Document:

Exhibit 4.5.1

                               SERIES SUPPLEMENT

                 CORPORATE BACKED CALLABLE TRUST CERTIFICATES

               J.C. PENNEY DEBENTURE-BACKED SERIES 2007-1 TRUST

                                    between

                              SELECT ASSET INC.,

                                 as Depositor,

                                      and

                        U.S. BANK NATIONAL ASSOCIATION,

                                  as Trustee,

                 CORPORATE BACKED CALLABLE TRUST CERTIFICATES

                         Dated as of January 31, 2007

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<TABLE>
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                                                  Table of Contents

                                                                                                               Page

<S>         <C>                                                                                                 <C>
Section 1.  Incorporation of Standard Terms.......................................................................1

Section 2.  Definitions...........................................................................................1

Section 3.  Designation of Trust and Certificates.................................................................4

Section 4.  Trust Certificates....................................................................................4

Section 5.  Distributions.........................................................................................5

Section 6.  Miscellaneous.........................................................................................6

Section 7.  Governing Law.........................................................................................7

Section 8.  Counterparts..........................................................................................7

Section 9.  Amendments............................................................................................7

SCHEDULE I     J.C. PENNEY DEBENTURE-BACKED SERIES 2007-1 UNDERLYING SECURITIES SCHEDULE
EXHIBIT A-1    FORM OF TRUST CERTIFICATE CLASS A-1
EXHIBIT A-2    FORM OF TRUST CERTIFICATE CLASS A-2
EXHIBIT B      FORM OF WARRANT AGENT AGREEMENT
EXHIBIT C      FORM OF INVESTMENT LETTER
</TABLE>

                                      i
<PAGE>

                               SERIES SUPPLEMENT

                 CORPORATE BACKED CALLABLE TRUST CERTIFICATES

                  J.C. PENNEY DEBENTURE-BACKED SERIES 2007-1

            SERIES SUPPLEMENT, J.C. Penney Debenture-Backed Series 2007-1
Trust, dated as of January 31, 2007 (the "Series Supplement"), by and between
Select Asset Inc., as Depositor (the "Depositor"), and U.S. Bank National
Association, as Trustee (the "Trustee").

                             W I T N E S S E T H:

            WHEREAS, the Depositor desires to create the Trust designated
herein (the "Trust") by executing and delivering this Series Supplement, which
shall incorporate the terms of the Standard Terms for Trust Agreements, dated
as of the date hereof (the "Standard Terms" and, together with this Series
Supplement, the "Trust Agreement" in respect of the Trust), by and between the
Depositor and the Trustee, as modified by this Series Supplement;

            WHEREAS, the Depositor desires to deposit into the Trust the
Underlying Securities described on Schedule I attached hereto, the general
terms of which are described in the Prospectus Supplement under the heading
"Description of the Deposited Assets--Underlying Securities;"

            WHEREAS, in connection with the creation of the Trust and the
deposit therein of the Underlying Securities, it is desired to provide for the
issuance of trust certificates evidencing undivided interests in the Trust;
and

            WHEREAS, the Trustee has joined in the execution of the Standard
Terms and this Series Supplement to evidence the acceptance by the Trustee of
the Trust.

            NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants expressed herein, it is hereby agreed by and between the
Depositor and the Trustee as follows:

            Section 1. Incorporation of Standard Terms. Except as otherwise
provided herein, all of the provisions of the Standard Terms are hereby
incorporated herein by reference in their entirety, and this Series Supplement
and the Standard Terms shall form a single agreement between the parties. In
the event of any inconsistency between the provisions of this Series
Supplement and the provisions of the Standard Terms, the provisions of this
Series Supplement will control with respect to the J.C. Penney
Debenture-Backed Series 2007-1 Certificates and the transactions described
herein.

            Section 2. Definitions.

            (a) Except as otherwise specified herein or as the context may
otherwise require, the following terms shall have the respective meanings set
forth below for all purposes under this Series Supplement. Capitalized terms
used but not defined herein shall have the meanings

<PAGE>

assigned to them in the Standard Terms. Terms defined in the Standard Terms
but not used herein shall not, unless otherwise indicated, apply to this
Series Supplement.

            "Allocation Discount Rate" shall mean (x) in the case of the P&I
Class and the calculation of the P&I Class Allocation with respect thereto,
7.00% per annum, and (y) in the case of the IO Strip Class and the calculation
of the IO Strip Class Allocation with respect thereto, 7.00% per annum.

            "Call Date" shall have the meaning set forth in the Warrant Agent
Agreement.

            "Call Price" shall mean the purchase price of an Underlying
Security to be paid by the holder of a Call Warrant to the Trust in connection
with its exercise of a Call Warrant as specified in the Warrant Agent
Agreement pursuant to which the applicable Call Warrant was issued.

            "Certificate Principal Balance" shall have the meaning specified
in Section 3 hereof.

            "Certificates" shall have the meaning specified in Section 3
hereof.

            "Class A-1 Certificates" shall mean the Certificates, in the form
attached hereto as Exhibit A-1, to be issued by the Trust representing a
proportionate undivided beneficial ownership interest in certain distributions
to be made by the Trust and having the characteristics described herein and in
the Certificates. The Class A-1 Certificates shall be a P&I Class for purposes
of the Trust Agreement.

            "Class A-2 Certificates" shall mean the Certificates, in the form
attached hereto as Exhibit A-2, to be issued by the Trust representing a
proportionate undivided beneficial ownership interest in certain distributions
to be made by the Trust and having the characteristics described herein and in
the Certificates. The Class A-2 Certificates shall be an IO Strip Class for
purposes of the Trust Agreement.

            "Class A-2 Rate" shall have the meaning set forth in Section 3
hereof.

            "Closing Date" shall mean January 31, 2007.

            "Collection Period" shall mean, (i) with respect to each March
Distribution Date, the period beginning on the day after the September
Distribution Date of the prior year (or in the case of the first Collection
Period, the Closing Date) and ending on such March Distribution Date,
inclusive, and (ii) with respect to each September Distribution Date, the
period beginning on the day after the March Distribution Date of such year and
ending on such September Distribution Date, inclusive; provided, however, that
clauses (i) and (ii) shall be subject to Section 4.01(j) of the Standard
Terms.

            "Depository" shall mean The Depository Trust Company, its nominees
and their respective successors.

                                      2
<PAGE>

            "Distribution Date" shall mean March 1 and September 1 of each
year (or if such date is not a Business Day, the next succeeding Business
Day), commencing on the Initial Distribution Date, and ending on the earlier
of the Final Scheduled Distribution Date and any date on which all Underlying
Securities are redeemed, prepaid or liquidated in whole for any reason other
than at their maturity.

            "Final Scheduled Distribution Date" shall mean the Distribution
Date in March 2097.

            "Initial Distribution Date" shall mean the Distribution Date in
March 2007.

            "Maturity Date" shall have the meaning specified in Schedule I
hereto.

            "Prepaid Ordinary Expenses" shall be zero for this Series.

            "Prospectus Supplement" shall mean the final Prospectus
Supplement, dated January 30, 2007, relating to the offering of the Class A-1
Certificates.

            "Rating Agencies" shall mean Moody's and S&P.

            "Securities Intermediary" shall mean initially, U.S. Bank National
Association.

            "Series" shall mean Corporate Backed Callable Trust Certificates,
J.C. Penney Debenture-Backed Series 2007-1.

            "Trust Property" shall mean the Underlying Securities described on
Schedule I hereto, the Certificate Account and any additional Underlying
Securities sold to the Trust pursuant to Section 2.01(g) of the Standard
Terms.

            "Underlying Securities" shall mean $55,000,000 aggregate principal
amount of 7 5/8% Debentures due 2097 issued by the Underlying Securities
Issuer, as set forth in Schedule I attached hereto.

            "Underlying Securities Guarantor" shall mean J.C. Penney Company,
Inc.

            "Underlying Securities Events of Default" shall mean, any event of
default on the Underlying Securities under the Underlying Securities Issuance
Agreement.

            "Underlying Securities Issuance Agreement" shall mean the
Indenture, dated as of April 1, 1994, between the Underlying Securities Issuer
and U. S. Bank National Association, as successor to First Trust of
California, National Association, successor trustee to Bank of America
National Trust and Savings Association and predecessor trustee to U.S. Bank,
as supplemented and pursuant to which the Underlying Securities were issued.

            "Underlying Securities Issuer" shall mean J.C. Penney Corporation,
Inc.

            "Underlying Securities Trustee" shall mean U. S. Bank National
Association, as successor to First Trust of California, National Association.

                                      3
<PAGE>

            "Underwriter" shall mean Lehman Brothers Inc. acting for itself
and as representative of RBC Dain Rauscher Inc.

            "Warrant Agent Agreement" shall mean that certain Warrant Agent
Agreement, dated as of the date hereof, between the Depositor and U.S. Bank
National Association, as Warrant Agent and as Trustee, as the same may be
amended from time to time.

