such opinions of counsel, letters from auditors, and
certificates of public officials or officers of Servicer as are reasonably
believed necessary by the trustee, any rating agency or the Owner, as the case
may be, in connection with such Private Securitization Transaction or Public Securitization
Transaction.  The Owner shall pay all
third party costs associated with the preparation of the information described
in clause (ii)(A) above and the delivery of any opinions (other than
opinions by in-house counsel), letters or certificates described in this clause
(ii)(B).

 

(iii)                               if the Servicer
will continue servicing the Mortgage Loans included in the Reconstitution, to
negotiate and execute one or more custodial agreements among the Owner, the
Servicer and a third party custodian/trustee which is generally considered to
be a prudent custodian/trustee in the secondary mortgage market designated by
the Owner in its sole discretion after consultation with the Servicer, in
either case for the purpose of pooling the Mortgage Loans with other Mortgage
Loans for resale or securitization; and

 

(iv)                              if the Servicer
will continue servicing the Mortgage Loans included in the Reconstitution, (1) cooperate
fully with the Owner, any prospective purchaser, any Rating Agency or any party
to any agreement to be executed in connection with such Whole Loan Transfer,
Private Securitization Transaction or Public Securitization Transaction, with
respect to all reasonable 

 

68

 

requests and due diligence procedures, including participating in
meetings with Rating Agencies, bond insurers and such other parties as the
Owner shall designate and participating in meetings with prospective purchasers
of the Mortgage Loans or interests therein and providing information reasonably
requested by such purchasers; (2) to execute, deliver and perform all
reconstitution agreements required by the Owner, and to use its best
reasonable, good faith efforts to facilitate such Whole Loan Transfer, Private
Securitization Transaction or Public Securitization Transaction, as the case
may be; (3) (a) to restate the representations and warranties set
forth in this Servicing Agreement as of the Reconstitution Date which shall not
be materially more onerous than those required under this Servicing Agreement
or (b) make the representations and warranties with respect to the
servicing of the Mortgage Loans set forth in the related selling/servicing
guide of the master servicer or issuer, as the case may be, or such
representations and warranties with respect to the servicing of the Mortgage
Loans as may be required by any Rating Agency or prospective purchaser of the
related securities or such Mortgage Loans, in connection with such
Reconstitution; provided, however, that such
representations and warranties shall not be materially more onerous than those
required under this Servicing Agreement. 
The Servicer shall use its reasonable best efforts to provide to such
master servicer or issuer, as the case may be, and any other participants in
such Reconstitution:  (i) any and
all information and appropriate verification of information which may be
reasonably available to the Servicer or its affiliates, whether through letters
of its auditors and counsel or otherwise, as the Owner or any such other
participant shall reasonably request and (ii) subject to the provisions of
this Section 13.12(b), to execute, deliver and satisfy all
conditions set forth in any indemnity agreement required by the Owner or any
such participant; provided that the Servicer is given an opportunity to review
and reasonably negotiate in good faith provisions of such indemnity.

 

(c)           Any execution of a security servicing agreement or
reconstitution agreement by the Servicer shall be conditioned on the Servicer
receiving the Servicing Fee or such other servicing fee acceptable to
Servicer.  All Mortgage Loans not sold or
transferred pursuant to a Whole Loan Transfer, Private Securitization
Transaction or Public Securitization Transaction shall be subject to this
Servicing Agreement and shall continue to be serviced in accordance with the
terms of this Servicing Agreement and with respect thereto this Servicing
Agreement shall remain in full force and effect.  Notwithstanding any provision to the contrary
in this Servicing Agreement, in the event that the Servicer is the servicer
with respect to a Reconstitution, the Owner agrees that in such Reconstitution
any servicing performance termination triggers shall be substantially similar
to those contained in this Servicing Agreement or otherwise subject to approval
by the Servicer in its reasonable discretion

 

Section 13.13                          Trademarks.

 

The Owner and the Servicer
agree that they and their employees, subcontractors and agents, shall not,
without the prior written consent of the other party in each instance, (i) use
in advertising, publicity or otherwise the name of each and every other party
to this Servicing Agreement or their Affiliates or any of their managing
directors, partners or employees, nor any 

 

69

 

trade
name, trademark, trade device, service mark, symbol or any abbreviation,
contraction or simulation thereof owned by the other party or their Affiliates,
or (ii) represent, directly or indirectly, any product or any service
provided by the Owner and the Servicer as approved or endorsed by the other
parties to this Servicing Agreement or their Affiliates.

 

Section 13.14                          Confidentiality
of Information.

 

If, during the term of this
Servicing Agreement, the Owner requests that the Servicer provide to the Owner
non-public, confidential information related to the Servicer and other
affiliates of the Servicer (collectively, “Parent”), and if Parent, in
its sole discretion agrees to provide this information, the parties agree that
they shall enter into a confidentiality agreement in form and substance
mutually agreeable to the parties prior to the release of such information
(which obligation shall not be assigned by the Owner).

