Document:

EX-10.2

 EXHIBIT 10.2 
 [CEI FUNDING LLC] [OE FUNDING LLC] 
 [TE FUNDING LLC], 

as Bond Issuer 
 AND 
 [THE CLEVELAND ELECTRIC ILLUMINATING COMPANY] 

[OHIO EDISON COMPANY] 
 [THE TOLEDO EDISON COMPANY], 
 as Servicer 

[FORM OF] 

PHASE-IN-RECOVERY PROPERTY SERVICING AGREEMENT 
 Dated as of                          , 2013 

 TABLE OF CONTENTS 

 
  

							
	 	  	 	  	Page	 
	 ARTICLE I. DEFINITIONS
	  	 	1	  
	 Section 1.01.
	  	Definitions	  	 	1	  
	 Section 1.02.
	  	Other Definitional Provisions	  	 	5	  
	 ARTICLE II. APPOINTMENT AND AUTHORIZATION
	  	 	5	  
	 Section 2.01.
	  	Appointment of Servicer; Acceptance of Appointment	  	 	5	  
	 Section 2.02.
	  	Authorization	  	 	5	  
	 Section 2.03.
	  	Dominion and Control Over the Phase-In-Recovery Property	  	 	6	  
	 ARTICLE III. BILLING SERVICES
	  	 	6	  
	 Section 3.01.
	  	Duties of Servicer	  	 	6	  
	 Section 3.02.
	  	Servicing and Maintenance Standards	  	 	7	  
	 Section 3.03.
	  	Certificate of Compliance	  	 	8	  
	 Section 3.04.
	  	Annual Report by Independent Registered Public Accountants	  	 	8	  
	 ARTICLE IV. SERVICES RELATED TO TRUE-UP ADJUSTMENTS; REMITTANCES AND RECONCILIATIONS
	  	 	9	  
	 Section 4.01.
	  	True-Up Adjustments	  	 	9	  
	 Section 4.02.
	  	Limitation of Liability	  	 	10	  
	 Section 4.03.
	  	Remittances; Reconciliations	  	 	10	  
	 ARTICLE V. THE PHASE-IN-RECOVERY PROPERTY
	  	 	11	  
	 Section 5.01.
	  	Custody of Phase-In-Recovery Property Records	  	 	11	  
	 Section 5.02.
	  	Duties of Servicer as Custodian	  	 	11	  
	 Section 5.03.
	  	Instructions; Authority to Act	  	 	12	  
	 Section 5.04.
	  	Effective Period and Termination	  	 	12	  
	 Section 5.05.
	  	Third-Party Billers	  	 	12	  
	 Section 5.06.
	  	Custodian’s Indemnification	  	 	12	  
	 ARTICLE VI. THE SERVICER
	  	 	13	  
	 Section 6.01.
	  	Representations and Warranties of Servicer	  	 	13	  
	 Section 6.02.
	  	Indemnities of Servicer	  	 	14	  
	 Section 6.03.
	  	Limitation on Liability of Servicer and Others	  	 	15	  
	 Section 6.04.
	  	Merger or Consolidation of, or Assumption of the Obligations of, Servicer	  	 	16	  
	 Section 6.05.
	  	[The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company] Not to Resign as Servicer	  	 	16	  
	 Section 6.06.
	  	Servicing Compensation	  	 	16	  
	 Section 6.07.
	  	Compliance with Applicable Law	  	 	17	  
	 Section 6.08.
	  	Access to Certain Records and Information Regarding Phase-In-Recovery Property	  	 	17	  
	 Section 6.09.
	  	Appointments	  	 	17	  
	 Section 6.10.
	  	No Servicer Advances	  	 	17	  
	 Section 6.11.
	  	Maintenance of Operations	  	 	17	  
	 ARTICLE VII. DEFAULT
	  	 	17	  
	 Section 7.01.
	  	Servicer Default	  	 	17	  
	 Section 7.02.
	  	Appointment of Successor	  	 	18	  
	 Section 7.03.
	  	Waiver of Past Defaults	  	 	19	  
	 Section 7.04.
	  	Notice of Servicer Default	  	 	19	  
	 ARTICLE VIII. MISCELLANEOUS PROVISIONS
	  	 	19	  
	 Section 8.01.
	  	Amendment	  	 	19	  
	 Section 8.02.
	  	Maintenance of Accounts and Records	  	 	20	  
	 Section 8.03.
	  	Notices	  	 	20	  
	 Section 8.04.
	  	Assignment	  	 	21	  

  
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	 Section 8.05.
	  	Limitations on Rights of Third Parties	  	 	21	  
	 Section 8.06.
	  	Severability	  	 	22	  
	 Section 8.07.
	  	Separate Counterparts	  	 	22	  
	 Section 8.08.
	  	Headings	  	 	22	  
	 Section 8.09.
	  	Governing Law	  	 	22	  
	 Section 8.10.
	  	Collateral Assignment to Bond Trustee	  	 	22	  
	 Section 8.11.
	  	Nonpetition Covenant	  	 	22	  
	 Section 8.12.
	  	Rule 17g-5 Compliance	  	 	22	  

 EXHIBITS AND SCHEDULES 
  

			
	 Exhibit A-1
	  	Form of Servicer Certificate
	 Exhibit A-2
	  	Certificate of Compliance
	 Exhibit B
	  	Form of Semiannual True-Up Filing
	 Exhibit C
	  	Form of Monthly Servicer Certificate
	 Exhibit D
	  	Form of Semiannual Servicer Certificate
	 Exhibit E
	  	Form of Semiannual Reconciliation
	 Schedule 4.01(a)
	  	Expected Amortization Schedule

 ANNEXES 
  

			
	 Annex I
	  	Servicing Procedures
	 Annex II
	  	Third-Party Billing

  
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 This PHASE-IN-RECOVERY PROPERTY SERVICING AGREEMENT, dated as of
                         , 2013, is between [CEI Funding LLC] [OE Funding LLC] [TE Funding LLC], a Delaware limited
liability company (the “Bond Issuer”), and [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company], an Ohio corporation. 
 RECITALS 
 Pursuant to the Statute and the Financing Order, the Seller and the
Bond Issuer are concurrently entering into the Sale Agreement pursuant to which the Seller is selling to the Bond Issuer the Seller’s Phase-In-Recovery Property created pursuant to the Statute and the Financing Order. 

In connection with the Bond Issuer’s ownership of the Phase-In-Recovery Property and in order to collect the Phase-In-Recovery
Charge, the Bond Issuer desires to engage the Servicer to carry out the functions described herein. The Servicer currently performs similar functions for itself with respect to its own charges to its customers and for others. In addition, the Bond
Issuer desires to engage the Servicer to act on its behalf in obtaining True-Up Adjustments from the PUCO. The Servicer desires to perform all of these activities on behalf of the Bond Issuer. 

NOW, THEREFORE, in consideration of the promises and the mutual covenants herein contained, the parties hereto agree as follows:

 ARTICLE I. 
 DEFINITIONS 
 Section 1.01. Definitions. Whenever used in this
Agreement, the following words and phrases shall have the following meanings: 
 “Adjustment Request” means any
filing made with the PUCO by the Servicer on behalf of the Bond Issuer to set or adjust the Phase-In-Recovery Charge, including the Issuance Advice Letter or a Semiannual True-Up Filing. 

“Administrative Trustee” means The Cleveland Electric Illuminating Company, Ohio Edison Company and The Toledo Edison
Company, collectively (in each case, in its capacity as a servicer). 
  “Agreement” means this
Phase-In-Recovery Property Servicing Agreement, together with all Exhibits, Schedules and Annexes hereto, as the same may be amended and supplemented from time to time. 
 “Annual Accountant’s Report” has the meaning set forth in Section 3.04. 
 “Bills” means each of the regular monthly bills, summary bills and other bills issued to Customers by [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison
Company] on its own behalf and in its capacity as Servicer or by a TPB. 
 “Bond Indenture” means the Bond
Indenture, dated as of                          , 2013, between the Bond Issuer and the Bond Trustee, as the same
may be amended and supplemented from time to time. 
 “Bond Issuer” has the meaning set forth in the preamble
to this Agreement. 
 “Certificate of Compliance” means the certificate referred to in
Section 3.03. 
 “Closing Date” means
                         , 2013. 
 “Customers” means all classes of retail users of the Seller’s distribution system within its geographic service territory at any given time. 

“Declaration of Trust” means the Amended and Restated Declaration of Trust dated as of
                         , 2013 by U.S. Bank Trust National Association, as Delaware Trustee, the Administrative
Trustee, CEI Funding LLC, OE Funding LLC and TE Funding LLC, as the same may be further amended and supplemented from time to time. 

  
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 “Deemed Phase-In-Recovery Charge Payments” means the payments in respect of
the Phase-In-Recovery Charge, which are deemed to have been received by the Servicer, directly or indirectly (including through any TPB), from or on behalf of Customers, calculated in accordance with Annex I hereto. 

“Estimated Phase-In-Recovery Charge Payments” means the estimated payments in respect of the Phase-In-Recovery Charge,
which are deemed to have been received by the Servicer, directly or indirectly (including through any TPB), from or on behalf of Customers, calculated in accordance with Annex I hereto. 

“Expected Amortization Schedule” means Schedule 4.01(a) hereto. 

“Financing Order” means the order of the PUCO issued on October 10, 2012, as amended by the entry on rehearing
issued by the PUCO on December 19, 2012 and as further amended by the entry nunc pro tunc issued by the PUCO on January 9, 2013. 
 “Governmental Authority” means any nation or government, any federal, state, local or other political subdivision thereof and any court, administrative agency, or other instrumentality or
entity exercising executive, legislative, judicial, regulatory or administrative function of government. 
 “Insolvency
Event” means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case
under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent
by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due. 
 “Issuance Advice Letter” means the initial Issuance Advice Letter, dated
                         , 2013, filed by the Servicer with the PUCO pursuant to the Financing Order. 

“Losses” has the meaning assigned to that term in Section 6.02(b). 

“Monthly Servicer Certificate” has the meaning assigned to that term in Section 4.01(d)(ii). 

“Officer’s Certificate” means a certificate of the Servicer signed by a Responsible Officer. 

“Opinion of Counsel” means one or more written opinions of counsel who may be an employee of or counsel to the party
providing such opinion(s) of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion(s) of counsel. 
 “Phase-In-Recovery Charge” means the Seller’s Phase-In-Recovery Charge designated pursuant to the Financing Order, as the same may be adjusted from time to time as provided in the
Financing Order. 
 “Phase-In-Recovery Charge Collections” means the Estimated Phase-In-Recovery Charge
Payments remitted to the Collection Account. 
 “Phase-In-Recovery Property” means the phase-in-recovery
property that is created simultaneous with the sale of such property by the Seller to the Bond Issuer and continues to exist pursuant to and in accordance with paragraph VI.A(6) of the Financing Order and Sections 4928.232, 4928.234
and 4928.2312 of the Statute and is sold by the Seller to the Bond Issuer under the Sale Agreement. 

  
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 “Phase-In-Recovery Property Records” has the meaning assigned to that term
in Section 5.01. 
 “Principal Balance” means, as of any Payment Date, the sum of the outstanding
principal amount of the Bonds. 
 “Projected Principal Balance” means, as of any Payment Date, the sum of the
projected outstanding principal amount of the Bonds for such Payment Date set forth in the Expected Amortization Schedule. 
 “PUCO” means the Public Utilities Commission of Ohio and any successor thereto. 
 “PUCO Regulations” means all regulations, rules, tariffs and laws applicable to public utilities or TPBs, as the case may be, and promulgated by, enforced by or otherwise within the
jurisdiction of the PUCO. 
 “Rating Agency Condition” means, with respect to any action, not less than ten
Business Days’ prior written notification to each Rating Agency of such action, and written confirmation from each of Standard & Poor’s and Moody’s to the Servicer, the Bond Trustee and the Bond Issuer that such action will
not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Bonds and that prior to the taking of the proposed action no other Rating Agency shall have provided written notice to the Bond
Issuer that such action has resulted or would result in the suspension, reduction or withdrawal of the then current rating of any Tranche of Bonds; provided, that if within such ten Business Day period, any Rating Agency (other than
Standard & Poor’s) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (i) the Bond Issuer shall be required to confirm that
such Rating Agency has received the Rating Agency Condition request, and if it has, promptly request the related Rating Agency Condition confirmation and (ii) if the Rating Agency neither replies to such notification nor responds in a manner
that indicates it is reviewing and considering the notification within five Business Days following such second request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this
definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency’s right to review or consent).

 “Rating Agency” means, collectively, Moody’s, Standard & Poor’s and Fitch. If no such
organization or successor is any longer in existence, “Rating Agency” shall be a nationally recognized statistical rating organization or other comparable Person designated by the Bond Issuer, notice of which designation shall be
given to the Bond Trustee, the Certificate Trustee and the Servicer. 
 “Reconciliation Period” means the
semiannual periods commencing on April 1 and October 1 of each year and ending on September 30 and March 31, respectively, of each year; provided, however, that the initial Reconciliation Period shall commence on
the Closing Date and end on or before the date which is 12 months after the Closing Date. 
 “Regulation AB”
means the rules of the Commission promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. Sections 229.1100-229.1123, as such may be amended from time to time. 

“Remittance” means each remittance hereunder of Estimated Phase-In-Recovery Charge Payments by the Servicer to the Bond
Trustee. 
 “Remittance Date” means each Servicer Business Day on which a Remittance is to be made by the
Servicer pursuant to Section 4.03. 
 “Remittance Excess” means the amount, if any, calculated for
a particular Reconciliation Period, by which all Phase-In-Recovery Charge Collections during such Reconciliation Period exceed Deemed Phase-In-Recovery Charge Payments during such Reconciliation Period. 

“Remittance Period” means the semiannual periods commencing on January 1 and July 1 of each year and ending on
June 30 and December 31, respectively, of each year; provided, however, that the initial Remittance Period shall commence on the Closing Date and end on or before the date which is three months after the end of the initial
Reconciliation Period. 

  
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 “Remittance Shortfall” means the amount, if any, calculated for a
particular Reconciliation Period, by which Deemed Phase-In-Recovery Charge Payments during such Reconciliation Period exceed Phase-In-Recovery Charge Collections during such Reconciliation Period. 

“Required Debt Service” means, for any Remittance Period, the total dollar amount calculated by the Servicer in
accordance with Section 4.01(b)(i) as necessary to be remitted to the Collection Account during such Remittance Period (after giving effect to (a) the allocation and distribution of amounts on deposit in the Excess Funds Subaccount
at the time of calculation and which are available for payments on the Bonds, (b) any shortfalls in Required Debt Service for any prior Remittance Period, (c) the required payment or credit of any Remittance Excess or Remittance Shortfall
during such Remittance Period and (d) any Remittances based upon the Phase-In-Recovery Charge in effect in the prior Remittance Period that are expected to be realized in such Remittance Period) in order to ensure that, as of the Payment Date
immediately following the end of such period, (i) all accrued and unpaid interest on the Bonds then due shall have been paid in full, (ii) the Principal Balance of the Bonds is equal to the Projected Principal Balance of the Bonds for that
Payment Date, (iii) the balance on deposit in the Capital Subaccount equals the Required Capital Level, and (iv) all other fees, expenses and indemnities due and owing and required or allowed to be paid under Section 8.02 of the Bond
Indenture as of such date shall have been paid in full; provided, however, that, with respect to any True-Up Adjustment occurring after the last Scheduled Maturity Date for any Bonds, the Required Debt Service shall be calculated to
ensure that sufficient amounts will be collected to retire such Bonds in full as of the earlier of (x) the next Payment Date and (y) the Final Maturity Date for such Bonds. 

“Responsible Officer” means the chief executive officer, the president, any vice president, the treasurer, any assistant
treasurer, the clerk, any assistant clerk, the controller or the director of corporate finance and cash management of the Servicer. 
 “Retirement of the Bonds” means the day on which the final payment is made to the Bond Trustee in respect of the last outstanding Bond. 

“Sale Agreement” means the Phase-In-Recovery Property Purchase and Sale Agreement dated as of
                         , 2013, between [The Cleveland Electric Illuminating Company][Ohio Edison Company][The
Toledo Edison Company], as Seller, and the Bond Issuer, as the same may be amended and supplemented from time to time. 

“Seller” means [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company], an Ohio
corporation, and its permitted successors and assigns under the Sale Agreement. 
 “Semiannual Servicer
Certificate” has the meaning assigned to that term in Section 4.01(d)(iii). 
  “Semiannual
True-Up Filing” means an adjustment request filed with the PUCO on or prior to November 1 and May 1 in each year (after the initial adjustment request to be filed with the PUCO within 12 months after the issuance date of the
Bonds, which initial adjustment request shall also constitute a Semiannual True-Up Filing), in respect of an adjustment request; provided that during the period commencing with the start of the last year that the last maturing tranche
of Bonds is expected to be outstanding and ending with the Final Maturity Date, “Semiannual True-Up Filing” means a True-Up Adjustment filed as frequently as monthly. Unless otherwise ordered by the PUCO, a Semiannual True-Up Filing
will become effective on a service tendered basis sixty (60) days after the filing with the PUCO. 

“Servicer” means [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company], as the
servicer of the Phase-In-Recovery Property, or each successor (in the same capacity) pursuant to Section 6.04 or 7.02. 
 “Servicer Business Day” means any Business Day on which the Servicer’s offices in the State of Ohio are open for business. 

  
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 “Servicer Default” means an event specified in Section 7.01.

 “Servicing Fee” has the meaning set forth in Section 6.06(a). 

“Sponsor” means [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company], an Ohio
corporation, and its permitted successors and assigns under the Sale Agreement. 
 “Statute” means Ohio Revised
Code, Sections 4928.23 through 4928.2318. 
 “Termination Notice” has the meaning assigned to that term in
Section 7.01. 
 “TPB” means a third party who bills and collects the Phase-In-Recovery Charge to
and from Customers in accordance with the Statute, PUCO Regulations and any order of the PUCO. 
 “True-Up
Adjustment” means each adjustment to the Phase-In-Recovery Charge made pursuant to the terms of the Financing Order and in accordance with Section 4.01 hereof. 

“Weighted Average Days Outstanding” means the weighted average number of days [The Cleveland Electric Illuminating
Company][Ohio Edison Company][The Toledo Edison Company]’s monthly retail customer bills remain outstanding during the calendar year immediately preceding the calculation thereof pursuant to Section 4.01(b)(i). For all purposes of
this Agreement, the calculation of Weighted Average Days Outstanding pursuant to Section 4.01(b)(i) shall become effective on [            ] of each year. The initial Weighted
Average Days Outstanding shall be [            ] days until updated pursuant to Section 4.01(b)(i). 
 Section 1.02. Other Definitional Provisions. 
 (a) Capitalized terms
used herein and not otherwise defined herein have the meanings assigned to them in the Bond Indenture. 
 (b) All terms defined
in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. 
 (c) The words “hereof,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not
to any particular provision of this Agreement; Section, Schedule, Exhibit and Annex references contained in this Agreement are references to Sections, Schedules, Exhibits and Annexes in or to this Agreement unless otherwise specified; and the term
“including” shall mean “including without limitation.” 
 (d) The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter forms of such terms. 
 ARTICLE II. 
 APPOINTMENT AND AUTHORIZATION 

Section 2.01. Appointment of Servicer; Acceptance of Appointment. Subject to Section 6.05 and Article 7,
the Bond Issuer hereby appoints the Servicer, and the Servicer hereby accepts such appointment, to perform the Servicer’s obligations pursuant to this Agreement on behalf of and for the benefit of the Bond Issuer or any assignee thereof in
accordance with the terms of this Agreement and applicable law. This appointment and the Servicer’s acceptance thereof may not be revoked except in accordance with the express terms of this Agreement. 

Section 2.02. Authorization. With respect to all or any portion of the Phase-In-Recovery Property, the Servicer is authorized
and empowered by the Bond Issuer to (a) execute and deliver, on behalf of itself and/or the Bond Issuer, as the case may be, any and all instruments, documents or notices, and (b) on behalf of itself and/or the Bond Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any governmental authorities, including with the PUCO. The Bond Issuer shall execute and/or furnish the Servicer such documents as 

  
 5 

 
have been prepared by the Servicer for execution by the Bond Issuer, and with such other documents as may be in the Bond Issuer’s possession, as the Servicer may determine to be necessary or
appropriate to enable it to carry out its servicing and administrative duties hereunder. Upon the Servicer’s written request, the Bond Issuer shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate to
enable the Servicer to carry out its duties hereunder. 
 Section 2.03. Dominion and Control Over the Phase-In-Recovery
Property. Notwithstanding any other provision herein, the Bond Issuer shall have dominion and control over the Phase-In-Recovery Property, and the Servicer, in accordance with the terms hereof, is acting solely as the servicing agent and
custodian for the Bond Issuer with respect to the Phase-In-Recovery Property and the Phase-In-Recovery Property Records. The Servicer shall not take any action that is not authorized by this Agreement or that shall impair the rights of the Bond
Issuer or the Bond Trustee in the Phase-In-Recovery Property, in each case unless such action is required by applicable law. 

ARTICLE III. 

BILLING SERVICES 

Section 3.01. Duties of Servicer. The Servicer, as agent for the Bond Issuer, shall have the following duties: 

(a) Duties of Servicer Generally. 
 (i) General Duties. The Servicer’s duties in general shall include management, servicing and administration of the Phase-In-Recovery Property; obtaining meter reads, calculating electricity
usage, billing, collection and posting of all payments in respect of the Phase-In-Recovery Property; responding to inquiries by Customers, the PUCO, competitive retail electric suppliers (if any) or any federal, local or other state governmental
authorities with respect to the Phase-In-Recovery Charges or Phase-In-Recovery Property; delivering Bills to Customers, investigating and handling delinquencies, processing and depositing collections and making periodic remittances; furnishing
periodic reports to the Bond Issuer, the Bond Trustee, the Certificate Trustee, the Rating Agencies and the PUCO; making all filings with the PUCO and taking such other action as may be necessary to perfect the Bond Issuer’s ownership interest
in and the Bond Trustee’s first priority security interest in the Phase-In-Recovery Property; making all filings and taking such other action as may be necessary to perfect and maintain the perfection and priority of the Bond Trustee’s
security interest in the Collateral; selling, as the agent for the Bond Issuer as its interests may appear, defaulted or written off accounts in accordance with the Servicer’s usual and customary practices; taking all necessary action in
connection with True-Up Adjustments as set forth herein; and performing such other duties as may be specified in the Financing Order to be performed by it. To the extent allowed by law and PUCO Regulations, certain of the duties set forth above may
be performed by TPBs. Without limiting the generality of this Section 3.01(a)(i), in furtherance of the foregoing, the Servicer hereby agrees that it shall also have, and shall comply with, the duties and responsibilities relating to
data acquisition, usage and bill calculation, billing, customer service functions, collection, payment processing and remittance set forth in Annex I hereto, as it may be amended from time to time. For the avoidance of doubt, the term
“usage” when used herein refers to both kilowatt hour consumption and kilowatt demand. 
 (ii) PUCO Regulations
Control. Notwithstanding anything to the contrary in this Agreement, the duties of the Servicer set forth in this Agreement shall be qualified in their entirety by any PUCO Regulations, the Financing Order and the federal securities laws and
rules and regulations promulgated thereunder, including without limitation, Regulation AB, as in effect at the time such duties are to be performed. 
 (b) Reporting Functions. 
 (i) Semiannual Reconciliation Report.
The Servicer shall deliver a semiannual written reconciliation report substantially in the form of Exhibit E hereto as required by Section 4.03(b) hereof. 
 (ii) Notification of Laws and Regulations. The Servicer shall promptly notify the Bond Issuer, the Bond Trustee, the Certificate Trustee and the Rating Agencies in writing of any laws or PUCO
Regulations hereafter promulgated that have a material adverse effect on the Servicer’s ability to perform its duties under this Agreement. 

  
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 (iii) Other Information. Upon the reasonable request of the Bond Issuer, the Bond
Trustee, the Certificate Trustee, any Rating Agency, or the PUCO, the Servicer shall provide to such Bond Issuer, Bond Trustee, Certificate Trustee, the Rating Agencies, or the PUCO, as the case may be, any public financial information in respect of
the Servicer, or any material information regarding the Phase-In-Recovery Property to the extent it is reasonably available to the Servicer, as may be reasonably necessary and permitted by law, including all applicable PUCO Regulations and
guidelines, for the Bond Issuer, the Bond Trustee, the Certificate Trustee, or the Rating Agencies to monitor the Servicer’s performance hereunder. 
 (iv) Preparation of Reports to be Filed with the Commission. The Servicer shall prepare and deliver such additional reports as are required under this Agreement, including a copy of each Semiannual
Servicer Certificate described in Section 4.01(d)(iii), the annual Certificate of Compliance described in Section 3.03, and the Annual Accountant’s Report described in Section 3.04. In addition, the Servicer
shall prepare, procure, deliver and/or file, or cause to be prepared, procured, delivered or filed, any reports, attestations, exhibits, certificates or other documents required to be delivered or filed with the Commission (and/or any other
Governmental Authority) by the Bond Issuer or the Sponsor under the federal securities or other applicable laws or in accordance with the Basic Documents, including, without limitation, filing with the Commission, if applicable and required by
applicable law, a copy or copies of (i) each Monthly Servicer Certificate described in Section 4.01(d)(ii) (under Form 10-D or any other applicable form), (ii) each Semiannual Servicer Certificate described in
Section 4.01(d)(iii) (under Form 10-D or any other applicable form), (iii) the annual statements of compliance, attestation reports and other certificates described in Section 3.03, and (iv) the Annual
Accountant’s Report (and any attestation required under Regulation AB) described in Section 3.04. In addition, the appropriate officer or officers of the Servicer shall (in its separate capacity as Servicer) sign the Sponsor’s
annual report on Form 10-K (and any other applicable Commission or other reports, attestations, certifications and other documents, to the extent that the Servicer’s signature is required by, and consistent with, the federal securities laws
and/or any other applicable law. 
 (c) Opinions of Counsel. The Servicer shall deliver to the Bond Issuer and the Bond
Trustee: 
 (i) promptly after the execution and delivery of this Agreement and of each amendment hereto, an Opinion of Counsel
from external counsel of the Bond Issuer either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the PUCO and all filings pursuant to the UCC, that are necessary under the UCC and the Statute to fully
preserve, protect and perfect the Lien of the Bond Trustee in the Phase-In-Recovery Property have been authorized, executed and filed, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are
given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Lien; and 
 (ii) within ninety days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the date hereof, an Opinion of Counsel from external counsel
of the Issuer, dated as of a date during such ninety-day period, either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the PUCO and all filings pursuant to the UCC, that are necessary under the UCC
and the Statute to fully preserve, protect and perfect the Lien of the Bond Trustee in the Phase-In-Recovery Property, have been authorized, executed and filed and reciting the details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Lien. 
 Each Opinion of Counsel referred to in clause (i) or (ii) above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to preserve, protect and
perfect such interest or Lien. 
 (d) Duties of Servicer as Administrative Trustee. The Servicer, in addition to the
Delaware Trustee, shall serve as a trustee of the Trust, and as a trustee shall have the administrative duties set forth in the Declaration of Trust including without limitation those duties designated for such trustee in Article IV of the
Declaration of Trust. The Servicer’s appointment as a trustee of the Trust shall become effective as of the Closing Date and shall continue in full force and effect until terminated pursuant to this Section 3.01(d). If any Servicer shall
resign as Servicer in accordance with the provisions of this Agreement or if all the rights and obligations of any Servicer shall have terminated under Section 7.01, the appointment of such Servicer as a trustee under the Declaration of Trust
shall terminate upon appointment of a successor Servicer, subject to the approval of the PUCO, and acceptance by such successor Servicer of such appointment. 
 Section 3.02. Servicing and Maintenance Standards. On behalf of the Bond Issuer, the Servicer shall (a) manage, service, administer and make collections in respect of the
Phase-In-Recovery Property with reasonable care and in accordance with applicable law, including all applicable PUCO Regulations and guidelines, using the same degree of care and diligence that the Servicer exercises with respect to similar assets
for its own account and, if applicable, for others; (b) follow customary standards, policies and procedures for the industry in performing its duties as Servicer; (c) use all reasonable efforts, consistent with its customary servicing
procedures, to bill and collect the Phase-In-Recovery Charge; (d) file all filings under the applicable UCC or the Statute necessary or desirable to maintain the first priority perfected security interest of the Bond Trustee in the
Phase-In-Recovery Property; (e) comply in all material respects with all laws and regulations applicable to and binding on it relating to 

  
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the Phase-In-Recovery Property; and (f) submit semiannually a request to the PUCO seeking a True-Up Adjustment, if any is required, of the Phase-In-Recovery Charge. The Servicer shall follow
such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of all or any portion of the Phase-In-Recovery Property, which, in the Servicer’s judgment, may include the taking of legal action, at
the Bond Issuer’s expense but subject to the priority of payments and Cap set forth in Section 8.02(e) of the Bond Indenture. 
 Section 3.03. Certificate of Compliance. 
 (a) The Servicer shall
deliver to the Bond Issuer, the Bond Trustee, the Certificate Trustee, the Rating Agencies, and the PUCO, on or before (a) March 31 of each year or (b) if earlier, for any calendar year in which the Sponsor is required to file an
annual report on Form 10-K in accordance with the Exchange Act and the rules and regulations thereunder, the date on which such annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations
thereunder, certificates from a Responsible Officer of the Servicer (i) containing, and certifying as to, the statements of compliance required by Item 1123 (or any successor or similar item or rule) of Regulation AB, as then in effect and
(ii) containing, and certifying as to, the statements and assessment of compliance required by Item 1122(a) (or any successor or similar item or rule) of Regulation AB, as then in effect. These certificates may be in the form of, or shall
include the forms attached hereto as Exhibit A-1 and Exhibit A-2, with, in the case of Exhibit A-1, such changes as may be required to conform to the applicable securities law. 

(b) The Servicer shall use commercially reasonable efforts to obtain from each other party participating in the servicing function any
additional certifications as to the statements and assessment required under Item 1122 or Item 1123 of Regulation AB to the extent required in connection with the filing of the annual report on Form 10-K; provided, however,
that a failure to obtain such certifications shall not be a breach of the Servicer’s duties hereunder. The parties acknowledge that the Bond Trustee’s certifications shall be limited to the Item 1122 certifications described in
Exhibit C of the Bond Indenture. 
 (c) The initial Servicer, in its capacity as Sponsor, shall post on its website and file
with or furnish to the Commission, in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the information described in Section 3.07(g) of the Bond Indenture to
the extent such information is reasonably available to the Sponsor. Except to the extent permitted by applicable law, the initial Servicer, in its capacity as Sponsor, shall not voluntarily suspend or terminate its filing obligations as Sponsor with
the SEC as described in this Section 3.03(c). The covenants of the initial Servicer, in its capacity as Sponsor, pursuant to this Section 3.03(c) shall survive the resignation, removal or termination of the initial Servicer
as Servicer hereunder. 
 Section 3.04. Annual Report by Independent Registered Public Accountants. 

(a) The Servicer, at its own expense in partial consideration of the Servicing Fee paid to it, shall cause a firm of Independent
registered public accountants (which may provide other services to the Servicer or the Seller) to prepare annually, and the Servicer shall deliver annually to the Bond Issuer, the Bond Trustee, Certificate Trustee, the Rating Agencies, and the PUCO,
on or before the earlier of (a) March 31 of each year, [beginning March 31, 2014,] or (b) with respect to each calendar year during which the Sponsor’s annual report on Form 10-K is required to be filed in accordance with
the Exchange Act and the rules and regulations thereunder, the date on which the annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rule and regulations thereunder, a report addressed to the Servicer (the
“Annual Accountant’s Report”) to the effect that such firm has performed certain procedures, agreed between the Servicer and such accountants, in connection with the Servicer’s compliance with its obligations under this
Agreement during the preceding twelve months ended December 31 (or, in the case of the first Annual Accountant’s Report to be delivered on or before March 31, [2014], the period of time from the date of this Agreement until
December 31, [2013]), identifying the results of such procedures and including any exceptions noted. 
 (b) The Annual
Accountant’s Report shall also indicate that the accounting firm providing such report is independent of the Servicer in accordance with the Rules of the Public Company Accounting Oversight Board, and shall include any attestation report
required under Item 1122(b) of Regulation AB (or any successor or similar item or rule), as then in effect. 

  
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 ARTICLE IV. 
 SERVICES RELATED TO TRUE-UP ADJUSTMENTS; REMITTANCES AND RECONCILIATIONS 

Section 4.01. True-Up Adjustments. From time to time, until the Retirement of the Bonds, the Servicer shall identify the need
for True-Up Adjustments and shall take all reasonable action to obtain and implement such True-Up Adjustments, all in accordance with the following: 
 (a) Expected Amortization Schedule. The Expected Amortization Schedule is attached hereto as Schedule 4.01(a). 

