Document:

Depositor Sale Agreement dated December 16, 2004

  
 Exhibit 10.2

  
 EXECUTION VERSION 
  
 DEPOSITOR SALE AGREEMENT 
  
 Between 
  
 E*TRADE BANK, 
 as
Transferor 
  
 and 
  
 ETCF ASSET FUNDING CORPORATION, 
 as Depositor 
  
 Dated as of December 16, 2004 
  

  
 TABLE OF CONTENTS

  

					
	 	  	 	  	Page

		
	 ARTICLE I Definitions
	  	1
			
	 SECTION 1.01.
	  	 Definitions
	  	1
			
	 SECTION 1.02.
	  	 Other Definitional Provisions
	  	1
		
	 ARTICLE II Sale of Receivables
	  	2
			
	 SECTION 2.01.
	  	 Sale
	  	2
			
	 SECTION 2.02.
	  	 Purchase Price
	  	3
			
	 SECTION 2.03.
	  	 Intent of the Parties
	  	3
		
	 ARTICLE III The Receivables
	  	3
			
	 SECTION 3.01.
	  	 Representations and Warranties as to Receivables
	  	3
		
	 ARTICLE IV The Transferor
	  	10
			
	 SECTION 4.01.
	  	 Representations of Transferor
	  	10
			
	 SECTION 4.02.
	  	 Corporate Existence
	  	11
			
	 SECTION 4.03.
	  	 Liability of the Transferor
	  	11
			
	 SECTION 4.04.
	  	 Indemnification
	  	11
			
	 SECTION 4.05.
	  	 Merger or Consolidation of, or Assumption of the Obligations of, Transferor
	  	12
			
	 SECTION 4.06.
	  	 Limitation on Liability of Transferor and Others
	  	13
			
	 SECTION 4.07.
	  	 Notice of Events
	  	13
		
	 ARTICLE V Miscellaneous
	  	13
			
	 SECTION 5.01.
	  	 Amendment
	  	13
			
	 SECTION 5.02.
	  	 Protection of Title; Change of Name, Identity, Corporate Structure or Location, Etc
	  	13
			
	 SECTION 5.03.
	  	 Notices
	  	14
			
	 SECTION 5.04.
	  	 Assignment
	  	15
			
	 SECTION 5.05.
	  	 Limitations on Rights of Others
	  	15
			
	 SECTION 5.06.
	  	 Severability
	  	15
			
	 SECTION 5.07.
	  	 Separate Counterparts
	  	15
			
	 SECTION 5.08.
	  	 Headings
	  	15
			
	 SECTION 5.09.
	  	 Governing Law
	  	15
			
	 SECTION 5.10.
	  	 Nonpetition Covenants
	  	16
			
	 SECTION 5.11.
	  	 Separate Corporate Existence
	  	16
			
	 SECTION 5.12.
	  	Submission to Jurisdiction	  	16

  

 -i- 

  
 RECITALS 

 
 DEPOSITOR SALE AGREEMENT dated as of December 16, 2004 (this
“Agreement”), between ETCF ASSET FUNDING CORPORATION, a Nevada corporation (the “Depositor”) and E*TRADE BANK, a federal savings bank (“E*TRADE Bank” or the “Transferor”).

  
 WHEREAS, the Depositor desires to purchase Receivables from
the Transferor; and 
  
 WHEREAS, the Transferor is willing to sell
such Receivables to the Depositor. 
  
 NOW, THEREFORE, for good
and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 
  
 ARTICLE I 
  
 Definitions 
  
 SECTION 1.01. Definitions. Except as otherwise specified herein or as the context may otherwise require, capitalized terms used herein (including in the RECITALS) have the respective meanings assigned thereto in Appendix
A to the Transfer and Servicing Agreement for all purposes of this Agreement. “Transfer and Servicing Agreement” means the Transfer and Servicing Agreement, dated the same date as this Agreement, among E*TRADE RV and Marine
Trust 2004-1, the Depositor, and E*TRADE Consumer Finance Corporation (“E*TRADE Consumer Finance”), as Servicer, as the same may be amended, amended and restated or otherwise modified from time to time. 
  
 SECTION 1.02. Other Definitional Provisions. 
  
 (a) All terms defined in Appendix A to the Transfer
and Servicing Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. 
  
 (b) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto,
accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. 
  
 (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; Article and Section references contained in this Agreement are references to Articles and Sections in this Agreement unless otherwise specified; the term
“including” shall mean “including without limitation”; and the word “or” is not exclusive. 
  

 (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 genders of such terms. 
  
 (e) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time amended, amended and restated or otherwise modified from time to time and includes (in the case of agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its permitted successors and assigns. 
  
 (f) Each reference to the “close of business” on a particular day shall mean 5:00 p.m. (New York City time) on such day.

  
 ARTICLE II 
  
 Sale of Receivables 
  
 SECTION 2.01. Sale. The Transferor does hereby sell, transfer, assign,
set over and otherwise convey to the Depositor, without recourse (subject to the obligations of the Transferor set forth herein), and the Depositor hereby purchases from the Transferor, all right, title and interest of the Transferor in, to and
under (but none of the obligations of the Transferor under): 
  
 (a) all of the Receivables and all moneys received thereon after the Cut-Off Date; 
  
 (b) (i) the security interests in the Financed Assets (other than Federally Documented Boats) created pursuant to the Receivables and any
other interest of the Transferor in the Financed Assets, and (ii) the Boat Mortgage Trust Agreement (but only to the extent relating to the Federally Documented Boats); 
  
 (c) any proceeds with respect to the Receivables and Financed Assets under any Insurance Policies and all
claims under such Insurance Policies; 
  
 (d) any
proceeds from recourse to Dealers with respect to Receivables that are not Purchased Receivables (other than any premium rebates owing to, or received by Transferor from a Dealer in accordance with the Transferor’s Customary Practices);

  
 (e) any Financed Asset, relating to a
Receivable, acquired in repossession; 
  
 (f) the
contents of the Receivable Files with respect to Receivables and all rights, benefits and proceeds arising therefrom or in connection therewith; 
  
 (g) the Trust Accounts and all funds on deposit from time to time in the Trust Accounts, and all investments and proceeds thereof
(including all income thereon); and 
  
 (h) the
proceeds of any and all of the foregoing. 
  
 The Receivables and
other items covered by clauses (a) through (h) of this Section 2.01 shall be referred to collectively as the “Transferor Sold Property”. 
  

 2 

 SECTION 2.02. Purchase Price. (a) The purchase price to be paid to the Transferor by the Depositor
for the Transferor Sold Property shall be stated in a separate written agreement between the parties (the “Cash Purchase Price”) which represents the fair market value of Transferor Sold Property as agreed upon by Transferor and
Depositor on the Closing Date. 
  
 (b) The Cash
Purchase Price shall be payable in full in cash by the Depositor on the Closing Date. 
  
 SECTION 2.03. Intent of the Parties. (a) The Transferor and the Depositor intend that the sale by the Transferor to the Depositor of the right, title and interest of the Transferor in, to and under the
Receivables and the other Transferor Sold Property pursuant to this Agreement shall constitute a true sale and not a loan, that such sale is absolute, unconditional and irrevocable, providing the Depositor with the full risks and benefits of
ownership of the Receivables and other Transferor Sold Property, and that the Transferor retain no interest in, to or under the Receivables and the other Transferor Sold Property. However, in the event that, notwithstanding the intent of the
parties, such sale is deemed to be a transfer for security and not a sale, then (i) the Transferor shall be deemed to have granted, and in such event does hereby grant, to the Depositor to secure the Transferor’s obligations hereunder a first
priority security interest in all of its right, title and interest in, to and under the Transferor Sold Property, and (ii) this Agreement shall constitute a security agreement under applicable law with respect to such sale. 
  