            Section 3. Designation of Trust and Certificates. The Trust
created hereby shall be known as the "Corporate Backed Callable Trust
Certificates, J.C. Penney Debenture-Backed Series 2007-1 Trust." The
Certificates evidencing certain undivided ownership interests therein shall be
known as "Corporate Backed Callable Trust Certificates, J.C. Penney
Debenture-Backed Series 2007-1." The Certificates shall consist of the Class
A-1 Certificates and the Class A-2 Certificates (together, the
"Certificates").

            (a) The Class A-1 Certificates shall be held through the
Depository in book-entry form and shall be substantially in the form attached
hereto as Exhibit A-1. The Class A-2 Certificates shall initially be held
through the Depository in book-entry form and, as set forth in Section 5.04(l)
of the Standard Terms, shall be held subsequent to the Closing Date in
physical form or through the Depository in book-entry form and shall be
substantially in the form attached hereto as Exhibit A-2. The Class A-1
Certificates shall be issued in denominations of $25. The Class A-2
Certificates shall be issued in minimum notional denominations of $100,000 and
in integral multiples of $1 in excess thereof; provided, however, that on any
Call Date on which a Warrant Holder shall purchase Underlying Securities in
connection with the exercise of a Call Warrant in accordance with the
provisions of Section 4.08 of the Standard Terms, Certificates may be issued
in other denominations. Except as provided in the Standard Terms, the Trust
shall not issue additional Certificates or incur any indebtedness.

            (b) The Class A-1 Certificates shall consist initially of
2,200,000 Certificates having an initial aggregate certificate principal
balance (the "Certificate Principal Balance") of $55,000,000. The Class A-2
Certificates, which are an IO Strip Class of Certificates, shall have an
initial aggregate Notional Amount of $55,000,000.

            (c) The holders of the Class A-1 Certificates will be entitled to
receive on each Distribution Date the interest, if any, received on the
Underlying Securities, to the extent necessary to pay interest at a rate of
7.00% per annum (the "Class A-1 Rate") on the outstanding Certificate
Principal Balance of the Class A-1 Certificates. The holders of the Class A-2
Certificates will be entitled to receive on each Distribution Date the
interest, if any, received on the Underlying Securities, to the extent
necessary to pay interest at a rate of 0.625% per annum (the "Class A-2 Rate")
on the outstanding Notional Amount thereof.

            Section 4. Trust Certificates. The Trustee hereby acknowledges
receipt, on or prior to the Closing Date, of:

            (a) the Underlying Securities set forth on Schedule I hereto and
the related Warrant Agent Agreement; and

            (b) all documents required to be delivered to the Trustee pursuant
to Section 2.01 of the Standard Terms.

                                      4
<PAGE>

            Section 5. Distributions.

            (a) Except as otherwise provided in Section 5(b) hereof, and in
Sections 4.01(c), 4.01(d), 4.01(g), 4.01(h) and 4.01(i) of the Standard Terms,
on each applicable Distribution Date, the Trustee shall apply Available Funds
in the Certificate Account as follows:

            (i) The Trustee will pay the interest portion of Available Funds:

                  (1) first, to the Trustee, as reimbursement for any
            Extraordinary Trust Expenses incurred by the Trustee in accordance
            with Section 7.06(b) of the Standard Terms and approved by 100% of
            the Certificateholders; and

                  (2) second, to the holders of the Class A-1 Certificates and
            the Class A-2 Certificates, accrued and unpaid interest on each
            such Class (as determined in accordance with Section 3(c)) pro
            rata in proportion to their entitlements thereto.

            (ii) the Trustee will pay the principal portion of Available
      Funds:

                  (1) first, to the Trustee, as reimbursement for any
            remaining Extraordinary Trust Expenses incurred by the Trustee in
            accordance with Section 7.06(b) of the Standard Terms and approved
            by 100% of the Certificateholders; and

                  (2) second, to the holders of the Class A-1 Certificates, an
            amount equal to the Certificate Principal Balance of the Class A-1
            Certificates (the Class A-2 Certificates are not entitled to
            distributions of principal).

            (iii) any Available Funds remaining in the Certificate Account
      after the payments set forth in clauses 5(a)(i) and 5(a)(ii) above shall
      be paid to the Trustee as reasonable compensation for services rendered
      to the Depositor, up to $1,000.

            (iv) the Trustee will pay any Available Funds remaining in the
      Certificate Account after the distributions in clauses 5(a)(i) through
      5(a)(iii) above to the holders of the Class A-1 Certificates and Class
      A-2 Certificates pro rata in accordance with the ratio of the P&I Class
      Allocation to the IO Strip Class Allocation.

Any funds received in respect of the Underlying Securities from the Underlying
Securities Guarantor shall be included in Available Funds on the related
Distribution Date or Special Distribution Date. Any portion of the Available
Funds (i) that does not constitute principal of, or interest on, the
Underlying Securities, (ii) that is not received in connection with (A) an
exercise of a Call Warrant related to the Underlying Securities or (B) a
tender offer, redemption, prepayment or liquidation of the Underlying
Securities and (iii) for which allocation by the Trustee is not otherwise
contemplated by this Series Supplement, shall be remitted by the Trustee to
the holders of the Class A-1 Certificates and the holders of the Class A-2
Certificates in accordance with the ratio of the P&I Class Allocation to the
IO Strip Class Allocation.

            (b) Notwithstanding the foregoing, if the Underlying Securities:

                                      5
<PAGE>

                  (i) are purchased from the Trust in connection with an
            exercise of a Call Warrant relating to the Underlying Securities,
            the Trustee shall apply the Call Price to the payment of the
            redemption price of the Class A-1 and/or Class A-2 Certificates in
            accordance with the provisions of Section 6 hereof;

                  (ii) are redeemed, prepaid or liquidated, in whole or in
            part, due to the occurrence of an Underlying Securities Event of
            Default or an SEC Reporting Failure, Available Funds will be
            allocated to the holders of the Class A-1 Certificates and the
            holders of the Class A-2 Certificates in accordance with the ratio
            of the P&I Class Allocation to the IO Strip Class Allocation; and

                  (iii) are redeemed, prepaid or liquidated in whole or in
            part for any reason other than due to (A) an exercise of a Call
            Warrant related to the Underlying Securities or (B) the occurrence
            of an Event of Default, an SEC Reporting Failure, or the Final
            Scheduled Distribution Date, the Trustee shall apply Available
            Funds in the manner described in Section 4.01(g) of the Standard
            Terms in the following order of priority:

                  (1)   first, to the Trustee, as reimbursement for any
                        Extraordinary Trust Expenses incurred by the Trustee
                        in accordance with Section 7.06(b) of the Standard
                        Terms and approved by 100% of the Certificateholders;

                  (2)   second, to the holders of the Class A-1 Certificates
                        and the holders of the Class A-2 Certificates, an
                        amount equal to any accrued and unpaid interest
                        thereon pro rata in proportion to their entitlements
                        thereto;

                  (3)   third, to the holders of the Class A-1 Certificates,
                        pro rata in proportion to their outstanding
                        Certificate Principal Balances;

                  (4)   fourth, to the Class A-2 Certificates, pro rata, an
                        amount equal to the IO Strip Class Allocation;

                  (4)   fifth, to the Trustee, as reasonable compensation for
                        services rendered to the Depositor, any remainder up
                        to $1,000; and

                  (5)   sixth, to the holders of the Class A-1 Certificates
                        and the Class A-2 Certificates pro rata in proportion
                        to the ratio of the P&I Class Allocation to the IO
                        Strip Class Allocation.

For the avoidance of doubt, with respect to any Optional Exchange of
Certificates for Underlying Securities on a Call Date pursuant to Section
4.06(b)(ix) of the Standard Terms, if the Trustee has identified any partial
demands from two or more Certificateholders that, in the aggregate, represent
an even multiple of the minimum denomination for the Underlying Securities, it
shall liquidate its interest in the Underlying Securities and distribute
liquidation proceeds to such Certificateholders.

            Section 6. Mandatory Redemption Upon Exercise of Call Warrants. On
any Call Date on which a Call Warrant Holder purchases Underlying Securities
from the Trust in connection with an exercise of a Call Warrant, a principal
amount of Class A-1 Certificates and a Notional

                                      6
<PAGE>

Amount of Class A-2 Certificates equal, in each case, to the principal amount
of the Underlying Securities so purchased shall be redeemed at a redemption
price equal to (i) with respect to each Class A-1 Certificate being redeemed,
its par value (i.e., an amount equal to $25 per Class A-1 Certificate) plus
any accrued and unpaid interest to the Call Date, and (ii) with respect to
each Class A-2 Certificate being redeemed, the present value of all amounts
payable on such Notional Amount of Class A-2 Certificates for the period from
the related Call Date to the Final Scheduled Distribution Date using a
discount rate of 8.65% per annum (assuming no delinquencies, deferrals,
redemptions or prepayments on such called Underlying Securities) plus accrued
and unpaid interest to the date of redemption on the Notional Amount of such
Class A-2 Certificates; provided that the exercising Call Warrant holder pays
the Call Price to the Trustee on or prior to such Call Date. In the event that
less than all of the Underlying Securities are purchased at any time, the
Trustee or DTC will select the Class A-1 Certificates and Class A-2
Certificates to be redeemed by lot from first, the Class A-1 Certificates to
be redeemed by lot from among all of the Class A-1 Certificates then
outstanding and, second, if the aggregate principal amount of Underlying
Securities purchased exceeds the aggregate principal balance of the Class A-1
Certificates outstanding as of the Call Date, the Class A-2 Certificates to be
redeemed by lot from among all of the Class A-2 Certificates then outstanding.