 

Section 13.15                          [Reserved]

 

Section 13.16                          WAIVER OF TRIAL
BY JURY.

 

THE SERVICER AND THE OWNER
EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF
ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

Section 13.17                          LIMITATION OF
DAMAGES.

 

NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, THE PARTIES AGREE THAT NEITHER PARTY SHALL BE
LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES
WHATSOEVER, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT
LIABILITY), OR ANY OTHER LEGAL OR EQUITABLE PRINCIPLE, PROVIDED, HOWEVER, THAT
SUCH LIMITATION SHALL NOT BE APPLICABLE WITH RESPECT TO THIRD PARTY CLAIM MADE
AGAINST A PARTY.

 

Section 13.18                          SUBMISSION TO
JURISDICTION; WAIVERS.

 

The
Servicer and the Owner hereby irrevocably and unconditionally:

 

(a)           SUBMITS FOR ITSELF IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
THE STATE OF CALIFORNIA, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR
THE CENTRAL DISTRICT OF CALIFORNIA AND APPELLATE COURTS FROM ANY THEREOF;

 

(b)           CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF 

 

70

 

ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT
AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

 

(c)           AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

 

[SIGNATURES APPEAR ON NEXT PAGE]

 

71

 

IN WITNESS WHEREOF, the
parties have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the date first above written.

 

	
   

  	
  PENNYMAC OPERATING
  PARTNERSHIP, L.P., a Delaware limited partnership

  
	
   

  	
  (Owner)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PENNYMAC LOAN SERVICES, LLC, a Delaware limited liability company

  
	
   

  	
  (Servicer)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

72

 

EXHIBIT 1

 

MONTHLY REPORTS

 

Remittance

Delinquency

Inventory Flow

Post Boarding Exception

 

 

DAILY REPORTS

 

Boarding Notification

Payoff

Transaction Detail

 

1-1

 

EXHIBIT 2

 

CUSTODIAL ACCOUNT CERTIFICATION

 

, 2009

 

As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of
[            ],
2009 (the “Servicing Agreement”), we hereby certify that the Servicer
has established the account described below as a Custodial Account (as such
term is defined in the Servicing Agreement) pursuant to Section 2.04.  The Custodial Account shall be a Special
Deposit Account as such term is defined in the Servicing Agreement.

 

	
  Title of Account:

  	
   

  	
  [            ],
  in trust for [                              ]

  
	
   

  	
   

  	
   

  
	
  Account Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address of office or
  branch of the Servicer at which Account is maintained:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PennyMac Loan Services, LLC,

  as Servicer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  

 

2-1

 

EXHIBIT 3

 

CUSTODIAL ACCOUNT LETTER AGREEMENT

 

, 2009

 

To:

 

 

(the “Depository”)

 

As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of
[            ],
2009 (the “Servicing Agreement”), we hereby authorize and
request you to establish an account, as a Custodial Account (as such term is
defined in the Servicing Agreement) pursuant to Section 2.04 of the
Agreement, to be designated “[            ],
as servicer, in trust for [                      ]”
All deposits in the account shall be subject to withdrawal therefrom by order
signed by the Servicer.  You may refuse
any deposit which would result in violation of the requirement that the account
be fully insured as described below.  This
letter is submitted to you in duplicate. 
Please execute and return one original to us.

 

	
   

  	
   

  	
  PennyMac Loan Services, LLC,

  as Servicer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  

 

3-1

 

The undersigned, as
Depository, hereby certifies that the above described account has been
established under Account Number
                    ,
at the office of the Depository indicated above, and agrees to honor
withdrawals on such account as provided above. 
The Custodial Account shall be a Special Deposit Account (as such term
is defined in the Servicing Agreement). 
The full amount deposited at any time in the account will be insured by
the Federal Deposit Insurance Corporation.

 

	
   

  	
   

  
	
   

  	
  Depository

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  

 

3-2

 

EXHIBIT 4

 

ESCROW ACCOUNT CERTIFICATION

 

, 2009

 

As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of
[            ],
2009 (the “Servicing Agreement”), we hereby certify that the Servicer
has established the account described below as an Escrow Account pursuant to Section 2.06
of the Agreement.  The Escrow Account
shall be a Special Deposit Account as such term is defined in the Servicing Agreement.

 

	
  Title of Account:

  	
   

  	
  [            ],
  in trust for
  [                              ]

  
	
   

  	
   

  	
   

  
	
  Account Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address of office or
  branch of the Servicer at which Account is maintained:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PennyMac Loan Services, LLC,

  as Servicer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  

 

4-1

 

EXHIBIT 5

 

ESCROW ACCOUNT LETTER AGREEMENT

 

,
2009

 

To:

 

 

(the “Depository”)

 

As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of
[            ],
2009 (the “Servicing Agreement”), we hereby authorize and request you to
establish an account as an Escrow Account (as such term is defined in the
Servicing Agreement) pursuant to Section 2.06 of the Agreement, to
be designated as “[            ],
in trust for
[                      ],
and various Mortgagors.”  All deposits in
the account shall be subject to withdrawal therefrom by order signed by the
Servicer.  You may refuse any deposit
which would result in violation of the requirement that the account be fully
insured as described below.  This letter
is submitted to you in duplicate.  Please
execute and return one original to us.

