Document:

Exhibit 10.11

Exhibit 10.11

CONFIDENTIAL TREATMENT REQUESTED

INFORMATION
FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND IS
IDENTIFIED BY THREE ASTERISKS, AS FOLLOWS “* * *”, AN
UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

LOAN SERVICING AGREEMENT

by and between

BOSCO CREDIT II, LLC

as the Owner,

and

FRANKLIN CREDIT MANAGEMENT CORPORATION

as the Servicer

dated and made effective as of September 22, 2010

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
	 	 	9	 
	 
	 	 	 	 
	2.1. The Servicer to Act as the Servicer
	 	 	9	 
	2.2. Liquidation of Mortgage Loans
	 	 	11	 
	2.3. Collection of Mortgage Loan Payments
	 	 	11	 
	2.4. Establishment of and Deposits to Control Account
	 	 	12	 
	2.5. Permitted Withdrawals From Control
	 	 	12	 
	2.6. Establishment of and Deposits to Escrow Account
	 	 	13	 
	2.7. Permitted Withdrawals From Escrow Account
	 	 	13	 
	2.8. Payment of Taxes, Insurance and Other Charges
	 	 	14	 
	2.9. Protection of Accounts
	 	 	14	 
	2.10. Maintenance of Hazard Insurance
	 	 	14	 
	2.11. Reserved
	 	 	15	 
	2.12. Maintenance of Fidelity Bond and Errors and Omissions Insurance
	 	 	15	 
	2.13. Inspections
	 	 	16	 
	2.14. Restoration of Mortgaged Property
	 	 	16	 
	2.15. Reserved
	 	 	16	 
	2.16. Title, Management and Disposition of REO Property
	 	 	16	 
	2.17. REO Reports
	 	 	17	 
	2.18. Liquidation Reports
	 	 	17	 
	2.19. Reports of Foreclosures and Abandonments of Mortgaged Property
	 	 	17	 
	2.20. Reserved
	 	 	18	 
	2.21. Notification of Adjustments
	 	 	18	 
	2.22. Transfer Notices
	 	 	18	 
	2.23. Privacy
	 	 	18	 
	2.24. Losses and Expenses
	 	 	19	 

 

 

 

	 	 	 	 	 
	ARTICLE III REMITTANCES
	 	 	20	 
	 
	 	 	 	 
	3.1. Reserve
	 	 	20	 
	3.2. Statements to the Owner
	 	 	20	 
	3.3. Monthly Advances by the Servicer
	 	 	20	 
	 
	 	 	 	 
	ARTICLE IV GENERAL SERVICING PROCEDURES
	 	 	20	 
	 
	 	 	 	 
	4.1. Transfers of Mortgaged Property
	 	 	20	 
	4.2. Satisfaction of Mortgages and Release of Mortgage Files
	 	 	21	 
	4.3. Servicing Compensation
	 	 	21	 
	4.4. Reserved
	 	 	21	 
	4.5. Right to Examine Servicer Records
	 	 	22	 
	 
	 	 	 	 
	ARTICLE V POSSESSION OF MORTGAGE FILES; BOOKS AND RECORDS; CUSTODIAL AGREEMENT; DELIVERY OF DOCUMENTS;
SERVICER TO COOPERATE
	 	 	22	 
	 
	 	 	 	 
	5.1. Provision of Information
	 	 	22	 
	5.2. Financial Statements; Servicing Facility
	 	 	22	 
	5.3. Possession of Mortgage Files; Maintenance of Servicing Files
	 	 	22	 
	5.4. Books and Records; Transfers of Mortgage Loans
	 	 	22	 
	5.5. Custodial Agreement; Delivery of Documents
	 	 	23	 
	 
	 	 	 	 
	ARTICLE VI REPRESENTATIONS AND WARRANTIES
	 	 	24	 
	 
	 	 	 	 
	6.1. General Representations and Warranties
	 	 	24	 
	6.2. Representations, Warranties and Covenants of the Owner Regarding
Individual Mortgage Loans
	 	 	24	 

 

 

 

	 	 	 	 	 
	ARTICLE VII THE SERVICER
	 	 	27	 
	 
	 	 	 	 
	7.1. Indemnification; Third Party Claims
	 	 	27	 
	7.2. Merger or Consolidation of the Servicer
	 	 	28	 
	7.3. Limitation on Liability of the Servicer and Others
	 	 	29	 
	7.4. Limitation on Assignment by the Servicer
	 	 	29	 
	 
	 	 	 	 
	ARTICLE VIII RESERVED
	 	 	29	 
	 
	 	 	 	 
	8.1. Reserved
	 	 	29	 
	 
	 	 	 	 
	ARTICLE IX DEFAULT
	 	 	29	 
	 
	 	 	 	 
	9.1. Events of Default
	 	 	29	 
	9.2. Waiver of Defaults
	 	 	30	 
	 
	 	 	 	 
	ARTICLE X TERMINATION
	 	 	30	 
	 
	 	 	 	 
	10.1. Termination
	 	 	30	 
	10.2. Termination With Cause
	 	 	31	 
	10.3. Termination Without Cause
	 	 	31	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS PROVISIONS
	 	 	31	 
	 
	 	 	 	 
	11.1. Successor to the Servicer
	 	 	31	 
	11.2. Reserved
	 	 	32	 
	11.3. Amendment; Extension Not a Waiver
	 	 	32	 
	11.4. Governing Law; Venue
	 	 	32	 
	11.5. Duration of Agreement
	 	 	32	 
	11.6. Notices
	 	 	33	 
	11.7. Severability of Provisions
	 	 	33	 
	11.8. Relationship of Parties
	 	 	33	 
	11.9. Execution; Successors and Assigns
	 	 	34	 
	11.10. Assignment by the Owner
	 	 	34	 
	11.11. Time of Payment
	 	 	34	 
	11.11. Force Majeure
	 	 	34	 

 

 

 

EXHIBITS

	 	 	 
	Exhibit A
	 	Mortgage Loan Schedule
	Exhibit B
	 	Contents of Each Mortgage Loan File
	Exhibit C
	 	Reserved
	Exhibit D
	 	Servicing Fee Schedule
	Exhibit E
	 	Reports
	 
	 	 
	Exhibit F
	 	Reserved
	 
	 	 
	Exhibit G
	 	Approval Matrix

 

 

 

LOAN SERVICING AGREEMENT

This Loan Servicing Agreement (the “Agreement”), dated and effective as of September
22, 2010, is by and between BOSCO CREDIT II, LLC, a Delaware limited liability company (“Owner”),
and Franklin Credit Management Corporation, a Delaware corporation (“Servicer”).

WHEREAS, the Mortgage Loans identified on the Mortgage Loan Schedule annexed hereto as
Exhibit A have been acquired by Owner; and

WHEREAS, the Servicer has agreed to service each Mortgage Loan on behalf of the Owner
commencing on the Effective Date (as defined herein), and the parties hereto desire to provide the
mechanics of such servicing by the Servicer;

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other
good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the
Owner and the Servicer agree as follows:

ARTICLE I

DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION

Whenever used herein, the following words and phrases shall have the following meanings:

“Accepted Servicing Practices” means, with respect to any Mortgage Loan, those
customary and reasonable mortgage servicing practices generally undertaken by prudent mortgage
lending institutions that service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located, subject to and in accordance with the
Approval Matrix and the Agreed Servicing Guidelines.

“Adjustment Date” means, as to each adjustable rate Mortgage Loan, the date on which
the Mortgage Interest Rate is adjusted in accordance with the terms of the related Mortgage Note
and Mortgage.

“Agreed Servicing Guidelines” mean the Agreed Servicing Guidelines attached hereto as
Exhibit H.

“Agreement” has the meaning assigned to it in the preamble.

“Ancillary Income” means all income derived from the Mortgage Loans other than
payments of principal and interest on the Mortgage Loans, including any interest that accrues on
funds on deposit in the Escrow Account and the Control Account, insufficient fund fees, conversion
fees, satisfaction fees, optional insurance administrative fees, assumption fees, escrow account
benefits, reinstatement fees, customary real estate referral fees, modification fees, release fees,
foreclosure fees, late payment fees, prepayment penalty fees and all other incidental fees and
charges received by the Servicer, but excluding Servicing Fees.

 

 

 

“Applicable Requirements” means as of the time of reference, with respect to the
Mortgage Loans, REO Property and the servicing of the Mortgage Loans, all of the following: (i) all
contractual obligations of the Servicer set forth in this Agreement; (ii) the requirements set
forth in the related Mortgage Note and the related Mortgage; (iii) all applicable federal, state
and local legal and regulatory requirements (including statutes, rules, regulations and ordinances
and including the Privacy Requirements); (iv) all other applicable requirements and guidelines of
each governmental agency, board, commission, instrumentality and other governmental body or officer
having jurisdiction; (v) all other applicable judicial and administrative judgments, orders,
stipulations, awards, writs and injunctions; and (vi) Accepted Servicing Practices.

“Appraised Value” means with respect to any Mortgage Loan, the lesser of (i) the value
set forth on the appraisal made in connection with the origination of the related Mortgage Loan as
the value of the related Mortgaged Property, or (ii) the purchase price paid for the Mortgaged
Property, provided, however, that in the case of a refinanced Mortgage Loan, such value shall be
based solely on the appraisal made in connection with the refinancing of such Mortgage Loan.

“Approval Matrix” means the Owner’s specified delegation of authority to the Servicer
for servicing the Accounts, which is set forth on Exhibit G to this Agreement.

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

“Business Day” means any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions located in New York or New Jersey are authorized or obligated by law or
executive order to be closed.

“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time
or any successor statute thereto, and applicable U.S. Department of the Treasury regulations issued
pursuant thereto.

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

“Control Account” has the meaning assigned to it in the Loan Agreement.

“Custodial Agreement” means the agreement governing the retention of the originals of
each Mortgage Note, Mortgage, Assignment of Mortgage and other Mortgage Loan Documents.

“Custodian” means the custodian under the Custodial Agreement, or its successor in
interest or assigns, or any successor to the Custodian under the Custodial Agreement as provided
therein.

“Customer Information” means any personally identifiable information in any form
(written, electronic or otherwise) relating to a Mortgagor, including, but not limited to: a
Mortgagor’s name, address, telephone number, Mortgage Loan number, Mortgage Loan payment
history, delinquency status, insurance carrier or payment information, tax amount or payment
information; the fact that the Mortgagor has a relationship with the servicer of such Mortgagor’s
Mortgage Loan; and any other non-public personally identifiable information.

 

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“Cut-off Date” means September 22, 2010, or with respect to Mortgage Loans and
servicing rights and obligations with respect to such Mortgage Loans made subject to this Agreement
after the first Effective Date hereunder, the date agreed to by the Servicer and the Owner.

“Damages” means any and all assessments, judgments, claims, liabilities, losses,
costs, damages or expenses (including interest, penalties and reasonable attorneys’ fees, expenses
and disbursements in connection with any action, suit or proceeding and including any such
reasonable attorneys’ fees, expenses and disbursements incurred in enforcing any right of
indemnification against any indemnitor). There shall be no limitation on the amount of Damages
under this Agreement except as provided in Section 7.3(c).

“Delinquent” means a Mortgage Loan is “Delinquent” when any payment contractually due
thereon has not been made by the close of business on the Due Date therefor. Such Mortgage Loan is
“30 days Delinquent” if such contractual payment has not been received by the close of business on
the numerically corresponding day of the month immediately succeeding the month in which such
contractual payment was due, or, if there is no such numerically corresponding day (e.g., when a
30-day month follows a 31-day month in which a payment was due on the 31st day of such month) then
on the last day of such immediately succeeding month. Similarly for “60 days Delinquent” the second
immediately succeeding month, and for “90 days Delinquent” the third immediately succeeding month.

“Determination Date” means the last calendar day of the month immediately preceding
the related Distribution Date.

“Distribution Date” means the 10th day (or if such 10th day is not a Business Day, the
first Business Day immediately following) of any month, beginning with the first Distribution Date.

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

“Due Period” means with respect to each Distribution Date, the period commencing on
the second day of the month preceding the month of the Distribution Date and ending on the first
day of the month of the Distribution Date.

“Effective Date” means September 23, 2010, or with respect to Mortgage Loans and
servicing rights and obligations with respect to such Mortgage Loans made subject to this Agreement
after such date, on the date that the Servicer obtains possession of the Mortgage Loan Documents.

“Errors and Omissions Insurance Policy” means an errors and omissions insurance policy
to be maintained by the Servicer pursuant to Section 2.12.

 

3

 

“Escrow Account” means the separate account or accounts created and maintained
pursuant to Section 2.6.

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

“Event of Default” means any one of the conditions or circumstances enumerated in
Section 9.1.

“Expenses” has the meaning assigned to it in Section 2.24.2.

“FDIC” means the Federal Deposit Insurance Corporation, or any successor thereto.

“FHA” means the Federal Housing Administration, or any successor thereto.

“Fidelity Bond” means a fidelity bond to be maintained by the Servicer pursuant to
Section 2.12.

“Float Benefit” means the net economic benefit resulting from escrow and custodial
deposits held for the account of the Servicer or the Owner relating to the Mortgage Loan and
servicing thereof. The Float Benefit is based on the Servicer’s selection of the investment
facility or interest rate swap or other arrangement offered from time to time by the financial
institution holding custodial deposits.

“Franklin Trust Loans” means the Mortgage Loans purchased from Franklin Mortgage Asset
Trust 2009-A.

“Gross Margin” means with respect to each Mortgage Loan, the fixed percentage amount
set forth in the related Mortgage Note which is added to the Index in order to determine the
related Mortgage Interest Rate, as set forth in the Mortgage Loan Schedule.

“HELOC” means a Mortgage Loan that is a home equity line of credit or any other
arrangement under which the Mortgagor has the right to demand further advances from the mortgagee.

“High Cost Loan” means a Mortgage Loan classified as (a) a “high cost” loan under
HOEPA, (b) a “high cost home,” “threshold,” “covered,” “high risk home,” “predatory” or similar
loan under any other applicable state, federal or local law or (c) a Mortgage Loan categorized as
“High Cost” pursuant to the Standard & Poor’s Glossary for File Format for LEVELS®, Appendix E, as
revised from time to time.

“HOEPA” means the Home Ownership Equity Protection Act of 1994, as amended.

 

4

 

“Index” means with respect to any adjustable rate Mortgage Loan, the index identified
on the Mortgage Loan Schedule and set forth in the related Mortgage Note for the purpose of
calculating the interest thereon.

“Insurer” means any entity that insures or guarantees all or part of the risk of loss
of a Mortgage Loan, and the providers of any hazard insurance policy, flood insurance policy or
title insurance policy.

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

“Lender” means Värde Investment Partners, L.P., a Delaware limited partnership.

“Litigation: means any litigation, arbitration or other proceeding before any
governmental, administrative or arbitral court or tribunal, or any government investigation or
administrative enforcement action.

“Liquidation Proceeds” means cash received in connection with the liquidation of a
defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage Loan, trustee’s
sale, foreclosure sale or otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage Loan.

“Loan-to-Value Ratio or LTV” means with respect to any Mortgage Loan, the ratio of the
original loan amount of the Mortgage Loan at its origination (unless otherwise indicated) to the
Appraised Value of the Mortgaged Property.

“Loan Agreement” means that certain Master Loan Agreement between Bosco Credit II, LLC
and Lender dated as of the date of this Agreement, as amended, modified, supplemented, replaced or
renewed from time to time in accordance with its terms.

“Monthly Payment” means the scheduled monthly payment of principal and interest on a
Mortgage Loan.

“Mortgage” means the mortgage, deed of trust or other instrument securing a Mortgage
Note, which creates a lien on Mortgaged Property securing the Mortgage Note.

“Mortgage File” means the items pertaining to a particular Mortgage Loan referred to
in Exhibit B to this Agreement, and any additional documents required to be added to the
Mortgage File pursuant to this Agreement.

“Mortgage Interest Rate” means the annual rate of interest borne on a Mortgage Note in
accordance with the provisions of the Mortgage Note.

“Mortgage Loan” means each Mortgage Loan subject to this Agreement and which is
identified on the Mortgage Loan Schedule, which Mortgage Loan includes the Mortgage File, the
Monthly Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds, REO Disposition Proceeds and all other rights, benefits, proceeds and
obligations arising from or in connection with such Mortgage Loan. To the extent the context
shall permit or require, each such reference to Mortgage Loan shall include REO Property.

 

5

 

“Mortgage Loan Documents” means with respect to a Mortgage Loan, the original related
Mortgage Note with applicable addenda and riders and endorsements, the original related Mortgage
and the originals of any required addenda and riders, the original related Assignment of Mortgage
and any original intervening related assignments, any guarantees, any written modification
agreements, the original related title insurance policy, and the related appraisal report.

“Mortgage Loan Remittance Rate” means with respect to each Mortgage Loan, the annual
rate of interest remitted to the Owner, which shall be equal to the related Mortgage Interest Rate
minus the Servicing Fee Rate.

