Document:

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                                                                    EXHIBIT 10.1

                          UNITED STATES DISTRICT COURT
                      FOR THE EASTERN DISTRICT OF WISCONSIN

UNITED STATES OF AMERICA
and the STATE OF WISCONSIN

          Plaintiffs,                          CIVIL ACTION NO.

     v.

P. H. GLATFELTER COMPANY
and
WTM I COMPANY
(f/k/a Wisconsin Tissue Mills Inc.),

          Defendants.

                                 CONSENT DECREE
          FOR REMEDIAL DESIGN AND REMEDIAL ACTION AT OPERABLE UNIT 1 OF
                     THE LOWER FOX RIVER AND GREEN BAY SITE

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                                TABLE OF CONTENTS

<TABLE>
<S>       <C>                                                                                                      <C>
I.        BACKGROUND.........................................................................................        1
II.       JURISDICTION.......................................................................................        4
III.      PARTIES BOUND  ....................................................................................        4
IV.       DEFINITIONS........................................................................................        5
V.        GENERAL PROVISIONS.................................................................................       13
VI.       ESTABLISHMENT AND USE OF CERTAIN SITE-SPECIFIC ACCOUNTS ...........................................       15
VII.      PERFORMANCE OF THE RESPONSE WORK BY SETTLING DEFENDANTS............................................       19
VIII.     POST-REMEDY RESPONSE WORK AND REMEDY REVIEW........................................................       26
IX.       QUALITY ASSURANCE, SAMPLING, AND DATA ANALYSIS.....................................................       28
X.        ACCESS AND INSTITUTIONAL CONTROLS .................................................................       30
XI        REPORTING REQUIREMENTS.............................................................................       36
XII.      RESPONSE AGENCIES' APPROVAL OF PLANS AND OTHER SUBMISSIONS.........................................       40
XIII.     PROJECT COORDINATORS   ............................................................................       43
XIV.      CERTIFICATION OF COMPLETION........................................................................       44
XV.       EMERGENCY RESPONSE.................................................................................       47
XVI.      NATURAL RESOURCE RESTORATION EFFORTS ..............................................................       48
XVII.     PAYMENTS TO PLAINTIFFS.............................................................................       51
XVIII.    INDEMNIFICATION AND INSURANCE......................................................................       58
XIX.      FORCE MAJEURE EVENTS...............................................................................       61
XX.       DISPUTE RESOLUTION.................................................................................       63
XXI.      STIPULATED PENALTIES...............................................................................       68
XXII.     COVENANTS NOT TO SUE BY PLAINTIFFS ................................................................       75
XXIII.    COVENANTS BY SETTLING DEFENDANTS ..................................................................       81
XXIV.     CONSENT DECREE FUNDING LIMITATION AND SPECIAL RESERVATION OF RIGHTS ...............................       84
XXV.      EFFECT OF SETTLEMENT AND CONTRIBUTION PROTECTION...................................................       89
XXVI.     ACCESS TO INFORMATION..............................................................................       92
XXVII.    RETENTION OF RECORDS...............................................................................       94
XXVIII.   NOTICES AND SUBMISSIONS ...........................................................................       95
XXIX.     EFFECTIVE DATE.....................................................................................       98
XXX.      RETENTION OF JURISDICTION..........................................................................       98
XXXI.     APPENDICES.........................................................................................       99
XXXII.    COMMUNITY RELATIONS................................................................................       99
XXXIII.   MODIFICATIONS......................................................................................      100
XXXIV.    LODGING AND OPPORTUNITY FOR PUBLIC COMMENT.........................................................      100
XXXV.     SIGNATORIES/SERVICE................................................................................      101
XXXVI.    FINAL JUDGMENT.....................................................................................      102
</TABLE>

                                       -i-

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                               TABLE OF APPENDICES

Appendix A        Trustee Council Resolution relating to this Consent Decree

Appendix B        Appendix addressing Management of the Disbursement Special
                  Account

Appendix C        Appendix addressing Escrow Account Management

Appendix D        Form of Escrow Agreement

Appendix E        Appendix addressing Special Procedures for Restoration Work

Appendix F        Administrative Order on Consent between WTM I Company, EPA,
                  and WDNR, captioned In the matter of the Lower Fox River and
                  the Green Bay Site, Docket No. V-W-'03-C-745 (including the
                  Statement of Work for Remedial Design)

Appendix G        Map of Operable Unit 1

Appendix H        Record of Decision for Operable Units 1 and 2

Appendix I        Statement of Work for the Remedial Action

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                                 CONSENT DECREE
          FOR REMEDIAL DESIGN AND REMEDIAL ACTION AT OPERABLE UNIT 1 OF
                     THE LOWER FOX RIVER AND GREEN BAY SITE

                                  I. BACKGROUND

         A.       The United States of America ("United States"), on behalf of
the Administrator of the United States Environmental Protection Agency ("EPA"),
and the State of Wisconsin (the "State"), on behalf of the Wisconsin Department
of Natural Resources ("WDNR"), filed a Complaint in this matter pursuant to
Sections 106 and 107 of the Comprehensive Environmental Response, Compensation,
and Liability Act ("CERCLA"), 42 U.S.C. Sections 9606 and 9607.

         B.       The Plaintiffs' Complaint seeks, inter alia: (i) reimbursement
of certain costs incurred by the United States and the State for response
actions at the Lower Fox River and Green Bay Site (the "Site," as defined below)
in Northeastern Wisconsin, together with accrued interest; and (ii) performance
of response work by the defendants at Operable Unit 1 ("OU1," as defined below)
of the Site consistent with the National Contingency Plan, 40 C.F.R. Part 300
(as amended) (the "NCP").

         C.       In accordance with the NCP and Section 121(f)(l)(F) of CERCLA,
42 U.S.C. Section 9621(f)(1)(F), the State was notified of negotiations with
potentially responsible parties regarding the implementation of the remedial
design and the remedial action for OU1. The State has been an active participant
in such negotiations and is a party to this Consent Decree.

         D.       In accordance with Section 122(j)(1) of CERCLA, 42 U.S.C.
Section 9622(j)(1), EPA has notified the appropriate natural resource trustees
(the "Trustees"), as represented by the Fox River/Green Bay Natural Resource
Trustee Council, of negotiations with potentially responsible parties regarding
the releases of hazardous substances that may have resulted in injuries to

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natural resources under Federal, State, and Tribal trusteeship at the Site. The
Trustees have participated in the negotiation of this Consent Decree, and
support this Consent Decree, as indicated by the Trustee Council Resolution
attached to this Consent Decree as Appendix A.

         E.       EPA, WDNR, and the Trustees are parties to several
Site-specific Memoranda of Agreement, as "Inter-Governmental Partners" sharing
a "mutual goal of remediating and/or responding to hazardous substances releases
and threats of releases to, and restoring injured and potentially injured
natural resources in, [the Site area]." The Inter-Governmental Partners'
founding Memorandum of Agreement recognized that WDNR would have "a leadership
role, in full partnership with EPA, in exercising response authority" at the
Site, and the Plaintiffs intend to continue that cooperative relationship as to
actions required under this Consent Decree.

         F.       The defendants that have entered into this Consent Decree
("Settling Defendants," as defined below) do not admit any liability to the
Plaintiffs, to the Trustees, or to any other party arising out of the
transactions or occurrences alleged in the Complaint, nor do they acknowledge
that the release or threatened release of hazardous substance(s) at or from the
Site constitutes an imminent or substantial endangerment to the public health or
welfare or the environment.

         G.       In response to a release or a substantial threat of a release
of a hazardous substance(s) at or from the Site, WDNR in 1998 commenced a
Remedial Investigation and Feasibility Study ("RI/FS") for the Site pursuant to
40 C.F.R. Section 300.430, with funding and technical assistance from EPA. In
December 2002, WDNR completed a Remedial Investigation ("RI") Report and a Final
Feasibility Study ("FS") for the Site.

         H.       Pursuant to Section 117 of CERCLA, 42 U.S.C. Section 9617,
notice of the completion of the FS and of the proposed plan for remedial action
was published in major local newspapers of general circulation in the Fox River
Valley. WDNR and EPA provided an opportunity for

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written and oral comments from the public on the proposed plan for remedial
action. A copy of the transcript of the public meeting is available to the
public as part of the administrative record upon which WDNR and EPA based the
selection of the response action.

         I.       The decision by WDNR and EPA on the remedial action to be
implemented at OU1 at the Site is embodied in a final Record of Decision
("ROD"), executed by WDNR and EPA in December 2002. The ROD includes an
explanation of significant differences between the final remedial action plan
and the proposed plan as well as a responsiveness summary to the public
comments. Notice of the final plan was published in accordance with Section
117(b) of CERCLA.

         J.       Based on the information presently available to EPA and WDNR,
EPA and WDNR believe that the Response Work (as defined below) will be properly
and promptly conducted by the Settling Defendants if conducted in accordance
with the requirements of this Consent Decree and its appendices.

         K.       Solely for the purposes of Section 113(j) of CERCLA, the
remedial action selected by the ROD and the Response Work to be performed by the
Settling Defendants shall constitute a response action taken or ordered by the
President.

         L.       The Parties recognize, and the Court by entering this Consent
Decree finds, that this Consent Decree has been negotiated by the Parties in
good faith and implementation of this Consent Decree will expedite the cleanup
of OU1 and will avoid prolonged and complicated litigation between the Parties,
and that this Consent Decree is fair, reasonable, and in the public interest.

         NOW, THEREFORE, it is hereby Ordered, Adjudged, and Decreed:

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                                II. JURISDICTION

         1.       This Court has jurisdiction over the subject matter of this
action pursuant to 28 U.S.C. Sections 1331 and 1345, and 42 U.S.C. Sections
9606, 9607, and 9613(b). This Court also has personal jurisdiction over the
Settling Defendants. Solely for the purposes of this Consent Decree and the
underlying Complaint, Settling Defendants waive all objections and defenses that
they may have to jurisdiction of the Court or to venue in this District.
Settling Defendants shall not challenge the terms of this Consent Decree or this
Court's jurisdiction to enter and enforce this Consent Decree.

                               III. PARTIES BOUND

         2.       This Consent Decree applies to and is binding upon the United
States and the State and upon Settling Defendants and their successors and
assigns. Any change in ownership or corporate status of a Settling Defendant
including, but not limited to, any transfer of assets or real or personal
property, shall in no way alter such Settling Defendant's responsibilities under
this Consent Decree.

         3.       Settling Defendants shall provide a copy of this Consent
Decree to each contractor hired to perform the Response Work required by this
Consent Decree and to each person representing any Settling Defendant with
respect to OU1 or the Response Work and shall condition all contracts entered
into hereunder upon performance of the Response Work in conformity with the
terms of this Consent Decree. Settling Defendants or their contractors shall
provide written notice of the Consent Decree to all subcontractors hired to
perform any portion of the Response Work required by this Consent Decree.
Settling Defendants shall nonetheless be responsible for ensuring that their
contractors and subcontractors perform the Response Work contemplated herein in
accordance with this Consent Decree. With regard to the activities

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undertaken pursuant to this Consent Decree, each contractor and subcontractor
shall be deemed to be in a contractual relationship with the Settling Defendants
within the meaning of Section 107(b)(3) of CERCLA, 42 U.S.C. Section 9607(b)(3).

                                 IV. DEFINITIONS

         4.       Unless otherwise expressly provided herein, terms used in this
Consent Decree which are defined in CERCLA or in regulations promulgated under
CERCLA shall have the meaning assigned to them in CERCLA or in such regulations.
Whenever terms listed below are used in this Consent Decree or in the appendices
attached hereto and incorporated hereunder, the following definitions shall
apply:

         "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Sections
9601-9675.

         "Consent Decree" shall mean this Decree and all appendices attached
hereto (listed in Section XXXI). In the event of conflict between this Decree
and any appendix, this Decree shall control.

         "Day" shall mean a calendar day unless expressly stated to be a working
day. "Working day" shall mean a day other than a Saturday, Sunday, or Federal
holiday. In computing any period of time under this Consent Decree, where the
last day would fall on a Saturday, Sunday, or Federal holiday, the period shall
run until the close of business of the next working day.

         "Date of Lodging" shall mean the day on which this Consent Decree is
lodged with the Court.

         "DOI" shall mean the United States Department of the Interior and any
successor departments or agencies of the United States.

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         "DOI Past Cost Payments" shall mean the payments to be made to the
DOI NRDAR Fund under Subparagraph 52.a.(ii) (Initial Payments to the United
States) of this Consent Decree to reimburse DOI for a portion of its past
natural resource damage assessment costs related to the Site.

         "DOJ" shall mean the United States Department of Justice and any
successor departments or agencies of the United States.

         "Effective Date" shall be the effective date of this Consent Decree as
provided by Section XXIX.

         "EPA" shall mean the United States Environmental Protection Agency and
any successor departments or agencies of the United States.

         "EPA Past Cost Payments" shall mean the payments to be made to the Fox
River Site Special Account within the EPA Hazardous Substance Superfund under
Subparagraph 52.a.(i) (Initial Payments to the United States) of this Consent
Decree to reimburse EPA for a portion of its past response costs related to the
Site.

         "Force Majeure Event," for purposes of this Consent Decree, shall mean
any event arising from causes beyond the control of the Settling Defendants, of
any entity controlled by Settling Defendants, or of Settling Defendants'
contractors or subcontractors, that delays or prevents the performance of any
obligation under this Consent Decree despite Settling Defendants' best efforts
to fulfill the obligation. The requirement that the Settling Defendants exercise
"best efforts to fulfill the obligation" includes using best efforts to
anticipate any potential Force Majeure Event and best efforts to address the
effects of any potential Force Majeure Event (i) as it is occurring and (ii)
following the potential Force Majeure Event, such that the delay is minimized to
the greatest extent possible.

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         "Fox River OU1 Disbursement Special Account" or the "Disbursement
Special Account" shall mean the disbursement special account established for OU1
by EPA pursuant to Section 122(b)(3) of CERCLA, 42 U.S.C. Section 9622(b)(3),
and this Consent Decree.

         "Fox River Site Special Account" shall mean the special account
established for the Site by EPA pursuant to Section 122(b)(3) of CERCLA, 42
U.S.C. Section 9622(b)(3).

         "Fox River OU1 Escrow Account" or the "Escrow Account" shall mean the
escrow account trust fund established for OU1 by the Settling Defendants
pursuant to this Consent Decree.

         "Institutional Controls" shall mean all response activities to
implement institutional controls requirements under the ROD.

         "Interest" shall mean interest at the rate specified for interest on
investments of the EPA Hazardous Substance Superfund established by 26 U.S.C.
Section 9507, compounded annually on October 1 of each year, in accordance with
42 U.S.C. Section 9607(a). The applicable rate of interest shall be the rate in
effect at the time the interest accrues. The rate of interest is subject to
change on October 1 of each year.

         "Interest Earned" shall mean interest earned on amounts in the
Disbursement Special Account, which shall be computed monthly at a rate based on
the annual return on investments of the Hazardous Substance Superfund. The
applicable rate of interest shall be the rate in effect at the time the interest
accrues.

         "July 2003 AOC" shall mean the Administrative Order on Consent between
WTM I Company, EPA, and WDNR, captioned In the matter of the Lower Fox River and
the Green Bay Site, Docket No. V-W-'03-C-745 (the "July 2003 AOC"). The July
2003 AOC is attached hereto as Appendix F.

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         "Long Term Monitoring" shall mean all response activities to implement
long term monitoring requirements under the ROD.

         "National Contingency Plan" or "NCP" shall mean the National Oil and
Hazardous Substances Pollution Contingency Plan promulgated pursuant to Section
105 of CERCLA, 42 U.S.C. Section 9605, codified at 40 C.F.R. Part 300, and any
amendments thereto.

         "NRD Commitment" shall mean the $3,000,000 committed to natural
resource restoration efforts under Paragraph 52 (Initial Payments to Plaintiffs)
and Paragraph 53 (Subsequent Payments for Natural Resource Restoration).

         "NRDAR Fund" shall mean DOI's Natural Resource Damage Assessment and
Restoration Fund.

         "Operation and Maintenance" or "O & M" shall mean all activities
required to maintain the effectiveness of the Remedial Action as required under
the Operation and Maintenance Plan approved or developed by the Response
Agencies pursuant to this Consent Decree and the Statements of Work.

         "Operable Unit 1" or "OU1" shall mean the Little Lake Butte des Morts
reach of the Lower Fox River, as delineated by the Record of Decision signed by
WDNR and EPA in December 2002. More specifically, OU1 is the portion of the
Lower Fox River (and the underlying River sediment) starting at the outlet of
Lake Winnebago at the Neenah Dam and the Menasha Dam downstream to the Upper
Appleton Dam, including sediment deposits A through H and POG. As so defined,
OU1 is depicted in Figure 7-9 of the December 2002 Final Feasibility Study for
the Site, a copy of which is attached hereto as Appendix G.

         "Paragraph" shall mean a portion of this Consent Decree identified by
an arabic numeral or an upper case letter.

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         "Parties" shall mean the United States, the State of Wisconsin, and the
Settling Defendants.

         "Performance Standards" shall mean the selected remedy requirements,
contingent remedy requirements, and cleanup standards for measuring the
achievement of the goals of the Remedial Action, as set forth in Sections
13.1,13.3.1, and 13.4 through 13.6 of the ROD and Section II of the SOW for
Remedial Action.

         "Plaintiffs" shall mean the United States and the State of Wisconsin.

         "Post-Remedy Institutional Controls Work" shall mean all response
activities to implement institutional controls requirements under the ROD and
the Institutional Controls Plan after Certification of Completion of Remedial
Action by EPA pursuant to Subparagraph 44.b.

         "Post-Remedy Monitoring" shall mean all response activities to
implement Long Term Monitoring requirements under the ROD and the Final
Operation and Maintenance Plan after Certification of Completion of Remedial
Action by EPA pursuant to Subparagraph 44.b.

         "RCRA" shall mean the Solid Waste Disposal Act, as amended, 42
U.S.C. Sections 6901 et seq. (also known as the Resource Conservation and
Recovery Act).

         "Record of Decision" or "ROD" shall mean the Record of Decision
relating to OU1 at the Site signed in December 2002 by the Deputy Administrator
of the Water Division of WDNR and by the Director of the Superfund Division of
EPA Region 5, and all attachments thereto. A copy of the ROD (excluding the ROD
Appendices) is attached as Appendix H.

         "Remedial Action" shall mean those activities (except for Operation and
Maintenance, Post-Remedy Institutional Controls Work, and Post-Remedy
Monitoring), to be undertaken by the Settling Defendants to implement the ROD
requirements for OU1, in accordance with the SOW, the final Remedial Design Work
Plan, the final Remedial Action Work Plan, and other

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plans approved by the Response Agencies. For the purpose of this Consent Decree,
Remedial Action shall not include any response action required solely under
Section XV (Emergency Response).

         "Remedial Action Work Plan" shall mean the document developed pursuant
to Paragraph 14 of this Consent Decree and approved by the Response Agencies,
and any amendments thereto.

         "Remedial Design" shall mean those activities to be undertaken by
Settling Defendant WTMI Company to conduct predesign investigations and to
develop the final plans and specifications for the Remedial Action for OU1
pursuant to the July 2003 AOC and the Remedial Design Work Plan.

         "Remedial Design Work Plan" shall mean the document described by
Paragraph 12 of this Consent Decree and approved by the Response Agencies, and
any amendments thereto.

         "Response Agencies" shall mean WDNR and EPA.

         "Response Work" shall mean all activities Settling Defendants are
required to perform under this Consent Decree, except those required by Section
XVI (Natural Resource Restoration Efforts) and Section XXVII (Retention of
Records).

         "Section" shall mean a portion of this Consent Decree identified by a
roman numeral.

         "Settling Defendants" shall mean P.H. Glatfelter Company and WTM I
Company.

         "Settling Defendants' Related Parties" shall mean: (i) Settling
Defendants' successors, but only to the extent that the alleged liability of
such person is based on the alleged liability of a Settling Defendant; (ii)
Settling Defendants' former or current officers, directors, employees, or
shareholders, but only to the extent that the alleged liability of such person
is based on acts

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and/or omissions which occurred in the scope of the person's employment or
capacity as an officer, director, employee, or shareholder of a Settling
Defendant.

         "Site" shall mean the Lower Fox River and Green Bay Site in
Northeastern Wisconsin.

         "Specified Future Response Costs" shall mean all costs, including, but
not limited to, direct and indirect costs, that the United States and the State
incur after July 1, 2003 in reviewing or developing plans, reports and other
items pursuant to the July 2003 AOC and this Consent Decree, in verifying the
Response Work, in implementing O&M, Institutional Controls, and Long Term
Monitoring requirements required under the ROD and the SOW, or in otherwise
implementing, overseeing, or enforcing this Consent Decree, including, but not
limited to, payroll costs, contractor costs, travel costs, laboratory costs, the
costs incurred pursuant to Paragraph 19 of Section VIII, Section X (including,
but not limited to, the cost of attorney time and any monies paid to secure
access and/or to secure or implement Institutional Controls including, but not
limited to, the amount of just compensation), Section XV, and Paragraph 90 of
Section XXII.

         "State" shall mean the State of Wisconsin.

         "State Past Cost Payments" shall mean the $10,000 payment to be made to
the State under Subparagraph 52.b (Initial Payments to the State) of this
Consent Decree to reimburse the State for a portion of its past response costs
related to the Site.

         "Statements of Work" or "SOW" shall mean: (i) the statement of work for
implementation of the Remedial Design, as set forth at Appendix F to this
Consent Decree, and any modifications made in accordance with the July 2003 AOC
and this Consent Decree; and/or (ii) the statement of work for implementation of
the Remedial Action, Institutional Controls,

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Long Term Monitoring, and Operation and Maintenance at the Site, as set forth in
Appendix I to this Consent Decree and any modifications made in accordance with
this Consent Decree.

         "Supervising Contractor" shall mean the principal contractor retained
by the Settling Defendants to supervise and direct the implementation of the
Response Work under this Consent Decree.

         "United States" shall mean the United States of America.

         "Unresolved DOI Past Costs" shall mean the unreimbursed natural
resource damage assessment costs that the United States has paid at or in
connection with the Site (or any portion of the Site) through July 1,2003.

         "Unresolved EPA Past Costs" shall mean the unreimbursed response costs,
including, but not limited to, direct and indirect costs, that the United States
has paid at or in connection with the Site (or any portion of the Site) through
July 1, 2003.

         "Unresolved State Past Costs" shall mean the unreimbursed response
costs, including, but not limited to, direct and indirect costs, that the State
has paid at or in connection with the Site (or any portion of the Site) through
July 1, 2003.

         "Waste Material" shall mean: (i) any "hazardous substance" under
Section 101(14) of CERCLA, 42 U.S.C.Section 9601(14); (ii) any pollutant or
contaminant under Section 101(33), 42 U.S.C.Section 9601(33); (iii) any "solid
waste" under Section 1004(27) of RCRA, 42 U.S.C. Section 6903(27); and (iv) any
"hazardous substance" under Wis. Stat. Section 292.01.

         "WDOJ" shall mean the Wisconsin Department of Justice and any successor
departments or agencies of the State.

         "WDNR" shall mean the Wisconsin Department of Natural Resources and any
successor departments or agencies of the State.

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                              V. GENERAL PROVISIONS

         5.       Objectives of the Parties. The objectives of the Parties in
entering into this Consent Decree are to protect public health and welfare and
the environment by the design and implementation of certain response actions at
OU1 by the Settling Defendants, to reimburse a portion of the EPA and State past
costs and to reimburse all Specified Future Response Costs, to provide partial
compensation for natural resource damages, and to resolve the claims of
Plaintiffs against Settling Defendants as provided in this Consent Decree.

         6.       Commitments by Settling Defendants.

                  a.       Settling Defendants shall finance and perform the
Response Work in accordance with this Consent Decree, the ROD, the SOW, and all
work plans and other plans, standards, specifications, and schedules set forth
herein or developed by Settling Defendants and approved by the Response Agencies
pursuant to this Consent Decree. Settling Defendants shall also reimburse EPA
and the State for a portion of their past response costs and shall reimburse EPA
and the State for future response costs, as provided by this Consent Decree.
Settling Defendants shall also provide partial compensation for natural resource
damages, as provided herein.

                  b.       Settling Defendants need not perform Response Work
under this Consent Decree unless: (i) the Disbursement Special Account and/or
the Escrow Account described by Section VI and Appendices B and C contain funds
to finance the work; or (ii) this Consent Decree specifically requires the
Settling Defendants to fund or to perform the work without reimbursement from,
or recourse to, the Disbursement Special Account and/or the Escrow Account.

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         7.       Compliance With Applicable Law. All activities undertaken by
Settling Defendants pursuant to this Consent Decree shall be performed in
accordance with the requirements of all applicable federal and state laws and
regulations. Settling Defendants must also comply with all applicable or
relevant and appropriate requirements of all Federal and state environmental
laws as set forth in the ROD and the SOW, unless the Response Agencies determine
that there are grounds for invoking a waiver under 40 C.F.R. Section
300.430(f)(l)(ii)(C). The activities conducted pursuant to this Consent Decree,
if approved by the Response Agencies, shall be considered to be necessary and
consistent with the NCP.

         8.       Permits.

                  a.       As provided in Section 121(e) of CERCLA and Section
300.400(e) of the NCP, no permit shall be required for any portion of the
Response Work conducted entirely on-site (i.e., within the areal extent of
contamination or in very close proximity to the contamination and necessary for
implementation of the Response Work). Where any portion of the Response Work
that is not on-site requires a federal or state permit or approval, Settling
Defendants shall submit timely and complete applications and take all other
actions necessary to obtain all such permits or approvals.

                  b.       The Settling Defendants may seek relief under the
provisions of Section XIX (Force Majeure Events) of this Consent Decree for any
delay in the performance of the Response Work resulting from a failure to
obtain, or a delay in obtaining, any permit required for the Response Work.

                  c.       This Consent Decree is not, and shall not be
construed to be, a permit issued pursuant to any federal or state statute or
regulation.

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         VI. ESTABLISHMENT AND USE OF CERTAIN SITE-SPECIFIC ACCOUNTS

         9.       Generally. As provided by this Section and Appendices B and C,
two separate Site-specific accounts - to be known as the Fox River OU1
Disbursement Special Account (the "Disbursement Special Account") and the Fox
River OU1 Escrow Account (the "Escrow Account") - shall be established and
managed to provide sources of funds for payment and reimbursement of particular
categories of Site-related response costs and natural resource restoration
costs, as specified by Paragraphs 10 and 11. The Escrow Account may be
established as several accounts or sub - accounts to address the different
sources and uses of the funds paid into the Escrow Account. The response costs
to be paid and reimbursed from the Disbursement Special Account and the Escrow
Account are expected to include, but will not be limited to, certain costs
incurred by the Settling Defendants that are defined herein as "Allowable RD/RA
Costs." The natural resource restoration costs to be paid and reimbursed from
the Escrow Account may include, but will not be limited to, certain costs
incurred by the Settling Defendants that are defined herein as "Allowable
Restoration Work Costs."

                  a.       Allowable RD/RA Costs. Solely for the purpose of this
Consent Decree, the term "Allowable RD/RA Costs" is defined as necessary
response costs incurred and paid by Settling Defendants for the Remedial Design
and the Remedial Action, excluding the following costs that shall not be
eligible for payment or reimbursement as Allowable RD/RA Costs:

                           (1)      any costs exceeding $2 million for the
                  contaminant delineation investigation and Remedial Design
                  components of the Response Work, as provided by Subparagraph
                  8.a of Appendix C;

                           (2)      response costs incurred or paid by the
                  Settling Defendants pursuant to Section XV (Emergency
                  Response);

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                           (3)      any other payments made by Settling
                  Defendants to the Plaintiffs pursuant to this Consent Decree,
                  including, but not limited to: (i) any direct payments to
                  Plaintiffs under Section XVII; and (ii) any interest,
                  stipulated penalties, or stipulated damages paid pursuant to
                  Section XXI;

                           (4)      attorneys' fees and costs;

                           (5)      costs of any response activities Settling
                  Defendants perform that are not required under, or approved by
                  the Response Agencies pursuant to this Consent Decree;

                           (6)      costs related to Settling Defendants'
                  litigation, settlement, development of potential contribution
                  claims or identification of defendants;

                           (7)      internal costs of Settling Defendants,
                  including but not limited to, salaries, travel, or in-kind
                  services, except for those costs that represent the work of
                  employees of Settling Defendants directly performing the
                  Remedial Design or the Remedial Action;

                           (8)      any costs incurred by Settling Defendants
                  prior to the Effective Date, except for: (i) Remedial Design
                  work approved by the Response Agencies; or (ii) other costs of
                  Response Work required by this Consent Decree after the Date
                  of Lodging; or

                           (9)      any costs incurred by Settling Defendants
                  pursuant to Section XX (Dispute Resolution).

                  b.       Allowable Restoration Work Costs. Solely for the
purpose of this Consent Decree, the term "Allowable Restoration Costs" is
defined as necessary restoration costs incurred and paid by Settling Defendants
for Approved Restoration Work (as defined by Paragraph 48),

                                       16

<PAGE>

excluding the following costs that shall not be eligible for payment or
reimbursement as Allowable Restoration Work Costs:

                           (1)      any costs for work other than Approved
                  Restoration Work;

                           (2)      any costs exceeding the pre-approved cost
                  ceiling set by the Statement of Work for Approved Restoration
                  Work;

                           (3)      any other payments made by Settling
                  Defendants to the Plaintiffs pursuant to this Consent Decree,
                  including, but not limited to: (i) any direct payments to
                  Plaintiffs under Section XVII; and (ii) any interest,
                  stipulated penalties, or stipulated damages paid pursuant to
                  Section XXI;

                           (4)      attorneys' fees and costs;

                           (5)      costs of any restoration activities Settling
                  Defendants perform that are not required under, or approved by
                  the Plaintiffs pursuant to, this Consent Decree;

                           (6)      costs related to Settling Defendants'
                  litigation, settlement, development of potential contribution
                  claims or identification of defendants;

                           (7)      internal costs of Settling Defendants,
                  including but not limited to, salaries, travel, or in-kind
                  services, except for those costs that represent the work of
                  employees of Settling Defendants directly performing Approved
                  Restoration Work;

                           (8)      any costs incurred by Settling Defendants
                  prior to the Effective Date, except for Approved Restoration
                  Work completed pursuant to this Consent Decree; or

                                       17

<PAGE>

                           (9)      any costs incurred by Settling Defendants
                  pursuant to Section XX (Dispute Resolution).