(b) True-Up Filings. 
 (i) Semiannual True-Up Filings. For the purpose of preparing a Semiannual True-Up Filing, the Servicer shall: (A) update the assumptions underlying the calculation of the Phase-In-Recovery
Charge, including energy usage volume, the rate of charge-offs and estimated expenses and fees of the Bond Issuer and the Certificate Issuer to the extent not fixed, in each case for the Remittance Periods beginning on January 1 and July 1 of such
year; (B) update the calculation of Weighted Average Days Outstanding; (C) determine the Required Debt Service for each such Remittance Period based upon such updated assumptions; and (D) determine the Phase-In-Recovery Charge to be
charged during each such Remittance Period based upon such Required Debt Service. The Servicer shall file a Semiannual True-Up Filing with the PUCO no later than November 1 and May 1 of each year (no later than
[            ] for the first Semiannual True-Up Filing). 
 (ii)
True-Up Adjustments. The Servicer shall take all reasonable actions and make all reasonable efforts to secure any True-Up Adjustments. 
 (c) Intentionally Omitted. 
 (d) Reports. 

(i) Notification of Adjustment Request Filings and True-Up Adjustments. Whenever the Servicer files an Adjustment Request with
the PUCO, the Servicer shall send a copy of such filing to the Bond Issuer, the Bond Trustee, the Certificate Trustee and the Rating Agencies concurrently therewith. If any True-Up Adjustment requested in any such Adjustment Request filing does not
become effective on the applicable date as provided by the Financing Order, the Servicer shall notify the Bond Issuer, the Bond Trustee, the Certificate Trustee and the Rating Agencies by the end of the second Servicer Business Day after such
applicable date. 
 (ii) Monthly Servicer Certificate. So long as any Bonds are outstanding, not later than fifteen
(15) days after the end of each month after the Certificates are issued (excluding                          ,
2013), or if such day is not a Servicer Business Day, the next succeeding Servicer Business Day, the Servicer shall deliver a written report substantially in the form of Exhibit C hereto (the “Monthly Servicer Certificate”)
to the Bond Issuer, the Bond Trustee, the Certificate Trustee, the Rating Agencies, and the PUCO. 
 (iii) Semiannual
Servicer Certificate. So long as any Bonds are outstanding, not later than the Servicer Business Day immediately preceding each Payment Date, the Servicer shall deliver a written report substantially in the form of Exhibit D hereto (the
“Semiannual Servicer Certificate”) to the Bond Issuer, the Bond Trustee, the Certificate Trustee, the Rating Agencies, and the PUCO. 
 (iv) Reports to Customers. After each revised Phase-In-Recovery Charge has gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to the extent and in the manner and time frame
required by applicable PUCO Regulations, if any, cause to be prepared and delivered to customers any required notices announcing such revised Phase-In-Recovery Charges. 

  
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 Section 4.02. Limitation of Liability. 

(a) The Bond Issuer and the Servicer expressly agree and acknowledge that: 

(i) In connection with any True-Up Adjustment, the Servicer is acting solely in its capacity as the servicing agent hereunder.

 (ii) Neither the Servicer nor the Bond Issuer shall be responsible in any manner for, and shall have no liability whatsoever
as a result of, any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer’s failure to file the applications required by Section 4.01 in a timely and correct
manner or other material breach by the Servicer of its duties under this Agreement that materially adversely affects the True-Up Adjustments), by the PUCO in any way related to the Phase-In-Recovery Property or in connection with any True-Up
Adjustment, the subject of any filings under Section 4.01, any proposed True-Up Adjustment, or the approval of the Phase-In-Recovery Charge and the adjustments thereto. 

(iii) The Servicer shall have no liability whatsoever relating to the calculation of the Phase-In-Recovery Charge and the adjustments
thereto, including as a result of any inaccuracy of any of the assumptions made in such calculation regarding expected energy usage volume, the rate of charge-offs, estimated expenses and fees of the Bond Issuer and the Certificate Issuer, so long
as the Servicer has not acted in a negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any Person, including the Bondholders or the Certificateholders, not receiving any payment, amount or
return anticipated or expected in respect of any Bond or Certificate generally, except only to the extent that the Servicer is liable under Section 6.02 of this Agreement. 

(b) Notwithstanding the foregoing, this Section 4.02 shall not relieve the Servicer of any liability under
Section 6.02 for any misrepresentation by the Servicer under Section 6.01 or for any breach by the Servicer of its obligations under this Agreement. 
 Section 4.03. Remittances; Reconciliations. 
 (a) Subject to
Section 4.03(b) below, on each Servicer Business Day commencing 45 days after the date of this Agreement, the Servicer shall cause to be made within two (2) Servicer Business Days of deemed receipt a wire transfer of immediately
available funds to the General Subaccount of the Collection Account in an amount equal to the Estimated Phase-In-Recovery Charge Payments (as calculated in accordance with Annex I hereto) received on such day and on any prior day that was not
a Servicer Business Day for which a Remittance has not previously been made (taking into account the Weighted Average Days Outstanding in effect from time to time). Prior to or simultaneous with each Remittance to the General Subaccount of the
Collection Account pursuant to this Section, the Servicer shall provide written notice to the Bond Trustee of each such Remittance (including the exact dollar amount to be remitted). 

(b) Within 12 months after the issuance of the Bonds and then on or before each January 1 and July 1 (and as frequently as monthly
during the period commencing with the start of the last year that the last maturing tranche of Bonds is expected to be outstanding and ending with the Final Maturity Date), the Servicer shall calculate the amount of any Remittance Shortfall or
Remittance Excess attributable to the prior Reconciliation Period and (A) if a Remittance Shortfall exists, the Servicer shall make a supplemental wire transfer of immediately available funds to the General Subaccount of the Collection Account
on the next Servicer Business Day following such calculation in the amount of such Remittance Shortfall, or (B) if a Remittance Excess exists, the Servicer may reduce the amount of Remittances to be made to the Bond Issuer on succeeding
Servicer Business Days in an amount equal to the amount of such Remittance Excess until the balance of the Remittance Excess has been reduced to zero. The Servicer shall deliver a written report setting forth in reasonable detail the calculation of
any Remittance Excess or Remittance Shortfall to the Bond Issuer, the Bond Trustee, the Certificate Trustee, the Rating Agencies, and the PUCO. 
  (c) The Servicer agrees and acknowledges that it will remit Estimated Phase-In-Recovery Charge Payments in accordance with this Section 4.03 without any surcharge, fee, offset, charge or other
deduction except (i) as set forth in Section 4.03(b) above and (ii) for late fees permitted by Section 6.06. 

  
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 ARTICLE V. 
 THE PHASE-IN-RECOVERY PROPERTY 
 Section 5.01. Custody of
Phase-In-Recovery Property Records. To assure uniform quality in servicing the Phase-In-Recovery Property and to reduce administrative costs, the Bond Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Bond Issuer and the Bond Trustee as custodian of any and all documents and records that the Servicer shall keep on file, in accordance with its customary procedures, relating to the Phase-In-Recovery Property,
including copies of the Financing Order and Adjustment Requests relating thereto and all documents filed with the PUCO in connection with any True-Up Adjustment and computational records relating thereto (collectively, the “Phase-In-Recovery
Property Records”), which are hereby constructively delivered to the Bond Trustee, as pledgee of the Bond Issuer with respect to all Phase-In-Recovery Property. 
 Section 5.02. Duties of Servicer as Custodian. 
 (a)
Safekeeping. The Servicer shall hold the Phase-In-Recovery Property Records on behalf of the Bond Issuer and the Bond Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to the Phase-In-Recovery
Property Records on behalf of the Bond Issuer and the Bond Trustee as shall enable the Bond Issuer to comply with this Agreement and the Bond Indenture. In performing its duties as custodian the Servicer shall act with reasonable care, using that
degree of care and diligence that the Servicer exercises with respect to comparable assets that the Servicer services for itself or, if applicable, for others. The Servicer shall promptly report to the Bond Issuer and the Bond Trustee any failure on
its part to hold the Phase-In-Recovery Property Records and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by the Bond Issuer or the Bond Trustee of the Phase-In-Recovery Property Records. The Servicer’s duties to hold the Phase-In-Recovery Property Records on behalf of the Bond Issuer set forth in this
Section 5.02, to the extent such Phase-In-Recovery Property Records have not been previously transferred to a successor Servicer pursuant to Article VII, shall terminate one year and one day after the earlier of the date on which
(i) the Servicer is succeeded by a successor Servicer in accordance with Article VII hereof and (ii) no Bonds are outstanding. 
 (b) Maintenance of and Access to Records. The Servicer shall maintain at all times records and accounts that permit the Servicer to identify Phase-In-Recovery Charges billed. The Servicer shall
maintain the Phase-In-Recovery Property Records in Akron, Ohio or at such other office as shall be specified to the Bond Issuer and the Bond Trustee by written notice at least 30 days prior to any change in location. The Servicer shall make
available for inspection to the Bond Issuer and the Bond Trustee or their respective duly authorized representatives, attorneys or auditors the Phase-In-Recovery Property Records at such times during normal business hours as the Bond Issuer or the
Bond Trustee shall reasonably request and which do not unreasonably interfere with the Servicer’s normal operations. Nothing in this Section 5.02(b) shall affect the obligation of the Servicer to observe any applicable law
(including any PUCO Regulations) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this
Section 5.02(b). 
 (c) Release of Documents. Upon instruction from the Bond Trustee in accordance with the
Bond Indenture, the Servicer shall release any Phase-In-Recovery Property Records to the Bond Trustee, the Bond Trustee’s agent or the Bond Trustee’s designee, as the case may be, at such place or places as the Bond Trustee may designate,
as soon as practicable. 
 (d) Defending Phase-In-Recovery Property Against Claims. The Servicer, on behalf of the
Bondholders, shall institute any action or proceeding necessary to compel performance by the PUCO or the State of Ohio of any of their obligations or duties under the Statute, the Financing Order or any Adjustment Request, and the Servicer agrees to
take such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to block or overturn any attempts to
cause a repeal of, modification of or supplement to the Statute or the Financing Order or the rights of holders of Phase-In-Recovery Property by legislative enactment, voter initiative or constitutional amendment that would be adverse to the
Bondholders, the Bond Issuer or the Bond Trustee, (and, thus, the Delaware 

  
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Trustee, the Certificate Trustee and the Certificateholders). The costs of any such action shall be payable from Phase-In-Recovery Charge Collections as an Operating Expense in accordance with
the priorities and Cap set forth in Section 8.02(e) of the Bond Indenture. The Servicer’s obligations pursuant to this Section 5.02 shall survive and continue notwithstanding the fact that the payment of Operating Expenses
pursuant to Section 8.02(e) of the Bond Indenture may be delayed (it being understood that the Servicer may be required to initially advance its own funds to satisfy its obligations hereunder). 

Section 5.03. Instructions; Authority to Act. For so long as any Bonds remain outstanding, the Servicer shall be deemed to
have received proper instructions with respect to the Phase-In-Recovery Property Records upon its receipt of written instructions signed by a Responsible Officer of the Bond Trustee. 

Section 5.04. Effective Period and Termination. The Servicer’s appointment as custodian shall become effective as of the
Closing Date and shall continue in full force and effect until terminated pursuant to this Section 5.04. If any Servicer shall resign as Servicer in accordance with the provisions of this Agreement or if all of the rights and obligations
of any Servicer shall have been terminated under Section 7.01, the appointment of such Servicer as custodian shall terminate upon appointment of a successor Servicer, subject to the approval of the PUCO, and acceptance by such successor
Servicer of such appointment. 
 Section 5.05. Third-Party Billers. 

(a) The Servicer hereby acknowledges and agrees that: 
 (i) billing and collection of Phase-In-Recovery Charges by TPBs is not currently permitted by the Statute or PUCO Regulations; 
 (ii) if at any time in the future the State of Ohio takes any action to amend the Statute, or the PUCO takes any action to adopt, supplement or amend PUCO Regulations, in either case, to permit the
billing and/or collecting of Phase-In-Recovery Charges by TPBs, the Servicer, on behalf of the Bondholders, shall take such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or
testifying at hearings or similar proceedings, as may be reasonably necessary to (A) if the Servicer reasonably believes that such action could result in a downgrade of the Bonds or is otherwise contrary to the Statute or the Financing Order,
block or overturn such action of the State or the PUCO, as the case may be, including by asserting that such action violates the State Pledge; and (B) if such challenge or opposition fails, compel performance by the PUCO or the State of Ohio,
as the case may be, of their obligations and duties under the Statute and the Financing Order, as applicable, with respect to TPBs, including but not limited to ensuring that the implementation of any such amendment, supplement, rule or regulation
does not result in a downgrade in the credit ratings assigned to the Bonds and otherwise conforms with the matters referenced in Annex II hereto; 
 (iii) it, on behalf of the Bondholders, will take reasonable steps to monitor on an ongoing basis proceedings in the legislature of the State of Ohio and at the PUCO for proposed legislation, rules,
regulations or other initiatives that could reasonably result in the taking by the State of Ohio or the PUCO of any action referenced in (ii) above; and 
 (iv) the costs of any action taken by, and the obligations of, the Servicer under this Section 5.05(a) shall be treated in the same manner as costs and obligations referenced in the second and
third sentences, respectively, of Section 5.02(d). 
 (b) Should the laws of the State of Ohio be changed to permit
the billing and/or collecting of Phase-In-Recovery Charges by TPBs, the Servicer shall, using the same degree of care and diligence that it exercises with respect to payments owed to it for its own account, implement such procedures and policies as
would be necessary to properly enforce the obligations of each TPB to remit Phase-In-Recovery Charges, in accordance with the terms and provisions of the Financing Order. 
 Section 5.06. Custodian’s Indemnification. The Servicer as custodian shall indemnify the Bond Issuer and the Bond Trustee (for itself and for the benefit of the Holders) and each of their
respective officers, directors, 

  
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employees and agents for, and defend and hold harmless each such Person from and against, any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or
expenses, of any kind whatsoever (collectively, “Indemnified Losses”) that may be imposed on, incurred by or asserted against each such Person as the result of any negligent act or omission in any way relating to the maintenance and
custody by the Servicer, as custodian, of the Phase-In-Recovery Property Records; provided, however, that the Servicer shall not be liable for any portion of any such amount resulting from the willful misconduct, bad faith or gross
negligence of the Bond Issuer or the Bond Trustee, as the case may be. 
 ARTICLE VI. 

THE SERVICER 

Section 6.01. Representations and Warranties of Servicer. The Servicer makes the following representations and warranties, as
of the Closing Date, on which the Bond Issuer is deemed to have relied in entering into this Agreement relating to the servicing of the Phase-In-Recovery Property. 
 (a) Organization and Good Standing. The Servicer is duly organized and validly existing as a corporation in good standing under the laws of the State of Ohio, with the requisite corporate power and
authority to own its properties as such properties are currently owned and to conduct its business as such business is now conducted by it, and has the requisite corporate power and authority to service the Phase-In-Recovery Property and to hold the
Phase-In-Recovery Property Records as custodian. 
 (b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Phase-In-Recovery
Property as required by this Agreement) shall require such qualifications, licenses or approvals (except where the failure to so qualify or obtain such licenses and approvals would not be reasonably likely to have a material adverse effect on the
Servicer’s business, operations, assets, revenues or properties or adversely affect the servicing of the Phase-In-Recovery Property). 
 (c) Power and Authority. The Servicer has the requisite corporate power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance
of this Agreement have been duly authorized by all necessary corporate action on the part of the Servicer. 
 (d) Binding
Obligation. This Agreement constitutes a legal, valid and binding obligation of the Servicer enforceable against it in accordance with its terms, subject to applicable insolvency, reorganization, moratorium, fraudulent transfer and other laws
relating to or affecting creditors’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a
proceeding in equity or at law. 
 (e) No Violation. The consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not: (i) conflict with or result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the articles of incorporation or code of
regulations of the Servicer, or any material indenture, agreement or other instrument to which the Servicer is a party or by which it is bound; (ii) result in the creation or imposition of any Lien upon any of the Servicer’s properties
pursuant to the terms of any such indenture, agreement or other instrument; or (iii) violate any existing law or any existing order, rule or regulation applicable to the Servicer of any federal or state court or regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Servicer or its properties. 
 (f) No
Proceedings. There are no proceedings pending and, to the Servicer’s knowledge, there are no proceedings threatened and no investigations pending or threatened, before any federal or state court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Servicer or its properties involving or relating to the Servicer or the Bond Issuer or, to the Servicer’s knowledge, any other Person: (i) asserting the invalidity of this
Agreement; (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement; or (iii) seeking any determination or ruling that might materially adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement. 

  
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 (g) Approvals. No approval, authorization, consent, order or other action of, or
filing with, any federal or state court, regulatory body, administrative agency or other governmental instrumentality is required in connection with the execution and delivery by the Servicer of this Agreement, the performance by the Servicer of the
transactions contemplated hereby or the fulfillment by the Servicer of the terms hereof, except those that have been obtained or made and those that the Servicer is required to make in the future pursuant to Article III or IV hereof.

 Section 6.02. Indemnities of Servicer. 
 (a) The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer and as expressly provided under this Section 6.02.

 (b) The Servicer shall indemnify the Bond Issuer and the Bondholders for, and defend and hold harmless each such Person from
and against, any and all liabilities, obligations, losses, damages, payments, claims, costs or expenses of any kind whatsoever (collectively, “Losses”) that may be imposed on, incurred by or asserted against any such Person as a
result of (i) the Servicer’s willful misconduct or negligence in the performance of its duties or observance of its covenants under this Agreement (including the Servicer’s willful misconduct or negligence relating to the maintenance
and custody by the Servicer, as custodian, of the Phase-In-Recovery Property Records) or (ii) the Servicer’s breach in any material respect of any of its representations or warranties in this Agreement; provided, however,
that the Servicer shall not be liable for any Losses resulting from the willful misconduct or gross negligence of any such indemnified person; and, provided, further, that the Bondholders shall be entitled to enforce their rights and
remedies against the Servicer under this Section 6.02(b) solely through a cause of action brought for their benefit by the Bond Trustee; and; provided, further, that the Servicer shall not be liable for any Losses,
regardless of when incurred, after the Bonds and all other Financing Costs have been paid in full, except as provided in Section 6.02(c). 
 (c) The Servicer shall indemnify and hold harmless the Bond Trustee, the Delaware Trustee, the Certificate Trustee and the Certificate Issuer and any of their respective affiliates, officials, officers,
directors, employees and agents (each an “Indemnified Person”) for, and defend and hold harmless each such Person from and against, any and all Losses imposed on, incurred by or asserted against any of such Indemnified Persons as a
result of: (i) the Servicer’s willful misconduct or negligence in the performance of its duties or observance of its covenants under this Agreement (including the Servicer’s willful misconduct or negligence relating to the maintenance
and custody by the Servicer, as custodian, of the Phase-In-Recovery Property Records) or (ii) the Servicer’s breach in any material respect of any of its representations or warranties in this Agreement; provided, however,
that the Servicer shall not be liable for any Losses resulting from the willful misconduct or negligence of such Indemnified Person or resulting from a breach of a representation or warranty made by such Indemnified Person in any of the Basic
Documents that gives rise to the Servicer’s breach. The Servicer shall not be required to indemnify an Indemnified Person for any amount paid or payable by such Indemnified Person in the settlement of any action, proceeding or investigation
without the written consent of the Servicer, which consent shall not be unreasonably withheld. Promptly after receipt by an Indemnified Person of notice of its involvement in any action, proceeding or investigation, such Indemnified Person shall, if
a claim for indemnification in respect thereof is to be made against the Servicer under this Section 6.02(c), notify the Servicer in writing of such involvement. Failure by an Indemnified Person to so notify the Servicer shall relieve
the Servicer from the obligation to indemnify and hold harmless such Indemnified Person under this Section 6.02(c) only to the extent that the Servicer suffers actual prejudice as a result of such failure. With respect to any action,
proceeding or investigation brought by a third party for which indemnification may be sought under this Section 6.02(c), the Servicer shall be entitled to assume the defense of any such action, proceeding or investigation. Upon
assumption by the Servicer of the defense of any such action, proceeding or investigation, the Indemnified Person shall have the right to participate in such action or proceeding and to retain its own counsel. The Servicer shall be entitled to
appoint counsel of the Servicer’s choice at the Servicer’s expense to represent the Indemnified Person in any action, proceeding or investigation for which a claim of indemnification is made against the Servicer under this
Section 6.02(c) (in which case the Servicer shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Servicer’s election to appoint counsel to represent the Indemnified Person in an action, proceeding or investigation, the Indemnified Person shall have the
right to employ separate counsel (including local counsel), and the Servicer shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of 

  
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counsel chosen by the Servicer to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person and the Servicer and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Servicer,
(iii) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Servicer shall
authorize the Indemnified Person to employ separate counsel at the expense of the Servicer. Notwithstanding the foregoing, the Servicer shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the
Indemnified Persons other than local counsel. The Servicer will not, without the prior written consent of the Indemnified Person, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought under this Section 6.02(c) (whether or not the Indemnified Person is an actual or potential party to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of the Indemnified Person from all liability arising out of such claim, action, suit or proceeding. 
 (d) Indemnification under Sections 6.02(b) and 6.02(c) shall include reasonable fees and out-of-pocket expenses of investigation and litigation (including reasonable attorneys’ fees and
expenses), except as otherwise provided in this Agreement. 
 (e) For purposes of Section 6.02(b) and
6.02(c), in the event of the termination of the rights and obligations of [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company] (or any successor thereto pursuant to Section 6.04) as
Servicer pursuant to Section 7.01, or a resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to Section 7.02.

 (f) The initial Servicer shall indemnify the Bond Trustee and, as to the Bond Issuer’s allocable portion only, the
Delaware Trustee and the Certificate Trustee for all due and unpaid compensation, expenses and indemnity amounts (owed by the Bond Issuer to such trustee under, and to the extent set forth in, Section 6.07 of the Bond Indenture, Sections 1
through 4 of the Fee and Indemnity Agreement and any applicable provisions of the other applicable Basic Documents) that exceed the Cap. The Servicer’s indemnity obligation under this Section 6.02(f) shall continue as an obligation
of [CEI] [OE] [TE], as the initial Servicer under this Agreement, in the event a successor servicer is appointed pursuant to Section 7.02. 
 (g) The indemnification obligations of the Servicer contained in this Section 6.02 shall survive the resignation or removal of the Bond Trustee, the Certificate Trustee or the Delaware Trustee
or the termination of this Agreement or the other applicable Basic Documents. 
 Section 6.03. Limitation on Liability
of Servicer and Others. Except as otherwise provided under this Agreement, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be liable to the Bond Issuer or any other Person for any action taken
or for refraining from the taking of any action pursuant to this Agreement or for errors in judgment; provided, however, that this provision shall not protect the Servicer or any director, officer, employee or agent of the Servicer
against any liability that would otherwise be imposed by reason of willful misconduct or negligence in the performance of duties under this Agreement. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith
on the advice of counsel reasonably acceptable to the Bond Trustee or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising under this Agreement. 

Except as provided in this Agreement, including but not limited to Section 5.02(d), the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action relating to the Phase-In-Recovery Property that is not directly related to one of the Servicer’s enumerated duties in this Agreement or related to its obligation to indemnify, and
that in its reasonable opinion may cause it to incur any expense or liability; provided, however, that the Servicer may, in respect of any Proceeding, undertake any action that it is not specifically identified in this Agreement as a
duty of the Servicer but that the Servicer reasonably determines is necessary or desirable in order to protect the rights and duties of the Bond Issuer or the Bond Trustee under this Agreement and the interests of the Holders and Customers under
this Agreement. The Servicer’s costs and expenses incurred in connection with any such proceeding shall be payable from Phase-In-Recovery Charges received by the Servicer (to be remitted to the

  
 15 

 
Collection Account) as an Operating Expense (and shall not be deemed to constitute a portion of the Servicing Fee) in accordance with the Bond Indenture. The Servicer’s obligations pursuant
to this Section 6.03 shall survive and continue notwithstanding that payment of such Operating Expense may be delayed pursuant to the terms of the Bond Indenture (it being understood that the Servicer may be required initially to advance
its own funds to satisfy its obligations hereunder). 
 Section 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. The Servicer shall not merge or consolidate into, or sell all or substantially all of its assets to, any other Person except in compliance with this Section. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the Servicer shall be a party or (c) which may succeed to the properties and assets of the Servicer substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the Servicer hereunder, shall be the successor to the Servicer under this Agreement without further act on the part of any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no Servicer Default and no event which, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Bond Issuer and the Bond Trustee an Officers’ Certificate stating that such consolidation, merger or succession and such agreement of assumption comply with this Section and that all conditions precedent
provided for in this Agreement relating to such transaction have been complied with, (iii) the Servicer shall have delivered to the Bond Issuer and the Bond Trustee an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all statutory filings to be made by the Servicer, including filings with the PUCO pursuant to the Statute and filings under the applicable UCC, have been executed and filed that are necessary to preserve and protect fully the interests of
the Bond Issuer and the Bond Trustee in the Phase-In-Recovery Property and reciting the details of such filings or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interests and
(iv) the Rating Agencies shall have received prior written notice of such transaction. When any Person acquires the properties and assets of the Servicer substantially as a whole and becomes the successor to the Servicer in accordance with the
terms of this Section 6.04, then upon satisfaction of all of the other conditions of this Section 6.04, the Servicer shall automatically and without further notice be released from all its obligations hereunder. 

Section 6.05. [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company] Not to Resign as
Servicer. Subject to the provisions of Section 6.04, [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company] shall not resign from the obligations and duties hereby imposed on it as Servicer
under this Agreement unless [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company] delivers to the Bond Trustee and the PUCO an opinion of external counsel to the effect that [The Cleveland Electric
Illuminating Company’s][Ohio Edison Company’s][The Toledo Edison Company’s] performance of its duties under this Agreement shall no longer be permissible under applicable law. No such resignation shall become effective until a
successor Servicer shall have assumed the responsibilities and obligations of [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company] in accordance with Section 7.02. In no event shall the Bond
Trustee be obligated to supervise the performance of the Servicer hereunder or to act as successor Servicer hereunder. The Bond Trustee shall have no liability for the default of the Servicer hereunder or the misconduct of the Servicer under this
Agreement. 
 Section 6.06. Servicing Compensation. 

(a) In consideration for its services hereunder, until the Retirement of the Bonds, the Servicer shall receive an annual fee (the
“Servicing Fee”) in an amount (i) equal to 10 one-hundredth of one percent (0.10%) of the initial principal balance of the Bonds for so long as [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo
Edison Company] remains the Servicer or (ii) of up to 75 one-hundredth of one percent (0.75%) of the initial principal balance of the Bonds in the case of a non-utility successor Servicer. The Servicing Fee shall be payable in semiannual
installments on each Payment Date. 
 (b) The Servicing Fee set forth in Section 6.06(a) above and expenses provided
for in Section 6.06(c) below shall be paid to the Servicer by the Bond Trustee, on each Payment Date in accordance with the priorities and subject to the Cap set forth in Section 8.02(e) of the Bond Indenture, by wire
transfer of immediately available funds from the Collection Account to an account designated by the Servicer. Any portion of the Servicing Fee not paid on such date shall be added to the Servicing Fee payable on the subsequent Payment Date.

  
 16 

 (c) The Bond Issuer shall pay all expenses incurred by the Servicer in connection with its
activities hereunder (including any fees to and disbursements by accountants, counsel, or any other Person, any taxes imposed on the Servicer (other than taxes based on the Servicer’s net income) and any expenses incurred in connection with
reports to Bondholders and Certificateholders, subject to the priorities and Cap set forth in Section 8.02(e) of the Bond Indenture). 
 Section 6.07. Compliance with Applicable Law. The Servicer covenants and agrees, in servicing the Phase-In-Recovery Property, to comply in all material respects with all laws applicable to,
and binding upon, the Servicer and relating to such Phase-In-Recovery Property the noncompliance with which would have a material adverse effect on the value of the Phase-In-Recovery Property; provided, however, that the foregoing is
not intended to, and shall not, impose any liability on the Servicer for noncompliance with any law that the Servicer is contesting in good faith in accordance with its customary standards and procedures. 

Section 6.08. Access to Certain Records and Information Regarding Phase-In-Recovery Property. The Servicer shall provide to
the Bondholders, the Bond Trustee and the Certificate Trustee access to the Phase-In-Recovery Property Records in such cases where the Bondholders, the Bond Trustee and the Certificate Trustee shall be required by applicable law to be provided
access to such records. Access shall be afforded without charge, but only upon reasonable request and during normal business hours at the respective offices of the Servicer. Nothing in this Section shall affect the obligation of the Servicer to
observe any applicable law (including any PUCO Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a
breach of this Section. 
  Section 6.09. Appointments. The Servicer may at any time appoint any Person to
perform all or any portion of its obligations as Servicer hereunder; provided, however, that the Rating Agency Condition shall have been satisfied in connection therewith; and, provided, further, that the Servicer
shall remain obligated and be liable under this Agreement for the servicing and administering of the Phase-In-Recovery Property in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment
of such Person and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Phase-In-Recovery Property; and, provided, further, however, that nothing herein
(including the Rating Agency Condition) shall preclude the execution by the Servicer of an agreement with any TPB permitted by applicable law and PUCO Regulations should the laws of the State of Ohio be changed to permit the billing and/or
collecting of Phase-In-Recovery Charges by TPBs. 
  Section 6.10. No Servicer Advances. Except with respect to
Remittances of Estimated Phase-In-Recovery Charge Payments, the Servicer shall not make any advances of interest on or principal of the Bonds or the Certificates. 
 Section 6.11. Maintenance of Operations. The Servicer agrees to continue to operate its distribution system to provide service to its customers so long as it is acting as the Servicer under
this Agreement. 
 ARTICLE VII. 
 DEFAULT 
 Section 7.01. Servicer Default. If any one of the following
events (each a “Servicer Default”) shall occur and be continuing: 

  
 17 

 (a) any failure by the Servicer to remit to the Collection Account on behalf of the Bond
Issuer any required Remittance that shall continue unremedied for a period of five (5) Servicer Business Days after written notice of such failure is received by the Servicer from the Bond Issuer or the Bond Trustee; or 

(b) any failure on the part of the Servicer duly to observe or to perform in any material respect any other covenants or agreements of
the Servicer set forth in this Agreement, which failure shall (a) materially adversely affect the rights of the Bondholders and (ii) continue unremedied for a period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given (A) to the Servicer by the Bond Issuer or (B) to the Servicer by the Bond Trustee or by the Holders of Bonds evidencing not less than 25 percent of the Outstanding Amount of the
Bonds; or 
 (c) any representation or warranty made by the Servicer in this Agreement shall prove to have been incorrect in any
material respect when made, which has a material adverse effect on the Bondholders and which material adverse effect continues unremedied for a period of 60 days after written notice of such failure is received by the Servicer from the Bond Issuer
or the Bond Trustee; or 
 (d) an Insolvency Event occurs with respect to the Servicer; 

then, and in each and every case, so long as the Servicer Default shall not have been remedied, either the Bond Trustee, or the Holders of Bonds
evidencing not less than 25 percent of the Outstanding Amount of the Bonds, by notice then given in writing to the Servicer (and to the Bond Trustee if given by the Bondholders) (a “Termination Notice”) may terminate all the rights
and obligations (other than the obligations set forth in Section 6.02 hereof) of the Servicer under this Agreement. In addition, upon a Servicer Default described in Section 7.01(a), each of the following shall be entitled to
apply to a court of competent jurisdiction for sequestration and payment of revenues arising with respect to the Phase-In-Recovery Property: (1) the Bondholders and the Bond Trustee as beneficiary of the Statutory Lien permitted by the Statute;
(2) the Bond Issuer or (3) financing parties or other assignees under Section 4928.2310 of the Statute, of the Phase-In-Recovery Property. On or after the receipt by the Servicer of a Termination Notice, and subject to the approval of
the PUCO, all authority and power of the Servicer under this Agreement, whether with respect to the Bonds, the Phase-In-Recovery Property, the Phase-In-Recovery Charge or otherwise, shall, without further action, pass to and be vested in such
successor Servicer as may be appointed under Section 7.02; and, without limitation, the Bond Trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any
and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such Termination Notice, whether to complete the transfer of the Phase-In-Recovery Property Records and
related documents, or otherwise. The predecessor Servicer shall cooperate with the successor Servicer, the Bond Issuer and the Bond Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this
Agreement, including the transfer to the successor Servicer for administration by it of all cash amounts that shall at the time be held by the predecessor Servicer for remittance, or shall thereafter be received by it with respect to the
Phase-In-Recovery Property or the Phase-In-Recovery Charge. In case a successor Servicer is appointed as a result of a Servicer Default, all reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred in
connection with transferring the Phase-In-Recovery Property Records to the successor Servicer and amending this Agreement to reflect such succession as Servicer pursuant to this Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. 
 Section 7.02. Appointment of Successor. 