“Mortgage Loan Schedule” means a schedule of Mortgage Loans annexed hereto as
Exhibit A, or as the same may be supplemented from time to time by mutual agreement of the
Owner and the Servicer, such schedule setting forth the following information with respect to each
Mortgage Loan: (1) the Servicer’s Mortgage Loan number; (2) the city state and zip code of the
Mortgaged Property; (3) a code indicating whether the Mortgaged Property is a single family
residence, two-family residence, three-family residence, four-family residence, PUD, mixed-use
property, or condominium; (4) the current Mortgage Interest Rate; (5) the current Mortgage Loan
Remittance Rate; (6) the current Monthly Payment; (7) the Gross Margin; (8) the original term to
maturity; (9) the scheduled maturity date; (10) the principal balance of the Mortgage Loan as of
the Cut-off Date; (11) the Loan-to-Value Ratio; (12) the next Adjustment Date; (13) the lifetime
Mortgage Interest Rate cap; (14) a code indicating whether the Mortgage Loan is convertible or not;
(15) a code indicating whether the Mortgage Loan Documents contain a prepayment fee, and, if so,
additional fields setting forth the terms thereof; and (16) any other information that the Servicer
may require.

“Mortgage Note” means the note or other evidence of the indebtedness of a Mortgagor
secured by a Mortgage.

“Mortgaged Property” means the real property securing repayment of the debt evidenced
by a Mortgage Note or, where the context permits or requires (including in Section 6.2), an REO
Property.

“Mortgagor” means the obligor on a Mortgage Note.

“New Loan Data File” means with respect to each Mortgage Loan delivered after the
initial Effective Date by the Owner to be serviced by the Servicer under this Agreement, the data
file produced by the Owner that is used to enable the Servicer to set up each Mortgage Loan on its
servicing system.

“Originator” means, with respect to any Mortgage Loan, the entity or entities that (a)
took the relevant Mortgagor’s loan application; (b) processed the relevant Mortgagor’s loan
application: and/or (c) closed and/or funded such Mortgage Loan.

 

6

 

“Owner” means Bosco Credit II, LLC, a Delaware limited liability company, or its
successor in interest or any successor to the Owner under this Agreement as herein provided.

“Owner Indemnitees” has the meaning assigned to it in Section 7.1.1.

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

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

“Principal Prepayment Period” means the month preceding the month in which the related
Distribution Date occurs.

“Prior Servicer” means all servicers and subservicers, collectively and individually,
other than the Servicer, which, at any time prior to the applicable Effective Date, pooled, sold,
serviced or subserviced any of the Mortgage Loans.

“Privacy Requirements” means the obligations imposed by (i) Title V of the
Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq.; (ii) the applicable federal regulations
implementing such act and codified at 12 CFR Parts 40, 216, 332, 573, and/or 16 CFR Part 313;
(iii) Interagency Guidelines Establishing Standards For Safeguarding Borrower Information published
in final form on February 1, 2001 (such final guidelines and/or rules the “Interagency Guidelines”)
to establish and maintain an Information Security Program (as such term is defined in the
Interagency Guidelines); and (iv) other applicable federal, state and local laws, rules,
regulations, and orders relating to the privacy and security of Customer Information, including the
federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and similar state laws.

“Qualified Depository” means a deposit account or accounts maintained with a federal
or state chartered depository institution selected by Servicer the deposits in which are insured by
the FDIC to the applicable limits and the short-term unsecured debt obligations of which (or, in
the case of a depository institution that is a subsidiary of a holding company, the short-term
unsecured debt obligations of such holding company) are rated A-1 by Standard & Poor’s Ratings
Services or Prime-1 by Moody’s Investors Service, Inc. (or a comparable rating if another rating
agency is specified by the Owner by written notice to the Servicer) at the time any deposits are
held on deposit therein.

“Qualified Insurer” means a mortgage guaranty insurance Insurer duly authorized and
licensed where required by law to transact mortgage guaranty insurance business and generally
acceptable as an Insurer under Accepted Servicing Practices.

“Remittance Date” has the meaning assigned to it in the Loan Agreement.

“REO Disposition” means the final sale by the Servicer of any REO Property.

 

7

 

“REO Disposition Proceeds” means all amounts received with respect to an REO
Disposition pursuant to Section 2.16.

“REO Property” means a Mortgaged Property acquired through foreclosure, by deed in
lieu of foreclosure or otherwise, as described in Section 2.16.

“Servicer” means Franklin Credit Management Corporation, or its successor in interest
or assigns, or any successor to the Servicer under this Agreement appointed as herein provided.

“Servicer Employees” means Servicer Employees has the meaning set forth in Section
2.12.

“Servicer Indemnitees” has the meaning assigned to it in Section 7.1.2.

“Servicing Advances” means all customary, reasonable and necessary “out of pocket”
costs and expenses (including reasonable attorney’s fees and disbursements) incurred in the
performance by the Servicer of its servicing obligations, including, but not limited to, the cost
of (a) the preservation, restoration and protection of the Mortgage Loan or Mortgaged Property, (b)
any enforcement or judicial proceedings, including foreclosures, money judgments and bankruptcy
proceedings, (c) the management and liquidation of any REO Property, including, but not limited to,
the cost of environmental inspection or review of such property, (d) compliance with the
obligations under Sections 2.8, 2.10, 2.11, 2.14 and 2.15, (e) other Expenses that are the
responsibility of the Owner under Section 2.24, and (f) any other amounts expressly designated as
Servicing Advances pursuant to this Agreement.

“Servicing Fee” means with respect to each Mortgage Loan, the fees the Owner shall pay
to the Servicer, as set forth on Exhibit D to this Agreement.

“Servicing Fee Rate” means with respect to each Mortgage Loan, the percentage set
forth on Exhibit D to this Agreement.

“Servicing File” means with respect to each Mortgage Loan, the file retained by the
Servicer consisting of originals of all documents in the Mortgage File which are not delivered to
the Custodian and copies of the Mortgage Loan Documents listed in the Custodial Agreement, the
originals of which are delivered to the Custodian pursuant to Section 5.5.

“VA: means the United States Department of Veterans Affairs, or any successor
thereto.

Construction of this Agreement and Certain Terms and Phrases.

(a) Unless the context of this Agreement clearly indicates otherwise, (i) words of any gender
include each other gender; (ii) words denoting the singular shall include the plural and vice
versa; (iii) the terms “hereof”, “herein”, “hereby” and derivate or similar words refer to this
entire Agreement and not to any particular provision of this Agreement; and (iv) the terms
“Article”, “Section”, and “Exhibit” without any reference to a specified document refer to the
specified Article, Section and Exhibit, respectively, of this Agreement.

 

8

 

(b) The words “including”, “include” and “includes” are not exclusive and shall be deemed to
be followed by the words “without limitation”.

(c) The word “or” shall be construed to mean “and/or” unless the context clearly prohibits
that construction.

(d) Whenever this Agreement refers to a number of days, such number shall refer to calendar
days unless Business Days are specified.

(e) Any reference to any federal, state, local or foreign statute or law, including any one or
more sections thereof, shall be deemed also to refer to, unless the context requires otherwise, all
rules and regulations promulgated thereunder.

(f) The headings contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.

ARTICLE II

ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

2.1. The Servicer to Act as the Servicer. The Servicer, as an independent contractor, shall
service and administer the Mortgage Loans on an actual/actual basis in accordance with this
Agreement, in accordance with Accepted Servicing Practices, and shall have full power and
authority, acting alone or through the delegation of duties to third party servicing providers, to
do any and all things in connection with such servicing and administration which the Servicer may
deem necessary or desirable, consistent with the terms of this Agreement. The Servicer may perform
its servicing responsibilities through agents or independent contractors, provided,
however, that in no event will the Servicer delegate oversight of servicing, interaction
with the Owner or the Custodian, administration of accounts or reporting and no event will the
Servicer be released from any of its responsibilities hereunder on account of any delegation.
Unless otherwise agreed in writing by the Owner, in no event will the Owner act in a manner that is
not consistent with the Approval Matrix or the Agreed Servicing Guidelines.

From and after the initial Effective Date, the Servicer shall assume responsibility under this
Agreement to service and administer additional Mortgage Loans upon the delivery, in accordance with
all reasonable instructions and directions which the Servicer may give to the Owner, of the related
New Loan Data File and all related Mortgage Loan Documents by the Owner. To the extent available to
the Owner and not otherwise available to the Servicer, the Owner shall provide the New Loan Data
File for each Mortgage Loan to the Servicer no event later than fifteen (15) days before the
Servicer is expected to perform servicing on that Mortgage Loan. To the extent available to the
Owner and not otherwise available to the Servicer, the Owner shall notify the Servicer within two
(2) Business Days, in writing, of any changes in the information contained in the New Loan Data
File. The Owner agrees to take such actions under the Custodial Agreement as are required of the
Owner in connection with the delivery to the Servicer of copies of the Mortgage Note, the Mortgage
or any other documents which are held by the Custodian with respect to a Mortgage Loan that the
Servicer deems reasonably necessary
in connection with its performance of the servicing of said Mortgage Loan. The Servicer shall
cooperate with the Owner in connection with the transfer of the servicing rights and obligations
with respect to the Mortgage Loans.

 

9

 

The Servicer shall have no liability hereunder and shall be excused from performance to the
extent that such liability or failure to perform is related to the fact that the Servicer has not
been provided with the Mortgage Loan Documents.

Consistent with the terms of this Agreement, the Servicer may waive, modify or vary any term
of any Mortgage Loan or consent to the postponement of strict compliance with any such term or in
any manner grant indulgence to any Mortgagor if in the Servicer’s reasonable and prudent
determination such waiver, modification, postponement or indulgence is not materially adverse to
the Owner and provided that in no event will Servicer (i) make any such waiver, modification,
variance or consent unless permitted under the Agreed Servicing Guidelines and/or the Approval
Matrix or (ii) make any future advances with respect to a Mortgage Loan. Unless the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment of the Servicer,
either imminent or reasonably foreseeable, the Servicer shall not accept short sales or partial
payments in full satisfaction of any payment obligation, grant forbearances or permit any
modification with respect to any Mortgage Loan that would change the Mortgage Interest Rate, defer
or forgive the payment of principal (except for actual payments of principal), capitalize
arrearages or change the final maturity date on any Mortgage Loan (a “Prohibited Modification”).
Notwithstanding the foregoing sentence, the Servicer may permit a Prohibited Modification if the
Owner has consented to the same in writing or the Servicer has reasonably determined that such
activities are necessary and desirable and in the best interests of the Owner to maximize recovery
of principal and interest over the life of the Mortgage Loans. Without limiting the generality of
the foregoing, the Servicer shall continue, and is hereby authorized and empowered, to execute and
deliver on behalf of itself and the Owner, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with respect to the
Mortgage Loans and with respect to the Mortgaged Properties. If reasonably required by the
Servicer, the Owner shall furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Agreement.

Unless the Servicer agrees for specified Mortgage Loans, the Owner shall not make any Mortgage
Loan subject to this Agreement for which the Owner or the Servicer has knowledge that there may be
a legal issue regarding the Mortgage Loan, including without limitation, fraudulent origination,
theft or identity, or failure to comply with applicable laws and regulations in the origination or
prior servicing of the Mortgage Loan. The Owner shall notify the Servicer in writing of those
Mortgage Loans, if any, that have been subject to a report to a governmental agency with regard to
alleged fraud or identity theft. The Servicer’s assumption of the responsibility to service and
administer such Mortgage Loan, if any, shall not constitute a waiver of the Servicer’s rights to
indemnification as otherwise provided in this Agreement.

 

10

 

2.2. Liquidation of Mortgage Loans. In the event that any payment due under any Mortgage
Loan and not postponed pursuant to Section 2.1 is not paid when the same becomes due and payable,
or in the event the Mortgagor
fails to perform any other covenant or obligation under the Mortgage Loan and such failure
continues beyond any applicable grace period, the Servicer shall take such action as shall be
consistent with Applicable Requirements. If foreclosure proceedings are commenced, the Servicer
shall make all necessary and proper Servicing Advances, subject to reimbursement in accordance with
the terms of this Agreement, provided, however, that the Servicer shall not be required to expend
funds in connection with any foreclosure or towards the restoration or preservation of any
Mortgaged Property, unless it shall determine that such preservation, restoration and/or
foreclosure is reasonably expected to increase the proceeds of liquidation of the Mortgage Loan to
the Owner after reimbursement to itself for such expenses.

Notwithstanding anything to the contrary contained herein, in connection with a foreclosure or
acceptance of a deed in lieu of foreclosure, (a) the Servicer shall have no obligation to commence
or continue foreclosure proceedings or obtain title to Mortgaged Property securing a Mortgage Loan
as a result of or in lieu of foreclosure or otherwise if (i) such Mortgage Loan is subject to HOEPA
or any regulations related thereto, (ii) such Mortgage Loan qualifies as a High Cost Loan under a
state or local anti-predatory lending law or regulation, or (iii) the Servicer determines, in its
reasonable judgment, that foreclosure and/or acquisition of title to Mortgaged Property would
expose it or the Owner to material risk or liability pertaining to the acts, errors or omissions of
the Originator or Prior Servicers and (b) in the event the Servicer has reasonable cause to believe
that a Mortgaged Property is contaminated by hazardous or toxic substances or wastes. If the Owner
otherwise requests an environmental inspection or review of such Mortgaged Property, such an
inspection or review is to be conducted by a qualified inspector. The cost for such inspection or
review shall be borne by the Owner. Upon completion of the inspection or review, the Servicer shall
promptly provide the Owner with a written report of the environmental inspection.

After reviewing the environmental inspection report, the Owner shall determine how the
Servicer shall proceed with respect to the Mortgaged Property. In the event (a) the environmental
inspection report indicates that the Mortgaged Property is contaminated by hazardous or toxic
substances or wastes and (b) the Owner directs the Servicer to proceed with foreclosure or
acceptance of a deed in lieu of foreclosure, the Servicer shall be reimbursed for all costs and
expenses associated with such foreclosure or acceptance of a deed in lieu of foreclosure and any
related environmental clean up costs, as applicable, pursuant to the terms of this Agreement. In
the event the Owner directs the Servicer not to proceed with foreclosure or acceptance of a deed in
lieu of foreclosure, the Servicer shall be reimbursed for all Servicing Advances and Expenses made
with respect to the related Mortgaged Property pursuant to the terms of this Agreement.

2.3. Collection of Mortgage Loan Payments. Continuously from the date hereof until the
principal and interest on all Mortgage Loans are paid in full, the Servicer shall proceed
diligently to collect all payments due under each of the Mortgage Loans when the same shall become
due and payable and, where required under Applicable Requirements, shall use commercially
reasonable efforts in ascertaining and estimating Escrow Payments and all other charges that will
become due and payable with respect to the Mortgage Loan and the Mortgaged Property.

 

11

 

2.4. Establishment of and Deposits to Control Account. The Servicer shall segregate and hold all funds collected and received pursuant to Mortgage
Loans separate and apart from any of its own funds and general assets. Except as provided herein,
the Servicer shall deposit in the Control Account within two (2) Business Days of the Servicer’s
receipt, and retain therein, the following collections received by the Servicer after the Cut-off
Date or received by the Servicer prior to the Cut-off Date but allocable to a period subsequent
thereto:

(a) all payments on account of principal on the Mortgage Loans, including all Principal
Prepayments (other than any related prepayment penalty fees, which shall be retained by the
Servicer);

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

(c) all Liquidation Proceeds;

(d) all Insurance Proceeds (other than proceeds to be held in the Escrow Account in
accordance with Section 2.6 and applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with Section 2.14);

(e) all Condemnation Proceeds which are not applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with Section 2.14; and

(f) any amounts received with respect to or related to any REO Property and all REO
Disposition Proceeds pursuant to Section 2.16.

2.5. Permitted Withdrawals From Control Account. On each Remittance Date, the Owner
shall cause amounts to be paid from the Control Account as provided in Section 3.4 of the Loan
Agreement, including, without limitation, for the following purposes:

(a) to pay the Servicing Fee;

(b) to pay Servicer for any unreimbursed Servicing Advances or Expenses or Ancillary
Income not retained prior to depositing funds in the Control Account or that are otherwise
reimbursable to the Servicer pursuant to this Agreement;

(c) to reimburse Servicer for expenses incurred and reimbursable to it pursuant to
Section 7.1;

(d) to pay any amount required to be paid pursuant to Section 2.16 related to any REO
Property;

(e) to reimburse Servicer for any REO expenses not otherwise reimbursed above; and

(f) to remove funds inadvertently placed in the Control Account by the Servicer.

If on any Distribution Date the amounts on deposit in the Control Account are insufficient to
cover payment or reimbursement to the Servicer of any Servicing Advances or Expenses, the Owner
shall reimburse the Servicer for any such amounts within a reasonable time period after receipt of
notice of such insufficiency by the Owner.