 (b) No party hereto shall take any action that is
inconsistent with the ownership of the Transferor Sold Property by the Depositor, it being understood that this sentence shall not prevent the transfer of the Transferor Sold Property by the Depositor to the Issuer in accordance with the Transfer
and Servicing Agreement. Each party hereto shall inform any Person inquiring about the Receivables that the Transferor Sold Property has been sold by the Transferor to the Depositor and sold by the Depositor to the Issuer (and such transfers shall
be reflected in the accounting records and computer systems of the parties hereto). Without limiting the generality of the foregoing, for accounting, tax and other purposes each party hereto shall treat the transfer of the Transferor Sold Property
by the Transferor to the Depositor as a sale by the Transferor to the Depositor. Notwithstanding any other provision of this Agreement, no Person shall have any recourse to E*TRADE Consumer Finance, the Transferor, the Depositor or the Servicer on
account of the financial inability of any Obligor to make payments in respect of a Receivable. 
  
 ARTICLE III 
  
 The Receivables

  
 SECTION 3.01. Representations and Warranties as to
Receivables. The Transferor makes the following representations and warranties as to the Receivables, on which representations and warranties each of the Depositor and the Issuer is deemed to have relied in acquiring the Receivables. Such
representations and warranties speak as of the execution and delivery of this Agreement and as of the Closing Date and shall survive the transfer and assignment of the Receivables to the Issuer and the Grant thereof to the Indenture Trustee pursuant
to the Indenture. 
  

 3 

 (i) Characteristics of Receivables. All of the Receivables were acquired by the
Transferor from E*TRADE Consumer Finance. Each Receivable (A) was fully and properly executed by the parties required to execute such Receivable, (B) contains customary and enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral security, (C) is fully amortizing and provides for level monthly payments which may vary from one another by no more than fifty dollars ($50) and which, if made when due, shall fully
amortize the Amount Financed over the original term, (D) provides for, in the event that such Receivable is prepaid in full, payment of an amount that fully pays the Principal Balance and includes accrued but unpaid interest at least through the
date of prepayment calculated at a rate at least equal to its Annual Percentage Rate, (E) provides for the payment of interest at a fixed Annual Percentage Rate, and (F) provides that payments thereon are to be applied in accordance with the Simple
Interest Method. If a Receivable was originated by a Dealer, such Receivable, to the knowledge of the Transferor, (I) was originated by the Dealer for the retail sale of a Financed Asset in the ordinary course of such Dealer’s business, (II)
was purchased from such Dealer for new value under a Dealer Agreement and (III) was validly assigned by the Dealer to Thor Credit Corporation or E*TRADE Consumer Finance and, if to Thor Credit Corporation, to E*TRADE Consumer Finance and from
E*TRADE Consumer Finance to the Transferor. To the knowledge of the Transferor, such Dealer had all necessary licenses and permits to originate Receivables in the state where such Dealer was located. If a Transferor Receivable was originated by
E*TRADE Consumer Finance or an Affiliated Originator, such Transferor Receivable was originated for value by E*TRADE Consumer Finance or such an Affiliated Originator, as applicable, in the ordinary course of its business to finance the purchase of,
or refinance, the related Financed Asset by the related Obligor and was validly assigned by E*TRADE Consumer Finance or such an Affiliated Originator, as applicable, to the Transferor. The Transferor, E*TRADE Consumer Finance and such Affiliated
Originator, as applicable, had all necessary licenses and permits to originate or purchase, as applicable, each Receivable at the time of its origination or purchase, as applicable. At the time each Receivable was purchased by the Transferor, any
related Financed Asset was, to the knowledge of the Transferor, to be used primarily for personal, family, or household purposes rather than for business or commercial purposes. The Receivables were selected by the Transferor from its portfolio of
recreational vehicle and marine receivables. No selection procedures believed to be adverse to the Depositor, the Issuer or the Noteholders were used in selecting the Receivables. 
  
 (ii) No Fraud or Misrepresentation. To the knowledge of the Transferor, each Receivable originated by
a Dealer was originated by the Dealer and sold by the Dealer to E*TRADE Consumer Finance or the applicable Affiliated Originator without any fraud or misrepresentation on the part of such Dealer. 
  
 (iii) Compliance with Law. To the knowledge of the
Transferor, all requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations “B” and “Z”, the Servicemembers Civil Relief Act,
state motor vehicle retail installment sales acts and lending acts and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and other consumer credit laws and equal credit 

  

 4 

 
opportunity and disclosure laws) in respect of all of the Receivables and each and every sale of Financed Assets relating thereto, have been complied with in
all material respects, and each Receivable and the sale of the Financed Asset evidenced by each Receivable complied at the time it was originated or made and now complies in all material respects with all applicable legal requirements, including the
laws and regulations contemplated by this clause (iii). 
  
 (iv) Origination. Each Receivable was originated in the United States of America. 
  
 (v) Binding Obligation. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors’ rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law; and all parties to each Receivable had full legal capacity to execute and deliver such Receivable and
all other documents related thereto and to grant the security interest purported to be granted thereby. 
  
 (vi) No Government Obligor. No Obligor of a Receivable is the United States of America or any State or any agency, department,
subdivision or instrumentality thereof. 
  
 (vii)
Obligor Bankruptcy. At the Cut-Off Date, no Obligor was noted on the records of the Transferor as being the subject of a current bankruptcy proceeding. 
  

(viii) Schedule of Receivables. The information with respect to Receivables set forth in the Schedule of Receivables is true and
correct in all material respects as of the close of business on the Cut-Off Date. 
  
 (ix) Marking Records. By the Closing Date, the Transferor shall have caused the portions of its electronic ledger relating to the
Receivables to be clearly and unambiguously marked to show that the Receivables have been sold absolutely from the Transferor and are property of the Trust. 
  
 (x) Computer Tape. The Computer Tape was complete and accurate as of the Cut-Off Date and includes a description of the same
Receivables that are described in the Schedule of Receivables. 
  
 (xi) Chattel Paper. The Receivables constitute chattel paper within the meaning of the UCC as in effect in the states in which the Obligors reside. 
  
 (xii) One Original. There is only one original executed copy of each Receivable. 
  
 (xiii) Receivable Files Complete. There exists a
Receivable File pertaining to each Receivable and, to the knowledge of the Transferor, such Receivable File contains (a) a fully executed original of the Receivable, with a fully executed assignment thereof in blank or from the related Dealer to
E*Trade Consumer Finance or the applicable Affiliated Originator (and then assigned E*Trade Consumer Finance), as the case may be, if such 

  

 5 

 
Receivable was acquired from a Dealer, (b) a signed representation letter or agreement from the Obligor named in the Receivable pursuant to which the Obligor
has agreed to obtain physical damage insurance for the Financed Asset, or copies thereof, (c) the Title Document or Lien Certificate (which may be held separately from the Receivable) or a copy of the application therefor or, except with respect to
Federally Documented Boats, a certification from the Servicer that it has received confirmation from an authorized official of the appropriate governmental office of the existence of the first lien of the E*Trade Consumer Finance or the Affiliated
Originator, as applicable, with respect to the Financed Asset relating to a Receivable and (d) a credit application signed by the Obligor, or a copy thereof. Each of such documents which is required to be signed by the Obligor has been signed by the
Obligor in the appropriate spaces. Each of the foregoing documents has been correctly prepared. The complete file for each Receivable currently is in the possession of the Servicer. 
  