            Section 7. Miscellaneous.

            (a) All directions, demands and notices hereunder shall be in
writing and shall be delivered as set forth in the Standard Terms (unless
written notice is otherwise provided to the Trustee).

            Section 8. Governing Law. THIS SERIES SUPPLEMENT AND THE
TRANSACTIONS DESCRIBED HEREIN SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CHOICE OF LAWS PROVISIONS THEREOF.

            Section 9. Counterparts. This Series Supplement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
and all such counterparts shall constitute but one and the same instrument.

            Section 10. Amendments. Notwithstanding anything in the Trust
Agreement to the contrary, in addition to the other restrictions on
modification and amendment contained therein, the Trustee shall not enter into
any amendment or modification of the Trust Agreement which would adversely
affect in any material respect the interests of the holders of any class of
Certificates without the consent of the holders of 100% of such class of
Certificates; provided, however, that no such amendment or modification will
be permitted which would cause the Trust to be taxed as an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes. Unless otherwise agreed, the Trustee shall provide five Business
Days written notice to each Rating Agency before entering into any amendment
or modification of the Trust Agreement pursuant to this Section 10.

                                      7
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Series
Supplement to be duly executed by their respective authorized officers as of
the date first written above.

                                    SELECT ASSET INC.,
                                    as Depositor

                                    By:    /s/ Charles M. Weaver
                                        ----------------------------------------
                                        Name:  Charles M. Weaver
                                        Title: Senior Vice President

                                    U.S. BANK NATIONAL ASSOCIATION,
                                    not in its individual capacity but solely as
                                    Trustee on behalf of the Corporate Backed
                                    Callable Trust Certificates, J.C. Penney
                                    Debenture-Backed Series 2007-1 Trust

                                    By:    /s/ David J. Kolibachuk
                                        ----------------------------------------
                                        Name:  David J. Kolibachuk
                                        Title: Vice President

                                      8
<PAGE>

                                                                    SCHEDULE I

               J.C. PENNEY DEBENTURE-BACKED SERIES 2007-1 TRUST

                        UNDERLYING SECURITIES SCHEDULE

Underlying Securities:                  7 5/8% Debentures due March 1, 2097

Issuer:                                 J.C. Penney Corporation, Inc.

Underlying Securities Guarantor:        J.C. Penney Company, Inc.

CUSIP Number:                           708160BL9

Principal Amount Deposited:             $55,000,000

Original Issue Date:                    February 20, 1997

Principal Amount of
Underlying Securities
Originally Issued:                      $500,000,000

Maturity Date:                          March 1, 2097

Interest Rate:                          7 5/8%

Interest Payment Dates:                 March 1 and September 1

                                     I-1
<PAGE>

                                  EXHIBIT A-1
                      FORM OF TRUST CERTIFICATE CLASS A-1

                             CLASS A-1 CERTIFICATE

NUMBER 1                                        2,200,000 $25 PAR CERTIFICATES
                                                                CUSIP NO. [__]

SEE REVERSE FOR CERTAIN DEFINITIONS

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS CERTIFICATE REPRESENTS A PROPORTIONATE UNDIVIDED BENEFICIAL OWNERSHIP
INTEREST IN THE TRUST AND DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE TRUST ASSETS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.

THE CERTIFICATEHOLDER, BY ITS ACCEPTANCE OF THIS CERTIFICATE, COVENANTS AND
AGREES TO TENDER ANY AND ALL CERTIFICATES SELECTED FOR REDEMPTION TO THE
TRUSTEE UPON THE WARRANT HOLDER'S EXERCISE OF CALL WARRANTS AND PAYMENT OF THE
CALL PRICE FOR THE RELATED UNDERLYING SECURITIES IN ACCORDANCE WITH THE
PROVISIONS HEREOF AND OF THE WARRANT AGENT AGREEMENT.

                                    A-1-1
<PAGE>

                               SELECT ASSET INC.

                               2,200,000 $25 PAR

                 CORPORATE BACKED CALLABLE TRUST CERTIFICATES,

                  J.C. PENNEY DEBENTURE-BACKED SERIES 2007-1

7.00% INTEREST RATE

evidencing a proportionate undivided beneficial ownership interest in the
Trust, as defined below, the property of which consists principally of
$55,000,000 aggregate principal amount of 7 5/8% Debentures due 2097, issued
by J.C. Penney Corporation, Inc (the "Underlying Securities Issuer") and all
payments received thereon (the "Trust Property"), deposited in trust by Select
Asset Inc. (the "Depositor").

      THIS CERTIFIES THAT CEDE & CO. is the registered owner of 2,200,000
Class A-1 Certificates issued by the Corporate Backed Trust Certificates, J.C.
Penney Debenture-Backed Series 2007-1 Trust (the "Trust"), having an aggregate
Certificate Principal Balance of $55,000,000, representing a nonassessable,
fully-paid, proportionate undivided beneficial ownership interest in the J.C.
Penney Debenture-Backed Series 2007-1 Trust, formed by the Depositor.

      The Trust was created pursuant to a Standard Terms for Trust Agreements,
dated as of November 9, 2006 (the "Standard Terms"), between the Depositor and
U.S. Bank National Association, not in its individual capacity but solely as
Trustee (the "Trustee"), as supplemented by the Series Supplement in respect
of the Corporate Backed Callable Trust Certificates, J.C. Penney
Debenture-Backed Series 2007-1 Trust, dated as of January 31, 2007 (the
"Series Supplement" and, together with the Standard Terms, the "Trust
Agreement"), between the Depositor and the Trustee. This Certificate does not
purport to summarize the Trust Agreement and reference is hereby made to the
Trust Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and obligations of the Trustee with respect hereto. A copy of the Trust
Agreement may be obtained from the Trustee by written request sent to the
Corporate Trust Office. Capitalized terms used but not defined herein have the
meanings assigned to them in the Trust Agreement.

      This Certificate is one of the duly authorized Certificates designated
as the "Corporate Backed Callable Trust Certificates, J.C. Penney
Debenture-Backed Series 2007-1, Class A-1" (herein called the "Certificates").
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The Trust Property consists of: (i) Underlying Securities
described in the Trust Agreement, and (ii) all payments on or collections in
respect of the Underlying Securities accrued on or after January 31, 2007,
together with any and all income, proceeds and payments with respect thereto;
provided, however, that any income from the investment of Trust funds in
certain permitted investments ("Eligible Investments") does not constitute
Trust Property.

                                    A-1-2
<PAGE>

      Subject to the terms and conditions of the Trust Agreement (including
the availability of funds for distributions) and until the obligation created
by the Trust Agreement shall have terminated in accordance therewith,
distributions will be made on each Distribution Date, to the Person in whose
name this Certificate is registered on the applicable Record Date, in an
amount equal to such Certificateholder's proportionate undivided beneficial
ownership interest in the amount required to be distributed to the Holders of
the Certificates on such Distribution Date. The Record Date applicable to any
Distribution Date is the close of business on the day immediately preceding
such Distribution Date (whether or not a Business Day). If a payment with
respect to the Underlying Securities is made to the Trustee after the date on
which such payment was due, then the Trustee will distribute any such amounts
received on the next occurring Business Day.

      Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not, until the date which is one
year and one day after the termination of the Trust, institute against the
Trust, or join in any institution against the Trust of, any bankruptcy
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates or the Trust
Agreement.

      Distributions made on this Certificate will be made as provided in the
Trust Agreement by the Trustee by wire transfer in immediately available
funds, or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the
making of any notation hereon, except that with respect to Certificates
registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee shall be Cede & Co.), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the Corporate
Trust Office or such other location as may be specified in such notice.

      Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

      Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Certificate shall not
entitle the Holder hereof to any benefit under the Trust Agreement or be valid
for any purpose.

      THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.

                                    A-1-3
<PAGE>

      IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.

                                    CORPORATE BACKED CALLABLE TRUST
                                    CERTIFICATES, J.C. PENNEY
                                    DEBENTURE-BACKED SERIES 2007-1
                                    TRUST

                                    By:  U.S. Bank National Association
                                    not in its individual capacity but solely as
                                    Trustee,

                                    By:
                                        ------------------------------------
                                        Authorized Signatory

Dated:  January 31, 2007

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Corporate Backed Callable Trust Certificates, J.C. Penney
Debenture-Backed Series 2007-1, described in the Trust Agreement referred to
herein.