(a) Upon the Servicer’s receipt of a Termination Notice pursuant to Section 7.01 or the Servicer’s resignation or
removal in accordance with the terms of this Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Agreement, and shall be entitled to receive the requisite portion of the Servicing Fee and reimbursement
of expenses as provided herein, until a successor Servicer shall have assumed in writing the obligations of the Servicer hereunder as described below. In the event of the Servicer’s termination hereunder, the Bond Issuer shall appoint, subject
to the approval of the PUCO, a successor Servicer with the Bond Trustee’s prior written consent thereto (which consent shall not be unreasonably withheld), and the successor Servicer shall accept its appointment by a written assumption in form
reasonably acceptable to the Bond Issuer and the Bond Trustee. If within 30 days after the delivery of the Termination Notice, the Bond Issuer shall not have obtained such a new Servicer, the Bond Trustee may petition the PUCO or a court of
competent jurisdiction to 

  
 18 

 
appoint a successor Servicer under this Agreement. A Person shall qualify as a successor Servicer only if (i) such Person is permitted under PUCO Regulations to perform the duties of the
Servicer, (ii) the Rating Agency Condition shall have been satisfied and (iii) such Person enters into a servicing agreement with the Bond Issuer having substantially the same provisions as this Agreement. 

(b) Upon appointment, the successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to
all the responsibilities, duties and liabilities arising thereafter relating thereto placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of
this Agreement. 
 Section 7.03. Waiver of Past Defaults. The Holders of Bonds evidencing not less than a majority
of the Outstanding Amount of the Bonds may, on behalf of all Bondholders, waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required Remittances to the
Collection Account in accordance with this Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any right consequent thereto. 
 Section 7.04.
Notice of Servicer Default. The Servicer shall deliver to the Bond Issuer, the Bond Trustee, the Certificate Trustee, the Certificate Issuer, the Rating Agencies, and the PUCO, promptly after having obtained knowledge thereof, but in no event
later than five Servicer Business Days thereafter, written notice in an Officer’s Certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Default under Section 7.01(a) or
(b). 
 ARTICLE VIII. 
 MISCELLANEOUS PROVISIONS 
 Section 8.01. Amendment. This Agreement may
be amended in writing by the Servicer and the Bond Issuer with ten Servicer Business Days’ prior written notice given to the Rating Agencies and the PUCO and the prior written consent of the Bond Trustee (which consent shall not be unreasonably
withheld), but without the consent of any of the Bondholders (or any other Person), to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Bondholders; provided, however, that such action shall not, as evidenced by an Officer’s Certificate delivered to the Bond Issuer
and the Bond Trustee, adversely affect in any material respect the interests of any Bondholder. 
 This Agreement may also be
amended in writing from time to time by the Servicer and the Bond Issuer with ten Servicer Business Days’ prior written notice given to the Rating Agencies and the PUCO and the prior written consent of the Bond Trustee (which consent shall not
be unreasonably withheld) and, subject to the first paragraph of this Section 8.01, the prior written consent of the Holders of Bonds evidencing not less than a majority of the Outstanding Amount of the Bonds, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Bondholders; provided, however, that any amendment of the provisions of Sections
4.01 or 4.03 of this Agreement shall satisfy the Rating Agency Condition. 
 It shall not be necessary for the
consent of Bondholders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. 

The Bond Issuer shall promptly provide each of the Rating Agencies and the PUCO with a copy of any amendment to this Agreement.

 Prior to its consent to any amendment to this Agreement, the Bond Trustee shall be entitled to receive and conclusively rely
upon an Opinion of Counsel stating that such amendment is authorized or permitted by this Agreement and all conditions precedent have been met. The Bond Trustee may, but shall not be obligated to, enter into any such amendment which affects the Bond
Trustee’s own rights, duties or immunities under this Agreement or otherwise. No amendment to this Agreement which adversely affects, in any material respect, the rights, protections or indemnities of the Certificate Trustee or Delaware Trustee
under Section 6.02 shall be effective without its prior written consent (not to be unreasonably withheld). 

  
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 Section 8.02. Maintenance of Accounts and Records. 

(a) The Servicer shall maintain accounts and records as to the Phase-In-Recovery Property accurately and in accordance with its standard
accounting procedures and in sufficient detail to permit reconciliation between Phase-In-Recovery Charge Collections and Deemed Phase-In-Recovery Charge Payments. 
 (b) The Servicer shall permit the Bond Trustee and its agents at any time during normal business hours, upon reasonable notice to the Servicer and to the extent it does not unreasonably interfere with the
Servicer’s normal operations, to inspect, audit and make copies of and abstracts from the Servicer’s records regarding the Phase-In-Recovery Property and the Phase-In-Recovery Charge. Nothing in this Section 8.02(b) shall
affect the obligation of the Servicer to observe any applicable law (including any PUCO Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of
such obligation shall not constitute a breach of this Section 8.02(b). 
 Section 8.03. Notices. Unless
otherwise specifically provided herein, all notices, directions, consents and waivers required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice, direction, consent or waiver may be given by
United States mail, courier service, facsimile transmission or electronic mail (confirmed by telephone, United States mail or courier service in the case of notice by facsimile transmission or electronic mail) or any other customary means of
communication, and any such notice, direction, consent or waiver shall be effective when delivered, or if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid: 

(a) if to the Servicer, to: 
 [The Cleveland Electric Illuminating Company][Ohio Edison Company][The Toledo Edison Company] 
 76 South Main Street 
 Akron, Ohio 44308 

Attention: James W. Burk, Counsel of Record 
 Facsimile: (330) 384-3875 
 Telephone: (330) 384-5861 

(b) if to the Bond Issuer, to: 
 [CEI Funding LLC] [OE Funding LLC] [TE Funding LLC] 
 c/o FirstEnergy Corp.

 76 South Main Street 
 Akron, OH 44308 
 Attention: James W. Burk, Counsel of Record 

Facsimile: (330) 384-3875 
 Telephone: (330) 384-5861 
 (c) if to the Bond Trustee, to: 

U.S. Bank National Association 
 190 S. LaSalle Street, 7th Floor 
 Mail Code: MK-IL-SL7R 

Chicago, IL 60603 
 Attention: First Energy Ohio PIRB Special Purpose Trust 2013 
 Facsimile: (312)
332-7996 
 Telephone: (312) 332-7496 
 E-mail: melissa.rosal@usbank.com 

  
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  (d) if to Moody’s, to: 

Moody’s Investors Service, Inc. 
 25th Floor, 7 World Trade Center, 250 Greenwich 
 New York, New York 10007

 Attention: ABS/RMBS Monitoring Department 
 E-mail: ServicerReports@moodys.com 
 (e) if to S&P, to: 

Standard & Poor’s Ratings Services 
 55 Water Street 
 New York, New York 10041 

Attention: Structured Credit Surveillance 
 E-mail: servicer-report@standardandpoors.com 
 Telephone: (212) 438-8991

 (f) if to Fitch, to: 
 Fitch Ratings 
 One State Street Plaza 

New York, New York 10004 
 Attention: ABS Surveillance 
 Telephone: (212) 908-0500 

Facsimile: (212) 908-0355 
 (g) if to the Certificate Issuer, to: 
 U.S. Bank Trust National Association, as
Delaware Trustee 
 for the FirstEnergy Ohio PIRB Special Purpose Trust 2013 

190 S. LaSalle Street, 7th Floor 
 Mail Code: MK-IL-SL7R 
 Chicago, IL 60603 

Attention: First Energy Ohio PIRB Special Purpose Trust 2013 
 Facsimile: (312) 332-7996 
 Telephone: (312) 332-7496 

E-mail: melissa.rosal@usbank.com 
 With a copy to the Administrative Trustee 
  (h) as to each of the foregoing,
at such other address as shall be designated by written notice to the other parties. 
 Section 8.04. Assignment.
Notwithstanding anything to the contrary contained herein, except as provided in Section 6.04 and Section 8.10 and as provided in the provisions of this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Servicer. 
 Section 8.05. Limitations on Rights of Third Parties. The provisions of this
Agreement are solely for the benefit of the Servicer, the Bond Issuer, the Bondholders, the Bond Trustee, the Certificate Trustee, the Delaware Trustee, the Certificate Issuer and the other Persons expressly referred to herein and such Persons shall
have the right to enforce the relevant provisions of this Agreement, except that the Bondholders shall be entitled to enforce 

  
 21 

 
their rights against the Servicer under this Agreement solely through a cause of action brought for their benefit by the Bond Trustee. Nothing in this Agreement, whether express or implied, shall
be construed to give to any other Person any legal or equitable right, remedy or claim in the Phase-In-Recovery Property or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. 

Section 8.06. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. 
 Section 8.07. Separate Counterparts. This Agreement may
be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 

Section 8.08. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof. 
 Section 8.09. Governing Law. This Agreement
shall be construed in accordance with the substantive laws of the State of Ohio, without giving effect to its conflict of law or other principles that would cause the application of the laws of another jurisdiction, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such laws. 
 Section 8.10. Collateral
Assignment to Bond Trustee. The Servicer hereby acknowledges and consents to the Grant of a security interest and collateral assignment by the Bond Issuer pursuant to the Bond Indenture of all of the Bond Issuer’s rights hereunder to the
Bond Trustee for the benefit of the holders of the Bonds and the Bond Trustee and to the Grant of a security interest and collateral assignment by the Bondholder to the Certificate Trustee pursuant to the Certificate Indenture for the benefit of the
Certificateholders and the Certificate Trustee in all of the Bondholder’s rights in all rights of the Certificate Trustee or the Certificate Issuer, as holder of the Bonds, in and to this Servicing Agreement. 

Section 8.11. Nonpetition Covenant. Notwithstanding any prior termination of this Agreement or the Bond Indenture, but
subject to the right of a court of competent jurisdiction to order the sequestration and payment of revenues arising with respect to the Phase-In-Recovery Property notwithstanding any bankruptcy, reorganization or other insolvency proceedings with
respect to [The Cleveland Electric Illuminating Company] [Ohio Edison Company] [The Toledo Edison Company] or any of its affiliates pursuant to Section 4928.2310 of the Statute, the Servicer solely in its capacity as creditor of the Bond
Issuer, shall not, prior to the date which is one year and one day after the termination of the Bond Indenture with respect to the Bond Issuer, petition or otherwise invoke or cause the Bond Issuer or the Trust to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining an involuntary case against the Bond Issuer or the Trust under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Bond Issuer or the Trust or any substantial part of the property of the Bond Issuer or the Trust, or, to the fullest extent permitted by law, ordering the winding up or liquidation of the
affairs of the Bond Issuer or the Trust. 
 Section 8.12. Rule 17g-5 Compliance. The Servicer agrees that any
notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Servicer to any Rating Agency under this Agreement or any other Basic Document to which it is a party for the purposes of
determining the initial credit rating of the Bonds and Certificates or undertaking credit rating surveillance of the Bonds and Certificates with any Rating Agency, shall be, substantially concurrently, posted by the Servicer on the 17g-5 Website.

  
 22 

 IN WITNESS WHEREOF, the parties hereto have caused this Phase-In-Recovery Property Servicing
Agreement to be duly executed by their respective officers as of the day and year first above written. 
  

			
	 [CEI FUNDING LLC] [OE FUNDING LLC] [TE FUNDING LLC]
 Bond Issuer

		
	By:	 	 
	Name:	 	 
	Title:	 	 
	
	 [THE CLEVELAND ELECTRIC ILLUMINATING COMPANY] [OHIO EDISON COMPANY][THE TOLEDO EDISON COMPANY]

Servicer

		
	By:	 	 
	Name:	 	 
	Title:	 	 

  
 23 

 EXHIBIT A-1 
 SERVICER’S CERTIFICATE 
 The undersigned hereby certifies that he/she is the duly elected and
acting _______________ of [The Cleveland Electric Illuminating Company] [Ohio Edison Company] [The Toledo Edison Company], as servicer (the “Servicer”) under the Phase-In-Recovery Property Servicing Agreement dated as of
[                         ] (the “Servicing Agreement”) between the Servicer and [CEI Funding LLC]
[OE Funding LLC] [TE Funding LLC] (the “Bond Issuer”) and further that: 
 1. The undersigned is responsible for assessing the
Servicer’s compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing Criteria”). 
 2. With respect to each of the Servicing Criteria, the undersigned has made the following assessment of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB, with such discussion
regarding the performance of such Servicing Criteria during the fiscal year covered by the Sponsor’s annual report on Form 10-K Report (such fiscal year, the “Assessment Period”): 

 

					
	 Reg AB
Reference
	  	 Servicing Criteria
	  	 Applicable

Servicer Criteria

		  	General Servicing Considerations	  	
			
	 1122(d)(1)(i)
	  	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	  	Applicable; assessment below.
			
	 1122(d)(1)(ii)
	  	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such
servicing activities.	  	Not applicable; no servicing activities were outsourced.
			
	 1122(d)(1)(iii)
	  	Any requirements in the transaction agreements to maintain a back-up servicer for pool assets are maintained.	  	Not applicable; documents do not provide for a back-up servicer.
			
	 1122(d)(1)(iv)
	  	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required
by and otherwise in accordance with the terms of the transaction agreements.	  	Not applicable; PUCO Regulations impose credit standards on retail electric providers who handle customer collections and govern performance requirements of
utilities.
		  	Cash Collection and Administration	  	
			
	 1122(d)(2)(i)
	  	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other
number of days specified in the transaction agreements.	  	Applicable
			
	 1122(d)(2)(ii)
	  	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	  	Applicable
			
	 1122(d)(2)(iii)
	  	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as
specified in the transaction agreements.	  	Applicable, but no current assessment required; no advances by the Servicer are permitted under the transaction
agreements.

  
 24 

					
	 Reg AB

Reference
	  	 Servicing Criteria
	  	 Applicable

Servicer Criteria

			
	 1122(d)(2)(iv)
	  	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to
commingling of cash) as set forth in the transaction agreements.	  	Applicable, but no current assessment is required since transaction accounts are maintained by and in the name of the Bond Trustee.
			
	 1122(d)(2)(v)
	  	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally
insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.	  	Applicable, but no current assessment required; all “custodial accounts” are maintained by the Bond Trustee.
			
	 1122(d)(2)(vi)
	  	Unissued checks are safeguarded so as to prevent unauthorized access.	  	Not applicable; all transfers made by wire transfer.
			
	 1122(d)(2)(vii)
	  	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These
reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the
person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction
agreements.	  	Applicable; assessment below.
		  	Investor Remittances and Reporting	  	
			
	 1122(d)(3)(i)
	  	Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements.
Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed
with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the Servicer.	  	Applicable; assessment below.
			
	 1122(d)(3)(ii)
	  	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	  	Not applicable; investor records maintained by Bond Trustee.
			
	 1122(d)(3)(iii)
	  	Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction
agreements.	  	Applicable
			
	 1122(d)(3)(iv)
	  	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	  	Applicable; assessment below.
		  	Pool Asset Administration	  	
			
	 1122(d)(4)(i)
	  	Collateral or security on pool assets is maintained as required by the transaction agreements or related documents.	  	Applicable; assessment below.
			
	 1122(d)(4)(ii)
	  	Pool assets and related documents are safeguarded as required by the transaction agreements.	  	Applicable; assessment below.

  
 25 

					
	 Reg AB

Reference
	  	 Servicing Criteria
	  	 Applicable

Servicer Criteria

			
	 1122(d)(4)(iii)
	  	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction
agreements.	  	Not applicable; no removals or substitutions of phase-in-recovery property are contemplated or allowed under the transaction documents.
			
	 1122(d)(4)(iv)
	  	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer’s obligor records maintained no more than
two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related transaction agreements.	  	Applicable; assessment below.
			
	 1122(d)(4)(v)
	  	The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.	  	Not applicable; because underlying obligation (phase-in-recovery charge) is not an interest bearing instrument.
			
	 1122(d)(4)(vi)
	  	Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in
accordance with the transaction agreements and related pool asset documents.	  	Applicable; assessment below
			
	 1122(d)(4)(vii)
	  	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted
and concluded in accordance with the timeframes or other requirements established by the transaction agreements.	  	Applicable; limited assessment below. Servicer actions governed by PUCO regulations.
			
	 1122(d)(4)(viii)
	  	Records documenting collection efforts are maintained during the period any pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at
least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases
where delinquency is deemed temporary (e.g., illness or unemployment).	  	Applicable, but does not require assessment since no explicit documentation requirement with respect to delinquent accounts are imposed under the transactional documents due to
availability of “true-up” adjustment mechanism.
			
	 1122(d)(4)(ix)
	  	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.	  	Not applicable; phase-in-recovery charges are not interest bearing instruments.
			
	 1122(d)(4)(x)
	  	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an
annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the
obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.	  	Applicable; [Servicer maintains deposit accounts in accordance with PUCO Regulations].

  
 26 

					
	 Reg AB

Reference
	  	 Servicing Criteria
	  	 Applicable

Servicer Criteria

			
	 1122(d)(4)(xi)
	  	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or
notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.	  	Not applicable; Servicer does not make payments on behalf of obligors.
			
	 1122(d)(4)(xii)
	  	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late
payment was due to the obligor’s error or omission.	  	Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the transaction documents.
			
	 1122(d)(4)(xiii)
	  	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in
the transaction agreements.	  	Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay principal or interest on the bonds.
			
	 1122(d)(4)(xiv)
	  	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.	  	Applicable; assessment below.
			
	 1122(d)(4)(xv)
	  	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction
agreements.	  	Not applicable; no external enhancement is required under the transaction documents.

 3. To the best of the undersigned’s knowledge, based on such review, the Servicer is in compliance in all material
respects with the applicable servicing criteria set forth above as of and for the period ending the end of the fiscal year covered by the Sponsor’s annual report on Form 10-K. [If not true, include description of any material instance of
noncompliance.] 

  
 27 

 Executed as of this      day of
                        ,         . 

 

			
	[THE CLEVELAND ELECTRIC ILLUMINATING COMPANY] [OHIO EDISON COMPANY] [THE TOLEDO EDISON COMPANY]
		
	By:	 	 
		 	 Name:

Title:

  
 28EXECUTION VERSION 

	
       

       

       

       

       

      MASTER REPURCHASE AGREEMENT
      

      Dated as of May 30, 2013
      

      
Between: 

      
CITIBANK, N.A., as Buyer
      

      and
      
 

      ZFC TRUST, as Seller
      

       

       

       

       

TABLE OF
CONTENTS 

	1.	      
    	APPLICABILITY	1
	2.		DEFINITIONS AND ACCOUNTING MATTERS	1
	3.		THE TRANSACTIONS	17
	4.		PAYMENTS; COMPUTATION; COMMITMENT
    FEE	20
	5.		TAXES; TAX
    TREATMENT	21
	6.		MARGIN MAINTENANCE	22
	7.		INCOME PAYMENTS	23
	8.		SECURITY INTEREST; BUYER’S APPOINTMENT AS
      ATTORNEY-IN-FACT	24
	9.		CONDITIONS
    PRECEDENT	26
	10.		RELEASE OF PARTICIPATION INTERESTS	30
	11.		RELIANCE	31
	12.		REPRESENTATIONS AND WARRANTIES	31
	13.		COVENANTS OF
    SELLER	37
	14.		REPURCHASE DATE PAYMENTS	45
	15.		REMOVAL OF PARTICIPATION
      INTERESTS	46
	16.		PROGRAM MANAGER	46
	17.		ACCELERATION OF REPURCHASE
      DATE	46
	18.		EVENTS OF DEFAULT	47
	19.		REMEDIES	49
	20.		DELAY NOT WAIVER; REMEDIES ARE
      CUMULATIVE	52
	21.		NOTICES AND OTHER
      COMMUNICATIONS	52
	22.		USE OF EMPLOYEE PLAN ASSETS	52
	23.		INDEMNIFICATION AND
      EXPENSES	53
	24.		WAIVER OF REDEMPTION AND DEFICIENCY
      RIGHTS	54
	25.		REIMBURSEMENT	54
	26.		FURTHER ASSURANCES	54
	27.		SEVERABILITY	54
	28.		BINDING EFFECT; GOVERNING LAW	54
	29.		AMENDMENTS	55
	30.		RESERVED	55
	31.		SURVIVAL	55
	32.		CAPTIONS	55
	33.		COUNTERPARTS; ELECTRONIC
      SIGNATURES	55
	34.		SUBMISSION TO JURISDICTION;
WAIVERS	55
	35.		WAIVER OF JURY
    TRIAL	56
	36.		ACKNOWLEDGEMENTS	56
	37.		RESERVED	56
	38.		ASSIGNMENTS; PARTICIPATIONS	56
	39.		SINGLE AGREEMENT	57
	40.		INTENT	57
	41.		CONFIDENTIALITY	58
	42.	 	SERVICING	58
	43.		PERIODIC DUE DILIGENCE
      REVIEW	59
	44.		SET-OFF	60
	45.		ENTIRE AGREEMENT	60

i 

	SCHEDULES		
	 	 	 
	             
      SCHEDULE 1	       	Representations and Warranties re: Loans and
      the Purchased Certificate
			 
	             
      SCHEDULE 2		Filing Jurisdictions and
Offices
			 
	             
      SCHEDULE 3		Subsidiaries
			 
	             
      SCHEDULE 4		Indebtedness
	 
	 
	EXHIBITS		
	 	 	 
	             
      EXHIBIT A-1		Form of Monthly Compliance
      Certification for Seller
			 
	             
      EXHIBIT A-2		Form of Monthly Compliance Certification for
      Guarantor
			 
	             
      EXHIBIT B		Reserved
			 
	             
      EXHIBIT C		Form of Confidentiality
  Agreement
			 
	             
      EXHIBIT D		Form of Instruction Letter
			 
	             
      EXHIBIT E		Form of Officer’s Certificate
			 
	             
      EXHIBIT F		Form of Security Release
    Certification
			 
	             
      EXHIBIT G		Notices

ii

       MASTER REPURCHASE AGREEMENT, dated as
of May 30, 2013, between ZFC TRUST, a Maryland real estate investment trust as
seller (the “Seller”) and CITIBANK, N.A., a national banking association as buyer
(“Buyer”).

1.
APPLICABILITY 

       On the date hereof (the “Initial
Purchase Date”), Buyer shall, upon the terms and conditions set forth herein, purchase the beneficial interest certificate
(the “Purchased Certificate”) representing the ownership in ZFC Trust Grantor Trust Holdings Pass Through Trust
I (the “Pass-Through Trust”), the initial asset of which, as of the date hereof, consists of the beneficial interest
certificate representing the ownership in ZFC Trust Whole Loan Grantor Trust I (“Grantor Trust I”), the assets
of which consist of Participation Interests in Eligible Loans, against the transfer of funds by Buyer in an amount equal to the
Purchase Price, with a simultaneous agreement by Buyer to transfer to Seller the Purchased Certificate at a date certain, against
the transfer of funds by Seller, in an amount equal to the Repurchase Price (the “Initial Transaction”). Buyer
shall, with respect to the Committed Amount and may, with respect to the Uncommitted Amount, from time to time, upon the request
of the Seller and subject to the terms and conditions set forth herein, enter into transactions in which Seller transfers either
(i) additional beneficial interest certificates (each such beneficial interest certificate, including the beneficial interest
certificate in Grantor Trust I, are referred to herein as an “Underlying Certificate”) in additional grantor
trusts (each such grantor trust, including Grantor Trust I, are referred to herein as an “Underlying Trust”)
that will hold additional Participation Interests, or (ii) Participation Interests to an Underlying Trust in an amount equal to
the related Purchase Price Increase related to such Participation Interests (a “Purchase Price Increase Transaction”).
In addition, the Purchased Certificate will be repurchased by Seller on each monthly Repurchase Date and, subject to the conditions
precedent set forth in Section 9(b) of this Agreement, immediately and automatically purchased by Buyer thereafter (a “Renewal
Transaction”); provided, however, that in no event shall this sentence be deemed to require that any such Renewal Transaction
include (a) any Participation Interests in loans that are not Eligible Loans, or (b) any amount of the Purchase Price in excess
of the Committed Amount. Each such Renewal Transaction, the Initial Transaction and each Purchase Price Increase Transaction shall
be referred to herein as a “Transaction”, and, unless otherwise agreed in writing, shall be governed by this
Agreement. The Purchase Price and Repurchase Price for each Transaction shall be determined using the Market Value of the related
Participation Interests owned or proposed to be owned by an Underlying Trust.

2.
DEFINITIONS AND ACCOUNTING
MATTERS

      
(a) Defined
Terms. As used herein, the following terms
have the following meanings (all terms defined in this Section 2 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa): 

      
“Accepted Servicing Practices” shall mean with respect to any Loan, those accepted and
prudent mortgage servicing practices (including collection procedures) of
prudent mortgage lending institutions that service mortgage loans of the same
type as the Loans in the jurisdiction where the related Mortgaged Property is
located, and Freddie Mac and Fannie Mae servicing practices and procedures for
MBS pool mortgages, as defined in the Freddie Mac and Fannie Mae servicing
guides including future updates, which are in a manner at least equal in quality
to the servicing Seller or Seller’s designee provides to mortgage loans which it
owns in its own portfolio. 

      
“Adjustable Rate Loan” shall mean a Loan which provides for the adjustment of the
Mortgage Interest Rate payable in respect thereto. 

      
“Adjustment Date” shall mean with respect to each Adjustable Rate Loan, the date set
forth in the related Note on which the Mortgage Interest Rate on the Loan is
adjusted in accordance with the terms of the Note.

      
“Affiliate”
shall mean, with respect to any Person, any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, “control” (together with the
correlative meanings of “controlled by” and “under common control with”) means
possession, directly or indirectly, of the power (a) to vote 10% or more of the
securities (on a fully diluted basis) having ordinary voting power for the
directors or managing general partners (or their equivalent) of such Person, or
(b) to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by contract, or
otherwise.

      
“Agency”
shall mean Freddie Mac, Fannie Mae or Ginnie Mae, as applicable.

      
“Agreement”
shall mean this Master Repurchase Agreement (including all exhibits, schedules
and other addenda hereto or thereto), as supplemented by the Pricing Side
Letter, as it may be amended, further supplemented or otherwise modified from
time to time.

      
“ALTA”
shall mean the American Land Title Association.

      
“Applicable Margin” shall have the meaning set forth in the Pricing Side Letter.

      
“Applicable Percentage” shall have the meaning set forth in the Pricing Side
Letter.

      
“Appraised Value” shall mean the value set forth in an appraisal made in connection with
the origination of the related Loan as the value of the Mortgaged
Property.

      
“Assignment of Mortgage” shall mean, with respect to any 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 assignment of the Mortgage in blank, in the
name of the Legal Title Trustee or, with respect to a MERS Loan, in the name of
MERS.

      
“Bankruptcy Code” shall mean the United States Bankruptcy Code of 1978, as amended from
time to time.

      
“Best’s”
shall mean Best’s Key Rating Guide, as the same shall be amended from time to
time.

      
“BPO” shall
mean, with respect to a Loan, a broker’s price opinion prepared by a duly
licensed real estate broker who has no interest, direct or indirect, in the Loan
or in Seller or any Affiliate of Seller and whose compensation is not affected
by the results of the broker’s price opinion and which valuation indicates the
expected proceeds for a sale of the related Mortgaged Property. Each BPO shall
take into account at least three (3) sales of comparable properties and at least
three (3) listings of comparable properties.

      
“BPO Value”
shall mean with respect to a Loan, the value of such Loan set forth in the most
recently obtained BPO.

      
“Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) a day on
which the New York Stock Exchange, the Federal Reserve Bank of New York, banking
and savings and loan institutions in the States of New York, the City of New
York or the city or state in which Custodian’s offices are located are closed,
or (iii) a day on which trading in securities on the New York Stock Exchange or
any other major securities exchange in the United States is not
conducted.

2

      
“Capital Lease Obligations” shall mean, for any Person, all obligations of such Person
to pay rent or other amounts under a lease of (or other agreement conveying the
right to use) Property to the extent such obligations are required to be
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP. 

      
“Cash Equivalents” shall mean (a) securities with maturities of 90 days or less from the
date of acquisition issued or fully guaranteed or insured by the United States
Government or any agency thereof, (b) certificates of deposit and eurodollar
time deposits with maturities of 90 days or less from the date of acquisition
and overnight bank deposits of any commercial bank having capital and surplus in
excess of $500,000,000, (c) repurchase obligations of any commercial bank
satisfying the requirements of clause (b) of this definition, having a term of
not more than seven days with respect to securities issued or fully guaranteed
or insured by the United States Government, (d) commercial paper of a domestic
issuer rated at least A-1 or the equivalent thereof by Standard and Poor’s
Ratings Group (“S&P”) or P-1 or the equivalent thereof by Moody’s Investors
Service, Inc. (“Moody’s”) and in either case maturing within 90 days after the
day of acquisition, (e) securities with maturities of 90 days or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody’s, (f) securities with maturities of 90 days or less
from the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the requirements of clause (b) of this definition, or
(g) shares of money market mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (f) of this
definition. 

      
“Change of Control” shall mean, with respect to Seller and Guarantor, the acquisition by
any Person, or two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended) of outstanding shares of
voting stock of Seller or Guarantor if after giving effect to such acquisition
such Person or Persons owns thirty percent (30%) or more of such outstanding
shares of voting stock. 

      
“Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time.

      
“Collection Account” shall mean the account identified in the Collection Account Control
Agreement.

      
“Collection Account Control
Agreement” shall mean the collection account
control agreement to be entered into by Buyer, Seller and Citibank, N.A. to be
entered into with respect to the Collection Account as of the date hereof.

      
“Commitment Fee” shall mean the Commitment Fee payable pursuant to Section 4(c)(i). 

       “Commitment Fee Percentage” shall have the meaning assigned to it in the Pricing Side
Letter. 

       “Committed Amount” shall have the meaning assigned to it in the Pricing Side
Letter. 

3 

      
“Compliance Certificate” shall mean a monthly certification delivered by Seller to
Buyer in the form attached hereto as Exhibit A-1 with respect to Seller and
Exhibit A-2 with respect to Guarantor.

      
“Contractual Obligation” shall mean as to any Person, any material provision of any
agreement, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound or any material provision of any
security issued by such Person. 

      
“Control Bank” shall mean Citibank, N.A., its successors and permitted assigns.

      
“Custodial Agreement” shall mean that certain Master Custodial Agreement dated as
of May 23, 2013, among the Legal Title Trustee, the Seller, as depositor, the
Program Manager, the Participation Agent and the Custodian, as amended,
supplemented or modified from time to time.

      
“Custodial Certification” shall have the meaning assigned thereto in the Custodial
Agreement. 

      
“Custodian”
shall mean U.S. Bank National Association, or such other entity agreed upon by
Buyer and Seller from time to time, or its successors and permitted assigns.

      
“Default”
shall mean an Event of Default or any event that, with the giving of notice or
the passage of time or both, could become an Event of Default. 

      
“Dollars”
or “$”
shall mean lawful money of the United States of America. 

      
“Due Date”
shall mean the day of the month on which the Monthly Payment is due on a Loan,
exclusive of any days of grace. 

      
“Due Diligence Review” shall mean the performance by Buyer of any or all of the
reviews permitted under Section 43 hereof with respect to any or all of the
Loans or Seller or related parties, as desired by Buyer from time to time.

      
“Effective Date” shall mean the date upon which the conditions precedent set forth in
Section 9(a) have been satisfied or waived in writing by Buyer. 

      
“Electronic Transmission” shall mean the delivery of information in an electronic
format acceptable to the applicable recipient thereof. An Electronic
Transmission shall be considered written notice for all purposes hereof (except
when a request or notice by its terms requires execution). 

      
“Eligible HELOC” shall have the meaning assigned thereto in the Pricing Side Letter.

      
“Eligible Loan” shall have the meaning assigned thereto in the Pricing Side Letter.

      
“Eligible Manufactured Housing
Loan” shall have the meaning assigned thereto
in the Pricing Side Letter.

      
“Environmental Laws” shall mean any federal, state, foreign or local statute, law, rule,
regulation, ordinance, code, guideline, written policy or rule of common law now
or hereafter in effect, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, relating to the environment, employee health and safety or hazardous
materials, including CERCLA, RCRA, the Federal Water Pollution Control Act, the
Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water Act,
the Oil Pollution Act of 1990, the Emergency Planning and the Community
Right-to-Know Act of 1986, the Hazardous Material Transportation Act, the
Occupational Safety and Health Act, and any state and local or foreign
counterparts or equivalents.