 (xiv) Receivables in Force. No Receivable has been satisfied, subordinated or rescinded, and the
Financed Asset securing each such Receivable has not been released from the lien of the related Receivable in whole or in part. No provisions of any Receivable have been waived, altered or modified (except that E*TRADE Consumer Finance as servicer
may have, for administrative purposes, modified the due date of a Receivable to a different date in the month, which modification is reflected in its servicing records) in any respect since its origination, except by instruments or documents
identified in the Receivable File. No Receivable has been modified as a result of application of the Servicemembers Civil Relief Act, as amended. 
  
 (xv) Lawful Assignment. No Receivable was originated in, or is subject to the laws of, any jurisdiction the laws of which (a) would
make unlawful, void or voidable the transfer and assignment of such Receivable under this Agreement or the pledge of such Receivable under the Indenture or (b) would impair the validity or enforceability of any Receivable because of any such
transfer, assignment or pledge. 
  
 (xvi) Good
Title. No Receivable has been sold, transferred, assigned or pledged by the Transferor except pursuant to this Agreement; immediately prior to the sale of the Receivables by the Transferor to the Depositor pursuant to this Agreement, the
Transferor had good and indefeasible title to the Receivables, free and clear of any Lien. No Dealer has a participation in, or other right to receive, payments or proceeds in respect of any Receivable. The Transferor has not taken any action to
convey any right to any Person that would result in such Person having a right to payments received under the related Insurance Policies or the related Dealer Agreements or to payments due under such Receivables. This Agreement is effective to
transfer to the Depositor all of the right, title and interest of the Transferor in, to and under the Receivables. 
  
 (xvii) Security Interest in Financed Asset. (A) Each Receivable (together with its related mortgage, if applicable), except with
respect to Receivables related to Federally Documented Boats, has created a valid, binding and enforceable first priority security interest in favor of the Transferor in the related Financed Asset, which is in full force and effect and which has
been perfected. Each Title Document and Lien Certificate contained in the Receivables Files shows E*Trade Consumer Finance or the applicable Affiliated Originator or, with respect to the Federally Documented Boats, the Boat Mortgage Trustee, as the
holder of a first priority security 

  

 6 

 
interest in such Financed Asset. With respect to each Receivable for which the Title Document or Lien Certificate is not contained in the related Receivable
File, the Servicer has either received written evidence that such Title Document or Lien Certificate showing E*Trade Consumer Finance or the applicable Affiliated Originator as first lienholder has been applied for or, except with respect to
Federally Documented Boats, has certified in writing in the related Receivable File that it has received confirmation from the appropriate governmental office of the existence of the first lien of the E*Trade Finance or the applicable Affiliated
Originator with respect to the related Financed Asset. The security interest of the E*Trade Finance or the applicable Affiliated Originator in each such Financed Asset (other than Federally Documented Boats) has been validly assigned (x) in the case
of security interests with respect to which Thor is the Affiliated Originator, by Thor to E*Trade Consumer Finance pursuant to the ETCFC Flow Purchase Agreement and (y) in the case of security interests with respect to which E*Trade Consumer Finance
is the originator or assignee of Thor, by E*Trade Consumer Finance to the Transferor pursuant to a Bank Purchase Agreements and by the Transferor to the Depositor pursuant to this Agreement. Each Receivable (other than those related to a Federally
Documented Boat) is secured by an enforceable and perfected first priority security interest in the Financed Asset in the name of E*Trade Consumer Finance or the applicable Affiliated Originator as secured party, which security interest is prior to
all other Liens upon and security interests in such Financed Asset. 
  
 (B) Each
Receivable (together with its related mortgage, if applicable) related to a Federally Documented Boat, has created a valid, binding and enforceable first priority security interest in favor of one of the Transferor, E*Trade Consumer Finance or the
Boat Mortgage Trustee in the related Federally Documented Boat, which is in full force and effect. In cases where the security interest is in favor of the Transferor or E*Trade Consumer Finance, such security interest of the Transferor or E*TRADE
Consumer Finance in each Federally Documented Boat securing a Receivable has been validly assigned by Transferor or E*TRADE Consumer Finance, as applicable, to the Boat Mortgage Trustee. 
  
 (C) With respect to each Financed Boat that secures a Receivable and that is eligible for documentation under the Ship Mortgage Statutes, a
fully effective Preferred Mortgage has been signed by the related Obligor in favor of, or assigned to, the Boat Mortgage Trustee as security for such Receivable. 
  
 (xviii) All Filings Made; Valid Security Interest. All filings (including, without limitation, UCC
filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Depositor a first priority perfected ownership interest in the Receivables and the proceeds thereof have been
made, taken or performed, subject to the transfer thereof by the Depositor to the Issuer. At the Closing Date the Depositor shall have a valid, subsisting and enforceable first priority ownership interest in each Receivable and the proceeds thereof,
subject to the transfer thereof by the Depositor to the Issuer. 
  
 (xix) No Impairment. The Transferor has not done and shall not do anything to convey any right to any Person that would result in such Person having a right to payments due under a Receivable or otherwise to
impair the rights of the Trust in any Receivable or the proceeds thereof. 
  

 7 

 (xx) No Release. No Receivable is assumable by another Person in a manner which
would release the Obligor thereof from such Obligor’s obligations to the Transferor with respect to such Receivable. 
  
 (xxi) No Defenses. No Receivable is subject to any right of rescission, setoff, counterclaim or defense and, to the knowledge of
the Transferor, no such right has been asserted or threatened with respect to any Receivable. The operation of the terms of any Receivable or the exercise of any right thereunder shall not render the Receivable unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, and to the knowledge of the Transferor, no such right of rescission, setoff, counterclaim or defense has been asserted or threatened with respect thereto. 
  
 (xxii) No Default. To the knowledge of the
Transferor, there has been no default, breach, violation or event permitting acceleration under the terms of any Receivable (other than payment delinquencies as of the Cut-Off Date of not more than 29 days), and no condition exists or event has
occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the foregoing. As of the
Cut-Off Date, no Financed Asset relating to any Receivable had been repossessed. 
  
 (xxiii) Insurance. Each Receivable requires the Obligor to maintain physical loss and damage insurance, naming E*Trade Consumer
Finance or the Affiliated Originator, as applicable, and its successors and assigns as additional insured parties or loss payees, and each Receivable permits the holder thereof to obtain physical loss and damage insurance at the expense of the
Obligor if the Obligor fails to do so. No Financed Asset relating to any Receivable was insured under a policy of force-placed insurance on the Cut-Off Date. 
  

(xxiv) Past Due. At the Cut-Off Date, no Receivable was more than 29 days past due. 
  
 (xxv) No Liens. There are no Liens or claims which
have been filed, and, to the knowledge of the Transferor, none pending or threatened to be filed, for work, labor, materials or unpaid state or federal taxes affecting the Financed Asset securing any Receivable which are or may become liens prior or
equal to the lien of the Receivable. 
  