         10.      Establishment and Management of the Disbursement Special
Account. In accordance with the procedures and requirements established by the
December 2001 Consent Decree in the matter captioned United States and the State
of Wisconsin v. Appleton Papers Inc. and NCR Corporation. Case No. 0l-C-0816
(E.D. Wis.) (the "API/NCR Decree"), the Plaintiffs shall use their best efforts
to have $10 million available for funding response action projects under the
API/NCR Decree deposited in the Disbursement Special Account after the Effective
Date. EPA shall establish the Disbursement Special Account as a new special
account within the EPA Hazardous Substance Superfund. Subject to the terms and
conditions set forth in this Consent Decree, EPA agrees to make those funds in
the Disbursement Special Account, including Interest Earned on those funds in
the Special Account, available for disbursement to the Escrow Account as partial
reimbursement of certain Allowable RD/RA Costs. The Disbursement Special Account
shall be managed as set forth in Appendix B to this Consent Decree, which is
incorporated herein by reference

         11.      Establishment and Management of the Escrow Account. By no
later than March 31, 2004, the Settling Defendants shall establish and maintain
financial security in the form of the Escrow Account trust fund, from which
funds shall be disbursed for payment and reimbursement of particular categories
of Site-related response costs and natural resource restoration costs. The
Settling Defendants shall establish the Escrow Account with the funds required
to be paid pursuant to Section XVII (Payments) below. The Escrow Account shall
be managed as set forth in Appendix C to this Consent Decree, which is
incorporated herein by reference. The escrow agreement establishing the Escrow
Account shall be in substantially the

                                       18

<PAGE>

form attached hereto as Appendix D and shall identify the manager for the Escrow
Account (the "Escrow Agent"). The Settling Defendants may establish the Escrow
Account (or an account or sub-account within the Escrow Account) as a Qualified
Settlement Fund (or "QSF") within the meaning of 468B-1 of the Treasury
Regulations.

          VII. PERFORMANCE OF THE RESPONSE WORK BY SETTLING DEFENDANTS

         12.      OU1 Remedial Design.

                  a.       Settling Defendant WTMI Company shall perform the
Remedial Design components of the Response Work (including predesign
investigations) in accordance with the July 2003 AOC. A copy of the July 2003
AOC is attached as Appendix F to this Consent Decree, is incorporated herein by
this reference, and all requirements under the July 2003 AOC are hereby made
enforceable requirements of this Consent Decree, but only as to Settling
Defendant WTM I Company.

                  b.       Settling Defendant WTM I Company shall submit the
following plans and reports to the Response Agencies pursuant to the July 2003
AOC and this Paragraph: (i) a Pre-Design Sampling Work Plan; (ii) a Remedial
Design Work Plan; (iii) a Basis of Design Report; (iv) a Preliminary (50%)
Design; (v) a Pre-Final (90%) Design; and (vi) a Final (100%) Design. Upon
approval by the Response Agencies, all submittals required by the July 2003 AOC
and this Paragraph 12 shall be incorporated into and become enforceable under
this Consent Decree.

                  c.       Settling Defendant WTM I Company shall provide
Settling Defendant P. H. Glatfelter Company with copies of the plans and reports
identified in the preceding Subparagraph contemporaneously with their submission
to the Response Agencies. Within 15 days of the date of submission, Settling
Defendant P. H. Glatfelter may submit written comments

                                       19

<PAGE>

on the relevant plan or submission; provided, however, that nothing in this
Paragraph shall be construed as affording Settling Defendant P. H. Glatfelter
Company a right to invoke or participate in any dispute resolution process under
Section XX (Dispute Resolution) concerning any submittal under the July 2003
AOC.

         13.      Selection of Supervising Contractor.

                  a.       All Remedial Design components of the Response Work
to be performed by Settling Defendant WTMI Company pursuant to Paragraph 12 of
this Consent Decree shall be under the direction and supervision of WTM I
Company's Project Coordinator designated pursuant to the July 2003 AOC. All
other aspects of the Response Work to be performed by Settling Defendants
pursuant to Sections VII (Performance of the Response Work by Settling
Defendants), VIII (Post-Remedy Response Work and Remedy Review), IX (Quality
Assurance, Sampling and Data Analysis), and XV (Emergency Response) of this
Consent Decree shall be under the direction and supervision of the Settling
Defendants' Supervising Contractor, the selection of which shall be subject to
disapproval by the Response Agencies. Within 10 days after Settling Defendant
WTM I Company's submittal of the Pre-Final (90%) Design, Settling Defendants
shall notify the Response Agencies in writing of the name, title, and
qualifications of any contractor proposed to be the Supervising Contractor. The
Response Agencies will issue a notice of disapproval or an authorization to
proceed. If at any time thereafter, Settling Defendants propose to change a
Supervising Contractor, Settling Defendants shall give such notice to the
Response Agencies and must obtain an authorization to proceed from the Response
Agencies before the new Supervising Contractor performs, directs, or supervises
any Response Work under this Consent Decree.

                                       20

<PAGE>

                  b.       If the Response Agencies disapprove a proposed
Supervising Contractor, the Response Agencies will notify Settling Defendants in
writing. Settling Defendants shall submit to the Response Agencies a list of
contractors, including the qualifications of each contractor, that would be
acceptable to them within 30 days of receipt of the Response Agencies'
disapproval of the contractor previously proposed. The Response Agencies will
provide written notice of the names of any contractors that they disapprove and
an authorization to proceed with respect to any of the other contractors.
Settling Defendants may select any contractor from that list that is not
disapproved and shall notify the Response Agencies of the name of the contractor
selected within 21 days of the Response Agencies' authorization to proceed.

                  c.       If the Response Agencies fail to provide written
notice of their authorization to proceed or disapproval as provided in this
Paragraph and this failure prevents the Settling Defendants from meeting one or
more deadlines in a plan approved by the Response Agencies pursuant to this
Consent Decree, Settling Defendants may seek relief under the provisions of
Section XIX (Force Majeure Events).

         14.      OU1 Remedial Action. Subject only to the funding limitations
of this Consent Decree and the special reservations of rights specified in
Section XXIV, the Settling Defendants shall perform all requirements under this
Paragraph 14 until the Performance Standards are achieved and for so long
thereafter as is otherwise required under this Consent Decree.

                  a.       The requirements under this Paragraph 14 shall be
performed by Settling Defendants with funding from the following sources:

                           (1)      To the extent such funds are available in
the Disbursement Special Account, the Settling Defendants shall be entitled to
seek disbursement from the Disbursement Special Account for reimbursement of
Allowable RD/RA Costs.

                                       21

<PAGE>

                           (2)      To the extent such funds are available in
the Escrow Account and not earmarked or disbursed for other purposes under this
Consent Decree, the Settling Defendants shall be entitled to seek disbursements
from the Escrow Account for payment or reimbursement of Allowable RD/RA Costs.

                  b.       Within 90 days after the approval of the Final Design
submittal described by the Statement of Work appended to the July 2003 AOC, but
no earlier than 90 days after the Effective Date, the Settling Defendants shall
submit to the Response Agencies a work plan for the performance of the Remedial
Action (the "Remedial Action Work Plan"). The Remedial Action Work Plan shall
provide for construction and implementation of the remedy set forth in the ROD
such that the Performance Standards will be achieved, in accordance with this
Consent Decree, the ROD, the SOW, and the design plans and specifications
developed by Settling Defendant WTM I Company under Paragraph 12 and approved by
the Response Agencies. Upon its approval by the Response Agencies, the Remedial
Action Work Plan shall be incorporated into and become enforceable under this
Consent Decree.

                  c.       The Remedial Action Work Plan shall include the
following: (i) an updated schedule for implementing all Remedial Action tasks
identified in the final design submittal, incorporating any refinements to the
Final Project Schedule submitted under the July 2003 AOC and Paragraph 12; (ii)
any refinements to the Final Health and Safety Plan, the Final Contingency Plan,
the Final Sediment Removal Verification Plan, and the Capital and Operation and
Maintenance Cost Estimate submitted under the July 2003 AOC and Paragraph 12;
(iii) a Final Construction Quality Assurance Project Plan; (iv) an Institutional
Controls Plan; (v) a Final Operation and Maintenance Plan (including a plan for
Long Term Monitoring); (vi) a schedule for submitting any other Remedial Action
Plans; and (vii) the initial formulation of the Settling

                                       22

<PAGE>

Defendants' Remedial Action Project Team (including, but not limited to, the
Supervising Contractor).

                  d.       Upon approval of the Remedial Action Work Plan by the
Response Agencies, Settling Defendants shall perform the activities required
under the Remedial Action Work Plan. The Settling Defendants shall submit to the
Response Agencies all plans, submittals, or other deliverables required under
the approved Remedial Action Work Plan in accordance with the approved schedule
for review and approval pursuant to Section XII (Response Agencies' Approval of
Plans and Other Submissions). Unless otherwise directed by the Response
Agencies, Settling Defendants shall not commence physical Remedial Action
activities at OU1 prior to approval of the Remedial Action Work Plan. Subject
only to the funding limitations of this Consent Decree and the special
reservations of rights specified in Section XXIV, the Settling Defendants shall
implement the Remedial Action as set forth in the approved Remedial Action Work
Plan until the Performance Standards are achieved.

                  e.       Notwithstanding the funding limitations of this
Consent Decree, after Certification of Completion of Remedial Action by EPA
pursuant to Subparagraph 44.b, the Settling Defendants shall continue to
implement the Institutional Controls Plan and the Final Operation and
Maintenance Plan for so long as required by those plans.

         15.      Modification of the SOW or Related Work Plans.

                  a.       Subject to Subparagraph 15.c below, if the Response
Agencies determine that modification to the work specified in the SOW and/or in
work plans developed pursuant to the SOW is necessary to achieve and maintain
the Performance Standards or to carry out and maintain the effectiveness of the
remedy set forth in the ROD, the Response Agencies may require that such
modification be incorporated in the SOW and/or such work plans; provided,

                                       23

<PAGE>

however, that a modification may only be required pursuant to this Paragraph to
the extent that it is consistent with the scope of the remedy selected in the
ROD.

                  b.       For the purposes of this Paragraph 15 and Paragraph
44 only, the "scope of the remedy selected in the ROD" is, as described by
Sections 13.1 and 13.3 of the ROD:

(i) removal of sediment in OU1 with PCB concentrations greater than the 1 ppm
remedial action level ("RAL") or achieving a surface weighed average
concentration ("SWAC") of 0.25 ppm or less after removal of sediment; (ii)
dewatering of the sediment that is removed; (iii) treatment of the water
collected during the dewatering process; (iv) off-Site disposal of the removed
sediment after dewatering; (v) demobilization and site restoration; and (vi)
Institutional Controls and Long Term Monitoring. The "scope of the remedy
selected in the ROD" may also include partial capping or supplemental capping of
contaminated sediments in certain areas of OU1, if specified requirements are
met, as described by Sections 13.4 through 13.7 of the ROD.

                  c.       If Settling Defendants object to any modification
determined by the Response Agencies to be necessary pursuant to this Paragraph,
they may seek dispute resolution pursuant to Section XX (Dispute Resolution),
Paragraph 65 (record review). The SOW and/or related work plans shall be
modified in accordance with final resolution of the dispute.

                  d.       Subject only to the funding limitations of this
Consent Decree and the special reservations of rights specified in Section XXIV,
Settling Defendants shall implement any work required by any modifications
incorporated in the SOW and/or in work plans developed pursuant to the SOW in
accordance with this Paragraph.

                  e.       Nothing in this Paragraph shall be construed to limit
the Response Agencies' authority to require performance of further response
actions as otherwise provided in this Consent Decree.

                                       24

<PAGE>

         16.      Settling Defendants acknowledge and agree that nothing in this
Consent Decree, the SOW, the Remedial Design Work Plan, or Remedial Action Work
Plan constitutes a warranty or representation of any kind by Plaintiffs that
compliance with the work requirements set forth in the SOW and the Work Plans
will achieve the Performance Standards.

         17.      Settling Defendants shall, prior to any off-Site shipment of
Waste Material from the Site to an out-of-state waste management facility,
provide written notification to the appropriate state environmental official in
the receiving facility's state and to the Response Agencies' Project
Coordinators of such shipment of Waste Material. However, this notification
requirement shall not apply to any off-Site shipments when the total volume of
all such shipments will not exceed 10 cubic yards.

                  a.       The Settling Defendants shall include in the written
notification the following information, where available: (i) the name and
location of the facility to which the Waste Material is to be shipped; (ii) the
type and quantity of the Waste Material to be shipped; (iii) the expected
schedule for the shipment of the Waste Material; and (iv) the method of
transportation. The Settling Defendants shall notify the state in which the
planned receiving facility is located of major changes in the shipment plan,
such as a decision to ship the Waste Material to another facility within the
same state, or to a facility in another state.

                  b.       The identity of the receiving facility and state will
be determined by the Settling Defendants following the award of the contract for
Remedial Action construction. The Settling Defendants shall provide the
information required by Subparagraph 17.a as soon as practicable after the award
of the contract and before the Waste Material is actually shipped.

                                       25

<PAGE>

                VIII. POST-REMEDY RESPONSE WORK AND REMEDY REVIEW

         18.      O&M and Post-Remedy Institutional Controls. After
Certification of Completion of Remedial Action by EPA pursuant to Subparagraph
44.b, Settling Defendants shall perform O&M and Post-Remedy Institutional
Controls Work as required by the ROD, the Final Operation and Maintenance Plan,
and the Institutional Controls Plan. In the event that Settling Defendants fail
to perform O&M and Post-Remedy Institutional Controls Work as required by this
Paragraph, and EPA or, as appropriate, the State takes such action instead,
Settling Defendants shall reimburse EPA and the State for all costs of the
response action not inconsistent with the NCP pursuant to Paragraph 54 (Payment
of Specified Future Response Costs).

         19.      Periodic Remedy Review and Post-Remedy Monitoring. Settling
Defendants shall conduct any studies and investigations as requested by the
Response Agencies, in order to permit the Response Agencies to conduct reviews
of whether the Remedial Action is protective of human health and the environment
at least every five years as required by Section 121(c) of CERCLA and any
applicable regulations. Such studies and investigations shall include, but shall
not be limited to, Post-Remedy Monitoring after Certification of Completion of
Remedial Action by EPA pursuant to Subparagraph 44.b. In the event that Settling
Defendants fail to conduct such studies and investigations as required by this
Paragraph, and EPA or, as appropriate, the State takes such action instead,
Settling Defendants shall reimburse EPA and the State for all costs of the
response action not inconsistent with the NCP pursuant to Paragraph 54 (Payment
of Specified Future Response Costs).

                                       26

<PAGE>

         20.      Further Response Actions.

                  a.       If the Response Agencies determine, at any time, that
the Remedial Action is not protective of human health and the environment, the
Response Agencies may select further response actions for OU1 in accordance with
the requirements of CERCLA and the NCP.

                  b.       Settling Defendants and, if required by Sections
113(k)(2) or 117 of CERCLA, the public, will be provided with an opportunity to
comment on any further response actions proposed by the Response Agencies as a
result of the review conducted pursuant to Section 121 (c) of CERCLA and to
submit written comments for the record during the comment period.

                  c.       Notwithstanding Paragraph F of Section I
(Background), Settling Defendants hereby agree and covenant that the Plaintiffs
shall not have to prove and that Settling Defendants shall not contest the
following facts with respect to OU1 in response to any administrative order or
in any judicial proceeding relating to any further response action the Response
Agencies select for OU1 to the extent that the reopener conditions in Paragraph
86 or Paragraph 87 (United States' reservations of liability based on unknown
conditions or new information) are satisfied:

         (i)      Each Settling Defendant is a person who at the time of
                  disposal of a hazardous substance owned or operated a facility
                  from which such hazardous substances were disposed of, and
                  from which there have been releases of hazardous substances
                  which caused the incurrence of response costs for OU1; and

         (ii)     Each Settling Defendant is a person who by contract,
                  agreement, or otherwise arranged for the disposal or treatment
                  of hazardous substances owned or possessed by the Settling
                  Defendant, by another party or entity, at a facility owned

                                       27

<PAGE>

                  or operated by another party or entity and containing such
                  hazardous substances, from which there have been releases of
                  hazardous substances which caused the incurrence of response
                  costs for OU1.

                  d.       Except as provided by Subparagraph 20.c, nothing
herein shall constitute a waiver of any claim or defense by any Party with
respect to any such further response action.

               IX. QUALITY ASSURANCE, SAMPLING, AND DATA ANALYSIS

         21.      Settling Defendants shall use quality assurance, quality
control, and chain of custody procedures for all treatability, design,
compliance and monitoring samples in accordance with "EPA Requirements for
Quality Assurance Project Plans (QA/R5)" (EPA/240/B-01/003, March 2001),
"Guidance for Quality Assurance Project Plans (QA/G-5)" (EPA/600/R-98/018,
February 1998), and subsequent amendments to such guidelines upon notification
by the Response Agencies to Settling Defendants of such amendment. Amended
guidelines shall apply only to procedures conducted after such notification.
Prior to the commencement of any monitoring project under this Consent Decree,
Settling Defendants shall submit to the Response Agencies for approval a Quality
Assurance Project Plan ("QAPP") that is consistent with the SOW, the NCP and
applicable guidance documents. If relevant to the proceeding, the Parties agree
that validated sampling data generated in accordance with the QAPP(s) and
reviewed and approved by the Response Agencies shall be admissible as evidence,
without objection, in any proceeding under this Decree. Settling Defendants
shall ensure that the Response Agencies' personnel and their authorized
representatives are allowed access at reasonable times to all laboratories
utilized by Settling Defendants in implementing this Consent Decree. In
addition, Settling Defendants shall ensure that such laboratories shall analyze
all samples submitted by the Response Agencies pursuant to the QAPP for quality
assurance monitoring. Settling Defendants

                                       28

<PAGE>

shall ensure that the laboratories they utilize for the analysis of samples
taken pursuant to this Decree perform all analyses according to accepted EPA
methods. Accepted EPA methods consist of those methods which are documented in
the "Contract Lab Program Statement of Work for Inorganic Analysis" and the
"Contract Lab Program Statement of Work for Organic Analysis," dated February
1988, and any amendments made thereto during the course of the implementation of
this Decree; however, upon approval by the Response Agencies, Settling
Defendants may use other analytical methods which are as stringent as or more
stringent than the CLP-approved methods. Settling Defendants shall ensure that
all laboratories they use for analysis of samples taken pursuant to this Consent
Decree participate in an EPA or EPA-equivalent QA/QC program. Settling
Defendants shall only use laboratories that have a documented Quality System
which complies with ANSI/ASQC E4-1994, "Specifications and Guidelines for
Quality Systems for Environmental Data Collection and Environmental Technology
Programs," (American National Standard, January 5, 1995), and "EPA Requirements
for Quality Management Plans (QA/R-2)," (EPA/240/B-01/002, March 2001) or
equivalent documentation as determined by the Response Agencies. The Response
Agencies may consider laboratories accredited under the National Environmental
Laboratory Accreditation Program ("NELAP") as meeting the Quality System
requirements. Settling Defendants shall ensure that all field methodologies
utilized in collecting samples for subsequent analysis pursuant to this Decree
will be conducted in accordance with the procedures set forth in the QAPP
approved by the Response Agencies.

         22.      Upon request, the Settling Defendants shall allow split or
duplicate samples to be taken by the Response Agencies or their authorized
representatives. Settling Defendants shall notify the Response Agencies not less
than 15 days in advance of any sample collection activity

                                       29

<PAGE>

unless shorter notice is agreed to by the Response Agencies. In addition, the
Response Agencies shall have the right to take any additional samples that the
Response Agencies deem necessary. Upon request, the Response Agencies shall
allow the Settling Defendants to take split or duplicate samples of any samples
they take as part of the Plaintiffs' oversight of the Settling Defendants'
implementation of the Response Work.

         23.      Settling Defendants shall submit to the Response Agencies
copies of the results of all sampling and/or tests or other data obtained or
generated by or on behalf of Settling Defendants with respect to OU1 and/or the
implementation of this Consent Decree unless the Response Agencies agree
otherwise.

         24.      Notwithstanding any provision of this Consent Decree, the
United States and the State hereby retain all of their information gathering and
inspection authorities and rights, including enforcement actions related
thereto, under CERCLA, RCRA and any other applicable statutes or regulations.

                      X. ACCESS AND INSTITUTIONAL CONTROLS

         25.      If any property where access and/or land/water use
restrictions are needed to implement this Consent Decree is owned or controlled
by any of the Settling Defendants, such Settling Defendants shall:

                  a.       commencing on the date of lodging of this Consent
Decree, provide the Plaintiffs and their representatives, including the Response
Agencies and their contractors, with access at all reasonable times to such
property, for the purpose of conducting any activity related to this Consent
Decree including, but not limited to, the following activities:

                           (1)      monitoring the Response Work;

                           (2)      verifying any data or information submitted
         to the Plaintiffs;

                                       30

<PAGE>

                           (3)      conducting investigations relating to
         contamination at or near the Site;

                           (4)      obtaining samples;

                           (5)      assessing the need for, planning, or
         implementing additional response actions at or near the Site;

                           (6)      implementing the Response Work pursuant to
         the conditions set forth in Paragraph 90 of this Consent Decree;

                           (7)      inspecting and copying records, operating
         logs, contracts, or other documents maintained or generated by Settling
         Defendants or their agents, consistent with Section XXVI (Access to
         Information);

                           (8)      assessing Settling Defendants' compliance
         with this Consent Decree; and

                           (9)      determining whether the Site or other
         property is being used in a manner that is prohibited or restricted, or
         that may need to be prohibited or restricted, by or pursuant to this
         Consent Decree;

                  b.       commencing on the date of lodging of this Consent
Decree, refrain from using the Site, or such other property, in any manner that
would interfere with or adversely affect the integrity or protectiveness of the
remedial measures to be implemented pursuant to this Consent Decree.

                  c.       if requested in writing by the Response Agencies,
execute and record in the appropriate County land records office, an easement,
running with the land, that: (i) grants a right of access for the purpose of
conducting any activity related to this Consent Decree including, but not
limited to, those activities listed in Paragraph 25.a of this Consent Decree,
and

                                       31

<PAGE>

(ii) grants the right to enforce the land/water use restrictions listed in
Paragraph 25.b of this Consent Decree, or other restrictions that the Response
Agencies determine are necessary to implement, ensure non-interference with, or
ensure the protectiveness of the remedial measures to be performed pursuant to
this Consent Decree. Such Settling Defendants shall grant the access rights and
the rights to enforce the land/water use restrictions to: (i) the United States,
on behalf of EPA, and its representatives, (ii) the State, on behalf of WDNR,
and its representatives, (iii) the other Settling Defendants and their
representatives, and/or (iv) other appropriate grantees identified by the
Response Agencies. Such Settling Defendants shall, within 45 days after
receiving a written request from the Response Agencies, submit to the response
Agencies for review and approval with respect to such property:

         (i)      a draft easement that is enforceable under the laws of the
                  State of Wisconsin, free and clear of all prior liens and
                  encumbrances (except as approved by EPA), and acceptable under
                  the Attorney General's Title Regulations promulgated pursuant
                  to 40 U.S.C. Section 255; and

         (ii)     a current title commitment or report prepared in accordance
                  with the U.S. Department of Justice's Title Standards 2001
                  (the "Standards").

Within 15 days of EPA's approval and acceptance of the easement, such Settling
Defendants shall update the title search and, if it is determined that nothing
has occurred since the effective date of the commitment or report to affect the
title adversely, take the steps necessary to record the easement with the
appropriate County land records office. Within 30 days of recording the
easement, such Settling Defendants shall provide EPA with final title evidence
acceptable under the Standards, and a certified copy of the original recorded
easement showing the clerk's recording stamps.

                                       32

<PAGE>

         26.      If any property where access and/or land/water use
restrictions are needed to implement this Consent Decree is owned or controlled
by persons other than any of the Settling Defendants, Settling Defendants shall
use best efforts to secure from such persons:

                  a.       an agreement to provide access thereto for Settling
Defendants, as well as for the Plaintiffs, on behalf of the response Agencies,
as well as their representatives (including contractors), for the purpose of
conducting any activity related to this Consent Decree including, but not
limited to, those activities listed in Paragraph 25.a of this Consent Decree;

                  b.       an agreement, enforceable by the Settling Defendants
and the Plaintiffs, to abide by the obligations and restrictions established by
Paragraph 25.b of this Consent Decree, or that are otherwise necessary to
implement, ensure non-interference with, or ensure the protectiveness of the
remedial measures to be performed pursuant to this Consent Decree; and

                  c.       if requested in writing by the Response Agencies, the
execution and recordation in the appropriate County land records office, of an
easement, running with the land, that: (i) grants a right of access for the
purpose of conducting any activity related to this Consent Decree including, but
not limited to, those activities listed in Paragraph 25.a of this Consent
Decree, and (ii) grants the right to enforce the land/water use restrictions
listed in Paragraph 25 .b of this Consent Decree, or other restrictions that the
Response Agencies determine are necessary to implement, ensure non-interference
with, or ensure the protectiveness of the remedial measures to be performed
pursuant to this Consent Decree. The access rights and/or rights to enforce
land/water use restrictions shall be granted to: (i) the United States, on
behalf of EPA, and its representatives, (ii) the State, on behalf of WDNR, and
its representatives, (iii) the other Settling Defendants and their
representatives, and/or (iv) other appropriate grantees. Settling

                                       33

<PAGE>

Defendants shall, within 45 days after receiving a written request from the
Response Agencies, submit to the Response Agencies for review and approval with
respect to such property:

         (i)      a draft easement that is enforceable under the laws of the
                  State of Wisconsin, free and clear of all prior liens and
                  encumbrances (except as approved by the Response Agencies),
                  and acceptable under the Attorney General's Title Regulations
                  promulgated pursuant to 40 U.S.C. Section 255; and

         (ii)     a current title commitment or report prepared in accordance
                  with the U.S. Department of Justice's Title Standards 2001
                  (the "Standards").

Within 15 days of EPA's approval and acceptance of the easement, Settling
Defendants shall update the title search and, if it is determined that nothing
has occurred since the effective date of the commitment or report to affect the
title adversely, take the steps necessary to record the easement with the
appropriate County land records office. Within 30 days of the recording of the
easement, Settling Defendants shall provide EPA with final title evidence
acceptable under the Standards, and a certified copy of the original recorded
easement showing the clerk's recording stamps.

         27.      For purposes of Paragraph 26 of this Consent Decree, "best
efforts" includes the payment of reasonable sums of money in consideration of
access, access easements, land/water use restrictions, and/or restrictive
easements. If any access or land/water use restriction agreements required by
Paragraphs 26.a or 26.b of this Consent Decree are not obtained within 45 days
of the Effective Date of this Consent Decree, or if any access easements or
restrictive easements required by Paragraph 26.c of this Consent Decree are not
submitted to the Response Agencies in draft form within 45 days of receipt of a
written request by the Response Agencies, then Settling Defendants shall
promptly notify the United States in writing, and shall include in

                                       34

<PAGE>

that notification a summary of the steps that Settling Defendants have taken to
attempt to comply with Paragraph 26 of this Consent Decree. The United States
and the State may, as they deem appropriate, assist Settling Defendants in
obtaining access or land/water use restrictions, either in the form of
contractual agreements or in the form of easements running with the land.
Settling Defendants shall reimburse the United States and the State, as
Specified Future Response Costs, for all costs incurred, direct or indirect, by
the United States or the State in obtaining such access and/or land/water use
restrictions including, but not limited to, the cost of attorney time and the
amount of monetary consideration paid or just compensation.