 

12

 

2.6. Establishment of and Deposits to Escrow Account. The Servicer shall segregate and
hold all funds collected and received pursuant to a Mortgage Loan constituting Escrow Payments
separate and apart from any of its own funds and general assets and shall establish and maintain
one or more Escrow Accounts, in the form of time deposit or demand accounts, titled, “Franklin
Credit Management Corporation, in trust for the Owner and/or subsequent the Owners of residential
Mortgage Loans, and various Mortgagors — T & I.” The Escrow Accounts shall be established with a
Qualified Depository. Upon request of the Owner and within ten (10) days thereof, the Servicer
shall provide the Owner with written confirmation of the existence of such Escrow Account. Funds
deposited in the Escrow Account may be drawn on by the Servicer in accordance with Section 2.7.

The Servicer shall deposit in the Escrow Account or Accounts within two (2) Business Days of
the Servicer’s receipt, and retain therein:

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

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

The Servicer shall make withdrawals from the Escrow Account only to effect such payments as
are required under this Agreement, as set forth in Section 2.7. The Servicer shall be entitled to
retain any interest or other Float Benefits paid on funds deposited in the Escrow Account by the
depository institution, other than interest on escrowed funds required by law to be paid to the
Mortgagor. Additionally, any other benefit derived from the Escrow Account associated with the
receipt, disbursement and accumulation of principal, interest, taxes, hazard insurance, mortgage
insurance, etc. shall accrue to the Servicer. To the extent required by law, the Servicer shall pay
interest on escrowed funds to the Mortgagor notwithstanding that the Escrow Account may be
non-interest bearing or that interest paid thereon is insufficient for such purposes.
Notwithstanding the foregoing sentence, any interest paid to a Mortgagor which exceeds any benefit
to the Servicer derived from the Escrow Account, as described in this paragraph, shall be
reimbursable in accordance with the terms of this Agreement.

2.7. Permitted Withdrawals From Escrow Account. Withdrawals from the Escrow Account or
Accounts may be made by the Servicer only:

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

(b) to reimburse the Servicer for any unreimbursed Servicing Advances or Expenses made
by the Servicer pursuant to Section 2.8;

 

13

 

(c) to refund to any Mortgagor any funds found to be in excess of the amounts required
under the terms of the related Mortgage Loan;

(d) for transfer to the Control Account and application to reduce the principal balance
of the Mortgage Loan in accordance with the terms of the related Mortgage and Mortgage Note;

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

(f) to pay to the Servicer, or any Mortgagor to the extent required by law, any
interest or other Float Benefit paid on the funds deposited in the Escrow Account;

(g) to remove funds inadvertently placed in the Escrow Account by the Servicer; and

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

2.8. Payment of Taxes, Insurance and Other Charges. With respect to each Mortgage Loan
that provides for Escrow Payments, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates, sewer rents, and other charges which are
or may become a lien upon the Mortgaged Property and the status of fire and hazard insurance
coverage and shall obtain, from time to time, all bills for the payment of such charges (including
renewal premiums) and shall effect payment thereof, if required under Applicable Requirements,
prior to the applicable penalty or termination date, employing for such purpose deposits of the
Mortgagor in the Escrow Account which shall have been estimated and accumulated by the Servicer for
such purposes, as allowed under the terms of the Mortgage. Any Servicing Advances or Expenses to
effect payments of such charges are reimbursable in accordance with the terms of this Agreement.

2.9. Protection of Accounts. The Servicer may transfer the Escrow Account to a
different Qualified Depository from time to time.

2.10. Maintenance of Hazard Insurance. The Servicer may in its reasonable discretion cause to be maintained hazard insurance on
some or all Mortgaged Properties, subject to reimbursement as a Servicing Advance in accordance
with the terms of this Agreement.

To the extent required by applicable law or at the prior written direction of the Owner, if
the related Mortgaged Property is located in an area identified by the Flood Emergency Management
Agency as having special flood hazards (and such flood insurance has been made available), the
Servicer shall cause to be maintained for such Mortgage Property a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance Administration in effect in an
amount representing coverage equal to the lesser of (i) the minimum amount required, under the
terms of coverage, to compensate for any damage or loss on a replacement cost basis; (ii) the
unpaid balance of the related Mortgage; and (iii) the maximum amount of insurance which is
available under the Flood Disaster Protection Act of 1973, as amended. The cost of any flood
insurance purchased by the Servicer pursuant to the foregoing shall be reimbursable as a Servicing
Advance in accordance with the terms of this Agreement.

 

14

 

It is understood and agreed that the Servicer shall have no obligation to maintain insurance
to cover loss or damage from an earthquake, windstorm or similar casualty.

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

All policies required hereunder shall name the Servicer as loss payee and shall be endorsed
with standard or union mortgagee clauses, without contribution, which shall provide for at least
thirty (30) days’ prior written notice to Servicer of any cancellation, reduction in amount or
material change in coverage.

Pursuant to Section 2.4, any amounts collected by the Servicer under any such policies (other
than amounts to be deposited in the Escrow Account and applied to the restoration or repair of the
related Mortgaged Property, or property acquired in liquidation of the Mortgage Loan, or to be
released to the Mortgagor, in accordance with the Servicer’s normal servicing procedures as
specified in Section 2.14) shall be deposited in the Control Account subject to withdrawal pursuant
to Section 2.5.

For purposes of this Section 2.10 and Section 2.11, the Owner acknowledges and agrees that an
Insurer may be an affiliate of the Servicer. Notwithstanding the foregoing, the Servicer shall not
interfere with the Mortgagor’s freedom of choice in selecting either his or her insurance carrier
or agent.

2.11. Reserved.

2.12 Maintenance of Fidelity Bond and Errors and Omissions Insurance. The Servicer
shall maintain with responsible companies, at its own expense, a blanket Fidelity Bond and an
Errors and Omissions Insurance Policy, with broad coverage on all of its officers, employees or
other persons acting in any capacity on behalf of the Servicer requiring such persons to handle
funds, money, documents or papers relating to the Mortgage Loans (the “Servicer Employees”). Any
such Fidelity Bond and Errors and Omissions Insurance Policy shall be in the form of the Mortgage
Banker’s Blanket Bond and shall protect and insure the Servicer against losses, including forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts of the Servicer Employees. Such
Fidelity Bond and Errors and Omissions Insurance Policy also shall protect and insure the Servicer
against losses in connection with the release or satisfaction of a Mortgage Loan without having
obtained payment in full of the indebtedness secured thereby. No provision of this Section 2.12
requiring such Fidelity Bond and Errors and Omissions Insurance Policy shall diminish or relieve
the Servicer from its duties and obligations as set forth in this Agreement. The minimum coverage
under any such Fidelity Bond and Errors and Omissions Insurance Policy shall be at least equal to
the amounts acceptable in accordance with Applicable Requirements. In any event, the Servicer
shall maintain such insurance as is required under Section 7.20 of the Loan Agreement.

 

15

 

2.13 Inspections. The Servicer shall perform inspections on Mortgaged Property in
accordance with Applicable Requirements. The Servicer shall keep a written report of each such
inspection.

2.14 Restoration of Mortgaged Property. The Servicer need not obtain the approval of
the Owner prior to releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be
applied to the restoration or repair of the Mortgaged Property if such release is in accordance
with Applicable Requirements. For claims greater than $15,000, the Servicer shall comply with the
following conditions in connection with any such release of Insurance Proceeds or Condemnation
Proceeds:

(a) the Servicer shall receive satisfactory independent verification of completion of
repairs and issuance of any required approvals with respect thereto;

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

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

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

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

2.15 Reserved.

2.16 Title, Management and Disposition of REO Property. In the event that title to any
Mortgaged Property is acquired in foreclosure, by deed in lieu of foreclosure or otherwise
(including by purchase), the deed or certificate of sale shall be taken in the name of the Owner,
or, at the direction of the Owner, the deed or certificate of sale shall be taken in the name of a
nominee for the Owner. The Person or Persons holding such title other than the Owner shall
acknowledge in writing that such title is being held as nominee for the Owner.

The Servicer shall manage, conserve, protect and operate each REO Property for the Owner
solely for the purpose of its prompt disposition and sale. The Servicer, either itself or through
an agent selected by the Servicer, shall manage, conserve, protect and operate the REO Property in
the same manner that similar property in the same locality as the REO Property is managed. The
Servicer shall attempt to sell the same (and may temporarily rent the same for a period not greater
than three years, except as otherwise provided below) on such terms and conditions as the Servicer
deems to be in the reasonable interest of the Owner.

 

16

 

The Servicer shall use commercially reasonable efforts to dispose of the REO Property as soon
as possible and shall sell such REO Property in any event within three years after title has been
taken to such REO Property, unless the Servicer determines, and gives notice to the Owner to such
effect, that a longer period is necessary for the orderly liquidation of such REO Property [or that
to maximize recovery the REO Property should be rented]. If a period longer than three years is
permitted under the foregoing sentence and is necessary to sell any REO Property, the Servicer
shall report monthly to the Owner as to the progress being made in selling such REO Property.

The Servicer shall also maintain on each REO Property fire and hazard insurance with extended
coverage in amount which is at least equal to the maximum insurable value of the improvements which
are a part of such property, liability insurance and, to the extent required and available under
the Flood Disaster Protection Act of 1973, as amended, flood insurance in the amount required
above.

The disposition of REO Property shall be carried out by the Servicer at such price, and upon
such terms and conditions, as the Servicer deems to be in the reasonable interests of the Owner.
The proceeds of sale of the REO Property shall be promptly deposited in the Control Account. As
soon as practical thereafter, the expenses of such sale shall be paid and the Servicer shall
reimburse itself for any related unreimbursed Servicing Advances, Expenses and unpaid Servicing
Fees. On the Distribution Date immediately following the Principal Prepayment Period in which such
sale proceeds are received, the net cash proceeds of such sale remaining in the Control Account
shall be distributed to the Owner, net of any Ancillary Income or unreimbursed Servicing Fees,
Expenses or Servicing Advances.

The Servicer shall withdraw from the Control Account funds necessary for the proper operation,
management and maintenance of the REO Property, including the cost of maintaining any hazard
insurance pursuant to Section 2.10 and the fees of any managing agent of the Servicer, or the
Servicer itself.

2.17 REO Reports. Together with the statement furnished pursuant to Section 3.2, the
Servicer shall furnish to the Owner on or before the Distribution Date of each month a statement
with respect to any REO Property, which statement shall cover the operation of such REO Property
for the previous month and the Servicer’s efforts in connection with the sale of such REO Property
and any rental of such REO Property incidental to the sale thereof for the previous month.

2.18 Liquidation Reports. Upon the foreclosure sale of any Mortgaged Property or the
acquisition thereof by the Owner pursuant to a deed in lieu of foreclosure, the Servicer shall
submit to the Owner a liquidation report with respect to such Mortgaged Property.

2.19 Reports of Foreclosures and Abandonments of Mortgaged Property. Following the
foreclosure sale or abandonment of any Mortgaged Property, the Servicer shall report such
foreclosure or abandonment as required pursuant to Section 6050J of the Code. The Servicer shall
file information reports with respect to the receipt of mortgage interest received in a trade or
business and information returns relating to cancellation of indebtedness income with respect to
any Mortgaged Property as required by the Code. Such reports shall be in form and substance
sufficient to meet the reporting requirements imposed by the Code.

 

17

 

2.20 Reserved.

2.21 Notification of Adjustments. With respect to each adjustable rate Mortgage Loan,
the Servicer shall adjust the Mortgage Interest Rate on the related Adjustment Date in compliance
with the requirements of applicable law and the related Mortgage and Mortgage Note. The Servicer
shall execute and deliver any and all necessary notices required under applicable law and the terms
of the related Mortgage Note and Mortgage regarding the Mortgage Interest Rate adjustments.

2.22 Transfer Notices.

2.22.1 At least fifteen (15) days before the Servicer initiates servicing under this
Agreement, the Servicer and the Owner shall provide any required notice to the Mortgagors of the
transactions contemplated herein through a notice jointly prepared and delivered by the Servicer
and the Owner in accordance with Applicable Requirements. The parties shall cooperate to accomplish
such notification in a timely and efficient manner as will best facilitate the assumption by the
Servicer of the servicing responsibilities. The form of the notice to be sent to Mortgagors shall
be approved by the Owner and the Servicer before mailing.

2.22.2 The Owner shall notify, or cause to be notified, all Insurers, by overnight or
registered mail, that all insurance premium billings for the Mortgage Loans must be sent to the
Servicer. Additionally, the Owner shall, prior to the applicable Effective Date, obtain
the written consent of any Insurers that have the contractual right to approve the assumption of
the servicing responsibilities by the Servicer.

2.22.3 For any Mortgage Loan that provides for Escrow Payments, the Owner, with the reasonable
assistance of the Servicer, shall notify the applicable taxing authorities (except as such is
handled through the tax service company) of the assumption of the servicing responsibilities by the
Servicer and include instructions to deliver all notices and tax bills to the Servicer or the
applicable tax service provider, as the case may be, from and after the Effective Date.

2.22.4 The Owner shall notify all attorneys who, on the Effective Date, are providing legal
services to or on behalf of the Owner in connection with pending foreclosure or Litigation
involving one or more of the Mortgage Loans, of the transfer of the servicing rights and
obligations with respect to the Mortgage Loans to the Servicer.

2.22.5 All notifications required to be made under this Section 2.22 shall be paid for or
reimbursed by the Owner.

2.23 Privacy.

2.23.1 Except in accordance with this Section 2.23, the Servicer shall not disclose any
Customer Information to any Person, including, but not limited to, any of the Servicer’s employees,
agents, or contractors, or any third party not affiliated with the Servicer. The Servicer shall
disclose such Customer Information only to the extent permitted by, or necessary to carry out the
Servicer’s express obligations and rights under, this Agreement or under Applicable Requirements
and for no other purpose. If and to the extent required by Applicable Requirements, the Servicer
shall ensure that each vendor or other Person to which the Servicer intends to disclose Customer
Information shall, prior to any such disclosure of information; agree to: (i) keep confidential any
such Customer Information; and (ii) use or disclose such Customer Information only to the extent
necessary to carry out the Servicer’s express obligations and rights under this Agreement.

 

18

 

2.23.2 Without limiting the scope of the above, the Servicer shall use at least the same
physical and other security measures to protect all Customer Information in the Servicer’s
possession or control as the Servicer uses for its own confidential and proprietary information of
a similar nature.

2.24 Losses and Expenses.

2.24.1 The Owner shall remain responsible, as between the Owner and the Servicer, for losses
related to the Owner’s investment in the Mortgage Loans. Losses of the type referred to above for
which the Owner shall remain responsible include, but are not limited to: credit losses, special
hazard insurance premiums, earthquake losses, losses resulting from the absence or inadequacy of
hazard insurance or flood insurance for a Mortgaged Property in accordance with Applicable
Requirements, foreclosure losses, REO Property losses, losses on Mortgage Loans in default or in
bankruptcy, and losses in connection with the Soldiers and Sailors Civil Relief Act (and any
successor to such Act).

2.24.2 In the event withdrawals from the Control Account or Escrow Accounts are insufficient
to reimburse the Servicer pursuant to this Agreement the Owner shall promptly upon receipt of an
invoice reimburse the Servicer for Servicing Advances and the following expenses
(“Expenses”): (i) any out-of-pocket expense the Servicer incurs with the prior approval of
the Owner in connection with its servicing and administrative obligations set forth in this
Agreement to the extent such expense is not ordinary to the servicing function (but not including
salaries, rent and other general operating expenses of the Servicer normally classified as
overhead); (ii) expenses that the Owner has expressly agreed to pay or be liable for hereunder; and
(iii) expenses incurred in connection with the performance by the Servicer at the request of the
Owner of any activity that is not specifically required to be performed by the Servicer under this
Agreement and is not reasonably ancillary to any specific requirements of the Owner under this
Agreement. Except as otherwise expressly provided in this Agreement, each party shall pay its own
expenses incurred in connection with the preparation of and performance under this Agreement,
including its own legal fees and expenses of preparing and delivering the notices, documents,
reports, accountings and any other information required of it hereunder.

2.24.3 On a monthly basis, following receipt of an invoice from the Servicer, the Owner shall
promptly reimburse the Servicer for outstanding Servicing Advances, Expenses and Servicing Fees as
provided in Section 2.7.

2.24.4 The Owner shall be solely responsible for all guaranty fees, credit enhancement fees,
custodial fees (and related shipping costs), trustee fees, and costs to record assignments. Except
as otherwise expressly set forth in this Agreement, the Servicer shall be solely responsible for
the direct and indirect internal and administrative costs associated with its obligations as the
Servicer of the Mortgage Loans hereunder, said costs to include but not be limited to: personnel,
facilities; supplies; mailing and computer system expenses, regardless of whether the Servicer
elects to contract with third party vendors to perform all or any portion of such internal and
administrative functions.