 (xxvi)
Remaining Principal Balance. At the Cut-Off Date, the Principal Balance of each Receivable set forth in the Schedule of Receivables is true and accurate in all material respects. 
  
 (xxvii) Final Scheduled Maturity Date. No Receivable has a final maturity which is later than 299
months after the Cut-Off Date. 
  
 (xxviii)
Certain Characteristics. (A) Each Receivable had a remaining term, as of the Cut-Off Date, of at least 8 months but not more than 299 months; (B) each Receivable had an original term of at least 12 months but not more than 300 months; (C)
each Receivable had a Principal Balance as of the Cut-Off Date of not more than $600,000; (D) as of the Cut-Off Date, each Receivable has an Annual Percentage Rate of at least 2.99% per annum and no greater than 14.99% per annum; (E) approximately
37.62% of the aggregate Principal 

  

 8 

 
Balance of the Receivables (measured as of the Cut-Off Date), constituting 42.81% of the number of such Receivables, were secured by used Financed Assets at
the time such Receivables were originated; (F) no funds have been advanced by E*TRADE Consumer Finance, Transferor, any Dealer, any Affiliated Originator or any Person acting on behalf of any of them in order to cause any Receivable to qualify under
paragraph (xxiv) above; (G) as of the Cut-Off Date, other than California (22.03%), Texas (9.03%), Florida (8.64%) and Washington (6.54%), no State represented more than 4.56% of the Initial Pool Balance with respect to the billing addresses
of the Obligors (determined by reference to the books and records of E*TRADE Consumer Finance); (H) the Principal Balance of each Receivable set forth in Schedule of Receivables is true and accurate in all material respects as of the Cut-Off Date;
(I) as of the Cut-Off Date, recreational vehicle Receivables represented 83.58% of the Initial Pool Balance and marine Receivables represented 16.42% of the Initial Pool Balance; (J) as of the Cut-Off Date, Receivables representing approximately
62.38% of the Initial Pool Balance were secured by new Financed Assets at the time such Receivables were originated, and Receivables representing approximately 37.62% of the Initial Pool Balance were secured by used Financed Assets at the time such
Receivables were originated; (K) all Receivables in the Boat Mortgage Trust are related to Federally Documented Boats; (L) each Receivable was originated on or after September 1, 2003; and (M) approximately 34% of the Initial Pool Balance
represented Receivables acquired by E*Trade Consumer Finance from Thor Credit Corporation (an affiliate thereof). 
  
 For purposes of determining whether the Transferor is obligated to purchase a Receivable on account of a breach of a representation and warranty pursuant
to this Section 3.01 or indemnify in respect of such breach pursuant Section 4.04(c), the determination as to whether a representation or warranty that is made to the knowledge of the Transferor has been breached shall be made without
regard to such knowledge of the Transferor as if such representation and warranty were not qualified by the knowledge of the Transferor. 
  
 Upon discovery by any party hereto of a breach of any of the representations and warranties of the Transferor set forth in this Section 3.01 which
materially and adversely affects the value of the Receivables or the interest therein of the Issuer or the Indenture Trustee (or which materially and adversely affects the interest of the Issuer or the Indenture Trustee in the related Receivable in
the case of a representation and warranty relating to a particular Receivable), the party discovering such breach shall give prompt written notice to the other parties hereto. On the last day of the Collection Period following the Collection Period
during which the Transferor discovers or receives notice of any such breach of any such representation or warranty, if such breach shall not have been cured in all material respects by such last day, the Transferor shall purchase such Receivable
from the Issuer (or from the Depositor, if the Depositor is required to purchase such Receivable pursuant to Section 3.01 of the Transfer and Servicing Agreement) as of such last day at a price equal to the Purchase Amount of such Receivable, which
price the Transferor shall remit in the manner specified in Section 5.05 of the Transfer and Servicing Agreement; provided, that, with respect to the representations set forth in paragraph (xiii), above, such purchase shall be required
with respect to a Receivable as set forth above, but only if any such breach is not cured (it being understood that if the related Lien Certificate or Title Document has been duly applied for from, or filed with, the applicable governmental offices
as evidenced by a copy of the application therefor or acknowledgement of filing thereof, as applicable, the receipt of such Lien Certificate or Title Document shall not be 

  

 9 

 
required to cure a breach of the applicable representation and warranty) within 90 days after the Closing Date. Subject to the indemnification provisions
contained in the last paragraph of Section 4.04, the sole remedy of the Depositor, the Issuer, the Owner Trustee, the Indenture Trustee, the Residual Interestholder and the Noteholders with respect to a breach of representations and
warranties of the Transferor set forth in this Section 3.01 shall be to require the Transferor to purchase the affected Receivables pursuant to this Section 3.01, subject to the conditions contained herein. 
  
 ARTICLE IV 
  
 The Transferor 
  
 SECTION 4.01. Representations of Transferor. The Transferor makes the following representations on which each of the Depositor and the Issuer is
deemed to have relied in acquiring the Receivables. The representations speak as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Receivables, and shall survive the transfer of the Receivables to the
Issuer and the Grant thereof to the Indenture Trustee pursuant to the Indenture. 
  
 (a) Organization and Good Standing. The Transferor is duly organized and validly existing as a federal savings bank in good
standing under the federal laws of the United States, with the necessary banking power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all
relevant times, and has, the necessary banking power, authority and legal right to acquire and own the Receivables. 
  
 (b) Due Qualification. The Transferor is duly qualified to do business as a federal savings bank 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 shall require such qualifications. 
  
 (c) Power and Authority. The Transferor has the necessary banking power and authority to execute and
deliver this Agreement and to carry out its respective terms; the Transferor has full power and authority to transfer and assign the property to be transferred and assigned to the Depositor, and the Transferor has duly authorized such transfer and
assignment by all requisite action; and the execution, delivery and performance of this Agreement by the Transferor has been duly authorized by the Transferor by all requisite action. 
  
 (d) Binding Obligation. This Agreement constitutes a legal, valid and binding obligation of the
Transferor enforceable in accordance with its terms. 
  
 (e) No Violation. The consummation of the transactions contemplated by this Agreement by the Transferor and the fulfillment of the terms hereof by the Transferor do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default under, the federal stock savings bank charter or bylaws of the Transferor, or any indenture, agreement or other instrument to which the Transferor is a party or by
which it is bound; or result in the creation or imposition of any Lien upon any of its 

  

 10 

 
properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents); or violate any law or, to
the best of the Transferor’s knowledge, any order, rule or regulation applicable to the Transferor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the
Transferor or its properties. 
  
 (f) No
Proceedings. To the Transferor’s best knowledge, there are no proceedings or investigations pending or threatened before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the
Transferor or its properties: (i) asserting the invalidity of this Agreement, the Indenture or any of the other Basic Documents, the Notes or the Residual Interest, (ii) seeking to prevent the issuance of the Notes or the Residual Interest or the
consummation of any of the transactions contemplated by this Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Transferor of its
obligations under, or the validity or enforceability of, this Agreement, the Indenture, any of the other Basic Documents, the Notes or the Residual Interest or (iv) which might adversely affect the federal or state income tax attributes of the Notes
or the Residual Interest. 
  