         28.      If any property where access and/or land/water use
restrictions are needed to implement this Consent Decree is owned or controlled
by the Plaintiffs, the Plaintiffs shall use best efforts to assist the Settling
Defendants in securing necessary access and/or land/water use restrictions.

         29.      If the Response Agencies determine that land/water use
restrictions in the form of state or local laws, regulations, ordinances or
other governmental controls are needed to implement the remedy selected in the
ROD, ensure the integrity and protectiveness thereof, or ensure non-interference
therewith, Settling Defendants shall cooperate with the Response Agencies'
efforts to secure such governmental controls.

         30.      Notwithstanding any provision of this Consent Decree, the
United States and the State retain all of their access authorities and rights,
as well as all of their rights to require land/water use restrictions, including
enforcement authorities related thereto, under CERCLA, RCRA and any other
applicable statute or regulations.

                                       35

<PAGE>

                           XI. REPORTING REQUIREMENTS

         31.      Monthly RD/RA Progress Reports.

                  a.       In addition to any other requirement of this Consent
Decree, starting with the first month after the Date of Lodging, Settling
Defendants shall submit two copies of written Monthly RD/RA Progress Reports to
each of the Response Agencies that shall: (i) describe the actions which have
been taken toward achieving compliance with this Consent Decree during the
previous month; (ii) include a summary of all results of sampling and tests and
all other data received or generated by Settling Defendants or their contractors
or agents in the previous month; (iii) identify all work plans, plans and other
deliverables required by this Consent Decree completed and submitted during the
previous month; (iv) describe all actions, including, but not limited to, data
collection and implementation of work plans, which are scheduled for the next
month and provide other information relating to the progress of construction,
including, but not limited to, critical path diagrams, Gantt charts and Pert
charts; (v) include information regarding percentage of completion, unresolved
delays encountered or anticipated that may affect the future schedule for
implementation of the Response Work, and a description of efforts made to
mitigate those delays or anticipated delays; (vi) include any modifications to
the work plans or other schedules that Settling Defendants have proposed to the
Response Agencies or that have been approved by the Response Agencies; and (vii)
describe all activities undertaken in support of the Community Relations Plan
during the previous month and those to be undertaken in the next month. Settling
Defendants shall submit these progress reports to the Response Agencies by the
tenth day of every month following the Date of Lodging until Certification of
Completion of Remedial Action by EPA pursuant to Subparagraph 44.b. During
performance of the Remedial Design, the Monthly RD/RA Progress Reports shall
include all information required by

                                       36

<PAGE>

Paragraph 38 of the July 2003 AOC and shall thereby satisfy the requirement to
submit a monthly progress report under the July 2003 AOC and this Consent
Decree. If requested by the Response Agencies, Settling Defendants shall also
provide briefings for the Response Agencies to discuss the progress of the
Response Work.

                  b.       The Settling Defendants shall notify the Response
Agencies of any change in the schedule described in the Monthly RD/RA Progress
Report for the performance of any activity, including, but not limited to, data
collection and implementation of work plans, no later than seven days prior to
the performance of the activity.

         32.      Quarterly Reports. Starting with the second quarter of 2004,
the Settling Defendants shall submit Quarterly Reports under this Paragraph to
assist the Plaintiffs in monitoring the funding and budgeting of the Response
Work and any Approved Restoration Work.

                  a.       The Settling Defendants shall submit Quarterly
Reports on a quarterly basis for so long as the Remedial Action continues under
this Consent Decree, until Certification of Completion of Remedial Action by EPA
pursuant to Subparagraph 44.b. For a given calendar year, the Report for the
first calendar quarter shall be submitted by no later than May 1 of that
calendar year, the Report for the second calendar quarter shall be submitted by
no later than August 1 of that calendar year, the Report for the third calendar
quarter shall be submitted by no later than November 1 of that calendar year,
and the Report for the fourth calendar quarter shall be submitted by no later
than February 1 of the next calendar year.

                  b.       Each Quarterly Report shall:

                           (1)      provide a complete and accurate written cost
                  summary of all Allowable RD/RA Costs submitted to the Escrow
                  Agent for payment from the

                                       37
<PAGE>

                  Escrow Account during the reporting period, certified in
                  accordance with Subparagraph 32.c;

                           (2)      specify any amount requested as a periodic
                  disbursement from the Disbursement Special Account to the
                  Escrow Account pursuant to Paragraph 10 and Appendix B;

                           (3)      provide a complete and accurate written cost
                  summary of all Allowable Restoration Work Costs submitted to
                  the Escrow Agent for payment from the Escrow Account during
                  the reporting period, certified in accordance with
                  Subparagraph 32.c;

                           (4)      list and total all amounts requested and/or
                  disbursed during the reporting period as payments or
                  reimbursements from the Escrow Account pursuant to Paragraph
                  11 and Appendix C;

                           (5)      indicate the approximate balance of the
                  Escrow Account at the end of the reporting period;

                           (6)      summarize all Response Work and all Approved
                  Restoration Work funded and performed under the Consent Decree
                  during the reporting period; and

                           (7)      project whether the total balance remaining
                  in the Disbursement Special Account and the Escrow Account is
                  likely to be sufficient to fund the completion of the Remedial
                  Action, after making all other payments and reimbursements
                  from those Accounts that are required under the Consent
                  Decree.

                  c.       Each Quarterly Report shall contain the following
certification signed by the Chief Financial Officer of a Settling Defendant or
by an Independent Certified Public Accountant retained by the Settling
Defendants:

                                       38

<PAGE>

         "To the best of my knowledge, after thorough investigation and review
         of Settling Defendants' documentation of unreimbursed costs incurred
         and paid for the work summarized in this report that was performed
         pursuant to the Consent Decree, I certify that the information
         contained in or accompanying this Quarterly Report is true, accurate,
         and complete. I am aware that there are significant penalties for
         knowingly submitting false information, including the possibility of
         fine and imprisonment."

Each Quarterly Report shall include a list of the cost documents that the
certifying individuals reviewed in support of the Quarterly Cost Summary Report.
Upon request by the Plaintiffs, Settling Defendants shall provide the Plaintiffs
any additional information that the Plaintiffs deem necessary for review of a
Quarterly Report.

                  d.       If the Plaintiffs find that a Quarterly Report
includes a mathematical error, an accounting error, costs that are not Allowable
Response Work Costs or Allowable Restoration Work Costs, costs that are
inadequately documented, or costs covered by a prior Quarterly Report, the
Plaintiffs will notify Settling Defendants and the Settling Defendants shall
cure the deficiency by submitting a revised Quarterly Report.

         33.      Release Reporting.

                  a.       Upon the occurrence of any event during performance
of the Response Work that Settling Defendants are required to report pursuant to
Section 103 of CERCLA or Section 304 of the Emergency Planning and Community
Right-to-Know Act ("EPCRA"), Settling Defendants shall within 24 hours of the
onset of such event orally notify the Response Agencies' Project Coordinators or
the Response Agencies' Alternate Project Coordinators (in the event of the
unavailability of the Project Coordinator). If neither the EPA Project
Coordinator nor the EPA Alternate Project Coordinator is available, oral
notification notice shall be given to the Emergency Response Section, Region 5,
United States Environmental Protection Agency.

                                       39

<PAGE>

These reporting requirements are in addition to the reporting required by CERCLA
Section 103 or EPCRA Section 304.

                  b.       Within 20 days of the onset of such an event,
Settling Defendants shall furnish to Plaintiffs a written report, signed by the
Settling Defendants' Project Coordinator, setting forth the events which
occurred and the measures taken, and to be taken, in response thereto. Within 30
days of the conclusion of such an event, Settling Defendants shall submit a
report to Plaintiffs setting forth all actions taken in response thereto.

         34.      Submission and Certification of Reports.

                  a.       Settling Defendants shall submit two hard copies of
all plans, reports, and data required by the SOW, the Remedial Design Work Plan,
the Remedial Action Work Plan, or any other approved plans to each of the
Response Agencies in accordance with the schedules set forth in such plans. At
the same time, the Settling Defendants shall submit an additional copy to each
of the Response Agencies in electronic format.

                  b.       All reports and other documents submitted by Settling
Defendants to the Response Agencies (other than the monthly progress reports
referred to above) which purport to document Settling Defendants' compliance
with the terms of this Consent Decree shall be signed by an authorized
representative of the Settling Defendants, including but not limited to the
Settling Defendants' Project Coordinator.

         XII. RESPONSE AGENCIES' APPROVAL OF PLANS AND OTHER SUBMISSIONS

         35.      After review of any plan, report or other item which is
required to be submitted for approval by the Response Agencies pursuant to this
Consent Decree, the Response Agencies shall: (i) approve, in whole or in part,
the submission; (ii) approve the submission upon specified conditions; (iii)
modify the submission to cure the deficiencies; (iv) disapprove, in whole or in

                                       40

<PAGE>

part, the submission, directing that the Settling Defendants modify the
submission; or (v) any combination of the above. However, the Response Agencies
shall not modify a submission without first providing Settling Defendants at
least one notice of deficiency and an opportunity to cure within 30 days, except
where to do so would cause serious disruption to the Response Work or where
previous submission(s) have been disapproved due to material defects and the
deficiencies in the submission under consideration indicate a bad faith lack of
effort to submit an acceptable deliverable.

         36.      In the event of approval, approval upon conditions, or
modification by the Response Agencies, pursuant to Paragraph 35(i), (ii), or
(iii), Settling Defendants shall proceed to take any action required by the
plan, report, or other item, as approved or modified by the Response Agencies
subject only to their right to invoke the Dispute Resolution procedures set
forth in Section XX (Dispute Resolution) with respect to the modifications or
conditions made by the Response Agencies. In the event that a submission has a
material defect and the Response Agencies modify the submission to cure the
deficiencies pursuant to Paragraph 35(i), the Response Agencies retain their
right to seek stipulated penalties, as provided in Section XXI (Stipulated
Penalties).

         37.      Resubmission of Plans.

                  a.       Upon receipt of a notice of disapproval pursuant to
Paragraph 35(iv), Settling Defendants shall, within 30 days or such longer time
as specified by the Response Agencies in such notice, correct the deficiencies
and resubmit the plan, report, or other item for approval. Any stipulated
penalties applicable to the submission, as provided in Section XXI, shall accrue
during the 30-day period or otherwise specified period but shall not be payable

                                       41

<PAGE>

unless the resubmission is disapproved or modified due to a material defect as
provided in Paragraphs 38 and 39.

                  b.       Notwithstanding the receipt of a notice of
disapproval pursuant to Paragraph 35(iv), Settling Defendants shall proceed, at
the direction of the Response Agencies, to take any action required by any
non-deficient portion of the submission. Implementation of any non-deficient
portion of a submission shall not relieve Settling Defendants of any liability
for stipulated penalties under Section XXI (Stipulated Penalties).

         38.      In the event that a resubmitted plan, report or other item, or
portion thereof, is disapproved by the Response Agencies, the Response Agencies
may again require the Settling Defendants to correct the deficiencies, in
accordance with the preceding Paragraphs. The Response Agencies also retain the
right to modify or develop the plan, report or other item. Settling Defendants
shall implement any such plan, report, or item as modified or developed by the
Response Agencies, subject only to their right to invoke the procedures set
forth in Section XX (Dispute Resolution).

         39.      If upon resubmission, a plan, report, or item is disapproved
or modified by the Response Agencies due to a material defect, Settling
Defendants shall be deemed to have failed to submit such plan, report, or item
timely and adequately unless the Settling Defendants invoke the dispute
resolution procedures set forth in Section XX (Dispute Resolution) and the
response Agencies' action is overturned pursuant to that Section. The provisions
of Section XX (Dispute Resolution) and Section XXI (Stipulated Penalties) shall
govern the implementation of the Response Work and accrual and payment of any
stipulated penalties during Dispute Resolution. If the Response Agencies'
disapproval or modification is upheld, stipulated penalties shall accrue

                                       42

<PAGE>

for such violation from the date on which the initial submission was originally
required, as provided in Section XXI.

         40.      All plans, reports, and other items required to be submitted
to the response Agencies under this Consent Decree shall, upon approval or
modification by the Response Agencies, be enforceable under this Consent Decree,
in the event the Response Agencies approve or modify a portion of a plan,
report, or other item required to be submitted to the Response Agencies under
this Consent Decree, the approved or modified portion shall be enforceable under
this Consent Decree.

                           XIII. PROJECT COORDINATORS

         41.      Within 10 days after Settling Defendant WTM I Company's
submittal of the Pre-Final (90%) Design, Settling Defendants, WDNR, and EPA will
notify each other, in writing, of the name, address and telephone number of
their respective designated Project Coordinators and Alternate Project
Coordinators. If a Project Coordinator or Alternate Project Coordinator
initially designated is changed, the identity of the successor will be given to
the other Parties at least 5 working days before the changes occur, unless
impracticable, but in no event later than the actual day the change is made. The
Settling Defendants' Project Coordinator shall be subject to disapproval by the
Response Agencies and shall have the technical expertise sufficient to
adequately oversee all aspects of the Response Work. The Settling Defendants'
Project Coordinator shall not be an attorney for any of the Settling Defendants
in this matter. He or she may assign other representatives, including other
contractors, to serve as a representative for oversight of performance of daily
operations during remedial activities at OU1.

         42.      Plaintiffs may designate other representatives, including, but
not limited to, EPA and WDNR employees, and federal and State contractors and
consultants, to observe and monitor

                                       43

<PAGE>

the progress of any activity undertaken pursuant to this Consent Decree. EPA's
Project Coordinator and Alternate Project Coordinator shall have the authority
lawfully vested in a Remedial Project Manager ("RPM") and an On-Scene
Coordinator ("OSC") by the National Contingency Plan, 40 C.F.R. Part 300. In
addition, the Response Agencies' Project Coordinators or Alternate Project
Coordinators shall have authority, consistent with the National Contingency
Plan, to halt any Response Work required by this Consent Decree and to take any
necessary response action when s/he determines that conditions at the Site
constitute an emergency situation or may present an immediate threat to public
health or welfare or the environment due to release or threatened release of
Waste Material.

         43.      The Response Agencies' Project Coordinators and the Settling
Defendants' Project Coordinator will meet, at a minimum, on a monthly basis.

                        XIV. CERTIFICATION OF COMPLETION

         44.      Certification of Completion of the Remedial Action for OU1.

                  a.       Within 90 days after Settling Defendants conclude
that the Remedial Action has been fully performed such that the Performance
Standards have been achieved, Settling Defendants shall schedule and conduct a
pre-certification inspection to be attended by Settling Defendants and the
Response Agencies. If, after the pre-certification inspection, the Settling
Defendants still believe that the Remedial Action has been fully performed such
that the Performance Standards have been achieved, they shall submit a written
report to the Response Agencies requesting certification pursuant to Section XII
(Response Agencies' Approval of Plans and Other Submissions) within 60 days of
the inspection. In the report, a registered professional engineer and the
Settling Defendants' Project Coordinator shall state that the Remedial Action
has been completed in full satisfaction of the requirements of this Consent
Decree. The written

                                       44

<PAGE>

report shall include as-built drawings signed and stamped by a professional
engineer. The report shall contain the following statement, signed by a
responsible corporate official of a Settling Defendant or the Settling
Defendants' Project Coordinator:

         To the best of my knowledge, after thorough investigation, I certify
         that the information contained in or accompanying this submission is
         true, accurate and complete. I am aware that there are significant
         penalties for submitting false information, including the possibility
         of fine and imprisonment for knowing violations.

If, after completion of the pre-certification inspection and receipt and review
of the written report, EPA, after reasonable opportunity to review and comment
by the State, determines that the Remedial Action or any portion thereof has not
been completed in accordance with this Consent Decree such that the Performance
Standards have not been achieved, EPA will notify Settling Defendants in writing
of the activities that must be undertaken by Settling Defendants pursuant to
this Consent Decree to complete the Remedial Action such that the Performance
Standards are achieved; provided, however, that EPA may only require Settling
Defendants to perform such activities pursuant to this Paragraph to the extent
that such activities are consistent with the "scope of the remedy selected in
the ROD," as that term is defined in Paragraph 15.b. EPA will set forth in the
notice a schedule for performance of such activities consistent with the Consent
Decree and the SOW or require the Settling Defendants to submit a schedule to
EPA for approval pursuant to Section XII (Response Agencies' Approval of Plans
and Other Submissions). Settling Defendants shall perform all activities
described in the notice in accordance with the specifications and schedules
established pursuant to this Paragraph, subject to their right to invoke the
dispute resolution procedures set forth in Section XX (Dispute Resolution).

                                       45

<PAGE>

                  b.       If EPA concludes, based on the initial or any
subsequent report requesting Certification of Completion and after a reasonable
opportunity for review and comment by the State, that the Remedial Action has
been performed in accordance with this Consent Decree such that the Performance
Standards have been achieved, EPA will so certify in writing to Settling
Defendants. This certification shall constitute the Certification of Completion
of the Remedial Action for purposes of this Consent Decree, including, but not
limited to, Section XXII (Covenants Not to Sue by Plaintiffs). Except as
expressly provided by this Consent Decree, Certification of Completion of the
Remedial Action shall not affect Settling Defendants' obligations under this
Consent Decree.

         45.      Certification of Completion of the Response Work for OU1.

                  a.       Within 90 days after Settling Defendants conclude
that all phases of the Response Work (including O&M, Post-Remedy Institutional
Controls Work, and Post-Remedy Monitoring) have been fully performed, Settling
Defendants shall schedule and conduct a pre-certification inspection to be
attended by Settling Defendants and the Response Agencies. If, after the
pre-certification inspection, the Settling Defendants still believe that the
Response Work has been fully performed, Settling Defendants shall submit a
written report by a registered professional engineer stating that the Response
Work has been completed in full satisfaction of the requirements of this Consent
Decree. The report shall contain the following statement, signed by a
responsible corporate official of a Settling Defendant or the Settling
Defendants' Project Coordinator:

          To the best of my knowledge, after thorough investigation, I certify
          that the information contained in or accompanying this submission is
          true, accurate and complete. I am aware that there are significant
          penalties for submitting false information, including the possibility
          of fine and imprisonment for knowing violations.

                                       46

<PAGE>

If, after review of the written report, EPA, after reasonable opportunity to
review and comment by the State, determines that any portion of the Response
Work has not been completed in accordance with this Consent Decree, EPA will
notify Settling Defendants in writing of the activities that must be undertaken
by Settling Defendants pursuant to this Consent Decree to complete the Response
Work; provided, however, that EPA may only require Settling Defendants to
perform such activities pursuant to this Paragraph to the extent that such
activities are consistent with the "scope of the remedy selected in the ROD," as
that term is defined in Paragraph 15.b. EPA will set forth in the notice a
schedule for performance of such activities consistent with the Consent Decree
and the SOW or require the Settling Defendants to submit a schedule to EPA for
approval pursuant to Section XII (Response Agencies' Approval of Plans and Other
Submissions). Settling Defendants shall perform all activities described in the
notice in accordance with the specifications and schedules established therein,
subject to their right to invoke the dispute resolution procedures set forth in
Section XX (Dispute Resolution).

                  b.       If EPA concludes, based on the initial or any
subsequent request for Certification of Completion by Settling Defendants and
after a reasonable opportunity for review and comment by the State, that the
Response Work has been performed in accordance with this Consent Decree, EPA
will so notify the Settling Defendants in writing.

                             XV. EMERGENCY RESPONSE

         46.      In the event of any action or occurrence during the
performance of the Response Work which causes or threatens a release of Waste
Material at or from OU1 that constitutes an emergency situation or may present
an immediate threat to public health or welfare or the environment, Settling
Defendants shall, subject to Paragraph 47, immediately take all appropriate
action to prevent, abate, or minimize such release or threat of release, and
shall immediately

                                       47

<PAGE>

notify the Response Agencies' Project Coordinators, or, if a Response Agency
Project Coordinator is unavailable, the Response Agency's Alternate Project
Coordinator. If neither the EPA Project Coordinator nor the EPA Alternate
Project Coordinator is available, the Settling Defendants shall notify the EPA
Emergency Response Unit, Region 5. Settling Defendants shall take such actions
in consultation with the EPA's Project Coordinator or other available authorized
EPA officer and in accordance with all applicable provisions of the Health and
Safety Plans, the Contingency Plans, and any other applicable plans or documents
developed pursuant to the SOW. In the event that Settling Defendants fail to
take appropriate response action as required by this Section, and EPA or, as
appropriate, the State takes such action instead, Settling Defendants shall
reimburse EPA and the State for all costs of the response action not
inconsistent with the NCP pursuant to Paragraph 54 (Payment of Specified Future
Response Costs).

         47.      Nothing in the preceding Paragraph or in this Consent Decree
shall be deemed to limit any authority of the United States, or the State, to:
(i) take all appropriate action to protect human health and the environment or
to prevent, abate, respond to, or minimize an actual or threatened release of
Waste Material on, at, or from the Site, or (ii) direct or order such action, or
seek an order from the Court, to protect human health and the environment or to
prevent, abate, respond to, or minimize an actual or threatened release of Waste
Material at or from the Site, subject to Section XXII (Covenants Not to Sue by
Plaintiffs).

                    XVI. NATURAL RESOURCE RESTORATION EFFORTS

         48.      Settling Defendants' Performance of Approved Restoration Work.
As provided by the following Subparagraphs, the Settling Defendants may propose
to the Plaintiffs or the Plaintiffs may propose to the Settling Defendants that
the Settling Defendants perform certain

                                       48

<PAGE>

natural resource restoration work under this Consent Decree, with the costs to
be paid or reimbursed from the Escrow Account.

                  a.       Any restoration work that the Parties agree will be
performed by one or both of the Settling Defendants under this Paragraph shall
be performed in accordance with a written Project Implementation Plan, jointly
approved by the Plaintiffs and by the other Trustees, as represented by the
Trustee Council ("Approved Restoration Work"). The Project Implementation Plan
shall: (i) describe the restoration work to be performed by one or both of the
Settling Defendants; (ii) establish a schedule for performance of the work; and
(iii) establish a project budget and a pre-approved cost ceiling for the work.
The Project Implementation Plan(including the project budget and the
pre-approved cost ceiling) may be revised during the course of the work by a
written amendment approved by the Parties to this Consent Decree and by the
other Trustees.

                  b.       All Approved Restoration Work shall be consistent
with the Trustees' Joint Restoration Plan and Environmental Assessment for the
Lower Fox River and Green Bay(the "Restoration Plan").

                  c.       All of the Settling Defendants' Allowable Restoration
Work Costs (as defined by Subparagraph 9.b) for Approved Restoration Work shall
be paid or reimbursed from the Escrow Account in accordance with Paragraph 11 of
this Consent Decree and Appendix C. Dispute resolution provisions and force
majeure provisions for Approved Restoration Work are set forth in Appendix E,
which is incorporated herein by reference.

                  d.       As provided by Paragraph 32, each Quarterly Report
submitted to the Plaintiffs under this Consent Decree shall include, among other
things, a complete and accurate written cost summary of all Allowable
Restoration Work Costs for the reporting period, and a

                                       49

<PAGE>

summary of all Approved Restoration Work funded and performed under this
Paragraph during the reporting period.

                  e.       Within 60 days after completing all Approved
Restoration Work under a particular Project Implementation Plan, the Settling
Defendants shall submit a Final Project Report to DOI and WDNR summarizing: (i)
all Approved Restoration Work performed under the Plan; and (ii) the total
Allowable Restoration Work Costs for the Approved Restoration Work performed
under the Plan. DOI and WDNR shall in turn provide the other Trustees copies of
each Final Project Report.

         49.      Trustee-Sponsored Natural Resource Restoration Efforts.

                  a.       All funds paid and disbursed to a Site-specific
sub-account within the NRDAR Fund under Paragraph 53 shall be managed by DOI for
the joint benefit and use of the Trustees to pay for Trustee-sponsored natural
resource restoration efforts in accordance with the Restoration Plan. Consistent
with the Restoration Plan, all such funds shall be applied toward the costs of
restoration, rehabilitation, or replacement of injured natural resources at the
Site, and/or acquisition of equivalent resources, including but not limited to
any administrative costs and expenses necessary for, and incidental to,
restoration, rehabilitation, replacement, and/or acquisition of equivalent
resources planning, and any restoration, rehabilitation, replacement, and/or
acquisition of equivalent resources undertaken.

                  b.       Decisions regarding any dedication or expenditure of
funds under this Paragraph shall be made by the Trustees, acting through the
Trustee Council. Settling Defendants shall not be entitled to dispute - under
Section XX (Dispute Resolution) or in another forum or proceeding - any decision
relating to funds or restoration efforts under this Paragraph.

                                       50

<PAGE>

                                 XVII. PAYMENTS

         50.      Payments Into the Escrow Account.

                  a.       Timing and Amount of Payments. Each Settling
Defendant shall pay a total of $26,250,000 into the Escrow Account in accordance
with the following schedule: (i) each Settling Defendant shall deposit
$10,500,000 into the Escrow Account by no later than March 31, 2004; and (ii)
each Settling Defendant shall deposit an additional $15,750,000 into the Escrow
Account by no later than June 30, 2004. The payment requirements of this
Paragraph are several obligations only, not joint obligations.

                  b.       Nature of the Payments. Each Settling Defendant's
payment under this Paragraph includes the following: (i) $25,000,000 to fund the
Remedial Action; and (ii) $1,250,000 to fund a portion of the NRD Commitment.

         51.      Disbursements from the Escrow Account

                  a.       As provided by this Consent Decree and Appendix C,
certain funds from the Escrow Account shall be disbursed to the United States
and the State as payment of sums due under this Consent Decree, and certain
other funds from Escrow Account shall be disbursed to the Settling Defendants
for payment or reimbursement of Allowable RD/RA Costs and/or Allowable
Restoration Work Costs.

                  b.       It is anticipated that certain funds may be disbursed
from the Escrow Account for payment of certain Allowable RD/RA costs and/or
Allowable Restoration Work Costs even before the Effective Date. In the event
the Plaintiffs withdraw or withhold consent to this Consent Decree before entry,
or the Court declines to enter the Consent Decree, the unexpended balance of the
Escrow Account shall be disbursed to the Settling Defendants at their request.

                                       51

<PAGE>

         52.      Initial Payments to Plaintiffs.

                  a.       Initial Payments to the United States. Within 30 days
after the Date of Lodging, the Settling Defendants shall pay a total of
$1,040,000 directly to the United States, with each Settling Defendant being
responsible for paying one-half of that total amount($520,000 each). The
$1,040,000 paid to the United States under this Subparagraph shall be applied as
follows: (i) $740,000 shall be directed to the Fox River Site Special Account
within the EPA Hazardous Substance Superfund, as the EPA Past Cost Payments, and
shall be retained and used to conduct or finance response actions at or in
connection with the Site, or transferred by EPA to the EPA Hazardous Substance
Superfund; and (ii) $300,000 shall be directed to the DOI NRDAR Fund, as the DOI
Past Cost Payments.

                  b.       State Past Cost Payments. Within 30 days after the
Date of Lodging, the Settling Defendants shall pay a total of $10,000 directly
to the State, as the State Past Cost Payments, with each Settling Defendant
being responsible for paying one-half of that total amount ($5,000 each).

                  c.       The payment requirements of this Paragraph are
several obligations only, not joint obligations.

         53.      Subsequent Payments and Disbursements for Natural Resource
Restoration. As provided by this Paragraph and by Appendix C, a total of
$3,000,000 shall be paid and disbursed as the NRD Commitment.

                  a.       By no later than January 31, 2004, the Settling
Defendants shall pay a total of $500,000 of the NRD Commitment directly to a
Site-specific sub-account within the DOI NRDAR Fund, with each Settling
Defendant being responsible for paying one-half of that total amount ($250,000
each), to finance Trustee-sponsored natural resource damage restoration

                                       52

<PAGE>

efforts under Paragraph 49. The payment requirements of this Subparagraph are
several obligations only, not joint obligations.

                  b.       The remaining $2,500,000 of the NRD Commitment shall
be disbursed from the Escrow Account in accordance with the schedule and
requirements of Appendix C: (i) for payment or reimbursement of Allowable
Restoration Work Costs incurred for Approved Restoration Work to be performed by
the Settling Defendants under Paragraph 48; and/or (ii) for payment to a
Site-specific sub-account within the DOI NRDAR Fund, to finance
Trustee-sponsored natural resource damage restoration efforts under
Paragraph 49.