U.S. Bank National Association
not in its individual capacity but solely as Trustee,

By:
   ---------------------------------
     Authorized Signatory

                                    A-1-4
<PAGE>

                           (REVERSE OF CERTIFICATE)

The Certificates are limited in right of distribution to certain payments and
collections respecting the Underlying Securities, all as more specifically set
forth herein and in the Trust Agreement. The registered Holder hereof, by its
acceptance hereof, agrees that it will look solely to the Trust Property (to
the extent of its rights therein) for distributions hereunder.

The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor and the Trustee and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor and the Trustee with the consent
of the Holders of Class A-1 Certificates in the manner set forth in the Series
Supplement and the Standard Terms. Any such consent by the Holder of this
Certificate (or any predecessor Certificate) shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not a notation of such consent is made upon this
Certificate. The Trust Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of
the Certificates.

The Certificates are issuable in fully registered form only in denominations
of $100,000.

As provided in the Trust Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registerable in the Certificate
Register upon surrender of this Certificate for registration of transfer at
the offices or agencies of the Certificate Registrar maintained by the Trustee
in the Borough of Manhattan, the City of New York, duly endorsed by or
accompanied by an assignment in the form below and by such other documents as
required by the Trust Agreement, and thereupon one or more new Certificates of
the same class in authorized denominations evidencing the same principal
amount will be issued to the designated transferee or transferees. The initial
Certificate Registrar appointed under the Trust Agreement is U.S. Bank
National Association.

No service charge will be made for any registration of transfer or exchange,
but the Trustee may require exchange of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer
or exchange of Certificates.

The Depositor and the Trustee and any agent of the Depositor or the Trustee
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Depositor, the Trustee, nor any such
agent shall be affected by any notice to the contrary.

It is the intention of the parties to the Trust Agreement that the Trust
created thereunder shall constitute a fixed investment trust for federal
income tax purposes under Treasury Regulation Section 301.7701-4, and the
Certificateholder agrees to treat the Trust, any distributions therefrom and
its beneficial interest in the Certificates consistently with such
characterization.

The Trust and the obligations of the Depositor and the Trustee created by the
Trust Agreement with respect to the Certificates shall terminate upon the
earliest to occur of (i) the payment in full at maturity or sale by the Trust
after a payment default on or an acceleration or other early payment of the
Underlying Securities and the distribution in full of all amounts due to the
Class A-1 Certificateholders and Class A-2 Certificateholders; (ii) the
exercise of all outstanding Call

                                    A-1-5
<PAGE>

Warrants by the Warrant Holders; (iii) the Final Scheduled Distribution Date
and (iv) the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof.

An employee benefit plan subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), a plan described in Section 4975(e) of the
Code, an entity whose underlying assets include plan assets by reason of any
such plan's investment in the entity, including an individual retirement
account or Keogh plan (any such, a "Plan") may purchase and hold Certificates
if the Plan can represent and warrant that its purchase and holding of the
Certificates would not be prohibited under ERISA or the Code.

                                    A-1-6
<PAGE>

                                  ASSIGNMENT

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE

(Please print or type name and address, including postal zip code, of
assignee) the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing ______________________ Attorney to
transfer said Certificate on the books of the Certificate Register, with full
power of substitution in the premises.

Dated:

                                                                *

                                                     Signature Guaranteed:

                                                                *

*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Signatures must be guaranteed
by an "eligible guarantor institution" meeting the requirements of the
Certificate Registrar, which requirements include membership or participation
in the Security Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Certificate
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.

                                    A-1-7
<PAGE>

                                  EXHIBIT A-2
                      FORM OF TRUST CERTIFICATE CLASS A-2

                             CLASS A-2 CERTIFICATE

NUMBER 1                                                         CUSIP NO. [__]

                      SEE REVERSE FOR CERTAIN DEFINITIONS

            THIS CLASS A-2 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER
SUCH ACT IS IN EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT.
THE CLASS A-2 CERTIFICATE REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF THE SERIES SUPPLEMENT.

            EACH PURCHASER OF THIS CLASS A-2 CERTIFICATE IS HEREBY NOTIFIED
THAT THE SELLER OF THIS CLASS A-2 CERTIFICATE MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.

            THE NOTIONAL AMOUNT OF THIS CLASS A-2 CERTIFICATE IS AS SET FORTH
HEREIN. ACCORDINGLY, THE NOTIONAL AMOUNT OF THIS CLASS A-2 CERTIFICATE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

            UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

            THIS CERTIFICATE REPRESENTS A PROPORTIONATE UNDIVIDED BENEFICIAL
OWNERSHIP INTEREST IN THE TRUST AND DOES NOT EVIDENCE AN OBLIGATION OF, OR AN
INTEREST IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF
THEIR RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE OR THE TRUST ASSETS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.

            THE CERTIFICATEHOLDER, BY ITS ACCEPTANCE OF THIS CERTIFICATE,
COVENANTS AND AGREES TO TENDER ANY AND ALL

                                    A-2-1
<PAGE>

CERTIFICATES SELECTED FOR REDEMPTION TO THE TRUSTEE UPON THE WARRANT HOLDER'S
EXERCISE OF CALL WARRANTS AND PAYMENT OF THE CALL PRICE FOR THE RELATED
UNDERLYING SECURITIES IN ACCORDANCE WITH THE PROVISIONS HEREOF AND OF THE
WARRANT AGENT AGREEMENT.

                                    A-2-2
<PAGE>

                               SELECT ASSET INC.

                 CORPORATE BACKED CALLABLE TRUST CERTIFICATES,

                  J.C. PENNEY DEBENTURE-BACKED SERIES 2007-1

                          $55,000,000 NOTIONAL AMOUNT

0.625% INTEREST RATE

evidencing a proportionate undivided beneficial ownership interest in the
Trust, as defined below, the property of which consists principally of
$55,000,000 aggregate principal amount of 7 5/8% Debentures due 2097, issued
by J.C. Penney Corporation, Inc. and all payments received thereon (the "Trust
Property"), deposited in trust by Select Asset Inc. (the "Depositor").

            THIS CERTIFIES THAT CEDE & CO. is the registered owner of Class
A-2 Certificates issued by the Corporate Backed Callable Trust Certificates,
J.C. Penney Debenture-Backed Series 2007-1 Trust (the "Trust"), having an
aggregate Notional Amount of $55,000,000, representing a nonassessable,
fully-paid, proportionate undivided beneficial ownership interest in the
Trust, formed by the Depositor.

            The Trust was created pursuant to a Standard Terms for Trust
Agreements, dated as of November 9, 2006 (the "Standard Terms"), between the
Depositor and U.S. Bank National Association, not in its individual capacity
but solely as Trustee (the "Trustee"), as supplemented by the Series
Supplement, Corporate Backed Callable Trust Certificates, J.C. Penney
Debenture-Backed Series 2007-1 Trust, dated as of January 31, 2007 (the
"Series Supplement" and, together with the Standard Terms, the "Trust
Agreement"), between the Depositor and the Trustee. This Certificate does not
purport to summarize the Trust Agreement and reference is hereby made to the
Trust Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and obligations of the Trustee with respect hereto. A copy of the Trust
Agreement may be obtained from the Trustee by written request sent to the
Corporate Trust Office. Capitalized terms used but not defined herein have the
meanings assigned to them in the Trust Agreement.

            This Certificate is one of the duly authorized Certificates
designated as the "Corporate Backed Callable Trust Certificates, J.C. Penney
Debenture-Backed Series 2007-1, Class A-2" (herein called the "Certificates").
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The Trust Property consists of: (i) Underlying Securities
described in the Trust Agreement, and (ii) all payments on or collections in
respect of the Underlying Securities accrued on or after January 31, 2007,
together with any and all income, proceeds and payments with respect thereto;
provided, however, that any income from the investment of Trust funds in
certain permitted investments ("Eligible Investments") does not constitute
Trust Property.

            Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the
obligation created by the Trust Agreement

                                    A-2-3
<PAGE>

shall have terminated in accordance therewith, distributions of interest will
be made on this Certificate on each Distribution Date.

            Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the
obligation created by the Trust Agreement shall have terminated in accordance
therewith, distributions will be made on each Distribution Date, to the Person
in whose name this Certificate is registered on the applicable Record Date, in
an amount equal to such Certificateholder's proportionate undivided beneficial
ownership interest in the amount required to be distributed to the Holders of
the Certificates on such Distribution Date.

            The Record Date applicable to any Distribution Date is the close
of business on the day immediately preceding such Distribution Date (whether
or not a Business Day). If a payment with respect to the Underlying Securities
is made to the Trustee after the date on which such payment was due, then the
Trustee will distribute any such amounts received on the next occurring
Business Day.

            Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not, until the date
which is one year and one day after the termination of the Trust, institute
against the Trust, or join in any institution against the Trust of, any
bankruptcy proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates or
the Trust Agreement.