 

19

 

2.24.5 Except as otherwise provided in this Section, any Litigation related solely to a single
Mortgage Loan (other than Litigation between or among the Owner or any of its affiliates, on the
one hand, and the Servicer and any of its affiliates, on the other hand) including foreclosure,
evictions, quiet title and bankruptcy filings, shall be managed by the Servicer working with local
counsel selected by and working on behalf of the Owner. The costs and expenses of such Litigation
shall be deemed a Servicing Advance and be subject to reimbursement pursuant to the terms of this
Agreement. The Owner shall reimburse the Servicer for any out-of-pocket costs that the Servicer
incurs in connection with any Litigation described in this Section 2.24.5 (other than Litigation
between or among the Owner or its affiliates, on the one hand, and the Servicer or its affiliates,
on the other hand). Servicer will not engage in Litigation relating to any single Mortgage Loan
unless such Litigation is consistent with the Agreed Servicing Guidelines and the Approval Matrix
or as otherwise agreed to in writing by the Owner.

ARTICLE III

REMITTANCE

3.1. Reserved

3.2. Statements to the Owner. The Servicer shall cause the “Remittance Report” (as
defined in the Loan Agreement) to be furnished to Lender as and when required pursuant to the Loan
Agreement.

3.3. Monthly Advances by the Servicer. The Servicer shall not be required to advance
Delinquent monthly payments to the Owner.

ARTICLE IV

GENERAL SERVICING PROCEDURES

4.1. Transfers of Mortgaged Property. The Servicer shall use commercially reasonable
efforts to enforce any “due-on-sale” provision contained in any Mortgage or Mortgage Note and to
deny assumption by the person to whom the Mortgaged Property has been or is about to be sold
whether by absolute conveyance or by contract of sale, and whether or not the Mortgagor remains
liable on the Mortgage and the Mortgage Note. When the Mortgaged Property has been conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance, exercise its
rights to accelerate the maturity of such Mortgage Loan under the “due-on-sale” clause applicable
thereto.

 

20

 

If the Servicer reasonably believes it is unable under applicable law to enforce such
“due-on-sale” clause, the Servicer shall enter into (i) an assumption and modification agreement
with the person to whom such property has been conveyed, pursuant to which such person becomes
liable under the Mortgage Note and the original Mortgagor remains liable thereon or (ii) in the
event the Servicer is unable under applicable law to require that the original Mortgagor remain
liable under the Mortgage Note and the Servicer has the prior consent of the primary mortgage
guaranty insurer, a substitution of liability agreement with the owner of the Mortgaged Property
pursuant to which the original Mortgagor is released from liability and the owner of the Mortgaged
Property is substituted as Mortgagor and becomes liable under the Mortgage Note. If an assumption
fee is collected by the Servicer for entering into an assumption agreement, the fee will be
retained by the Servicer as additional servicing compensation. In connection with any such
assumption, neither the Mortgage Interest Rate borne by the related Mortgage Note, the term of the
Mortgage Loan, the outstanding principal amount of the Mortgage Loan nor any other materials terms
shall be changed without the Owner’s consent.

To the extent that any Mortgage Loan is assumable under the terms of the Mortgage Note, the
Servicer shall inquire diligently into the credit worthiness of the proposed transferee, and shall
use the underwriting criteria for approving the credit of the proposed transferee which are used
with respect to underwriting mortgage loans of the same type as the Mortgage Loans. If the credit
worthiness of the proposed transferee does not meet such underwriting criteria, the Servicer shall
diligently, to the extent permitted by the Mortgage or the Mortgage Note and by applicable law,
accelerate the maturity of the Mortgage Loan.

4.2. Satisfaction of Mortgages and Release of Mortgage Files. Upon the payment in full
of any Mortgage Loan, or the receipt by the Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Servicer shall notify the Owner in the
monthly remittance statement as provided in Section 3.2, and may request the release of any
Mortgage Loan Documents. The Servicer shall maintain the Fidelity Bond and Errors and Omissions
Insurance Policy as provided for in Section 2.12 insuring the Servicer against losses it may
sustain with respect to Mortgage Loans not satisfied in accordance with the procedures set forth
herein.

4.3. Servicing Compensation. As compensation for its services hereunder, the Servicer shall
be entitled to the fees specified in the Servicing Fee Schedule detailed on Exhibit D to
this Agreement. Such fees shall be payable monthly by Servicer’s debit of such fees from the
Control Account as provided in Section 2.5. Notwithstanding anything in this Agreement to the
contrary, if the Servicer is unable to or otherwise does not withdraw the full amount of the
Servicing Fee from the Control Account in any month for any reason, then the outstanding amount of
the Servicing Fee due to the Servicer shall be due and payable by the Owner to the Servicer in
immediately available funds and the Owner shall pay the Servicer such outstanding upon presentation
of an invoice therefore as provided in Section 2.5. All servicing compensation shall be fully
earned if the Mortgage Loan is serviced for any portion of the month and shall not be prorated.

Any Ancillary Income shall be paid in the same manner as the Servicing Fee. Except as
specifically provided for herein, the Servicer shall be required to pay all expenses incurred by it
in connection with its servicing activities hereunder (other than Servicing Advances or Expenses)
and shall not be entitled to reimbursement thereof.

4.4 Reserved.

 

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4.5 Right to Examine Servicer Records.
The Owner, or its designee, shall have the
right to examine and audit any and all of the books, records, or other information of the Servicer,
whether held by the Servicer or by another on its behalf, with respect to or concerning this
Agreement or the Mortgage Loans, during business hours or as otherwise acceptable to the Servicer,
upon reasonable advance notice. The Owner shall pay all of its or its designees’ costs and expenses
associated with such examination.

ARTICLE V

POSSESSION OF MORTGAGE FILES; BOOKS AND RECORDS; CUSTODIAL 

AGREEMENT; DELIVERY OF DOCUMENTS; SERVICER TO COOPERATE

5.1. Provision of Information. During the term of this Agreement, the Servicer shall
furnish the Owner with the reports listed on Exhibit E to this Agreement. Servicer shall
also furnish to the Owner copies or originals of any documents contained in the Servicing File for
each Mortgage Loan as well as all special reports or information not provided for herein as shall
be necessary, reasonable, and appropriate with respect to the Owner or any regulatory agency and
will be provided at the Owner’s expense. All such reports, documents or information shall be
provided by and in accordance with all reasonable instructions and directions which the Owner may
give to the Servicer. Servicer shall also assist the Owner in preparing or delivering all reports
required to be delivered by the Owner to the Lender under the Loan Agreement.

5.2. Financial Statements; Servicing Facility. In connection with marketing the
Mortgage Loans, the Owner may make available to a prospective Owner a Consolidated Statement of
Operations of the Servicer for the most recently completed two fiscal years for which such a
statement is available, as well as a Consolidated Statement of Condition at the end of the last two
fiscal years covered by such Consolidated Statement of Operations to the extent any such statements
have been prepared by or on behalf of the Servicer (and are available upon request to members or
stockholders of the Servicer or to the public at large).

5.3. Possession of Mortgage Files; Maintenance of Servicing Files. The contents of
each Mortgage File not delivered to the Custodian are and shall be held in trust by the Servicer
for the benefit of the Owner as owner thereof. The Servicer shall maintain a Servicing File
consisting of a copy of the contents of each Mortgage File and the originals of the documents in
each Mortgage File not delivered to the Custodian. The Servicer shall release its custody of the
contents of any Servicing File only in accordance with written instructions from the Owner, unless
such release is required as incidental to the Servicer’s servicing of the Mortgage Loans. All such
costs associated with the release, transfer and re-delivery to the Servicer shall be the
responsibility of the Owner.

5.4. Books and Records; Transfers of Mortgage Loans. Except as otherwise provided in
this Agreement, all rights arising out of the Mortgage Loans, including, but not limited to, all
funds received on or in connection with the Mortgage Loans, shall be received and held by the
Servicer in trust for the benefit of the Owner as owner of the Mortgage Loans, and any record title
to the related Mortgages that the Servicer may have or acquire shall be for the sole purpose of
facilitating the servicing and the supervision of the servicing of the Mortgage Loans.

 

22

 

The Servicer shall be responsible for maintaining, and shall maintain, a complete set of books
and records for each Mortgage Loan which shall be marked clearly to reflect the ownership of each
Mortgage Loan by the Owner. To the extent that original documents are not required for purposes of
realization of Liquidation Proceeds or Insurance Proceeds, documents maintained by the Servicer may
be in the form of microfilm or microfiche or such other reliable means of recreating original
documents, including but not limited to, optical imagery techniques so long as the Servicer
complies with document retention requirements in accordance with Applicable Requirements.

The Servicer shall maintain with respect to each Mortgage Loan and shall make available for
inspection by the Owner or its designee the related Servicing File during the time the Owner
retains ownership of a Mortgage Loan and thereafter in accordance with Applicable Requirements.

The Servicer shall keep at its servicing office, or such other location as the Servicer may
designate from time to time, books and records in which, subject to such reasonable policies,
procedures, rules and regulations as it may prescribe, the Servicer shall note transfers of
Mortgage Loans. No transfer of a Mortgage Loan may be made unless such transfer is in compliance
with the terms hereof. For the purposes of this Agreement, the Servicer shall be under no
obligation to deal with any person with respect to this Agreement or the Mortgage Loans unless the
books and records show such person as the owner of the Mortgage Loan. The Owner may, subject to the
terms of this Agreement, sell and transfer one or more of the Mortgage Loans. The Owner also shall
advise the Servicer of the transfer. Upon receipt of notice of the transfer, the Servicer shall
mark its books and records to reflect the ownership of the Mortgage Loans of such assignee and,
unless the Servicer agrees otherwise, the Servicer shall not be responsible for servicing the
transferred Mortgage Loan. If the Servicer receives notification of a transfer less than five (5)
Business Days before the last calendar day of the month, the Servicer’s duties to remit and report
as required by Section 3 shall begin with the next Due Period.

5.5. Custodial Agreement; Delivery of Documents. To the extent in the Owner’s
possession or control, the Owner has delivered and released, or caused to be delivered and
released, to the Custodian those Mortgage Loan Documents as required by Exhibit B to this
Agreement with respect to each Mortgage Loan.

The Custodian has certified its receipt of all such Mortgage Loan Documents required to be
delivered pursuant to the Custodial Agreement, as evidenced by the trust receipt of the Custodian in the form annexed to the Custodial Agreement. The Owner will be responsible for
the fees and expenses of the Custodian.

 

23

 

The Servicer shall forward to the Custodian original documents evidencing an assumption,
modification, consolidation or extension of any Mortgage Loan entered into in accordance with
Section 2.1 or 4.1 within one (1) week of their execution, provided, however, that the Servicer
shall provide the Custodian with a certified true copy of any such document submitted for
recordation within ten (10) days of its execution, and shall provide the original of any document
submitted for recordation or a copy of such document certified by the appropriate public recording
office to be a true and complete copy of the original within ten (10) days following receipt of
such document from the public recording office.

From time to time, the Servicer may have a need for Mortgage Loan Documents to be released by
the Custodian. If the Servicer shall require any of the Mortgage Loan Documents, the Servicer shall
notify the Custodian in writing of such request. The Owner shall cause the Custodian to release
such documents, to the extent available, promptly upon request. To the extent that the Servicer
obtains possession of any such document which is held by the Custodian, the Servicer agrees that it
will act as the custodian and bailee and trustee of such documents for the benefit of the Owner
during the term of this Agreement.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES 

6.1. General Representations and Warranties. Each of the Servicer and the Owner hereby
represents and warrants to the other that, as of the initial Effective Date:

6.1.1. Due Organization and Authority. It is the type of entity first described above,
duly organized, validly existing and in good standing under the laws of the state of formation and
has all licenses necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each state where a Mortgaged Property is located if the laws of
such state require licensing or qualification in order to conduct business of the type conducted by
it, and in any event it is in compliance with the laws of any such state to the extent necessary to
ensure the enforceability of the related Mortgage Loan and the servicing of such Mortgage Loan in
accordance with the terms of this Agreement. It has the full corporate power and authority to
execute and deliver this Agreement and to perform in accordance herewith. The execution, delivery
and performance of this Agreement by it and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all necessary actions on its part. This Agreement
has been duly executed and delivered by it and constitutes legal, valid and binding obligations of
it, enforceable against it in accordance with its terms;

6.1.2. No Conflicts. Neither the execution and delivery of this Agreement, or the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement will conflict with or result in a breach of any of its articles of
incorporation or by-laws or other governing documents or any legal restriction or, except as has been waived prior to the applicable Effective Date, any material agreement or
instrument to which it is now a party or by which it is bound, or constitute a default or result in
the violation of any law, rule, regulation, order, judgment or decree to which it or its property
is subject;

6.1.3. No Litigation Pending. There is no action, suit, proceeding or investigation
pending or to the best of its knowledge threatened against it which, either in any one instance or
in the aggregate, may result in any material adverse change in the business, operations, financial
condition, properties or assets of it, or in any material impairment of the right or ability of it
to carry on its business substantially as now conducted, or in any material liability on the part
of it, or which would draw into question the validity of this Agreement or the Mortgage Loans or of
any action taken or to be contemplated herein, or which would be likely to impair materially the
ability of it to perform under the terms of this Agreement;

 

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6.1.4. No Consent Required. No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and performance by it of or
compliance by it with this Agreement, or if required, such approval has been obtained prior to the
applicable Effective Date; and

6.2. Representations, Warranties and Covenants of the Servicer Regarding Certain
Individual Mortgage Loans. In consideration of the Owner’s agreement to retain the Servicer
under this Agreement with respect to the Franklin Trust Loans, and in light of the fact that the
Servicer previously owned and serviced the Franklin Trust Loans, as to each Franklin Trust Loan
(including REO Property, as appropriate), and understanding that the Owner will rely on the
following representations, warranties and covenants in purchasing the Franklin Trust Loans, the
Servicer hereby represents, warrants and covenants to the Owner with respect to the Franklin Trust
only, as of the applicable Effective Date:

6.2.1. Loan Schedule. The information set forth in the Mortgage Loan Schedule attached
hereto as Exhibit A and the information contained in each electronic data file delivered to
the Servicer accurately represents the information maintained on the books and records of the
Servicer.

6.2.2. No Modifications Except as Disclosed in the Mortgage File. Other than as
indicated in the Mortgage Loan Schedule, the terms of the Mortgage and the Mortgage Note have not
been waived, altered, or modified in any material respect, except by a written instrument that has
been recorded, if necessary, and that is a part of the Mortgage File and included with the Mortgage
Loan Documents delivered to the Owner by the seller of the Franklin Trust Loans.

6.2.3. No Satisfaction, Cancellation, Subordination or Rescission. The Mortgage has
not been satisfied, canceled, subordinated or rescinded. No Mortgagor and no part of any Mortgaged
Property has been released, in whole or in part, except as indicated in the Mortgage File and
reflected on the Mortgage Loan Schedule. No instrument has been executed that would effect any such
release, cancellation, subordination or rescission.

6.2.4. No Litigation. Other than foreclosures or bankruptcies described on the
Mortgage Loan Schedule, to the best knowledge of the Servicer, there is no litigation, bankruptcy
or governmental proceeding pending or, to the Servicer’s actual knowledge, threatened with respect
to a Franklin Trust Loan or the related Mortgaged Property or Mortgagor that will be reasonably
likely to materially and adversely affect the Owner’s right, title or interest thereon or the
priority of the Mortgage, or the value of the Mortgage Loan.

 

25

 

6.2.5. Compliance with Applicable Laws. To the best knowledge of the Servicer, any
and all requirements of any federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit protection, predatory, abusive
and fair lending laws, equal credit opportunity and disclosure laws or unfair and deceptive
practices laws applicable to the Mortgage Loan, have been complied with in all material respects in
connection with the servicing of the Franklin Trust Loans, except to the extent that non-compliance
would not be reasonably likely to materially and adversely affect the Owner’s right, title or
interest in the Mortgage Loan or the priority of the Mortgage, or the value of the Mortgage Loan.

6.2.6. Full Disbursement of Proceeds. Each Franklin Trust Loan has been closed and
the proceeds of the Mortgage Loan have been fully disbursed and there is no requirement for future
advances thereunder, and any and all requirements as to completion of any on-site or off-site
improvement and as to disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the
Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due
under the Mortgage Note or Mortgage.

6.2.7. Reserved.

6.2.8. Single-premium Credit Life Insurance Policy. In connection with the
origination of any Franklin Trust Loan, no proceeds from any Franklin Trust Loan were used to
finance or acquire a single-premium credit life insurance policy. No Mortgagor was required to
purchase any single premium credit insurance policy (e.g., life, disability, accident, unemployment
or property insurance product) or debt cancellation agreement as a condition of obtaining the
extension of credit. No Mortgagor obtained a prepaid single premium credit insurance policy (e.g.,
life, disability, accident, unemployment or property insurance policy) in connection with the
origination of the Franklin Trust Loan; no proceeds from any Franklin Trust Loan were used to
purchase single premium credit insurance policies or debt cancellation agreements as part of the
origination of, or as a condition to closing, such Franklin Trust Loan.