         54.      Reimbursement of Specified Future Response Costs.

                  a.       EPA Reimbursement. All Specified Future Response
Costs incurred by the United States shall be reimbursed as follows:

                           (1)      Except for costs under Section XV (Emergency
Response) that are payable under Subparagraph 54.a.(2), all Specified Future
Response Costs incurred and billed by the United States before Certification of
Completion of Remedial Action by EPA pursuant to Subparagraph 44.b shall be
reimbursed from the Escrow Account as provided by Appendix C, to the extent that
such costs are not inconsistent with the National Contingency Plan.

                           (2)      The Settling Defendants shall make direct
payments to EPA for any Specified Future Response Costs incurred by the United
States under Section XV (Emergency Response) and for any Specified Future
Response Costs incurred and/or billed by the United States after Certification
of Completion of Remedial Action by EPA pursuant to Subparagraph 44.b, to the
extent such costs are not inconsistent with the National Contingency Plan. On a
periodic basis, the United States will send Settling Defendants a bill requiring
payment that includes an EPA cost summary, showing direct and indirect costs
incurred by EPA

                                       53

<PAGE>

and its contractors, and a DOJ cost summary, showing costs incurred by DOJ and
its contractors, if any. Settling Defendants shall make all payments within 30
days of Settling Defendants' receipt of each bill requiring payment, except as
otherwise provided by Paragraph 68.

                           (3)      All payments and disbursements received by
EPA under this Subparagraph 54.a shall be deposited in the Fox River Site
Special Account within the EPA Hazardous Substance Superfund, and shall be
retained and used to conduct or finance response actions at or in connection
with the Site, or transferred by EPA to the EPA Hazardous Substance Superfund.

                  b.       State Reimbursement. All Specified Future Response
Costs incurred by the State shall be reimbursed as follows:

                           (1)      Except for costs under Section XV (Emergency
Response) that are payable under Subparagraph 54.b.(2), all Specified Future
Response Costs incurred and billed by the State before Certification of
Completion of Remedial Action by EPA pursuant to Subparagraph 44.b shall be
reimbursed from the Escrow Account as provided by Appendix C, to the extent that
such costs are not inconsistent with the National Contingency Plan.

                           (2)      The Settling Defendants shall make direct
payments to the State for any Specified Future Response Costs incurred by the
State under Section XV (Emergency Response) and for any Specified Future
Response Costs incurred and/or billed by the State after Certification of
Completion of Remedial Action by EPA pursuant to Subparagraph 44.b, to the
extent such costs are not inconsistent with the National Contingency Plan. On a
periodic basis, the State will send Settling Defendants a bill requiring payment
that includes a WDNR cost summary, showing direct and indirect costs incurred by
WDNR and its contractors, and a WDOJ cost summary, showing costs incurred by
WDOJ and its contractors, if any. Settling Defendants

                                       54

<PAGE>

shall make all payments within 30 days of Settling Defendants' receipt of each
bill requiring payment, except as otherwise provided by Paragraph 68.

                  c.       The payment requirements of this Paragraph are joint
obligations of both Settling Defendants, not several obligations.

         55.      Payment Instructions.

                  a.       Payments to the United States.

                           (1)      Initial Payments to the United States. The
Initial Payments to the United States under Subparagraph 52.a shall be paid by
FedWire Electronic Funds Transfer ("EFT") to the U.S. Department of Justice
account in accordance with current EFT procedures, referencing the Lower Fox
River and Green Bay Site and DOJ Case Number 90-11-2-1045/2. Payment shall be
made in accordance with instructions to be provided by the Financial Litigation
Unit of the United States Attorney's Office for the Eastern District of
Wisconsin after the Date of Lodging. Any payments received by the Department of
Justice after 4:00 p.m. (Eastern Time) will be credited on the next business
day. At the time of payment, Settling Defendants shall ensure that notice that
payment has been made is sent to DOJ, DOI, and EPA in accordance with Section
XXVIII (Notices and Submissions) and to:

         Financial Management Officer
         U.S. Environmental Protection Agency, Region 5
         Mail Code MF-10J
         77 W. Jackson Blvd.
         Chicago, IL  60604

Of the $1,040,000 total amount paid to the United States under Subparagraph
52.a: (i) $740,000 shall be deposited in the Fox River Site Special Account, to
be retained and used to conduct or finance response actions at or in connection
with the Site, or transferred by EPA to the EPA Hazardous Substance Superfund;
and (ii) $300,000 shall be deposited in the DOI NRDAR Fund.

                                       55

<PAGE>

                           (2)      All Other Payments to EPA. Except as
provided by Subparagraph 55.a.(l), all payments to EPA under this Section or
under Appendix C shall: (i) be made by a certified or cashier's check or checks
made payable to "EPA Hazardous Substance Superfund, Fox River Site Special
Account;" (ii) reference the Lower Fox River and Green Bay Site, EPA Site/Spill
ID Number A565, and DOJ Case Number 90-11-2-1045/2; and (iii) indicate that the
payment is for Specified Future Response Costs payable pursuant to this Consent
Decree. All payments to EPA under Section XXI (Stipulated Penalties and
Stipulated Damages) shall: (i) be made by a certified or cashier's check or
checks made payable to "EPA Hazardous Substance Superfund;" (ii) reference the
Lower Fox River and Green Bay Site, EPA Site/Spill ID Number A565, and DOJ Case
Number 90-11-2-1045/2; and (iii) indicate that the payment is for stipulated
penalties payable pursuant to this Consent Decree. All payments under this
Subparagraph 55.a. (2) shall be sent to:

         U.S. Environmental Protection Agency, Region 5
         Program Accounting and Analysis Branch
         P.O. Box 70753
         Chicago, IL 60673

At the time of payment, Settling Defendants shall ensure that notice that
payment has been made is sent to DOJ and EPA in accordance with Section XXVIII
(Notices and Submissions) and to:

         Financial Management Officer
         U.S. Environmental Protection Agency, Region 5
         Mail Code MF-10J
         77 W. Jackson Blvd.
         Chicago, IL 60604

                           (3)      All Other Payments to the DOI NRDAR Fund.
Except as provided by Subparagraph 55.a.(l), all payments to the DOI NRDAR Fund
under this Section or under Appendix C shall: (i) be made by an electronic funds
transfer transaction in accordance with

                                       56

<PAGE>

transfer instruction to be provided by the United States; (ii) reference the
Lower Fox River and Green Bay Site and DOJ Case Number 90-11-2-1045/2; and (iii)
indicate that the payment is being made pursuant to this Consent Decree with
WTM I Company and P. H. Glatfelter Company. At the time of payment, Settling
Defendants shall ensure that notice that payment has been made is sent to DOI,
DOJ, WDNR, and WDOJ in accordance with Section XXVIII (Notices and Submissions)
and to:

         Department of the Interior
         Natural Resource Damage Assessment and Restoration Program
         Attn: Restoration Fund Manager
         1849 C Street, N.W.
         Mailstop 4449
         Washington, DC   20240

DOI shall in turn notify the other Trustees that a payment to the DOI NRDAR Fund
has been received under this Subparagraph.

                           (4)      Payments to the United States for Stipulated
Damages Under Paragraph 74. All payments to the United States under Paragraph 74
(Stipulated Damages Amounts - NRD Commitment) shall: (i) be made by a certified
or cashier's check or checks made payable to "Treasurer, United States of
America;" (ii) be tendered to the Financial Litigation Unit of the Office of the
United States Attorney for the Eastern District of Wisconsin; and (iii) be
accompanied by a letter referencing the Lower Fox River and Green Bay Site and
indicating that the payment is for stipulated damages payable pursuant to
Paragraph 74 of this Consent Decree with WTM I Company and P. H. Glatfelter
Company. At the time of payment, Settling Defendants shall ensure that notice
that payment has been made is sent to DOI and DOJ in accordance with Section
XXVIII (Notices and Submissions).

                                       57

<PAGE>

                  b.       Payments to the State. All payments to the State
under this Section or under Section XXI (Stipulated Penalties and Stipulated
Damages) shall: (i) be made by a certified or cashier's check or checks made
payable to "Wisconsin Department of Natural Resources;" (ii) reference the Lower
Fox River and Green Bay Site; (iii) indicate that the payment is being made
pursuant to this Consent Decree with WTM I Company and P. H. Glatfelter Company;
and (iv) be sent to:

         Wisconsin Department of Natural Resources
         Attn: Greg Hill, State Project Coordinator
         101 S.Webster St.
         Madison, WI  53703

At the time of payment, Settling Defendants shall ensure that notice that
payment has been made is sent to the State in accordance with Section XXVIII
(Notices and Submissions).

                      XVIII. INDEMNIFICATION AND INSURANCE

         56.      Settling Defendants' Indemnification of the United States and
the State.

                  a.       The United States and the State do not assume any
liability by entering into this agreement or by virtue of any designation of
Settling Defendants as EPA's authorized representatives under Section 104(e) of
CERCLA. Settling Defendants shall indemnify, save and hold harmless the United
States, the State, and their officials, agents, employees, contractors,
subcontractors, or representatives for or from any and all claims or causes of
action arising from, or on account of, negligent or other wrongful acts or
omissions of Settling Defendants, their officers, directors, employees, agents,
contractors, subcontractors, and any persons acting on their behalf or under
their control, in carrying out activities pursuant to this Consent Decree,
including, but not limited to, any claims arising from any designation of
Settling Defendants as EPA's authorized representatives under Section 104(e) of
CERCLA. Further, the Settling Defendants

                                       58

<PAGE>

agree to pay the United States and the State all costs they incur including, but
not limited to, attorneys fees and other expenses of litigation and settlement
arising from, or on account of, claims made against the United States or the
State based on negligent or other wrongful acts or omissions of Settling
Defendants, their officers, directors, employees, agents, contractors,
subcontractors, and any persons acting on their behalf or under their control,
in carrying out activities pursuant to this Consent Decree. Neither the United
States nor the State shall be held out as a party to any contract entered into
by or on behalf of Settling Defendants in carrying out activities pursuant to
this Consent Decree. Neither the Settling Defendants nor any such contractor
shall be considered an agent of the United States or the State.

                  b.       The United States and the State shall give Settling
Defendants notice of any claim for which the United States or the State plans to
seek indemnification pursuant to Paragraph 56, and shall consult with Settling
Defendants prior to settling such claim.

                  c.       Nothing contained in this Consent Decree is intended
to limit Settling Defendants' potential for insurance coverage.

         57.      Settling Defendants waive all claims against the United States
and the State for damages or reimbursement or for set-off of any payments made
or to be made to the United States or the State, arising from or on account of
any contract, agreement, or arrangement between any one or more of Settling
Defendants and any person for performance of Response Work on or relating to OU1
or any Approved Restoration Work, including, but not limited to, claims on
account of construction delays. In addition, Settling Defendants shall indemnify
and hold harmless the United States and the State with respect to any and all
claims for damages or reimbursement arising from or on account of any contract,
agreement, or arrangement between any one or more of Settling Defendants and any
person for performance of Response Work on or

                                       59

<PAGE>

relating to OU1 or any Approved Restoration Work, including, but not limited to,
claims on account of construction delays.

         58.      No later than 15 days before commencing any on-site Remedial
Design work under this Consent Decree, Settling Defendant WTMI Company shall
secure, and shall maintain throughout the Remedial Design, comprehensive general
liability insurance with limits of 1 million dollars, combined single limit, and
automobile liability insurance with limits of 1 million dollars, combined single
limit, naming the United States and the State as additional insureds. No later
than 15 days before commencing any on-site Remedial Action work under this
Consent Decree, Settling Defendants shall secure, and shall maintain until the
first anniversary of EPA's Certification of Completion of the Remedial Action
pursuant to Subparagraph 44.b, comprehensive general liability insurance with
limits of 5 million dollars, combined single limit, and automobile liability
insurance with limits of 2 million dollars, combined single limit, naming the
United States and the State as additional insureds. In addition, for the
duration of this Consent Decree, Settling Defendants shall satisfy, or shall
ensure that their contractors or subcontractors satisfy, all applicable laws and
regulations regarding the provision of worker's compensation insurance for all
persons performing the Response Work on behalf of Settling Defendants in
furtherance of this Consent Decree. Prior to commencement of the Response Work
under this Consent Decree, Settling Defendants shall provide the Response
Agencies certificates of such insurance and a copy of each insurance policy.
Settling Defendants shall resubmit such certificates and copies of policies each
year on the anniversary of the Effective Date. If Settling Defendants
demonstrate by evidence satisfactory to the Response Agencies that any
contractor or subcontractor maintains insurance equivalent to that described
above, or insurance covering the same risks but in a lesser amount, then, with
respect to that contractor or

                                       60

<PAGE>

subcontractor, Settling Defendants need provide only that portion of the
insurance described above which is not maintained by the contractor or
subcontractor. Costs incurred by Settling Defendants to comply with this
paragraph shall be considered Allowable RD/RA Costs.

                            XIX. FORCE MAJEURE EVENTS

         59.      Except as provided by Paragraph 2 of Appendix E, if any event
occurs or has occurred that may delay the performance of any obligation under
this Consent Decree, whether or not caused by a Force Majeure Event, the
Settling Defendants or their contractors shall orally notify the Response
Agencies' Project Coordinators or, in a Response Agency's Project Coordinator's
absence, the response Agency's Alternate Project Coordinator or, in the event
both of EPA's designated representatives are unavailable, Superfund Division
Director for EPA Region 5, within 5 working days of when Settling Defendants
first knew that the event might cause a delay. Within 10 working days
thereafter, Settling Defendants shall provide the Response Agencies a written
explanation and description of the reasons for the delay; the anticipated
duration of the delay; all actions taken or to be taken to prevent or minimize
the delay; a schedule for implementation of any measures to be taken to prevent
or mitigate the delay or the effect of the delay; the Settling Defendants'
rationale for attributing such delay to a Force Majeure Event if they intend to
assert such a claim; and a statement as to whether, in the opinion of the
Settling Defendants, such event may cause or contribute to an endangerment to
public health, welfare or the environment. The Settling Defendants shall include
with any notice all available documentation supporting their claim that the
delay was attributable to a Force Majeure Event. Failure to comply with the
above requirements shall preclude Settling Defendants from asserting any claim
of a Force Majeure Event for that event for the period of time of such failure
to comply, and for any additional delay caused by such failure. Settling
Defendants shall be

                                       61

<PAGE>

deemed to know of any circumstance of which Settling Defendants, any entity
controlled by Settling Defendants, or Settling Defendants' contractors knew or
should have known.

         60.      If EPA, after a reasonable opportunity for review and comment
by WDNR, agrees that the delay or anticipated delay is attributable to a Force
Majeure Event, the time for performance of the obligations under this Consent
Decree that are affected by the Force Majeure Event will be extended by EPA,
after a reasonable opportunity for review and comment by WDNR, for such time as
is necessary to complete those obligations. An extension of the time for
performance of the obligations affected by the Force Majeure Event shall not, of
itself, extend the time for performance of any other obligation. If EPA, after a
reasonable opportunity for review and comment by WDNR, does not agree that the
delay or anticipated delay has been or will be caused by a Force Majeure Event,
EPA will notify the Settling Defendants in writing of its decision. If EPA,
after a reasonable opportunity for review and comment by WDNR, agrees that the
delay is attributable to a Force Majeure Event, EPA will notify the Settling
Defendants in writing of the length of the extension, if any, for performance of
the obligations affected by the Force Majeure Event.

         61.      If the Settling Defendants elect to invoke the dispute
resolution procedures set forth in Section XX (Dispute Resolution), they shall
do so no later than 15 days after receipt of EPA's notice. In any such
proceeding, Settling Defendants shall have the burden of demonstrating by a
preponderance of the evidence that the delay or anticipated delay has been or
will be caused by a Force Majeure Event, that the duration of the delay or the
extension sought was or will be warranted under the circumstances, that best
efforts were exercised to avoid and mitigate the effects of the delay, and that
Settling Defendants complied with the requirements of Paragraphs 57 and 58,
above. If Settling Defendants carry this burden, the delay at issue shall be

                                       62

<PAGE>

deemed not to be a violation by Settling Defendants of the affected obligation
of this Consent Decree identified to EPA and the Court.

                             XX. DISPUTE RESOLUTION

         62.      Except as provided by Paragraph 3 of Appendix E, the dispute
resolution procedures of this Section shall be the exclusive mechanism to
resolve disputes between Settling Defendants and the Plaintiffs arising under or
with respect to this Consent Decree. However, the procedures set forth in this
Section shall not apply to actions by the Plaintiffs to enforce obligations of
the Settling Defendants that have not been disputed in accordance with this
Section. The dispute resolution procedures of this Section shall not apply to
any disputes between Settling Defendants and the Plaintiffs not arising under or
with respect to this Consent Decree.

         63.      Informal Dispute Resolution. Any dispute which arises under or
with respect to this Consent Decree shall in the first instance be the subject
of informal negotiations between the parties to the dispute. The period for
informal negotiations shall not exceed 20 days from the time the dispute arises,
unless it is modified by written agreement of the parties to the dispute. The
dispute shall be considered to have arisen when one party sends the other
parties a written Notice of Dispute.

         64.      Formal Dispute Resolution.

                  a.       Except as provided by Paragraph 3 of Appendix E, in
the event that the parties cannot resolve a dispute by informal negotiations
under Paragraph 63, then the position advanced by EPA shall be considered
binding unless, within 10 days after the conclusion of the informal negotiation
period, Settling Defendants invoke the formal dispute resolution procedures of
this Section by serving on the Plaintiffs a written Statement of Position on the
matter in

                                       63

<PAGE>

dispute, including, but not limited to, any factual data, analysis or opinion
supporting that position and any supporting documentation relied upon by the
Settling Defendants. The Statement of Position shall specify the Settling
Defendants' position as to whether formal dispute resolution should proceed
under Paragraph 65 or Paragraph 66.

                  b.       Within 30 days after receipt of Settling Defendants'
Statement of Position, EPA will serve on Settling Defendants its Statement of
Position, including, but not limited to, any factual data, analysis, or opinion
supporting that position and all supporting documentation relied upon by EPA.
EPA's Statement of Position shall include a statement as to whether formal
dispute resolution should proceed under Paragraph 65 or 66. Within 10 days after
receipt of EPA's Statement of Position, Settling Defendants may submit a Reply.

                  c.       If there is disagreement between EPA and the Settling
Defendants as to whether dispute resolution should proceed under Paragraph 65 or
66, the parties to the dispute shall follow the procedures set forth in the
paragraph determined by EPA to be applicable. However, if the Settling
Defendants ultimately appeal to the Court to resolve the dispute, the Court
shall determine which paragraph is applicable in accordance with the standards
of applicability set forth in Paragraphs 65 and 66.

         65.      Formal dispute resolution for disputes pertaining to the
selection or adequacy of any response action, any disputes under Paragraph 98,
and all other disputes that are accorded review on the administrative record
under applicable principles of administrative law shall be conducted pursuant to
the procedures set forth in this Paragraph. For purposes of this Paragraph, the
adequacy of any response action includes, without limitation: (i) the adequacy
or appropriateness of plans, procedures to implement plans, or any other items
requiring approval by the Response Agencies under this Consent Decree; and (ii)
the adequacy of the performance

                                       64

<PAGE>

of response actions taken pursuant to this Consent Decree. Nothing in this
Consent Decree shall be construed to allow any dispute by Settling Defendants
under this Consent Decree regarding the validity of the ROD's provisions.

                  a.       An administrative record of the dispute shall be
maintained by EPA and shall contain all statements of position, including
supporting documentation, submitted pursuant to this Section. Where appropriate,
EPA may allow submission of supplemental statements of position by the parties
to the dispute.

                  b.       The Superfund Division Director for EPA Region 5 will
issue a final administrative decision resolving the dispute based on the
administrative record described in Subparagraph 65.a. This decision shall be
binding upon the Settling Defendants, subject only to the right to seek judicial
review pursuant to Subparagraphs 65.c and d.

                  c.       Any administrative decision made by EPA pursuant to
Subparagraph 65.b shall be reviewable by this Court, provided that a motion for
judicial review of the decision is filed by the Settling Defendants with the
Court and served on all Parties within 20 days of receipt of EPA's decision. The
motion shall include a description of the matter in dispute, the efforts made by
the parties to resolve it, the relief requested, and the schedule, if any,
within which the dispute must be resolved to ensure orderly implementation of
this Consent Decree. The United States and the State may file a response to
Settling Defendants' motion.

                  d.       In proceedings on any dispute governed by this
Paragraph, Settling Defendants shall have the burden of demonstrating that the
decision of the Superfund Division Director for EPA Region 5 is arbitrary and
capricious or otherwise not in accordance with law. Judicial review of EPA's
decision shall be on the administrative record compiled pursuant to Subparagraph
65.a.

                                       65

<PAGE>

         66.      Formal dispute resolution for disputes that neither pertain to
the selection or adequacy of any response action nor are otherwise accorded
review on the administrative record under applicable principles of
administrative law, shall be governed by this Paragraph.

                  a.       Following receipt of Settling Defendants' Statement
of Position submitted pursuant to Paragraph 64, and after service of EPA's
Statement of Position and any Reply, the Superfund Division Director for EPA
Region 5 will issue a final decision resolving the dispute. The Superfund
Division Director's decision shall be binding on the Settling Defendants unless,
within 20 days of receipt of the decision, the Settling Defendants file with the
Court and serve on the parties a motion for judicial review of the decision
setting forth the matter in dispute, the efforts made by the parties to resolve
it, the relief requested, and the schedule, if any, within which the dispute
must be resolved to ensure orderly implementation of the Consent Decree. The
United States may file a response to Settling Defendants' motion.

                  b.       Notwithstanding Paragraph K of Section I (Background)
of this Consent Decree, judicial review of any dispute governed by this
Paragraph shall be governed by applicable principles of law.

         67.      The invocation of formal dispute resolution procedures under
this Section shall not extend, postpone or affect in any way any obligation of
the Settling Defendants under this Consent Decree, not directly in dispute,
unless EPA or the Court agrees otherwise. Stipulated penalties with respect to
the disputed matter shall continue to accrue but payment shall be stayed pending
resolution of the dispute as provided in Paragraph 79. Notwithstanding the stay
of payment, stipulated penalties shall accrue from the first day of
noncompliance with any applicable provision of this Consent Decree. In the event
that the Settling Defendants do not

                                       66

<PAGE>

prevail on the disputed issue, stipulated penalties shall be assessed and paid
as provided in Section XXI (Stipulated Penalties).

         68.      Disputes Regarding Specified Future Response Costs. Settling
Defendants may contest payment of any Specified Future Response Costs under
Paragraph 54 if they determine that the United States or the State has made an
accounting error or if they allege that a cost item that is included represents
costs that are inconsistent with the NCP. For any such costs incurred and billed
before Certification of Completion of Remedial Action by EPA pursuant to
Subparagraph 44.b, notice of any such objection shall be submitted in writing as
provided by Subparagraph 5.c of Appendix C. For any such costs incurred and
billed after Certification of Completion of Remedial Action by EPA pursuant to
Subparagraph 44.b, notice of any such objection shall be given in writing within
30 days of receipt of the bill. A copy of any notice of objection shall be sent
to the United States (if the United States' accounting is being disputed) or to
the State (if the State's accounting is being disputed) pursuant to Section
XXVIII (Notices and Submissions). Any such notice of objection shall
specifically identify the contested Specified Future Response Costs and the
basis for objection. In the event of an objection, all uncontested Specified
Future Response Costs shall immediately be paid to the United States or the
State in the manner described in Paragraph 54. Upon submitting a notice of
objection, the Settling Defendants shall initiate the Dispute Resolution
procedures in Section XX (Dispute Resolution). If the United States or the State
prevails in the dispute, within 10 days of the resolution of the dispute, all
sums due (with accrued Interest) shall be paid to EPA (if the United States'
cost are disputed) or to the State (if the State's costs are disputed) in the
manner described in Paragraph 54. If the Settling Defendants prevail concerning
any aspect of the contested costs, the portion of the costs (plus associated
accrued interest) for which they did not prevail shall be

                                       67

<PAGE>

disbursed to EPA or the State, as appropriate, in the manner described in
Paragraph 54; and the amount that was successfully contested need not be paid to
EPA or to the State. The dispute resolution procedures set forth in this
Paragraph in conjunction with the procedures set forth in Section XX (Dispute
Resolution) shall be the exclusive mechanisms for resolving disputes regarding
reimbursement of the United States and the State for their Specified Future
Response Costs.

                XXI. STIPULATED PENALTIES AND STIPULATED DAMAGES

         69.      Settling Defendants shall be liable for stipulated penalties
and/or stipulated damages in the amounts set forth in this Section for failure
to comply with the requirements of this Consent Decree specified below, unless
excused under Section XIX (Force Majeure Events) or Paragraph 2 (Force Majeure
Events for Restoration Work) of Appendix E. "Compliance" by Settling Defendants
shall include completion of the activities under this Consent Decree or any work
plan or other plan approved under this Consent Decree identified below in
accordance with all applicable requirements of law, this Consent Decree, the
SOW, and any plans or other documents approved by the Plaintiffs pursuant to
this Consent Decree and within the specified time schedules established by and
approved under this Consent Decree.

                                       68

<PAGE>

         70.     Stipulated Penalty Amounts - Failure to Make Payments. A
Settling Defendant shall be liable for stipulated penalties in the amounts set
forth below for each day of violation for that Settling Defendant's failure to
make payments as required under this Consent Decree:

<TABLE>
<CAPTION>
                                                                                     PENALTY PER DAY
                                                                                ---------------------------
                                                                                 UP TO     11-30     OVER
         VIOLATION                                                              10 DAYS    DAYS     30 DAYS
         ---------                                                              -------   -------   -------
<S>                                                                             <C>       <C>       <C>
Failure to deposit funds in the Escrow
 Account as required
 by Subparagraph 50.a:                                                          $10,000   $15,000   $25,000

Failure to make any Initial Payments to
 Plaintiffs as required by Paragraph 52:                                        $ 1,000   $ 2,500   $ 5,000

Failure to make any payment of Specified
 Future Response Costs as required by
 Subparagraphs 54.a.(2) or 54.b.(2):                                            $ 1,000   $ 2,500   $ 5,000
</TABLE>

Any stipulated penalties for failure to deposit funds in the Escrow Account
shall be divided evenly between EPA and the State. Any stipulated penalties for
failure to make any Initial Payments to Plaintiffs shall be divided between the
United States and the State in proportion to the amounts that are unpaid or
overdue. Any stipulated penalties for failure to make payment of Specified
Future Response Costs shall be paid to the Party that rendered the bill
involved.

                                       69

<PAGE>

         71.      Stipulated Penalty Amounts - Response Work. Settling
Defendants shall be liable for stipulated penalties in the amounts set forth
below for each day of violation for failure to perform Response Work as required
under this Consent Decree:

<TABLE>
<CAPTION>
                                                                                     PENALTY PER DAY
                                                                                ---------------------------
                                                                                 UP TO     11-30     OVER
         VIOLATION                                                              10 DAYS    DAYS     30 DAYS
         ---------                                                              -------   -------   -------
<S>                                                                             <C>       <C>       <C>
Failure to perform the Remedial Action in
 accordance with the schedule and requirements
 established by the Remedial Action Work Plan,
 as mandated by Paragraph 14:                                                   $ 2,000   $ 5,000   $10,000

Failure to perform O&M or Long Term Monitoring
 in accordance with the schedule and requirements
 established by the Final Operation and Maintenance
 Plan, as mandated by Paragraph 14, Paragraph 18,
 and Paragraph 19:                                                              $ 1,000   $ 2,500   $ 5,000

Failure to perform Institutional Controls requirements
 in accordance with the schedule and requirements
 established by the Institutional Controls Plan,
 as mandated by Paragraph 14 and Paragraph 18:                                  $ 1,000   $ 2,500   $ 5,000

Failure to undertake response action as required
 by Section XV (Emergency Response):                                            $ 5,000   $10,000   $20,000
</TABLE>

Any stipulated penalties under this Paragraph shall be divided evenly between
EPA and the State.

         72.      Stipulated Penalty Amount - Response Work Takeover. In the
event that the Response Agencies assume performance of a portion or all of the
Response Work pursuant to Paragraph 90 of Section XXII (Covenants Not to Sue by
Plaintiffs), Settling Defendants shall be liable for a stipulated penalty in the
amount of $250,000. Any stipulated penalties under this Paragraph shall be
divided evenly between EPA and the State.