            Distributions made on this Certificate will be made as provided in
the Trust Agreement by the Trustee by wire transfer in immediately available
funds, or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the
making of any notation hereon, except that with respect to Certificates
registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee shall be Cede & Co.), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the Corporate
Trust Office or such other location as may be specified in such notice.

            Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.

            Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Certificate shall
not entitle the Holder hereof to any benefit under the Trust Agreement or be
valid for any purpose.

            THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                    A-2-4
<PAGE>

            IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed as of the date set forth below.

                                    CORPORATE BACKED CALLABLE TRUST
                                    CERTIFICATES, J.C. PENNEY
                                    DEBENTURE-BACKED SERIES 2007-1
                                    TRUST

                                    By:  U.S. Bank National Association
                                    not in its individual capacity but solely as
                                    Trustee,

                                    By:
                                        ------------------------------------
                                        Authorized Signatory

Dated:  January 31, 2007

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Corporate Backed Callable Trust Certificates, J.C. Penney
Debenture-Backed Series 2007-1, described in the Trust Agreement referred to
herein.

U.S. Bank National Association
not in its individual capacity but solely as Trustee,

By:
   ---------------------------------
     Authorized Signatory

                                    A-2-5
<PAGE>

                           (REVERSE OF CERTIFICATE)

            The Certificates are limited in right of distribution to certain
payments and collections respecting the Underlying Securities, all as more
specifically set forth herein and in the Trust Agreement. The registered
Holder hereof, by its acceptance hereof, agrees that it will look solely to
the Trust Property (to the extent of its rights therein) for distributions
hereunder.

            The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the
Certificateholders under the Trust Agreement at any time by the Depositor and
the Trustee with the consent of the holders of Class A-2 Certificates in the
manner set forth in the Series Supplement and the Standard Terms. Any such
consent by the Holder of this Certificate (or any predecessor Certificate)
shall be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders
of any of the Certificates.

            The Certificates are issuable in fully registered form only in
denominations of $100,000 and in integral multiples of $1 in excess thereof,
provided, however, that the Certificates will only be transferable in an
aggregate Notional Amount equal to or greater than $100,000.

            As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate
for registration of transfer at the offices or agencies of the Certificate
Registrar maintained by the Trustee in the Borough of Manhattan, the City of
New York, duly endorsed by or accompanied by an assignment in the form below
and by such other documents as required by the Trust Agreement, and thereupon
one or more new Certificates of the same class in authorized denominations
evidencing the same Notional Amount will be issued to the designated
transferee or transferees. The initial Certificate Registrar appointed under
the Trust Agreement is U.S. Bank National Association.

            No service charge will be made for any registration of transfer or
exchange, but the Trustee may require exchange of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
any transfer or exchange of Certificates.

            The Depositor and the Trustee and any agent of the Depositor or
the Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Depositor, the Trustee,
nor any such agent shall be affected by any notice to the contrary.

            It is the intention of the parties to the Trust Agreement that the
Trust created thereunder shall constitute a fixed investment trust for federal
income tax purposes under Treasury Regulation Section 301.7701-4, and the
Certificateholder agrees to treat the Trust, any distributions therefrom and
its beneficial interest in the Certificates consistently with such
characterization.

                                    A-2-6
<PAGE>

            The Trust and the obligations of the Depositor and the Trustee
created by the Trust Agreement with respect to the Certificates shall
terminate upon the earliest to occur of (i) the payment in full at maturity or
sale by the Trust after a payment default on or an acceleration or other early
payment of the Underlying Securities and the distribution in full of all
amounts due to the Class A-1 Certificateholders and Class A-2
Certificateholders; (ii) the exercise of all outstanding Call Warrants by the
Warrant Holders; (iii) the Final Scheduled Distribution Date and (iv) the
expiration of 21 years from the death of the last survivor of the descendants
of Joseph P. Kennedy, the late Ambassador of the United States to the Court of
St. James, living on the date hereof.

            An employee benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), a plan described in Section
4975(e) of the Code, an entity whose underlying assets include plan assets by
reason of any such plan's investment in the entity, including an individual
retirement account or Keogh plan (any such, a "Plan") may purchase and hold
Certificates if the Plan can represent and warrant that its purchase and
holding of the Certificates would not be prohibited under ERISA or the Code.

                                    A-2-7
<PAGE>

                                  ASSIGNMENT

            FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE

(Please print or type name and address, including postal zip code, of
assignee) the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing ____________________ Attorney to
transfer said Certificate on the books of the Certificate Register, with full
power of substitution in the premises.

Dated:

                                                                   *

                                                        Signature Guaranteed:

                                                                   *

*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Signatures must be guaranteed
by an "eligible guarantor institution" meeting the requirements of the
Certificate Registrar, which requirements include membership or participation
in the Security Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Certificate
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.

                                    A-2-8
<PAGE>

                                   EXHIBIT B
                        FORM OF WARRANT AGENT AGREEMENT

                                    B-A-1
<PAGE>

                                   EXHIBIT C

                           FORM OF INVESTMENT LETTER

             QUALIFIED INSTITUTIONAL BUYER AND ACCREDITED INVESTOR

                                                 Dated:

U.S. Bank National Association,
     as Trustee
     100 Wall Street
     New York, New York 10005

Lehman Brothers Inc.,
     as Initial Purchaser
     745 Seventh Avenue
     New York, New York 10019

Select Asset Inc.,
     as Depositor
     745 Seventh Avenue
     New York, New York 10019

Ladies and Gentlemen:

            In connection with our proposed purchase of $______________
aggregate Notional Amount of Class A-2 Certificates (the "Class A-2
Certificates") representing an interest in the Corporate Backed Callable Trust
Certificates, J.C. Penney Debenture-Backed Series 2007-1 Trust (the "Trust"),
the undersigned, by executing this letter (the "Purchaser") confirms that:

      1.    The Purchaser understands that substantial risks are involved in
            an investment in the Class A-2 Certificates. The Purchaser
            represents that, in making its investment decision to acquire the
            Class A-2 Certificates, the Purchaser has not relied on
            representations, warranties, opinions, projections, financial or
            other information or analysis, if any, supplied to it by any
            person or entity, including the Initial Purchaser, the Depositor
            or the Trustee or any of their affiliates, except as expressly
            contained in written information, if any. The Purchaser is
            purchasing the Class A-2 Certificates for investment purposes and
            not with a view to, or for, the offer or sale in connection with a
            public distribution or in any other manner that would violate the
            Securities Act or the securities or blue sky laws of any state of
            the United States. The Purchaser has such knowledge and experience
            in financial and business matters as to be capable of evaluating
            the merits and risks of purchasing any of the Class A-2
            Certificates. The Purchaser is aware that it may be required to
            bear the substantial economic risk of an investment in the Class
            A-2 Certificates for an indefinite period of time and such
            Purchaser is able to bear such risk for an indefinite period. The
            Purchaser has relied upon its own tax, legal and financial
            advisors in connection with its decision to purchase the Class A-2
            Certificates.

                                     C-1
<PAGE>

      2.    The Purchaser is not an "affiliate" (as defined in Rule 144 under
            the Securities Act) of the Depositor and is either:

            (i) (A) a "Qualified Institutional Buyer" (a "QIB"), within the
            meaning of Rule 144A under the Securities Act of 1933, as amended
            (the "Securities Act" and "Rule 144A") and has delivered to you
            the certification contained herein as to the fact that it is a QIB
            and (B) acquiring the Class A-2 Certificates for its own account,
            for the account of an Accredited Investor (as defined in Rule
            501(a) under the Securities Act), or for the account of a QIB as
            to each of which the Purchaser exercises sole investment
            discretion. The Purchaser is aware that the Class A-2 Certificates
            are being sold to it in reliance on the exemption from the
            provisions of Section 5 of the Securities Act provided by Rule
            144A; or

            (ii) an Accredited Investor and, if the Class A-2 Certificates are
            to be purchased for one or more accounts ("investor accounts") for
            which it is acting as fiduciary or agent, each such investor
            account is an Accredited Investor on a like basis or a QIB; in the
            normal course of its business, such Purchaser invests in or
            purchases securities similar to the Class A-2 Certificates.

      3.    The Purchaser acknowledges that neither the Depositor nor the
            Initial Purchaser, or any person representing the Depositor or the
            Initial Purchaser, has made any representation to such purchaser
            with respect to the Trust, the Underlying Securities or the
            offering or sale of any Class A-2 Certificates.