 

	
   

  	
   

  	
  PennyMac Loan Services, LLC,

  as Servicer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  

 

5-1

 

The undersigned, as
Depository, hereby certifies that the above described account has been
established under Account Number
            , at
the office of the Depository indicated above, and agrees to honor withdrawals
on such account as provided above.  The
Escrow Account shall be a Special Deposit Account (as such term is defined in
the Servicing Agreement).  The full amount
deposited at any time in the account will be insured by the Federal Deposit
Insurance Corporation.

 

	
   

  	
   

  
	
   

  	
  Depository

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  

 

5-2

 

EXHIBIT 6

 

FORM OF OFFICER’S CERTIFICATE

 

I,
                                        ,
hereby certify that I am the duly elected
[                            ],of
PennyMac Loan Services, LLC, a Delaware limited liability company  (the “Company”) and further as
follows:

 

1.             Attached hereto as Exhibit 1 is a true,
correct and complete copy of the Certificate of Formation of the Company which
is in full force and effect on the date hereof and which has been in effect
without amendment, waiver, rescission or modification.

 

2.             Attached hereto as Exhibit 2 is an original
certificate of good standing of the Company issued within ten days of the date
hereof, and no event has occurred since the date thereof which would impair
such standing.

 

3.             Attached hereto as Exhibit 3 is a true,
correct and complete copy of the resolutions of the
[            ] of
the Company authorizing the Company to execute and deliver the Flow Servicing
Agreement, dated as of [            ],
2009 (the “Flow Servicing Agreement”), between the Company and PennyMac
Operating Partnership, L.P. (the “Owner”), and such resolutions are in
effect on the date hereof.

 

4.             Each person listed on Exhibit 4 attached
hereto who, as an officer or representative of the Company, signed (a) the
Flow Servicing Agreement, and (b) any other document delivered or on the
date hereof in connection with any purchase described in the agreements set
forth above was, at the respective times of such signing and delivery, and is
now, a duly elected or appointed, qualified and acting officer or
representative of the Company, who holds the office set forth opposite his or
her name on Exhibit 4, and the signatures of such persons appearing
on such documents are their genuine signatures.

 

6-1

 

IN WITNESS WHEREOF, I have
hereunto signed my name and affixed the seal of the Company.

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  PennyMac Loan Services, LLC

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

I,
                                                ,
an [Assistant] Secretary of the Company, hereby certify that
                        
is the duly elected, qualified and acting [Vice] President of the Company and
that the signature appearing above is [her] [his] genuine signature.

 

IN WITNESS WHEREOF, I have
hereunto signed my name.

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  PennyMac Loan Services, LLC

  
	
  [Seal]

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

6-2

 

EXHIBIT 4 to

Company’s Officer’s Certificate

 

	
  NAME

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

6-3

 

EXHIBIT 7

 

MORTGAGE LOAN DOCUMENTS

 

The following documents
shall constitute the Mortgage Loan Documents with respect to each Mortgage
Loan:

 

(a)           the original Mortgage Note bearing all intervening
endorsements, endorsed “Pay to the order of                   ,
without recourse” and signed in the name of the last endorsee (the “Last
Endorsee”) by an authorized officer. 
To the extent that there is no room on the face of the Mortgage Notes
for endorsements, the endorsement may be contained on an allonge, if state law
so allows and the Custodian is so advised by the Owner that state law so
allows.  If the Mortgage Loan was
acquired by the Seller in a merger, the endorsement must be by “[Last
Endorsee], successor by merger to [name of predecessor]”.  If the Mortgage Loan was acquired or
originated by the Last Endorsee while doing business under another name, the
endorsement must be by “[Last Endorsee], formerly known as [previous name]”;
the original of any guarantee executed in connection with the Mortgage Note;

 

(b)           the original Mortgage with evidence of recording
thereon.  If in connection with any
Mortgage Loan, the Owner cannot deliver or cause to be delivered the original
Mortgage with evidence of recording thereon because of a delay caused by the public
recording office where such Mortgage has been delivered for recordation or
because such Mortgage has been lost or because such public recording office
retains the original recorded Mortgage, the Seller shall deliver or cause to be
delivered to the Custodian, a photocopy of such Mortgage, together with (i) in
the case of a delay caused by the public recording office, an Officer’s
Certificate of the Seller (or certified by the title company, escrow agent, or
closing attorney) stating that such Mortgage has been dispatched to the
appropriate public recording office for recordation and that the original
recorded Mortgage or a copy of such Mortgage certified by such public recording
office to be a true and complete copy of the original recorded Mortgage will be
promptly delivered to the Custodian upon receipt thereof by the Seller; or (ii) in
the case of a Mortgage 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, a copy of such Mortgage certified by such public
recording office to be a true and complete copy of the original recorded
Mortgage; the originals of all assumption, modification, consolidation or
extension agreements, if any, with evidence of recording thereon;