4 

      
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from
time to time. 

      
“ERISA Affiliate” shall mean any entity, whether or not incorporated, that is a member of
any group of organizations described in Section 414(b), (c), (m) or (o) of the
Code of which Seller is a member. 

      
“Equity Interests” shall mean with respect to any Person, (a) any share or interest in
Capital Stock (including any participation interest or divided ownership or
profit sharing interest however denominated) in such Person, whether voting or
nonvoting, and whether or not such share, warrant, option right or other
interest is authorized or otherwise existing as of any date of determination,
(b) any warrant, option or other right for the purchase or acquisition from such
Person of any share or interest described in (a) above, (c) any security
convertible into or exchangeable for any of the foregoing, and (d) any other
ownership interest in such Person (including partnership, member or trust
interests therein). 

      
“Escrow Payments” shall mean, with respect to any Loan, the amounts constituting ground
rents, taxes, assessments, water charges, sewer rents, municipal charges,
mortgage 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 terms of any Note or Mortgage or any other
document. 

      
“Event of Default” shall have the meaning provided in Section 18 hereof. 

      
“Executive Order” shall mean Executive Order 13224-- Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism.

      
“Exception”
shall have the meaning assigned thereto in the Custodial Agreement. 

      
“Exception Report” shall mean the exception report prepared by Custodian pursuant to the
Custodial Agreement. 

      
“Excess Margin Notice” shall have the meaning assigned thereto in Section 6(c)
hereof. 

      
“Fannie Mae” shall mean Fannie Mae, or any successor thereto. 

      
“Foreclosure Referred Loan” shall mean any delinquent Loan which has been referred to an
attorney for the commencement of a either a judicial or non-judicial foreclosure
proceeding. 

      
“Freddie Mac” shall mean Freddie Mac, or any successor thereto. 

      
“Funding Notice” shall mean Buyer’s agreement to enter into a Transaction requested by
Seller pursuant to a Transaction Notice. Such Funding Notice shall specify the
Participation Interests to be added to an Underlying Trust that Buyer has agreed
to include in such Transaction, the fields set forth on Exhibit 9 to the
Custodial Agreement, as applicable, with respect to the Initial Transaction, the
related Purchase Date and Repurchase Date and the related Purchase Price for the
Initial Transaction, with respect to any other Transaction, the related Purchase
Price Increase for such Transaction, and any other terms of such Transaction
agreed upon between the Seller and Buyer. 

5 

      
“GAAP”
shall mean generally accepted accounting principles in effect from time to time
in the United States of America. 

      
“Ginnie Mae” shall mean the Government National Mortgage Association, or any
successor thereto. 

      
“Governmental Authority” shall mean with respect to any Person, any nation or
government, any state or other political subdivision, agency or instrumentality
thereof, any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any court or
arbitrator having jurisdiction over such Person, any of its Subsidiaries or any
of its properties. 

      
“Gross Margin” shall mean with respect to each Adjustable Rate Loan, the fixed
percentage amount set forth in the related Note and the Loan Schedule that is
added to the Index on each Adjustment Date in accordance with the terms of the
related Note to determine the new Mortgage Interest Rate for such Loan.

      
“Guarantee”
shall mean, as to any Person, any obligation of such Person directly or
indirectly guaranteeing any Indebtedness of any other Person or in any manner
providing for the payment of any Indebtedness of any other Person or otherwise
protecting the holder of such Indebtedness against loss (whether by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, or to take-or-pay or otherwise), provided that the term
“Guarantee” shall not include (i) endorsements for collection or deposit in the
ordinary course of business, or (ii) obligations to make servicing advances for
delinquent taxes and insurance, or other obligations in respect of a Mortgaged
Property, to the extent required by Buyer. The amount of any Guarantee of a
Person shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith. The terms
“Guarantee” and “Guaranteed” used as verbs shall have correlative
meanings.

      
“Guarantor”
shall mean ZAIS Financial Corp., a Maryland corporation, as Guarantor under the
Guaranty.

      
“Guaranty”
shall mean that certain Guaranty Agreement, dated as of the date hereof, by
Guarantor in favor of Buyer, as such agreement may be amended from time to time
in accordance with its terms. The Guaranty shall be a full-recourse Guarantee
with respect to all of the Seller’s Obligations hereunder. 

      
“Income”
shall mean, with respect to any Participation Interest, any principal and/or
interest thereon and all dividends, sale proceeds (including, without
limitation, any proceeds from the liquidation or securitization of the related
Loan or other disposition thereof), rent and other collections and distributions
thereon (including, without limitation, any proceeds received in respect of
mortgage insurance), but not including any commitment fees, origination fees
and/or servicing fees accrued in respect of periods on or after the initial
Purchase Date with respect to the related Loan. 

      
“Indebtedness” shall mean, for any Person: (a) obligations created, issued or incurred
by such Person for borrowed money (whether by loan, the issuance and sale of
debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered; (c) indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations (contingent or otherwise) of
such Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person; (e) Capital Lease Obligations of such Person; (f) obligations of such
Person under repurchase agreements or like arrangements; (g) indebtedness of
others Guaranteed by such Person; (h) all obligations of such Person incurred in
connection with the acquisition or carrying of fixed assets by such Person; (i)
indebtedness of general partnerships of which such Person is a general partner;
and (j) any other indebtedness of such Person by a note, bond, debenture or
similar instrument.

6 

      
“Index”
shall mean with respect to each Adjustable Rate Loan, the index identified on
the related Loan Schedule and set forth in the related Note for the purpose of
calculating the interest rate thereon. 

      
“Initial Purchase Date” has the meaning assigned thereto in Section 1. 

      
“Initial Transaction” has the meaning assigned thereto in Section 1. 

      
“Instruction Letter” shall mean a letter agreement between Seller and each Subservicer or
interim servicer of the Loans related to the Participation Interests
substantially in the form of Exhibit
D attached hereto, in which such Persons
acknowledge Buyer’s interest in the Loans, and agree to remit any collections
with respect to the Loans as Buyer may so direct from time to time, which
Instruction Letter may be delivered by Buyer to such Subservicer in its sole
discretion.

      
“Insurance Proceeds” shall mean with respect to each Loan, proceeds of insurance policies
insuring such Loan or the related Mortgaged Property. 

      
“Interest Period” shall mean, with respect to any Transaction, the period commencing on
the Purchase Date with respect to such Transaction and ending on the calendar
day prior to the related Repurchase Date.

      
“Interest Rate Adjustment Date” means with respect to each Adjustable Rate Loan, the date,
specified in the related Note and the Loan Schedule, on which the Mortgage
Interest Rate is adjusted. 

      
“Investment Company Act” shall mean the Investment Company Act of 1940, as amended,
including all rules and regulations promulgated thereunder. 

      
“Legal Title Trustee” shall mean U.S. Bank National Association as Legal Title
Trustee on behalf of the Legal Title Trust. 

      
“Legal Title Trust” shall mean the ZFC Legal Title Trust I created pursuant to the Legal
Title Trust Agreement. 

      
“Legal Title Trust Agreement” shall mean that certain Legal Title Trust Agreement dated as
of May 23, 2013, among the Legal Title Trustee, the Seller, as depositor, the
Program Manager and the Participation Agent. 

      
“LIBO Base Rate” shall mean the rate determined daily by Buyer on the basis of the
“BBA’s Interest Settlement Rate” offered for one-month U.S. dollar deposits, as
such rate appears on Bloomberg L.P.’s page “BBAM” as of 11:00 a.m. (London time)
on such date (rounded to five decimal places) provided that if such rate does
not appear on Bloomberg L.P.’s page “BBAM” as of such time on such date, the
rate for such date will be the rate determined by reference to the most recently
published rate on Bloomberg L.P.’s page “BBAM”; provided
further that if such rate is no longer set on Bloomberg L.P.’s page “BBAM”, the
rate of such date will be determined by reference to such other comparable
publicly available service publishing such rates as may be selected by Buyer in
its sole discretion for use under this Agreement and comparable facilities
provided by Buyer through Residential Mortgage Finance, a division of Citi
Global Securitized Markets, which rates have performed or are expected by Buyer
to perform in a manner substantially similar to the rate appearing on Bloomberg
L.P.’s page “BBAM”, and which rate will be communicated to Seller.
Notwithstanding anything to the contrary herein, Buyer shall have the sole
discretion to re-set the LIBO Base Rate on a daily basis.

7 

     “LIBO Rate” shall mean with respect to
each Interest Period pertaining to a Transaction, a rate per annum determined by
Buyer in its sole discretion in accordance with the following formula (rounded
to five decimal places), which rate as determined by Buyer shall be conclusive
absent manifest error by Buyer: 

	     LIBO
      Base Rate
	     1.00 – LIBO Reserve
      Requirements

     The LIBO Rate shall be calculated
daily. 

     “LIBO Reserve Requirements” shall mean
for any Interest Period for any Transaction, the aggregate (without duplication)
of the rates (expressed as a decimal fraction) of reserve requirements
applicable to Buyer in effect on such day (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other Governmental Authority
having jurisdiction with respect thereto), dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of such Board) maintained by a member bank of such
Governmental Authority. As of the Effective Date, the LIBO Reserve Requirements
shall be deemed to be zero.

     “Lien” shall mean any mortgage, lien,
pledge, charge, security interest or similar encumbrance. 

     “Liquidity” means with respect to
Guarantor, the sum of (i) its unrestricted cash, (ii) its unrestricted Cash
Equivalents and (iii) the market value of unencumbered Agency securities.

     “Loan” shall mean a first lien mortgage
loan, which is held by Custodian on behalf of the Legal Title Trust pursuant to
the Custodial Agreement, a Participation Interest in which is owned by an
Underlying Trust, and which Loan includes, without limitation, (i) a Note, the
related Mortgage and all other Loan Documents, (ii) all right, title and
interest of Seller in and to the Mortgaged Property covered by such Mortgage and
(iii) the related Servicing Rights. 

     “Loan Documents” shall mean, with
respect to a Loan, the documents comprising the Mortgage File for such Loan.

     “Loan Schedule” shall mean a hard copy
or electronic format incorporating the fields reasonably required by Buyer,
which shall include with respect to each Loan to be included in a Transaction
without limitation: (i) the Loan number, (ii) the Mortgagor’s name, (iii) the
original principal amount of the Loan, (iv) the current principal balance of the
Loan and (v) any other information required by Buyer and any other additional
information to be provided pursuant to the Custodial Agreement. 

     “Margin Call” shall have the meaning
assigned thereto in Section 6(a) hereof. 

     “Margin Deficit” shall have the meaning
assigned thereto in Section 6(a) hereof.

8 

     “Margin Excess” shall have the meaning
assigned thereto in Section 6(c) hereof. 

     “Margin Trigger” shall mean at any time
there exists (i) any Margin Deficit equal to or greater than $500,000 or (ii)
any Margin Deficit less than $500,000 while the outstanding Purchase Price
hereunder is less than $10,000,000. 

     “Market Value” shall have the meaning
assigned thereto in the Pricing Side Letter. 

     “Master Participation Agreement” shall
mean that certain Master Participation Agreement dated as of May 23, 2013, among
the Legal Title Trustee, the Seller, as depositor, the Program Manager and the
Participation Agent, as amended, supplemented or otherwise modified from time to
time.

     “Material Adverse Effect” shall mean a
material adverse effect on (a) the property, business, operations or financial
condition of Seller or Guarantor, (b) the ability of Seller or Guarantor to
perform its obligations under any of the Program Documents to which it is a
party, (c) the validity or enforceability of any of the Program Documents, (d)
the rights and remedies of Buyer under any of the Program Documents, (e) the
timely repurchase of the Purchased Certificate or payment of other amounts
payable in connection therewith or (f) the Purchased Items.

     “Materials of Environmental Concern”
shall mean any hazardous, toxic or harmful substances, materials, wastes,
pollutants or contaminants defined as such in or regulated under any
Environmental Law. 

     “Maximum Aggregate Purchase Price”
shall mean the sum of (i) the Committed Amount and (ii) in Buyer’s sole
discretion, the Uncommitted Amount. 

     “Maximum Mortgage Interest Rate” shall
mean with respect to each Adjustable Rate Loan, a rate that is set forth on the
related Loan Schedule and in the related Note and is the maximum interest rate
to which the Mortgage Interest Rate on such Loan may be increased on any
Adjustment Date. 

     “MERS” shall mean Mortgage Electronic
Registration Systems, Inc., a Delaware corporation, or any successor in interest
thereto.

     “MERS Loan” shall have the meaning set
forth in the Custodial Agreement. 

     “MERS® System” shall mean MERS’s
mortgage electronic registry system, as more particularly described in the MERS
Procedures Manual. 

     “MERS Procedures Manual” shall mean the
MERS Procedures Manual, as it may be amended, supplemented or otherwise modified
from time to time. 

     “Monthly Payment” shall mean the
scheduled monthly payment of principal and interest on a Loan as adjusted in
accordance with changes in the Mortgage Interest Rate pursuant to the provisions
of the Note for an Adjustable Rate Loan. 

     “Mortgage” shall mean with respect to a
Loan, the mortgage, deed of trust or other instrument, which creates a first
lien on the fee simple or leasehold estate in such real property which secures
the Note.

     “Mortgage File” shall have the meaning
assigned thereto in the Custodial Agreement. 

9 

     “Mortgage Interest Rate” means the
annual rate of interest borne on a Note, which shall be adjusted from time to
time with respect to Adjustable Rate Loans. 

     “Mortgaged Property” shall mean the
real property (including all improvements, buildings, fixtures, building
equipment and personal property thereon and all additions, alterations and
replacements made at any time with respect to the foregoing) and all other
collateral securing repayment of the debt evidenced by a Note. 

     “Mortgagee” shall mean the record
holder of a Note secured by a Mortgage. 

     “Mortgagor” shall mean the obligor or
obligors on a Note, including any person who has assumed or guaranteed the
obligations of the obligor thereunder. 

     “Multiemployer Plan” shall mean a
multiemployer plan defined as such in Section 3(37) of ERISA to which
contributions have been or are required to be made by Seller or any ERISA
Affiliate or as to which Seller or any ERISA Affiliate has any actual or
potential liability or obligation and that is covered by Title IV of ERISA.

     “MV Margin Amount” shall mean, with
respect to any Transaction, as of any date of determination, the amount obtained
by application of the MV Margin Percentage to the Purchase Price for such
Transaction as of such date. 

     “MV Margin Percentage” shall have the
meaning assigned thereto in the Pricing Side Letter. 

     “Net Income” shall mean, for any
period, the net income of any Person for such period as determined in accordance
with GAAP. 

     “Net Worth” shall mean, with respect to
any Person, the excess of total assets of such Person, over total liabilities of
such Person, determined in accordance with GAAP. 

     “Note” shall mean, with respect to any
Loan, the related promissory note together with all riders thereto and
amendments thereof or other evidence of indebtedness of the related Mortgagor.

     “Obligations” shall mean (a) all of
Seller’s obligation to pay the Repurchase Price on the Repurchase Date and other
obligations and liabilities (including, without limitation, the Commitment Fee)
of Seller to Buyer, its Affiliates, Custodian or any other Person arising under,
or in connection with, the Program Documents or directly related to the
Purchased Certificate, whether now existing or hereafter arising; (b) any and
all sums paid by Buyer or on behalf of Buyer pursuant to the Program Documents
in order to preserve the Purchased Certificate or its interest therein; (c) in
the event of any proceeding for the collection or enforcement of any of Seller’s
indebtedness, obligations or liabilities referred to in clause (a), the
reasonable expenses of retaking, holding, collecting, preparing for sale,
selling or otherwise disposing of or realizing on the Purchased Certificate or
otherwise exercising Buyer’s rights as certificate holder of the Purchased
Certificate (including terminating the Pass-Through Trust, each Underlying Trust
and Legal Title Trust and realizing, holding, collecting preparing for sale,
selling or otherwise disposing of the Participation Interests or Loans), or of
any exercise by Buyer or any Affiliate of Buyer of its rights under the Program
Documents, including, without limitation, reasonable attorneys’ fees and
disbursements and court costs; and (d) all of Seller’s indemnity obligations to
Buyer pursuant to the Program Documents. 

     “OFAC” shall mean the Office of Foreign
Assets Control of the United States Department of the Treasury. 

10 

     “Participation Agent” shall mean U.S.
Bank National Association as participation agent under the Master Participation
Agreement. 

     “Participation Documents” shall mean
each Servicing Agreement, the Master Participation Agreement, the Pass-Through
Trust Agreement, each Underlying Trust Agreement, the Legal Title Trust
Agreement, and any other agreement entered into by Seller or an Affiliate of
Seller in connection therewith. 

     “Participation Interest” shall mean an
uncertificated participation interest created pursuant to the Master
Participation Agreement, representing a 100% beneficial ownership interest in a
Loan. 

     “Participation Interest Account” shall
mean the “Sub-Participation Interest Account” held by the Participation Agent on
behalf and for the benefit of the Pass-Through Trust pursuant to Article IV of
the Participation Agreement. 

     “Participants” shall have the meaning
assigned thereto in Section 39 hereof. 

     “Pass-Through Trust” has the meaning
assigned thereto in Section 1. 

     “Pass-Through Trust Account” shall mean
the “Beneficial Interest Account” held by the Pass-Through Trustee for the
Pass-Through Trust pursuant to Article IV of the Pass-Through Trust Agreement.

     “Pass-Through Trust Agreement” shall
mean that certain Pass-Through Trust Agreement dated as of May 23, 2013, between
the Pass-Through Trustee, the Program Manager and the Seller, as depositor, to
hold Underlying Certificates. 

     “Pass-Through Trustee” shall mean U.S.
Bank National Association as Pass-Through Trustee on behalf of the Pass-Through
Trust.

     “Pass-Through Trust Distribution Date”
means the 25th day of each month, or if such day is not a Business Day, the
immediately succeeding Business Day. 

     “PBGC” shall mean the Pension Benefit
Guaranty Corporation or any entity succeeding to any or all of its functions
under ERISA. 

     “Person” shall mean any individual,
corporation, company, voluntary association, partnership, joint venture, limited
liability company, trust, unincorporated association or government (or any
agency, instrumentality or political subdivision thereof). 

     “Plan” shall mean an employee benefit
or other plan established or maintained by Seller or, in the case of a Plan
subject to Title IV of ERISA, any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan. 

     “PMI Policy” or “Primary Insurance Policy”
shall mean a policy of primary mortgage guaranty insurance issued by a Qualified
Insurer. 

     “Post-Default Rate” shall have the
meaning assigned thereto in the Pricing Side Letter. 

     “Price Differential” shall have the
meaning assigned thereto in the Pricing Side Letter. 

11 

     “Pricing Rate” shall mean the per annum
percentage rate for determination of the Price Differential as set forth in the
Pricing Side Letter. 

     “Pricing Side Letter” shall mean the
pricing side letter, dated as of the date hereof, between Seller and Buyer, as
the same may be amended, supplemented or modified from time to time. 

     “Program Documents” shall mean this
Agreement, the Custodial Agreement, the Guaranty, each Participation Document,
the Pricing Side Letter, any Instruction Letters, the Collection Account Control
Agreement and any other agreement entered into by Seller, on the one hand, and
Buyer and/or any of its Affiliates or Subsidiaries (or Custodian on its behalf)
on the other, in connection herewith or therewith. 

     “Program Manager” shall mean ZAIS
Financial Partners, L.P. 

     “Prohibited Jurisdiction” shall mean
any country or jurisdiction, from time to time, that is the subject of a
prohibition order (or any similar order or directive), sanctions or restrictions
promulgated or administered by any Governmental Authority of the United States.

     “Prohibited Person” shall mean any
Person: 

     (i) listed in the Annex to (the
“Annex”),
or otherwise subject to the provisions of, the Executive Order; 

     (ii) that is owned or controlled
by, or acting for or on behalf of, any person or entity that is listed to the
Annex to, or is otherwise subject to the provisions of, the Executive Order;

     (iii) with whom Buyer is
prohibited from dealing or otherwise engaging in any transaction by any
terrorism or money laundering law, including the Executive Order; 

     (iv) who commits, threatens or
conspires to commit or supports “terrorism” as defined in the Executive Order;

     (v) that is named as a “specially
designated national and blocked person” on the most current list published by
the OFAC at its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any
replacement website or other replacement official publication of such list; or

     (vi) who is an Affiliate of a
Person listed above. 

     “Property” shall mean any right or
interest in or to property of any kind whatsoever, whether real, personal or
mixed and whether tangible or intangible. 

     “Purchase Date” shall mean, the date on
which the Purchased Certificate is sold by Seller to Buyer in a Transaction
hereunder, including the Initial Purchase Date, and the date of any Purchase
Price Increase. 

     “Purchase Price” shall have the meaning
assigned thereto in the Pricing Side Letter. 

     “Purchase Price Decrease” shall mean a
decrease in the outstanding Purchase Price for the Purchased Certificate that
results from the payment by Seller of all or a portion of the outstanding
Purchase Price. 

12 

     “Purchase Price Decrease Date” shall
mean the date upon which the Buyer and Seller effectuate a Purchase Price
Decrease. 

     “Purchase Price Increase” shall mean an
increase in the Purchase Price for the Purchased Certificate based upon the
Legal Title Trust acquiring additional Loans and an Underlying Trust acquiring
the related Participation Interests, as requested by Seller pursuant to Section
3(a) hereof, to which such portion of the Purchase Price is allocated.

     “Purchased Certificate” shall have the
meaning assigned thereto in Section 1.

     “Purchased Items” shall have the
meaning assigned thereto in Section 8 hereof. 

     “Qualified Insurer” shall mean an
insurance company duly qualified as such under the laws of each state in which
any Mortgaged Property is located, duly authorized and licensed in each such
state to transact the applicable insurance business and to write the insurance
provided, and approved as an insurer by Fannie Mae and Freddie Mac and whose
claims paying ability is rated in the two highest rating categories by any of
the rating agencies with respect to primary mortgage insurance and in the two
highest rating categories by Best’s with respect to hazard and flood insurance.

     “Records” shall mean, with respect to
any Loan, the Loan Documents and the Servicing Records.

     “Renewal Transaction” has the meaning
assigned thereto in Section 1. 

     “Reportable Event” shall mean any of
the events set forth in Section 4043(b) of ERISA, other than those events as to
which the thirty day notice period is waived under subsections .21, .22, .23,
..24, .28, .29, .31, or .32 of PBGC Reg. § 4043 (provided that a failure to meet
the minimum funding standard of Section 412 of the Code or Sections 302 or 303
of ERISA, including, without limitation, the failure to make on or before its
due date a required installment under Section 430(j) of the Code or Section
303(j) of ERISA, shall be a reportable event regardless of the issuance of any
waivers in accordance with Section 412(d) of the Code). 

     “Repurchase Date” shall mean the
earliest to occur of (i) the 15th day of each month following the related
Purchase Date (or if such date is not a Business Day, the following Business
Day), (ii) any other Business Day set forth in the related Funding Notice, (iii)
the date determined by application of Section 19, as applicable, or (iv) the
Termination Date. In no event shall the Repurchase Date for any Transaction
occur after the Termination Date. 

     “Repurchase Price” shall mean with
respect to a Transaction, the price at which the Purchased Certificate is to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the outstanding Purchase Price and any unpaid Price Differential as
of the date of such determination. 

     “Requirement of Law” shall mean as to
any Person, the certificate of incorporation and by-laws or other organizational
or governing documents of such Person, and any law, treaty, rule or regulation
or interpretation thereof or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject. 

     “Responsible Officer” shall mean, as to
any Person, the chief executive officer or, with respect to financial matters,
the chief financial officer of such Person; provided, that in the event any such
officer is unavailable at any time he or she is required to take any action
hereunder, Responsible Officer shall mean any officer authorized to act on such
officer’s behalf as demonstrated by a certificate of corporate resolution.

13 

     “Restricted Payments” shall mean with
respect to any Person, collectively, all dividends or other distributions of any
nature (cash, securities, assets or otherwise), and all payments, by virtue of
redemption or otherwise, on any class of equity securities (including, without
limitation, warrants, options or rights therefor) issued by such Person, whether
such securities are now or may hereafter be authorized or outstanding and any
distribution in respect of any of the foregoing, whether directly or indirectly.

     “Section 404 Notice” shall mean the
notice required pursuant to Section 404 of the Helping Families Save Their Homes
Act of 2009 (P.L. 111-22), which amends 15 U.S.C. Section 1641 et seq., to be
delivered by a creditor that is an owner or an assignee of a mortgage loan to
the related Mortgagor within thirty (30) days after the date on which such
mortgage loan is sold or assigned to such creditor. 

     “Security Release Certification” shall
mean a security release certification in substantially the form set forth in
Exhibit F
hereto.

     “Servicer” shall mean Fay Servicing,
LLC in its capacity as servicer of the Loans, or another servicer of the Loans
approved by Buyer, and any interim servicer of one or more Loans during any
related interim servicing period that does not exceed sixty (60) days.

     “Servicer Termination Event” shall mean
(i) it is discovered that the collection practices used by a Servicer with
respect to one or more of the Loans have not been, in all material respects,
legal, proper, prudent and customary in the residential mortgage loan servicing
business or in accordance with the terms of each Mortgage and the related Note
or otherwise in material compliance with the related Servicing Agreement or (ii)
Servicer does not maintain all consents, licenses and approvals necessary to
service the Loans. 

     “Servicing Agreement” shall mean the
Flow Servicing Agreement, dated as of May 23, 2013, among the Legal Title
Trustee, the Program Manager, the Participation Agent and the Servicer, as such
agreement may be amended from time to time, or another servicing agreement
approved by Buyer, and any interim servicing agreement or document containing
interim servicing provisions with respect to an interim servicer of one or more
Loans during the related interim servicing period; provided, that no interim
servicing period shall exceed sixty (60) days.

     “Servicing File” shall mean with
respect to each Loan, the file retained by Servicer on behalf of Seller
consisting of all documents that a prudent servicer would have, including copies
of the Loan Documents, all documents necessary to document and service the
Loans, including any and all documents required to be delivered pursuant to any
of the Program Documents. 

     “Servicing Records” shall have the
meaning assigned thereto in Section 42(b) hereof. 

     “Servicing Rights” shall mean
contractual, possessory or other rights of Seller or any other Person to service
a Loan, whether arising under the Servicing Agreement, the Custodial Agreement
or otherwise, to administer or service a Loan or to possess related Servicing
Records, including the right to terminate any servicing agreement without cause
and free and clear of any obligations (including the obligation to repay or
reimburse any servicing advances), costs or fees. 

     “Servicing Transmission” shall mean a
computer-readable magnetic or other electronic format acceptable to the parties.

14 

     “Subservicer” shall have the meaning
provided in Section 9(b)(xi) hereof. 

     “Subservicing Agreement” shall have the
meaning provided in Section 42. 

     “Subsidiary” shall mean, with respect
to any Person, any corporation, partnership or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership or
other entity (irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such corporation,
partnership or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person. 

     “Tangible Net Worth” shall mean, with
respect to any Person as of any date of determination, the consolidated Net
Worth of such Person and its Subsidiaries, less the consolidated net book value
of all assets of such Person and its subsidiaries (to the extent reflected as an
asset in the balance sheet of such Person or any Subsidiary at such date) which
will be treated as intangibles under GAAP, including, without limitation, such
items as deferred financing expenses, deferred taxes, net leasehold
improvements, good will, trademarks, trade names, service marks, copyrights,
patents, licenses and unamortized debt discount and expense; provided, that
residual securities issued by such Person or its Subsidiaries shall not be
treated as intangibles for purposes of this definition. 

     “Termination Date” shall mean May 29,
2014, or such earlier date on which this Agreement shall terminate in accordance
with the provisions hereof or by operation of law. 

     “Total Indebtedness” shall mean with
respect to any Person, for any period, the aggregate Indebtedness of such Person
and its Subsidiaries during such period, less the amount of any nonspecific
consolidated balance sheet reserves maintained in accordance with GAAP and less
the amount of any non-recourse debt, including any securitization debt.

     “Transaction” has the meaning assigned
thereto in Section 1. 

     “Transaction Notice” shall mean
Seller’s request to enter into a Transaction (other than a Renewal Transaction)
delivered to Buyer pursuant to the terms of this Agreement, specifying the
Loans, the Participation Interests of which will be transferred to the related
Underlying Trust, that Seller requests to include in the determination of the
Purchase Price or Purchase Price Increase, as applicable, for the Transaction,
and any loan-level details as agreed reasonably required by Buyer in connection
with such Transaction. Each Transaction Notice shall have attached thereto an
electronic data file with all required loan-level information. 

     “Transferor” shall mean the related
seller or transferor of Loans to Seller. 

     “Uncommitted Amount” shall have the
meaning provided in the Pricing Side Letter. 

     “Underlying Trust” shall have the
meaning assigned thereto in Section 1. 

     “Underlying Trust Account” shall mean
the “Beneficial Interest Account” held by the Underlying Trustee for the related
Underlying Trust pursuant to Article IV of the related Underlying Trust
Agreement. 

15 

     “Underlying Trust Agreement” shall mean
each Underlying Trust Agreement to be entered into between the Underlying
Trustee and the Seller, as depositor, to hold Participation Interests, which
agreement has been approved by Buyer. 

     “Underlying Trustee” shall mean U.S.
Bank National Association as underlying trustee on behalf of each Underlying
Trust. 

     “Underlying Trust Distribution Date”
shall mean the 25th day of each month, or if such day is not a
Business Day, the immediately succeeding Business Day. 

     “Uniform Commercial Code” shall mean
the Uniform Commercial Code as in effect on the date hereof in the State of New
York; provided that if by reason of mandatory provisions of law, the perfection
or the effect of perfection or non-perfection of the security interest in any
Purchased Items is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than New York, “Uniform Commercial Code” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or effect of perfection or
non-perfection. 

     “USC” shall mean the United States
Code, as amended. 

     (b)
Accounting Terms and
Determinations. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to Buyer hereunder shall be prepared, in accordance
with GAAP. 

     (c)
Interpretation. The following rules of this subsection (c) apply unless the context
requires otherwise. A gender includes all genders. Where a word or phrase is
defined, its other grammatical forms have a corresponding meaning. A reference
to a subsection, Section, Annex or Exhibit is, unless otherwise specified, a
reference to a Section of, or annex or exhibit to, this Agreement. A reference
to a party to this Agreement or another agreement or document includes the
party’s successors and permitted substitutes or assigns. A reference to an
agreement or document (including any Program Document) is to the agreement or
document as amended, modified, novated, supplemented or replaced, except to the
extent prohibited thereby or by any Program Document and in effect from time to
time in accordance with the terms thereof. A reference to legislation or to a
provision of legislation includes a modification or re-enactment of it, a
legislative provision substituted for it and a regulation or statutory
instrument issued under it. A reference to writing includes a facsimile
transmission and any means of reproducing words in a tangible and permanently
visible form. A reference to conduct includes, without limitation, an omission,
statement or undertaking, whether or not in writing. The words “hereof”,
“herein”, “hereunder” and similar words refer to this Agreement as a whole and
not to any particular provision of this Agreement. The term “including” is not
limiting and means “including, without limitation”. In the computation of
periods of time from a specified date to a later specified date, the word “from”
means “from and including”, the words “to” and “until” each mean “to but
excluding”, and the word “through” means “to and including”. 

     Except where otherwise provided in
this Agreement, any determination, consent, approval, statement or certificate
made or confirmed in writing with notice to Seller by Buyer or an authorized
officer of Buyer provided for in this Agreement is conclusive and binds the
parties in the absence of manifest error. A reference to an agreement includes a
security interest, guarantee, agreement or legally enforceable arrangement
whether or not in writing related to such agreement. 

     A reference to a document includes
an agreement (as so defined) in writing or a certificate, notice, instrument or
document, or any information recorded in computer disk form. Where Seller
is required to provide any document to
Buyer under the terms of this Agreement, the relevant document shall be provided
in writing or printed form unless Buyer requests otherwise.

16 

     References in this Agreement and in
the other Program Documents to the ownership of one or more Loans by the Legal
Title Trust shall be interpreted to mean the ownership of such Loans by the
Legal Title Trustee on behalf of the Legal Title Trust. Similarly, references in
this Agreement and in the other Program Documents to the ownership of one or
more Participation Interests by an Underlying Trust shall mean the ownership of
such Participation Interests by the trustee of such Underlying Trust on behalf
of the Legal Title Trustee.