      4.    The Purchaser understands that the Class A-2 Certificates are
            being offered in a transaction not involving any public offering
            in the United States within the meaning of the Securities Act,
            that the Class A-2 Certificates have not been and will not be
            registered under the Securities Act or under the securities or
            blue sky laws of any state, and that (i) if in the future it
            decides to offer, resell, pledge or otherwise transfer the Class
            A-2 Certificates, such Class A-2 Certificates shall only be
            offered, resold, assigned or otherwise transferred (A) to the
            Trust, (B) pursuant to an effective registration statement under
            the Securities Act, (C) to a QIB, in accordance with Rule 144A or
            (D) to any person or entity (including an Accredited Investor
            within the meaning of Rule 501(a) under the Securities Act)
            pursuant to another available exemption from registration provided
            under the Securities Act, and, in each of cases (A) through (D),
            in accordance with any applicable securities laws of any state of
            the United States and other jurisdictions and (ii) the purchaser
            will, and each subsequent holder is required to, notify any
            subsequent purchaser of such Class A-2 Certificates from it of the
            resale restrictions referred to in clause (i) above. Upon the
            transfer of Class A-2 Certificates held in the form of global
            certificates to an Accredited Investor, the transferor's interest
            in such global certificates shall be exchanged for a Class A-2
            Certificate in definitive form. Thereafter, upon transfer of a
            definitive Class A-2 Certificate to a QIB, such Class A-2
            Certificate may be exchanged for a beneficial interest in a global
            certificate.

      5.    The Purchaser understands that each Class A-2 Certificate will,
            unless otherwise agreed to by the Depositor and the Trustee, bear
            a legend substantially to the following effect:

                                     C-2
<PAGE>

                  "THIS CLASS A-2 CERTIFICATE (OR ITS PREDECESSOR) HAS NOT
                  BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
                  AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
                  DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN
                  EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
                  SUCH ACT. THE CLASS A-2 CERTIFICATE REPRESENTED HEREBY MAY
                  BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE
                  SERIES SUPPLEMENT.

                  EACH PURCHASER OF THIS CLASS A-2 CERTIFICATE IS HEREBY
                  NOTIFIED THAT THE SELLER OF THIS CLASS A-2 CERTIFICATE MAY
                  BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
                  OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER."

      6.    The Purchaser understands that no subsequent transfer of the Class
            A-2 Certificates is permitted unless (A) such transfer is of a
            Class A-2 Certificate with a denomination of at least $100,000 and
            (B) it causes its proposed transferee to provide to the Trustee
            and the Initial Purchaser a letter substantially in the form of
            Exhibit C to the Series Supplement and otherwise satisfactory to
            the Trustee and Initial Purchaser, as applicable, or such other
            written statement as the Depositor shall prescribe.

      7.    The Purchaser agrees that if at some time in the future it wishes
            to transfer or exchange any of the Class A-2 Certificates, it will
            not transfer or exchange any of the Class A-2 Certificates unless
            such transfer or exchange is in accordance with Section 5.04 of
            the Trust Agreement. The Purchaser understands that any purported
            transfer of the Class A-2 Certificates (or any interest therein)
            in contravention of any of the restrictions and conditions in the
            Trust Agreement, as applicable, shall be void, and the purported
            transferee in such transfer shall not be recognized by the Trust
            or any other Person as a Certificateholder, as the case may be,
            for any purpose.

      8.    The purchaser (i) acknowledges that the Depositor, the Initial
            Purchaser, the Trustee and others will rely upon the truth and
            accuracy of the foregoing acknowledgments, representations and
            agreements and agrees that the Depositor, the Initial Purchaser
            and the Trustee are irrevocably authorized to produce this letter
            or a copy hereof to any interested party in any administrative or
            legal proceeding or official inquiry with respect to the matters
            covered hereby, and (ii) agrees that, if any of the
            acknowledgments, representations, warranties and agreements made
            or deemed to have been made by such purchaser's purchase of the
            Class A-2 Certificates are no longer accurate, such purchaser
            shall promptly notify the Depositor and the Initial Purchaser. If
            the purchaser is acquiring any Class A-2 Certificates as a
            fiduciary or agent for one or more investor accounts, it
            represents that it has sole investment discretion with respect to
            each such account and it has full power to make the foregoing
            acknowledgments, representations

                                     C-3
<PAGE>

            and agreements on behalf of each such account and that each such
            investor account is eligible to purchase the Class A-2
            Certificates.

            You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

                                                Very truly yours,

                                                By:
                                                   -----------------------------
                                                Name:
                                                Title:

                                     C-4<PAGE>

                              EMPLOYMENT AGREEMENT
                              --------------------

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into and is
effective this 1st day of January, 2007 (the "Effective Date"), by and between
COOPERATIVE BANKSHARES, INC. (the "Company"), COOPERATIVE BANK (the "Bank") and
FREDERICK WILLETTS, III (the "Employee").

         WHEREAS, the Employee has heretofore been employed by the Company and
the Bank as President and Chief Executive Officer and is experienced in all
phases of the business of the Company and the Bank; and

         WHEREAS, the Board of Directors of each of the Company and the Bank and
the Employee have determined that it is necessary and appropriate to enter into
this Employment Agreement to ensure the Employee's continued service on terms
consistent with his role and his importance to the success of the Company and
the Bank;

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the adequacy of
which is acknowledged by the parties hereto, it is AGREED as follows:

         1.   DEFINED TERMS
              -------------

         When used anywhere in this Agreement, the following terms shall have
the meaning set forth herein.

         (a)  "BANK BOARD" shall mean the Board of Directors of the Bank.

         (b)  "CHANGE IN CONTROL" shall mean any one of the following events:
(i) the acquisition by any person (or persons acting as a group) of ownership,
holding or power to vote more than 25% of the voting stock of the Company or the
Bank, (ii) the acquisition by any person (or persons acting as a group) of the
ability to control the election of a majority of the Company's or the Bank's
directors, (iii) the acquisition of a controlling influence over the management
or policies of the Company or of the Bank, (iv) the Company or the Bank merges
into or consolidates with another corporation, or merges another corporation
into the Company or the Bank and as a result less than a majority of the
combined voting power of the resulting corporation immediately after the merger
or consolidation is held by persons who were stockholders of the Company or the
Bank immediately before the merger or consolidation; or (v) during any period of
two consecutive years, individuals (the "Continuing Directors") who at the
beginning of such period constitute the Board of Directors of the Company or of
the Bank (the "Existing Board") cease for any reason to constitute at least
two-thirds thereof, provided that any individual whose election or nomination
for election as a member of the Existing Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall be considered
a Continuing Director. For purposes of this paragraph, the terms "person" or
"persons acting as a group" shall be construed within the meaning of Section
13(d) of the Securities Exchange Act of 1934 and shall refer to an individual or
a corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.

         (c)  "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.

         (d)  "COMPANY BOARD" shall mean the Board of Directors of the Company.

<PAGE>
         (e)  "GOOD REASON" shall mean any of the following events, which has
not been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than 35 miles from his primary office as of the later
of the Effective Date and the most recent voluntary relocation by the Employee;
(ii) a material reduction in the Employee's base compensation under this
Agreement as the same may be increased from time to time; (iii) the failure by
the Company or the Bank to continue to provide the Employee with compensation
and benefits provided under this Agreement as the same may be increased from
time to time, or with benefits substantially similar to those provided to him
under any of the employee benefit plans in which the Employee now or hereafter
becomes a participant, or the taking of any action by the Company or the Bank
which would directly or indirectly reduce any of such benefits or deprive the
Employee of any material fringe benefit enjoyed by him under this Agreement;
(iv) the assignment to the Employee of duties and responsibilities materially
different from those normally associated with his position; (v) a failure to
reelect the Employee to the Company Board or the Bank Board, if the Employee has
served on such Board at any time during the term of the Agreement; (vi) a
material diminution or reduction in the Employee's responsibilities or authority
(including reporting responsibilities) in connection with his employment with
the Company or the Bank; or (vii) a material reduction in the secretarial or
other administrative support of the Employee.

         (f)  "JUST CAUSE" shall mean, in the good faith determination of the
Company Board and the Bank Board, the Employee's personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
No act, or failure to act, on the Employee's part shall be considered "willful"
unless he has acted, or failed to act, with an absence of good faith and without
a reasonable belief that his action or failure to act was in the best interest
of the Company and the Bank.

         (g)  "PROTECTED PERIOD" shall mean the period that begins on the date
six months before a Change in Control and ends on the later of the second annual
anniversary of the effective date of a Change in Control or the expiration date
of this Agreement (including any renewal terms).

         2.   EMPLOYMENT. The Employee is employed as the President and Chief
              ----------
Executive Officer of the Company and the Bank. The Employee shall render such
administrative and management services to the Company and the Bank as are
currently rendered and as are customarily performed by persons situated in a
similar executive capacity. The Employee shall also promote, as and to the
extent permitted by law, the business of the Company and the Bank. The
Employee's other duties shall be such as the Company Board or the Bank Board may
from time to time reasonably direct, including normal duties as an officer of
the Company and Bank.