6.2.9. Delivery of Books and Records. The Owner will, on or before the applicable
Effective Date, deliver, or cause to be delivered, to the Servicer or the Custodian, as applicable,
all of the books, records, data, files and Mortgage Loan Documents, including records on microfiche
or its equivalent, reasonably required by the Servicer and available to the Owner to document and
service each Mortgage Loan. Such books, records, data, files and documents contain all of the
items (including but not limited to hazard insurance policies, flood insurance policies and private
mortgage insurance policies) which are required by the Applicable Requirements to service the
Mortgage Loans and are true, accurate and complete in all material respects. It is reasonable for
the Servicer to rely thereon.

6.2.10. Ownership. With respect to each Mortgage Loan, the Owner is the owner of all
the right, title and interest in and to the Mortgage Loan, free and clear of any claims or
encumbrances.

 

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ARTICLE VII

THE SERVICER

7.1. Indemnification; Third Party Claims.

7.1.1. The Servicer shall indemnify the Owner, its affiliates and their respective officers,
directors, employees and agents (collectively, “Owner Indemnitees”) and hold each of the
Owner Indemnitees harmless from and against any and all third party claims and Damages that the
Owner and the Owner Indemnitees may sustain to the extent resulting from or related to a breach by
the Servicer of any covenant, agreement, representation or warranty in this Agreement. The Owner
shall promptly notify the Servicer of any claim covered hereby; provided, however,
that the Servicer shall not be relieved of its indemnification obligations hereunder due to the
Owner’s failure to give such notice except to the extent that the Owner has knowledge of the
breach, fails to notify the Servicer and the Servicer has been prejudiced thereby. In connection
with the Servicer’s indemnification obligations hereunder, the Servicer may assume (with the prior
written consent of the Owner, if required pursuant to the terms hereof, and with counsel reasonably
satisfactory to the Owner) the defense of any such claim and pay all reasonable expenses in
connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy
any final judgment or decree which may be entered against the Owner or any other Owner Indemnitees
in respect of such claim. The Servicer agrees that it will not enter into any settlement of any
such claim without the consent of the Owner (which consent shall not be unreasonably withheld or
delayed) and such other Owner Indemnitees unless such settlement includes an unconditional release
of the Owner and such other Owner Indemnitees from all liability that is the subject matter of such
claim.

7.1.2. The Owner shall indemnify the Servicer, its affiliates, and their respective officers,
directors, employees and agents (collectively, “Servicer Indemnitees”) and hold each of
such Persons harmless from and against any and all third party claims and Damages that the Servicer
or such Persons may sustain to the extent resulting from or related to a breach by the Owner of any
covenant, agreement, representation or warranty in this Agreement. The Servicer shall notify the
Owner of any claim covered hereby; provided, however, that the Owner shall not be relieved of its
indemnification obligations hereunder due to the Servicer’s failure to give such notice except to
the extent that the Servicer has knowledge of the breach, fails to notify the Owner and the
Servicer has been prejudiced thereby. In connection with the Owner’s indemnification obligations
hereunder, the Owner may assume (with the prior written consent of the Servicer, if required
pursuant to the terms hereof, and with counsel reasonably satisfactory to the Servicer) the defense
of any such claim and pay all reasonable expenses in connection therewith, including reasonable
counsel fees, and promptly pay, discharge and satisfy any final judgment or decree which may be
entered against the Servicer or any other Servicer Indemnitees in respect of such claim. The Owner
agrees that it will not enter into any settlement of any such claim without the consent of the
Servicer (which consent shall not be unreasonably withheld or delayed) and such other indemnified
Person unless such settlement includes an unconditional release of the Servicer and such other
indemnified Person from all liability that is the subject matter of such claim.

 

27

 

7.1.3. In addition to the indemnification set forth in Section 7.1.1 hereof, the Servicer
shall indemnify and hold the Owner Indemnitees harmless from and against any Damages resulting from
or related to the Servicer’s failure (either under this Agreement or as servicer of any Mortgage
Loan prior to this Agreement) to have complied with all Applicable Requirements with respect to the
origination, purchase, sale, securitization or servicing of the Mortgage Loans.

7.1.4. In addition to the indemnification set forth in Section 7.1.2 hereof, the Owner shall
indemnify and hold the Servicer Indemnitees harmless from and against any Damages resulting from or
related to:

(a) any outstanding Servicing Advance for which the Servicer is not reimbursed in
accordance with Section 2.24 hereof or any outstanding Servicing Fee for which Servicer is
not paid in accordance with Section 4.3.hereof ; or

(b) any Litigation commenced against the Servicer after the applicable Effective Date
as a result of the Servicer’s acting as, or status as, servicer of the Mortgage Loans
hereunder, to the extent that such Litigation does not arise out of or result from the
Servicer’s breach of any provision of this Agreement (including any failure by the Servicer
to disclose such Litigation as required herein).

7.1.5. The provisions of this Section 7.1 shall survive termination of this Agreement.

7.1.6. For all purposes of this Agreement, knowledge of the Servicer will not be imputed or
attributed to the Owner, and knowledge of the Owner will not be imputed or attributed to the
Servicer.

7.2. Merger or Consolidation of the Servicer. The Servicer shall keep in full effect
its existence, rights and franchises as a corporation, and shall obtain and preserve all required
licenses and its qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and enforceability of
this Agreement or any of the Mortgage Loans and to perform its duties under this Agreement.

Any person into which the Servicer may be merged or consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Servicer shall be a party, or any Person
succeeding to the business of the Servicer, shall be the successor of the Servicer hereunder,
without the execution or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding. Furthermore, in the event the Servicer
transfers or otherwise disposes of all or substantially all of its assets to an affiliate of the
Servicer, such affiliate shall satisfy the condition above, and shall also be fully liable to the
Owner for all of the Servicer’s obligations and liabilities hereunder.

 

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7.3. Limitation on Liability of the Servicer and Others.

(a) Neither the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in judgment, provided,
however, that this provision shall not protect the Servicer or any such Person against any breach
of warranties or representations made herein, or failure to comply with the obligations of the
Servicer under this Agreement. The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.

(b) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER WARRANTY,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

(c) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INCIDENTAL, SPECIAL,
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES, REGARDLESS OF THE FORM OF THE CAUSE OF
ACTION, WHETHER IN CONTRACT, STATUTE, TORT, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, OR
OTHERWISE, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

7.4. Limitation on Assignment by the Servicer. The Owner has entered into this
Agreement with the Servicer and subsequent Owners will purchase the Mortgage Loans in reliance upon
the independent status of the Servicer, and the representations as to the adequacy of its servicing
facilities, personnel, records and procedures, its integrity, reputation and financial standing,
and the continuance thereof. Therefore, except as allowed or permitted by Section 7.2 of this
Agreement, the Servicer shall neither assign this Agreement or the servicing hereunder without the
prior written consent of the Owner, which consent may be given or withheld in the sole discretion
of the Owner.

ARTICLE VIII

Reserved.

ARTICLE IX

DEFAULT

9.1. Events of Default. Each of the following shall constitute an Event of Default on
the part of the applicable party hereto:

(a) any failure by such party to remit to the other party any payment required to be
made under the terms of this Agreement, which continues unremedied for a period of five (5)
days after the date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to such party; or

(b) unless otherwise specified herein, a party shall fail duly to perform or observe
any of its covenants, conditions or terms contained herein or in the Custodial Agreement and
such failure shall remain uncured for thirty (30) calendar days following notice from the
non-defaulting party; provided, however, that if the nature of such breach
is such that it cannot reasonably be cured within thirty (30) days following such written
notice, but can reasonably be cured within sixty (60) days following such written notice,
the defaulting party may cure such breach by commencing in good faith to cure the breach
promptly after its receipt of such written notice and prosecuting the cure of such breach to
completion with diligence and continuity within a reasonable time thereafter, but in any
event within sixty (60) days thereafter; or

 

29

 

(c) a decree or order of a court or agency or supervisory authority having jurisdiction
for the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, including bankruptcy, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have been entered
against such party and such decree or order shall have remained in force undischarged or
unstayed for a period of sixty (60) days; or

(d) such party shall consent to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to such party or of or relating to all or substantially
all of its property; or

(e) such party shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable insolvency, bankruptcy or
reorganization statute, make an assignment for the benefit of its creditors, voluntarily
suspend payment of its obligations or cease its normal business operations for three (3)
Business Days; or

9.2. Waiver of Defaults. By a written notice, the non-breaching party may waive any
default by the breaching Party in the performance of its obligations hereunder and its
consequences. Upon any explicit written waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair
any right consequent thereon except to the extent expressly so waived.

ARTICLE X

TERMINATION

10.1. Termination. This Agreement shall terminate upon the earliest of: (i) the
liquidation and dissolution of the Owner; (ii) mutual consent of the Servicer and the Owner in
writing; or (iii) termination of this Agreement pursuant to Section 10.2 or Section 10.3. The
termination of this Agreement pursuant to this Article X shall not release either party from
liability for its own misrepresentation or for any breach by it of any covenant, agreement or warranty herein prior
to such termination.

 

30

 

10.2. Termination With Cause. So long as an Event of Default shall have occurred and
shall not have been remedied, the non-breaching party, by notice in writing to the other party,
may, in addition to whatever rights such party may have at law or equity to damages, including
injunctive relief and specific performance, terminate this Agreement. Upon written request from
the Owner, the Servicer shall prepare, execute and deliver to a successor servicer any and all
documents and other instruments relating to the Mortgage Loans, place in such successor’s
possession all Mortgage Servicing Files and do or cause to be done all other acts or things
necessary or appropriate to effect the purposes of such notice of termination, including, but not
limited to, the transfer and endorsement or assignment of the Mortgage Loans and related documents
to the successor at the Servicer’s sole expense if the termination is based on a Servicer Event of
Default or the Owner’s sole expense if the termination is based on an Owner Event of Default. The
Servicer agrees to cooperate with the Owner and such successor in effecting the termination of the
Servicer’s responsibilities and rights hereunder, including the transfer to such successor for
administration by it of all amounts which shall at the time be credited by the Servicer to the
Control Account or Escrow Account or thereafter received with respect to the Mortgage Loans. In
the event of a termination by the Servicer upon an Owner Event of Default pursuant to this Section
10.2, the Owner shall pay the Servicer (1) any fees and costs for which the Servicer is entitled to
reimbursement hereunder, and (2) as liquidated damages, the termination fee detailed on Exhibit
D with respect to each Mortgage Loan.

10.3. Termination Without Cause. The Owner may terminate the Servicer’s right to
service one or more Mortgage Loans under this Agreement, as provided in this Section 11.03
(provided however, that Owner shall not adversely select such Mortgage Loans) upon thirty (30) days
prior written notice. Any such notice of termination shall be in writing and delivered to the
Servicer by registered mail as provided in Section 12.06. In the event that the Servicer is
terminated pursuant to this Section 10.3, the Owner shall pay the Servicer an amount equal to (1)
the costs and expenses of Servicer to transfer the servicing rights and obligations with respect to
such Mortgage Loans, (2) all outstanding Servicing Advances, Expenses and other Servicer
expenditures for which Servicer is entitled to reimbursement hereunder, Servicing Fees and other
compensation and (3) as liquidated damages, the termination fee detailed on Exhibit D with
respect to each such Mortgage Loan.

ARTICLE XI

MISCELLANEOUS PROVISIONS

11.1. Successor to the Servicer. Upon effectiveness of termination of the Servicer’s
servicing of any Mortgage Loans under this Agreement pursuant to Section 10.1, the Owner or its
successors shall (i) appoint a successor to assume all of the responsibilities, duties and liabilities of the Servicer under
this Agreement or (ii) if no such appointment has been made, automatically and immediately succeed
to and assume all of the Servicer’s responsibilities, duties and obligations under this Agreement.
In connection with such appointment and assumption, the Owner may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such successor shall
agree, subject to having first paid or reimbursed Servicer for all outstanding amounts due to the
Servicer. Prior to the transfer of servicing with respect to any Mortgage Loan hereunder, the
Servicer shall be reimbursed by the Owner or the successor servicer for any unpaid Servicing Fees,
Expenses and Servicing Advances with respect to such Mortgage Loan.

 

31

 

The Servicer shall, upon the request of the Owner, deliver promptly to the successor servicer
authority over the funds in the Control Account and Escrow Account (subject to any withdrawals
permitted under this Agreement and an additional withdrawal amount to be retained as a reserve by
the Servicer equal to the Servicer’s estimated fees and expenses, in respect of termination and
cessation of services under this Agreement, until termination and cessation is finalized, fees and
expenses have been calculated, and permitted withdrawals have been made from the amounts so
withheld as a reserve.) and shall deliver all Mortgage Files and related documents and statements
held by it hereunder. The Servicer shall account for all funds and shall execute and deliver such
instruments and do such other things as may reasonably be required to more fully and definitively
vest in the successor all such rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer.

Upon a successor’s acceptance of appointment as such, the Owner shall notify by mail the
Servicer of such appointment in accordance with Section 11.6.

11.2. Reserved.

11.3. Amendment; Extension Not a Waiver. This Agreement sets forth the entire
agreement between the parties with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous agreements or understandings, written, oral or otherwise with respect to
the subject matter hereof. This Agreement may be amended from time to time by, and only by, a
writing signed by the Servicer and the Owner.

No delay or omission in the exercise of any power, remedy or right herein provided or
otherwise available to any party hereto will impair or affect the right of such party thereafter to
exercise the same. Any extension of time or other indulgence granted to any party hereunder will
not otherwise alter or affect any power, remedy or right of any other party hereto, or the
obligations of the party to whom such extension or indulgence is granted.

11.4. Governing Law; Venue. This Agreement shall be construed in accordance with the
laws of the State of New York applicable to agreements made and fully performed within the State of
New York without giving effect to the conflict of laws principles thereof (except for Section
5-1401 of the New York General Obligations Law) and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.

Any action or other legal proceeding brought under this Agreement will be subject to the
exclusive jurisdiction of the United States District Court for the Southern District of New York in
New York County, New York or the United States District Court for the Eastern District of New York
in Kings County, New York and in the absence of federal jurisdiction, the jurisdiction of any state
court of general jurisdiction sitting in New York County, New York or Kings County, New York. Each
of the Owner and the Servicer consents to such jurisdiction for actions or legal proceedings
brought by either party and waives any objection which it may have to the laying of the venue of
such suit, action or proceeding in any of such courts.

11.5. Duration of Agreement. This Agreement shall continue in existence and effect
until terminated as herein provided. This Agreement shall continue notwithstanding transfers of the
Mortgage Loans by the Owner.

 

32

 

11.6. Notices. All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed by registered
mail, postage prepaid, addressed as follows:

(a) if to the Servicer:

Franklin Credit Management Corporation

101 Hudson Street

Jersey City, NJ 07302

Attn: Chief Operating Officer

With a copy to:

Franklin Credit Management Corporation

101 Hudson Street

Jersey City, NJ 07302

Attn: General Counsel

or such other address as may hereafter be furnished to the Owner in
writing by the Servicer;

(b) if to the Owner:

Bosco Credit II, LLC

c/o Franklin Credit Management Corporation

101 Hudson Street, 25th Floor

Jersey City, NJ 07302

Attn.: Thomas J. Axon

With a copy to:

Appel & Lucas, P.C.

1660 Seventeenth Street, Suite 200

Denver, CO, 80200

Attn: Peter J. Lucas, Esq.

or such other address as may hereafter be furnished to the Servicer
in writing by the Owner;

11.7. Severability of Provisions. If any provision of this Agreement is found to be
unenforceable by a court of competent jurisdiction, such unenforceable provision shall not affect
the other provisions, but such court shall have the authority to modify such unenforceable
provision to the extent necessary to render it enforceable, preserving to the fullest extent
permissible the intent of the parties.

11.8. Relationship of Parties. The parties are entering into, and shall perform, this
Agreement as independent contractors. Nothing in this Agreement shall be construed to make either
party the agent of the other for any purpose whatsoever, to authorize either party to enter into
any contract or assume any obligation on behalf of the other or to establish a partnership,
franchise or joint venture between the parties.

 

33

 

11.9. Execution; Successors and Assigns. This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall constitute one and
the same agreement. Subject to Section 7.4, this Agreement shall inure to the benefit of and be
binding upon the Servicer and the Owner and their respective successors and assigns.

11.10. Assignment by the Owner. The Owner shall have the right, without the consent of
the Servicer but subject to the limits set forth in Section 5.4 hereof, to assign, in whole or in
part, its interest under this Agreement with respect to some or all of the Mortgage Loans, and
designate any person to exercise any rights of the Owner hereunder, by executing an assignment and
assumption agreement in a form acceptable to the Servicer and the assignee or designee shall
accede to the rights and obligations hereunder of the Owner with respect to such Mortgage Loans.