     This Agreement is the result of
negotiations between, and has been reviewed by counsel to, Buyer and Seller, and
is the product of all parties. In the interpretation of this Agreement, no rule
of construction shall apply to disadvantage one party on the ground that such
party proposed or was involved in the preparation of any particular provision of
this Agreement or this Agreement itself. Except where otherwise expressly
stated, Buyer may give or withhold, or give conditionally, approvals and
consents and may form opinions and make determinations at its absolute
discretion. Any requirement of good faith, discretion or judgment by Buyer shall
not be construed to require Buyer to request or await receipt of information or
documentation not immediately available from or with respect to Seller, a
servicer of the Loans, any other Person, the Participation Interests or the
Loans themselves. 

3. THE
TRANSACTIONS

     (a)
Subject to the terms and conditions of the
Program Documents, on the Initial Purchase Date, Buyer shall, upon the terms and
conditions set forth herein, purchase the Purchased Certificate against the
transfer of funds by Buyer in an amount equal to the Purchase Price, with a
simultaneous agreement by Buyer to transfer to Seller the Purchased Certificate
on the Repurchase Date, against the transfer of funds by Seller, in an amount
equal to the Repurchase Price. In addition, Buyer shall, with respect to the
Committed Amount and may, with respect to the Uncommitted Amount as requested by
Seller, from time to time, upon the terms and conditions set forth herein, enter
into transactions in which Seller transfers either (i) additional Underlying
Certificates in one or more additional Underlying Trusts that hold additional
Participation Interests or (ii) additional Participation Interests to an
existing Underlying Trust in an amount equal to the related Purchase Price
Increase related to such additional Participation Interests, subject to
Transactions not to exceed the Maximum Aggregate Purchase Price. Buyer shall
have the obligation, subject to the terms and conditions of the Program
Documents, to enter into Transactions up to the Committed Amount and shall have
no obligation to enter into Transactions with respect to the Uncommitted Amount,
which Transactions shall be entered into in the sole discretion of Buyer. Unless
otherwise agreed by Buyer, all Transactions hereunder shall be first deemed
committed up to the Committed Amount and then the remainder, if any, shall be
deemed uncommitted up to the Uncommitted Amount. 

     (b)
Unless otherwise agreed, Seller shall request
that Buyer enter into a Transaction (other than a Renewal Transaction) by
delivering (i) to Buyer a Transaction Notice, (ii) to Buyer and Custodian an
estimate of the Purchase Price or an estimate of the Purchase Price Increase, as
applicable (which estimate, in each case, may be included in a Transaction
Notice), (iii) to Custodian, the Mortgage Files for each such Eligible Loan, a
Participation Interest in which is proposed to be held by an Underlying Trust
and included in a Transaction by the times set forth in the Custodial Agreement,
each in accordance with the times specified in the Custodial Agreement, and (iv)
to Buyer, the original Custodial Certification issued by the Custodian without
Exceptions, unless any such Exceptions have been otherwise approved by Buyer.
Any Renewal Transaction shall be subject to the same terms and conditions
specified in the original Transaction Notice unless an updated Transaction
Notice is delivered to Buyer and agreed to by Buyer; provided, that if no
updated Transaction Notice is delivered, the “Repurchase Date” for
such Renewal Transaction shall be deemed to
be the next monthly Repurchase Date or such earlier date on which a Repurchase
Date may occur pursuant to the definition of “Repurchase Date” herein.

17 

     Each
Transaction Notice shall specify the proposed Purchase Date, Purchase Price or
Purchase Price Increase, as applicable, Pricing Rate, Repurchase Date and the
related Underlying Trust. In addition, each Transaction Notice shall set forth
the related Purchase Price allocable to each individual Loan related to the
Participation Interests. Each Transaction Notice shall include a Loan Schedule
in respect of the Loans related to Participation Interests that are proposed to
be transferred to an Underlying Trust. 

    
Buyer shall notify the Seller of its agreement to enter into a
Transaction (other than a Renewal Transaction) and confirm the terms of such
Transaction, by delivering to Seller a Funding Notice specifying the Loans
related to Participation Interests that are proposed to be transferred to an
Underlying Trust, and any other terms of the related Transaction. In the event
of a conflict between the terms set forth in the Transaction Notice delivered by
Seller to Buyer and the terms set forth in the related Funding Notice delivered
by Buyer to Seller, the terms of the related Funding Notice shall control. In
the event of a conflict between the terms set forth in this Agreement and the
terms set forth in any Funding Notice, the terms of such Funding Notice shall
control to the extent that the Funding Notice notes such conflict and specifies
that the Funding Notice shall control.

    
By entering into a Transaction with Buyer, the Seller consents to the
terms set forth in the related Funding Notice. The Funding Notice, together with
this Agreement, shall constitute conclusive evidence of the terms agreed to
between Buyer and Seller with respect to the Transaction to which the Funding
Notice relates. With respect to any Renewal Transaction, the terms of such
Transaction shall be as set forth in the original Funding Notice for such
Transaction, unless Buyer delivers an updated Funding Notice with respect to
such Transaction. 

    
(c) In
accordance with the times specified in the Custodial Agreement, upon Seller’s
request to enter into a Transaction, Seller will cause Custodian to deliver to
the Buyer, with a copy to the Legal Title Trustee on behalf of the Legal Title
Trust, an original Custodial Certification issued by the Custodian showing that
the related Mortgage Files for each Loan are held by the Custodian under the
Custodial Agreement without Exceptions, unless otherwise approved by Buyer. The
original Custodial Certifications shall be delivered to 540/580 Crosspoint
Parkway, Getzville, New York 14068, Attention: Peter Szalowski for the account
of Citibank, N.A., telephone number (716) 730-7086, as agent for Buyer by
overnight delivery using a nationally recognized insured overnight delivery
service. In addition, in accordance with the times specified in the Custodial
Agreement, Seller will deliver to Buyer or cause Custodian to deliver to Buyer
on each Business Day, via Electronic Transmission acceptable to Buyer, an
electronic data file with respect to all Loans held by Custodian on behalf of
the Legal Title Trust subject to a Transaction and an Exception Report showing
the status of all Loans then held by Custodian for the Legal Title Trust,
including but not limited to the Loans which are subject to Exceptions, and the
time the related Loan Documents have been released in accordance with the terms
of the Custodial Agreement.

    
(d) Upon Seller’s request to enter into a Transaction pursuant to Section
3(a), Buyer shall, assuming all conditions precedent set forth in this Section 3
and in Sections 9(a) and (b), as applicable, have been met, and provided no
Default shall have occurred and be continuing, enter into a Transaction for the
purchase of the Purchased Certificate or for a Purchase Price Increase by
transferring to Seller, via wire transfer, to the following account maintained
by Seller at Wells Fargo Bank Minnesota, N.A., ABA # 121000248, BNF 0000840245, BNF Trust Wire Clearing, OBI: ZFC Trust/Acc#
25279305, the Purchase Price or the Purchase Price Increase, as applicable, in
immediately available funds on the related Purchase Date and not later than the
related time set forth in the Custodial Agreement. Seller acknowledges and
agrees that the Purchase Price or Purchase Price Increase paid in connection
with any Participation Interests related to any
Transaction includes a mutually negotiated premium allocated to the portion of
the related Loans that constitutes the related Servicing Rights, which Servicing
Rights shall be held by the Legal Title Trust for the benefit of the owners of
the Participation Interest related to such Loans. 

18

     (e) Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any LIBO Base Rate: 

     (i) Buyer
determines, which determination shall be conclusive, that quotations of interest
rates for the relevant deposits referred to in the definition of “LIBO Base
Rate” in Section 2 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for
Transactions as provided herein;

     (ii) Buyer determines, which determination shall be
conclusive, that the Applicable Margin plus the relevant rate of interest
referred to in the definition of “LIBO Base Rate” in Section 2 upon the basis of
which the rate of interest for Transactions is to be determined is not likely to
adequately cover the cost to Buyer of purchasing and holding the Participation
Interests hereunder; or 

     (iii) it becomes unlawful for Buyer to enter into
Transactions with a Pricing Rate based on the LIBO Base Rate; 

then Buyer shall give Seller prompt
notice thereof and, so long as such condition remains in effect, Buyer shall be
under no obligation to enter into Transactions with respect to additional
Participation Interests hereunder, and Seller shall, at its option, either
repurchase the Purchased Certificate at the Repurchase Price or pay a Pricing
Rate at a rate per annum as determined by Buyer taking into account the
increased cost to Buyer of purchasing and holding the Purchased Certificate.

     (f) Seller shall repurchase the Purchased Certificate from Buyer on each
related Repurchase Date. Each obligation to repurchase exists without regard to
any prior or intervening liquidation or foreclosure with respect to any Loan,
the Participation Interest of which is held by an Underlying Trust.

    
(g) Provided that the applicable conditions in Section 9(b) have been
satisfied and provided further no Default shall have occurred and be continuing,
unless Buyer is notified by the Seller to the contrary not later than 11:00 a.m.
New York City time at least two (2) Business Days prior to any such Repurchase
Date, on each related Repurchase Date the Purchased Certificate shall
automatically and immediately become subject to a new Transaction. In such
event, the related Repurchase Date on which such Transaction becomes subject to
a new Transaction shall become the “Purchase Date” for such Transaction. For
each new Transaction, unless otherwise agreed, (y) the accrued and unpaid Price
Differential shall be settled in cash on each related Repurchase Date, and (z)
the Pricing Rate shall be as set forth in the Pricing Side Letter. 

    
(h) [Reserved]

    
(i) If
Seller intends to repurchase any Purchased Certificate or pay the portion of the
Repurchase Price allocable to any Participation Interests on any day which is
not a Repurchase Date, Seller shall give prior written notice thereof to Buyer
by 2:00 p.m. (New York City time) on the date of repurchase. If such notice is
given, the Repurchase Price specified in such notice shall be due and payable on
the date specified therein, together with the Price Differential to such date on
the amount prepaid.

19

     (j) If
any Requirement of Law (other than with respect to any amendment made to Buyer’s
certificate of incorporation and by-laws or other organizational or governing
documents) or any change in the interpretation or application thereof or
compliance by Buyer with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof: 

     (i) shall
subject Buyer to any tax of any kind whatsoever with respect to this Agreement
or any Loans purchased pursuant to it (excluding net income taxes) or change the
basis of taxation of payments to Buyer in respect thereof; 

     (ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory advance or similar requirement against
assets held by deposits or other liabilities in or for the account of
Transactions or extensions of credit by, or any other acquisition of funds by
any office of Buyer which is not otherwise included in the determination of the
LIBO Base Rate hereunder; or 

     (iii) shall impose on Buyer any other condition;

and the result of any of the foregoing
is to increase the cost to Buyer, by an amount which Buyer deems to be material,
of effecting or maintaining purchases hereunder, or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, Seller shall
promptly pay Buyer such additional amount or amounts as will compensate Buyer
for such increased cost or reduced amount receivable; provided, that any such
determination under this Section 3(i) shall be consistent with determinations
made by Buyer in respect of similar loan facilities. 

     If Buyer shall
have determined that the adoption of or any change in any Requirement of Law
(other than with respect to any amendment made to Buyer’s certificate of
incorporation and by-laws or other organizational or governing documents)
regarding capital adequacy or in the interpretation or application thereof or
compliance by Buyer or any corporation controlling Buyer with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any Governmental Authority made subsequent to the date hereof shall have
the effect of reducing the rate of return on Buyer’s or such corporation’s
capital as a consequence of its obligations hereunder to a level below that
which Buyer or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration Buyer’s or such corporation’s
policies with respect to capital adequacy) by an amount deemed by Buyer to be
material, then from time to time, Seller shall, upon notice from Buyer of such
additional amounts, promptly pay to Buyer such additional amount or amounts as
will thereafter compensate Buyer for any such reduction that was incurred by
Buyer within ninety (90) days of Buyer’s notice thereof; provided, that any such
determination under this Section 3(i) shall be consistent with determinations
made by Buyer in respect of similar loan facilities. 

     If Buyer
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall promptly notify Seller of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
subsection submitted by Buyer to Seller shall be conclusive in the absence of
manifest error. 

4.
PAYMENTS; COMPUTATION; COMMITMENT
FEE 

     (a) Payments. All payments to be made by
Seller under this Agreement shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to Buyer, except to the
extent otherwise provided herein, at the following account maintained by Buyer
at Citibank, New York, Account Number 36855692, For the A/C of Citibank, N.A.,
ABA# 021000089, Reference: ZAIS not later than 5:00
p.m., New York City time, on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day). Seller acknowledges that it has
no rights of withdrawal from the foregoing account. 

20

     (b) Computations. The Price Differential
shall be computed on the basis of a 360-day year for the actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable; provided, that with respect to the payment of any Price
Differential on any Repurchase Date, Buyer shall provide the amount of such
Price Differential at least one (1) Business Day prior to such Repurchase
Date.

     (c) Commitment Fee. Seller agrees to pay
to Buyer, a commitment fee from and including the Effective Date to the
Termination Date, equal to (a) the Commitment Fee Percentage, multiplied by (b)
the Committed Amount (the “Commitment
Fee”), such payment to be made in Dollars, in
immediately available funds, without deduction, set off or counterclaim, to
Buyer at the account set forth in Section 4(a) in twelve (12) equal
installments. The first installment of the Commitment Fee shall be payable on or
prior to the date of this Agreement, and each subsequent installment shall be
paid on a monthly basis no later than the last Business Day of each calendar
month, until the Commitment Fee is paid in full. Buyer may, in its sole
discretion, net any installment of the Commitment Fee that is due and payable
from the proceeds of any Purchase Price paid to Seller. The Commitment Fee is
and shall be deemed to be fully earned as of the date hereof and each
installment shall be non-refundable when paid. In the event that the Termination
Date is accelerated to a date which is prior to the payment in full of all
installments of the Commitment Fee, any unpaid installments of the Commitment
Fee shall be payable on the Termination Date.

5.
TAXES; TAX TREATMENT

    
(a) All payments made by Seller under this Agreement shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities (including penalties, interest and additions to tax) with respect
thereto imposed by any Governmental Authority, excluding income taxes, branch
profits taxes, franchise taxes or any other tax imposed on the net income by the
United States, a state or a foreign jurisdiction under the laws of which Buyer
is organized or of its applicable lending office, or any political subdivision
thereof (collectively, “Taxes”), all of which shall be paid by Seller for its own account
not later than the date when due. If Seller is required by law or regulation to
deduct or withhold any Taxes from or in respect of any amount payable to Buyer
hereunder, it shall: (a) make such deduction or withholding; (b) pay the amount
so deducted or withheld to the appropriate Governmental Authority not later than
the date when due; (c) deliver to Buyer, promptly, original tax receipts of such
Taxes paid and other evidence reasonably satisfactory to Buyer of the payment
when due of the full amount of such Taxes; and (d) pay to Buyer such additional
amounts as may be necessary so that such Buyer receives, free and clear of all
Taxes, a net amount equal to the amount it would have received under this
Agreement, as if no such deduction or withholding had been made. 

    
(b) In
addition, Seller agrees to pay to the relevant Governmental Authority in
accordance with applicable law any current or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies (including,
without limitation, mortgage recording taxes, transfer taxes and similar fees)
imposed by the United States or any taxing authority thereof or therein that
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement (“Other Taxes”). 

21

     (c) Seller agrees to indemnify Buyer for the full amount of Taxes (including
additional amounts with respect thereto) and Other Taxes, and the full amount of
Taxes of any kind imposed by any jurisdiction on amounts payable under this
Section 5, and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, provided that Buyer shall have
provided Seller with evidence, reasonably satisfactory to Seller, of payment of
Taxes or Other Taxes, as the case may be. 

    
(d) Any Buyer that is not incorporated under the laws of the United States,
any State thereof, or the District of Columbia (a “Foreign Buyer”) shall provide Seller
with properly completed United States Internal Revenue Service (“IRS”) Form W-8BEN or W-8ECI
or any successor form prescribed by the IRS, certifying that such Foreign Buyer
is entitled to benefits under an income tax treaty to which the United States is
a party or under the applicable law which eliminates the U.S. withholding tax on
payments of interest or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States on or prior to the date upon which each such Foreign Buyer
becomes a Buyer. Each Foreign Buyer will resubmit the appropriate form on the
earliest of (A) the third anniversary of the prior submission or (B) on or
before the expiration of thirty (30) days after there is a “change in
circumstances” with respect to such Foreign Buyer as defined in Treas. Reg.
Section 1.1441-1(e)(4)(ii)(D). For any period with respect to which a Foreign
Buyer has failed to provide Seller with the appropriate form or other relevant
document pursuant to this Section 5(d) (unless such failure is due to a change
in treaty, law, or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Foreign Buyer shall not be
entitled to any “gross-up” of Taxes or indemnification under Section 5(c) with
respect to Taxes imposed by the United States; provided, however, that should a Foreign Buyer,
which is otherwise exempt from a withholding tax, become subject to Taxes
because of its failure to deliver a form required hereunder, Seller shall take
such steps as such Foreign Buyer shall reasonably request to assist such Foreign
Buyer to recover such Taxes. 

    
(e) Without prejudice to the survival or any other agreement of Seller
hereunder, the agreements and obligations of Seller contained in this Section 5
shall survive the termination of this Agreement. Nothing contained in this
Section 5 shall require Buyer to make available any of its tax returns or other
information that it deems to be confidential or proprietary. 

    
(f) Each party to this Agreement acknowledges that it is its intent for
purposes of U.S. federal, state and local income and franchise taxes to treat
each Transaction as indebtedness of the Seller that is secured by the Purchased
Certificate and that the Purchased Certificate is owned by Seller in the absence
of an Event of Default by Seller. All parties to this Agreement agree to such
treatment and agree to take no action inconsistent with this treatment, unless
required by law. 

6.
MARGIN
MAINTENANCE 

    
(a) If
at any time the sum of the aggregate Market Value of the Participation Interests
owned by the Underlying Trusts is less than the aggregate MV Margin Amount for
all outstanding Transactions (such event, a “Margin Deficit”), then Buyer may, by
notice to Seller, require Seller and/or Guarantor to transfer to Buyer cash
within the time period specified in clause (b) below, so that the cash and
aggregate Market Value of the Participation Interests owned by the Underlying
Trusts will thereupon equal or exceed the aggregate MV Margin Amount (such
requirement, a “Margin Call”); provided however that neither Seller nor Guarantor shall
be required to cure a Margin Deficit unless a Margin Trigger has occurred or any
Default or Event of Default has occurred. Buyer shall deposit such cash into a
non-interest bearing account until the next succeeding Repurchase
Date.

    
(b) Notice required pursuant to Section 6(a) may be given by any means
provided in Section 21 hereof. Any notice given
shall be met, and the related Margin Call satisfied, within one (1) Business Day. The failure of Buyer, on any one or more
occasions, to exercise its rights under this Section 6, shall not change or
alter the terms and conditions to which this Agreement is subject or limit the
right of Buyer to do so at a later date. Seller, Guarantor and Buyer each agree
that a failure or delay by Buyer to exercise its rights hereunder shall not
limit or waive Buyer’s rights under this Agreement or otherwise existing by law
or in any way create additional rights for Seller or Guarantor.

22

     (c) If, after the Initial Purchase Date, the Market Value of Participation
Interests owned by the Underlying Trusts is greater than the aggregate MV Margin
Amount for all outstanding Transactions (such event, a “Margin Excess”), then
Seller may, by one (1) Business Day’s prior written notice to Buyer (an
“Excess Margin Notice”), request that Buyer transfer to Seller cash in an amount
equal not to exceed the amount of such Margin Excess. Buyer shall, within one
(1) Business Day of its receipt of a Margin Excess Notice, transfer to Seller
cash in an amount not to exceed the amount of such Margin Excess; provided, that
no Default or Event of Default has occurred and is continuing or would exist
after such action by Buyer, and provided further that Buyer will not be required
to take any action under this provision that would result in a Margin Deficit.

7.
INCOME PAYMENTS 

    
(a) Where a particular term of a Transaction extends over the date on which
Income is paid in respect of any Participation Interest owned by an Underlying
Trust, such Income shall be the property of Buyer. Seller shall cause (i) all
Income net of applicable servicing fees and servicing advances due Servicer
pursuant to the Servicing Agreement, to be deposited within two (2) Business
Days of receipt to the Servicer Collection Account, (ii) the Servicer to remit
such income (net of applicable servicing fees and servicing advances due
Servicer pursuant to the Servicing Agreement to the extent not previously
deducted) to the Participation Agent to deposit in the Participation Interest
Account on each Servicer Remittance Date, (iii) the Participation Agent to remit
such Income net of any applicable fees and expenses payable pursuant to the
Master Participation Agreement to the Underlying Trustee to deposit in the
related Underlying Trust Account prior to the Underlying Trust Distribution
Date, (iv) the Underlying Trustee to remit such Income net of any applicable
fees and expenses payable pursuant to the Underlying Trust Agreement to the
Pass-Through Trustee to deposit in the Pass-Through Trust Account prior to the
Pass Through Trust Distribution Date, and (v) the Pass-Through Trustee to remit
such Income net of any applicable fees and expenses payable pursuant to the
Pass-Through Trust Agreement to the Collection Account on the Pass-Through Trust
Distribution Date. 

    
(b) So
long as no Default or Event of Default is in existence, Buyer shall, or shall
direct the Control Bank on the applicable Repurchase Date, to apply such Income
on deposit in the Collection Account in the following order of priority:
first, to Buyer, all accrued and unpaid expenses, fees and other amounts
(other than the amounts specified in clauses third and fourth of this paragraph)
due and payable by Seller pursuant to this Agreement; second, to pay to Buyer
an amount equal to any accrued and unpaid Price Differential; third, to pay to Buyer an amount sufficient
to eliminate any Margin Deficit to the extent a Margin Trigger has occurred and
is continuing; and fourth, to Seller, all remaining
funds. In the event that any Default or Event of Default is in existence, Buyer
shall be entitled to retain all Income, or shall direct the Control Bank on the
applicable Repurchase Date, to apply such Income on deposit in the Collection
Account.

    
Buyer shall not be obligated to take any action pursuant to the preceding
clause (b) (A) to the extent that such action would result in the creation of a
Margin Deficit, unless prior thereto or simultaneously therewith Seller
transfers to Buyer cash sufficient to eliminate such Margin Deficit to the
extent a Margin Trigger has occurred and is continuing, or (B), if an Event of
Default has occurred and is then continuing at the time such Income is paid.

23

8.
SECURITY INTEREST; BUYER’S APPOINTMENT
AS ATTORNEY-IN-FACT 

     (a) Seller and Buyer intend that the Initial Transaction and each Renewal
Transaction hereunder be a sale to Buyer of the Purchased Certificate and not a
loan from Buyer to the Seller secured by the Purchased Certificate. However, in
order to preserve Buyer’s rights under this Agreement in the event that a court
or other forum recharacterizes such Transactions hereunder as other than sales,
and as security for Seller’s performance of all of its Obligations, Seller
hereby grants Buyer a perfected first priority security interest in all of
Seller’s rights, title and interest in and to the following property, whether
now existing or hereafter acquired: (i) the Purchased Certificate and the rights
of the Seller with respect to all Participation Interests identified on a
Funding Notice or any Transaction Notice delivered by Buyer to Seller and
Custodian from time to time, (ii) all interests of Seller in the related Loan
Documents, including, without limitation, all promissory notes, (iii) all
interests of Seller in any other collateral pledged or otherwise relating to the
related Loans, together with all files, material documents, instruments, surveys
(if available), certificates, correspondence, appraisals, computer records,
computer storage media, Loan accounting records and other books and records
relating thereto, (iv) the Servicing Records, and the related Servicing Rights
in connection with any Loan subject to a Participation Interest which is held by
the Legal Title Trust for the benefit of the owners of the related Participation
Interests, (v) all rights of Seller to receive from any third party or to take
delivery of any Servicing Records or other documents which constitute a part of
the Mortgage File or Servicing File, all rights of Seller to receive from any
third party or to take delivery of any Records or other documents which
constitute a part of the Mortgage File or Servicing File, (vi) the Collection
Account and all Income deposited therein relating to such Participation
Interests, (vii) Seller’s right to the Participation Interest Account and all
Income deposited therein, (viii) Seller’s right to each Underlying Trust Account
and all Income on deposit therein, (ix) Seller’s right to the Pass-Through Trust
Account and all Income on deposit therein, (x) all interests in real property
collateralizing any Loans represented by Participation Interests, (xi) all other
insurance policies and insurance proceeds relating to any Loans represented by
Participation Interests or the related Mortgaged Property and all Insurance
Proceeds and all rights of Seller to receive from any third party or to take
delivery of any of the foregoing, (xii) any purchase agreements or other
agreements, contracts or any related takeout commitments relating to or
constituting any or all of the foregoing and all rights to receive documentation
relating thereto, (xiii) all “accounts”, “chattel paper”, “commercial tort
claims”, “deposit accounts”, “documents,” “equipment”, “general intangibles”,
“goods”, “instruments”, “inventory”, “investment property”, “letter of credit
rights”, and “securities’ accounts” as each of those terms is defined in the
Uniform Commercial Code and all cash and Cash Equivalents and all products and
proceeds relating to or constituting any or all of the foregoing, and (xiv) any
and all replacements, substitutions, distributions on or proceeds of any or all
of the foregoing (collectively the “Purchased Items”).

    
Seller acknowledges and agrees that its rights with respect to the
Purchased Items (including, without limitation, any security interest Seller may
have in the Loans and any other collateral granted by Seller to Buyer pursuant
to any other agreement) are and shall continue to be at all times junior and
subordinate to the rights of Buyer hereunder. Seller further acknowledges that
it has no rights to the Servicing Rights related to the Loans. Without limiting
the generality of the foregoing and for the avoidance of doubt, in the event
that Seller is deemed to retain any residual Servicing Rights, Seller grants,
assigns and pledges to Buyer a first priority security interest in all of its
rights, title and interest in and to the Servicing Rights as indicated
hereinabove.

    
(b) At
any time and from time to time, upon the written request of Buyer, and at the
expense of Seller, Seller will promptly and duly execute and deliver, or will
promptly cause to be executed and delivered, such further instruments and
documents and take such further action as Buyer may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the
Purchased Items and the liens created hereby. Seller also hereby authorizes
Buyer to file any such financing or continuation statement without the signature
of Seller to the extent permitted by applicable law. This Agreement shall
constitute a security agreement under applicable law. 

24

     (c) Seller shall not (i) change the location of its chief executive
office/chief place of business from that specified in Section 12(m) hereof, (ii)
change its name, identity or corporate structure (or the equivalent) or change
the location where it maintains its records with respect to the Purchased Items,
or (iii) reincorporate or reorganize under the laws of another jurisdiction
unless it shall have given Buyer at least thirty (30) days prior written notice
thereof and shall have delivered to Buyer all Uniform Commercial Code financing
statements and amendments thereto as Buyer shall request and taken all other
actions deemed reasonably necessary by Buyer to continue its perfected status in
the Purchased Items with the same or better priority. 

    
(d) Seller hereby irrevocably constitutes and appoints Buyer and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Seller and in the name of Seller or in its own name, from time to time
in Buyer’s discretion, for the purpose of carrying out the terms of this
Agreement, including, without limitation, protecting, preserving and realizing
upon the Purchased Items, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, including, without limitation, to
protect, preserve and realize upon the Purchased Items, to file such financing
statement or statements relating to the Purchased Items without Seller’s
signature thereon as Buyer at its option may deem appropriate, and, without
limiting the generality of the foregoing, Seller hereby gives Buyer the power
and right, on behalf of Seller, without assent by, but with notice to, Seller,
if a Default shall have occurred and be continuing, to do the following:

     (i) in the name of Seller, or in its own name, or
otherwise, to take possession of and endorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due with
respect to any Purchased Items and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise deemed appropriate by
Buyer for the purpose of collecting any and all such moneys due with respect to
any Purchased Items whenever payable; 

     (ii) to pay or discharge taxes and Liens levied or
placed on or threatened against the Purchased Items; 

     (iii) (A) to direct any party liable for any payment
under any Purchased Items to make payment of any and all moneys due or to become
due thereunder directly to Buyer or as Buyer shall direct, including, without
limitation, to send “goodbye” letters and Section 404 Notices on behalf of
Seller and any applicable Servicer; (B) to ask or demand for, collect, receive
payment of and receipt for, any and all moneys, claims and other amounts due or
to become due at any time in respect of or arising out of any Purchased Items;
(C) to sign and endorse any invoices, assignments, verifications, notices and
other documents in connection with any Purchased Items; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Purchased Items or any proceeds thereof
and to enforce any other right in respect of any Purchased Items; (E) to defend
any suit, action or proceeding brought against Seller with respect to any
Purchased Items; (F) to settle, compromise or adjust any suit, action or
proceeding described in clause (E) above and, in connection therewith, to give
such discharges or releases as Buyer may deem appropriate; and (G) generally, to
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any Purchased Items as fully and completely as
though Buyer were the absolute owner thereof for all purposes, and to do, at
Buyer’s option and Seller’s expense, at any time, and from time to time, all
acts and things which Buyer deems necessary to protect, preserve or realize upon
the Purchased Items and Buyer’s Liens thereon and to effect the intent of this
Agreement, all as fully and effectively as Seller might
do.

25

     Seller hereby
ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof. This power of attorney is a power coupled with an interest and shall be
irrevocable. This power of attorney shall not revoke any prior powers of
attorney granted by Seller. 

    
Seller also authorizes Buyer, if an Event of Default shall have occurred
and be continuing, from time to time, to execute, in connection with any sale
provided for in Section 19 hereof, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Purchased Items.

    
(e) The powers conferred on Buyer hereunder are solely to protect Buyer’s
interests in the Purchased Items and shall not impose any duty upon it to
exercise any such powers. Buyer shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither it nor
any of its officers, directors, employees or agents shall be responsible to
Seller for any act or failure to act hereunder, except for its or their own
gross negligence or willful misconduct. 

    
(f) If
Seller fails to perform or comply with any of its agreements contained in the
Program Documents and Buyer performs or complies, or otherwise cause performance
or compliance, with such agreement, the reasonable out-of-pocket expenses of
Buyer incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the Post-Default Rate, shall be
payable by Seller to Buyer on demand and shall constitute Obligations.

    
(g) Buyer’s duty with respect to the custody, safekeeping and physical
preservation of the Purchased Items in its possession, under Section 9-207 of
the Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as Buyer deals with similar property for its own account. Neither Buyer
nor any of its directors, officers or employees shall be liable for failure to
demand, collect or realize upon all or any part of the Purchased Items or for
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Purchased Items upon the request of Seller or otherwise.

    
(h) All authorizations and agencies herein contained with respect to the
Purchased Items are irrevocable and powers coupled with an interest. 

9.
CONDITIONS
PRECEDENT 

    
(a) As
conditions precedent to the Initial Transaction, Buyer shall have received on or
before the date on which such Initial Transaction is consummated the following,
in form and substance satisfactory to Buyer and duly executed by each party
thereto (as applicable): 

     
(i) Program Documents. The Program Documents (including all exhibits, annexes and schedules
related thereto) duly executed and delivered by Seller and being in full force
and effect, free of any modification, breach or waiver. 

     (ii) Organizational Documents. An Officer’s Certificate in substantially the form attached
hereto as Exhibit E, together with a good standing certificate of Seller and Guarantor dated
as of a recent date, but in no event more than ten (10) days prior to the date
of such initial Transaction, and certified copies of the charter and by-laws (or
equivalent documents) of Seller and Guarantor, and of all corporate or other
authority for Seller and Guarantor with respect to the execution, delivery and performance of the Program Documents and each
other document to be delivered by each of Seller and Guarantor from time to time
in connection herewith (and Buyer may conclusively rely on such certificate
until it receives notice in writing from Seller to the contrary).

26

     (iii) Incumbency
Certificate. An incumbency certificate with
respect to Seller and Guarantor of the secretary of Seller or Guarantor, as
applicable, certifying the names, true signatures and titles of Seller’s or
Guarantor’s (as applicable) representatives duly authorized to request
Transactions hereunder and to execute the Program Documents and the other
documents to be delivered thereunder. 

     (iv) Legal Opinion. A legal opinion of counsel to Seller and Guarantor in form
and substance acceptable to Buyer. 

     (v) Filings, Registrations,
Recordings. (i) Any documents (including,
without limitation, financing statements) required to be filed, registered or
recorded in order to create, in favor of Buyer, a perfected, first-priority
security interest in the Purchased Items, subject to no Liens other than those
created hereunder, shall have been properly prepared and executed for filing
(including the applicable county(ies) if Buyer determines such filings are
necessary in its reasonable discretion), registration or recording in each
office in each jurisdiction in which such filings, registrations and
recordations are required to perfect such first-priority security interest; and
(ii) UCC lien searches, dated as of a recent date, in no event more than
fourteen (14) days prior to the date of such initial Transaction, in such
jurisdictions as shall be applicable to Seller and the Purchased Items, the
results of which shall be satisfactory to Buyer. 