 (g) Chief
Executive Office. The chief executive office and its “home office” (as that term is used in 12 C.F.R. 552.3) of the Transferor is located at 671 North Globe Road, Arlington, Virginia 22203. 
  
 SECTION 4.02. Corporate Existence. During the term of this Agreement,
the Transferor shall keep in full force and effect its existence, rights and franchises as a federal savings bank under the federal laws of United States and shall obtain and preserve its qualification to do business in each jurisdiction in which
such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Basic Documents and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the
transactions contemplated hereby. 
  
 SECTION 4.03. Liability
of the Transferor. The Transferor shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Transferor under this Agreement. 
  
 SECTION 4.04. Indemnification. (a) The Transferor shall indemnify, defend and hold harmless the Depositor against any
taxes that may at any time be asserted against the Depositor with respect to any sales, tangible personal property, privilege or license taxes relating to this Agreement (but not including any taxes asserted with respect to, and as of the date of,
the transfer of the Receivables to the Depositor or the issuance and original sale of the Notes or the Residual Interest, or asserted with respect to ownership of the Receivables, or federal or other income taxes) and costs and expenses in defending
against the same. 
  
 (b) The Transferor shall
indemnify, defend and hold harmless the Depositor and any of the officers, directors, employees and agents of the Depositor from and against any loss, liability or expense incurred by reason of the Transferor’s willful misfeasance, bad faith or

  

 11 

 
negligence in the performance of its duties under this Agreement, or by reason of reckless disregard of its obligations and duties under this Agreement.

  
 (c) The Transferor shall indemnify defend and
hold harmless the Depositor, the Issuer, the Owner Trustee and the Indenture Trustee from and against any loss, damages, penalties, fines, forfeitures, legal fees and related costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, a breach of the representations and warranties of the Transferor contained in this Agreement; except that the Transferor shall not be liable for any indirect damages or for
any loss, damage, penalty, fine, forfeiture, legal fees and related costs, judgments and other costs and expenses due to the willful misfeasance, bad faith or negligence (except for errors in judgment) of the Owner Trustee, the Indenture Trustee or
the Issuer. 
  
 Indemnification under this Section 4.04
shall survive termination of this Agreement and the other Basic Documents and shall include reasonable fees and expenses of counsel and expenses of litigation. If the Transferor shall have made any indemnity payments pursuant to this Section
4.04 and the Person to or on behalf of whom such payments are made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Transferor, without interest. 
  
 SECTION 4.05. Merger or Consolidation of, or Assumption of the Obligations
of, Transferor. Any Person (a) into which the Transferor may be merged or consolidated, (b) which may result from any merger or consolidation to which the Transferor shall be a party or (c) which may succeed to the properties and assets of the
Transferor substantially as a whole, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Transferor under this Agreement, shall be the successor to the Transferor hereunder without the
execution or filing of any document or any further act by any of the parties to this Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made by the Transferor in
Section 3.01 shall have been breached (unless the applicable breach shall have been cured in all material respects, or the applicable Receivable shall have been purchased in accordance herewith), (ii) the Transferor shall have delivered to
the Depositor, the Owner Trustee and the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, (iii) the Transferor shall have delivered to the Owner Trustee and the Indenture Trustee an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary fully to preserve and protect the interest of the Owner Trustee and Indenture Trustee,
respectively, in the Receivables 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) E*TRADE Consumer Finance or the
Transferor shall have delivered notice of such merger, consolidation or assumption to the Rating Agencies. Notwithstanding anything herein to the contrary, the execution of the foregoing agreement of assumption and compliance with clauses
(i), (ii), (iii) and (iv) above shall be conditions to the consummation of the transactions referred to in clauses (a), (b) or (c) above. 
  

 12 

 SECTION 4.06. Limitation on Liability of Transferor and Others. The Transferor and any director,
officer, employee or agent of the Transferor may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Transferor shall not
be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability. 
  
 SECTION 4.07. Notice of Events. The Transferor shall give each of the
Rating Agencies prior written notice of (i) any mergers involving the Transferor, (ii) any amendments to this Agreement and (iii) any assignment under this Agreement as permitted by Sections 4.05 and 5.04 of this Agreement. 

 
 ARTICLE V 
  
 Miscellaneous 
  
 SECTION 5.01. Amendment. (a) This Agreement may be amended by the parties hereto, with the consent of the Indenture Trustee, but without the
consent of any other Person; provided, however, that no such amendment shall be effective unless either (i) the Owner Trustee and the Indenture Trustee shall have been delivered an Opinion of Counsel to the effect that such amendment
shall not adversely affect in any material respect the interests of any Noteholder or the Residual Interestholder, or (ii) the Holders of 100% of the Note Balance of the Notes shall have consented to such amendment. It shall not be necessary for the
consent of Noteholders or the Residual Interestholder pursuant to this Section 5.01 to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof.

  
 (b) Promptly after the execution of any such
amendment or consent, the Depositor shall furnish written notification of the substance of such amendment or consent to the Indenture Trustee and each of the Rating Agencies. 
  
 (c) Prior to the execution of or the consent to any amendment to this Agreement, the Indenture Trustee shall
be entitled to receive and rely upon an Opinion of Counsel stating that the execution of or the consent to such amendment is authorized or permitted by this Agreement. The Indenture Trustee may, but shall not be obligated to, consent to any such
amendment which affects the Indenture Trustee’s own rights, duties or immunities under this Agreement or otherwise. 
  
 SECTION 5.02. Protection of Title; Change of Name, Identity, Corporate Structure or Location, Etc. 
  
 (a) The Transferor shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Depositor, the Issuer and of the Indenture
Trustee in the Receivables and in the proceeds thereof. The Transferor shall deliver (or cause to be delivered) to the Owner Trustee and the Indenture Trustee file-stamped 

  

 13 

 
copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. 
  
 (b) The Transferor shall not change its location, main or
home office, name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed in accordance with paragraph (a) above seriously misleading within the meaning of Section
9-503(a) of the UCC, unless it shall have given the Depositor, the Owner Trustee and the Indenture Trustee at least five days’ prior written notice thereof and shall have promptly filed appropriate amendments to all previously filed financing
statements or continuation statements. 
  
 (c)
The Transferor shall give the Depositor, the Owner Trustee and the Indenture Trustee at least 60 days’ prior written notice of any relocation of its chief executive office, home office or main office or organization in any jurisdiction other
than as a federal savings bank if, as a result of such relocation or organization, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment or new financing statement. 
  
 (d) If at any time the Transferor shall propose to sell, grant a security interest in, or otherwise transfer any interest in recreational
vehicle or marine receivables to any prospective purchaser, lender or other transferee, and the Transferor shall give (or shall cause the Servicer to give) to such prospective purchaser, lender or other transferee computer tapes, records or
printouts (including any restored from backup archives) that, refer in any manner whatsoever to any Receivable, such information shall indicate clearly that such Receivable has been transferred by the Transferor to the Depositor and by the Depositor
to the Issuer and is owned by the Issuer and has been Granted to the Indenture Trustee. 
  
 (e) The Transferor shall cooperate fully and in good faith with the Servicer, the Indenture Trustee and the Boat Mortgage Trustee in order
to maintain and promote the perfection and priority of security interests in the Financed Assets and in order to facilitate enforcement and collection of the Receivables. 
  