11.11. Time of Payment. Unless otherwise specifically set forth in this Agreement, any
amount due to a party under this Agreement will be due and payable upon receipt by the paying party
of the invoice from the other party. All amounts will be payable by wire transfer, in accordance with payment
instructions provided from time to time. Any amount not paid when due as set forth in this
Agreement will bear interest until paid at a rate of interest equal to the prime rate published
from time to time by The Wall Street Journal, “Money Rates.” If any portion of an amount
due to a party under this Agreement is subject to a bona fide dispute between the parties, the
other party will pay to that party on the date such amount is due all amounts not disputed in good
faith.

11.12. Force Majeure. The Servicer shall not be liable to any other Person for any
acts or omissions resulting from circumstances or causes beyond its reasonable control, including
fire or other casualty, act of God, strike or labor dispute, war, terrorism or other violence or
any governmental action or any acts or omissions of the other Person.

[Intentionally Blank — Next Page Signature Page]

 

34

 

IN WITNESS WHEREOF, the Servicer and the Owner have caused their names to be signed hereto by
their respective officers thereunto duly authorized as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	FRANKLIN CREDIT MANAGEMENT CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	By:	 	/s/ Thomas J. Axon 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	Thomas J. Axon 	 
	 

	 	 	 	Title:
	 	President 	 
	 
	 	 	 	 	 	 	 	 
	 	 	BOSCO CREDIT II, LLC, a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Thomas J. Axon 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name: Thomas J. Axon	 	 
	 	 	 	 	Its: Manager	 	 

 

35

 

EXHIBIT A

MORTGAGE LOAN SCHEDULE

 

 

 

EXHIBIT B

CONTENTS OF EACH MORTGAGE FILE

With respect to each Mortgage Loan, the Mortgage File shall include each of the following
items, which the Owner shall deliver a copy thereof to the Servicer for retention in the Servicing
File:

	 	1.	 	The original Mortgage Note bearing all intervening endorsements, endorsed “Pay
to the order of
 _____ 
without recourse” and signed in the name of the Owner by an
authorized officer (in the event that the Mortgage Loan was acquired by the Owner in a
merger, the signature must be in the following form: “[the Owner], successor by merger
to [name of predecessor]”; and in the event that the Mortgage Loan was acquired or
originated by the Owner while doing business under another name, the signature must be
in the following form: “[the Owner], formerly known as [previous name]”).

	 	2.	 	The original of any guarantee executed in connection with the Mortgage Note (if
any).

	 	3.	 	The original Mortgage, with evidence of recording thereon or a certified true
and correct copy of the Mortgage sent for recordation.

	 	4.	 	The originals or certified true copies of any document sent for recordation of
all assumption, modification, consolidation or extension agreements, with evidence of
recording thereon.

	 	5.	 	The original Assignment of Mortgage for each Mortgage Loan, in form and
substance acceptable for recording (except for the insertion of the name of the
assignee and recording information).

	 	6.	 	Originals or certified true copies of documents sent for recordation of all
intervening assignments of the Mortgage with evidence of recording thereon.

	 	7.	 	The original mortgagee policy of title insurance or evidence of title.

	 	8.	 	Any security agreement, chattel mortgage or equivalent executed in connection
with the Mortgage.

With respect to each Mortgage Loan, the Mortgage File shall include each of the following items to
the extent in the possession of the Owner or in the possession of the Owner’s agent(s):

	 	9.	 	The original hazard insurance policy and, if required by law, flood insurance
policy, in accordance with Section 4.10 of the Agreement.

	 	10.	 	Residential loan application.

	 	11.	 	Mortgage Loan closing statement.

 

 

 

	 	12.	 	Verification of employment and income, if applicable.

	 	13.	 	Verification of acceptable evidence of source and amount of down payment, if
applicable.

	 	14.	 	Credit report on the Mortgagor.

	 	15.	 	Residential appraisal report.

	 	16.	 	Photograph of the Mortgaged Property.

	 	17.	 	Survey of the Mortgage property, if required by the title owner or applicable
law.

	 	18.	 	Copy of each instrument necessary to complete identification of any exception
set forth in the exception schedule in the title policy, i.e. map or plat,
restrictions, easements, sewer agreements, home association declarations, etc.

	 	19.	 	All required disclosure statements.

	 	20.	 	If available, termite report, structural engineer’s report, water potability
and septic certification.

	 	21.	 	Sales contract, if applicable.

	 	22.	 	Evidence of payment of taxes and insurance premiums, insurance claim files,
correspondence, current and historical computerized data files, and all other
processing, underwriting and closing papers and records which are customarily contained
in a mortgage loan file and which are required to document the Mortgage Loan or to
service the Mortgage Loan.

	 	23.	 	Amortization schedule, if available.

	 	24.	 	Mortgage Loan payment history.

	 	25.	 	Original power of attorney, if applicable.

 

B-2

 

EXHIBIT C

Reserved.

 

 

 

EXHIBIT D

SERVICING FEE SCHEDULE

BASE FEE

Cash Flow Servicing Fee

Monthly per Loan Servicing Fee

	 	 	 	 	 
	Performing Mortgage Loans (0-29 days past due)
	 	$	* * *	 
	Additional: gross collection
	 	 	* * *	 

CONTINGENCY

Contingency
Fee = * * * of Net Collection Dollars

Franklin Credit will earn a Contingency Servicing Fee

	 	•	 	Greater than or equal to 30 days contractually delinquent

	 	•	 	Owner will be responsible for all advances including but not limited to judgment,
valuation, foreclosure, bankruptcy, and wilcap model.

 

 

 

EXHIBIT E

REPORTS

Trial Balance

Principal and Interest Collections

Prepaid Loans

Delinquent Loans

Unscheduled Principal Collections (Curtailments)

Payoff/Foreclosure Collections

Remittances

Loan Transfers

Cutoff Summary

Investor Payment/Rate Changes

 

 

 

EXHIBIT F

RESERVED

 

D-2

 

EXHIBIT G

APPROVAL MATRIX

TO BE DETERMINED

 

D-3

 

EXHIBIT H

AGREED SERVICING GUIDELINES

TO BE DETERMINED

 

D-4exv4w1

Exhibit 4.1

WYNDHAM WORLDWIDE CORPORATION

as Issuer

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

__________________

FOURTH SUPPLEMENTAL INDENTURE

Dated as of September 20, 2010

to

INDENTURE

Dated as of November 20, 2008

__________________

5.75% Notes due 2018

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1. DEFINITIONS
	 	 	1	 
	Section 1.1 Definition of Terms
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 2. GENERAL TERMS AND CONDITIONS OF THE NOTES
	 	 	5	 
	Section 2.1 Designation and Principal Amount
	 	 	5	 
	Section 2.2 Maturity
	 	 	5	 
	Section 2.3 Further Issues
	 	 	5	 
	Section 2.4 Form of Payment
	 	 	5	 
	Section 2.5 Global Securities and Denomination of Notes
	 	 	6	 
	Section 2.6 Interest
	 	 	6	 
	Section 2.7 Redemption
	 	 	6	 
	Section 2.8 Limitations on Liens
	 	 	6	 
	Section 2.9 Limitations on Sale and Leaseback Transactions
	 	 	6	 
	Section 2.10 Merger, Consolidation and Sale of Assets
	 	 	7	 
	Section 2.11 Additional Amounts
	 	 	7	 
	Section 2.12 Events of Default
	 	 	10	 
	Section 2.13 Appointment of Agents
	 	 	11	 
	Section 2.14 Defeasance upon Deposit of Moneys or U.S. Government Obligations
	 	 	11	 
	Section 2.15 SEC Reports
	 	 	12	 
	Section 2.16 Purchase of Notes Upon a Change of Control
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 3. FORM OF NOTES
	 	 	14	 
	Section 3.1 Form of Notes
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 4. ORIGINAL ISSUE OF NOTES
	 	 	14	 
	Section 4.1 Original Issue of Notes
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 5. MISCELLANEOUS
	 	 	14	 
	Section 5.1 Ratification of Indenture
	 	 	14	 
	Section 5.2 Trustee Not Responsible for Recitals
	 	 	15	 
	Section 5.3 Governing Law
	 	 	15	 
	Section 5.4 Separability
	 	 	15	 
	Section 5.5 Counterparts Originals
	 	 	15	 
	 
	 	 	 	 
	EXHIBIT A — Form of Notes
	 	 	A-1	 

 

 

     FOURTH SUPPLEMENTAL INDENTURE, dated as of September 20, 2010 (this “Supplemental
Indenture”), between Wyndham Worldwide Corporation, a corporation duly organized and existing
under the laws of the State of Delaware, having its principal office at 22 Sylvan Way, Parsippany,
NJ 07054 (the “Company”), and U.S. Bank National Association, a national banking
association, organized and in good standing under the laws of the United States, as trustee (the
“Trustee”).

     WHEREAS, the Company executed and delivered the indenture, dated as of November 20, 2008, to
the Trustee (the “Base Indenture,” and as hereby supplemented, the “Indenture”), to provide
for the issuance of the Company’s debt Securities to be issued in one or more series;

     WHEREAS, pursuant to the terms of the Base Indenture, the Company desires to provide for the
establishment of a new series of its notes under the Base Indenture to be known as its “5.75% Notes
due 2018” (the “Notes”), the form and substance and the terms, provisions and conditions
thereof to be set forth as provided in the Base Indenture and this Supplemental Indenture;

     WHEREAS, the Board of Directors, the Executive Committee and the Pricing Committee thereof,
pursuant to resolutions duly adopted on July 13, 2006, November 20, 2008, September 13, 2010 and
September 15, 2010, have duly authorized the issuance of the Notes, and have authorized the proper
officers of the Company to execute any and all appropriate documents necessary or appropriate to
effect each such issuance;

     WHEREAS, this Supplemental Indenture is being entered into pursuant to the provisions of
Section 14.01 of the Base Indenture;

     WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental
Indenture; and

     WHEREAS, all things necessary to make this Supplemental Indenture a valid agreement of the
Company, in accordance with its terms, and to make the Notes, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the Company, have been
performed, and the execution and delivery of this Supplemental Indenture has been duly authorized
in all respects;

     NOW THEREFORE, in consideration of the premises and the purchase and acceptance of the Notes
by the Holders thereof, and for the purpose of setting forth, as provided in the Base Indenture,
the forms and terms of the Notes, the Company covenants and agrees, with the Trustee, as follows:

ARTICLE 1.

DEFINITIONS

     Section 1.1 Definition of Terms. Unless the context otherwise requires:

     (a) each term defined in the Base Indenture has the same meaning when used in this
Supplemental Indenture;

 

 

     (b) the singular includes the plural and vice versa;

     (c) headings are for convenience of reference only and do not affect interpretation;

     (d) a reference to a Section or Article is to a Section or Article of this Supplemental
Indenture unless otherwise indicated; and

     (e) the following terms have the meanings given to them in this Section 1.1(e):

     (i) “Additional Amounts” shall have the meaning assigned to it in Section 2.11.

     (ii) “Attributable Debt” means, with regard to a sale and leaseback arrangement of a
Principal Property, an amount equal to the lesser of: (a) the fair market value of the
Principal Property (as determined in good faith by the Board of Directors); or (b) the
present value of the total net amount of rent payments to be made under the lease during its
remaining term (including any period for which such lease has been extended and excluding
any unexercised renewal or other extension options exercisable by the lessee, and excluding
amounts on account of maintenance and repairs, services, taxes and similar charges and
contingent rents), discounted at the rate of interest set forth or implicit in the terms of
the lease (or, if not practicable to determine such rate, the weighted average interest rate
per annum borne by the Notes then outstanding), compounded semi-annually.

     (iii) “Below Investment Grade Rating Event” means the Notes are rated below an
Investment Grade Rating by each of the Rating Agencies on any date from the earlier of (1)
the occurrence of a Change of Control or (2) public notice of the Company’s intention to
effect a Change of Control, in each case until the end of the 60-day period following the
earlier of (1) the occurrence of a Change of Control or (2) public notice of the Company’s
intention to effect a Change of Control; provided, however, that if (i) during such 60-day
period one or more Rating Agencies has publicly announced that it is considering the
possible downgrade of the Notes, and (ii) a downgrade by each of the Rating Agencies that
has made such an announcement would result in a Below Investment Grade Rating Event, then
such 60-day period shall be extended for such time as the rating of the Notes by any such
Rating Agency remains under publicly announced consideration for possible downgrade to a
rating below an Investment Grade Rating and a downgrade by such Rating Agency to a rating
below an Investment Grade Rating could cause a Below Investment Grade Rating Event.
Notwithstanding the foregoing, a rating event otherwise arising by virtue of a particular
reduction in rating will not be deemed to have occurred in respect of a particular Change of
Control (and thus will not be deemed a Below Investment Grade Rating Event for purposes of
the definition of Change of Control Triggering Event) if the Rating Agencies making the
reduction in rating to which this definition would otherwise apply do not announce or
publicly confirm or inform the Trustee in writing at the Company’s or its request that the
reduction was the result, in whole or in part, of any event or circumstance comprised of or
arising as a result of, or in respect of, the applicable Change of Control (whether or not
the applicable Change of Control has occurred at the time of the rating event).

2

 

     (iv) “Change in Domicile” shall have the meaning assigned to it in Section
2.11.

     (v) “Change of Control” means the occurrence of any of the following: (i) the direct
or indirect sale, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or substantially all of
the properties or assets of the Company and its Subsidiaries taken as a whole to any
“person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than the
Company or one of its Subsidiaries; (ii) the adoption of a plan relating to the liquidation
or dissolution of the Company; (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any “person” (as
defined in this paragraph) becomes the beneficial owner, directly or indirectly, of 50% or
more of the total voting power of all shares of the Company’s capital stock entitled to vote
generally in elections of directors; or (iv) the first day on which a majority of the
members of the Board of Directors are not Continuing Directors. Notwithstanding the
foregoing, a transaction will not be deemed to involve a Change of Control if (1) the
Company becomes a direct or indirect wholly-owned Subsidiary of a holding company and (2)(A)
the direct or indirect holders of the voting stock of such holding company immediately
following that transaction are substantially the same as the holders of the Company’s voting
stock immediately prior to that transaction or (B) immediately following that transaction no
Person (other than a holding company satisfying the requirements of this sentence) is the
beneficial owner, directly or indirectly, of more than 50% of the voting stock of such
holding company.

     (vi) “Change of Control Offer” shall have the meaning assigned to it in Section
2.16.

     (vii) “Change of Control Payment” shall have the meaning assigned to it in Section
2.16.

     (viii) “Change of Control Payment Date” shall have the meaning assigned to it in
Section 2.16.

     (ix) “Change of Control Triggering Event” means the occurrence of both a Change of
Control and a Below Investment Grade Rating Event.

     (x) “Consolidated Net Worth” means, as of any date of determination, all items which in
conformity with GAAP would be included under stockholders’ equity on a consolidated balance
sheet of the Company and its Subsidiaries at such date.

     (xi) “Continuing Directors” means, as of any date of determination, any member of the
Board of Directors who (i) was a member of such Board of Directors on the date of this
Supplemental Indenture; or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were members of
such Board of Directors at the time of such nomination or election.

     (xii) “DTC” means The Depository Trust Company.

3

 

     (xiii) “EDGAR” means the SEC’s Electronic Data Gathering, Analysis, and Retrieval
system or any successor thereto.

     (xiv) “Event of Default” shall have the meaning assigned to it in Section 2.12.

     (xv) “Indebtedness” of any Person means, for purposes of this Supplemental Indenture
only, without duplication, (i) any obligation of such Person for money borrowed, (ii) any
obligation of such Person evidenced by bonds, debentures, notes or other similar instruments
and (iii) any reimbursement obligation of such Person in respect of letters of credit or
other similar instruments which support financial obligations which would otherwise become
Indebtedness.

     (xvi) “Investment Grade Rating” means a rating equal to or higher than Baa3 (or the
equivalent) by Moody’s and BBB- (or the equivalent) by S&P.

     (xvii) “Lien” means any pledge, mortgage, lien, encumbrance or other security interest.

     (xviii) “Moody’s” means Moody’s Investors Service, Inc., and its successors.

     (xix) “Permitted Liens” means: (a) Liens existing on the date the Notes are issued;
(b) Liens on any property or any Indebtedness of a Person existing at the time the Person
becomes a Subsidiary (whether by acquisition, merger or consolidation) which were not
incurred in anticipation thereof; (c) Liens in favor of the Company or its Subsidiaries; (d)
Liens existing at the time of acquisition of the assets encumbered thereby which were not
incurred in anticipation of such acquisition; (e) purchase money Liens which secure
Indebtedness that does not exceed the cost of the purchased property; (f) Liens on real
property acquired after the date on which the Notes are first issued which secure
Indebtedness incurred to acquire such real property or improve such real property so long as
(i) such Indebtedness is incurred on the date of acquisition of such real property or within
180 days of the acquisition of such real property; (ii) such Liens secure Indebtedness in an
amount no greater than the purchase price or improvement price, as the case may be, of such
real property so acquired; and (iii) such Liens do not extend to or cover any property of
the Company’s or any Restricted Subsidiary other than the real property so acquired; and (g)
extensions, renewals or replacements of any Indebtedness secured by the foregoing types of
Permitted Liens, so long as the principal amount of Indebtedness secured thereby shall not
exceed the amount of Indebtedness existing at the time of such extension, renewal or
replacement.