         3.   BASE COMPENSATION. The Bank agrees to pay the Employee during the
              -----------------
initial year of the term of this Agreement a salary at the rate of $325,000 per
annum, payable in accordance with the Bank's customary payroll policies. The
Bank Board shall review, not less often than annually, the rate of the
Employee's salary, and in its sole discretion may decide to adjust his salary;
provided, however, in the event of a Change in Control, the Bank Board may not
thereafter adjust the Employee's salary below the level in effect immediately
prior to the Change in Control.

         4.   DISCRETIONARY BONUSES. The Employee shall participate in an
              ---------------------
equitable manner with all other senior management employees of the Bank in
discretionary bonuses that the Bank Board may award from time to time to the
Bank's senior management employees. No other compensation provided for in this
Agreement shall be deemed a substitute for the Employee's right to participate
in such discretionary bonuses.
                                       2

<PAGE>
         5.   PARTICIPATION IN BENEFIT PROGRAMS; EXPENSES.
              -------------------------------------------

         (a)  During the term of this Agreement, the Employee shall be eligible
to participate in all employee benefit plans sponsored by the Bank for its
employees including health, dental, disability, life insurance, retirement,
pension, or any similar programs.

         (b)  The Employee shall be eligible to participate in any executive
compensation or benefits which are or may become available to the Bank's senior
management employees, including, by way of example, but not limitation, any
stock-based compensation or incentive compensation plans, supplemental
retirement programs or any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement.

         (c)  The Employee shall be reimbursed for all reasonable out-of-pocket
business expenses which he shall incur in connection with his services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Bank.

         6.   TERM. The term of this Agreement shall be for the period
              ----
commencing on the Effective Date and ending 60 months thereafter (or such
earlier date as is determined in accordance with Sections 10 or 12).
Additionally, on or before each annual anniversary date of the Effective Date,
the Company Board and the Bank Board may extend the Employee's term of
employment for an additional one-year period beyond the then effective
expiration date, unless the Employee gives notice not later than ninety (90)
days prior to the anniversary date of an intention that the Agreement not be
extended beyond its then current term.

         7.   LOYALTY; NONCOMPETITION.
              -----------------------

         (a)  During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, the Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Bank or any of its subsidiaries or
affiliates, or unfavorably affect the performance of Employee's duties pursuant
to this Agreement, or will not violate any applicable statute or regulation.
"Full business time" is hereby defined as that amount of time usually devoted to
like companies by similarly situated executive officers. During the term of his
employment under this Agreement, the Employee shall not engage in any business
or activity contrary to the business affairs or interests of the Bank.

         (b)  Nothing contained in this Section shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities of
any business dissimilar from that of the Bank, or, solely as a passive or
minority investor, in any business.

         8.   STANDARDS. The Employee shall perform his duties under this
              ---------
Agreement in accordance with such reasonable standards as the Company Board or
the Bank Board may establish from time to time. The Bank will provide Employee
with the working facilities and staff customary for similar executives and
necessary for him to perform his duties.

         9.   VACATION AND SICK LEAVE.
              -----------------------

         (a)  The Employee shall be entitled to annual vacation and sick leave
benefits in accordance with the policies that the Bank Board periodically
establishes for senior management employees.

                                       3
<PAGE>

         (b)  The Employee shall not receive any additional compensation from
the Bank on account of his failure to take a vacation or sick leave, and the
Employee shall not accumulate unused vacation or sick leave from one fiscal year
to the next, except in either case to the extent authorized by the Bank Board.

         (c)  In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and legitimate reasons as the Company Board and the Bank Board may in
their discretion determine. Further, the Company Board and the Bank Board may
grant to the Employee a leave or leaves of absence, with or without pay, at such
time or times and upon such terms and conditions as such Boards in their
discretion may determine.

         10.  TERMINATION AND TERMINATION PAY. Subject to Section 12 hereof, the
              -------------------------------
Employee's employment hereunder may be terminated under the following
circumstances:

         (a)  DEATH. The Employee's employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.

         (b)  DISABILITY. The Company and the Bank may terminate the Employee's
employment after having established the Employee's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Employee's ability to substantially perform his duties under this Agreement
and which results in the Employee becoming eligible for long-term disability
benefits under the Bank's long-term disability plan (or, if the Bank has no such
plan in effect, which impairs the Employee's ability to substantially perform
his duties under this Agreement for a period of 180 consecutive days). In the
event that the Employee's employment is terminated by reason of his Disability,
the Employee's base salary (at the rate in effect on his termination date) shall
be continued during his continuing period of Disability for a period not to
exceed five years in accordance with the following schedule: (i) 100% of base
salary for the first three years and (ii) 50% of base salary for the next two
years. Any payments made to the Employee under this paragraph (b) shall be
reduced dollar-for-dollar by the amount of any benefits payable to the Employee
under the Bank's long-term disability plan. In addition, beginning on the
Employee's termination date and during his continuing period of Disability for a
period not to exceed five years, the Bank shall continue to provide the Employee
with coverage under the Bank's health, dental and life insurance programs on the
same terms as such benefits were made available to the Employee prior to his
termination date.

              During any period that the Employee shall receive disability
benefits and to the extent that the Employee shall be physically and mentally
able to do so, he shall furnish such information, assistance and documents so as
to assist in the continued ongoing business of the Bank and, if able, shall make
himself available to the Bank to undertake reasonable assignments consistent
with his prior position and his physical and mental health. The Bank shall pay
all reasonable expenses incident to the performance of any assignment given to
the Employee during the disability period.

         (c)  JUST CAUSE. The Company Board and the Bank Board may, by written
notice to the Employee, terminate his employment at any time, for Just Cause.
The Employee shall have no right to receive compensation or other benefits for
any period after termination for Just Cause. No act, or failure to act, on the
Employee's part shall be considered "willful" unless the Employee has acted, or
failed to act, with an absence of good faith and without a reasonable belief
that the action, or failure to act, was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Just Cause unless there shall have been delivered to the Employee

                                       4

<PAGE>

a copy of a resolution duly adopted by the affirmative vote of not less than a
two-thirds majority of the membership of the Company Board and the Bank Board at
a meeting called and held for that purpose (after reasonable notice to the
Employee and an opportunity for the Employee to be heard before the Boards),
finding that in the good faith opinion of the Boards the Employee was guilty of
conduct and specifying the particulars thereof in detail.

         (d)  TERMINATION WITHOUT JUST CAUSE OR FOR GOOD REASON. (i) The Company
Board and the Bank Board may, by written notice to the Employee, terminate his
employment at any time for a reason other than Just Cause, or (ii) the Employee
may, by written notice to the Company and the Bank, terminate his employment for
Good Reason. Upon the occurrence of either event, the Employee shall be entitled
to receive the following compensation and benefits (unless such termination
occurs during the Protected Period, in which event the benefits and compensation
provided for in Section 12 shall apply): (x) a payment equal to the amount of
base salary (at the rate in effect on his termination date) the Employee would
have been paid through the expiration date of this Agreement, including any
renewal term (the "Expiration Date"), (y) the Bank shall cover the entire cost
of the continued participation of the Employee and his spouse in the Bank's
group health, life and disability insurance programs through the Expiration
Date. In the event that coverage under such programs is not available to the
Employee by reason of his status as a former employee, the Bank shall provide
the Employee with substantially comparable coverage on an individual basis. All
cash amounts payable to the Employee under this subsection (d) shall be paid in
one lump sum within ten days of such termination.

         (e)  VOLUNTARY TERMINATION BY EMPLOYEE. The Employee may voluntarily
terminate employment with the Bank during the term of this Agreement, upon at
least 90 days prior written notice to the Company Board and the Bank Board, in
which case the Employee shall receive only his compensation, vested rights and
employee benefits up to the date of his termination (unless such termination
occurs pursuant to Section 10(d) hereof or within the Protected Period, in
Section 12(a) hereof, in which event the benefits and compensation provided for
in Sections 10(d) or 12, as applicable, shall apply).

         11.  NO MITIGATION. The Employee shall not be required to mitigate the
              -------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.

         12.  CHANGE IN CONTROL.
              -----------------

         (a)  TRIGGER EVENTS. The Employee shall be entitled to collect the
greater of (i) the severance benefits set forth in Section 12(b) or (ii) the
severance benefits described in Section 10(d), in the event that either (x) the
Employee voluntarily terminates employment for any reason within the one-year
period beginning on the date of a Change in Control (which for purposes of this
Section 12(a) shall be treated in the same manner as a termination for Good
Reason), (y) the Employee voluntarily terminates employment within 90 days of an
event that both occurs during the Protected Period and constitutes Good Reason,
or (z) the Company or Bank or their successor(s) in interest terminate the
Employee's employment without his written consent and for any reason other than
Just Cause during the Protected Period.

         (b)  SEVERANCE PAYMENTS AND BENEFITS. Upon the occurrence of a trigger
event described in Section 12(a), the Employee shall be entitled to receive the
following payments and benefits:

              (i)  A cash severance benefit equal to three times the sum of (x)
                   the Employee's base salary at the rate in effect on the date

                                       5

<PAGE>

                   of termination or the date immediately preceding the
                   effective date of the Change in Control, whichever is higher
                   and (y) the highest cash bonus paid or accrued on the
                   Employee's behalf during the 60-month period preceding his
                   termination date. The severance benefit shall be payable in
                   one lump sum within ten days of the Employee's last day of
                   employment.