                                       70

<PAGE>

         73.      Stipulated Penalty Amounts - Response Work Reports and
Submissions. Settling Defendants shall be liable for stipulated penalties in the
amounts set forth below for each day of violation for failure to comply with
Response Work reporting and submission requirements under this Consent Decree:

<TABLE>
<CAPTION>
                                                                                     PENALTY PER DAY
                                                                                ---------------------------
                                                                                 UP TO     11-30     OVER
         VIOLATION                                                              10 DAYS    DAYS     30 DAYS
         ---------                                                              -------   -------   -------
<S>                                                                             <C>       <C>       <C>
Failure to submit a Remedial Action Work Plan
 or any other Remedial Action Plan as
 Required by Paragraph 14:                                                      $ 2,000   $ 4,000   $ 5,000

Failure to submit any Monthly RD/RA
 Progress Report as required by
 Paragraph 31:                                                                  $ 1,000   $ 2,000   $ 2,500

Failure to submit any Quarterly
 Report as required by Paragraph 32:                                            $ 1,000   $ 2,000   $ 2,500

Failure to comply with the Release Reporting
 requirements under Paragraph 33:                                               $ 1,000   $ 2,000   $ 2,500
</TABLE>

Any stipulated penalties under this Paragraph shall be divided evenly between
the United States and the State.

         74.      Stipulated Damages Amounts - NRD Commitment. A Settling
Defendant shall be liable for stipulated damages in the amounts set forth below
for each day of violation for that Settling Defendant's failure to comply with
requirements under this Consent Decree relating to the NRD Commitment:

                                       71

<PAGE>

<TABLE>
<CAPTION>
                                                                                     DAMAGES PER DAY
                                                                                ---------------------------
                                                                                 UP TO     11-30     OVER
         VIOLATION                                                              10 DAYS    DAYS     30 DAYS
         ---------                                                              -------   -------   -------
<S>                                                                             <C>       <C>       <C>
Failure to make the Subsequent Payment for
 Natural Resource Restoration as required
 by Subparagraph 53.a:                                                          $ 1,000   $ 2,500   $ 5,000

Failure to perform Approved Restoration Work
 in accordance with an approved
 Project Implementation Plan, as required
 by Paragraph 48:                                                               $   500   $ 1,000   $ 1,500

Failure to submit a Final Project Report
 on Approved Restoration Work, as
 required by Subparagraph 48.e:                                                 $   500   $ 1,000   $ 2,000
</TABLE>

Any stipulated damages under this Paragraph shall be divided evenly between the
United States and the State.

         75.      All stipulated penalties and/or stipulated damages shall begin
to accrue on the day after the complete performance is due or the day a
violation occurs, and shall continue to accrue through the final day of the
correction of the noncompliance or completion of the activity. However,
stipulated penalties shall not accrue: (i) with respect to a deficient
submission under Section XII (Response Agencies' Approval of Plans and Other
Submissions), during the period, if any, beginning on the 31st day after the
response Agencies' receipt of such submission until the date that the Response
Agencies notify Settling Defendants of any deficiency; (ii) with respect to a
decision by the Plaintiffs under Paragraph 3 (Dispute Resolution for Restoration
Work) of Appendix E, during the period, if any, beginning on the 21st day after
the date that Settling Defendants' Statement of Position is received until the
date that the Plaintiffs issue a final administrative decision regarding such
dispute; (iii) with respect to a decision by the Superfund Division Director for
Region 5 under Subparagraph 65.b or 66.a of Section XX

                                       72

<PAGE>

(Dispute Resolution), during the period, if any, beginning on the 21st day after
the date that Settling Defendants' reply to EPA's Statement of Position is
received until the date that the Superfund Division Director issues a final
decision regarding such dispute; or (iv) with respect to judicial review by this
Court of any dispute under Section XX (Dispute Resolution) or Paragraph 3 of
Appendix E, during the period, if any, beginning on the 31st day after the
Court's receipt of the final submission regarding the dispute until the date
that the Court issues a final decision regarding such dispute. Nothing herein
shall prevent the simultaneous accrual of separate stipulated penalties and/or
stipulated damages for separate violations of this Consent Decree.

         76.      Following the Plaintiffs' determination that Settling
Defendants have failed to comply with a requirement of this Consent Decree, the
Plaintiffs may give Settling Defendants written notification of the same and
describe the noncompliance. The Plaintiffs may send the Settling Defendants a
written demand for the payment of the penalties. However, penalties shall accrue
as provided in the preceding Paragraph regardless of whether the Plaintiffs have
notified the Settling Defendants of a violation.

         77.      Settling Defendants shall pay any stipulated penalties or
stipulated damages accruing under this Section directly to the Plaintiffs, and
shall not be entitled to seek payment or reimbursement of such penalties or
damages from the Disbursement Special Account or from the Escrow Account under
Paragraph 10, Paragraph 11, Appendix B, or Appendix C. All penalties or damages
accruing under this Section shall be due and payable to the United States and
the State within 30 days of the Settling Defendants' receipt of a demand for
payment by the Plaintiffs, unless Settling Defendants invoke the Dispute
Resolution procedures under Paragraph 3 of Appendix E or Section XX (Dispute
Resolution). All payments under this

                                       73

<PAGE>

Section shall be paid by certified or cashier's check(s), shall indicate that
the payment is for stipulated penalties or stipulated damages, and shall be
submitted to EPA, to the State, and/or to the DOINRDAR Fund, as appropriate, in
the manner specified by Paragraph 55 (Payment Instructions).

         78.      The payment of penalties or damages under this Section shall
not alter in any way Settling Defendants' obligation to complete the performance
of the Response Work or any Approved Restoration Work required under this
Consent Decree.

         79.      Penalties and/or damages shall continue to accrue as provided
in Paragraph 75 during any dispute resolution period, but need not be paid until
the following:

                  a.       If the dispute is resolved by agreement or by an
administrative decision that is not appealed to this Court, accrued penalties
and/or damages determined to be owing shall be paid to within 15 days of the
agreement or the receipt of the administrative decision;

                  b.       If the dispute is appealed to this Court and the
Plaintiffs prevail in whole or in part, Settling Defendants shall pay all
accrued penalties and/or damages determined by the Court to be owed to the
Plaintiffs within 60 days of receipt of the Court's decision or order, except as
provided in Subparagraph c below;

                  c.       If the District Court's decision is appealed by any
Party, Settling Defendants shall pay all accrued penalties and/or damages
determined by the District Court to be owing to the United States or the State
into an interest-bearing escrow account within 60 days of receipt of the Court's
decision or order. Penalties and/or damages shall be paid into this account as
they continue to accrue, at least every 60 days. Within 15 days of receipt of
the final appellate court decision, the Escrow Agent shall pay the balance of
the account to the Plaintiffs or to Settling Defendants to the extent that they
prevail.

                                       74

<PAGE>

         80.      If Settling Defendants fail to pay stipulated penalties and/or
stipulated damages when due, the United States or the State may institute
proceedings to collect the penalties and/or damages, as well as interest.
Settling Defendants shall pay Interest on the unpaid balance, which shall begin
to accrue on the date of demand made pursuant to Paragraph 77.

         81.      Nothing in this Consent Decree shall be construed as
prohibiting, altering, or inane way limiting the ability of the United States or
the State to seek any other remedies or sanctions available by virtue of
Settling Defendants' violation of this Decree or of the statutes and regulations
upon which it is based, including, but not limited to, penalties pursuant to
Section 122(1) of CERCLA; provided, however, that the United States shall not
seek civil penalties pursuant to Section 122(1) of CERCLA for any violation for
which a stipulated penalty is provided herein, except in the case of a willful
violation of the Consent Decree.

         82.      Notwithstanding any other provision of this Section, the
United States may, in its unreviewable discretion, waive any portion of
stipulated penalties or stipulated damages payable to the United States that
have accrued pursuant to this Consent Decree. Similarly, notwithstanding any
other provision of this Section, the State may, in its unreviewable discretion,
waive any portion of stipulated penalties or stipulated damages payable to the
State that have accrued pursuant to this Consent Decree.

                     XXII. COVENANTS NOT TO SUE BY PLAINTIFFS

         83.      General Scope of Covenants

                  a.       As specified by the covenants not to sue contained in
Paragraphs 84 and 85, and subject to the reservations contained in Paragraphs
86, 87, 89, and 98, this Consent Decree is intended to addresses the Settling
Defendants' alleged liability under Sections 106 and

                                       75

<PAGE>

107(a) of CERCLA for "OU1 Response Activities and Costs," as that term is
defined by the following Subparagraph 83.b.

                  b.       For the purpose of this Consent Decree, the term "OU1
Response Activities and Costs" is defined as all response activities for
Operable Unit 1 performed or to be performed after July 1, 2003, as well as all
costs for response activities for Operable Unit 1 incurred after July 1, 2003.
The "OU1 Response Activities and Costs" shall therefore include, but shall not
be limited to, all Response Work performed or to be performed after July 1, 2003
and all Specified Future Response Costs.

         84.      United States' Covenant Not To Sue. In consideration of the
actions that will be performed by the Settling Defendants pursuant to this
Consent Decree and the payments that will be made to the Plaintiffs under the
terms of the Consent Decree, and except as specifically provided by Paragraphs
86, 87, 89, and 98, the United States covenants not to sue or to take
administrative action against Settling Defendants for OU1 Response Activities
and Costs pursuant to: (i) CERCLA Sections 106 and 107,42 U.S.C. Sections 9606
and 9607; (ii) RCRA Section 7003, 42 U.S.C. Section 6973; (iii) Clean Water Act
Section 311, 33 U.S.C. Section 1321; (iv) Toxic Substances Control Act Section
7, 15 U.S.C. Section 2606; or (v) Section 10 of the Rivers and Harbors Act of
1899, 33 U.S.C. Section 403. Except with respect to future liability, these
covenants not to sue shall take effect upon the receipt by Plaintiffs of the
payments required by Paragraph 52 (Initial Payments to Plaintiffs). With respect
to future liability, these covenants not to sue shall take effect upon
Certification of Completion of Remedial Action by EPA pursuant to Paragraph
44.b. These covenants not to sue are conditioned upon the satisfactory
performance by Settling Defendants of their obligations under this Consent
Decree. These covenants not to sue extend only to the Settling Defendants and do
not extend to any other person; provided, however that

                                       76

<PAGE>

these covenants not to sue (and the reservations thereto) shall also apply to
Settling Defendants' Related Parties.

         85.      State's Covenant Not To Sue. In consideration of the actions
that will be performed by the Settling Defendants and the payments that will be
made to the Plaintiffs under the terms of the Consent Decree, and except as
specifically provided by Paragraphs 86, 87, 89,and 98, the State covenants not
to sue or to take administrative action against Settling Defendants for OU1
Response Activities and Costs pursuant to: (i) CERCLA Section 107, 42 U.S.C.
Section 9607; (ii) RCRA Section 700, 42 U.S.C. Section 6972; (iii) Clean Water
Act Section 505, 33 U.S.C. Section 1365; (iv) Toxic Substances Control Act
Section 20, 15 U.S.C. Section 2619; or (v) Wisconsin statutory or common law.
Except with respect to future liability, these covenants not to sue shall take
effect upon the receipt by Plaintiffs of the payments required by Paragraph 52
(Initial Payments to Plaintiffs). With respect to future liability, these
covenants not to sue shall take effect upon Certification of Completion of
Remedial Action by EPA pursuant to Paragraph 44.b. These covenants not to sue
are conditioned upon the satisfactory performance by Settling Defendants of
their obligations under this Consent Decree. These covenants not to sue extend
only to the Settling Defendants and do not extend to any other person; provided,
however that these covenants not to sue (and the reservations thereto) shall
also apply to Settling Defendants' Related Parties.

         86.      Pre-certification Reservations. Notwithstanding any other
provision of this Consent Decree, the United States and the State reserve, and
this Consent Decree is without prejudice to, the right to institute proceedings
in this action or in a new action, or to issue an administrative order seeking
to compel Settling Defendants (i) to perform further response

                                       77
<PAGE>

actions relating to OU1 or (ii) to reimburse the United States or the State for
additional costs of response if, prior to Certification of Completion of the
Remedial Action:

                           (1)      conditions relating to OU1, previously
         unknown to EPA, are discovered, or

                           (2)      information, previously unknown to EPA, is
         received, in whole or in part,

and these previously unknown conditions or information together with any other
relevant information indicates that the Remedial Action is not protective of
human health or the environment.

         87.      Post-certification Reservations. Notwithstanding any other
provision of this Consent Decree, the United States and the State reserve, and
this Consent Decree is without prejudice to, the right to institute proceedings
in this action or in a new action, or to issue an administrative order seeking
to compel Settling Defendants (i) to perform further response actions relating
to OU1 or (ii) to reimburse the United States or the State for additional costs
of response if, subsequent to Certification of Completion of the Remedial
Action:

                           (1)      conditions relating to OU1, previously
         unknown to EPA, are discovered, or

                           (2)      information, previously unknown to EPA, is
         received, in whole or in part,

and these previously unknown conditions or this information together with other
relevant information indicate that the Remedial Action is not protective of
human health or the environment.

                                       78
<PAGE>

         88.      For purposes of Paragraph 86, the information and the
conditions known to EPA shall include only that information and those conditions
known to EPA as of the date the ROD was signed and set forth in the Record of
Decision and the administrative record supporting the Record of Decision. For
purposes of Paragraph 87, the information and the conditions known to EPA shall
include only that information and those conditions known to EPA as of the date
of Certification of Completion of the Remedial Action and set forth in the
Record of Decision, the administrative record supporting the Record of Decision,
the post-ROD administrative record, or in any information received by EPA
pursuant to the requirements of this Consent Decree prior to Certification of
Completion of the Remedial Action.

         89.      General Reservations of Rights. The covenants not to sue set
forth above do not pertain to any matters other than those expressly specified
in Paragraphs 84 and Paragraph 85. The United States and the State reserve, and
this Consent Decree is without prejudice to, all rights against Settling
Defendants with respect to all other matters, including but not limited to, the
following:

                  a.       claims based on a failure by Settling Defendants to
meet a requirement of this Consent Decree;

                  b.       liability for performance of response activities or
for response costs falling outside the definition of the OU1 Response Activities
and Costs, including but not limited to: (i) liability arising from the past,
present, or future disposal, release, or threat of release of Waste Materials
outside of the Site; (ii) liability for operable units at the Site other than
OU1; and (iii) liability for response costs for OU1 incurred by the United
States or by the State before the Date of Lodging (specifically including, but
not limited to, any additional liability for Unresolved EPA Past Costs or for
Unresolved State Past Costs);

                                       79
<PAGE>

                  c.       liability for future disposal of Waste Material at
OU1, other than as provided in the ROD, the Response Work, or otherwise ordered
by EPA;

                  d.       liability, prior to Certification of Completion of
the Remedial Action, for additional response actions at OU1 that EPA determines
are necessary to achieve Performance Standards, but that cannot be required
pursuant to Paragraph 15 (Modification of the SOW or Related Work Plans);

                  e.       liability for damages for injury to, destruction of,
or loss of natural resources at the Site, and for the costs of any natural
resource damage assessments relating to the Site (specifically including, but
not limited to, any additional liability for natural resource damages beyond the
NRD Commitment or for Unresolved DOI Past Costs);

                  f.       liability for violations of federal or state
law which occur during or after implementation of the Remedial Action; and

                  g.       criminal liability.

         90.      Response Work Takeover In the event EPA, in consultation with
WDNR, determines that Settling Defendants have ceased implementation of any
portion of the Response Work, are seriously or repeatedly deficient or late in
their performance of the Response Work, or are implementing the Response Work in
a manner which may cause an endangerment to human health or the environment, EPA
and/or WDNR may assume the performance of all or any portions of the Response
Work as EPA determines necessary. Settling Defendants may invoke the procedures
set forth in Section XX (Dispute Resolution), Paragraph 65, to dispute EPA's
determination that takeover of the Response Work is warranted under this
Paragraph. Subject to the funding limitations and special reservations of rights
specified in Section XXIV, costs

                                       80
<PAGE>

incurred by the United States and/or the State in performing the Response Work
pursuant to this Paragraph shall be considered Specified Future Response Costs.

         91.      Notwithstanding any other provision of this Consent Decree,
the United States and the State retain all authority and reserve all rights to
take any and all response actions authorized by law.

                     XXIII. COVENANTS BY SETTLING DEFENDANTS

         92.      Settling Defendants' Covenant Not to Sue. Subject to the
reservations in Paragraph 93 and Paragraph 98, Settling Defendants hereby
covenant not to sue and agree not to assert any claims or causes of action
against the United States or the State with respect to the EPA Past Cost
Payments, the State Past Cost Payments, the DOI Past Cost Payments, the NRD
Commitment, the OU1 Response Activities and Costs, or this Consent Decree,
including, but not limited to:

                  a.       any direct or indirect claim for reimbursement from
the Hazardous Substance Superfund (established pursuant to the Internal Revenue
Code, 26 U.S.C. Section 9507) through CERCLA Sections 106(b)(2), 107, 111, 112,
113 or any other provision of law;

                  b.       any claims against the United States (including any
department, agency or instrumentality of the United States) or State (including
any department, agency or instrumentality of the States) under CERCLA Sections
107 or 113, 42 U.S.C. Sections 9607 or 9613, related to the EPA Past Cost
Payments, the State Past Cost Payments, the DOI Past Cost Payments, the NRD
Commitment, or the OU1 Response Activities and Costs;

                  c.       any claims against the United States (including any
department, agency or instrumentality of the United States) or State (including
any department, agency or instrumentality of the States) under the United States
Constitution, the Wisconsin Constitution,

                                       81
<PAGE>

the Tucker Act, 28 U.S.C. Section 1491, the Equal Access to Justice Act, 28
U.S.C. Section 2412, as amended, or at common law, related to the EPA Past Cost
Payments, the State Past Cost Payments, the DOI Past Cost Payments, the NRD
Commitment, or the OU1 Response Activities and Costs;

                  d.       any direct or indirect claim for disbursement from
the Disbursement Special Account (established pursuant to this Consent Decree),
except as provided by Paragraph 10; or

                  e.       any direct or indirect claim for disbursement from
the Fox River Site Special Account.

Except as provided in Paragraph 95 (Waiver of Claims Against De Micromis
Parties) and Paragraph 105 (Waiver of Claim-Splitting Defenses), these covenants
not to sue shall not apply in the event that the United States or the State
brings a cause of action or issues an order pursuant to the reservations set
forth in Paragraph 86, Paragraph 87, or Subparagraphs 89.b to 89.e, but only to
the extent that Settling Defendants' claims arise from the same response action,
response costs, or damages that the United States or the State is seeking
pursuant to the applicable reservation.

         93.      The Settling Defendants reserve, and this Consent Decree is
without prejudice to, claims against the United States, subject to the
provisions of Chapter 171 of Title 28 of the United States Code, for money
damages for injury or loss of property or personal injury or death caused by the
negligent or wrongful act or omission of any employee of the United States while
acting within the scope of his office or employment under circumstances where
the United States, if a private person, would be liable to the claimant in
accordance with the law of the place where the act or omission occurred.
However, any such claim shall not include a claim for any

                                       82
<PAGE>
damages caused, in whole or in part, by the act or omission of any person,
including any contractor, who is not a federal employee as that term is defined
in 28 U.S.C. Section 2671; nor shall any such claim include a claim based on
EPA's selection of response actions, or the oversight or approval of the
Settling Defendants' plans or activities. The foregoing applies only to claims
which are brought pursuant to any statute other than CERCLA and for which the
waiver of sovereign immunity is found in a statute other than CERCLA;

         94.      Nothing in this Consent Decree shall be deemed to constitute
preauthorization of a claim within the meaning of Section 111 of CERCLA, 42
U.S.C. Section 9611, or 40 C.F.R. Section 300.700(d).

         95.      Waiver of Claims Against De Micromis Parties.

                  a.       Settling Defendants agree not to assert any claims
and to waive all claims or causes of action that they may have for all matters
relating to the Site, including for contribution, against any person where the
person's liability to Settling Defendants with respect to the Site is based
solely on having arranged for disposal or treatment, or for transport for
disposal or treatment, of hazardous substances at the Site, or having accepted
for transport for disposal or treatment of hazardous substances at the Site, if
the materials contributed by such person to the Site contained less than 2.0
kilograms of polychlorinated biphenyls (which amounts to 0.002% of the total
mass of polychlorinated biphenyls remaining at the Site, as estimated by the
December 2002 Remedial Investigation Report).

                  b.       This waiver shall not apply to any claim or cause of
action against any person meeting the above criteria if EPA has determined that
the materials contributed to the Site by such person contributed or could
contribute significantly to the costs of response at the Site. This waiver also
shall not apply with respect to any defense, claim, or cause of action that a

                                       83
<PAGE>

Settling Defendant may have against any person if such person asserts a claim or
cause of action relating to the Site against such Settling Defendant.

                   XXIV. CONSENT DECREE FUNDING LIMITATION AND
                         SPECIAL RESERVATIONS OF RIGHTS

         96.      Generally. The Parties currently anticipate that the funds to
be deposited in the Escrow Account and the Disbursement Special Account under
this Consent Decree (together with the interest earned on such deposits) will be
sufficient to fund the completion of the Response Work, after all other payments
and reimbursements from those Accounts have been made as required under this
Consent Decree. This Section addresses the anticipated risk of a future
determination that those funds may not be sufficient for that purpose. If that
determination is made, the Parties' rights and obligations shall be governed by
this Section, and the insufficiency shall not be considered a change in
circumstances or a basis for seeking non-consensual relief from this Consent
Decree pursuant to Fed. R. Civ. P. 60(b).

         97.      Funding Limitation. Except as expressly provided by
Subparagraph 98.f.(3), this Consent Decree is not intended to impose any
obligation on Settling Defendants to finance the Remedial Action with funding
sources other than the Disbursement Special Account and the Escrow Account, or
to deposit funds in those Accounts other than as required by Subparagraph 50.a.

         98.      Special Reservations of Rights Based on Costs of the Remedial
Action.

                  a.       EPA Insufficiency Determination. EPA, in consultation
with WDNR, shall periodically evaluate and project whether the total aggregated
balance in the Escrow Account and the Disbursement Special Account is likely to
be sufficient to fund the completion of the Response Work, after all other
payments and reimbursements from those two Accounts

                                       84
<PAGE>

have been made as required under this Consent Decree. EPA's evaluations shall
include an assessment of the timing and projected costs of the Remedial Action,
the O&M, the Post-Remedy Institutional Controls Work, and the Post-Remedy
Monitoring. In making such evaluations, EPA shall consider the information and
projections contained in Settling Defendants' Quarterly Reports submitted under
Paragraph 32 and any other information deemed relevant by EPA. If EPA determines
that the total aggregated balance in the Escrow Account and the Disbursement
Special Account is likely to be insufficient to fund the completion of the
Response Work, after all other payments and reimbursements from the Accounts
have been made as required under this Consent Decree, then EPA, in consultation
with WDNR, may provide the Settling Defendants formal written notice of that
determination (an "Insufficiency Determination") in the manner provided by
Section XXVIII (Notices and Submissions).

                  b.       Timing. EPA may make an Insufficiency Determination
under this Paragraph: (i) at any time after the Response Agencies' approval of
the Remedial Action Work Plan under Paragraph 14; but (ii) not after
Certification of Completion of Remedial Action by EPA pursuant to Paragraph
44.b.

                  c.       Request for an Insufficiency Determination. A
Settling Defendant may request that EPA make an Insufficiency Determination
under this Paragraph if: (i) the determination would be timely under
Subparagraph 98.b; (ii) the total aggregated balance in the Escrow Account and
the Disbursement Special Account is less than $6 million; and (iii) the Settling
Defendant can demonstrate that the total aggregated balance in the Escrow
Account and the Disbursement Special Account is likely to be insufficient to
fund the completion of the Response Work, after all other payments and
reimbursements from those two Accounts have been made as required under this
Consent Decree. Any such request shall be made in writing,

                                       85
<PAGE>

shall include all information supporting the request, and shall be provided to
all Parties as provided by Section XXVIII (Notices and Submissions).

                  d.       Advance Notice. At least 30 days before issuing
formal written notice of an Insufficiency Determination under this Paragraph, or
within a longer time period agreed to in writing by the Parties, EPA shall send
the Settling Defendants a written communication affording the Settling
Defendants an opportunity, within that time period, to: (i) provide EPA
additional information relevant to whether the total aggregated balance in the
Accounts is likely to be sufficient or insufficient; (ii) deposit additional
funds in the Escrow Account, in order to avoid an Insufficiency Determination;
and (iii) have informal negotiations to attempt to resolve any dispute.

                  e.       Termination of Certain Consent Decree Rights and
Obligations. As specified by this Subparagraph, certain rights and obligations
of the Parties under this Consent Decree shall terminate if an Insufficiency
Determination is not disputed pursuant to Subparagraph 98.f, or if a dispute
under Subparagraph 98.f is resolved in EPA's favor.

                           (1)      For the purpose of this Subparagraph 98.e,
the "Termination Date" shall be defined as: (i) 10 days after an Insufficiency
Determination, if the Insufficiency Determination is not disputed in accordance
with Subparagraph 98.f; (ii) 10 days after the time expires for seeking
appellate court review, if this Court resolves a dispute under Subparagraph
98.f in EPA's favor and if this Court's decision is not appealed; or (iii) 10
days after any final appellate court decision resolving a dispute under
Subparagraph 98.f in EPA's favor.

                           (2)      Upon the Termination Date, the Settling
Defendants' Consent Decree obligation to perform the Remedial Action under
Paragraph 14 (OU1 Remedial Action) shall cease.

                                       86
<PAGE>

                           (3)      Upon the Termination Date, the Settling
Defendants' Consent Decree obligation to perform the response actions under
Paragraph 18 (O&M and Post-Remedy Institutional Controls) shall cease.

                           (4)      Upon the Termination Date, the Settling
Defendants' Consent Decree obligation to perform the response actions under
Paragraph 19 (Periodic Remedy Review and Post-Remedy Monitoring) shall cease.

                           (5)      Upon the Termination Date, the Consent
Decree obligation to reimburse Plaintiffs' Specified Future Response Costs under
Paragraph 54 shall cease for costs incurred after the Termination Date.

                           (6)      Upon the Termination Date, the covenants not
to sue under Paragraph 84 (United States' Covenant Not to Sue) and Paragraph 85
(State's Covenant Not To Sue) shall cease to apply to Settling Defendants and
shall terminate as to all OU1 Response Activities and Costs. Even after the
Termination Date, the provisions of Paragraph 102 (Credit for Payments Made and
Work Performed) shall continue to apply.

                           (7)      Upon the Termination Date, the covenants not
to sue under Paragraph 92 (Settling Defendants' Covenant Not to Sue) shall cease
to apply to OU1 Response Activities and Costs after the Termination Date, such
as: (i) any response activities for OU1 performed or to be performed after the
Termination Date; and (ii) any costs of response activities for OU1 to the
extent that such costs are incurred after the Termination Date. Even after the
Termination Date, the covenants not to sue under Paragraph 92 (Settling
Defendants' Covenant Not to Sue) shall continue to apply to the EPA Past Cost
Payments, the State Past Cost Payments, the DOI Past Cost Payments, the NRD
Commitment, and any OU1 Response Activities and Costs before the Termination
Date, such as: (i) any response activities for OU1

                                       87
<PAGE>

performed before the Termination Date; any (ii) any costs of response activities
for OU1 to the extent that such costs were incurred before after the Termination
Date.

                           (8)      Upon the Termination Date, Paragraph 101
shall cease to apply to Settling Defendants and shall terminate, and the OU1
Response Activities and Costs shall not be considered "matters addressed" by
this Consent Decree.

                           (9)      Settling Defendants specifically reserve any
rights they may have to seek review of the remedial action selected in the ROD
as authorized by CERCLA Section 113(h), 42 U.S.C. Section 9613(h), at any time
after the Termination Date, other than in an action brought by the United States
or the State to enforce this Consent Decree.

                  f.       Insufficiency Determination Disputes.

                           (1)      Settling Defendants shall not be entitled to
dispute - under Section XX (Dispute Resolution) or in any other forum or
proceeding - EPA's failure to make an Insufficiency Determination or EPA's
discretionary election to delay or defer issuance of formal written notice of an
Insufficiency Determination.

                           (2)      Within 10 days after EPA's issuance of
formal written notice of an Insufficiency Determination, the Settling Defendants
may dispute the Insufficiency Determination in accordance with Paragraph 64
(Formal Dispute Resolution) and Paragraph 65 (record review).

                           (3)      Until a dispute under this Subparagraph 98.f
is resolved, Settling Defendants shall continue to perform all Response Work
required under this Consent Decree, specifically including all work to implement
the Remedial Action under Paragraph 14, with the continuation of the Response
Work being financed either by: (i) any funds remaining in the Disbursement
Special Account or the Escrow Account; or (ii) any additional funds that
Settling

                                       88
<PAGE>

Defendants may need to commit or provide under this Subparagraph, as necessary
to finance the continuation of the Response Work.