 SECTION 5.03. Notices. All demands, notices, directions, communications and instructions upon, to, or by the
Servicer, the Transferor, the Depositor, the Issuer, the Owner Trustee, the Indenture Trustee or the Rating Agencies under this Agreement shall be in writing, personally delivered or mailed by certified mail, return receipt requested, and shall be
deemed to have been duly given upon receipt (a) in the case of the Servicer (so long as E*TRADE Consumer Finance is the Servicer), to E*TRADE Consumer Finance, 3353 Michelson Drive, 2nd Floor, Irvine, California 92612, Attention: Treasurer or Chief Legal Officer, (b) in the case of the Transferor, to E*TRADE Bank, 3353 Michelson Drive,
2nd Floor, Irvine, California 92612, Attention: Senior Vice President, (c) in the case of the Depositor, to ETCF
Asset Funding Corporation, 3355 Michelson Drive, Suite 350, Irvine, California 92612, Attention: President, (d) in the case of the Issuer or the Owner Trustee, at the Corporate Trust Office (as defined in the Trust Agreement), (e) in the case of the
Indenture Trustee, at the Corporate Trust Office, (f) in the case of Standard & Poor’s, to Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10041, Attention of
Asset 

  

 14 

 
Backed Surveillance Group, and (g) in the case of Moody’s, to Moody’s Investors Service, 99 Church Street, New York, New York 10007, Attention:
Moody’s ABS Monitoring Group; or, as to each of the foregoing, at such other address as shall be designated by written notice to the other Persons listed in this Section. 
  
 SECTION 5.04. Assignment. Notwithstanding anything to the contrary contained herein, except as provided in Section
4.05, this Agreement may not be assigned by the Transferor. The Transferor hereby acknowledges and consents to (i) the transfer by the Depositor to the Issuer pursuant to the Transfer and Servicing Agreement of all right, title and interest of
the Depositor in, to and under (but none of the obligations of the Depositor under) the Transferor Sold Property and this Agreement, including the representations and warranties of the Transferor in this Agreement, together with all rights of the
Depositor with respect to any breach thereof, including the right to require the Transferor to purchase Receivables in accordance with this Agreement, (ii) the further mortgage, pledge, assignment and grant of a security interest in such property by
the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Noteholders, and (iii) the other terms of and transactions contemplated by the Transfer and Servicing Agreement and the other Basic Documents. 
  
 SECTION 5.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Transferor, the Depositor, the Servicer, the Issuer, the Owner Trustee, the Indenture Trustee and the Noteholders, and, except as expressly provided in this Agreement, nothing in this Agreement shall be
construed to give to any other Person any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenants, conditions or provisions contained herein. 
  
 SECTION 5.06. 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 5.07. 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 5.08.
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 5.09. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION (AND THE EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF ANY PERSON IN SOLD PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. 
  

 15 

 SECTION 5.10. Nonpetition Covenants. Notwithstanding any prior termination of this Agreement, the
Transferor shall not acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer or the Boat Mortgage 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 Issuer or the Boat Mortgage Trust or any part of its property, or ordering the
winding up or liquidation of the affairs of the Issuer or the Boat Mortgage Trust. Notwithstanding any prior termination of this Agreement, the Transferor shall not acquiesce, petition or otherwise invoke or cause the Depositor to invoke the process
of any court or government authority for the purpose of commencing or sustaining a case against the Depositor 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 Depositor or any part of its property, or ordering the winding up or liquidation of the affairs of the Depositor. 
  

SECTION 5.11. Separate Corporate Existence. Each party hereto hereby acknowledges that the Trust is entering into the transactions contemplated
by the Basic Documents in reliance upon the Depositor’s identity as a legal entity separate from E*TRADE Consumer Finance and the Transferor. Therefore, each of the Transferor and the Depositor shall take all reasonable steps to make it
apparent to third Persons that the Depositor is an entity with assets and liabilities distinct from those of E*TRADE Consumer Finance and the Transferor and that the Depositor is not a division of E*TRADE Consumer Finance, the Transferor or any
other Person. Without limiting the foregoing, each party hereto shall operate and conduct its respective businesses and otherwise act in a manner which is consistent with Section 10.13 of the Transfer and Servicing Agreement. 
  
 SECTION 5.12. Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally: 
  
 (a)
SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER BASIC 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 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 WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; 
  
 (c) AGREES THAT 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 SUCH PERSON AT ITS ADDRESS SET FORTH IN 

  

 16 

 
SECTION 5.03 OR AT SUCH OTHER ADDRESS NOTIFIED TO THE OTHER PARTY TO THIS AGREEMENT PURSUANT THERETO; 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. 
  
 [SIGNATURES FOLLOW] 
  

 17 

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

			
	E*TRADE BANK, as Transferor
		
	By:	 	 
	 	 	 Name:

	 	 	 Title:

	
	 ETCF ASSET FUNDING CORPORATION,
 as
Depositor

		
	By:	 	 
	 	 	 Name:

	 	 	 Title:

  

 18Executive Employment Agreement, dated December 31, 2004

 Exhibit 10.1 
  
 EXECUTIVE EMPLOYMENT AGREEMENT 
  
 This Amended Executive Employment Agreement (the “Agreement”), dated December 31,
2004, is between CREDENCE SYSTEMS CORPORATION (the “Company”) and John C. Batty (“Executive”). 
  

I. POSITION AND RESPONSIBILITIES 
  
 A. Position. Executive shall be employed by the Company for a period of two (2) years from the Effective Date (the “Term”).
Executive is employed by the Company to render services to the Company in the position of Senior Vice President, Chief Financial Officer and Secretary, reporting to the Company’s Chief Executive Officer. Executive shall perform such duties and
responsibilities as are normally related to such position in accordance with the standards of the industry and any additional duties now or hereafter assigned to Executive by the Company. Executive shall abide by the rules, regulations, and
practices as adopted or modified from time to time in the Company’s sole discretion. Executive and the Company may elect to continue Executive’s employment following the end of the Term, upon mutual agreement, on terms to be mutually
agreed by the parties. 
  
 B. Other Activities.
Except upon the prior written consent of the Company, Executive will not, during the Term, (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that
might interfere with Executive’s duties and responsibilities hereunder or create a conflict of interest with the Company. 
  
 C. No Conflict. Executive represents and warrants that his execution of this Agreement, his employment with the Company, and the performance
of his proposed duties under this Agreement shall not violate any obligations he may have to any other employer, person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.

  
 II. COMPENSATION AND BENEFITS 
  
 A. Base Salary. In consideration of the services to be
rendered under this Agreement, the Company shall pay Executive an annual base salary of Two Hundred and Eighty-five Thousand Dollars ($285,000) (“Base Salary”). The Base Salary shall be paid in accordance with the Company’s regularly
established payroll practice. Executive’s Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole
discretion of the Company. 
  
 B. Bonus. Executive shall be
eligible for an annual target incentive bonus equal to Sixty Percent (60%) of his then-current Base Salary (“Target Bonus”), based on Executive’s achievement of performance objectives determined by the Company. 

 C. Initial Stock Option Grant. Contemporaneous with the execution of this Agreement, the Company
shall grant to Executive an option to purchase Two Hundred Fifty Thousand (250,000) shares of the Company’s Common Stock, which option shall vest over a four year period in accordance with the Company’s customary stock option policies and
the terms and conditions of the Company’s 1993 Stock Option Plan. 
  