     (vi) Fees and
Expenses. Buyer shall have received all fees
and expenses (including, without limitation, the Commitment Fee) required to be
paid by Seller on or prior to the initial Purchase Date, which fees and expenses
may be netted out of any purchase proceeds paid by Buyer hereunder. 

     (vii) Financial
Statements. Buyer shall have received (A) the
financial statements referenced in Section 12(b) and (B) the unaudited
consolidated balance sheet of Guarantor as of March 31, 2013. 

     (viii) Reserved.

     (ix) Consents, Licenses,
Approvals, etc. Buyer shall have received
copies certified by Seller of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by Seller
of, and the validity and enforceability of, the Loan Documents, which consents,
licenses and approvals shall be in full force and effect. 

     (x) Collection
Account. Buyer shall have received evidence
in form and substance satisfactory to Buyer showing the establishment of the
Collection Account and compliance with the terms and conditions of the
Collection Account Control Agreement. 

     (xi) Servicing
Agreement(s). Buyer shall have received a
copy of and approved the terms of each Servicing Agreement applicable to the
related Loans, in each case, as such agreement may be amended, supplemented or
otherwise modified from time to time and approved by Buyer. 

27

     (xii) Insurance. Buyer shall have received evidence in form and substance
satisfactory to Buyer showing compliance by Seller as of such initial Purchase
Date with Section 13(v) hereof. 

     (xiii) Other
Documents. Buyer shall have received such
other documents as Buyer or its counsel may reasonably request. 

     (xiv) Purchased
Certificate. Buyer shall have received on or
before the day of the Initial Transaction, the original Purchased Certificate in
the name of Buyer. 

    
(b) The obligation of Buyer to enter into each Transaction pursuant to this
Agreement (including the Initial Transaction) is subject to the following
further conditions precedent, both immediately prior to any Transaction and also
after giving effect thereto and to the intended use thereof: 

     (i) No Default or Event of Default
shall have occurred and be continuing. 

     (ii) Both immediately prior to
entering into such Transaction and also after giving effect thereto and to the
intended use of the proceeds thereof, the representations and warranties made by
Seller in Section 12 and Schedule 1 hereof, and in each of the other Program
Documents, shall be true and complete on and as of the Purchase Date in all
material respects (in the case of the representations and warranties in Section
12(w) and Schedule 1, solely with respect to Loans which have not been
repurchased by the Seller) with the same force and effect as if made on and as
of such date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date). At the request
of Buyer, Buyer shall have received an officer’s certificate signed by a
Responsible Officer of Seller certifying as to the truth and accuracy of the
above, which certificates shall specifically include a statement that Seller is
in compliance with all governmental licenses and authorizations and is qualified
to do business and in good standing in all required jurisdictions. 

     (iii) The then aggregate outstanding
Purchase Price for the Purchased Certificate, when added to the Purchase Price
for the requested Transaction, shall not exceed the Maximum Aggregate Purchase
Price. 

     (iv) Subject to Buyer’s right to
perform one or more Due Diligence Reviews pursuant to Section 44 hereof, Buyer
shall have completed its Due Diligence Review of the Loan Documents for each
Loan subject to such Transaction and such other documents, records, agreements,
instruments, Mortgaged Properties or information relating to Seller, any
servicer, Guarantor or such Loans as Buyer in its reasonable discretion deems
appropriate to review and such review shall be satisfactory to Buyer in its
reasonable discretion. 

     (v) Buyer shall not have determined
that any Loan or any pool of Loans is not eligible to become subject to a
Transaction pursuant to the terms of this Agreement or the Program Documents.

     (vi) With respect to each additional
Underlying Trust proposed by Seller to become subject to a Purchase Price
Increase, Buyer shall have approved the related Underlying Trust Agreement and
all other documents related to such Underlying Trust, and Seller shall have
provided evidence reasonably satisfactory to Buyer that (1) the related
Participation Interests have been transferred to and are held by such Underlying
Trust and (2) the related Underlying Trust Certificate
has been transferred and delivered to the Pass-Through Trust and is held by the
Pass-Through Trust for the benefit of the Buyer. 

28

     (vii) Buyer or its designee shall have received on or before the day of a
Transaction (unless otherwise specified in this Agreement) the following, in
form and substance satisfactory to Buyer and (if applicable) duly executed:

	          
    	(A)	      	the Transaction Notice
      with respect to such Participation Interests, delivered pursuant to
      Section 3(a);
		 
		(B)		an original Custodial
      Certification issued by the Custodian to the Buyer with respect to the
      Loans related to such Participation Interests, with the Funding Notice
      attached; and
		 
		(C)		such certificates,
      customary opinions of counsel or other documents as Buyer may reasonably
      request, provided that such opinions of counsel shall not be required
      routinely in connection with each Transaction but shall only be required
      from time to time as deemed necessary by Buyer in its commercially
      reasonable judgment.

     (viii)
With respect to any Loan that was acquired by
Seller from an Affiliate of Seller, Buyer may, in its sole discretion, require
Seller to provide evidence sufficient to satisfy Buyer that such Loan was
acquired in a legal sale, including, without limitation, an opinion, in form and
substance and from an attorney, in both cases, acceptable to Buyer in its sole
discretion, that such Loan was acquired in a legal sale. 

     (ix)
None of the following shall have occurred and/or
be continuing: (i) other than with respect to a Renewal Transaction, (i) an
event or events resulting in the inability of Buyer to finance its purchases of
assets with traditional counterparties at rates which would have been reasonable
prior to the occurrence of such event or events or a material adverse change in
the financial condition of Buyer that affects (or can reasonably be expected to
affect) materially and adversely the ability of Buyer to fund its obligations
under or otherwise comply with the terms of this Agreement, or (ii) an event
beyond the control of Buyer which Buyer reasonably determines may result in
Buyer’s inability to perform its obligations under this Agreement including,
without limitation, acts of God, strikes, lockouts, riots, acts of war or
terrorism, epidemics, nationalization, expropriation, currency restrictions,
fire, communication line failures, computer viruses, power failures,
earthquakes, or other disasters of a similar nature to the foregoing shall have
occurred or be continuing; provided, that any such determination under this
Section 9(b)(ix) shall be consistent with determinations made by Buyer in
respect of similar loan facilities. Seller shall be entitled to a refund of a
pro-rated portion of any Commitment Fee actually paid by Seller with respect to
any period after the date on which such payment and any event occurring pursuant
to clause (i) or (ii) above is effective. 

     (x)
Reserved. 

     (xi)
If any Loans are serviced by a Person other than
Servicer (a “Subservicer”), Buyer shall have received, no later than 10:00 a.m. two
(2) days prior to the requested Purchase Date, an Instruction Letter in the form
attached hereto as Exhibit D, executed by the Seller to the attention of each Subservicer
and executed by such Subservicer, with the related Servicing Agreement attached
thereto in form and substance acceptable to Buyer.

29 

     (xii) Buyer shall have determined that all actions necessary or, in the
reasonable opinion of Buyer, desirable to maintain Buyer’s perfected interest in
the Purchased Certificate and other Purchased Items have been taken, including,
without limitation, duly executing and filing Uniform Commercial Code financing
statements on Form UCC-1. 

     (xiii)
Seller shall have paid to Buyer all fees and
expenses owed to Buyer in accordance with this Agreement and any other Program
Document including, without limitation the amount of any Commitment Fees then
due and owing, and all of Buyer’s attorney fees and expenses and due diligence
expenses then due and owing. 

     (xiv)
Buyer or its designee shall have received any
other documents reasonably requested by Buyer. 

     (xv)
There is no Margin Deficit at the time
immediately prior to entering into a new Transaction. 

     (xvi)
Seller shall have provided to Buyer copies of all
due diligence (including all FICO updates, valuations, and credit and compliance
related diligence) that Seller or Servicer has performed with respect to any
Loans to be purchased by Buyer hereunder. 

     (xvii)
Seller shall have delivered to Buyer, with
respect to each Mortgaged Property related to a Loan, (i) with respect to the
initial Purchase Date related to such Loan, a BPO obtained by Seller no more
than one hundred and fifty (150) days prior to such initial Purchase Date, (ii)
thereafter, for so long as such Loan is a Delinquent Loan and subject to a
Transaction hereunder, an updated BPO every one hundred and eighty (180) days
from the prior BPO and (iii) thereafter, for so long as such Loan is
contractually current and subject to a Transaction hereunder, an updated BPO
every twelve (12) months from the prior BPO; provided, however, that Seller will
provide any additional BPOs requested by Buyer from time to time in its
reasonable discretion, at Buyer’s expense.

     (xviii)
With respect to each Loan that is subject to a
security interest (including any precautionary security interest) immediately
prior to the transfer of such Loan to the Legal Title Trust, Buyer shall have
received a Security Release Certification for such Loan that is duly executed by
the related secured party and the Seller. If necessary, such secured party shall
have filed Uniform Commercial Code termination statements in respect of any
Uniform Commercial Code filings made in respect of such Loan, and each such
release and Uniform Commercial Code termination statement has been delivered to
Buyer prior to each Transaction and to Custodian as part of the Mortgage
File.

     (xix)
Fees and Expenses. Buyer shall have received all fees and expenses that are due and owing
and are required to be paid by Seller under the Program Documents, which fees
and expenses may be netted out of any purchase proceeds paid by Buyer hereunder.

     (xx)
Other Documents. Buyer shall have received such other documents as Buyer or its counsel
may reasonably request. 

10. RELEASE OF PARTICIPATION
INTERESTS 

    
Upon timely payment in full of the Repurchase Price then owing with
respect to the Purchased Certificate and the satisfaction of all other
Obligations and the termination of this Agreement, then Buyer shall be deemed to have terminated any security interest that
Buyer may have in such Purchased Certificate and any Purchased Items solely
related to the Purchased Certificate.

30 

     With respect
to any Participation Interests held by an Underlying Trust, upon timely payment
in full of the Repurchase Price allocable to such Participation Interests and
the satisfaction of all other Obligations (if any) then outstanding, unless a
Default or an Event of Default shall have occurred and be continuing, then Buyer
shall release its interest in such Participation Interests and any Purchased
Items related to any such Participation Interests, unless such release would
give rise to or perpetuate a Margin Deficit. No Participation Interests may be
removed from an Underlying Trust unless Buyer shall have released its interest
pursuant to this Section 10.

    
Seller shall provide at least two (2) Business Days’ prior written notice
to Buyer if any repurchase or removal pursuant to this Section 10 shall occur on
any date other than the Repurchase Date. If any release and termination gives
rise to or perpetuates a Margin Deficit, Buyer shall notify Seller of the amount
thereof and prior to such release, Seller shall thereupon satisfy the Margin
Call to the extent a Margin Trigger has occurred and is continuing or shall
occur upon such release in the manner specified in Section 6.

11. RELIANCE 

    
With respect to any Transaction, Buyer may conclusively rely upon, and
shall incur no liability to Seller in acting upon, any request or other
communication that Buyer reasonably believes to have been given or made by a
person authorized to enter into a Transaction on Seller’s behalf. 

12. REPRESENTATIONS AND
WARRANTIES 

    
Seller represents and warrants to Buyer that throughout the term of this
Agreement:

    
(a) Existence. Each of Seller and
Guarantor (a) is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it was formed, (b) has all requisite corporate
or other power, and has all governmental licenses, authorizations, consents and
approvals, necessary to own its assets and carry on its business as now being or
as proposed to be conducted, except where the lack of such licenses,
authorizations, consents and approvals would not be reasonably likely to have a
Material Adverse Effect, (c) is qualified to do business and is in good standing
in all other jurisdictions in which the nature of the business conducted by it
makes such qualification necessary, except where failure so to qualify would not
be reasonably likely (either individually or in the aggregate) to have a
Material Adverse Effect, and (d) is in compliance in all material respects with
all Requirements of Law.

    
(b) Financial Condition. Seller has
heretofore furnished to Buyer a copy of the related audited consolidated balance
sheet of Guarantor and its consolidated Subsidiaries, each as at December 31,
2012 with the opinion thereon of PricewaterhouseCoopers LLP and, a copy of which
has been provided to Buyer. Seller has also heretofore furnished to Buyer the
related consolidated statements of income and stockholders’ equity and of cash
flows for Guarantor and its Subsidiaries for the one year period ending December
31, 2012, setting forth in comparative form the figures for the previous year.
All such financial statements are complete and correct in all material respects
and fairly present the consolidated financial condition of Guarantor and its
Subsidiaries and the consolidated results of their operations for the fiscal
year ended on said date, all in accordance with GAAP applied on a consistent
basis. Since December 31, 2012, there has been no development or event nor any
prospective development or event which has had or should reasonably be expected
to have a Material Adverse Effect. Guarantor has no material contingent
liability or liability for taxes or any long term lease or unusual forward or
long term commitment, which is not reflected in the foregoing statements or
notes. Since the date of the financial statements and other
information delivered to Buyer prior to the date of this Agreement, Guarantor
has not sold, transferred or otherwise disposed of any material part of its
property or assets (except pursuant to the Program Documents) or acquired any
property or assets (including Equity Interests of any other Person) that are
material in relation to the financial condition of Guarantor. 

31 

    
(c) Litigation. There are no actions,
suits, arbitrations, investigations or proceedings pending or, to its knowledge,
threatened against Seller or Guarantor or affecting any of the property thereof
before any Governmental Authority, (i) as to which individually or in the
aggregate there is a reasonable likelihood of an adverse decision which would be
reasonably likely to have a Material Adverse Effect, (ii) which questions the
validity or enforceability of any of the Program Documents or any action to be
taken in connection with the transactions contemplated thereby or (iii) which
seeks to prevent the consummation of any Transaction. 

    
(d) No
Breach. Neither (a) the execution and
delivery of the Program Documents, nor (b) the consummation of the transactions
therein contemplated in compliance with the terms and provisions thereof will
conflict with or result in a breach of the charter or by-laws of Seller or
Guarantor, or any applicable law, rule or regulation, or any order, writ,
injunction or decree of any Governmental Authority, or other material agreement
or instrument to which Seller or Guarantor or any of their Subsidiaries is a
party or by which any of them or any of their property is bound or to which any
of them or their property is subject, or constitute a default under any such
material agreement or instrument, or (except for the Liens created pursuant to
this Agreement) result in the creation or imposition of any Lien upon any
property of Seller, Guarantor or any of their Subsidiaries, pursuant to the
terms of any such agreement or instrument. 

    
(e) Action. Seller has all necessary
corporate or other power, authority and legal right to execute, deliver and
perform its obligations under each of the Program Documents to which it is a
party; the execution, delivery and performance by Seller of each of the Program
Documents to which it is a party has been duly authorized by all necessary
corporate or other action on its part; and each Program Document has been duly
and validly executed and delivered by Seller and constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. 

    
(f) Approvals. No authorizations,
approvals or consents of, and no filings or registrations with, any Governmental
Authority, or any other Person, are necessary for the execution, delivery or
performance by Seller of the Program Documents to which it is a party or for the
legality, validity or enforceability thereof, except for filings and recordings
in respect of the Liens created pursuant to this Agreement. 

    
(g) Taxes. Seller has filed all Federal
income tax returns and all other tax returns that are required to be filed by it
and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by it, except for any such taxes, if any, that are being
appropriately contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves have been provided. The
charges, accruals and reserves on the books of Seller in respect of taxes and
other governmental charges are, in the opinion of Seller, adequate. Any taxes,
fees and other governmental charges payable by Seller in connection with a
Transaction and the execution and delivery of the Program Documents have been
paid. 

    
(h) Investment Company Act. Seller is not
an “investment company”, or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended. Seller is
not subject to any Federal or state statute or regulation which limits its
ability to incur indebtedness. 

32 

     (i) No
Legal Bar. The execution, delivery and
performance of this Agreement, the other Program Documents, the sales hereunder
and the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of Seller and will not result in, or require, the
creation or imposition of any Lien (other than the Liens created hereunder) on
any of its properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation. 

    
(j) Compliance with Law. No practice,
procedure or policy employed or proposed to be employed by Seller in the conduct
of its business violates any law, regulation, judgment, agreement, regulatory
consent, order or decree applicable to it which, if enforced, would result in a
Material Adverse Effect. 

    
(k) No
Default. Seller is not in default under or
with respect to any of its Contractual Obligations in any respect which should
reasonably be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing. 

    
(l) Collateral; Collateral Security.

     (i)
Immediately prior to the sale of the Purchased
Certificate by Seller, Seller was the sole owner of the Purchased Certificate
and had good and marketable title thereto, free and clear of all Liens, and no
Person other than Seller has any interest in the Purchased Certificate. The
Legal Title Trust is the sole owner and holder of each Loan subject to a
Participation Interest and has good and marketable title thereto, free and clear
of all Liens, and no Person other than the Legal Title Trust, each Underlying
Trust and the Pass-Through Trust has an interest in any Loan. With respect to a
Participation Interest, the related Underlying Trust is the sole owner of such
Participation Interest and has good and marketable title thereto, free and clear
of all Liens, and no Person other than the related Underlying Trust has any
interest in such Participation Interest. 

     (ii)
The provisions of this Agreement are effective to
create in favor of Buyer a valid security interest in all right, title and
interest of Seller in, to and under the Purchased Items. 

     (iii)
Upon receipt by Buyer of each Certificate in the
name of Buyer, Buyer shall have a fully perfected first priority security
interest therein. 

     (iv)
Upon the filing of financing statements on Form
UCC-1 naming Buyer as “Secured Party” and Seller as “Debtor”, and describing the
Purchased Items, in the jurisdictions and recording offices listed on Schedule 2
attached hereto, the security interests granted hereunder in the Purchased Items
will constitute fully perfected first priority security interests under the
Uniform Commercial Code in all right, title and interest of Seller in, to and
under such Purchased Items, which can be perfected by filing under the Uniform
Commercial Code. 

    
(m) Chief Executive Office; Chief Operating Office. Seller’s chief executive office and chief operating office on the
Effective Date is located at 2 Bridge Avenue, Red Bank, NJ 07701. 

    
(n) Location of Books and Records. The
location where Seller keeps its books and records including all computer tapes
and records relating to the Purchased Items is its chief executive office or
chief operating office or the offices of Custodian. 

33 

     (o) True
and Complete Disclosure. The information,
reports, financial statements, exhibits and schedules furnished in writing by or
on behalf of Seller or Guarantor to Buyer in connection with the negotiation,
preparation or delivery of this Agreement and the other Program Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole, do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. All
written information furnished after the date hereof by or on behalf of Seller or
Guarantor or any of their Subsidiaries to Buyer in connection with this
Agreement and the other Program Documents and the transactions contemplated
hereby and thereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on the
date as of which such information is stated or certified. There is no fact known
to a Responsible Officer that, after due inquiry, could reasonably be expected
to have a Material Adverse Effect that has not been disclosed herein, in the
other Program Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to Buyer for use in connection with
the transactions contemplated hereby or thereby. Notwithstanding the foregoing,
no breach of this subsection (o) shall occur with respect to any information,
reports, financial statements, exhibits or schedules that are corrected prior to
reliance thereon. 

    
(p) Reserved.

    
(q) ERISA. Each Plan which is not a
Multiemployer Plan, and, to Seller’s knowledge, each Multiemployer Plan, is in
compliance in all material respects with, and has been administered in all
material respects in compliance with, the applicable provisions of ERISA, the
Code and any other Federal or State law. No event or condition has occurred and
is continuing as to which Seller would be under an obligation to furnish a
report to Buyer under Section 13(a)(xi) hereof. The present value of all
accumulated benefit obligations under each Plan subject to Title IV of ERISA
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed the fair market value of the assets
of such Plan, and the present value of all accumulated benefit obligations of
all Plans (based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed the fair market value of
the assets of all such Plans. Seller and its Subsidiaries do not provide any
material medical or health benefits to former employees other than as required
by the Consolidated Omnibus Budget Reconciliation Act, as amended, or similar
state or local law at no cost to the employer (collectively, “COBRA”).

    
(r) Licenses. Buyer will not be required
as a result of purchasing the Purchased Certificate or exercising any of its
rights hereunder with respect to the Purchased Certificate, to be licensed,
registered or approved or to obtain permits or otherwise qualify (i) to do
business in any state in which it is not currently so required or (ii) under any
state or other jurisdiction’s consumer lending, fair debt collection or other
applicable state or other jurisdiction’s statute or regulation.

    
(s) Filing Jurisdictions. Schedule 2 sets
forth all of the jurisdictions and filing offices in which a financing statement
should be filed in order for Buyer to perfect its security interest in the
Purchased Items that can be perfected by filing. 

    
(t) No
Burdensome Restrictions. No Requirement of
Law or Contractual Obligation of Seller or Guarantor or any of their
Subsidiaries has a Material Adverse Effect. 

    
(u) Subsidiaries. All the Subsidiaries of
Seller on the date hereof are listed on Schedule 3.

34 

     (v) Loan Level Representations and Warranties;
Acquisition of Loans. Each of the Loans complies with the representations and warranties listed in Schedule 1 hereto.
Each Loan subject to a Participation Interest is an Eligible Loan. With respect to each Loan purchased by the Legal Title Trust
from a Transferor, (a) such Loan was acquired and transferred on a true sale basis, (b) such Transferor received reasonably equivalent
value in consideration for the transfer of such Loan, (c) no such transfer was made for or on account of an antecedent debt owed
by such Transferor to Seller or an Affiliate of Seller and (d) no such transfer is or may be voidable or subject to avoidance
under the Bankruptcy Code. 

    
(w) Due
Diligence. The review and inquiries made on
behalf of Seller in connection with the making of the representations and
warranties listed on Schedule 1 hereto have been made by Persons having the
requisite expertise, knowledge and background to verify such representations and
warranties. Seller has no knowledge of any material fact that could reasonably
lead it to expect that the Market Value assigned to any Participation Interest
will not be obtained or realized. 

    
(x) Seller Solvent; Fraudulent Conveyance.
As of the date hereof and immediately after giving effect to each Transaction,
the fair value of the assets of Seller is greater than the fair value of the
liabilities (including, without limitation, contingent liabilities if and to the
extent required to be recorded as a liability on the financial statements of
Seller in accordance with GAAP) of Seller and Seller is and will be solvent, is
and will be able to pay its debts as they mature and does not and will not have
an unreasonably small capital to engage in the business in which it is engaged
and proposes to engage. Seller does not intend to incur, nor believes that it
has incurred, debts beyond its ability to pay such debts as they mature. Seller
is not contemplating the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of Seller or any of its
assets. Seller is not transferring any Loans with any intent to hinder, delay or
defraud any of its creditors. 

    
(y) No
Adverse Selection. None of Seller, Guarantor
or any Affiliate thereof have used selection procedures that identified the
Loans subject to Participation Interests, when taken as a whole, as being less
desirable or valuable than other comparable Loans owned by Seller. 

    
(z) No
Broker. Seller has not dealt with any broker,
investment banker, agent, or other person, except for Buyer, who may be entitled
to any commission or compensation in connection with the sale of Participation
Interests pursuant to this Agreement; provided, that if Seller has dealt
with any broker, investment banker, agent, or other person, except for Buyer,
who may be entitled to any commission or compensation in connection with the
sale of Participation Interests pursuant to this Agreement, such commission or
compensation shall have been paid in full by Seller. 

    
(aa) Seller’s Internal Mortgage Tracking System. Each printout and paper copy produced by the Seller’s internal mortgage
tracking system and delivered to Buyer is true, complete and accurate.

    
(bb) Servicer Approvals. Servicer and each
subservicer servicing any Loans hereunder has all consents, licenses and
approvals necessary to service the Loans. 

    
(cc) USA
Patriot Act; OFAC. None of Seller, Guarantor,
or any of their Affiliates is a Prohibited Person and Seller and Guarantor is in
full compliance with all applicable orders, rules, regulations and
recommendations of OFAC. None of Seller, Guarantor, or any of their members,
directors, executive officers, parents or Subsidiaries: (1) is subject to U.S.
or multilateral economic or trade sanctions currently in force; (2) is owned or
controlled by, or act on behalf of, any governments, corporations, entities or
individuals that are subject to U.S. or multilateral economic or trade sanctions
currently in force; (3) is a Prohibited Person or is otherwise named, identified
or described on any blocked persons list, designated nationals list, denied
persons list, entity list, debarred party list, unverified list, sanctions list or other list of individuals or entities with whom U.S.
persons may not conduct business, including but not limited to lists published
or maintained by OFAC, lists published or maintained by the U.S. Department of
Commerce, and lists published or maintained by the U.S. Department of State.
Seller and Guarantor have each established an anti-money laundering compliance
program as required by all applicable anti-money laundering laws and
regulations, including, without limitation, the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56) (the “USA Patriot
Act”) (collectively, the “Anti-Money Laundering Laws”).

35 

     (dd)
Anti-Money Laundering. Seller and Guarantor have complied with all applicable Anti-Money Laundering Laws, has conducted
the requisite due diligence in connection with the acquisition of each Loan for purposes of the Anti-Money Laundering Laws, and
will maintain, sufficient information to identify the applicable Mortgagor for purposes of the Anti-Money Laundering Laws; no
Loan is subject to nullification pursuant to Executive Order 13224 (the “Executive Order”) or the regulations
promulgated by the OFAC (the “OFAC Regulations”) or in violation of the Executive Order or the OFAC Regulations,
and no Mortgagor is subject to the provisions of such Executive Order or the OFAC Regulations nor listed as a “blocked person”
for purposes of the OFAC Regulations. 

    
(ee) Environmental Matters. No Mortgaged
Property contains or previously contained any Materials of Environmental Concern
that constitute or constituted a violation of Environmental Laws or reasonably
could be expected to give rise to liability of Seller thereunder. Neither Seller
nor Guarantor has knowledge of any violation, alleged violation, non-compliance,
liability or potential liability of Seller or any related Mortgagor under any
Environmental Law. No Materials of Environmental Concern have been released,
transported, generated, treated, stored or disposed of in violation of
Environmental Laws or in a manner that could reasonably be expected to give rise
to liability of Seller. 

    
(ff) Financial Reporting. There has been no
fraud that involves management or other employees who have a significant role
in, the internal controls of Seller or Guarantor or any Relevant Entity over
financial reporting, in each case as described in the Securities Laws.

    
(gg) Participation Interests. Each
Participation Interest represents a 100% beneficial ownership interest in an
Eligible Loan.

    
(hh) Ownership of the Purchased Certificate and Participation
Interests. Immediately prior to the Initial
Transaction, the Seller shall be the sole owner and holder of the Purchased
Certificate, the Pass-Through Trust shall be the sole owner and holder of each
Underlying Trust and, with respect to a Participation Interest, the related
Underlying Trust shall be the sole owner and holder of such Participation
Interest. The Purchased Certificate is not nor shall it be assigned or pledged
to any Person other than Buyer, and the Seller has good, indefeasible and
marketable title thereto, and has full right to transfer and assign the
Purchased Certificate to Buyer free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest, and
has full right and authority subject to no interest or participation of, or
agreement with, any other party, to assign, transfer and pledge the Purchased
Certificate pursuant to this Agreement and following the sale of the Purchased
Certificate, Buyer will own the Purchased Certificate free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest except any such security interest created pursuant to the
terms of this Agreement. No Underlying Certificate is or shall be assigned or
pledged to any Person other than the Pass-Through Trust, and the Pass-Through
Trust has good, indefeasible and marketable title thereto. No Participation
Interest is or shall be assigned or pledged to any Person other than the related
Underlying Trust, and the related Underlying Trust has good, indefeasible and
marketable title thereto. 

36 

13. COVENANTS OF
SELLER 

     Seller
covenants and agrees with Buyer that during the term of this Agreement:

     (a)
Financial Statements and Other Information;
Financial Covenants. 

     Seller shall deliver or cause to be
delivered to Buyer: 

     (i)
As soon as available and in any event within
forty-five (45) days after the end of each calendar month, the unaudited
consolidated balance sheet of Guarantor and its consolidated Subsidiaries as at
the end of such month, the related unaudited consolidated statements of
stockholders’ equity for Guarantor and its consolidated Subsidiaries for such
period and the portion of the fiscal year through the end of such period,
setting forth in each case in comparative form the figures for the previous
year, accompanied by a certificate of a Responsible Officer of Guarantor, which
certificate shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of
Guarantor and its Subsidiaries in accordance with GAAP, consistently applied, as
at the end of, and for, such month (subject to normal year-end audit
adjustments), and consolidated statements of liquidity of Guarantor and its
consolidated Subsidiaries as at the end of such period; 

     (ii)
As soon as available and in any event within
sixty (60) days after the end of each of the first three quarterly fiscal
periods of each fiscal year of Guarantor, the unaudited consolidated balance
sheet of Guarantor and its consolidated Subsidiaries as at the end of such
period and the related unaudited consolidated statements of income and
stockholders’ equity and of cash flows for Guarantor and its consolidated
Subsidiaries for such period and the portion of the fiscal year through the end
of such period, setting forth in each case in comparative form the figures for
the previous year, accompanied by a certificate of a Responsible Officer of
Guarantor, which certificate shall state that said consolidated financial
statements fairly present the consolidated financial condition and results of
operations of Guarantor and its Subsidiaries in accordance with GAAP,
consistently applied, as at the end of, and for, such period (subject to normal
year-end audit adjustments), and consolidated statements of liquidity of
Guarantor and its consolidated Subsidiaries as at the end of such period.

     (iii)
As soon as available and in any event within one
hundred (100) days after the end of each fiscal year of Guarantor, the audited
consolidated balance sheet of Guarantor and its consolidated Subsidiaries as at
the end of such fiscal year and the related audited consolidated statements of
income and stockholders’ equity and of cash flows for Guarantor and its
consolidated Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous year, accompanied by an opinion
thereon of independent certified public accountants of recognized national
standing, which opinion shall not be qualified as to scope of audit or going
concern and shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of
Guarantor and its consolidated Subsidiaries at the end of, and for, such fiscal
year in accordance with GAAP, and consolidated statements of liquidity of
Guarantor and its consolidated Subsidiaries as at the end of such period.

     (iv)
Together with each set of the financial
statements delivered pursuant to clauses (i) through (iii) above, (1) (i) a
compliance certification signed by a Responsible Officer of the Guarantor in the
form of Exhibit A-1 attached hereto and (ii) a compliance certification signed by a
Responsible Officer of the Guarantor in the form of Exhibit A-2 attached hereto, and (2) a
certificate of a Responsible Officer of Seller to the effect that, to the best
of such Responsible Officer’s knowledge, Seller during such fiscal period or
year has observed or performed all of its covenants and
other agreements, and satisfied every material condition, contained in this
Agreement and the other Program Documents to be observed, performed or satisfied
by it, and that such Responsible Officer has obtained no knowledge of any
Default or Event of Default except as specified in such certificate (and, if any
Default or Event of Default has occurred and is continuing, describing the same
in reasonable detail and describing the action Seller has taken or proposes to
take with respect thereto); 

37 

     (v) Reserved; 

     (vi)
From time to time such other information
regarding the financial condition, operations, well being or business of Seller
or Guarantor as Buyer may reasonably request, within three (3) Business Days of
such request; 

     (vii)
Reserved;

     (viii)
Within fifteen (15) days after the end of each
month, (i) a report of all sales, repurchase and other transactions with respect
to the Participation Interests or the related Loans, (ii) a properly completed
Loan Schedule with respect to each Participation Interest, (iii) servicing
reports for the prior month, including static pool analyses, liquidity (cash and
availability) and identification of any modifications to any Loans, (iv)
servicing data feeds for the prior month detailing Loan level attributes; and
(v) reports reflecting those Loans that have a scheduled foreclosure date within
sixty (60) days; 

     (ix)
Within five (5) days after any material
amendment, modification or supplement to the Servicing Agreement a certified,
fully executed copy of such amendment, modification or supplement; 

     (x)
Promptly upon reasonable request by Buyer,
information regarding assets held by Seller including information regarding
asset allocation, leverage, liquidity and such other information respecting the
condition or operations (financial or otherwise), of Seller; 

     (xi)
As soon as reasonably possible, and in any event
within fifteen (15) days after a Responsible Officer knows or has reason to
believe, that any of the events or conditions specified below with respect to
any Plan or Multiemployer Plan has occurred or exists, a statement signed by a
senior financial officer of the Seller setting forth details respecting such
event or condition and the action, if any, that Seller or its ERISA Affiliate
proposes to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by Seller or an ERISA Affiliate with
respect to such event or condition): 

     (A)
any Reportable Event, or any request for a waiver
under Section 412(c) of the Code for any Plan; 

     (B)
the distribution under Section 4041(c) of ERISA
of a notice of intent to terminate any Plan or any action taken by Seller,
Guarantor or an ERISA Affiliate to terminate any Plan; 

     (C)
the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by Seller, Guarantor or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan; 

38 

     (D) the complete or partial withdrawal from a Multiemployer Plan by Seller or
any ERISA Affiliate that results in liability under Section 4201 or 4204 of
ERISA (including the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by Seller or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA; 

     (E)
the institution of a proceeding by a fiduciary of
any Multiemployer Plan against Seller or any ERISA Affiliate to enforce Section
515 of ERISA, which proceeding is not dismissed within 30 days; and 

     (F)
the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if Seller or an
ERISA Affiliate fails to timely provide security to such Plan in accordance with
the provisions of said Sections. 