 

(c)           the original Assignment of Mortgage for each Mortgage
Loan, in form and substance acceptable for recording.  The Assignment of Mortgage must be duly
recorded only if recordation is either necessary under applicable law or
commonly required by private institutional mortgage investors in the area where
the Mortgaged Property is located or on direction of the Owner as provided in
this Agreement.  If the Assignment of
Mortgage is to be recorded, the Mortgage shall be assigned to the Owner or as
directed by the Owner.  If the Assignment
of Mortgage is not to be recorded, the Assignment of Mortgage shall be
delivered in blank.  If the Mortgage Loan
was acquired by the Seller in a merger, the Assignment of Mortgage must be made
by “[Seller], successor by merger to 

 

7-1

 

[name
of predecessor]”.  If the Mortgage Loan
was acquired or originated by the Seller while doing business under another
name, the Assignment of Mortgage must be by “[Seller], formerly known as
[previous name]”;

 

(d)           the originals of all intervening assignments of mortgage
(if any) evidencing a complete chain of assignment from the Originator to the
Last Endorsee with evidence of recording thereon, or if any such intervening
assignment has not been returned from the applicable recording office or has
been lost or if such public recording office retains the original recorded
assignments of mortgage, the Seller shall deliver or cause to be delivered to
the Custodian, a photocopy of such intervening assignment, together with (i) in
the case of a delay caused by the public recording office, an Officers
Certificate of the Seller (or certified by the title company, escrow agent, or
closing attorney) stating that such intervening assignment of mortgage has been
dispatched to the appropriate public recording office for recordation and that
such original recorded intervening assignment of mortgage or a copy of such
intervening assignment of mortgage certified by the appropriate public recording
office to be a true and complete copy of the original recorded intervening
assignment of mortgage will be promptly delivered to the Custodian upon receipt
thereof by the Seller; or (ii) in the case of an intervening assignment
where a public recording office retains the original recorded intervening
assignment or in the case where an intervening assignment is lost after
recordation in a public recording office, a copy of such intervening assignment
certified by such public recording office to be a true and complete copy of the
original recorded intervening assignment;

 

(e)           The original mortgagee policy of title insurance or, in
the event such original title policy is unavailable, a certified true copy of
the related policy binder or commitment for title certified to be true and
complete by the title insurance company (provided, that the original mortgagee
policy of title insurance shall be added when available);

 

(f)            original powers of attorney, if applicable, or, if in
connection with any Mortgage Loan, the Seller cannot deliver or cause to be
delivered the original power of attorney with evidence of recording thereon, if
applicable, because of a delay caused by the public recording office, the
Seller shall deliver or cause to be delivered to the Custodian, a photocopy of
such power of attorney, together with an Officer’s Certificate of the Seller
(or certified by the title company, escrow agent, or closing attorney) stating
that such power of attorney has been dispatched to the appropriate public recording
office for recordation and that the original recorded power of attorney or a
copy of such power of attorney certified by such public recording office to be
a true and complete copy of the original recorded power of attorney will be
promptly delivered to the Custodian upon receipt thereof by the Seller; and

 

(g)           security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage.

 

7-2

 

The following documents,
together with the Mortgage Loan Documents, shall constitute the Mortgage File
with respect to each Mortgage Loan:

 

(a)           The original hazard insurance policy and, if required by
law, flood insurance policy.

 

(b)           Residential loan application.

 

(c)           Mortgage Loan closing statement.

 

(d)           Verification of employment and income except for Mortgage
Loans originated under a Limited Documentation Program.

 

(e)           Verification of acceptable evidence of source and amount
of downpayment.

 

(f)            Credit report on the Mortgagor.

 

(g)           Residential appraisal report, if available.

 

(h)           Photograph of the Mortgaged Property.

 

(i)            Survey of the Mortgaged Property, if any.

 

(j)            Copy of each instrument necessary to complete
identification of any exception set forth in the exception schedule in the title
policy, i.e., map or plat, restrictions, easements, sewer agreements, home
association declarations, etc.  All
required disclosure statements.

 

(l)            If available, termite report, structural engineer’s
report, water potability and septic certification.

 

(m)          Sales contract, if applicable.

 

(n)           Tax receipts, insurance premium receipts, ledger sheets,
payment history from date of origination, insurance claim files,
correspondence, current and historical computerized data files, and all other
processing, underwriting and closing papers and records which are customarily
contained in a mortgage loan file and which are required to document the
Mortgage Loan or to service the Mortgage Loan.

 

(o)           Amortization schedule, if applicable.