         99.      Nothing in this Consent Decree shall be construed as limiting
or precluding Plaintiffs' right to issue an administrative order or to institute
a judicial proceeding relating to OU1 after the Termination Date, including but
not limited any administrative order or judicial proceeding seeking continuation
or completion of the Response Work after the Termination Date. Notwithstanding
Paragraph F of Section I (Background), Settling Defendants hereby agree and
covenant that the Plaintiffs shall not have to prove and that Settling
Defendants shall not contest the following facts with respect to OU1 in response
to any administrative order or in any judicial proceeding relating to OU1 after
the Termination Date:

         (i)      Each Settling Defendant is a person who at the time of
                  disposal of a hazardous substance owned or operated a facility
                  from which such hazardous substances were disposed of, and
                  from which there have been releases of hazardous substances
                  which caused the incurrence of response costs for OU1; and

         (ii)     Each Settling Defendant is a person who by contract,
                  agreement, or otherwise arranged for the disposal or treatment
                  of hazardous substances owned or possessed by the Settling
                  Defendant, by another party or entity, at a facility owned or
                  operated by another party or entity and containing such
                  hazardous substances, from which there have been releases of
                  hazardous substances which caused the incurrence of response
                  costs for OU1.

             XXV. EFFECT OF SETTLEMENT AND CONTRIBUTION PROTECTION

         100.     Except as provided in Paragraph 95 (Waiver of Claims Against
De Micromis Parties), nothing in this Consent Decree shall be construed to
create any rights in, or grant any

                                       89
<PAGE>

cause of action to, any person not a Party to this Consent Decree. The preceding
sentence shall not be construed to waive or nullify any rights that any person
not a signatory to this decree may have under applicable law. Except as provided
in Paragraph 95 (Waiver of Claims Against De Micromis Parties), each of the
Parties expressly reserves any and all rights (including, but not limited to,
any right to contribution), defenses, claims, demands, and causes of action
which each Party may have with respect to any matter, transaction, or occurrence
relating in any way to the Site against any person not a Party hereto.

         101.     Statutory Contribution Protection. The Parties agree, and by
entering this Consent Decree this Court finds, that the Settling Defendants are
entitled, as of the Effective Date, to protection from contribution actions or
claims as provided by CERCLA Section 113(f)(2), 42 U.S.C. Section 9613(f)(2) for
matters addressed in this Consent Decree. Settling Defendants' Related Parties
are also entitled, as of the Effective Date, to protection from contribution
actions or claims as provided by Section 113(f)(2) of CERCLA, 42 U.S.C. Section
9613(f)(2), for "matters addressed" in this Consent Decree. For the purpose of
this Paragraph 101, and except as provided by Subparagraph 98.e.(8), the
"matters addressed" by this Consent Decree are the OU1 Response Activities and
Costs.

         102.     Credit for Payments Made and Work Performed.

                  a.       The Parties agree and acknowledge that the Plaintiffs
shall recognize that the Settling Defendants are entitled to full credit,
applied against their liabilities for response costs and natural resource
damages at the Site, for: (i) the EPA Past Cost Payments, (ii) the State Past
Cost Payments; (iii) the DOJ Past Cost Payments; (iv) the NRD Commitment; (v)
all Specified Future Response Costs reimbursed under Paragraph 54; (vi) all
response costs incurred and paid by the Settling Defendants in performing the
Remedial Design under the July 2003

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<PAGE>

AOC and this Consent Decree; and (vii) the Allowable RD/RA Costs paid or
reimbursed from the Escrow Account under Paragraph 11 of this Consent Decree and
Appendix C; provided, however, that the credit ultimately recognized shall take
into account and shall not include the amount of any recoveries by Settling
Defendants of any portion of such payments from other liable persons, such as
through a recovery under Sections 107 and 113 of CERCLA, 42 U.S.C. Sections 9607
and 9613. With respect to the Allowable RD/RA Costs, the recognized credit shall
take into account and shall not include the amount of any disbursements from the
Disbursement Special Account to the Escrow Account pursuant to Paragraph 10 of
this Consent Decree and Appendix B. With respect to the NRD Commitment, the
recognized credit may take into account, as appropriate, the value of
restoration projects funded by the NRD Commitment.

                  b.       As provided by Paragraph 30 of the API/NCR Consent
Decree, the Plaintiffs shall recognize that Appleton Papers Inc. and NCR
Corporation are entitled to full credit, applied against their liabilities for
response costs at the Site, for the funds deposited in and disbursed from the
Disbursement Special Account pursuant to Paragraph 10 of this Consent Decree and
Appendix B. In addition, the Settling Defendants hereby agree and acknowledge
that they shall recognize that Appleton Papers Inc. and NCR Corporation are
entitled to full credit, applied against their liabilities for response costs at
the Site, for the funds deposited in and disbursed from the Disbursement Special
Account pursuant to Paragraph 10 of this Consent Decree and Appendix B.

         103.     The Settling Defendants agree that with respect to any suit or
claim for contribution brought by them for matters related to this Consent
Decree they will notify the United States and the State in writing no later than
20 days prior to the initiation of such suit or claim.

                                       91
<PAGE>

         104.     The Settling Defendants also agree that with respect to any
suit or claim for contribution brought against them for matters related to this
Consent Decree they will notify in writing the United States and the State
within 20 days of service of the complaint on them. In addition, Settling
Defendants shall notify the United States and the State within 20 days of
service or receipt of any Motion for Summary Judgment and within 20 days of
receipt of any order from a court setting a case for trial.

         105.     Waiver of Claim-Splitting Defenses. In any subsequent
administrative or judicial proceeding initiated by the United States or the
State for injunctive relief, recovery of response costs, or other appropriate
relief relating to the Site, Settling Defendants shall not assert, and may not
maintain, any defense or claim based upon the principles of waiver, res
judicata, collateral estoppel, issue preclusion, claim-splitting, or other
defenses based upon any contention that the claims raised by the United States
or the State in the subsequent proceeding were or should have been brought in
the instant case; provided, however, that nothing in this Paragraph affects the
enforceability of the covenants not to sue set forth in Section XXII (Covenants
Not to Sue by Plaintiffs).

                           XXVI. ACCESS TO INFORMATION

         106.     Settling Defendants shall provide to the Response Agencies,
upon request, copies of all documents and information within their possession or
control or that of their contractors or agents relating to activities at OU1 or
to the implementation of this Consent Decree, including, but not limited to,
sampling, analysis, chain of custody records, manifests, trucking logs,
receipts, reports, sample traffic routing, correspondence, or other documents or
information related to the Response Work. Settling Defendants shall also make
available to the Response Agencies, for purposes of investigation, information
gathering, or testimony, their employees, agents, or

                                       92
<PAGE>

representatives with knowledge of relevant facts concerning the performance of
the Response Work.

         107.     Business Confidential and Privileged Documents.

                  a.       Settling Defendants may assert business
confidentiality claims covering part or all of the documents or information
submitted to Plaintiffs under this Consent Decree to the extent permitted by and
in accordance with Section 104(e)(7) of CERCLA, 42 U.S.C. Section 9604(e)(7),
and 40 C.F.R. Section 2.203(b). Documents or information determined to be
confidential by EPA will be afforded the protection specified in 40 C.F.R. Part
2, Subpart B. If no claim of confidentiality accompanies documents or
information when they are submitted to EPA and the State, or if EPA has notified
Settling Defendants that the documents or information are not confidential under
the standards of Section 104(e)(7) of CERCLA, the public may be given access to
such documents or information without further notice to Settling Defendants.

                  b.       The Settling Defendants may assert that certain
documents, records and other information are privileged under the
attorney-client privilege or any other privilege recognized by federal law. If
the Settling Defendants assert such a privilege in lieu of providing documents,
they shall provide the Plaintiffs with the following: (i) the title of the
document, record, or information; (ii) the date of the document, record, or
information; (iii) the name and title of the author of the document, record, or
information; (iv) the name and title of each addressee and recipient; (v) a
description of the contents of the document, record, or information: and (vi)
the privilege asserted by Settling Defendants. However, no documents, reports or
other information created or generated pursuant to the requirements of the
Consent Decree shall be withheld on the grounds that they are privileged.

                                       93
<PAGE>

         108.     No claim of confidentiality shall be made with respect to any
data generated pursuant to the requirements of this Consent Decree, including,
but not limited to, all sampling, analytical, monitoring, hydrogeologic,
scientific, chemical, or engineering data, or any other documents or information
evidencing conditions at or around the Site.

                           XXVII. RETENTION OF RECORDS

         109.     Until 10 years after the Settling Defendants' receipt of EPA's
notification of Certification of Completion of the Response Work pursuant to
Paragraph 45.b, each Settling Defendant shall preserve and retain all records
and documents now in its possession or control or which come into its possession
or control that relate in any manner to the performance of the Response Work or
liability of any person for response actions conducted and to be conducted at
the Site, regardless of any corporate retention policy to the contrary. Until 10
years after the Settling Defendants' receipt of EPA's notification of
Certification of Completion of the Response Work pursuant to Paragraph 45.b,
Settling Defendants shall also instruct their contractors and agents to preserve
all documents, records, and information of whatever kind, nature or description
relating to the performance of the Response Work. At any time more than 5 years
after Certification of Completion of Remedial Action by EPA pursuant to Consent
Decree Subparagraph 44.b, the Settling Defendants may request Plaintiffs' assent
to terminate the document retention period earlier for specified categories of
records and documents. If Plaintiffs assent to any such request, the Plaintiffs
assent shall be given in writing.

         110.     At the conclusion of this document retention period, Settling
Defendants shall notify the United States and the State at least 90 days prior
to the destruction of any such records or documents, and, upon request by the
United States or the State, Settling Defendants shall deliver any such records
or documents to EPA or WDNR. The Settling Defendants may assert

                                       94
<PAGE>

that certain documents, records and other information are privileged under the
attorney-client privilege or any other privilege recognized by federal law. If
the Settling Defendants assert such a privilege, they shall provide the
Plaintiffs with the following: (i) the title of the document, record, or
information; (ii) the date of the document, record, or information; (iii) the
name and title of the author of the document, record, or information; (iv) the
name and title of each addressee and recipient; (v) a description of the subject
of the document, record, or information; and (vi) the privilege asserted by
Settling Defendants. However, no documents, reports or other information created
or generated pursuant to the requirements of the Consent Decree shall be
withheld on the grounds that they are privileged.

         111.     Each Settling Defendant hereby certifies individually that, to
the best of its knowledge and belief, after thorough inquiry, it has not
altered, mutilated, discarded, destroyed or otherwise disposed of any records,
documents or other information relating to its potential liability regarding the
Site since notification of potential liability by the United States or the State
or the filing of suit against it regarding the Site and that it has fully
complied with any and all requests for information pursuant to Section 104(e)
and 122(e) of CERCLA, 42 U.S.C. Sections 9604(e) and 9622(e), and Section 3007
of RCRA, 42 U.S.C. Section 6927.

                         XXVIII. NOTICES AND SUBMISSIONS

         112.     Whenever, under the terms of this Consent Decree, written
notice is required to be given or a report or other document is required to be
sent by one Party to another, it shall be directed to the individuals at the
addresses specified below, unless those individuals or their successors give
notice of a change to the other Parties in writing. All notices and submissions
shall be considered effective upon receipt, unless otherwise provided. Written
notice as specified

                                       95
<PAGE>

herein shall constitute complete satisfaction of any written notice requirement
of the Consent Decree with respect to the United States, the State, and the
Settling Defendants, respectively.

As to the United States:

         As to DOJ:

         Chief, Environmental Enforcement Section
         Environment and Natural Resources Division
         U.S. Department of Justice (DJ # 90-11-2-1045Z)

         P.O. Box 7611                     1425 New York Avenue, NW - 13th Floor
         Washington, D.C. 20044-7611       Washington, DC 20005

         As to EPA:

         Director, Superfund Division
         U.S. Environmental Protection Agency
         Region 5
         77 West Jackson Blvd.
         Chicago, IL 60604

         As to DOI:

         Office of the Solicitor
         Division of Parks and Wildlife
         U.S. Department of the Interior
         1849 C Street, N.W.
         Washington, DC 20240

As to the State:

         As to WDOJ:

         Jerry L. Hancock
         Assistant Attorney General
         Wisconsin Department of Justice

         P.O. Box 7857                     17 West Main Street
         Madison, WI 53707-7857            Madison, WI 53702

                                       96
<PAGE>

         As to WDNR:

         Greg Hill
         State Project Coordinator
         Wisconsin Department of Natural Resources

         P.O. Box 7921                       101 S. Webster St.
         Madison, WI 53707-7921              Madison, WI 53703

As to the Settling Defendants:

         As to the P. H. Glatfelter Company

         Patrick H. Zaepfel
         Environmental Counsel
         P. H. Glatfelter Company
         96 South George St., Suite 420
         York, PA 17401

         with a copy to:

         David G. Mandelbaum
         Ballard Spahr Andrews & Ingersoll, LLP
         1735 Market Street, 51st Floor
         Philadelphia, PA 19103-7599

         As to WTM I Company:

         J.P. Causey Jr.
         Vice President & Corporate Secretary/WTM I Company
         c/o Chesapeake Corporation
         1021 E. Cary Street
         Box 2350
         Richmond, VA 23218-2350

         with a copy to:

         Nancy K. Peterson
         Quarles & Brady LLP
         411 East Wisconsin Avenue, Suite 2040
         Milwaukee, Wisconsin 53202-4497

                                       97
<PAGE>

                              XXIX. EFFECTIVE DATE

         113.     The effective date of this Consent Decree shall be the date
upon which this Consent Decree is entered by the Court; provided, however, that
the Settling Defendants hereby agree that they shall be bound upon the Date of
Lodging to comply with obligations of the Settling Defendants specified in this
Consent Decree as accruing upon the Date of Lodging. In the event the Plaintiffs
withdraw or withhold consent to this Consent Decree before entry, or the Court
declines to enter the Consent Decree, then the preceding requirement to comply
with requirements of this Consent Decree upon the Date of Lodging shall
terminate; provided, however, that the parties hereby agree that even after any
such termination: (i) the Plaintiffs shall be entitled to retain any and all
payments already made to Plaintiffs under this agreement, and the provisions of
Section XVII (Payments) concerning Plaintiffs' retention and use of such
payments shall survive termination; and (ii) Plaintiffs shall continue to
recognize that the Settling Defendants are entitled to full credit for payments
already made and work already performed under this agreement as provided by
Subparagraph 102.a. In the event the Plaintiffs withdraw or withhold consent to
this Consent Decree before entry, or the Court declines to enter the Consent
Decree, the Parties agree that the unexpended balance of the Escrow Account
shall be disbursed to the Settling Defendants at their request.

                         XXX. RETENTION OF JURISDICTION

         114.     This Court retains jurisdiction over both the subject matter
of this Consent Decree and the Settling Defendants for the duration of the
performance of the terms and provisions of this Consent Decree for the purpose
of enabling any of the Parties to apply to the Court at any time for such
further order, direction, and relief as may be necessary or appropriate for the

                                       98
<PAGE>

construction or modification of this Consent Decree, or to effectuate or enforce
compliance with its terms, or to resolve disputes in accordance with Section XX
(Dispute Resolution) hereof.

                                XXXI. APPENDICES

         115.     The following appendices are attached to and incorporated into
this Consent Decree:

         "Appendix A" is the Trustee Council Resolution relating to this Consent
Decree.

         "Appendix B" is the Appendix addressing Management of the Disbursement
Special Account.

         "Appendix C" is the Appendix addressing Escrow Account Management.

         "Appendix D" is the form of Escrow Agreement.

         "Appendix E" is the Appendix addressing Special Procedures for
Restoration Work.

         "Appendix F" is the July 2003 AOC (including the SOW for Remedial
Design).

         "Appendix G" is the map of OU1.

         "Appendix H" is the ROD.

         "Appendix I" is the Statement of Work for the Remedial Action.

                            XXXII. COMMUNITY RELATIONS

         116.     Settling Defendants shall propose to the Response Agencies the
Settling Defendants' participation in the community relations plan to be
developed by the Response Agencies. The Response Agencies will determine the
appropriate role for the Settling Defendants under the Plan. Settling Defendants
shall also cooperate with the Response Agencies in providing information
regarding the Response Work to the public. As requested by the Response
Agencies, Settling Defendants shall participate in the preparation of such
information

                                       99
<PAGE>

for dissemination to the public and in public meetings which may be held or
sponsored by the Response Agencies to explain activities at or relating to OU1.

                              XXXIII. MODIFICATION

         117.     Schedules specified in this Consent Decree for completion of
the Response Work may be modified by agreement of the Response Agencies and the
Settling Defendants. All such modifications shall be made in writing.

         118.     Except as provided in Paragraph 15 ("Modification of the SOW
or related Work Plans"), no material modifications shall be made to the SOW
without written notification to and written approval of the United States, the
State, Settling Defendants, and the Court. Modifications to the SOW that do not
materially alter that document may be made by written agreement between the
Response Agencies and the Settling Defendants.

         119.     Nothing in this Decree shall be deemed to alter the Court's
power to enforce, supervise or approve modifications to this Consent Decree.

                XXXIV. LODGING AND OPPORTUNITY FOR PUBLIC COMMENT

         120.     This Consent Decree shall be lodged with the Court for a
period of not less than thirty (30) days for public notice and comment in
accordance with Section 122(d)(2) of CERCLA, 42 U.S.C. Section 9622(d)(2), and
28 C.F.R. Section 50.7. The United States reserves the right to withdraw or
withhold its consent if the comments regarding the Consent Decree disclose facts
or considerations which indicate that the Consent Decree is inappropriate,
improper, or inadequate. Settling Defendants consent to the entry of this
Consent Decree without further notice.

         121.     If for any reason the Court should decline to approve this
Consent Decree in the form presented, this agreement is voidable at the sole
discretion of any Party and the terms of the agreement may not be used as
evidence in any litigation between the Parties.

                                       100
<PAGE>

                            XXXV. SIGNATORIES/SERVICE

         122.     The undersigned representatives of each Settling Defendant,
the undersigned representatives of the State, and the Assistant Attorney General
for the Environment and Natural Resources Division of the United States
Department of Justice each certify that he or she is fully authorized to enter
into the terms and conditions of this Consent Decree and to execute and legally
bind such Party to this document.

         123.     Each Settling Defendant hereby agrees not to oppose entry of
this Consent Decree by this Court or to challenge any provision of this Consent
Decree unless the United States has notified the Settling Defendants in writing
that it no longer supports entry of the Consent Decree.

         124.     Each Settling Defendant shall identify, on the attached
signature page, the name, address and telephone number of an agent who is
authorized to accept service of process by mail on behalf of that Party with
respect to all matters arising under or relating to this Consent Decree.
Settling Defendants hereby agree to accept service in that manner and to waive
the formal service requirements set forth in Rule 4 of the Federal Rules of
Civil Procedure and any applicable local rules of this Court, including, but not
limited to, service of a summons.

                                       101
<PAGE>

                              XXXVI. FINAL JUDGMENT

         125.     Upon approval and entry of this Consent Decree by the Court,
this Consent Decree shall constitute a final judgment between and among the
United States, the State, and the Settling Defendants. The Court finds that
there is no just reason for delay and therefore enters this judgment as a final
judgment under Fed. R. Civ. P. 54 and 58.

SO ORDERED THIS___DAY OF________________, 200__.

                                                    ____________________________

                                                    United States District Judge

                                       102
<PAGE>

THE UNDERSIGNED PARTY enters into this Consent Decree in the matter of United
States and the State of Wisconsin v. P. H. Glatfelter Company and WTM I Company
(E.D. Wis.), relating to Operable Unit 1 of the Lower Fox River and Green Bay
Site.

                                     FOR THE UNITED STATES OF AMERICA

9.5.03                               /s/ Thomas L. Sansonetti
---------                            -------------------------------------------
Date                                 THOMAS L. SANSONETTI
                                     Assistant Attorney General
                                     Environment and Natural Resources Division
                                     U.S. Department of Justice
                                     Washington, D.C. 20530

9/5/2003                             /s/ Randall M. Stone
---------                            -------------------------------------------
Date                                 RANDALL M. STONE, Trial Attorney
                                     JEFFREY A. SPECTOR, Trial Attorney
                                     DANIEL C. BECKHARD, Senior Counsel
                                     Environmental Enforcement Section
                                     Environment and Natural Resources Division
                                     U.S. Department of Justice
                                     P.O. Box 7611
                                     Washington, D.C. 20044-7611

                                     STEVEN M. BISKUPIC
                                     United States Attorney

                                     MATTHEW V. RICHMOND
                                     Assistant United States Attorney
                                     Eastern District of Wisconsin
                                     U.S. Courthouse and Federal Building
                                     Room 530
                                     517 E. Wisconsin Avenue
                                     Milwaukee, WI  53202

<PAGE>

THE UNDERSIGNED PARTY enters into this Consent Decree in the matter of United
States and the State of Wisconsin v. P. H. Glatfelter Company and WTM I Company
(E.D. Wis.), relating to Operable Unit 1 of the Lower Fox River and Green Bay
Site.

9/5/03                               /s/ Thomas V. Skinner
---------                            -------------------------------------------
Date                                 THOMAS V. SKINNER
                                     Regional Administrator
                                     U.S. Environmental Protection Agency
                                     Region 5
                                     77 West Jackson Boulevard
                                     Chicago, IL 60604

9/02/03                              /s/ Roger M. Grimes
---------                            -------------------------------------------
Date                                 ROGER M. GRIMES
                                     Associate Regional Counsel
                                     U.S. Environmental Protection Agency
                                     Region 5
                                     77 West Jackson Boulevard
                                     Chicago, IL 60604

<PAGE>

THE UNDERSIGNED PARTY enters into this Consent Decree in the matter of United
States and the State of Wisconsin v. P. H. Glatfelter Company and WTM I Company
(E.D. Wis.), relating to Operable Unit 1 of the Lower Fox River and Green Bay
Site.

                                     FOR THE STATE OF WISCONSIN

9/2/03                               /s/ P. Scott Hassett
---------                            -------------------------------------------
Date                                 P. SCOTT HASSETT
                                     Secretary
                                     Wisconsin Department of Natural Resources
                                     101 South Webster Street
                                     Madison, WI 53703

7/3/03                               /s/ Jerry L. Hancock
---------                            -------------------------------------------
Date                                 JERRY L. HANCOCK
                                     Assistant Attorney General
                                     Wisconsin Department of Justice
                                     17 West Main Street
                                     Madison, WI 53702

<PAGE>

THE UNDERSIGNED PARTY enters into this Consent Decree in the matter of United
States and the State of Wisconsin v. P. H. Glatfelter Company and WTM I Company
(E.D. Wis.), relating to Operable Unit 1 of the Lower Fox River and Green Bay
Site.

                                     FOR P. H. GLATFELTER COMPANY

08/26/03                             Signature: George H. Glatfelter II
--------                                        --------------------------------
Date                                 Name (print): George H. Glatfelter II
                                     Title:        Chairman & C.E.O.
                                     Address:      96 S. George St., Suite 500
                                                   York, PA 17401

Agent Authorized to Accept Service on Behalf of Above-signed Party:

                                     Name (print): Patrick H. Zaepfel
                                                   --------------------
                                     Title: Environmental Counsel
                                     Address: 96 South George St., Suite 420
                                              York, PA 17401
                                     Ph. Number: (717) 225-2778

<PAGE>

THE UNDERSIGNED PARTY enters into this Consent Decree in the matter of United
States and the State of Wisconsin v. P. H. Glatfelter Company and WTM I Company
(E.D. Wis.), relating to Operable Unit 1 of the Lower Fox River and Green Bay
Site.

                                     FOR WTM I COMPANY

August 26, 2003                      Signature: J.P. Causey Jr.
---------------                                 --------------------------------
Date                                 Name (print): J.P. Causey Jr.
                                     Title:        Vice President
                                     Address:      1021 East Cary St., 22d Floor
                                                   Box 2350
                                                   Richmond, Virginia 23218

Agent Authorized to Accept Service on Behalf of Above-signed Party:

                                  Name (print): J.P. Causey Jr.
                                                --------------------
                                  Title:        Vice President
                                  Address:      c/o Chesapeake Corporation
                                                1021 East Cary Street, 22d Floor
                                                Box 2350, Richmond, VA 23218
                                  Ph. Number:   804 697-1166--------------------------------------------------------------------------------

                        RESIDENTIAL FUNDING CORPORATION,
                               as Master Servicer

                            HOME LOAN TRUST 2003-HI3,
                                    as Issuer

                                       and

                               JPMORGAN CHASE BANK
                              as Indenture Trustee

                             ----------------------

                               SERVICING AGREEMENT
                         Dated as of September 25, 2003
                             ----------------------

                                   Home Loans

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<TABLE>
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                                TABLE OF CONTENTS

                                                                                          Page

                                    ARTICLE I

Definitions
<S>             <C>                                                                         <C>
        Section 1.01. Definitions............................................................1
        Section 1.02. Other Definitional Provisions..........................................1
        Section 1.03. Interest Calculations..................................................2

                                   ARTICLE II

Representations and Warranties
        Section 2.01. Representations and Warranties Regarding the Master Servicer...........3
        Section 2.02. Representations and Warranties of the Issuer...........................4
        Section 2.03. Enforcement of Representations and Warranties..........................4

                                   ARTICLE III

Administration and Servicing
of Home Loans
        Section 3.01. The Master Servicer....................................................6
        Section 3.02. Collection of Certain Home Loan Payments...............................8
        Section  3.03.Withdrawals from the Custodial Account................................11
        Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses.........12
        Section 3.05. Modification Agreements; Release or Substitution of Lien..............13
        Section 3.06. Trust Estate; Related Documents.......................................15
        Section 3.07. Realization Upon Defaulted Home Loans; Loss Mitigation................16
        Section 3.08. Issuer and Indenture Trustee to Cooperate.............................18
        Section 3.09. Servicing Compensation; Payment of Certain Expenses by Master Servicer
                ............................................................................19
        Section 3.10. Annual Statement as to Compliance.....................................19
        Section 3.11. Annual Servicing Report...............................................19
        Section 3.12. Access to Certain Documentation and Information Regarding the Home
               Loans........................................................................20
        Section 3.13. Maintenance of Certain Servicing Insurance Policies...................20
        Section 3.14. Information Required by the Internal Revenue Service and Reports of
               Foreclosures and Abandonments of Mortgaged Property..........................20
        Section 3.15. Optional Repurchase of Defaulted Home Loans...........................20
        Section 4.01. Statements to Securityholders.........................................22
        Section 4.02. Tax Reporting.........................................................24
        Section 4.03. Calculation of Adjusted Issue Price...................................24

                                              i

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                                    ARTICLE V

Payment Account
        Section 5.01. Payment Account.......................................................25

                                   ARTICLE VI

The Master Servicer
        Section 6.01. Liability of the Master Servicer......................................26
        Section 6.02. Merger or Consolidation of, or Assumption of the Obligations of, the Master
               Servicer.....................................................................26
        Section 6.03. Limitation on Liability of the Master Servicer and Others.............26
        Section 6.04. Master Servicer Not to Resign.........................................27
        Section 6.05. Delegation of Duties..................................................28

                                   ARTICLE VII

Default
        Section 7.01. Servicing Default.....................................................30
        Section 7.02. Indenture Trustee to Act; Appointment of Successor....................32
        Section 7.03. Notification to Securityholders.......................................33

                                  ARTICLE VIII

Miscellaneous Provisions
        Section 8.01. Amendment.............................................................34
        SECTION 8.02. GOVERNING LAW.........................................................34
        Section 8.03. Notices...............................................................34
        Section 8.04. Severability of Provisions............................................35
        Section 8.05. Third-Party Beneficiaries.............................................35
        Section 8.06. Counterparts..........................................................35
        Section 8.07. Effect of Headings and Table of Contents..............................35
        Section 8.08. Termination Upon Purchase by the Master Servicer or Liquidation of All
               Home Loans; Partial Redemption...............................................35
        Section 8.09. Certain Matters Affecting the Indenture Trustee.......................36
        Section 8.10. Owner Trustee Not Liable for Related Documents........................36

EXHIBIT A-1 - GROUP I LOANS         .......................................................A-1
EXHIBIT A-2 - GROUP II LOANS        .......................................................A-2
EXHIBIT B - POWER OF ATTORNEY       B-1
EXHIBIT C - FORM OF REQUEST FOR RELEASE ...................................................C-1
EXHIBIT D - FORM OF FORM 10-K CERTIFICATE .................................................D-1
</TABLE>

                                       ii

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               This is a Servicing  Agreement,  dated as of  September  25, 2003
(the "Servicing Agreement"),  among Residential Funding Corporation (the "Master
Servicer"),  the Home Loan Trust 2003-HI3 (the "Issuer") and JPMorgan Chase Bank
(the "Indenture Trustee").