    
(b) Reserved.

    
(c) Existence, Etc. Seller will:

	          
    	(i)	      	(A) preserve and maintain its
      legal existence and all of its material rights, privileges, franchises;
      (B) maintain all licenses, permits or other approvals necessary to conduct
      its business and to perform its obligations under the Program Documents;
      (C) except as would not be reasonably likely to have a Material Adverse
      Effect or would have a material adverse effect on the Purchased Items or
      Buyer’s interest therein, remain in good standing under the laws of each
      state in which it conducts business or any Mortgaged Property is located;
      and (D) not change its tax identification number, fiscal year or method of
      accounting without the consent of Buyer;
		 
		(ii)		comply with the requirements of
      and conduct its business strictly in accordance with all applicable laws,
      rules, regulations and orders of Governmental Authorities (including,
      without limitation, truth in lending, real estate settlement procedures
      and all environmental laws) if failure to comply with such requirements
      would be reasonably likely (either individually or in the aggregate) to
      have a Material Adverse Effect;
		 
		(iii)		keep adequate records and books
      of account, in which complete entries will be made in accordance with GAAP
      consistently applied;
		 
		(iv)		not move its chief executive
      office or chief operating office from the addresses referred to in Section
      12(m) unless it shall have provided Buyer 30 days prior written notice of
      such change;
		 
		(v)		pay and discharge all taxes,
      assessments and governmental charges or levies imposed on it or on its
      income or profits or on any of its Property prior to the date on which
      penalties attach thereto, except for any such tax, assessment, charge or
      levy the payment of which is being contested in good faith and by proper
      proceedings and against which adequate reserves are being
      maintained;

39 

	               	(vi)	     	
      permit representatives of Buyer,
      during normal business hours upon three (3) Business Days’ prior written
      notice at a mutually desirable time or at any time during the continuance
      of an Event of Default, to examine, copy and make extracts from its books
      and records, to inspect any of its Properties, and to discuss its business
      and affairs with its officers, all to the extent reasonably requested by
      Buyer; and

		 
		(vii)		
      not directly or indirectly enter
      into any agreement that would be violated or breached by any Transaction
      or the performance by Seller of its obligations under any Program
      Documents.

     (d) Prohibition of Fundamental Changes.
Seller shall not at any time, directly or indirectly, (i) enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation, winding up or dissolution) or, other
than in connection with a securitization transaction, the proceeds of which are
used to pay the Repurchase Price then due and owing hereunder, sell all or
substantially all of its assets without Buyer’s prior consent; or (ii) form or
enter into any partnership, joint venture, syndicate or other combination which
would have a Material Adverse Effect with respect to Seller.

    
(e) Margin Deficit. If at any time there
exists a Margin Deficit, Seller shall cure the same in accordance with Section 6
hereof to the extent a Margin Trigger has occurred and is continuing.

    
(f) Notices. Seller shall give notice to
Buyer promptly in writing of any of the following: 

	               	(i)	     	
      upon Seller becoming aware of,
      and in any event within one (1) Business Day after the occurrence of any
      Default, Event of Default or any event of default or default under any
      Program Document or other material agreement of Seller;

		 
		(ii)		
      upon, and in any event within
      three (3) Business Days after, service of process on Seller, or any agent
      thereof for service of process, in respect of any legal or arbitrable
      proceedings affecting Seller (i) that question or challenge the validity
      or enforceability of any of the Program Documents, (ii) in which the
      amount in controversy exceeds $1,000,000, (iii) as to which there is a
      reasonable likelihood of an adverse decision and such adverse decision
      would result in a Material Adverse Effect or (iv) which seek to prevent
      the consummation of any Transaction;

		 
		(iii)		
      upon Seller becoming aware of any
      default related to any Purchased Items, any Material Adverse Effect and
      any event or change in circumstances which should reasonably be expected
      to have a Material Adverse Effect;

		 
		(iv)		
      upon Seller determining during
      the normal course of its business that the Mortgaged Property in respect
      of any Loan or Loans with an aggregate unpaid principal balance of at
      least $1,000,000 has been damaged by waste, fire, earthquake or earth
      movement, windstorm, flood, tornado or other casualty, or otherwise
      damaged so as to materially and adversely affect the Market Value of such
      Loan;

		 
		(v)		
      upon the entry of a judgment or
      decree against Seller or any of its Subsidiaries in an amount in excess of
      $1,000,000;

40 

	               	(vi)	     	any material change in
      the insurance coverage required of Seller or any other Person pursuant to
      any Program Document, with copy of evidence of same attached;
		 
		(vii)		any material dispute,
      licensing issue, litigation, audit, revocation, sanctions, penalties,
      investigation, proceeding or suspension between Seller or Guarantor, on
      the one hand, and any Governmental Authority or any other
  Person;
		 
		(viii)		any material change in
      accounting policies or financial reporting practices of Seller or
      Guarantor;
		 
		(ix)		any material change in
      the management of Seller or Guarantor; and

to the extent any Servicer currently
has any agency of HUD approvals, notice of the revocation of any such approvals
or changes to the approved servicer status with respect to the servicing of
mortgage loans by Servicer or any Subservicer (including any interim
servicer).

Each notice pursuant to this Section
13(f) shall be accompanied by a statement of a Responsible Officer of Seller,
setting forth details of the occurrence referred to therein and stating what
action Seller has taken or proposes to take with respect thereto. 

    
(g) Servicing. Except as provided in
Section 43, Seller shall not permit any Person other than Servicer to service
Loans without the prior written consent of Buyer.

    
(h) OFAC. At all times throughout the term
of this Agreement, Seller and Guarantor (a) shall be in full compliance with all
applicable orders, rules, regulations and recommendations of OFAC and (b) shall
not permit any Loans to be maintained, insured, traded, or used (directly or
indirectly) in violation of any United States statutes, rules or regulations, in
a Prohibited Jurisdiction or by a Prohibited Person. 

    
(i) Reserved. 

    
(j) Transactions with Affiliates. Other
than (i) in connection with a securitization transaction, (ii) a transfer of a
Participation Interest from any Underlying Trust to either the ZFC Trust REO
Pass-Through Trust I or the ZFC Trust Participating Pass Through Trust I, (iii)
any transfer of a Participation Interest to an Affiliate of Seller where the
Market Value of the related Loan has been deemed to be zero or the transfer of
such Loan to an Affiliate of Seller, or (iv) a transfer of a Participation
Interest (or related Loan) that has been released by Buyer in accordance with
Section 10, Seller shall not (1) enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (i) otherwise
permitted under this Agreement, (ii) in the ordinary course of Seller’s business
and (iii) upon fair and reasonable terms no less favorable to Seller than it
would obtain in a comparable arm’s length transaction with a Person which is not
an Affiliate or (2) make a payment that is not otherwise permitted by this
Section (j) to any Affiliate. 

    
(k) Defense of Title. Seller warrants and
will defend the right, title and interest of Buyer in and to all Purchased Items
against all adverse claims and demands of all Persons whomsoever. 

    
(l) Preservation of Purchased Items.
Seller shall do all things necessary to preserve the Purchased Items so that
such Purchased Items remain subject to a first priority perfected security
interest hereunder. Without limiting the foregoing, Seller will comply with all
applicable laws, rules and regulations of any Governmental Authority applicable
to Seller or relating to the Purchased Items and cause the Purchased Items to
comply with all applicable laws, rules and regulations of any such Governmental
Authority. Seller will not allow any default to occur for which Seller is
responsible under any Purchased Items or any Program Documents and Seller shall
fully perform or cause to be performed when due all of its obligations under any
Purchased Items or the Program Documents.

41 

    
(m) No
Assignment. Seller shall not (i) sell,
assign, transfer or otherwise dispose of, or grant any option with respect to,
or pledge, hypothecate or grant a security interest in or lien on or otherwise
encumber (except pursuant to the Program Documents), the Purchased Certificate,
Participation Interests or the related Loans, or (ii) enter into any agreement
or undertaking restricting the right or ability of the Seller or Buyer to sell,
assign or transfer the Purchased Certificate, Participation Interests or the
related Loans.

    
(n) Limitation on Sale of Assets. Except
in connection with the Program Documents, Seller shall not convey, sell, lease,
assign, transfer or otherwise dispose of (collectively, “Transfer”), all or
substantially all of its Property, business or assets (including, without
limitation, receivables and leasehold interests) whether now owned or hereafter
acquired or allow any Subsidiary to Transfer substantially all of its assets to
any Person. 

    
(o) Limitation on Distributions. Without
Buyer’s consent, Seller shall not (i) make any payment on account of, or set
apart assets for a sinking or other analogous fund for the purchase, redemption,
defeasance, retirement or other acquisition of, any stock or senior or
subordinate debt of Seller, whether now or hereafter outstanding, or (ii) make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of Seller.

    
(p) Financial Covenants of Guarantor.
Guarantor shall comply with the following financial covenants: (A) the ratio of
Guarantor’s Total Indebtedness to Guarantor’s Tangible Net Worth is not greater
than 7:1, (B) Guarantor has Liquidity in an amount equal to not less than 3% of
Guarantor’s Tangible Net Worth (the “Liquidity
Baseline”); provided that no more than 25% of
the Liquidity Baseline may be comprised of unencumbered Agency Securities, (C)
the Tangible Net Worth of Guarantor shall not at any time decline by (i) 35% or
more during any calendar year or (ii) 25% or more during any calendar quarter
and (D) as of the end of the immediately preceding calendar quarter, Guarantor’s
consolidated net income (excluding unrealized losses on securities and loans)
for at least one (1) of the previous two (2) consecutive fiscal quarters is
equal to or greater than $1.00. 

    
(q) Amendment of Program Documents. Seller
shall not permit any amendment or modification to the Program Documents without
the consent of Buyer. 

    
(r) Power of Attorney. Seller shall, from
time to time at the request of Buyer, deliver to Buyer any powers of attorney or
other documentation required by Buyer to ensure the enforceability under
applicable law of any rights and/or powers granted to Buyer in Section 8 of this
Agreement. 

    
(s) Restricted Payments. Seller shall not
make any Restricted Payments following an Event of Default. 

    
(t) Servicing Transmission. Seller shall
provide to Buyer on a monthly basis no later than 11:00 a.m. New York City time
two (2) Business Days prior to each Repurchase Date (or such other day requested
by Buyer) (i) the Servicing Transmission, on an asset-by-asset basis and in the
aggregate, with respect to the Loans serviced hereunder by Seller which were
funded prior to the first day of the current month, summarizing (A) Seller
delinquency and loss experience with respect to Loans serviced by Seller
(including, in the case of the Loans, the following categories: current, 30-59,
60-89 and 90+), (B) any Mortgagor that is in bankruptcy and (C) any amendments,
modifications or waivers of any term or condition of or extension of the
scheduled maturity date or modification of the interest rate of Loan or
settlement or compromise of any claim in respect of any Loan and (ii) any other
information reasonably requested by Buyer with respect to the Loans. Each
monthly servicing report described above shall separately identify Loans
represented by the Participation Interests and the related Purchase Date
therefor.

42 

    
(u) Amendment or Compromise. In the event
that Seller or anyone acting on Seller’s behalf amends, modifies or waives any
term or condition of, or settles or compromises any claim in respect of, or
extends the scheduled maturity date or modifies the interest rate of any item of
the Loans, any such amendment, modification, waiver, settlement, compromise,
extension, cancellation or discharge shall be flagged to Buyer on the
Transaction Notice. Seller shall promptly provide or shall cause to be provided
to Buyer, any information requested by Buyer with respect to any action taken
pursuant to this paragraph. Seller shall not cancel or discharge any of the
outstanding principal balance of any Loan.

    
(v) Maintenance of Property; Insurance.
Seller shall keep all property useful and necessary in its business in good
working order and condition. Seller and each subservicer shall maintain errors
and omissions insurance and/or mortgage impairment insurance and blanket bond
coverage in such amounts as are in effect on the Effective Date and as disclosed
to Buyer in writing and shall not reduce such coverage without the written
consent of Buyer, and shall also maintain such other insurance with financially
sound and reputable insurance companies, and with respect to property and risks
of a character usually maintained by entities engaged in the same or similar
business similarly situated, against loss, damage and liability of the kinds and
in the amounts customarily maintained by such entities. 

    
(w) Further Identification of Purchased Items. Seller will furnish to Buyer from time to time statements and schedules
further identifying and describing the Purchased Items and such other reports in
connection with the Purchased Items as Buyer may reasonably request, all in
reasonable detail. 

    
(x) Loans Determined to be Defective. Upon
discovery by Seller of any breach of any representation or warranty listed on
Schedule 1
hereto applicable to any Loan, Seller shall promptly give notice of such
discovery to Buyer. 

    
(y) Reserved. 

    
(z) Reserved.

    
(aa) Indebtedness. All Indebtedness
incurred by Seller as of the Closing Date is set forth on Schedule 4 attached
hereto. 

    
(bb) Business Operations. Seller shall not,
without the prior written consent of Buyer, directly or indirectly alter, modify
or otherwise change: (i) its current business operations; and (ii) its current
mortgage loan acquisition policies and procedures.

    
(cc) Maintenance of Papers, Records and Files.

	               	(i)	     	
      Seller shall acquire, and Seller
      shall build, maintain and have available, a complete file in accordance
      with lending industry custom and practice for each Loan. Seller will
      maintain all such Records not in the possession of Custodian or Buyer in
      good and complete condition in accordance with industry practices and
      preserve them against loss or destruction.

43 

	               	(ii)	     	
      Seller shall collect and maintain
      or cause to be collected and maintained all Records relating to the Loans
      in accordance with industry custom and practice, including those
      maintained pursuant to subsection (i), and all such Records shall be in
      Servicer’s possession on behalf of Buyer. If requested by Buyer, Seller
      shall deliver to Buyer or its designee updates of such Servicing Records
      at least monthly. Seller will not cause or authorize any such papers,
      records or files that are an original or an only copy to leave Custodian’s
      possession, except for individual items removed in connection with
      servicing a specific Loan, in which event Seller will obtain or cause to
      be obtained a receipt from Custodian for any such paper, record or
      file.

		  
		(iii)		
      For so long as Buyer has an
      interest in any Loan, Seller will hold or cause to be held all related
      Records in trust for Buyer. Seller shall notify, or cause to be notified,
      every other party holding any such Records of the interests and liens
      granted hereby.

		  
		(iv)		
      Upon reasonable advance notice
      from Custodian or Buyer, Seller shall (x) make any and all such Records
      available to Custodian or Buyer to examine any such Records, either by its
      own officers or employees, or by agents or contractors, or both, and make
      copies of all or any portion thereof, (y) permit Buyer or its authorized
      agents to discuss the affairs, finances and accounts of Seller with its
      chief operating officer and chief financial officer and to discuss the
      affairs, finances and accounts of Seller with its independent certified
      public accountants.

    
(dd) Reserved. 

    
(ee) Taxes, Etc. Seller shall pay and
discharge or cause to be paid and discharged, when due, all taxes, assessments
and governmental charges or levies imposed upon Seller or upon its income and
profits or upon any of its property, real, personal or mixed (including, without
limitation, the Loans) or upon any part thereof, as well as any other lawful
claims which, if unpaid, might become a Lien upon such properties or any part
thereof, except for any such taxes, assessments and governmental charges, levies
or claims as are appropriately contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves are
provided. Seller shall file, on a timely basis, all federal, state and local tax
and information returns, reports and any other information statements or
schedules required to be filed by or in respect of it. 

    
(ff) Use
of Custodian. Without the prior written
consent of Buyer, Seller shall use no third party custodian as document
custodian other than Custodian with respect to the Loans. 

    
(gg) Change of Fiscal Year. Seller will
not, at any time, directly or indirectly, except upon ninety (90) days’ prior
written notice to Buyer, change the date on which Seller’s fiscal year begins
from Seller’s current fiscal year beginning date. 

    
(hh) Delivery of Servicing Rights. With
respect to the Servicing Rights appurtenant to each Loan, the Legal Title Trust
shall own, and Seller shall deliver such Servicing Rights to Buyer on the
related Purchase Date, and shall hold such Servicing Rights for the benefit of
the related owners of the Participation Interests in such Loans, and in
connection with any sale or transfer of any Participation Interest or the
dissolution of any Participation Interest, the related Servicing Rights shall be
transferred with the related Loan and remain appurtenant thereto, without any
requirement on the owner of such Loan to pay or incur any fees or obligations to
the Servicer or any other Person. In addition, such Servicing Rights shall
include the gross amount of all escrows held for the related mortgagors (without
reduction for unreimbursed advances or “negative escrows”).

44 

    
(ii) Establishment of Collection Account.
Prior to the Initial Purchase Date, Seller shall establish the Collection
Account for the sole and exclusive benefit of Buyer. With respect to the
previous calendar month, on each Pass-Through Trust Distribution Date, Seller
shall segregate all amounts collected on account of the Participation Interests,
to be held in trust for the benefit of Buyer, and shall cause such collections
to be remitted directly from the Pass-Through Trust Account to the Collection
Account. Except in accordance with the terms of the Pass-Through Trust Agreement
or as required for deposit into the Collection Account in accordance with this
paragraph, no amounts deposited into the Pass-Through Trust Account shall be
removed without Buyer’s prior written consent. Seller shall follow the
instructions of Buyer with respect to the Participation Interests and deliver to
Buyer any information with respect to the Participation Interests reasonably
requested by Buyer. 

    
(jj) MERS. Legal Title Trustee and Servicer
are members of MERS in good standing and current in the payment of all fees and
assessments imposed by MERS, and shall comply with all rules and procedures of
MERS in connection with the servicing of MERS Loans for as long as such
Purchased Loans are registered with MERS. Seller shall cause the Servicer and
the Legal Title Trustee to follow all instructions provided by Buyer with
respect to any MERS Loans that are Purchased Loans, including without
limitation, the removal of Purchased Loans from MERS and assignment out of MERS
within two (2) Business Days of receipt of instructions from Buyer. 

    
(kk) Servicing Advances; Servicing Rights.
No Loans shall at any time be subject to any servicing advance or servicing
rights financing facility or similar agreement or facility and the servicing
advances made with respect to any Loans have not been sold, assigned,
transferred, pledged or hypothecated to any party or otherwise encumbered in any
way. The Servicing Rights to each Loan shall be owned by the Legal Title Trust
on behalf of the owner of the related Participation Interests and cannot be
sold, assigned, transferred, pledged or hypothecated or otherwise encumbered in
any way. 

    
(ll) BPO. Seller shall deliver to Buyer
with respect to each Mortgaged Property related to a Loan, (i) with respect to
the initial Purchase Date related to such Loan, a BPO obtained by Seller not
more than one hundred fifty (150) days prior to such initial Purchase Date, (ii)
thereafter, for so long as such Loan is a Delinquent Loan and subject to a
Transaction hereunder, an updated BPO every one hundred and eighty (180) days
from the prior BPO, and (iii) thereafter, for so long as such Loan is
contractually current and subject to a Transaction hereunder, an updated BPO
every twelve (12) months from the prior BPO; provided, however, that Seller will
provide any additional BPOs requested by Buyer from time to time in its
reasonable discretion, at Buyer’s expense. 

    
(mm) Reserved.

    
(nn) Reserved.

    
(oo) Books and Records. Guarantor shall
keep or cause to be kept, in reasonable detail, books and records of Guarantor
setting forth an account of Guarantor’s assets and business. Guarantor shall
furnish or cause to be furnished to Buyer any other financial information
regarding Guarantor reasonably requested by Buyer. 

14. REPURCHASE DATE
PAYMENTS 

    
On each Repurchase Date, Seller shall remit or shall cause to be remitted
to Buyer the Repurchase Price together with any other Obligations then due and
payable. 

45 

15. REMOVAL OF PARTICIPATION
INTERESTS 

    
Upon discovery by Seller of a breach of any of the representations and
warranties set forth on Schedule
1 to this Agreement, Seller shall give prompt
written notice thereof to Buyer. It is understood and agreed that the
representations and warranties set forth in Schedule 1 with respect to the Loans
shall survive delivery of the respective Mortgage Files to Custodian and shall
inure to the benefit of Buyer. The fact that Buyer has conducted or has failed
to conduct any partial or complete due diligence investigation with respect to
any Participation Interest or the related Loan shall not affect Buyer’s right to
demand the removal of such Participation Interest and repayment of the
Repurchase Price allocable to such Participation Interest as provided under this
Agreement. Seller shall, upon the earlier of Seller’s discovery or Seller
receiving notice with respect to any Loan of (i) any breach of a representation
or warranty contained in Schedule
1, or (ii) any failure to deliver any of the
items required to be delivered as part of the Mortgage File within the time
period required for delivery pursuant to the Custodial Agreement, promptly cure
such breach or delivery failure in all material respects. If on the Business Day
after the earlier of Seller’s discovery of such breach or delivery failure or
Seller receiving notice thereof that such breach or delivery failure has not
been remedied by Seller and such breach or delivery failure would cause Buyer to
require the payment of the Repurchase Price allocable to such Participation
Interest, the Seller shall promptly upon receipt of written instructions from
Buyer pay to Buyer the outstanding Repurchase Price allocable to such
Participation Interest by wire transfer to the account designated by Buyer, and
upon receipt of such amount, subject to the terms of Section 10, Buyer shall
consent to the removal of such Participation Interest from the related
Underlying Trust. 

16. PROGRAM
MANAGER

    
Unless a Default has occurred and is continuing, Buyer agrees that it
shall not issue any instructions or directions to any Servicer, the Program
Manager, the Participation Agent, the Underlying Trustee, the Pass-Through
Trustee or the Legal Title Trustee. Upon the occurrence and during the
continuance of an Event of Default, Buyer shall have the same rights to issue
instructions or directions (i) to the Participation Agent as a Participant or
the Program Manager does under the Master Participation Agreement and (ii) to
the Legal Title Trustee as the Program Manager does under the Legal Title Trust
Agreement. Notwithstanding the preceding two sentences, Program Manager hereby
covenants and agrees to follow all instructions or directions received from
Buyer, at any time during the term of this Agreement, with respect causing the
Participation Agent or Legal Title Trustee (as the case may be) to remove,
transfer or sell any Loan with respect to which the Market Value has been deemed
less than zero by Buyer in its sole discretion. 

17. ACCELERATION OF REPURCHASE
DATE 

    
Buyer may, in its sole discretion, at any time, require a Purchase Price
Decrease with respect to the Uncommitted Amount by providing written notice to
Seller. Within ten (10) Business Days of receipt of such notice, Seller agrees
to pay the Repurchase Price in connection with such Purchase Price Decrease to
Buyer and cause the release and removal of any related Participation Interests
from the related Underlying Trust in accordance with Section 10.

46 

18. EVENTS OF
DEFAULT 

    
Each of the following events shall constitute an Event of Default (an
“Event of Default”) hereunder: 

    
(a) Seller
fails to transfer the Purchased Certificate to Buyer on the applicable Purchase
Date or Seller fails to cause the related Participation Interests to be owned by
the related Underlying Trust (provided Buyer has tendered the related Purchase
Price); or 

    
(b) Seller
fails to repurchase the Purchased Certificate on the applicable Repurchase Date
or fails to perform its obligations under Section 6; or 

    
(c) Seller
shall default in the payment of any other amount payable by them hereunder or
under any other Program Document after notification by Buyer of such default,
and such default shall have continued unremedied for three (3) Business Days; or

    
(d) Any
representation, warranty or certification made or deemed made herein or in any
other Program Document by Seller or Guarantor or any certificate furnished to
Buyer pursuant to the provisions thereof, shall prove to have been false or
misleading in any material respect as of the time made or furnished (other than
the representations and warranties set forth in Schedule 1 which shall be
considered solely for the purpose of determining the Market Value of the Loans;
unless (i) Seller shall have made any such representations and warranties with
knowledge that they were materially false or misleading at the time made or (ii)
any such representations and warranties have been determined by Buyer in its
sole discretion to be materially false or misleading on a regular basis); or

    
(e) Seller
shall fail to comply with the requirements of Section 13(c)(i)(A), Section
13(d), Section 13(f)(i), Section 13(m), Section 13(n), Section 13(o), Section
13(p), Section 13(dd) or Section 13(jj) hereof, and such default shall continue
unremedied for a period of one (1) Business Day; Seller shall fail to comply
with Section 12(bb) or Section 13(t) and such default shall continue unremedied
for a period of fifteen (15) days; or Seller or Guarantor shall otherwise fail
to observe or perform any other obligation, representation or covenant contained
in this Agreement or any other Program Document and such failure to observe or
perform shall continue unremedied for a period of five (5) Business Days;
or

    
(f) Any
final judgment or judgments or order or orders for the payment of money in
excess of $2,000,000 in the aggregate (to the extent that it is, in the
reasonable determination of Buyer, uninsured and provided that any insurance or
other credit posted in connection with an appeal shall not be deemed insurance
for these purposes) shall be rendered against Seller or any final judgment or
judgments or orders for the payment of money in excess of $5,000,000 in the
aggregate (to the extent that it is, in the reasonable determination of Buyer,
uninsured and provided that any insurance or other credit posted in connection
with an appeal shall not be deemed insurance for these purposes) shall be
rendered against Guarantor by one or more courts, administrative tribunals or
other bodies having jurisdiction over it and the same shall not be discharged
(or provisions shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within sixty (60) days from the date of
entry thereof and Seller or Guarantor shall not, within said period of sixty
(60) days, or such longer period during which execution of the same shall have
been stayed or bonded, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or

    
(g) Any
Participation Interest is removed from the related Underlying Trust other than
in accordance with Section 10; or 

    
(h) Seller,
Guarantor or any of their Affiliates files a voluntary petition in bankruptcy,
seeks relief under any provision of any bankruptcy, reorganization, moratorium,
delinquency, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction whether now or subsequently in effect; or
consents to the filing of any petition against it under any such law; or
consents to the appointment of or taking possession by a custodian, receiver,
conservator, trustee, liquidator, sequestrator or similar official for Seller,
Guarantor or any of their Affiliates, or of all or any part of Seller’s,
Guarantor’s or their Affiliates’ Property; or makes an assignment for the
benefit of Seller’s, Guarantor’s or their Affiliates’ creditors; or

47 

    
(i) A
custodian, receiver, conservator, liquidator, trustee, sequestrator or similar
official for Seller, Guarantor or any of their Affiliates, or of Seller’s,
Guarantor’s or any of their Affiliates’ respective Property (as a debtor or
creditor protection procedure), is appointed or takes possession of such
Property; or Seller, Guarantor or any of their Affiliates generally fails to pay
Seller’s, Guarantor’s or any of their Affiliates’ debts as they become due; or
Seller, Guarantor or any of their Affiliates is adjudicated bankrupt or
insolvent; or an order for relief is entered under the Federal Bankruptcy Code,
or any successor or similar applicable statute, or any administrative insolvency
scheme, against Seller, Guarantor or any of their Affiliates; or any of
Seller’s, Guarantor’s or their Affiliates’ Property is sequestered by court or
administrative order; or a petition is filed against Seller, Guarantor, or any
of their Affiliates under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, moratorium, delinquency or
liquidation law of any jurisdiction, whether now or subsequently in effect;
or

    
(j) Any
Governmental Authority or any person, agency or entity acting or purporting to
act under governmental authority shall have taken any action to condemn, seize
or appropriate, or to assume custody or control of, all or any substantial part
of the Property of Seller or Guarantor or any of their Affiliates, or shall have
taken any action to displace the management of Seller or Guarantor or any of
their Affiliates or to curtail its authority in the conduct of the business of
Seller or Guarantor or any of their Affiliates, or takes any action in the
nature of enforcement to remove, limit or restrict the approval of Seller or
Guarantor or any of their Affiliates as an issuer, buyer or seller/servicer of
loans or securities backed thereby, and such action provided for in this
subsection (j) shall not have been discontinued or stayed within thirty (30)
days; or 

    
(k) (i) Any
Program Document shall for whatever reason (including an event of default
thereunder) be terminated (other than as agreed upon by Buyer and Seller), (ii)
this Agreement shall for any reason cease to create a valid, first priority
security interest or ownership interest upon transfer in any of the Purchased
Items purported to be covered hereby or any of Seller’s material obligations
(including the Obligations hereunder) shall cease to be in full force and
effect, or the enforceability thereof shall be contested by Seller; or

    
(l) Any
Material Adverse Effect shall have occurred as determined by Buyer in its
reasonable discretion; or 

    
(m) (i)
Seller, Guarantor or any ERISA Affiliate shall engage in any “prohibited
transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) a determination that a Plan is “at risk” (within the
meaning of Section 302 of ERISA) or any Lien in favor of the PBGC or a Plan
shall arise on the assets of Seller, Guarantor or any ERISA Affiliate, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of Buyer, likely to
result in the termination of such Plan for purposes of Title IV of ERISA, (iv)
any Plan shall terminate for purposes of Title IV of ERISA, (v) Seller,
Guarantor or any ERISA Affiliate shall, or in the reasonable opinion of Buyer is
likely to, incur any liability in connection with a withdrawal from, or the
insolvency or reorganization of, a Multiemployer Plan, (vi) Seller, Guarantor or
any ERISA Affiliate shall file an application for a minimum funding waiver under
Section 302 of ERISA or Section 412 of the Code with respect to any Plan, (vii)
any obligation for post-retirement medical costs (other than as required by
COBRA) exists, or (viii) any other event or condition shall occur or exist with
respect to a Plan and in each case in clauses (i) through (vii) above, such
event or condition, together with all other such events or conditions, if any,
is likely to subject Seller or Guarantor or any of their Affiliates to any tax,
penalty or other liabilities in the aggregate material in relation to the
business, operations, property or financial or other condition of Seller or
Guarantor or any of their Affiliates or could reasonably be expected to have a
Material Adverse Effect; or

48 

    
(n) A
Change of Control shall have occurred without the prior consent of Buyer; or

    
(o) Seller
shall grant, or suffer to exist, any Lien on any Purchased Items except the
Liens contemplated hereby; or the Liens contemplated hereby shall cease to be
first priority perfected Liens on the Purchased Items in favor of Buyer or shall
be Liens in favor of any Person other than Buyer; or 

    
(p) Buyer
shall reasonably request, specifying the reasons for such request, reasonable
information, and/or written responses to such requests, regarding the financial
well-being of Seller or Guarantor and such reasonable information and/or
responses shall not have been provided within three (3) Business Days of such
request; or 

    
(q) (i)
Guarantor or any of its Subsidiaries or Affiliates shall default under, or fail
to perform as required under, or shall otherwise breach the terms of any
instrument, agreement or contract between Guarantor or such other entity, on the
one hand, and Buyer or any of Buyer’s Affiliates on the other and (ii) Guarantor
or any of its Subsidiaries or Affiliates shall default under, or fail to perform
as requested under, the terms of any Indebtedness (including, without
limitation, any repurchase agreement, loan and security agreement or similar
credit facility or agreement for borrowed funds) of Guarantor or such other
entity in excess of $5,000,000, which default or failure entitles any party to
cause acceleration or require prepayment of such Indebtedness; or 

    
(r) Seller
shall fail to cause any Income received on behalf of Seller with respect to the
Purchased Certificate to be deposited into the Collection Account on the related
Pass-Through Trust Distribution Date within one (1) Business Day of the date
such deposit was due pursuant to the related Servicing Agreement; or 

    
(s) Seller
fails to pay any portion of the Commitment Fee when due hereunder; or

    
(t) An
event of default of Guarantor shall have occurred under the Guaranty; or

    
(u) Seller
or Guarantor shall admit in writing its inability to, or intention not to,
perform any of their Obligations or pay its debts as such debts become due, or
Buyer shall have determined in good faith that Seller or Guarantor is unable to
meet their commitments; or 

    
(v) Guarantor (i) fails to perform its obligations under Section 6 or (ii)
fails to make any payment due under or pursuant to the Guaranty.