 D. Benefits. Executive shall be eligible to participate in the benefits made generally available by the Company to similarly-situated executives, in accordance with the benefit plans established by the Company, and as may be
amended from time to time in the Company’s sole discretion. 
  
 E. Expenses. The Company shall reimburse Executive for reasonable business expenses incurred in the performance of Executive’s duties hereunder in accordance with the Company’s expense reimbursement guidelines.

  
 III. AT-WILL EMPLOYMENT; TERMINATION BY COMPANY 
  
 A. At-Will Termination by Company. Executive’s employment
with the Company shall be “at-will” at all times. The Company may terminate Executive’s employment with the Company at any time, without any advance notice, for any reason or no reason at all, notwithstanding anything to the contrary
contained in or arising from any statements, policies or practices of the Company relating to the employment, discipline or termination of its employees. Upon and after such termination, all obligations of the Company under this Agreement shall
cease, except as otherwise provided herein. 
  
 B.
Separation Benefits. Except in situations where the employment of Executive is terminated For Cause, By Death or By Disability (as defined in Section IV below), in the event that the Company terminates Executive’s employment at any
time, Executive will be eligible to receive the following benefits (collectively, “Separation Benefits”) or if the Company fails to continue Executive’s employment following the end of the Term: 
  
 1. an amount equal to (1) One Hundred Percent (100%) of
Executive’s then-current Base Salary plus (2) One Hundred Percent (100%) of Executive’s annual Target Bonus, payable in equal monthly installments over the twelve (12) month period following the date of such termination (“Salary
Continuation Period”); 
  
 2. continued vesting of
Executive’s stock options until the earlier of (a) the end of the Salary Continuation Period or (b) the date Executive begins other employment, and a period of twelve (12) months thereafter to exercise such vested options; 
  
 3. if Executive elects to continue his medical coverage under the
Consolidated Omnibus Reconciliation Act (“COBRA”), the Company shall pay the premiums for Executive’s COBRA coverage until the earlier of (a) the end of the Salary Continuation Period or (b) the date Executive becomes covered under
another employer’s health plan; and 
  

 2 

 4. continued payment of the premiums required to maintain Executive’s coverage under his
Company-provided life insurance policy during the Salary Continuation Period. 
  
 Notwithstanding the foregoing, if Executive begins other employment during the Salary Continuation Period, all vesting of Executive’s stock options shall cease and Executive shall receive an accelerated lump-sum payment of the
remaining payments for the Salary Continuation Period, in lieu of salary continuation. Executive shall not be eligible to participate in the Company’s deferred compensation, 401K, or employee stock purchase plans during the Salary Continuation
Period. 
  
 Executive’s eligibility for the foregoing Separation Benefits is
conditioned on (a) Executive remaining available during the Salary Continuation Period to consult with the Company regarding matters for which he previously had responsibility as a Company executive; (b) Executive having first signed a release
agreement in the form attached as Exhibit A, and (c) Executive’s agreement not to compete with the Company, or its successors or assigns, during the Salary Continuation Period. If Executive engages in any business activity competitive with the
Company or its successors or assigns during the Salary Continuation Period, all Separation Benefits immediately shall cease. 
  
 IV. OTHER TERMINATIONS BY COMPANY 
  
 A. Termination for Cause. For purposes of this Agreement, “For Cause” shall mean: (i) Executive commits a crime involving
dishonesty, breach of trust, or physical harm to any person; (ii) Executive willfully engages in conduct that is in bad faith and materially injurious to the Company, including but not limited to, misappropriation of trade secrets, fraud or
embezzlement; (iii) Executive commits a material breach of this Agreement, which breach is not cured within twenty days after written notice to Executive from the Company; (iv) Executive willfully refuses to implement or follow a lawful policy or
directive of the Company, which breach is not cured within twenty days after written notice to Executive from the Company; or (v) Executive engages in misfeasance or malfeasance demonstrated by a pattern of failure to perform job duties diligently
and professionally. The Company may terminate Executive’s employment For Cause at any time, without any advance notice. The Company shall pay to Executive all compensation to which Executive is entitled up through the date of termination,
subject to any other rights or remedies of the Company under law; and thereafter all obligations of the Company under this Agreement shall cease. 
  
 B. By Death. Executive’s employment shall terminate automatically upon Executive’s death. The Company shall pay to
Executive’s beneficiaries or estate, as appropriate, any compensation then due and owing. Thereafter all obligations of the Company under this Agreement shall cease. Nothing in this Section shall affect any entitlement of Executive’s heirs
or devisees to the benefits of any life insurance plan or other applicable benefits. 
  
 C. By Disability. If Executive becomes eligible for the Company’s long term disability benefits or if, in the sole opinion of the Company, Executive is unable to carry out the responsibilities and
functions of the position held by Executive by reason of any physical or 

  

 3 

 
mental impairment for more than ninety consecutive days or more than one hundred and twenty days in any twelve-month period, then, to the extent permitted by
law, the Company may terminate Executive’s employment. The Company shall pay to Executive all compensation to which Executive is entitled up through the date of termination, and thereafter all obligations of the Company under this Agreement
shall cease. Nothing in this Section shall affect Executive’s rights under any disability plan in which Executive is a participant. 
  
 V. CHANGE OF CONTROL 
  
 A. “Change of Control.” For purposes of this Agreement, “Change of Control” shall mean a change in ownership or control
of the Company effected through a merger, consolidation or acquisition by any person or related group of persons (other than an acquisition by the Company or by a Company-sponsored employee benefit plan or by a person or persons that directly or
indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of securities possessing more than fifty percent of the total
combined voting power of the outstanding securities of the Company. 
  
 B. Termination Following a Change of Control. If the Company terminates Executive’s employment in the absence of Cause, Death, or Disability, and within twelve (12) months following a Change of Control, Executive will be
eligible to receive the Separation Benefits set forth in Section III(B) above, subject to the conditions set forth therein. However, in lieu of the continued stock option vesting provided under Section III(B)(3), Executive would receive full
accelerated vesting, effective as of the date of such termination, of any unvested stock option shares, and twelve (12) months following the end of the Salary Continuation Period to exercise such options. 
  
 VI. TERMINATION BY EXECUTIVE 
  
 A. At-Will Termination By Executive. Executive may terminate
his employment with the Company at any time for any reason or no reason at all, upon four (4) weeks’ advance written notice. During such notice period Executive shall continue to diligently perform all of Executive’s duties hereunder. The
Company shall have the option, in its sole discretion, to make Executive’s termination effective at any time prior to the end of such notice period as long as the Company pays Executive all compensation to which Executive is entitled up through
the last day of the four (4) week notice period. Thereafter all obligations of the Company shall cease. 
  
 B. Termination for Good Reason After Change of Control. Executive’s termination shall be for “Good Reason” if Executive
provides written notice to the Company of the Good Reason within six (6) months of the event constituting Good Reason and provides the Company with a period of twenty (20) days to cure the Good Reason and the Company fails to cure the Good Reason
within that period. For purposes of this Agreement, “Good Reason” shall mean any of the following events if (i) the event is effected by the Company without the consent of Executive, and (ii) such event occurs after a Change in Control:
(A) a change in Executive’s position with Employer which materially reduces Executive’s level of responsibility; (B) a material reduction in Executive’s Base Salary, except for reductions that are comparable to 

  

 4 

 
reductions generally applicable to similarly situated executives of the Company; or (C) a relocation of Executive’s principal place of employment by
more than fifty miles. In such event Executive may terminate his employment for Good Reason, in which case Executive will be eligible to receive the Separation Benefits set forth in Section III(B) above, subject to the conditions set forth therein.