 

7-3

 

EXHIBIT 8

 

FORM OF LIMITED POWER
OF ATTORNEY

 

PennyMac
Operating Partnership, L.P., a limited partnership, organized under the laws of
Delaware and having its principal place of business at 27001 Agoura Road, Third
Floor, Calabasas, CA 91301, as Owner (hereinafter called “Owner”) hereby
appoints PennyMac Loan Services, LLC. (hereinafter called the “Servicer”),
as its true and lawful attorney in fact to act in the name, place and stead of
Owner solely for the purposes set forth below.

 

The
said attorney in fact is hereby authorized and empowered, solely with respect
to the Mortgage Loans and REO Properties, as defined in, and subject to the
terms of, that certain Flow Servicing Agreement, between the Servicer and
Owner, dated as of [            ],
2009 (the “Servicing Agreement”), as follows:

 

1.             To execute, acknowledge, seal and
deliver deed of trust/mortgage note endorsements, lost note affidavits,
assignments of deed of trust/mortgage and other recorded documents,
satisfactions/releases/reconveyances of deed of trust/mortgage, subordinations
and modifications, tax authority notifications and declarations, deeds, bills
of sale, and other instruments of sale, conveyance, and transfer, appropriately
completed, with all ordinary or necessary endorsements, acknowledgments,
affidavits, and supporting documents as may be necessary or appropriate to
effect its execution, delivery, conveyance, recordation or filing.

 

2.             To execute and deliver insurance
filings and claims, affidavits of debt, substitutions of trustee, substitutions
of counsel, non military affidavits, notices of rescission, foreclosure deeds,
transfer tax affidavits, affidavits of merit, verifications of complaints,
notices to quit, bankruptcy declarations for the purpose of filing motions to
lift stays, and other documents or notice filings on behalf of Owner in
connection with insurance, foreclosure, bankruptcy and eviction actions.

 

3.             To endorse any checks or other
instruments received by the Servicer and made payable to Owner.

 

4.             To pursue any deficiency, debt or
other obligation, secured or unsecured, including but not limited to those
arising from foreclosure or other sale, promissory note or check.  This power also authorizes the Servicer to
collect, negotiate or otherwise settle any deficiency claim, including interest
and attorney’s fees.

 

5.             To do any other act or complete any
other document that arises in the normal course of servicing of all Mortgage
Loans and REO Properties, as defined in, and subject to the terms of the
Servicing Agreement.

 

8-1

 

This Limited Power of
Attorney shall expire on
          
    , 20    .

 

[NAME]

 

	
  Dated:
                                                                                      ,
  20    

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  

 

8-2

 

EXHIBIT 9

 

TERM SHEET

 

BASE SERVICING FEE
PERCENTAGE

(per loan)

 

With
respect to each Mortgage Loan, the Base Servicing Fee Percentage for that
Mortgage Loan set forth in the Servicer’s servicing records.  The Base Servicing Fee Percentage for a
Mortgage Loan shall be determined in accordance with the written protocol
approved by (i) a majority of the independent members of the board of Trustees
of PennyMac REIT, (ii) the Owner and (iii) the Servicer.  The following factors shall be taken into
account in formulating the written protocol: 
The Base Servicing Fee Percentages shall (i) be based on the risk
characteristics of the mortgage loans in a particular pool, including the
market value of the underlying properties, creditworthiness of the borrowers,
seasoning of the mortgage loans, degree of current and expected mortgage loan
defaults, current loan-to-value ratios, borrowers’ payment history and
debt-to-income levels,  (ii) be
consistent with the assumptions used by the PennyMac REIT Manager in
determining the bid for the related portfolio of mortgage loans, (iii) be
competitive with those charged by specialty mortgage loan servicers providing
comparable services for comparable mortgage loans, and (iv) range from 30
to 100 basis points per annum on the unpaid principal balance of the related
mortgage loans.

 

OTHER KEY PARAMETERS

 

	
  Remittance Types

  	
  Actual/Actual Basis during Interim Servicing Period

  
	
   

  	
   

  
	
  Remittance Date

  	
  See definition of Remittance Date

  
	
   

  	
   

  
	
  Servicing Advances

  	
  Servicer to be reimbursed monthly for all unpaid Servicing Advances
  incurred by Servicer in the prior month including Cost of Funds.

  
	
   

  	
   

  
	
  Cost of Funds on Servicing Advances

  	
  Refer to Section 3.04

  
	
   

  	
   

  
	
  Prepayment Penalties

  	
  Owner will retain 100% of the prepayment penalties.