     (xx) “Principal Property” means an asset or assets owned by the Company or any
Restricted Subsidiary having a gross book value in excess of $50,000,000.

     (xxi) “Rating Agencies” means (1) each of Moody’s and S&P; and (2) if either of Moody’s
or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available
for reasons outside of the Company’s control, a “nationally recognized statistical rating
organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, as
amended, selected by the Company (as certified by a resolution of the

4

 

Board of Directors of the Company) as a replacement agency for Moody’s or S&P, or both,
as the case may be.

     (xxii) “Relevant Taxing Jurisdiction” shall have the meaning assigned to it in
Section 2.11.

     (xxiii) “Restricted Subsidiary” means a Subsidiary of the Company (other than a
Securitization Entity) that (i) is owned, directly or indirectly, by the Company or by one
or more of the Subsidiaries of the Company, or by the Company and by one or more of the
Subsidiaries of the Company, (ii) is incorporated under the laws of the United States or a
state thereof and (iii) owns a Principal Property.

     (xxiv) “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors.

     (xxv) “Securitization Entity” means any Subsidiary or other Person that is engaged
solely in the business of effecting asset securitization transactions and related
activities.

     (xxvi) “Significant Subsidiary” shall mean any Subsidiary of the Company (other than a
Securitization Entity) that is a “significant subsidiary” of the Company within the meaning
given to such term in Article 1, Rule 1-02 of Regulation S-X.

     (xxvii) “Taxes” shall have the meaning assigned to it in Section 2.11.

ARTICLE 2.

GENERAL TERMS AND CONDITIONS OF THE NOTES

     Section 2.1 Designation and Principal Amount. There is hereby authorized and
established a new series of Securities under the Base Indenture designated as the “5.75% Notes due
2018,” which is not limited in aggregate principal amount. The initial aggregate principal amount
of the Notes to be issued under this Supplemental Indenture shall be $250,000,000. The Notes are
not Original Issue Discount Securities and are issued at a public offering price of 99.949%. Any
additional amounts of Notes to be issued shall be set forth in a Company Order.

     Section 2.2 Maturity. The stated maturity of principal for the Notes shall be
February 1, 2018.

     Section 2.3 Further Issues. The Company may from time to time, without the consent of
the Holders of Notes, issue additional Notes, but only if such additional Notes are issued as part
of a “qualified reopening” for U.S. federal income tax purposes. Any such additional Notes shall
have the same ranking, interest rate, maturity date and other terms as the Notes. Any such
additional Notes, together with the Notes herein provided for, shall constitute a single series of
Securities under the Indenture.

     Section 2.4 Form of Payment. Principal of, premium, if any, and interest on the Notes
shall be payable in U.S. dollars.

5

 

     Section 2.5 Global Securities and Denomination of Notes. Upon the original issuance,
the Notes shall be represented by one or more Global Securities. The Company shall issue the Notes
in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof and shall
deposit the Global Securities with the Trustee as custodian for DTC in New York, New York, and
register the Global Securities in the name of DTC or its nominee.

     Section 2.6 Interest. The Notes shall bear interest (computed on the basis of a
360-day year consisting of twelve 30-day months) from September 20, 2010 at the rate of 5.75% per
annum payable semiannually in arrears; interest payable on each Interest Payment Date shall include
interest accrued from September 20, 2010, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for; the Interest Payment Dates on which such interest
shall be payable are February 1 and August 1, commencing on February 1, 2011; and the record date
for the interest payable on any Interest Payment Date is the close of business on January 15 or
July 15, as the case may be, next preceding the relevant Interest Payment Date.

     Section 2.7 Redemption. The Notes are subject to redemption at the option of the
Company as set forth in the form of Note attached hereto as Exhibit A.

     Section 2.8 Limitations on Liens.

     (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, incur, assume or guarantee any Indebtedness secured by a Lien on any of its
or any of its Subsidiaries’ capital stock, properties or assets, other than Permitted Liens, unless
it has made or shall make effective provision whereby the Notes shall be secured by such Lien
equally and ratably with (or prior to) the Indebtedness of the Company or any Restricted Subsidiary
secured by such Lien for so long as such Indebtedness is secured. Any such Lien created pursuant
to this Section 2.8 shall be automatically and unconditionally released and discharged upon
the release and discharge of the Lien to which it relates.

     (b) Notwithstanding paragraph (a) of this Section 2.8, the Company and its Restricted
Subsidiaries may, without securing the Notes, directly or indirectly, incur, assume or guarantee
Indebtedness that would otherwise be subject to paragraph (a) if the sum of (i) the aggregate of
all Indebtedness secured by such Liens and (ii) any Attributable Debt related to any permitted sale
and leaseback arrangement does not at any one time exceed the greater of (i) 25% of Consolidated
Net Worth calculated as of the date of the creation or incurrence of the Lien and (ii)
$300,000,000.

     Section 2.9 Limitations on Sale and Leaseback Transactions. The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, enter into any arrangement with any
Person to lease a Principal Property (except for any arrangements that exist on the date the Notes
are issued or that exist at the time any Person that owns a Principal Property becomes a Restricted
Subsidiary) which has been or is to be sold by the Company or the Restricted Subsidiary to such
Person unless:

     (a) the sale and leaseback arrangement involves a lease for a term of not more than three
years;

6

 

     (b) the sale and leaseback arrangement is entered into between the Company and a Subsidiary of
the Company or between Subsidiaries of the Company;

     (c) the Company or the Restricted Subsidiary would be entitled to incur Indebtedness secured
by a Lien on the Principal Property at least equal in amount to the Attributable Debt associated
with such Principal Property without having to secure equally and ratably the Notes pursuant to
Section 2.8(a) hereof;

     (d) the proceeds of the sale and leaseback arrangement are at least equal to the fair market
value (as determined by the Board of Directors in good faith) of the Principal Property and the
Company applies within 180 days after the sale an amount equal to the greater of the net proceeds
of the sale or the Attributable Debt associated with the Principal Property to (i) the retirement
of long-term debt for borrowed money that is not subordinated to the Notes and that is not debt to
the Company or a Subsidiary of the Company, or (ii) the purchase or development of other comparable
property; or

     (e) the sale and leaseback arrangement is entered into within 180 days after the initial
acquisition of the Principal Property subject to the sale and leaseback arrangement.

     Section 2.10 Merger, Consolidation and Sale of Assets. Section 6.04(a) of the
Base Indenture shall be revised in its entirety to read:

     (a) The Company shall not consolidate with any other entity or accept a merger of any other
entity into the Company or permit the Company to be merged into any other entity, or sell other
than for cash or lease all or substantially all its assets to another entity, unless (i) either the
Company shall be the continuing entity, or the successor, transferee or lessee entity (if other
than the Company) shall expressly assume, by indenture supplemental hereto, executed and delivered
by such entity prior to or simultaneously with such consolidation, merger, sale or lease, the due
and punctual payment of the principal of and interest and premium, if any, on all the Notes,
according to their tenor, and the due and punctual performance and observance of all other
obligations to the Holders of Notes and the Trustee under this Indenture or under the Notes to be
performed or observed by the Company; (ii) immediately after such consolidation, merger, sale,
lease or purchase, no Event of Default shall have occurred and be continuing; and (iii) the
successor, transferee or lessee entity (if other than the Company) is a corporation or a limited
liability company organized and validly existing under the laws of the United States or any
jurisdiction thereof, Canada, Mexico, Switzerland or any other country that is a member country of
the European Union on the date hereof.

     Section 2.11 Additional Amounts.

     (a) All payments made by the Company, including any successor thereto, on the Notes shall be
made without withholding or deduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (“Taxes”) unless the withholding or
deduction of such Taxes is then required by law.

     (b) If, pursuant to Section 2.10, as a result of or following a merger or
consolidation of the Company with, or a sale by the Company of all or substantially all of its
assets to, an entity that is organized under the laws of a jurisdiction outside of the United
States (a “Change in

7

 

Domicile”), any deduction or withholding is at any time required for, or on account
of, any Taxes imposed or levied by or on behalf of:

     (i) any jurisdiction (other than the United States) from or through which the Company
makes (or, as a result of the Company’s connection with such jurisdiction, is deemed to
make) a payment or delivery on the Notes, or any political subdivision or governmental
authority thereof or therein having the power to tax; or

     (ii) any other jurisdiction (other than the United States) in which Company is
organized or otherwise considered to be a resident or doing business for tax purposes, or
any political subdivision or governmental authority thereof or therein having the power to
tax (each of clauses (i) and (ii), a “Relevant Taxing Jurisdiction”);

to be made in respect of any payment or delivery under the Notes, the Company shall pay (together
with such payment or delivery) such additional amounts (the “Additional Amounts”) as may be
necessary in order that the net amounts received in respect of such payment or delivery by each
beneficial owner of the Notes after such withholding or deduction (including any such deduction or
withholding from such Additional Amounts), shall equal the amount that would have been received in
respect of such payment or delivery in the absence of such withholding or deduction; provided,
however, that Additional Amounts shall be payable only to the extent necessary so that the net
amount received by the holder, after taking into account such withholding or deduction, equals the
amount that would have been received by the holder in the absence of a Change in Domicile;
provided, further, that no such Additional Amounts shall be payable with respect to:

     (1) any Taxes that would have been imposed absent a Change in Domicile;

     (2) any Taxes that would not have been so imposed but for the existence of any
present or former connection between the beneficial owner (or between a fiduciary,
settlor, beneficiary, member or shareholder of, or possessor of power over the
relevant beneficial owner, if the relevant beneficial owner is an estate, nominee,
trust or corporation) and the Relevant Taxing Jurisdiction (including the beneficial
owner being a citizen or resident or national of, or carrying on a business or
maintaining a permanent establishment in, or being physically present in, the
Relevant Taxing Jurisdiction) other than by the mere ownership or holding of such
Note or enforcement of rights thereunder or the receipt of payments in respect
thereof;

     (3) any Taxes that would not have been so imposed if the beneficial owner had
made a declaration of non-residence or any other claim or filing for exemption to
which it is entitled (provided that (x) such declaration of non-residence or other
claim or filing for exemption is required by the applicable law of the Relevant
Taxing Jurisdiction as a precondition to exemption from the requirement to deduct or
withhold such Taxes and (y) at least 30 days prior to the first payment date with
respect to which such declaration of non-residence or other claim or filing for
exemption is required under the applicable law of the

8

 

Relevant
 Taxing Jurisdiction, the relevant beneficial owner at that time has been notified by
mail to the addresses of such Holders of Notes as they appear in the Register by the
Company or any other person through whom payment may be made that a declaration of
non-residence or other claim or filing for exemption is required to be made);

     (4) any Note presented for payment (where presentation is required) more than
30 days after the relevant payment is first made available for payment to the
beneficial owner (except to the extent that the beneficial owner would have been
entitled to Additional Amounts had the Note been presented during such 30 day
period);

     (5) any Taxes that are payable otherwise than by withholding from a payment or
delivery on the Notes;

     (6) any estate, inheritance, gift, sale, transfer, personal property or similar
tax, assessment or other governmental charge;

     (7) any withholding or deduction imposed on a payment to an individual that is
required to be made pursuant to European Council Directive 2003/48/ EC on the
taxation of savings or any other directive implementing the conclusions of the
ECOFIN Council meeting of 26-27 November, 2000 or any law implementing or complying
with, or introduced in order to conform to, such directive;

     (8) any Taxes that could have been avoided by the presentation (where
presentation is required) of the relevant Note to another Paying Agent in a member
state of the European Union; and

     (9) where, had the beneficial owner of the Note been the holder of the Note, it
would not have been entitled to payment of Additional Amounts by reason of any of
clauses (1) to (8) inclusive of this Section 2.11(b).

     (c) The Company shall (i) make any required withholding or deduction and (ii) remit the full
amount deducted or withheld to the Relevant Taxing Jurisdiction in accordance with applicable law.
The Company shall use all reasonable efforts to obtain certified copies of tax receipts evidencing
the payment of any Taxes so deducted or withheld from each Relevant Taxing Jurisdiction imposing
such Taxes and shall provide such certified copies to each holder. The Company shall attach to
each certified copy a certificate stating (x) that the amount of withholding Taxes evidenced by the
certified copy was paid in connection with payments in respect of the principal amount of Notes
then outstanding and (y) the amount of such withholding Taxes paid per $1,000 principal amount of
the Notes. Copies of such documentation shall be available for inspection during ordinary business
hours at the office of the Trustee by the Holders of Notes upon request and shall be made available at the offices of
the Paying Agent.

     (d) At least 30 days prior to each date on which any payment under or with respect to the
Notes is due and payable (unless such obligation to pay Additional Amounts arises shortly

9

 

before or after the 30th day prior to such date, in which case it shall be promptly thereafter), if the
Company shall be obligated to pay Additional Amounts with respect to such payment, the Company
shall deliver to the Trustee an Officer’s Certificate stating the fact that such Additional Amounts
shall be payable, the amounts so payable and shall set forth such other information necessary to
enable the Trustee to pay such Additional Amounts to Holders of Notes on the payment date. Each
such Officer’s Certificate may be conclusively relied upon by the Trustee until receipt of a
further Officer’s Certificate addressing such matters.

     (e) References in this Indenture or the Notes to the payment of principal, purchase prices in
connection with a purchase of Notes, interest, or any other amount payable on or with respect to
the Notes shall be deemed to include payment of Additional Amounts pursuant to this Section 2.11 to
the extent that, in such context, Additional Amounts are, were or would be payable in respect
thereof.

     (f) The obligations provided for in this Section 2.11 shall survive any termination,
defeasance or discharge of the Indenture and shall apply mutatis mutandis to any jurisdiction in
which any successor to the Company is organized or any political subdivision or taxing authority or
agency thereof or therein.

     Section 2.12 Events of Default.

     (a) The term “Event of Default” as used in this Indenture with respect to the Notes only,
shall include the following described events in addition to those set forth in Section 7.01
of the Base Indenture:

     (i) any failure by the Company to comply with its obligations under Section
2.10 hereof or Section 6.04 of the Base Indenture;

     (ii) the entry by a court having jurisdiction in the premises of a decree or order for
relief in respect of a Significant Subsidiary in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of
a Significant Subsidiary or of substantially all the property of a Significant Subsidiary or
ordering the winding-up or liquidation of its affairs and such decree or order shall remain
unstayed and in effect for a period of 90 consecutive days;

     (iii) the commencement by a Significant Subsidiary of a voluntary case under the
federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent
by a Significant Subsidiary to the entry of an order for relief in an involuntary case under
any such law, or the consent by any Significant Subsidiary to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or similar official) of a Significant Subsidiary or of substantially all
the property of a Significant Subsidiary or the making by it of an assignment for the
benefit of creditors or the admission by it in writing of its inability to pay its debts
generally as

10

 

they become due, or the taking of corporate action by a Significant Subsidiary
in furtherance of any action; and

     (iv) any final judgment or decree for the payment of money which, when taken together
with all other final judgments or decrees for the payment of money, causes the aggregate
amount of such judgments or decrees entered against the Company or any Significant
Subsidiary to exceed $50 million (net of any amounts with respect to which a reputable and
creditworthy insurance company has acknowledged liability), remains outstanding for a period
of 60 consecutive days after the later of (a) the date on which the right to appeal thereof
has expired if no such appeal has commenced, or (b) the date on which all rights to appeal
have been extinguished.

     (b) The “Event of Default” set forth in Section 7.01(a) of the Base Indenture with
respect to the Notes only shall be replaced with the following:

     (i) the failure of the Company to pay any installment of interest, including any
additional interest and any Additional Amounts, on any Note when and as the same shall
become payable, which failure shall have continued unremedied for a period of 30 days;

     (c) The “Event of Default” set forth in Section 7.01(b) of the Base Indenture with
respect to the Notes only shall be replaced with the following:

     (i) the failure of the Company to pay the principal of any Note, including any
Additional Amount, when and as the same shall become payable, whether at Maturity, by call
for redemption (otherwise than pursuant to a sinking fund), upon required repurchase in
connection with a Fundamental Change, or upon acceleration as authorized by the Indenture;

     (d) The “Event of Default” set forth in Section 7.01(g) of the Base Indenture with
respect to the Notes only shall be replaced with the following:

     (i) Indebtedness of the Company or any of its Restricted Subsidiaries of at least
$50,000,000 in aggregate principal amount is accelerated which acceleration has not been
rescinded or annulled after 30 days notice thereof.