  
 VII. TERMINATION OBLIGATIONS 
  
 A. Return of Property. Executive agrees that all property
(including without limitation all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials) furnished to or created or prepared by Executive incident to Executive’s employment belongs to
the Company and shall be promptly returned to the Company upon termination of Executive’s employment. 
  
 B. Resignation and Cooperation. Upon termination of Executive’s employment, Executive shall be deemed to have resigned from all offices
and directorships then held with the Company. Following any termination of employment, Executive shall cooperate with the Company in the winding up of pending work on behalf of the Company and the orderly transfer of work to other employees.
Executive shall also cooperate with the Company in the defense of any action brought by any third party against the Company that relates to Executive’s employment by the Company. 
  
 VIII. INVENTIONS AND PROPRIETARY INFORMATION; PROHIBITION ON THIRD PARTY INFORMATION 
  
 A. Proprietary Information Agreement. Executive acknowledges
that he has signed and remains bound by the terms of the Company’s Proprietary Information and Inventions Agreement, which is attached as Exhibit B (“Proprietary Information Agreement”). 
  
 B. Non-Solicitation. Executive acknowledges that because of
Executive’s position in the Company, Executive will have access to material intellectual property and confidential information. During the term of Executive’s employment and for one year thereafter, in addition to Executive’s other
obligations hereunder or under the Proprietary Information Agreement, Executive shall not, for Executive or any third party, directly or indirectly (a) divert or attempt to divert from the Company any business of any kind, including without
limitation the solicitation of or interference with any of its customers, clients, members, business partners or suppliers, or (b) solicit or otherwise induce any person employed by the Company to terminate his employment. 
  
 C. Non-Disclosure of Third Party Information. Executive
represents and warrants and covenants that Executive shall not disclose to the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others at any time, including but not limited to any proprietary
information or trade secrets of any former employer, if any; and Executive acknowledges and agrees that any violation of this provision shall be grounds for Executive’s immediate termination and could subject Executive to substantial civil
liabilities and criminal penalties. Executive further specifically and expressly acknowledges that no officer or other employee or representative of the Company has requested or instructed Executive to disclose or use any such third party
proprietary information or trade secrets. 
  

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 IX. ARBITRATION 
  
 Executive agrees to sign and be bound by the terms of the Company’s Arbitration Agreement, which is attached as Exhibit C. 
  
 X. AMENDMENTS; WAIVERS; REMEDIES 
  
 This Agreement may not be amended or waived except by a writing signed by
Executive and by a duly authorized representative of the Company other than Executive. Failure to exercise any right under this Agreement shall not constitute a waiver of such right. Any waiver of any breach of this Agreement shall not operate as a
waiver of any subsequent breaches. All rights or remedies specified for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable law. 
  
 XI. ASSIGNMENT; BINDING EFFECT 
  
 A. Assignment. The performance of Executive is personal
hereunder, and Executive agrees that Executive shall have no right to assign and shall not assign or purport to assign any rights or obligations under this Agreement. This Agreement may be assigned or transferred by the Company; and nothing in this
Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially all of its assets. 
  
 B. Binding Effect. Subject to the foregoing restriction on assignment by Executive, this Agreement shall inure to the benefit of and be
binding upon each of the parties; the affiliates, officers, directors, agents, successors and assigns of the Company; and the heirs, devisees, spouses, legal representatives and successors of Executive. 
  
 XII. NOTICES 
  
 All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have
been duly given if delivered: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by United States first class registered or certified mail, return receipt requested, to the principal address of the other party, as set
forth below. The date of notice shall be deemed to be the earlier of (i) actual receipt of notice by any permitted means, or (ii) five business days following dispatch by overnight delivery service or the United States Mail. Executive shall be
obligated to notify the Company in writing of any change in Executive’s address. Notice of change of address shall be effective only when done in accordance with this paragraph. 
  
 Company’s Notice Address: 
  
 Credence Systems Corporation 
 1421 California Circle 
 Milpitas, CA 95035 
  

 6 

 Executive’s Notice Address: 
  
 1044 Rhine Way 
  
 Pleasanton, CA 94566 
  
 XIII. SEVERABILITY 
  
 If
any provision of this Agreement shall be held by a court or arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and
effect. In the event that the time period or scope of any provision is declared by a court or arbitrator of competent jurisdiction to exceed the maximum time period or scope that such court or arbitrator deems enforceable, then such court or
arbitrator shall reduce the time period or scope to the maximum time period or scope permitted by law. 
  
 XIV. TAXES 
  
 All amounts
paid under this Agreement (including without limitation Base Salary, Bonus, or Separation Benefits) shall be paid less all applicable state and federal tax withholdings and any other withholdings required by any applicable jurisdiction. 

 
 XV. GOVERNING LAW 
  
 This Agreement shall be governed by and construed in accordance with the laws of the State of California. 
  
 XVI. INTERPRETATION 
  
 This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party.
Sections and section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement. Whenever the context requires, references to the singular shall include
the plural and the plural the singular. 
  
 XVII. OBLIGATIONS SURVIVE
TERMINATION OF EMPLOYMENT 
  
 Executive agrees that any and
all of Executive’s obligations under this agreement, including but not limited to Exhibits B and C, shall survive the termination of employment and the termination of this Agreement. 
  

 7 

 XVIII. COUNTERPARTS 
  
 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall
constitute one and the same instrument. 
  
 XIX. AUTHORITY 
  
 Each party represents and warrants that such party has the right, power and
authority to enter into and execute this Agreement and to perform and discharge all of the obligations hereunder; and that this Agreement constitutes the valid and legally binding agreement and obligation of such party and is enforceable in
accordance with its terms. 
  
 XX. ENTIRE AGREEMENT 
  
 This Agreement is intended to be the final, complete, and exclusive
statement of the terms of Executive’s employment by the Company and may not be contradicted by evidence of any prior or contemporaneous statements or agreements, except for agreements specifically referenced herein (including the Executive
Proprietary Information and Inventions Agreement attached as Exhibit B, the Arbitration Agreement attached as Exhibit C, and the Stock Plan and Stock Option Agreement of the Company). To the extent that the practices, policies or procedures of the
Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control. Any subsequent change in Executive’s duties, position, or compensation will not affect the
validity or scope of this Agreement. 
  
 XXI. EXECUTIVE ACKNOWLEDGEMENT

  
 EXECUTIVE ACKNOWLEDGES EXECUTIVE HAS HAD THE OPPORTUNITY
TO CONSULT LEGAL COUNSEL CONCERNING THIS AGREEMENT, THAT EXECUTIVE HAS READ AND UNDERSTANDS THE AGREEMENT, THAT EXECUTIVE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EXECUTIVE HAS ENTERED INTO IT FREELY BASED ON EXECUTIVE’S OWN JUDGMENT AND
NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT. 
  
 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. 
  

 8 

			
	                 CREDENCE SYSTEMS
CORPORATION
	 	                JOHN C. BATTY
		
	 /s/ Graham J. Siddall

	 	 /s/ John C. Batty

	Signature	 	Signature
		
	 Title: Chairman of the Board
           and Chief Executive Officer
	 	 

  

 9

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