              (ii) For a period of 36 months following the Employee's
                   termination date, the Bank shall, at the Bank's expense,
                   continue the Employee's coverage under the Bank's health,
                   dental, life, and disability programs. In the event that
                   coverage under such programs is not available to the Employee
                   by reason of his status as a former employee, the Bank shall
                   provide the Employee with substantially comparable coverage
                   on an individual basis

         13.  EXCISE TAXES.
              ------------

         (a)  COVERED BENEFITS. "Covered Benefits" shall mean any payment or
benefit paid or provided to the Employee by the Company or any affiliate or any
successor in interest to the Company (whether pursuant to this Agreement or
otherwise) that will be (or in the opinion of Tax Counsel (as defined below)
might reasonably be expected to be) subject to any excise tax (the "Excise Tax")
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"). In the event that at any time during or after the Term of Employment
the Employee shall receive any Covered Benefits, the Company shall pay to the
Employee an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Employee from the Gross-Up Payment, after deduction of any
federal, state and local income taxes, Excise Tax, and FICA and Medicare
withholding taxes on the Gross-Up Payment, shall be equal to the Excise Tax on
the Covered Benefits. For purposes of determining the amount of such Excise Tax
on the Covered Benefits, the amount of the Covered Benefits that shall be taken
into account in calculating the Excise Tax shall be equal to (i) the Covered
Benefits, less (ii) the amount of such Covered Benefits that, in the opinion of
tax counsel selected by the Company and reasonably acceptable to the Employee
("Tax Counsel"), are not parachute payments (within the meaning of Section
280G(b)(1) of the Code).

         (b)  CERTAIN ASSUMPTIONS. For purposes of this Section 13, the Employee
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Excise Tax is payable
and state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Employee's residence on the effective date of the
Employee's termination, net of the reduction in federal income taxes which could
be obtained from deduction of such state and local taxes. Except as otherwise
provided herein, all determinations required to be made under this Section 13
shall be made by Tax Counsel, which determinations shall be conclusive and
binding on the Employee and Company, absent manifest error.

         (c)  TAX INDEMNIFICATION. The Company shall indemnify and hold the
Employee harmless from any and all losses, costs and expenses (including without
limitation, reasonable attorney's fees, reasonable accountant's fees, interest,
fines and penalties of any kind) which the Employee incurs as a result of any
administrative or judicial review of the Employee's liability under Section 4999
of the Code by the Internal Revenue Service or any comparable state agency
through and including a final judicial determination or final administrative
settlement of any dispute arising out of the Employee's liability for the Excise
Tax or otherwise relating to the classification for purposes of Section 280G of
the Code of any of the Covered Benefits or other payment or benefit in the
nature of compensation made or provided to the Employee by the Company. The

                                       6

<PAGE>

Employee shall promptly notify the Company in writing whenever the Employee
receives notice of the commencement of any judicial or administrative
proceeding, formal or informal, in which the federal tax treatment under Section
4999 of the Code of any amount paid or payable under this Agreement or otherwise
is being reviewed or is in dispute (including a notice of audit or other inquiry
concerning the reporting of the Employee's liability under Section 4999). The
Company may assume control at its expense over all legal and accounting matters
pertaining to such federal or state tax treatment (except to the extent
necessary or appropriate for the Employee to resolve any such proceeding with
respect to any matter unrelated to the Covered Benefits or other payment or
benefit in the nature of compensation made or provided to the Employee by the
Company) and the Employee shall cooperate fully with the Company in any such
proceeding. The Employee shall not enter into any compromise or settlement or
otherwise prejudice any rights the Company may have in connection therewith
without prior consent of the Company. In the event that the Company elects not
to assume control over such matters, the Company shall promptly reimburse the
Employee for all expenses related thereto as and when incurred upon presentation
of appropriate documentation relating thereto.

         14.  INDEMNIFICATION AND INSURANCE.
              -----------------------------

         (a)  To the maximum extent permitted under applicable law, during the
term of this Agreement and for a period of six years thereafter, the Company
shall indemnify the Employee against and hold the Employee harmless from any
costs, liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company or any affiliate thereof.

         (b)  During the term of this Agreement and for a period of six years
thereafter, the Company shall cause the Employee to be covered by and named as
an insured under any policy or contract of insurance obtained by either Company
to insure directors and officers against personal liability for acts or
omissions in connection with service as an officer or director of the Company or
any of its affiliates service in other capacities at its request. The coverage
provided to the Employee pursuant to this Section 14 shall be of the same scope
and on the same terms and conditions as the coverage (if any) provided to other
officers or directors of the Company.

         15.  REIMBURSEMENT FOR EXPENSES RELATED TO A DISPUTE REGARDING THE
              -------------------------------------------------------------
AGREEMENT. In the event that any dispute arises between the Employee and the
---------
Bank as to the terms or interpretation of this Agreement, whether instituted by
formal legal proceedings or otherwise, including any action that the Employee
takes to defend against any action taken by the Bank or the Company, the
Employee shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, provided
that the Employee obtains either a written settlement or a final judgment by a
court of competent jurisdiction substantially in his favor. Such reimbursement
shall be paid within ten days of Employee's furnishing to the Bank written
evidence, which may be in the form, among other things, of a cancelled check or
receipt, of any costs or expenses incurred by the Employee.

         16.  FEDERAL INCOME TAX WITHHOLDING. The Bank may withhold all federal
              ------------------------------
and state income or other taxes from any benefit payable under this Agreement as
shall be required pursuant to any law or government regulation or ruling.

         17.  SUCCESSORS AND ASSIGNS.
              ----------------------

         (a)  COMPANY AND THE BANK. This Agreement shall not be assignable by
the Company Bank, provided that this Agreement shall inure to the benefit of and

                                       7

<PAGE>

be binding upon any corporate or other successor of the Company or the Bank
which shall acquire, directly or indirectly, by merger, consolidation, purchase
or otherwise, all or substantially all of the assets or stock of the Company or
the Bank.

         (b)  EMPLOYEE. Since the Company and the Bank are contracting for the
unique and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Bank; provided, however, that nothing in this
paragraph shall preclude (i) the Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to the person or persons entitled thereunto.

         (c)  ATTACHMENT. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.

         18.  AMENDMENTS. No amendments or additions to this Agreement shall be
              ----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.

         19.  SOURCE OF PAYMENTS. Unless otherwise determined by the Company
              ------------------
Board and except to the extent contemplated by Section 5(b), the Executive shall
not receive any separate compensation or benefits from the Company for services
rendered under this Agreement; provided, however, that the Company agrees that
it shall be jointly and severally liable with the Bank for the payment of all
amounts and the provision of all benefits due the Employee under any provision
of this Agreement.

         20.  SPECIAL LIMITATIONS. (1) If the Employee is removed and/or
              -------------------
permanently prohibited from participating in the conduct of the Bank's affairs
by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit
Insurance Act ("FDIA") (12 U.S.C. Sections 1818(e)(4) and (g)(1)), all
obligations of the Bank under this Agreement shall terminate, as of the
effective date of the order, but vested rights of the parties shall not be
affected.

         (2)  If the Bank is in default (as defined in Section 3(x)(1) of FDIA),
all obligations under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.

         (3)  If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. Section 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the
Employee from participating in the conduct of the Bank's affairs, the Bank's
obligations under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may in its discretion (i) pay the Employee all or part
of the compensation withheld while its contract obligations were suspended, and
(ii) reinstate (in whole or in part) any of its obligations which were
suspended.

         (4)  Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

                                       8

<PAGE>

         (5)  Any payments in the nature of severance made to the Employee under
this Agreement are subject to and conditioned upon their compliance with Section
409A of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated under Section 409A regarding any delay in such payments by the
Company.

         21.  APPLICABLE LAW. Except to the extent preempted by federal law, the
              --------------
laws of the State of North Carolina shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

         22.  SEVERABILITY. The provisions of this Agreement shall be deemed
              ------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

         23.  ENTIRE AGREEMENT. This Agreement, together with any understanding
              ----------------
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto and shall supersede
any prior agreement between the parties including the Employment Agreement
between the Employee and the Bank dated August 16, 1991 and any amendments
thereto.

                                       9

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.

ATTEST:                                     COOPERATIVE BANKSHARES,INC.

/s/ Linda B. Garland                        By: /s/ James D. Hundley
---------------------------------               --------------------------------
Secretary

ATTEST:                                     COOPERATIVE BANK

/s/ Linda B. Garland                        By: /s/ James D. Hundley
---------------------------------               --------------------------------
Secretary

WITNESS:

/s/ Dare C. Rhodes                          /s/ Frederick Willetts, III
---------------------------------           ------------------------------------
                                            Frederick Willetts, III

                                       10

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