  
	
   

  	
   

  
	
  Late Charges Collected

  	
  Servicer will retain 100% of late charges collected by Servicer

  
	
   

  	
   

  
	
  Ancillary Income

  	
  Servicer will retain 100% of all Ancillary Income

  
	
   

  	
   

  
	
  Delegated Authority

  	
  Refer to Exhibit 10

  

 

9-1

 

	
  Contract Term

  	
  Refer to Section 6.01

  
	
   

  	
   

  
	
  Eligible Mortgage Loan

  	
  See definition of Eligible Mortgage Loan

  

 

MISCELLANEOUS ONE-TIME AND
OTHER FEES

 

Service
Release Fee:  $500 if released within one
year of boarding; $250 if released within two years of boarding; $150 if
released thereafter

 

REO
Marketing Fee:  75 basis points of the
gross proceeds received in connection with the disposition of an REO Property

 

Tax
Service Contract:  Servicer’s cost

 

Flood
Zone Service Contract:  Servicer’s cost

 

Backfill
Fee:  $15 per Mortgage File

 

MERS
Fee:  Servicer’s cost

 

Modification
Fee:  $1,000 for modifications classified
by the Servicer as full modifications (to include interest rate reductions);
$295 for modifications classified by the Servicer as simple modifications (to
include capitalization of delinquent payments)

 

To the extent the Servicer
participation in the U.S. Treasury’s Home Affordable Modification Program (or
other similar mortgage loan modification programs), the Servicer shall be
entitled to retain any incentive payments payable to mortgage loan servicers
under the program.

 

In the event the Servicer
effects a refinancing of a Mortgage Loan on behalf of the Owner and not through
a third party lender and the resulting Mortgage Loan is readily saleable, the
Servicer shall be entitled to retain a market-based origination fee (set, as of
the date of this Servicing Agreement, at one percent (1%) of the principal
balance of the Refinanced Mortgage Loan plus a $750 underwriting fee).  Should the Servicer originate a Mortgage Loan
to facilitate the disposition of REO Property, the Servicer shall be entitled
to retain a market-based origination fee (set, as of the date of this Servicing
Agreement, at one percent (1%) of the principal balance of the Refinanced
Mortgage Loan plus a $750 underwriting fee). 
The amount of the origination fee shall be subject to review by the
Owner and the Servicer from time to time to reflect market rates.  The Owner shall reimburse the Servicer for
any out of pocket expenses that the Servicer incurs in connection with any such
origination, including title fees, legal fees and closing costs.

 

In addition to the Ancillary
Income that the Servicer is entitled to retain pursuant to Section 4.03,
the Servicer shall be entitled to customary market-based fees and charges for
the boarding, deboarding and disposition of Mortgage Loans.

 

9-2

 

EXHIBIT 10

 

DELEGATION OF AUTHORITY MATRIX

 

	
  FUNCTION

  	
   

  	
  DELEGATION

  
	
  Delinquent Taxes on Non-escrowed Loans

  	
   

  	
  Authority is granted to Servicer to make payment of delinquent taxes
  on non-escrowed loans.

  
	
   

  	
   

  	
   

  
	
  Advances on Escrowed Loans

  	
   

  	
  Authority is granted to Servicer to advance corporate funds in
  payment of escrowed items.

  
	
   

  	
   

  	
   

  
	
  New Escrow Accounts

  	
   

  	
  Authority is granted to Servicer to establish escrow accounts upon
  borrower request.

  
	
   

  	
   

  	
   

  
	
  Escrow Shortage Pro-ration

  	
   

  	
  Authority is granted to Servicer to negotiate extended escrow
  shortage repayment periods as the situation warrants.

  
	
   

  	
   

  	
   

  
	
  Escrow Cushion Requirement

  	
   

  	
  Authority is granted to Servicer to negotiate down or remove any
  escrow cushion requirement used for escrow analysis.

  
	
   

  	
   

  	
   

  
	
  Escrow Account Waiver

  	
   

  	
  Authority is granted to Servicer to waive an escrow account following
  Fannie Mae Servicing Guidelines Part III, Chapter 103.01.

  
	
   

  	
   

  	
   

  
	
  Loss Drafts

  	
   

  	
  Authority is granted to Servicer to process insurance losses as
  described in the Fannie Mae Servicing Guide Part II, Chapter 5.

  
	
   

  	
   

  	
   

  
	
  Private Mortgage Insurance Waiver

  	
   

  	
  Authority is granted to Servicer to waive Private Mortgage Insurance
  requirement as described in the Fannie Mae Servicing Guide Part II,
  Chapters 102.03, 102.04 and 102.05.

  
	
   

  	
   

  	
   

  
	
  Transfer of Ownership — Exempt Transactions

  	
   

  	
  Authority is granted to Servicer to follow guidelines as stated in
  the Fannie Mae Servicing Guide Part III, 408.02. In addition to Fannie
  Mae servicing guidelines, there must be evidence of insurance with Owner
  named in mortgagee clause; mortgage payments must be current; and if
  required, approval of the private mortgage insurance company, FHA or VA must
  be obtained.

  

 

10-1

 

	
  Prepayment Penalties

  	
   

  	
  No authority is granted to Servicer to negotiate reduction of
  prepayment penalties without Owner approval unless the mortgage loan is
  accelerated in which case Servicer may waive in accordance with the Fannie
  Mae Servicing Guide Part I, Chapter 203.05. This clause excludes the
  waiving of pre-payment penalties/early closure fees extending more than 36
  months from Mortgage Loan origination date.