                                 W I T N E S S E T H T H A T:

               WHEREAS,  pursuant  to  the  terms  of  the  Home  Loan  Purchase
Agreement, Residential Funding Corporation (in its capacity as Seller) will sell
to the  Depositor  the Home Loans  together  with the Related  Documents  on the
Closing Date;

               WHEREAS,  the  Depositor  will sell the Home Loans and all of its
rights under the Home Loan Purchase  Agreement to the Issuer,  together with the
Related Documents on the Closing Date;

               WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer
will  issue  and  transfer  to  or  at  the  direction  of  the  Depositor,  the
Certificates;

     WHEREAS,  pursuant to the terms of the Indenture, the Issuer will issue and
transfer to or at the direction of the Depositor, the Notes; and

               WHEREAS,  pursuant to the terms of this Servicing Agreement,  the
Master  Servicer  will  service  the Home Loans  directly or through one or more
Subservicers;

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

                                          ARTICLE I

                                         Definitions

               Section  1.01.  Definitions.  For all purposes of this  Servicing
Agreement,  except as otherwise  expressly provided herein or unless the context
otherwise  requires,  capitalized  terms not otherwise defined herein shall have
the meanings  assigned to such terms in the Definitions  contained in Appendix A
to the Indenture dated September 25, 2003 (the  "Indenture"),  between Home Loan
Trust 2003-HI3, as issuer, and JPMorgan Chase Bank, as indenture trustee,  which
is incorporated by reference  herein.  All other  capitalized  terms used herein
shall have the meanings specified herein.

               Section  1.02.  Other  Definitional  Provisions.  (a)  All  terms
defined in this Servicing Agreement shall have the defined meanings when used in
any  certificate  or other  document  made or delivered  pursuant  hereto unless
otherwise defined therein.

               (b) As used in this Servicing Agreement and in any certificate or
other document made or delivered  pursuant hereto or thereto,  accounting  terms
not defined in this  Servicing  Agreement  or in any such  certificate  or other
document, and accounting terms partly defined in this

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Servicing Agreement or in any such certificate or other document,  to the extent
not defined,  shall have the respective  meanings given to them under  generally
accepted accounting principles. To the extent that the definitions of accounting
terms in this Servicing  Agreement or in any such  certificate or other document
are  inconsistent  with the  meanings  of such terms  under  generally  accepted
accounting principles,  the definitions contained in this Servicing Agreement or
in any such certificate or other document shall control.

               (c) The  words  "hereof,"  "herein,"  "hereunder"  and  words  of
similar  import  when  used in this  Servicing  Agreement  shall  refer  to this
Servicing  Agreement  as a whole  and not to any  particular  provision  of this
Servicing Agreement;  Section and Exhibit references contained in this Servicing
Agreement  are  references  to Sections  and  Exhibits  in or to this  Servicing
Agreement  unless  otherwise  specified;  and the term  "including"  shall  mean
"including without limitation".

               (d) The  definitions  contained in this  Servicing  Agreement are
applicable  to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.

               (e) Any agreement,  instrument or statute  defined or referred to
herein or in any  instrument or  certificate  delivered in  connection  herewith
means  such  agreement,  instrument  or  statute  as from time to time  amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all  attachments  thereto and  instruments  incorporated  therein;
references to a Person are also to its permitted successors and assigns.

               Section 1.03. Interest Calculations. All calculations of interest
hereunder  that are made in respect of the Loan  Balance of a Home Loan shall be
made in accordance  with the Mortgage Note. All  calculations of interest on the
Securities  (other than the Class A-I-1  Notes)  shall be made on the basis of a
30-day month and a year assumed to consist of 360 days.  Calculation of interest
on the Class A-I-1 Notes shall be made on the basis of the actual number of days
in the Interest  Accrual  Period and a year assumed to consist of 360 days.  The
calculation  of the  Servicing  Fee shall be made on the basis of a 30-day month
and a year  assumed  to  consist  of 360 days.  All  dollar  amounts  calculated
hereunder shall be rounded to the nearest penny with one-half of one penny being
rounded up.

                                              2

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                                   ARTICLE II

                         Representations and Warranties

               Section 2.01. Representations and Warranties Regarding the Master
Servicer.  The Master Servicer represents and warrants to the Issuer and for the
benefit  of the  Indenture  Trustee,  as pledgee  of the Home  Loans,  as of the
Cut-off Date:

               (i) The Master Servicer is a corporation duly organized,  validly
          existing and in good standing  under the laws of the State of Delaware
          and has the  corporate  power to own its  assets and to  transact  the
          business in which it is currently engaged. The Master Servicer is duly
          qualified  to do  business  as a  foreign  corporation  and is in good
          standing in each  jurisdiction  in which the character of the business
          transacted  by it or  properties  owned or leased by it requires  such
          qualification  and in which the  failure  to so  qualify  would have a
          material  adverse  effect  on the  business,  properties,  assets,  or
          condition (financial or other) of the Master Servicer;

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

               (iii) The Master  Servicer is not  required to obtain the consent
          of any other Person or any consent, license, approval or authorization
          from, or registration or declaration with, any governmental authority,
          bureau  or  agency  in  connection   with  the  execution,   delivery,
          performance,  validity or enforceability of this Servicing  Agreement,
          except  for such  consent,  license,  approval  or  authorization,  or
          registration or declaration,  as shall have been obtained or filed, as
          the case may be;

               (iv) The execution and delivery of this  Servicing  Agreement and
          the performance of the transactions  contemplated hereby by the Master
          Servicer  will  not  violate  any  provision  of any  existing  law or
          regulation  or any  order or decree  of any  court  applicable  to the
          Master Servicer or any provision of the  Certificate of  Incorporation
          or Bylaws of the Master  Servicer,  or constitute a material breach of
          any  mortgage,  indenture,  contract or other  agreement  to which the
          Master  Servicer  is a party or by which the  Master  Servicer  may be
          bound; and

               (v) No litigation or  administrative  proceeding of or before any
          court,  tribunal or governmental body is currently pending,  or to the
          knowledge of the Master

                                              3

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        Servicer  threatened,   against  the  Master  Servicer  or  any  of  its
        properties or with respect to this Servicing Agreement or the Securities
        which in the opinion of the Master Servicer has a reasonable  likelihood
        of  resulting  in  a  material   adverse  effect  on  the   transactions
        contemplated by this Servicing Agreement.

               The foregoing  representations  and warranties  shall survive any
termination of the Master Servicer hereunder.

               Section 2.02.  Representations  and Warranties of the Issuer. The
Issuer hereby represents and warrants to the Master Servicer and for the benefit
of the Indenture Trustee, as pledgee of the Home Loans, as of the Cut-off Date:

               (i) The  Issuer is a  statutory  trust  duly  formed  and in good
          standing  under the laws of the State of Delaware  and has full power,
          authority  and legal  right to  execute  and  deliver  this  Servicing
          Agreement  and  to  perform  its  obligations   under  this  Servicing
          Agreement,  and has  taken  all  necessary  action  to  authorize  the
          execution, delivery and performance by it of this Servicing Agreement;
          and

               (ii) The execution  and delivery by the Issuer of this  Servicing
          Agreement and the performance by the Issuer of its  obligations  under
          this Servicing  Agreement will not violate any provision of any law or
          regulation governing the Issuer or any order, writ, judgment or decree
          of  any  court,   arbitrator  or  governmental   authority  or  agency
          applicable  to  the  Issuer  or any of  its  assets.  Such  execution,
          delivery,  authentication  and performance  will not conflict with, or
          result in a breach or violation of, any mortgage, deed of trust, lease
          or other agreement or instrument to which the Issuer is bound.

               Section 2.03. Enforcement of Representations and Warranties.  The
Master  Servicer,  on behalf of and subject to the  direction  of the  Indenture
Trustee,  as  pledgee  of the Home  Loans,  or the  Issuer,  shall  enforce  the
representations  and warranties of the Seller pursuant to the Home Loan Purchase
Agreement. Upon the discovery by the Seller, the Depositor, the Master Servicer,
the Indenture  Trustee,  the Credit Enhancer,  the Issuer, or any Custodian of a
breach  of any of the  representations  and  warranties  made in the  Home  Loan
Purchase  Agreement or of the existence of a Repurchase Event, in respect of any
Home  Loan  which  materially  and  adversely   affects  the  interests  of  the
Securityholders  or the Credit  Enhancer,  the party  discovering such breach or
existence  shall give prompt  written  notice to the other  parties.  The Master
Servicer  shall  promptly  notify the  Seller of such  breach or  existence  and
request  that,  pursuant to the terms of the Home Loan Purchase  Agreement,  the
Seller either (i) cure such breach or Repurchase Event in all material  respects
within 45 days (with respect to a breach of the  representations  and warranties
contained in Section  3.1(a) of the Home Loan  Purchase  Agreement or Repurchase
Event)  or 90  days  (with  respect  to a  breach  of  the  representations  and
warranties contained in Section 3.1(b) of the Home Loan Purchase Agreement) from
the date the Seller was  notified  of such  breach or  Repurchase  Event or (ii)
purchase such Home Loan from the Issuer at the price and in the manner set forth
in Section 3.1(c) of the Home Loan Purchase Agreement;  provided that the Seller
shall,  subject to compliance with all the conditions set forth in the Home Loan
Purchase Agreement, have the option to substitute

                                              4

<PAGE>

an Eligible  Substitute  Loan or Loans for such Home Loan. In the event that the
Seller elects to substitute  one or more Eligible  Substitute  Loans pursuant to
Section 3.1(c) of the Home Loan Purchase Agreement,  the Seller shall deliver to
the Issuer with respect to such Eligible Substitute Loans, the original Mortgage
Note, the Mortgage,  and such other  documents and agreements as are required by
the Home  Loan  Purchase  Agreement.  Payments  due  with  respect  to  Eligible
Substitute  Loans in the month of  substitution  shall not be transferred to the
Issuer and will be retained by the Master  Servicer  and  remitted by the Master
Servicer to the Seller on the next succeeding Payment Date provided a payment at
least equal to the  applicable  Monthly  Payment has been received by the Issuer
for such month in respect of the Home Loan to be  removed.  The Master  Servicer
shall amend or cause to be amended the Home Loan Schedule to reflect the removal
of such Home Loan and the substitution of the Eligible  Substitute Loans and the
Master  Servicer  shall  promptly  deliver the amended Home Loan Schedule to the
Owner Trustee and the Indenture Trustee.

               It is understood  and agreed that the obligation of the Seller to
cure such breach or purchase or substitute for such Home Loan as to which such a
breach  has  occurred  and  is  continuing  shall  constitute  the  sole  remedy
respecting  such breach  available to the Issuer and the Indenture  Trustee,  as
pledgee of the Home Loans,  against the Seller.  In connection with the purchase
of or substitution for any such Home Loan by the Seller, the Issuer shall assign
to the Seller all of its right,  title and  interest in respect of the Home Loan
Purchase Agreement  applicable to such Home Loan. Upon receipt of the Repurchase
Price, or upon completion of such substitution, the Master Servicer shall notify
the  Custodian and then the  Custodian  shall deliver the Mortgage  Files to the
Master  Servicer,  together  with  all  relevant  endorsements  and  assignments
prepared by the Master Servicer which the Indenture Trustee shall execute.

                                              5

<PAGE>

                                   ARTICLE III

                          Administration and Servicing
                                  of Home Loans

               Section 3.01. The Master Servicer.  (a) The Master Servicer shall
service  and  administer  the Home  Loans in  accordance  with the terms of this
Servicing  Agreement,  following such  procedures as it would employ in its good
faith business  judgment and which are normal and usual in its general  mortgage
servicing activities,  and shall have full power and authority,  acting alone or
through  a  subservicer,  to do any and  all  things  in  connection  with  such
servicing and administration which it may deem necessary or desirable,  it being
understood,  however,  that  the  Master  Servicer  shall  at all  times  remain
responsible to the Issuer and the Indenture  Trustee for the  performance of its
duties and obligations  hereunder in accordance  with the terms hereof.  Without
limiting the generality of the foregoing,  the Master  Servicer shall  continue,
and is hereby authorized and empowered by the Issuer and the Indenture  Trustee,
as pledgee of the Home Loans, to execute and deliver,  on behalf of itself,  the
Issuer,  the  Indenture  Trustee  or any of  them,  any and all  instruments  of
satisfaction or cancellation,  or of partial or full release or discharge, or of
consent  to  modification  in  connection  with  a  proposed  conveyance,  or of
assignment of any Mortgage and Mortgage Note in connection  with the  repurchase
of a Home Loan and all other  comparable  instruments  with  respect to the Home
Loans and with  respect  to the  Mortgaged  Properties,  or with  respect to the
modification  or  re-recording  of a Mortgage for the purpose of correcting  the
Mortgage,  the  subordination  of the lien of the  Mortgage in favor of a public
utility company or government agency or unit with powers of eminent domain,  the
taking  of a deed in lieu  of  foreclosure,  the  commencement,  prosecution  or
completion  of judicial or  non-judicial  foreclosure,  the  acquisition  of any
property  acquired  by  foreclosure  or  deed in  lieu  of  foreclosure,  or the
management,  marketing and conveyance of any property acquired by foreclosure or
deed  in  lieu  of  foreclosure.  The  Issuer,  the  Indenture  Trustee  and the
Custodian,  as applicable,  shall furnish the Master Servicer with any powers of
attorney  and other  documents  necessary  or  appropriate  to enable the Master
Servicer to carry out its  servicing and  administrative  duties  hereunder.  In
addition,  the Master  Servicer may, at its own  discretion and on behalf of the
Indenture Trustee,  obtain credit information in the form of a Credit Score from
a credit repository. On the Closing Date, the Indenture Trustee shall deliver to
the Master  Servicer a limited  power of attorney  substantially  in the form of
Exhibit B hereto.

               If the  Mortgage  relating  to a Home  Loan  did not  have a lien
senior to the Home Loan on the  related  Mortgaged  Property  as of the  Cut-off
Date, then the Master Servicer, in such capacity, may not consent to the placing
of a lien senior to that of the Mortgage on the related Mortgaged  Property.  If
the  Mortgage  relating to a Home Loan had a lien senior to the Home Loan on the
related Mortgaged Property as of the Cut-off Date, then the Master Servicer,  in
such capacity, may consent to the refinancing of the prior senior lien, provided
that the following requirements are met:

                       (i) (A) the  Mortgagor's  debt-to-income  ratio resulting
        from such refinancing is less than the original  debt-to-income ratio as
        set forth on the  Mortgage  Loan  Schedule  and,  in the event  that the
        resulting Combined Loan-to-Value Ratio ("Combined  Loan-to-Value Ratio")
        of such Home Loan increases by more than 10% above the Combined

                                              6

<PAGE>

        Loan-to-Value Ratio prior to such refinancing, the Master Servicer shall
        obtain the prior consent of the Credit Enhancer, which consent shall not
        be unreasonably withheld;  provided,  however, that in no instance shall
        the resulting Combined  Loan-to-Value  Ratio of such Home Loan be higher
        than that permitted by the Program Guide; or

                       (B) the resulting  Combined  Loan-to-Value  Ratio of such
        Home Loan is no higher than the  Combined  Loan-to-Value  Ratio prior to
        such refinancing; provided, however, if such refinanced mortgage loan is
        a "rate and term" mortgage loan (meaning, the Mortgagor does not receive
        any cash from the  refinancing),  the Combined  Loan-to-Value  Ratio may
        increase  to the extent of either (a) the  reasonable  closing  costs of
        such  refinancing  or (b)  any  decrease  in the  value  of the  related
        Mortgaged  Property,  if the Mortgagor is in good standing as defined by
        the Program Guide;

                (ii) the interest  rate,  or, in the case of an adjustable  rate
        existing senior lien, the maximum interest rate, for the loan evidencing
        the refinanced senior lien is no more than 2.0% higher than the interest
        rate or the  maximum  interest  rate,  as the case  may be,  on the loan
        evidencing  the existing  senior lien  immediately  prior to the date of
        such  refinancing;  provided,  however  (a) if the loan  evidencing  the
        existing  senior lien prior to the date of refinancing has an adjustable
        rate and the loan  evidencing  the  refinanced  senior  lien has a fixed
        rate,  then  the  current  interest  rate  on the  loan  evidencing  the
        refinanced  senior lien may be up to 2.0%  higher than the  then-current
        loan rate of the loan evidencing the existing senior lien and (b) if the
        loan   evidencing  the  existing  senior  lien  prior  to  the  date  of
        refinancing  has a fixed  rate and the loan  evidencing  the  refinanced
        senior lien has an adjustable  rate,  then the maximum  interest rate on
        the loan  evidencing  the  refinanced  senior lien shall be less than or
        equal to (x) the  interest  rate on the  loan  evidencing  the  existing
        senior lien prior to the date of refinancing plus (y) 2.0%; and

                (iii) the loan  evidencing  the  refinanced  senior  lien is not
        subject to negative amortization.

               The  relationship of the Master Servicer (and of any successor to
the Master  Servicer as servicer under this  Servicing  Agreement) to the Issuer
under this  Servicing  Agreement  is  intended  by the  parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.

               (b) The  Master  Servicer  may  continue  in effect  Subservicing
Agreements  entered into by Residential  Funding and  Subservicers  prior to the
execution  and  delivery  of  this  Servicing  Agreement,  and  may  enter  into
Subservicing  Agreements with Subservicers for the servicing and  administration
of certain of the Home Loans.  Each Subservicer of a Home Loan shall be entitled
to receive and retain, as provided in the related Subservicing  Agreement and in
Section 3.02, the related Subservicing Fee from payments of interest received on
such Home Loan after  payment of all  amounts  required  to be  remitted  to the
Master Servicer in respect of such Home Loan. For any Home Loan not subject to a
Subservicing  Agreement,  the Master  Servicer  shall be entitled to receive and
retain  an amount  equal to the  Subservicing  Fee from  payments  of  interest.
References  in this  Servicing  Agreement to actions taken or to be taken by the
Master Servicer in servicing the Home

                                              7

<PAGE>

Loans include  actions  taken or to be taken by a  Subservicer  on behalf of the
Master  Servicer.  Each  Subservicing  Agreement  will be upon  such  terms  and
conditions  as are not  inconsistent  with this  Servicing  Agreement and as the
Master Servicer and the Subservicer have agreed. With the approval of the Master
Servicer,  a Subservicer  may delegate its servicing  obligations to third-party
servicers,  but such  Subservicers  will  remain  obligated  under  the  related
Subservicing Agreements.  The Master Servicer and the Subservicer may enter into
amendments to the related Subservicing Agreements;  provided,  however, that any
such  amendments  shall not cause the Home Loans to be serviced in a manner that
would be materially  inconsistent with the standards set forth in this Servicing
Agreement.  The Master Servicer shall be entitled to terminate any  Subservicing
Agreement in accordance  with the terms and  conditions  thereof and without any
limitation by virtue of this Servicing Agreement; provided, however, that in the
event of termination of any Subservicing Agreement by the Master Servicer or the
Subservicer,  the Master  Servicer  shall  either act as servicer of the related
Home Loan or enter into a Subservicing  Agreement  with a successor  Subservicer
which  will be bound by the terms of the  related  Subservicing  Agreement.  The
Master Servicer shall be entitled to enter into any agreement with a Subservicer
for  indemnification  of the  Master  Servicer  and  nothing  contained  in this
Servicing Agreement shall be deemed to limit or modify such indemnification.

               In the event  that the  rights,  duties  and  obligations  of the
Master Servicer are terminated  hereunder,  any successor to the Master Servicer
in its sole discretion may, to the extent permitted by applicable law, terminate
the existing Subservicing  Agreement with any Subservicer in accordance with the
terms of the applicable  Subservicing  Agreement or assume the terminated Master
Servicer's  rights and obligations under such  subservicing  arrangements  which
termination or assumption will not violate the terms of such arrangements.

               As  part  of  its  servicing  activities  hereunder,  the  Master
Servicer, for the benefit of the Securityholders and the Credit Enhancer,  shall
use reasonable  efforts to enforce the obligations of each Subservicer under the
related  Subservicing  Agreement,  to the extent that the non-performance of any
such  obligation  would have a  material  adverse  effect on a Home  Loan.  Such
enforcement,  including,  without  limitation,  the legal prosecution of claims,
termination  of  Subservicing  Agreements  and the pursuit of other  appropriate
remedies,  shall be in such form and  carried  out to such an extent and at such
time as the Master Servicer would employ in its good faith business judgment and
which are normal and usual in its general  mortgage  servicing  activities.  The
Master Servicer shall pay the costs of such enforcement at its own expense,  and
shall be reimbursed  therefor only (i) from a general  recovery  resulting  from
such  enforcement to the extent,  if any, that such recovery exceeds all amounts
due in respect of the  related  Home Loan or (ii) from a  specific  recovery  of
costs,   expenses  or  attorneys  fees  against  the  party  against  whom  such
enforcement is directed.

               Section 3.02.  Collection of Certain Home Loan Payments.  (a) The
Master Servicer shall make reasonable efforts to collect all payments called for
under the terms and provisions of the Home Loans,  and shall, to the extent such
procedures  shall be  consistent  with this  Servicing  Agreement  and generally
consistent with any related insurance policy,  follow such collection procedures
as it would employ in its good faith business  judgment and which are normal and
usual  in  its  general  mortgage  servicing  activities.  Consistent  with  the
foregoing, and without limiting the

                                              8

<PAGE>

generality of the foregoing, the Master Servicer may in its discretion waive any
late payment charge,  prepayment  charge or penalty interest or other fees which
may be collected in the ordinary  course of servicing such Home Loan. The Master
Servicer  may  also  extend  the Due  Date  for  payment  due on a Home  Loan in
accordance with the Program Guide,  provided,  however, that the Master Servicer
shall  first  determine  that any such waiver or  extension  will not impair the
coverage of any related insurance policy or materially adversely affect the lien
of the related  Mortgage  (except as  described  below) or the  interests of the
Securityholders  and the  Credit  Enhancer.  Consistent  with the  terms of this
Servicing Agreement, the Master Servicer may also:

               (i) waive, modify or vary any term of any Home Loan;

               (ii) consent to the  postponement  of strict  compliance with any
               such term or in any manner grant indulgence to any Mortgagor;

               (iii)  arrange  with a  Mortgagor  a schedule  for the payment of
               principal and interest due and unpaid;

               (iv) forgive any portion of the amounts  contractually owed under
               the Home Loan;

               (v)  capitalize  past due  amounts  owed  under  the Home Loan by
               adding any amounts in arrearage to the existing principal balance
               of the Home  Loan (a  "Capitalization  Workout")  of  which  will
               result in an increased Monthly Payment amount, provided that: (A)
               the amount  added to the existing  principal  balance of the Home
               Loan (the  "Capitalized  Amount")  shall be no greater  than five
               times the Mortgagor's current Monthly Payment amount; and (B) the
               Master  Servicer  shall not enter into a  Capitalization  Workout
               unless the Combined Loan-to-Value Ratio of the Home Loan prior to
               the  Capitalization   Workout  equals  or  exceeds  80%  and  the
               Mortgagor has qualified for the Capitalization  Workout under the
               Master Servicer's servicing guidelines;

               (vi) reset the due date for the Home Loan, or any  combination of
               the foregoing;

if  in  the  Master   Servicer's   determination   such  waiver,   modification,
postponement or indulgence, arrangement or other action referred to above is not
materially  adverse  to the  interests  of  the  Securityholders  or the  Credit
Enhancer and is generally  consistent with the Master  Servicer's  policies with
respect  to  mortgage  loans  similar  to those in the Home Loan Pool  (meaning,
mortgage  loans  used for home  improvement  or debt  consolidation);  provided,
however,  that the Master  Servicer may not modify or permit any  Subservicer to
modify any Home Loan (including  without  limitation any modification that would
change the Loan Rate,  forgive the payment of any principal or interest  (unless
in connection with the liquidation of the related Home Loan) or extend the final
maturity  date of such Home Loan) unless such Home Loan is in default or, in the
judgment of the Master  Servicer,  such default is reasonably  foreseeable.  The
general  terms of any waiver,  modification,  postponement  or  indulgence  with
respect to any of the Home Loans will be included in the Servicing  Certificate,
and such Home Loans will not be considered  "delinquent" for the purposes of the
Basic Documents

                                              9

<PAGE>

so long as the Mortgagor  complies with the terms of such waiver,  modification,
postponement or indulgence.

               (b) The Master  Servicer  shall  establish a  Custodial  Account,
which shall be an Eligible Account in which the Master Servicer shall deposit or
cause to be  deposited  any amounts  representing  payments and  collections  in
respect of the Home Loans  received by it  subsequent to the Cut-off Date (other
than in respect of the payments  referred to in the following  paragraph) within
one  Business Day  following  receipt  thereof (or  otherwise on or prior to the
Closing Date), including the following payments and collections received or made
by it (without duplication):

                       (i) all  payments  of  principal  or interest on the Home
        Loans received by the Master  Servicer from the respective  Subservicer,
        net of any portion of the interest  thereof  retained by the Subservicer
        as Subservicing Fees;

                       (ii) the  aggregate  Repurchase  Price of the Home  Loans
        purchased  by the Master  Servicer  pursuant  to Section  3.15 or by the
        Limited Repurchase Price Holder pursuant to Section 3.16;

                       (iii)  Net  Liquidation   Proceeds  net  of  any  related
        Foreclosure Profit;

                       (iv) all  proceeds of any Home Loans  repurchased  by the
        Seller   pursuant  to  the  Home  Loan  Purchase   Agreement,   and  all
        Substitution  Adjustment  Amounts required to be deposited in connection
        with the  substitution  of an Eligible  Substitute  Loan pursuant to the
        Home Loan Purchase Agreement;

                       (v)  Insurance  Proceeds,   other  than  Net  Liquidation
        Proceeds,  resulting from any insurance policy maintained on a Mortgaged
        Property; and

                       (vi) amounts  required to be paid by the Master  Servicer
        pursuant to Sections 3.04 and 8.08 and any  prepayments  or  collections
        constituting prepayment charges.

provided,  however,  that with  respect to each  Collection  Period,  the Master
Servicer  shall be permitted  to retain from  payments in respect of interest on
the Home  Loans,  the  Master  Servicing  Fee for such  Collection  Period.  The
foregoing  requirements   respecting  deposits  to  the  Custodial  Account  are
exclusive,  it being  understood  that,  without  limiting the generality of the
foregoing, the Master Servicer need not deposit in the Custodial Account amounts
representing  Foreclosure  Profits,  fees (including annual fees) or late charge
penalties  payable by  Mortgagors  (such  amounts to be retained  as  additional
servicing  compensation  in  accordance  with Section 3.09  hereof),  or amounts
received by the Master  Servicer for the accounts of Mortgagors for  application
towards the payment of taxes, insurance premiums, assessments and similar items.
In the event any amount not required to be deposited in the Custodial Account is
so deposited,  the Master Servicer may at any time withdraw such amount from the
Custodial  Account,  any provision herein to the contrary  notwithstanding.  The
Custodial  Account  may  contain  funds that  belong to one or more trust  funds
created for the notes or  certificates  of other  series and may  contain  other
funds respecting payments

                                       10

<PAGE>

on other mortgage loans  belonging to the Master  Servicer or serviced or master
serviced by it on behalf of others.  Notwithstanding  such commingling of funds,
the Master  Servicer  shall keep  records that  accurately  reflect the funds on
deposit  in the  Custodial  Account  that  have been  identified  by it as being
attributable  to the Home Loans and shall hold all  collections in the Custodial
Account  to the  extent  they  represent  collections  on the Home Loans for the
benefit of the Trust, the  Securityholders  and the Indenture Trustee,  as their
interests may appear.  The Master Servicer shall retain all Foreclosure  Profits
as additional servicing compensation.

        The Master Servicer may cause the institution  maintaining the Custodial
Account to invest any funds in the  Custodial  Account in Permitted  Investments
(including obligations of the Master Servicer or any of its Affiliates,  if such
obligations otherwise qualify as Permitted Investments),  which shall mature not
later than the Business Day  preceding the next Payment Date and which shall not
be sold or disposed of prior to its  maturity.  Except as  provided  above,  all
income and gain realized from any such investment  shall inure to the benefit of
the Master Servicer and shall be subject to its withdrawal or order from time to
time.  The amount of any losses  incurred in respect of the principal  amount of
any such investments  shall be deposited in the Custodial  Account by the Master
Servicer out of its own funds immediately as realized.

        (c) The Master Servicer will require each  Subservicer to hold all funds
constituting  collections on the Home Loans,  pending  remittance thereof to the
Master Servicer, in one or more accounts meeting the requirements of an Eligible
Account, and invested in Permitted Investments.