     (e) This Section 2.12 shall incorporate the provisions of Section 2.15(c).
The third and second from last paragraphs of Section 7.01 of the Base Indenture shall be
replaced by Section 2.15(c) with respect to the Notes only.

     Section 2.13 Appointment of Agents. The Trustee shall initially be the Registrar and
Paying Agent for the Notes.

     Section 2.14 Defeasance upon Deposit of Moneys or U.S. Government Obligations. At the
Company’s option, either (a) the Company shall be deemed to have been Discharged from its
obligations with respect to the Notes on the first day after the applicable conditions set
forth in Section 12.03 of the Base Indenture have been satisfied or (b) the Company shall
cease to be under any obligation to comply with any term, provision or condition set forth in
Section 6.04 or

11

 

Section 10.02 of the Base Indenture and Sections 2.9,
2.10 and 2.11 of this Supplemental Indenture with respect to the Notes at any time
after the applicable conditions set forth in Section 12.03 of the Base Indenture have been
satisfied.

     Section 2.15 SEC Reports.

     (a) Any documents, reports or other information that the Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act shall be filed by the Company with the
Trustee within 15 days after the same are required to be filed with the SEC (after giving effect to
any grace period provided by Rule 12b-25 under the Exchange Act). The Company shall otherwise
comply with the requirements of Section 314(a) of the Trust Indenture Act. Documents, reports or
other information filed by the Company with the SEC via EDGAR shall be deemed to be filed with the
Trustee as of the time such documents, reports or other information are filed via EDGAR. The
Trustee does not have the duty to review such information, documents or reports, is not considered
to have notice of the content of such information, documents or reports or any defaults or Events
of Default discernable therefrom and does not have a duty to verify the accuracy of such
information, documents or reports.

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

     (c) Notwithstanding anything to the contrary in Section 2.12, to the extent that the
Company elects, pursuant to Section 2.15(e), the sole remedy available to the Holders of
Notes or to the Trustee on their behalf for an Event of Default relating to (i) the Company’s
failure to file with the Trustee pursuant to Section 314(a)(1) of the Trust Indenture Act any
documents or reports that the Company is required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act, or (ii) the Company’s failure to comply with its obligations in
Section 2.15(a), shall, after the occurrence of such an Event of Default, consist
exclusively of the right to receive additional interest on the Notes at a rate equal to:

     (i) 0.25% per annum of the principal amount of the Notes outstanding for each day
during the 60-day period beginning on, and including, the occurrence of such an Event of
Default during which such Event of Default is continuing; and

     (ii) 0.50% per annum of the principal amount of the Notes outstanding for each day
during the 120-day period beginning on, and including, the 61st day following, and
including, the occurrence of such an Event of Default during which such Event of Default is
continuing;

provided, however, that in no event shall such additional interest accrue at an annual rate in
excess of 0.50% during the six-month period beginning on, and including, the date which is six
months after the last date of original issuance of the Notes for any failure to timely file any
document or report that the Company is required to file with the SEC pursuant to Section 13 or

12

 

15(d) of the Exchange Act (after giving effect to all applicable grace periods thereunder and other
than reports on Form 8-K).

     (d) If the Company elects, additional interest shall be payable in the same manner and on the
same dates as the stated interest payable on the Notes. On the 181st day after such Event of
Default (if the Event of Default relating to the reporting obligations is not cured or waived prior
to such 181st day), the Notes shall be subject to acceleration as provided in Section 7.02
of the Base Indenture. This Section 2.15(d) shall not affect the rights of Holders of
Notes in the event of the occurrence of any Event of Default unrelated to this Section
2.15. In the event that the Company does not elect to pay the additional interest following an
Event of Default in accordance with this Section 2.15(d), the Notes shall be subject to
acceleration as provided in Section 7.02 of the Base Indenture.

     (e) In order to elect to pay additional interest as the sole remedy during the first 180 days
after the occurrence of an Event of Default relating to the Company’s failure to comply with the
reporting obligations, the Company must notify, in writing, all Holders of Notes and the Trustee
and Paying Agent of such election prior to the beginning of such 180-day period. Upon the
Company’s failure to timely give such notice, the Notes shall be immediately subject to
acceleration as provided in Section 7.02 of the Base Indenture.

     Section 2.16 Purchase of Notes Upon a Change of Control.

     (a) Upon the occurrence of a Change of Control Triggering Event, unless the Company has
exercised its right to redeem the Notes as provided in Article Four of the Base Indenture, each
Holder shall have the right to require the Company to repurchase all or any part (equal to $2,000
or an integral multiple of $1,000 in excess thereof) of each Holder’s Notes pursuant to the offer
described in this Section 2.16 (the “Change of Control Offer”) on the terms set
forth in the Base Indenture at a purchase price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, to but not including the date of purchase
(the “Change of Control Payment”).

     (b) Within 30 days following any Change of Control Triggering Event, or, at the Company’s
option, prior to the date of consummation of any Change of Control, but after the public
announcement of the pending Change of Control, the Company shall mail a notice to each Holder, with
a copy to the Trustee, describing the transaction or transactions that constitute the Change of
Control and offering to repurchase the Notes on the date specified in the notice, which date shall
be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the
“Change of Control Payment Date”), pursuant to the procedures required by the Base
Indenture and described in such notice. The repurchase obligation with respect to any notice
mailed prior to the consummation of the Change of Control, shall be conditioned on the Change of
Control Triggering Event occurring on or prior to the payment date specified in the notice.

     (c) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent those laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control Triggering Event. To the extent that the provisions of any securities laws
or regulations conflict with this Section 2.16, the Company shall comply with the
applicable

13

 

securities laws and regulations and shall not be deemed to have breached its obligations
under this Section 2.16 by virtue of such conflicts.

     (d) On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept
for payment all Notes or portions thereof properly tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof properly tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by the Company and the
amount to be paid by the Paying Agent. The Paying Agent shall promptly mail to each Holder of
Notes properly tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered by such Holder, if
any; in denominations as set forth herein. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

     (e) The Company shall not be required to make a Change of Control Offer upon a Change of
Control Triggering Event if another Person makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this Section 2.16
otherwise applicable to a Change of Control Offer made by the Company and such other Person
purchases all Notes properly tendered and not withdrawn pursuant to such Change of Control Offer.

ARTICLE 3.

FORM OF NOTES

     Section 3.1 Form of Notes. The Notes and the Trustee’s Certificate of Authentication
to be endorsed thereon are to be substantially in the form set forth in Exhibit A hereto.

ARTICLE 4.

ORIGINAL ISSUE OF NOTES

     Section 4.1 Original Issue of Notes. The Notes may, upon execution of this
Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication,
and the Trustee shall, upon receipt of a Company Order, authenticate and deliver such Notes as in
such Company Order provided.

ARTICLE 5.

MISCELLANEOUS

     Section 5.1 Ratification of Indenture. The Base Indenture, as supplemented by this
Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental
Indenture shall be deemed part of the Base Indenture in the manner and to the extent herein
and

14

 

therein provided; provided that the provisions of this Supplemental Indenture apply solely with
respect to the Notes.

     Section 5.2 Trustee Not Responsible for Recitals. The recitals herein contained are
made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this
Supplemental Indenture.

     Section 5.3 Governing Law. This Supplemental Indenture and each Note shall be deemed
to be contracts made under the law of the State of New York, and for all purposes shall be governed
by and construed in accordance with the law of said State.

     Section 5.4 Separability. In case any provision in this Supplemental Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

     Section 5.5 Counterparts Originals. This Supplemental Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an original, but all
such counterparts shall together constitute but one and the same instrument.

15

 

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

	 	 	 	 	 
	 	

WYNDHAM WORLDWIDE CORPORATION

 	 
	 	By:  	/s/
Stephen P. Holmes 	 
	 	 	Name:  	Stephen P. Holmes 	 
	 	 	Title:  	Chairman of the Board of Directors and

Chief Executive Officer 	 
	 
	 	U.S. BANK NATIONAL ASSOCIATION,

as Trustee

 	 
	 	By:  	/s/
William G. Keenan 	 
	 	 	Name:  	William G. Keenan 	 
	 	 	Title:  	Vice President 	 
	 

Signature Page to Fourth Supplemental Indenture

 

EXHIBIT A

[FACE OF NOTE]

          THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY
THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS NOTE FOR ALL PURPOSES.

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”) TO THE COMPANY 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
HEREON 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 SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

 

 

CUSIP No. 98310WAF5

WYNDHAM WORLDWIDE CORPORATION

5.75% NOTES DUE 2018

	 	 	 

	No. R-1
	 	$250,000,000
	 
	 	As revised by the
	 
	 	Schedule of
	 
	 	Increases or
	 
	 	Decreases in
	 
	 	Global Security
	 
	 	attached hereto

          Interest. Wyndham Worldwide Corporation, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the “Company,” which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to
Cede & Co. or registered assigns, the principal sum of TWO HUNDRED FIFTY MILLION DOLLARS
($250,000,000), as revised by the Schedule of Increases or Decreases in Global Security attached
hereto, on February 1, 2018 and to pay interest thereon from September 20, 2010 or from the most
recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in
arrears on February 1 and August 1 in each year, commencing February 1, 2011 at the rate of 5.75%
per annum, until the principal hereof is paid or made available for payment.

          Method of Payment. The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date shall, as provided in such Indenture, be paid to the Person in whose name
this Note (or one or more Predecessor Securities) is registered at the close of business on the
Record Date for such interest, which shall be January 15 or July 15, as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at
the close of business on a Special Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice thereof having been given to Holders of Notes not less than 10 days
prior to such Special Record Date, all as more fully provided in said Indenture. Payment of the
principal of (and premium, if any) and any such interest on this Note shall be made at the
Corporate Trust Office in U.S. Dollars.

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

          Authentication. Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.

 

 

          IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its
corporate seal.

Dated: September 20, 2010

	 	 	 	 	 
	 	WYNDHAM WORLDWIDE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Stephen P. Holmes 	 
	 	 	Title:  	Chairman of the Board of Directors

and Chief Executive Officer 	 
	 

					
	 	

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

Dated: September 20, 2010

U.S. BANK NATIONAL ASSOCIATION

           as Trustee, certifies

           that this is one of the

           Securities of the series

           referred to in the Indenture.

 	 
	 	By:  	 	 
	 	 	Authorized Signatory 	 
	 	 	 	 

 

 

	 	 	 	 	 

[REVERSE OF NOTE]

          Indenture. This Note is one of a duly authorized issue of securities of the Company (herein
called the “Notes”) issued and to be issued under an Indenture, dated as of November 20, 2008 (the
“Base Indenture”), as supplemented by a Fourth Supplemental Indenture dated September 20, 2010 (as
so supplemented, herein called the “Indenture”), between the Company and U.S. Bank National
Association, as Trustee (herein called the “Trustee,” which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the
Notes are, and are to be, authenticated and delivered. This Note is one of the series designated
on the face hereof, initially limited in aggregate principal amount to $250,000,000. To the extent the terms of this Note conflict
with the terms of the Indenture, the terms of the Indenture shall govern.

          Optional Redemption. The Notes are subject to redemption at the Company’s option, at any time
and from time to time, in whole or in part, at a redemption price equal to the greater of (i) 100%
of the principal amount to be redeemed plus accrued and unpaid interest thereon to, but excluding,
the Redemption Date, and (ii) the sum, as determined by an Independent Investment Banker, of the
present values of the remaining scheduled payments of principal and interest on the Securities to
be redeemed (exclusive of interest accrued to the Redemption Date) discounted to the Redemption
Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the
applicable Treasury Rate plus 50 basis points plus accrued and unpaid interest on the principal
amount being redeemed to the Redemption Date (exclusive of interest accrued to the Redemption
Date).

          For purposes of determining the optional redemption price, the following definitions are
applicable:

          “Treasury Rate” means, with respect to any Redemption Date, (i) the yield, under the heading
which represents the average for the immediately preceding week, appearing in the most recently
published statistical release designated “H.15(519)” or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to constant maturity under the
caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the Remaining Life, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue shall be
determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month), (ii) if the period from the Redemption Date to
the maturity date of the Securities to be redeemed is less than one year, the weekly average yield
on actually traded United States Treasury securities adjusted to a constant maturity of one year
shall be used, or (iii) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per annum equal to the
semiannual equivalent yield to

 

 

maturity of the Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury
Price for such Redemption Date.

          The Treasury Rate shall be calculated on the third Business Day preceding the Redemption Date.

          “Comparable Treasury Issue” means the U.S. Treasury security selected by an Independent
Investment Banker as having a maturity comparable to the remaining term (“Remaining Life”) of the
Securities to be redeemed that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining terms of the Securities.

          “Comparable Treasury Price” means, with respect to any Redemption Date:

          (a) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest Reference Treasury Dealer Quotations, or

          (b) if the Independent Investment Banker is unable to obtain at least four such Reference
Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations obtained by the
Independent Investment Banker or, if the Independent Investment Banker is able to obtain only one
Reference Treasury Dealer Quotation, such Reference Treasure Dealer Quotation.

          “Independent Investment Banker” means an independent investment banking institution of
national standing appointed by the Company, which may be one of the Reference Treasury Dealers.

          “Reference Treasury Dealer” means any primary U.S. government securities dealer in New York
City (a “Primary Treasuries Dealer”) that the Company selects. The Company has selected Banc of
America Securities LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and RBS
Securities Inc., and their respective successors, as Primary Treasury Dealers.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date for the Securities, an average, as determined by the Independent Investment
Banker, of the bid and asked prices for the Comparable Treasury Issue for the Securities (expressed
in each case as a percentage of its principal amount) quoted in writing to the Independent
Investment Banker by the Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
Business Day preceding such Redemption Date.

 

 

          Notice of any redemption shall be mailed at least 30 days but not more than 60 days before the
Redemption Date to each registered Holder of the Securities to be redeemed. If money sufficient to
pay the redemption price of all of the Securities (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Trustee or Paying Agent on or before the Redemption Date, and
unless the Company defaults in payment of the redemption price, on and after the Redemption Date,
interest shall cease to accrue on the Securities or portions of the Securities called for
redemption. If fewer than all of the Securities are to be redeemed, and such Securities are at the
time represented by a Global Security, the Depositary shall select by lot the particular interests
to be redeemed. If the Company elects to redeem fewer than all of the Securities, and any of such
Securities are not represented by a Global Security, then the Trustee shall select the particular
Securities to be redeemed in a manner it deems appropriate and fair (and the Depositary shall
select by lot the particular interests in any Global Security to be redeemed).

          The Company may at any time, and from time to time, purchase the Securities at any price or
prices in the open market or otherwise.

          Defaults and Remedies. If an Event of Default with respect to Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the manner and with the
effect provided in the Indenture.

          Amendment, Modification and Waiver. The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and obligations of the Company
and the rights of the Holders of the Notes at any time by the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of a majority in
aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all
Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this Note.

          Restrictive Covenants. The Indenture does not limit the incurrence of additional debt by the
Company or any of its Subsidiaries; however, it does limit the creation of certain Liens and the
entry into sale and leaseback transactions by the Company or any of its Restricted Subsidiaries.
The limitations are subject to a number of important qualifications and exceptions. Once a year,
the Company must report to the Trustee on its compliance with these limitations.

          Denominations, Transfer and Exchange. The Notes are issuable only in registered form without
coupons in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof.
As provided in the Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount

 

 

of Notes of any different authorized denomination or denominations, as requested by the Holder
surrendering the same.

          As provided in the Indenture and subject to certain limitations therein set forth, including
Section 3.06 of the Base Indenture, the transfer of this Note is registerable in the
Register, upon surrender of this Note for registration of transfer at the Registrar accompanied by
a written request for transfer in form satisfactory to the Company and the Registrar duly executed
by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new
Notes of any different authorized denomination or denominations and for the same aggregate
principal amount, shall be issued to the designated transferee or transferees.

          No service charge shall be made for any such registration of transfer or exchange, but the
Company or the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.

          Persons Deemed Owners. Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose
name this Note is registered as the owner hereof for the purpose of receiving payment of principal
of and premium, if any, and (subject to Section 3.08 of the Base Indenture) interest, if any, on
such Note and for all other purposes whatsoever, whether or not this Note be overdue, and neither
the Company, the Trustee nor any agent shall of the Company or the Trustee shall be affected by
notice to the contrary.

          Defined Terms. All terms used in this Note and not defined herein shall have the meanings
assigned to them in the Indenture.

 

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

          The following increases or decreases in this Global Security have been made:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Principal Amount of	 	 
	 	 	 	 	Amount of increase	 	Amount of decrease	 	this Global	 	Signature of
	 	 	 	 	in Principal Amount	 	in Principal Amount	 	Security following	 	authorized
	Date of	 	of this Global	 	of this Global	 	each decrease or	 	signatory of
	Exchange	 	Security	 	Security	 	increase	 	Trustee

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