  
	
   

  	
   

  	
   

  
	
  Waiver of Fees

  	
   

  	
  Authority is granted to Servicer to waive any fee that it is entitled
  to receive as Ancillary Income without Owner’s consent. Servicer shall be
  entitled to waive late charges based on Servicer’s policies and procedures.

  
	
   

  	
   

  	
   

  
	
   Subordination Requests

  	
   

  	
  Servicer may approve a request to subordinate a second mortgage in
  favor of a refinanced loan if:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.)

  	
  The new loan to value of the refinanced loan is equal to or less than
  the original LTV of the first mortgage (no cash-out refinancing allowed
  unless substantiated through a new appraisal to reflect increased value), and

  
	
   

  	
   

  	
  2.)

  	
  The loan has had no delinquencies in past 12 months, and

  
	
   

  	
   

  	
  3.)

  	
  The new senior lien is not a HELOC, Land Contract, Recapture Lien,
  Texas A6, Cal Vet, Bond with recapture Taxes, All Inclusive Trust Deed,
  Option ARM, Flex 100, or Reverse Mortgage. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Without Owner’s approval, Servicer MAY NOT
  approve a subordination request if any of the following conditions exist:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.) 

  	
  The first lien amount increases and the first lien LTV increases; or 

  
	
   

  	
   

  	
  2.)

  	
  Any senior lien is a private party; or

  
	
   

  	
   

  	
  3.)

  	
  The new senior lien has the potential for negative amortization. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Owner shall review the subordination request prior to final approval
  if the request has any of the MAY NOT
  conditions listed above.

  
	
   

  	
   

  	
   

  
	
  Partial Release, Acquisitions, Easement

  	
   

  	
  Authority is granted to Servicer to approve requests for Partial
  Release, Acquisitions, and Easements in accordance with the standards
  specified in the Fannie Mae Servicing Guide.

  

 

10-2

 

	
  Lien Releases

  	
   

  	
  Authority is granted to Servicer to approve full lien releases upon
  full payoff of the loan without the prior approval of Owner. Full lien
  releases to be completed in compliance with applicable law, and penalties for
  non-compliance accrue to Servicer. Servicer shall not be responsible for
  penalties as a result of third party delays if Servicer has timely processed
  a lien release pursuant to applicable law.

  
	
   

  	
   

  	
   

  
	
  Assumptions

  	
   

  	
  Authority is granted to Servicer to negotiate Simple Assumptions
  according to the Fannie Mae Servicing Guide Part III, Chapter 4.
  Qualified Assumption requests will be referred to Owner for approval.

  
	
   

  	
   

  	
   

  
	
  Foreclosure Approval

  	
   

  	
  Authority is granted to Servicer to proceed with foreclosure using
  prudent servicing guidelines.

  
	
   

  	
   

  	
   

  
	
  Property Evaluations (BPO’s)/Drive-By Appraisal

  	
   

  	
  Authority is granted to Servicer to order a brokers price opinion
  (BPO) or drive-by appraisal using prudent servicing guidelines. The cost of
  the BPO or drive-by appraisal shall be passed on to the borrower if the BPO
  or drive-by appraisal is related to a borrower requested forbearance plan as
  reasonably determined by Servicer.

  
	
   

  	
   

  	
   

  
	
  Impact Analysis

  	
   

  	
  Authority is granted to Servicer to complete an impact analysis using
  prudent servicing guidelines.

  
	
   

  	
   

  	
   

  
	
  REO Marketing

  	
   

  	
  Authority is granted to Servicer to follow Servicer’s current
  guidelines to make REO marketing decisions.

  
	
   

  	
   

  	
   

  
	
  Property Preservation

  	
   

  	
  Authority is granted to Servicer to use Fannie Mae Property
  Preservation guidelines as outlined in the Fannie Mae Servicing Guide for
  loans owned by Owner and following internal state guidelines.

  
	
   

  	
   

  	
   

  
	
  Bidding Instruction

  	
   

  	
  Owner approval is required on bidding instructions.

  
	
   

  	
   

  	
   

  
	
  Short Term Forbearance — Written agreement to reduce or suspend
  payments not to exceed 6 months

  	
   

  	
  Authority is granted to Servicer to permit forbearance or allow for
  suspension of monthly payments up to 90 days, if the mortgagor is in default
  or Servicer determines that default is imminent and granting such forbearance
  is in the best interest of Owner. Mortgagor must be current as to all fees
  and costs prior to any forbearance plan. Owner approval is required to permit
  forbearance or allow for suspension of monthly payments of 91 days or
  more.

  

 

10-3

 

	
  Long Term Forbearance — Written agreement to reduce or suspend
  payments up to 12 months

  	
   

  	
  Unless pursuant to the PennyMac Property Preservation Program, Owner
  approval is required. Servicer to provide approval package including
  financials, credit report, valuation, hardship description and
  recommendation.