19. REMEDIES 

    
Upon the occurrence of an Event of Default, Buyer, at its option (which
option shall be deemed to have been exercised immediately upon the occurrence of
an Event of Default pursuant to Section 18(g), (h), (i) or (j) hereof), shall
have the right to exercise any or all of the following rights and
remedies:

     (a)(i) The Repurchase Date for each
Transaction hereunder shall, if it has not already occurred, be deemed
immediately to occur (provided that, in the event that the Purchase Date for any
Transaction has not yet occurred as of the date of such exercise or deemed
exercise, such Transaction shall be deemed immediately canceled). Seller’s
obligations hereunder to repurchase the Purchased Certificate at the Repurchase
Price therefor on the Repurchase Date in such Transactions shall thereupon
become immediately due and payable; all Income then on deposit in the Collection
Account and all Income paid after such exercise or deemed exercise shall be
remitted to and retained by Buyer and applied to the aggregate Repurchase Price
and any other amounts owing by Seller hereunder; Seller shall immediately
deliver to Buyer or its designee any and all original papers, Records and files
relating to the Loans subject to such Transaction then in Seller’s possession
and/or control; and all right, title and interest in and entitlement to the
Purchased Certificate shall be deemed transferred to Buyer or its
designee.

49 

     (ii) Buyer shall have the right to (A)
sell or cause to be sold, on or following the Business Day following the date on
which the Repurchase Price became due and payable pursuant to Section 19(a)(i)
without notice or demand of any kind, at a public or private sale and at such
price or prices as Buyer may deem commercially reasonable upon Buyer’s exercise
of its rights as owner of the Purchased Certificate, any or all Loans with
respect to such Participation Interests and/or (B) in its sole discretion elect,
in lieu of selling all or a portion of such of the Loans related to such
Participation Interests, to give Seller credit for such Participation Interests
(or the related Loans) in an amount equal to the Market Value of the
Participation Interests (or the related Loans) against the aggregate unpaid
Repurchase Price and any other amounts owing by Seller hereunder, provided,
however, with respect to Participation Interests with a Market Value of zero,
Buyer shall in its sole discretion either sell such Loans related to the
Participation Interests in accordance with clause (A) of this Section 19(a)(ii)
or release such Participation Interests to the Seller. Seller shall remain
liable to Buyer for any amounts that remain owing to Buyer following a sale
and/or credit under the preceding sentence. The proceeds of any disposition of
Loans related to the Participation Interests shall be applied first to the reasonable
costs and expenses incurred by Buyer in connection with or as a result of an
Event of Default; second, costs of cover and/or related hedging transactions;
third to
the aggregate Repurchase Prices; and fourth to all other
Obligations.

     (iii) Buyer shall have the right to
terminate this Agreement and declare all obligations of Seller to be immediately
due and payable, by a notice in accordance with Section 21 hereof provided no
such notice shall be required for an Event of Default pursuant to Section 18(g),
(h), (i) or (j).

     (iv) The parties recognize that it may
not be possible to purchase or sell the Loans related to the Participation
Interests upon the Buyer’s exercise of its rights as owner of the Purchased
Certificate, on a particular Business Day, or in a transaction with the same
purchaser, or in the same manner because the market for such Loans related to
the Participation Interests may not be liquid. In view of the nature of the
Purchased Certificate and Participation Interests or the related Loans, the
parties agree that liquidation of a Transaction or the underlying Loans does not
require a public purchase or sale and that a good faith private purchase or sale
shall be deemed to have been made in a commercially reasonable manner.
Accordingly, Buyer may elect the time and manner of liquidating the Loans
related to the Participation Interests and nothing contained herein shall
obligate Buyer to liquidate the Purchased Certificate, Participation Interests
or the related Loans on the occurrence of an Event of Default or to liquidate
the Purchased Certificate, Participation Interests or the related Loans in the
same manner or on the same Business Day or constitute a waiver of any right or
remedy of Buyer. Notwithstanding the foregoing, the parties to this Agreement
agree that the Transactions have been entered into in consideration of and in
reliance upon the fact that all Transactions hereunder constitute a single
business and contractual obligation and that each Transaction has been entered
into in consideration of the other Transactions. 

50 

     (v) To the
extent permitted by applicable law, Seller waives all claims, damages and
demands it may acquire against Buyer arising out of the exercise by Buyer of any
of its rights hereunder, other than those claims, damages and demands arising
from the gross negligence or willful misconduct of Buyer. If any notice of a
proposed sale or other disposition of Purchased Items shall be required by law,
such notice shall be deemed reasonable and proper if given at least 2 days
before such sale or other disposition. 

    
(b) Seller
hereby acknowledges, admits and agrees that Seller’s obligations under this
Agreement are recourse obligations of Seller to which Seller pledges its full
faith and credit. In addition to its rights hereunder, Buyer shall have the
right to proceed against any of Seller’s assets which may be in the possession
of Buyer, any of Buyer’s Affiliates or their respective designees (including
Custodian), including the right to liquidate such assets and to set-off the
proceeds against monies owed by Seller to Buyer pursuant to this Agreement.
Buyer may set off cash, the proceeds of the liquidation of the Loans related to
the Participation Interests, upon the Buyer’s exercise of its rights as owner of
the Purchased Certificate, any other Purchased Items and their proceeds and all
other sums or obligations owed by Buyer, or any of Buyer’s Affiliates, to Seller
against all of Seller’s obligations to Buyer, whether under this Agreement,
under a Transaction, or under any other agreement between the parties, or
otherwise, or under any other agreement between the parties, or otherwise, in
each case whether or not such obligations are then due, without prejudice to
Buyer’s right to recover any deficiency. 

    
(c) Buyer
shall have the right as owner of the Purchased Certificate to obtain physical
possession of the Servicing Records upon Buyer’s exercise of its rights as owner
of the Purchased Certificate, and all other files of Seller relating to the
Loans and all documents relating to the Loans which are then or may thereafter
come into the possession of Seller or any third party acting for Seller and
Seller shall deliver to Buyer such assignments as Buyer shall request.

    
(d) Buyer
shall have the right upon Buyer’s exercise of its rights as owner of the
Purchased Certificate, to direct all Persons servicing the Loans to take such
action with respect to the Loans as Buyer determines appropriate. Buyer hereby
agrees that Buyer shall use reasonable efforts to take all action necessary to
cause the removal of the Participation Interests from each Underlying Trust and
terminate each Underlying Trust and the Pass-Through Trust within sixty (60)
days of any termination of this Agreement following an Event of Default.

    
(e) Buyer
shall, without regard to the adequacy of the security for the Obligations, be
entitled to the appointment of a receiver by any court having jurisdiction,
without notice, to take possession of and protect, collect, manage, liquidate,
and sell the Loans related to the Participation Interests upon the unwinding of
each Underlying Trust, the Pass-Through Trust and the Legal Title Trust, and,
upon the Buyer’s exercise of its rights as owner of the Purchased Certificate,
the Participation Interests, the Loans and any other Purchased Items or any
portion thereof, collect the payments due with respect to the Participation
Interests or the Loans and any other Purchased Items or any portion thereof, and
do anything that Buyer is authorized hereunder or by law to do. Seller shall pay
all costs and expenses incurred by Buyer in connection with the appointment and
activities of such receiver. 

    
(f) In
addition to all the rights and remedies specifically provided herein, Buyer
shall have all other rights and remedies provided by applicable federal, state,
foreign, and local laws, whether existing at law, in equity or by statute,
including, without limitation, all rights and remedies available to a purchaser
or a secured party, as applicable, under the Uniform Commercial Code.

    
Except as otherwise expressly provided in this Agreement, Buyer shall
have the right to exercise any of its rights and/or remedies without
presentment, demand, protest or further notice of any kind other than as
expressly set forth herein, all of which are hereby expressly waived by Seller.

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     Buyer may
enforce its rights and remedies hereunder without prior judicial process or
hearing, and Seller hereby expressly waives, to the extent permitted by law, any
right Seller might otherwise have to require Buyer to enforce its rights by
judicial process. Seller also waives, to the extent permitted by law, any
defense Seller might otherwise have to the Obligations, arising from use of
nonjudicial process, enforcement and sale of all or any portion of the Loans
related to the Participation Interests and any other Purchased Items or from any
other election of remedies. Seller recognizes that nonjudicial remedies are
consistent with the usages of the trade, are responsive to commercial necessity
and are the result of a bargain at arm’s length. 

     Seller shall cause all sums received by
them with respect to the Purchased Certificate or the Participation Interests to
be deposited with such Person as Buyer may direct after receipt thereof. Seller
shall be liable to Buyer for the amount of all expenses (plus interest thereon
at a rate equal to the Post-Default Rate). 

20. DELAY NOT WAIVER; REMEDIES ARE
CUMULATIVE

     No failure on the part of Buyer to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by Buyer
of any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All rights and
remedies of Buyer provided for herein are cumulative and in addition to any and
all other rights and remedies provided by law, the Program Documents and the
other instruments and agreements contemplated hereby and thereby, and are not
conditional or contingent on any attempt by Buyer to exercise any of its rights
under any other related document. Buyer may exercise at any time after the
occurrence of an Event of Default one or more remedies, as they so desire, and
may thereafter at any time and from time to time exercise any other remedy or
remedies. 

21. NOTICES AND OTHER
COMMUNICATIONS

     Except as otherwise expressly permitted
by this Agreement, all notices, requests and other communications provided for
herein and under the Custodial Agreement (including, without limitation, any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including, without limitation, by telex or telecopy
or Electronic Transmission) delivered to the intended recipient at the “Address
for Notices” specified below its name on Exhibit G hereof); or, as to any party,
at such other address as shall be designated by such party in a written notice
to each other party. Except as otherwise provided in this Agreement and except
for notices given by Seller under Section 3(b) (which shall be effective only on
receipt), all such communications shall be deemed to have been duly given when
transmitted (i) by Electronic Transmission and followed by written notice via
overnight courier or (ii) by telex or telecopier or personally delivered or, in
the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid. 

22. USE OF EMPLOYEE PLAN
ASSETS

     No assets of an employee benefit plan
subject to any provision of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”) shall be used by either party hereto in a Transaction. 

52

23. INDEMNIFICATION AND
EXPENSES

     (a) Seller agrees to hold Buyer, its
Affiliates and each of their officers, directors, employees, agents and advisors
(each an “Indemnified Party”) harmless from and indemnify any Indemnified Party
against all liabilities, losses, damages, judgments, costs and expenses of any
kind which may be imposed on, incurred by or asserted against
such Indemnified Party (collectively, the “Costs”) relating to or arising out of
this Agreement, any other Program Document or any transaction contemplated
hereby or thereby, or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, this Agreement, any other Program
Document or any transaction contemplated hereby or thereby, that, in each case,
results from anything other than any Indemnified Party’s gross negligence or
willful misconduct. Without limiting the generality of the foregoing, Seller
agrees to hold any Indemnified Party harmless from and indemnify such
Indemnified Party against all Costs with respect to all Loans relating to or
arising out of any violation or alleged violation of any environmental law, rule
or regulation or any consumer credit laws, including, without limitation, laws
with respect to unfair or deceptive lending practices and predatory lending
practices, the Truth in Lending Act and/or the Real Estate Settlement Procedures
Act, that, in each case, results from anything other than such Indemnified
Party’s gross negligence or willful misconduct. In any suit, proceeding or
action brought by an Indemnified Party in connection with any Loan for any sum
owing thereunder, or to enforce any provisions of any Loan, Seller will save,
indemnify and hold such Indemnified Party harmless from and against all expense,
loss or damage suffered by reason of any defense, set-off, counterclaim,
recoupment or reduction of liability whatsoever of the account debtor or obligor
thereunder, arising out of a breach by Seller of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to or in favor of such account debtor or obligor or its successors from Seller.
Seller also agrees to reimburse any Indemnified Party as and when billed by such
Indemnified Party for all such Indemnified Party’s costs and expenses incurred
in connection with the enforcement or the preservation of such Indemnified
Party’s rights under this Agreement, any other Program Document or any
transaction contemplated hereby or thereby, including, without limitation, the
reasonable fees and disbursements of its counsel. Seller hereby acknowledges
that the obligations of Seller under this Agreement are recourse obligations of
Seller. 

     (b) Seller
agrees to pay as and when billed by Buyer all of the out-of pocket costs and
expenses (other than Taxes which are the subject of Section 5) incurred by Buyer
in connection with the development, preparation, negotiation, administration,
enforcement and execution of, and any amendment, waiver, supplement or
modification to, this Agreement, any other Program Document or any other
documents prepared in connection herewith or therewith. Seller agrees to pay as
and when billed by Buyer all of the reasonable out-of-pocket costs and expenses
incurred in connection with the consummation and administration of the
transactions contemplated hereby and thereby including, without limitation, (i)
all the reasonable fees, disbursements and expenses of counsel to Buyer, and
(ii) all the due diligence, inspection, testing and review (including but not
limited to any loan level file review of any Loans and all on-going due
diligence costs) and expenses incurred by Buyer with respect to Purchased Items
under this Agreement, including, but not limited to, those costs and expenses
incurred by Buyer pursuant to Sections 23, 39 and 44 hereof; provided, however,
that prior to the occurrence of a Default or Event of Default hereunder,
Seller’s liability for expenses incurred by Buyer pursuant to Section 43 shall
be subject to the dollar limitation provided in such section. Seller also agrees
not to assert any claim against Buyer or any of its Affiliates, or any of their
respective officers, directors, employees, attorneys and agents, on any theory
of liability, for special, indirect, consequential or punitive damages arising
out of or otherwise relating to the Program Documents, the actual or proposed
use of the proceeds of the Transactions, this Agreement or any of the
transactions contemplated hereby or thereby. THE FOREGOING INDEMNITY AND
AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE
NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED
PARTIES.

53

     (c) If Seller
fails to pay when due any costs, expenses or other amounts payable by them under
this Agreement, including, without limitation, reasonable fees and expenses of
counsel and indemnities, such amount may be paid on behalf of Seller by Buyer
(including, without limitation, by Buyer netting such amount from the proceeds
of any Purchase Price paid by Buyer to Seller hereunder), in its sole discretion and Seller shall
remain liable for any such payments by Buyer. No such payment by Buyer shall be
deemed a waiver of any of Buyer’s rights under the Program Documents.

     (d) Without
prejudice to the survival of any other agreement of Seller hereunder, the
covenants and obligations of Seller contained in this Section 23 shall survive
the termination of this Agreement, the payment in full of the Repurchase Price
and all other amounts payable hereunder and delivery of the Purchased
Certificate by Buyer against full payment therefor. 

24. WAIVER OF REDEMPTION AND
DEFICIENCY RIGHTS

    
Seller hereby expressly waives, to the fullest extent permitted by law,
every statute of limitation on a deficiency judgment, any reduction in the
proceeds of any Purchased Items as a result of restrictions upon Buyer or
Custodian contained in the Program Documents or any other instrument delivered
in connection therewith, and any right that it may have to direct the order in
which any of the Purchased Items shall be disposed of in the event of any
disposition pursuant hereto. 

25. REIMBURSEMENT

    
All sums reasonably expended by Buyer in connection with the exercise of
any right or remedy provided for herein shall be and remain Seller’s obligation
(unless and to the extent that Seller is the prevailing party in any dispute,
claim or action relating thereto). Seller agrees to pay, with interest at the
Post-Default Rate to the extent that an Event of Default has occurred, the
reasonable out-of-pocket expenses and reasonable attorneys’ fees incurred by
Buyer and/or Custodian in connection with the preparation, negotiation,
enforcement (including any waivers), administration and amendment of the Program
Documents (regardless of whether a Transaction is entered into hereunder), the
taking of any action, including legal action, required or permitted to be taken
by Buyer and/or Custodian pursuant thereto, any “due diligence” or loan agent
reviews conducted by Buyer or on its behalf or by refinancing or restructuring
in the nature of a “workout.” 

26. FURTHER
ASSURANCES

    
Seller agrees to do such further acts and things and to execute and
deliver to Buyer such additional assignments, acknowledgments, agreements,
powers and instruments as are reasonably required by Buyer to carry into effect
the intent and purposes of this Agreement and the other Program Documents, to
perfect the interests of Buyer in the Purchased Items or to better assure and
confirm unto Buyer its rights, powers and remedies hereunder and thereunder.

27. SEVERABILITY

    
If any provision of any Program Document is declared invalid by any court
of competent jurisdiction, such invalidity shall not affect any other provision
of the Program Documents, and each Program Document shall be enforced to the
fullest extent permitted by law. 

28. BINDING EFFECT; GOVERNING
LAW

    
This Agreement shall be binding and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF
(EXCEPT FOR SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 

54

29. AMENDMENTS

     Except as
otherwise expressly provided in this Agreement, any provision of this Agreement
may be modified or supplemented only by an instrument in writing signed by
Seller and Buyer and any provision of this Agreement may be waived by Buyer.

30. RESERVED

31. SURVIVAL

    
The obligations of Seller under Sections 3(i), 5, 12, 13, 23 and 25
hereof and any other reimbursement or indemnity obligation of Seller to Buyer
pursuant to this Agreement or any other Program Document shall survive the
repurchase of the Loans hereunder, the purchase of any Loans pursuant to a
takeout commitment and the termination of this Agreement. In addition, each
representation and warranty made, or deemed to be made by a request for a
purchase, herein or pursuant hereto shall survive the making of such
representation and warranty, and Buyer shall not be deemed to have waived, by
reason of purchasing any Loan, any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that Buyer may have had notice or knowledge or reason to believe
that such representation or warranty was false or misleading at the time such
purchase was made. 

32. CAPTIONS

    
The table of contents and captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement. 

33. COUNTERPARTS; ELECTRONIC
SIGNATURES

    
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.
The parties agree that this Agreement, any documents to be delivered pursuant to
this Agreement and any notices hereunder may be transmitted between them by
e-mail and/or by facsimile. The parties intend that faxed signatures and
electronically imaged signatures such as .pdf files shall constitute original
signatures and are binding on all parties.

34. SUBMISSION TO JURISDICTION;
WAIVERS

    
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:

    
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND/OR ANY OTHER PROGRAM DOCUMENT, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, 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 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;

55

     (C) AGREES
THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS
SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH BUYER SHALL HAVE BEEN
NOTIFIED; AND

    
(D) 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.

35. WAIVER OF JURY
TRIAL

    
SELLER AND BUYER HEREBY IRREVOCABLY WAIVE, 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 AGREEMENT, ANY OTHER PROGRAM
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

36. ACKNOWLEDGEMENTS

    
Seller hereby acknowledges that: 

(a) it has been advised by counsel
in the negotiation, execution and delivery of this Agreement and the other
Program Documents to which it is a party; 

(b) Buyer has no fiduciary
relationship to Seller; and 

(c) no joint venture exists between
Buyer and Seller. 

37. RESERVED

38. ASSIGNMENTS;
PARTICIPATIONS

    
(a) Seller may assign any of its rights or obligations hereunder only
with the prior written consent of Buyer. Buyer may assign or transfer to any
bank or other financial institution that makes or invests in repurchase
agreements or loans all or any of its rights and obligations under this
Agreement and the other Program Documents only with the prior written consent of
Seller; provided that such prior written consent shall not be required if Buyer
assigns any of its rights and obligations to an Affiliate of Buyer. 

    
(b) Buyer may, in accordance with applicable law, sell to one or more
entities (“Participants”) participating interests in this Agreement, its
agreement to purchase the Purchased Certificate, or any other interest of Buyer
hereunder and under the other Program Documents, only with the prior written
consent of Seller; provided that such prior written consent shall not be
required if the Participant is an Affiliate of Buyer. In the event of any such
sale by Buyer of participating interests to a Participant, Buyer’s obligations
under this Agreement to Seller shall remain unchanged, Buyer shall remain solely
responsible for the performance thereof and Seller shall continue to deal solely
and directly with Buyer in connection with Buyer’s
rights and obligations under this Agreement and the other Program Documents.
Seller agrees that if amounts outstanding under this Agreement are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Buyer under this Agreement; provided,
that such Participant shall only be entitled to such right of set-off if it
shall have agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with Buyer the proceeds thereof. Buyer also
agrees that each Participant shall be entitled to the benefits of Sections 3(i)
and 23 with respect to its participation in the Purchased Certificate and
Purchased Items outstanding from time to time; provided, that Buyer and all
Participants shall be entitled to receive no greater amount in the aggregate
pursuant to such Sections than Buyer would have been entitled to receive had no
such transfer occurred. For the avoidance of doubt, Seller shall continue to
deal solely and directly with Buyer in connection with any rights and
obligations of any Participant under this Agreement and the other Program
Documents. 

56

     (c) Buyer may
furnish any information concerning Seller and Guarantor or any of their
Subsidiaries in the possession of Buyer from time to time to assignees and
Participants (including prospective assignees and Participants) only after
notifying Seller in writing and securing signed confidentiality statements (a
form of which is attached hereto as Exhibit
C) by Seller, such Participant and Buyer and
only for the sole purpose of evaluating assignments or participations and for no
other purpose. 

    
(d) Seller agrees to cooperate with Buyer in connection with any such
assignment and/or participation, to execute and deliver replacement notes, and
to enter into such restatements of, and amendments, supplements and other
modifications to, this Agreement and the other Program Documents in order to
give effect to such assignment and/or participation. Seller further agrees to
furnish to any Participant identified by Buyer to Seller copies of all reports
and certificates to be delivered by Seller to Buyer hereunder, as and when
delivered to Buyer. 

39. SINGLE
AGREEMENT

    
Seller and Buyer acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, Seller and Buyer each agree (i) to perform all of its obligations
in respect of each Transaction hereunder, and that a default in the performance
of any such obligations shall constitute a default by it in respect of all
Transactions hereunder, and (ii) that payments, deliveries and other transfers
made by any of them in respect of any Transaction shall be deemed to have been
made in consideration of payments, deliveries and other transfers in respect of
any other Transaction hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other and netted.

40. INTENT

    
Seller and Buyer recognize that each Transaction is a “repurchase
agreement” as that term is defined in Section 101(47)(A)(i) of Title 11 of the
USC, a “securities contract” as that term is defined in Section 741(7)(A)(i) of
Title 11 of the USC, and a “master netting agreement” as that term is defined in
Section 101(38A)(A) of Title 11 of the USC. Seller and Buyer further intend that
Buyer be entitled to, without limitation, the liquidation, termination,
acceleration, setoff and non-avoidability rights afforded to parties such as
Buyer to “repurchase agreements,” pursuant to sections 559, 362(b)(7) and 546(f)
of the Bankruptcy Code; “securities contracts,” pursuant to sections 555,
362(b)(6) and 546(e) of the Bankruptcy Code; and “master netting agreements,”
pursuant to sections 561, 362(b)(27) and 546(j) of the Bankruptcy Code.

57

     It is
understood that Buyer’s right to liquidate the Purchased Certificate delivered
to it in connection with the Transactions hereunder and unwind each Underlying
Trust, the Pass-Through Trust and the Legal Title Trust or to accelerate or
terminate this Agreement or otherwise exercise any other remedies pursuant to
Section 19 hereof is a contractual right to liquidate, accelerate or terminate
such Transaction as described in Sections 555, 559 and 561 of Title 11 of the
USC. 

41. CONFIDENTIALITY

    
The Program Documents and their respective terms, provisions, supplements
and amendments, and transactions and notices thereunder, are proprietary to
Buyer and shall be held by Seller and Buyer in strict confidence and shall not
be disclosed to any third party without the consent of the other party, except
for (i) disclosure to Seller’s or Buyer’s Affiliates, directors, attorneys,
agents or accountants, provided that such attorneys or accountants likewise
agree to be bound by this covenant of confidentiality, or are otherwise subject
to confidentiality restrictions or (ii) upon prior written notice to the other
party, disclosure required by law, rule, regulation or order of a court or other
regulatory body or (iii) when circumstances reasonably permit, any disclosures
or filing required under Securities and Exchange Commission (“SEC”) or state securities’
laws; provided, that in the case of disclosure by any party pursuant to the foregoing
clauses (ii) and (iii), each party shall take reasonable actions to provide the
other party with prior written notice; provided further that in the case of (iii),
neither party shall file any of the Program Documents other than the Agreement
and the Pricing Side Letter with the SEC or state securities office unless such
party shall have provided at least five (5) days (or such lesser time as may be
demanded by the SEC or state securities office) prior written notice of such
filing to the other party. Notwithstanding anything herein to the contrary, each
party (and each employee, representative, or other agent of each party) may
disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of the transaction and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such tax treatment and tax structure. For this purpose, tax treatment and tax
structure shall not include (i) the identity of any existing or future party (or
any Affiliate of such party) to this Agreement or (ii) any specific pricing
information or other commercial terms, including the amount of any fees,
expenses, rates or payments arising in connection with the transactions
contemplated by this Agreement. 

42. SERVICING

    
(a) Seller covenants to maintain or cause the servicing of the Loans to
be maintained in conformity with Accepted Servicing Practices and pursuant to
the Servicing Agreement. In the event that the preceding language is interpreted
as constituting one or more servicing contracts, each such servicing contract
shall terminate automatically upon the earliest of (i) the occurrence of a
Servicer Termination Event, (ii) the termination thereof by Buyer pursuant to
subsection (d) below, (iii) thirty (30) days after the last Purchase Date
related to the Purchased Certificate, (iv) a Default or an Event of Default, (v)
the date on which all the Obligations have been paid in full, or (vi) the
transfer of servicing to any entity approved by Buyer and the assumption thereof
by such entity. Upon any such termination, Seller shall comply with the
requirements set forth in Section 13(hh) as to the delivery of the Servicing
Records and the physical servicing of each Loan.

    
(b) With respect to all Loans, Seller agrees that the Legal Title Trust
is the owner of the Servicing Rights and all servicing records with respect to
the related Loans on behalf of the owners of the related Participation
Interests, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of such Loans (the “Servicing Records”). At all times
during the term of this Agreement, Seller covenants to hold or cause the
Servicer to hold such Servicing Records in trust for Buyer and to
safeguard, or cause each Subservicer to safeguard, such Servicing Records and to
deliver them, or cause any such Subservicer to deliver them to the extent
permitted under the related Servicing Agreement promptly to Buyer or its
designee (including Custodian) at Buyer’s request or otherwise as required by
operation of Section 13(hh) hereof. It is understood and agreed by the parties
that prior to an Event of Default, the Seller, as servicer shall retain the
servicing fees with respect to the Loans. 

58

     (c) If any
Loan related to a Participation Interest that is proposed to be purchased by an
Underlying Trust on a Purchase Date is serviced by a Subservicer, or if the
servicing of any Loan is to be transferred to a Subservicer, Seller shall
provide a copy of the related servicing agreement and an Instruction Letter
executed by such Subservicer (collectively, the “Subservicing Agreement”) to
Buyer at least three (3) Business Days prior to such Purchase Date or transfer
date, as applicable, which Subservicing Agreement shall be in form and substance
acceptable to Buyer. In addition, Seller shall have obtained the prior written
consent of Buyer for such Subservicer to subservice the Loans.

    
(d) In addition to the rights provided in Section 42(a), Buyer shall have
the right, exercisable at any time in its sole discretion, upon written notice,
to terminate Servicer or any Subservicers as servicer or subservicer,
respectively, and any related Servicing Agreement, free and clear of any
obligations (including, without limitation, any obligation to pay or reimburse
any previous servicer for outstanding servicing advances). Upon any such
termination, the Seller shall transfer or shall cause Servicer or Subservicer to
transfer such servicing with respect to such Loans to Buyer or its designee, at
no cost or expense to Buyer. Seller agrees to cooperate with Buyer in connection
with the transfer of servicing.

    
(e) Buyer shall have the right in its sole discretion to appoint a third
party to perform due diligence with respect to Servicer at any time. Seller
shall use its best efforts to enable Buyer to inspect the servicing facilities
of Servicer and any Subservicer and to cause Servicer and each Subservicer to
cooperate with Buyer and/or its designees in connection with any due diligence
performed by Buyer and/or such designees in accordance with this Section 42(e).
Seller and Buyer further agree that all reasonable out-of-pocket costs and
expenses incurred by Buyer in connection with any due diligence or inspection
performed pursuant to this Section 42(e) shall be paid by Buyer. 

43. PERIODIC DUE DILIGENCE
REVIEW

    
Seller acknowledges that Buyer has the right to perform continuing due
diligence reviews with respect to the Loans, for purposes of verifying
compliance with the representations, warranties, covenants and specifications
made hereunder or under any other Program Document, or otherwise, and Seller
agrees that upon reasonable (but no less than five (5) Business Days’) prior
notice to Seller ) (provided that upon the occurrence of a Default or an Event
of Default, no such prior notice shall be required), Buyer or its authorized
representatives will be permitted during normal business hours to examine,
inspect, make copies of, and make extracts of, the Mortgage Files, the Servicing
Records and any and all documents, records, agreements, instruments or
information relating to such Loans in the possession, or under the control, of
Seller and/or Custodian. Seller also shall make available to Buyer a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Mortgage Files and the Loans. Without limiting the
generality of the foregoing, Seller acknowledges that Buyer shall purchase the
Purchased Certificate and effectuate each Purchase Price Increase from Seller
based solely upon the information provided by Seller to Buyer in the Loan
Schedule and the representations, warranties and covenants contained herein, and
that Buyer, at its option, has the right, at any time to conduct a partial or
complete due diligence review on some or all of the Participation Interests,
including, without limitation, ordering new credit reports, new appraisals on
the related Mortgaged Properties and otherwise regenerating the information used
to originate the related Loans. Buyer may underwrite the related Loans itself or
engage a third party underwriter to perform such underwriting. Seller agrees to
cooperate with Buyer and any third party underwriter
in connection with such underwriting, including, but not limited to, providing
Buyer and any third party underwriter with access to any and all documents,
records, agreements, instruments or information relating to the applicable Loans
in the possession, or under the control, of Seller. In addition, Buyer has the
right in its reasonable discretion to perform continuing Due Diligence Reviews
(including, without limitation, operational, legal, corporate and background due
diligence) of Seller and Guarantor and their directors, and their respective
Subsidiaries and the officers, employees and significant shareholders thereof.
Seller and Buyer further agree that all reasonable out-of-pocket costs and
expenses incurred by Buyer in connection with Buyer’s activities pursuant to
this Section 43 and with respect to any periodic servicing due diligence
requested by Buyer, shall be paid by Seller; provided, that such costs shall not
exceed $25,000 per calendar year unless a Default or Event of Default shall have
occurred, in which event, the dollar limitation described in this proviso shall
not apply. 

59

44. SET-OFF

     In addition to
any rights and remedies of Buyer provided by this Agreement and by law, upon the
occurrence of a Default, Buyer shall have the right, without prior notice to
Seller, any such notice being expressly waived by Seller to the extent permitted
by applicable law, upon any amount becoming due and payable by Seller hereunder
(whether at the stated maturity, by acceleration or otherwise) to set-off and
appropriate and apply against such amount any and all Property and deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by Buyer or any Affiliate thereof to or for the credit or the
account of Seller. Upon the occurrence of a Default, Buyer may set-off cash, the
proceeds of the liquidation of any Purchased Items and all other sums or
obligations owed by Buyer or its Affiliates to Seller against all of Seller’s
obligations to Buyer or its Affiliates, whether under this Agreement or under
any other agreement between the parties or between Seller and any Affiliate of
Buyer, or otherwise, whether or not such obligations are then due, without
prejudice to Buyer’s or its Affiliate’s right to recover any deficiency. Buyer
agrees promptly to notify Seller after any such set-off and application made by
Buyer; provided that the failure to give such notice shall not affect the
validity of such set-off and application. For purposes of this Section 44 only,
any Affiliate of Buyer referred to herein shall mean Citigroup Global Markets
Realty Corp. 

45. ENTIRE
AGREEMENT

    
This Agreement and the other Program Documents embody the entire
agreement and understanding of the parties hereto and thereto and supersede any
and all prior agreements, arrangements and understandings relating to the
matters provided for herein and therein. No alteration, waiver, amendments, or
change or supplement hereto shall be binding or effective unless the same is set
forth in writing by a duly authorized representative of each party hereto.

[SIGNATURE PAGE FOLLOWS]

60

     IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year first above written. 

		ZFC TRUST,
      a
      Maryland real estate investment
		trust, as Seller
		 
		 
		 
		 
		By: /s/ Michael F.
      Szymanski
		Name: Michael F. Szymanski
		Title: Trustee
		 
		 
		 
		CITIBANK, N.A.
      as
      Buyer
		 
		 
		 
		By: /s/ Susan
    Mills
		Name: Susan Mills
		Title: Vice
President

	ACKNOWLEDGED AND AGREED:
	 
	ZAIS FINANCIAL
      CORP., as
      Guarantor
	 
	By: /s/ Michael F.
      Szymanski
	Name: Michael F.
  Szymanski
	Title: President
	 
	SOLELY WITH RESPECT TO SECTION
      16:
	 
	ZAIS FINANCIAL PARTNERS,
      L.P.,
      as
	Program Manager
	 
	By: ZAIS Financial Corp., its General
      Partner
	 
	By: /s/ Michael F.
      Szymanski
	Name: Michael F.
  Szymanski
	Title:
President

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