  
	
   

  	
   

  	
   

  
	
  Repayment Plan — Written agreement where the mortgagor must
  immediately make payments in addition to regular monthly payments to cure the
  delinquency

  	
   

  	
  Authority is granted pursuant to the PennyMac Property Preservation
  Program, and to Servicer to negotiate Repayment Plans where borrower must
  cure through full reinstatement within 6 months, including fees and costs.
  Any Repayment Plan over 6 months requires Owner approval.

  
	
   

  	
   

  	
   

  
	
  Modifications — Formal agreement to change payment amount based upon
  one or more terms of the original loan (i.e. interest rate reduction,
  extended term, capitalized arrearage)

  	
   

  	
  Authority is granted pursuant to the PennyMac Property Preservation
  Program, and all modification requests to capitalize arrearages are to be
  processed in accordance with the Fannie Mae Servicing Guide Part VII,
  Chapter 502 and will require Owner approval. Servicer will obtain
  pre-qualification information as prescribed by Owner (credit report,
  financial statements and cash flow information from all obligors).

  
	
   

  	
   

  	
   

  
	
  Pre-foreclosure Sale — Borrower allowed to sell or refinance property
  to avoid foreclosure

  	
   

  	
  Authority is granted pursuant to the PennyMac Property Preservation
  Program, and authority is granted to Servicer to negotiate Pre-foreclosure
  Sales according to the Fannie Mae Servicing Guide Part VII, Chapter 504.
  Authority is granted to Servicer to accept pre-foreclosure sale offers as
  long as the loss from the pre-foreclosure sale is equal to or less than the
  loss anticipated and the negotiated price is at least 95% of the Asset Balance.
  For all other pre-foreclosure sales, Owner approval to accept the sale is
  required.

  
	
   

  	
   

  	
   

  
	
  Discounted Payoff

  	
   

  	
  Authority is granted pursuant to the PennyMac Property Preservation
  Program. For all discounted payoffs with the exception of those covered by
  mortgage insurance, Owner approval to accept the payoff is required.
  Authority is granted to Servicer to negotiate a discounted payoff where the
  loss amount is fully covered by the applicable mortgage insurance policy.

  
	
   

  	
   

  	
   

  
	
  Deed-in-Lieu — Borrower voluntarily deeds property to lender,
  avoiding foreclosure

  	
   

  	
  Authority is granted pursuant to the PennyMac Property Preservation
  Program, otherwise, Owner must approve deed-in-lieu requests on all
  transactions.

  
	
   

  	
   

  	
   

  
	
  Partial Claims — PMI remits funds to bring account current. If
  mortgage is subsequently foreclosed, prepaid claim amounts are deducted from
  final claim

  	
   

  	
  Authority is granted pursuant to the PennyMac Property Preservation
  Program, and authority is granted to Servicer to negotiate and accept Partial
  Claims subject to account being brought current; no associated
  pre-foreclosure sale, modification or repayment plan.

  

 

10-4

 

	
  Bankruptcy Actions

  	
   

  	
  1st Liens — Authority is granted to Servicer to process bankruptcy
  filing following Fannie Mae Servicing Guidelines and refer to the delegations
  listed in this Exhibit (impact analysis, charge-off, foreclosure) for
  final disposition in Bankruptcy. 

   

  Junior Liens — Authority is granted to Servicer to process bankruptcy
  filing in accordance with Servicer’s guidelines for owned assets and refer to
  the above delegations for final disposition in Bankruptcy. Decisions on how
  to proceed with charge-off/foreclosure revert to Owner at impact analysis
  stage.

  
	
   

  	
   

  	
   

  
	
  Review and Approval of Walk Analysis

  	
   

  	
  Servicer will review collection activities and complete an “Impact
  Analysis” which begins the pre-foreclosure review process. The analysis
  assists in determining the economic impact of foreclosure (equity
  position/loss severity). Servicer will provide the analysis to Owner with a
  recommendation of future loss mitigation actions. Servicer takes no
  responsibility for these recommendations, and will contact Owner for final
  approval and direction as to what those actions will be.

  
	
   

  	
   

  	
   

  
	
  Charge-off of Loans

  	
   

  	
  Authority is granted to Servicer to charge off loans that are 180
  days contractually delinquent, with the approval by Owner of an impact
  analysis form. Authority is granted to Servicer to charge off loans that are
  120 days contractually delinquent, with Owner’s approval of an impact
  analysis, for loans that are in Chapter 7 bankruptcy and have no equity, per
  Owner’s approval of an impact analysis form.

  
	
   

  	
   

  	
   

  
	
  Post Charge-off Transfer

  	
   

  	
  Authority is granted to Servicer to initiate service transfer for loans
  that have been fully charged-off, or have been sold from REO, with a
  resulting loss.

  
	
   

  	
   

  	
   

  
	
  Payoff Processing

  	
   

  	
  Authority is granted to Servicer to accept as payment in full a
  payment amount within $100 of the total indebtedness. Owner shall reimburse Servicer
  for any shortfall that is $100 or less of the indebtedness.

  

 

10-5

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