        Section 3.03.Withdrawals from the Custodial Account. The Master Servicer
shall, from time to time as provided herein, make withdrawals from the Custodial
Account  of  amounts  on  deposit  therein  pursuant  to  Section  3.02 that are
attributable to the Home Loans for the following purposes:

                       (i) to remit  to the  Paying  Agent  for  deposit  in the
        Payment  Account,  on the Business Day prior to each  Payment  Date,  an
        amount  equal to the  Interest  Collections  and  Principal  Collections
        required to be  distributed  on such  Payment  Date and any  payments or
        collections  constituting prepayment charges received during the related
        Prepayment Period;

                       (ii) to the extent deposited to the Custodial Account, to
        reimburse itself or the related Subservicer for previously  unreimbursed
        expenses incurred in maintaining  individual insurance policies pursuant
        to Section 3.04, or Liquidation Expenses,  paid pursuant to Section 3.07
        or  otherwise  reimbursable  pursuant  to the  terms  of this  Servicing
        Agreement  (to the extent not payable  pursuant to Section  3.09),  such
        withdrawal  right being limited to amounts  received on particular  Home
        Loans  (other  than any  Repurchase  Price  in  respect  thereof)  which
        represent  late  recoveries of the payments for which such advances were
        made,  or from  related  Liquidation  Proceeds  or the  proceeds  of the
        purchase of such Home Loan;

                       (iii) to pay to itself out of each  payment  received  on
        account of interest on a Home Loan as  contemplated  by Section 3.09, an
        amount equal to the related Master

                                       11

<PAGE>

        Servicing Fee (to the extent not retained pursuant to Section 3.02), and
        to pay to any Subservicer any Subservicing Fees not previously  withheld
        by the Subservicer;

                       (iv) to the extent deposited in the Custodial  Account to
        pay to itself as  additional  servicing  compensation  any  interest  or
        investment income earned on funds deposited in the Custodial Account and
        Payment  Account  that it is entitled  to withdraw  pursuant to Sections
        3.02(b) and 5.01;

                       (v) to the extent deposited in the Custodial Account,  to
        pay to itself  as  additional  servicing  compensation  any  Foreclosure
        Profits;

                       (vi) to pay to itself or the Seller,  with respect to any
        Home  Loan or  property  acquired  in  respect  thereof  that  has  been
        purchased or otherwise  transferred to the Seller,  the Master Servicer,
        the  Limited  Repurchase  Right  Holder  or other  entity,  all  amounts
        received  thereon and not required to be distributed to  Securityholders
        as of the date on which the related  Purchase Price or Repurchase  Price
        is determined;

                       (vii) to clear and terminate  the Custodial  Account upon
        the termination of this Agreement; and

                       (viii)to  withdraw  any  other  amount  deposited  in the
        Custodial Account that was not required to be deposited therein pursuant
        to Section 3.02.

        Since, in connection with withdrawals  pursuant to clauses (ii),  (iii),
(v)  and  (vi),  the  Master  Servicer's   entitlement  thereto  is  limited  to
collections or other  recoveries on the related Home Loan,  the Master  Servicer
shall keep and maintain separate accounting,  on a Home Loan by Home Loan basis,
for the purpose of justifying any withdrawal from the Custodial Account pursuant
to  such  clauses.   Notwithstanding  any  other  provision  of  this  Servicing
Agreement,  the Master  Servicer  shall be entitled to reimburse  itself for any
previously  unreimbursed expenses incurred pursuant to Section 3.07 or otherwise
reimbursable  pursuant to the terms of this Servicing  Agreement that the Master
Servicer determines to be otherwise  nonrecoverable  (except with respect to any
Home Loan as to which the Repurchase  Price has been paid),  by withdrawal  from
the Custodial  Account of amounts on deposit  therein  attributable  to the Home
Loans on any Business Day prior to the Payment Date  succeeding the date of such
determination.

        Section  3.04.  Maintenance  of Hazard  Insurance;  Property  Protection
Expenses.  The Master  Servicer  shall cause to be maintained for each Home Loan
hazard insurance naming the Master Servicer or related Subservicer as loss payee
thereunder  providing  extended coverage in an amount which is at least equal to
at  least  100%  of  the  insurable  value  of  the   improvements   (guaranteed
replacement)  or the sum of the unpaid  principal  balance of the first mortgage
loan and the Home Loan  amount.  The  Master  Servicer  shall  also  cause to be
maintained  on  property  acquired  upon   foreclosure,   or  deed  in  lieu  of
foreclosure,  of any Home Loan,  fire  insurance  with  extended  coverage in an
amount which is at least equal to the amount  necessary to avoid the application
of any  coinsurance  clause  contained in the related hazard  insurance  policy.
Amounts collected by the Master

                                       12

<PAGE>

Servicer  under any such  policies  (other  than  amounts  to be  applied to the
restoration  or  repair of the  related  Mortgaged  Property  or  property  thus
acquired or amounts  released to the  Mortgagor  in  accordance  with the Master
Servicer's  normal  servicing  procedures)  shall be deposited in the  Custodial
Account  to the  extent  called  for by  Section  3.02.  In cases  in which  any
Mortgaged  Property  is located at any time  during the life of a Home Loan in a
federally  designated  flood area, the hazard insurance to be maintained for the
related Home Loan shall include flood insurance (to the extent  available).  All
such flood  insurance  shall be in amounts equal to the lesser of (i) the amount
required to  compensate  for any loss or damage to the  Mortgaged  Property on a
replacement  cost basis and (ii) the maximum amount of such insurance  available
for the related  Mortgaged  Property under the national flood insurance  program
(assuming  that  the  area in  which  such  Mortgaged  Property  is  located  is
participating in such program). The Master Servicer shall be under no obligation
to require that any Mortgagor maintain earthquake or other additional  insurance
and  shall  be  under no  obligation  itself  to  maintain  any such  additional
insurance on property acquired in respect of a Home Loan, other than pursuant to
such  applicable  laws and  regulations  as shall at any time be in force and as
shall require such additional insurance. If the Master Servicer shall obtain and
maintain  a  blanket  policy  consistent  with its  general  mortgage  servicing
activities  insuring  against  hazard losses on all of the Home Loans,  it shall
conclusively  be deemed to have  satisfied its  obligations  as set forth in the
first  sentence of this Section 3.04, it being  understood  and agreed that such
blanket  policy  may  contain a  deductible  clause,  in which  case the  Master
Servicer  shall,  in the event that there shall not have been  maintained on the
related  Mortgaged  Property a policy  complying with the first sentence of this
Section  3.04 and there shall have been a loss which would have been  covered by
such policy,  deposit in the Custodial  Account the amount not otherwise payable
under the blanket policy because of such deductible  clause. Any such deposit by
the Master  Servicer  shall be made on the last  Business Day of the  Collection
Period in the month in which  payments  under any such  policy  would  have been
deposited  in the  Custodial  Account.  In  connection  with its  activities  as
servicer of the Home Loans, the Master Servicer agrees to present,  on behalf of
itself,  the Issuer and the  Indenture  Trustee,  claims  under any such blanket
policy.

        Section 3.05. Modification Agreements;  Release or Substitution of Lien.
(a) The Master Servicer or the related Subservicer, as the case may be, shall be
entitled  to  (A)  execute  assumption  agreements,   modification   agreements,
substitution  agreements,  and instruments of satisfaction or cancellation or of
partial or full release or discharge, or any other document contemplated by this
Servicing  Agreement and other  comparable  instruments with respect to the Home
Loans and with respect to the Mortgaged Properties subject to the Mortgages (and
the Issuer  and the  Indenture  Trustee  each shall  promptly  execute  any such
documents on request of the Master  Servicer) and (B) approve the granting of an
easement thereon in favor of another Person, any alteration or demolition of the
related  Mortgaged  Property or other  similar  matters,  in each case if it has
determined, exercising its good faith business judgment in the same manner as it
would if it were the owner of the related Home Loan,  that the security for, and
the timely and full  collectability  of,  such Home Loan would not be  adversely
affected  thereby.  A partial  release  pursuant to this  Section  3.05 shall be
permitted only if the Combined Loan-to-Value Ratio for such Home Loan after such
partial release does not exceed the Combined  Loan-to-Value  Ratio for such Home
Loan as of the Cut-off  Date.  Any fee  collected by the Master  Servicer or the
related  Subservicer  for processing such request will be retained by the Master
Servicer or such Subservicer as additional servicing compensation.

                                       13

<PAGE>

        (b) The Master  Servicer may enter into an agreement with a Mortgagor to
release  the  lien  on the  Mortgaged  Property  relating  to a Home  Loan  (the
"Existing  Lien"),  if at the time of such agreement the Home Loan is current in
payment of principal and interest, under any of the following circumstances:

                (i) in any case in which, simultaneously with the release of the
        Existing  Lien,  the  Mortgagor  executes  and  delivers  to the  Master
        Servicer a Mortgage on a substitute  Mortgaged  Property,  provided that
        the Combined  Loan-to-Value  Ratio of the Home Loan (calculated based on
        the Appraised Value of the substitute Mortgaged Property) is not greater
        than the Combined  Loan-to-Value  Ratio prior to releasing  the Existing
        Lien;

                (ii) in any case in which,  simultaneously  with the  release of
        the Existing  Lien,  the  Mortgagor  executes and delivers to the Master
        Servicer a Mortgage on a substitute  Mortgaged Property,  provided that:
        (A) the Combined  Loan-to-Value Ratio of the Home Loan (calculated based
        on the  Appraised  Value of the  substitute  Mortgaged  Property) is not
        greater  than  the  lesser  of (1)  125%  and (2)  105% of the  Combined
        Loan-to-Value  Ratio prior to releasing the Existing  Lien;  and (B) the
        Master Servicer  determines  that at least two appropriate  compensating
        factors  are  present   (compensating   factors  may  include,   without
        limitation,  an increase in the Mortgagor's monthly cash flow after debt
        service,  the Mortgagor's  debt-to-income  ratio has not increased since
        origination, or an increase in the Mortgagor's credit score); or

                (iii)  in any  case in  which,  at the  time of  release  of the
        Existing Lien, the Mortgagor does not provide the Master Servicer with a
        Mortgage on a substitute  Mortgaged Property (any Home Loan that becomes
        and remains unsecured in accordance with this subsection,  an "Unsecured
        Loan"),  provided that: (A) the Mortgagor,  in addition to being current
        in payment of  principal  and  interest  on the  related  Home Loan,  is
        current in payment of  principal  and interest on any loan senior to the
        Home Loan; (B) the Mortgagor's Credit Score, as determined by the Master
        Servicer at the time of the  request  for  release of lien,  is not less
        than 640; (C) the Mortgagor  makes a cash  contribution  in reduction of
        the outstanding  principal  balance of the Home Loan,  which may include
        any net proceeds from the sale of the original  Mortgaged  Property,  of
        not less than 20% of the unpaid principal  balance of the Home Loan; and
        (D) the Mortgagor signs a  reaffirmation  agreement  acknowledging  that
        they must continue to pay in  accordance  with the terms of the original
        Mortgage Note.

                (iv) If the above  conditions  (iii)(A) through (iii)(D) are not
        met,  the Master  Servicer  may still enter into an agreement to release
        the Existing  Lien,  provided  that:  (A) the Master  Servicer shall not
        permit the release of an Existing Lien under this clause (iv) as to more
        than 200 Home  Loans in any  calendar  year;  (B) at no time  shall  the
        aggregate  Principal  Balance of  Unsecured  Loans exceed 5% of the then
        Pool  Balance;  (C) the Mortgagor  agrees to an automatic  debit payment
        plan;  and (D) the Master  Servicer  shall provide notice to each Rating
        Agency that has requested notice of such releases.

                                       14

<PAGE>

        In connection  with any Unsecured  Loan, the Master Servicer may require
the Mortgagor to enter into an agreement  under which:  (i) the Loan Rate may be
increased  effective until a substitute  Mortgage meeting the criteria under (i)
or (ii) above is  provided;  or (ii) any other  provision  may be made which the
Master  Servicer  considers to be appropriate.  Thereafter,  the Master Servicer
shall determine in its discretion whether to accept any proposed Mortgage on any
substitute  Mortgaged  Property  as security  for the Home Loan,  and the Master
Servicer may require the Mortgagor to agree to any further  conditions which the
Master  Servicer  considers  appropriate in connection  with such  substitution,
which may include a  reduction  of the Loan Rate (but not below the Loan Rate in
effect  at the  Closing  Date).  Any  Home  Loan  as to  which a  Mortgage  on a
substitute  Mortgaged  Property  is provided in  accordance  with the  preceding
sentence shall no longer be deemed to be an Unsecured Loan.

        Section 3.06. Trust Estate; Related Documents.  (a) When required by the
provisions of this  Servicing  Agreement,  the Issuer or the  Indenture  Trustee
shall  execute  instruments  to  release  property  from the  terms of the Trust
Agreement,  Indenture  or  Custodial  Agreement,  as  applicable,  or convey the
Issuer's or the Indenture  Trustee's interest in the same, in a manner and under
circumstances  which are not inconsistent  with the provisions of this Servicing
Agreement.  No party  relying upon an  instrument  executed by the Issuer or the
Indenture  Trustee as provided in this  Section 3.06 shall be bound to ascertain
the Issuer's or the Indenture Trustee's authority, inquire into the satisfaction
of any conditions precedent or see to the application of any monies.

        (b) If from  time to time  the  Master  Servicer  shall  deliver  to the
Custodian copies of any written assurance,  assumption agreement or substitution
agreement or other similar  agreement  pursuant to Section  3.05,  the Custodian
shall check that each of such documents purports to be an original executed copy
(or a copy of the original  executed  document if the original executed copy has
been  submitted for recording and has not yet been  returned)  and, if so, shall
file such  documents,  and upon receipt of the original  executed  copy from the
applicable  recording  office or  receipt  of a copy  thereof  certified  by the
applicable  recording  office shall file such originals or certified copies with
the Related Documents. If any such documents submitted by the Master Servicer do
not meet the above qualifications,  such documents shall promptly be returned by
the  Custodian  to  the  Master  Servicer  pursuant  to  the  related  Custodial
Agreement,  with a  direction  to the Master  Servicer  to forward  the  correct
documentation.

        (c) Upon receipt of a Request for Release from the Master  Servicer,  to
the  effect  that a Home  Loan has  been the  subject  of a final  payment  or a
prepayment  in full  and the  related  Home  Loan has  been  terminated  or that
substantially all Liquidation  Proceeds which have been determined by the Master
Servicer  in  its  reasonable  judgment  to be  finally  recoverable  have  been
recovered,  and upon  deposit to the  Custodial  Account  of such final  monthly
payment,  prepayment in full  together  with accrued and unpaid  interest to the
date of such  payment  with  respect  to  such  Home  Loan  or,  if  applicable,
Liquidation Proceeds, the Custodian shall promptly release the Related Documents
to the Master Servicer  pursuant to the related Custodial  Agreement,  which the
Indenture  Trustee  shall  execute,  along  with such  documents  as the  Master
Servicer or the Mortgagor may request to evidence  satisfaction and discharge of
such Home Loan, upon request of the Master Servicer. If from time to time and as
appropriate for the servicing or foreclosure of any Home Loan, the Master

                                       15

<PAGE>

Servicer requests the Custodian to release the Related Documents and delivers to
the  Custodian a trust  receipt  reasonably  satisfactory  to the  Custodian and
signed by a Responsible  Officer of the Master  Servicer,  the  Custodian  shall
release the Related  Documents  to the Master  Servicer  pursuant to the related
Custodial  Agreement.  If such Home Loans shall be liquidated  and the Custodian
receives a certificate  from the Master Servicer as provided  above,  then, upon
request of the Master Servicer, the Custodian shall release the trust receipt to
the Master Servicer pursuant to the related Custodial Agreement.

        Section 3.07.  Realization  Upon Defaulted Home Loans;  Loss Mitigation.
With respect to such of the Home Loans as come into and continue in default, the
Master  Servicer  will  decide  whether  to (i)  foreclose  upon  the  Mortgaged
Properties securing such Home Loans, (ii) write off the unpaid principal balance
of the Home Loans as bad debt,  (iii) take a deed in lieu of  foreclosure,  (iv)
accept a short sale (a payoff of the Home Loan for an amount less than the total
amount  contractually  owed in  order  to  facilitate  a sale  of the  Mortgaged
Property by the  Mortgagor) or permit a short  refinancing (a payoff of the Home
Loan for an amount  less than the total  amount  contractually  owed in order to
facilitate refinancing transactions by the Mortgagor not involving a sale of the
Mortgaged  Property),  (v)  arrange  for  a  repayment  plan,  (vi)  agree  to a
modification  in  accordance  with this  Servicing  Agreement,  or (vii) take an
unsecured  note,  in  connection  with a  negotiated  release of the lien of the
Mortgage in order to facilitate a settlement  with the  Mortgagor;  in each case
subject  to the  rights of any  related  first  lien  holder;  provided  that in
connection with the foregoing if the Master  Servicer has actual  knowledge that
any  Mortgaged  Property is affected by hazardous or toxic wastes or  substances
and that the  acquisition of such Mortgaged  Property would not be  commercially
reasonable,  then the Master Servicer will not cause the Issuer or the Indenture
Trustee to acquire title to such Mortgaged  Property in a foreclosure or similar
proceeding.  In connection with such decision,  the Master Servicer shall follow
such  practices  (including,  in the case of any  default  on a  related  senior
mortgage  loan,  the  advancing of funds to correct such default if deemed to be
appropriate by the Master Servicer) and procedures as it shall deem necessary or
advisable  and as shall be normal and usual in its  general  mortgage  servicing
activities and as shall be required or permitted by the Program Guide;  provided
that the Master  Servicer  shall not be liable in any respect  hereunder  if the
Master Servicer is acting in connection  with any such  foreclosure or attempted
foreclosure  which is not  completed  or other  conversion  in a manner  that is
consistent  with the  provisions of this Servicing  Agreement.  The foregoing is
subject to the proviso that the Master  Servicer shall not be required to expend
its own funds in connection with any foreclosure or attempted  foreclosure which
is not completed or towards the  correction  of any default on a related  senior
mortgage loan or restoration of any property unless it shall determine that such
expenditure  will  increase  Net  Liquidation   Proceeds.  In  the  event  of  a
determination by the Master Servicer that any such  expenditure  previously made
pursuant to this  Section  3.07 will not be  reimbursable  from Net  Liquidation
Proceeds, the Master Servicer shall be entitled to reimbursement of its funds so
expended pursuant to Section 3.03.

        Notwithstanding any provision of this Servicing  Agreement,  a Home Loan
may be deemed to be finally  liquidated if substantially all amounts expected by
the Master Servicer to be received in connection with the related defaulted Home
Loan have been received;  provided, however, the Master Servicer shall treat any
Home Loan that is 180 days or more delinquent as having been finally

                                       16

<PAGE>

liquidated.  Any subsequent collections with respect to any such Home Loan shall
be deposited to the Custodial Account. For purposes of determining the amount of
any  Liquidation   Proceeds  or  Insurance   Proceeds,   or  other   unscheduled
collections,  the  Master  Servicer  may take into  account  minimal  amounts of
additional  receipts  expected  to  be  received  or  any  estimated  additional
liquidation  expenses  expected to be incurred  in  connection  with the related
defaulted Home Loan.

        In the  event  that  title to any  Mortgaged  Property  is  acquired  in
foreclosure or by deed in lieu of  foreclosure,  the deed or certificate of sale
shall be issued to the Indenture  Trustee,  who shall hold the same on behalf of
the Issuer in accordance with Section 3.13 of the Indenture. Notwithstanding any
such  acquisition  of title and  cancellation  of the  related  Home Loan,  such
Mortgaged  Property  shall (except as otherwise  expressly  provided  herein) be
considered to be an  outstanding  Home Loan held as an asset of the Issuer until
such time as such property shall be sold.

        Any proceeds  from the purchase or  repurchase of any Home Loan pursuant
to the terms of this Servicing Agreement  (including without limitation Sections
2.03, 3.15 and 3.16) will be applied in the following order of priority:  first,
to the Master  Servicer or the related  Subservicer,  all Servicing Fees payable
therefrom  to the Payment  Date on which such amounts are to be deposited in the
Payment Account; second, as Interest Collections, accrued and unpaid interest on
the related  Home Loan,  at the Net Loan Rate to the Payment  Date on which such
amounts are to be  deposited  in the Payment  Account;  and third,  as Principal
Collections, as a recovery of principal on the Home Loan.

        Liquidation  Proceeds  with  respect to a  Liquidated  Home Loan will be
applied in the  following  order of priority:  first,  to  reimburse  the Master
Servicer or the related Subservicer in accordance with this Section 3.07 for any
Liquidation Expenses; second, to the Master Servicer or the related Subservicer,
all unpaid  Servicing Fees through the date of receipt of the final  Liquidation
Proceeds;  third,  as Principal  Collections,  as a recovery of principal on the
Home Loan,  up to an amount  equal to the Loan  Balance of the related Home Loan
immediately  prior to the date it became a  Liquidated  Home  Loan;  fourth,  as
Interest  Collections,  accrued and unpaid  interest on the related Home Loan at
the Net Loan Rate through the date of receipt of the final Liquidation Proceeds;
and fifth, to Foreclosure Profits.

        Proceeds  and  other  recoveries  from a Home  Loan  after it  becomes a
Liquidated Home Loan will be applied in the following order of priority:  first,
to reimburse the Master  Servicer or the related  Subservicer in accordance with
this Section  3.07 for any expenses  previously  unreimbursed  from  Liquidation
Proceeds  or  otherwise;   second,   to  the  Master  Servicer  or  the  related
Subservicer,  all unpaid  Servicing  Fees  payable  thereto  through the date of
receipt of the proceeds  previously  unreimbursed  from Liquidation  Proceeds or
otherwise;  third, as Interest Collections,  up to an amount equal to the sum of
(a) the Loan Balance of the related Home Loan  immediately  prior to the date it
became a Liquidated  Home Loan,  less any Net  Liquidation  Proceeds  previously
received  with respect to such Home Loan and applied as a recovery of principal,
and (b)  accrued and unpaid  interest  on the related  Home Loan at the Net Loan
Rate through the date of receipt of the  proceeds;  and fourth,  to  Foreclosure
Profits.

                                       17

<PAGE>

        Section 3.08.  Issuer and Indenture  Trustee to Cooperate.  On or before
each Payment Date, the Master Servicer will notify the Indenture  Trustee or the
Custodian,  with a copy to the Issuer,  of the  termination of or the payment in
full and the  termination  of any Home  Loan  during  the  preceding  Collection
Period.  Upon receipt of payment in full,  the Master  Servicer is authorized to
execute,  pursuant  to the  authorization  contained  in  Section  3.01,  if the
assignments  of Mortgage  have been  recorded  if  required  under the Home Loan
Purchase  Agreement,   an  instrument  of  satisfaction  regarding  the  related
Mortgage,  which  instrument  of  satisfaction  shall be  recorded by the Master
Servicer if required by applicable  law and be delivered to the Person  entitled
thereto.  It is understood  and agreed that any expenses  incurred in connection
with such  instrument  of  satisfaction  or transfer  shall be  reimbursed  from
amounts deposited in the Custodial Account. From time to time and as appropriate
for the servicing or foreclosure of any Home Loan, the Indenture  Trustee or the
Custodian  shall,  upon  request  of the Master  Servicer  and  delivery  to the
Indenture  Trustee or  Custodian,  with a copy to the  Issuer,  of a Request for
Release,  signed by a Servicing  Officer,  release or cause to be  released  the
related Mortgage File to the Master Servicer and the Issuer or Indenture Trustee
shall  promptly  execute  such  documents,  in the forms  provided by the Master
Servicer,  as shall be necessary for the prosecution of any such  proceedings or
the taking of other  servicing  actions.  Such trust receipt shall  obligate the
Master  Servicer to return the  Mortgage  File to the  Indenture  Trustee or the
Custodian  (as  specified in such  receipt) when the need therefor by the Master
Servicer no longer  exists  unless the Home Loan shall be  liquidated,  in which
case,  upon  receipt of a  certificate  of a Servicing  Officer  similar to that
hereinabove  specified,  the  trust  receipt  shall be  released  to the  Master
Servicer.

        In order to facilitate the foreclosure of the Mortgage securing any Home
Loan that is in default following  recordation of the assignments of Mortgage in
accordance  with  the  provisions  of the  Home  Loan  Purchase  Agreement,  the
Indenture  Trustee or the Issuer shall, if so requested in writing by the Master
Servicer, promptly execute an appropriate assignment in the form provided by the
Master  Servicer to assign such Home Loan for the purpose of  collection  to the
Master  Servicer  (any such  assignment  shall  unambiguously  indicate that the
assignment is for the purpose of collection  only),  and, upon such  assignment,
such assignee for collection  will thereupon  bring all required  actions in its
own name and otherwise  enforce the terms of the Home Loan and deposit or credit
the Net Liquidation  Proceeds,  exclusive of Foreclosure Profits,  received with
respect  thereto in the  Custodial  Account.  In the event  that all  delinquent
payments  due under any such Home Loan are paid by the  Mortgagor  and any other
defaults are cured,  then the assignee for collection  shall  promptly  reassign
such Home Loan to the Indenture  Trustee and return all Related Documents to the
place where the related Mortgage File was being maintained.

        In connection  with the Issuer's  obligation to cooperate as provided in
this Section 3.08 and all other provisions of this Servicing Agreement requiring
the Issuer to  authorize  or permit any actions to be taken with  respect to the
Home Loans, the Indenture Trustee,  as pledgee of the Home Loans and as assignee
of record of the Home Loans on behalf of the Issuer  pursuant to Section 3.13 of
the  Indenture,  expressly  agrees,  on behalf of the  Issuer,  to take all such
actions  on  behalf  of the  Issuer  and to  promptly  execute  and  return  all
instruments  reasonably required by the Master Servicer in connection therewith;
provided that if the Master  Servicer shall request a signature of the Indenture
Trustee,  on behalf of the  Issuer,  the  Master  Servicer  will  deliver to the
Indenture Trustee

                                       18

<PAGE>

an Officer's Certificate stating that such signature is necessary or appropriate
to enable the Master  Servicer  to carry out its  servicing  and  administrative
duties under this Servicing Agreement.

        Section 3.09.  Servicing  Compensation;  Payment of Certain  Expenses by
Master  Servicer.  The Master  Servicer  shall be entitled to receive the Master
Servicing Fee in accordance with Sections 3.02 and 3.03 as compensation  for its
services in  connection  with  servicing  the Home Loans.  Moreover,  additional
servicing compensation in the form of late payment charges, investment income on
amounts in the Custodial  Account or the Payment  Account and other receipts not
required to be deposited in the  Custodial  Account as specified in Section 3.02
shall be retained by the Master Servicer.  The Master Servicer shall be required
to pay all expenses  incurred by it in connection with its activities  hereunder
(including payment of all other fees and expenses not expressly stated hereunder
to be for the account of the Securityholders, including, without limitation, the
fees and expenses of the Owner Trustee, Indenture Trustee and any Custodian) and
shall not be entitled to reimbursement therefor.

        Section 3.10. Annual Statement as to Compliance.
                      ---------------------------------

        (a) The Master  Servicer  will deliver to the  Depositor,  the Indenture
Trustee and the Credit Enhancer on or before the earlier of (a) March 31 of each
year,  beginning  with the first March 31 that occurs at least six months  after
the Cut-off  Date,  or (b) with  respect to any  calendar  year during which the
Depositor's  annual  report on Form 10-K is required  to be filed in  accordance
with the Exchange Act and the rules and regulations of the Commission,  the date
on which the  Depositor's  annual report on Form 10-K is required to be filed in
accordance with the Exchange Act and the rules and regulations of the Commission
(or, in each case, if such day is not a Business Day, the immediately  preceding
Business Day), an Officers' Certificate stating, as to each signer thereof, that
(i) a review of the  activities  of the Master  Servicer  during  the  preceding
calendar year related to its servicing of mortgage loans and of its  performance
under servicing  agreements,  including this Servicing Agreement,  has been made
under such officers' supervision,  (ii) to the best of such officers' knowledge,
based on such review,  the Master Servicer has complied in all material respects
with the minimum servicing standards set forth in the Uniform Single Attestation
Program for Mortgage  Bankers and has fulfilled all of its material  obligations
in all material  respects  throughout  such year, or, if there has been material
noncompliance  with such servicing  standards or a default in the fulfillment in
all  material  respects  of any  such  obligation  relating  to  this  Servicing
Agreement,  such statement shall include a description of such  noncompliance or
specify  each such  default,  as the case may be,  known to such officer and the
nature and status  thereof  and (iii) to the best of such  officers'  knowledge,
each  Subservicer  has  complied  in all  material  respects  with  the  minimum
servicing  standards  set forth in the Uniform  Single  Attestation  Program for
Mortgage  Bankers and has  fulfilled all of its material  obligations  under its
Subservicing  Agreement in all material  respects  throughout  such year,  or if
there  has been  material  noncompliance  with  such  servicing  standards  or a
material  default  in the  fulfillment  of  such  obligations  relating  to this
Agreement,  specifying  such  statement  shall  include  a  description  of such
noncompliance  or specify each such  default,  as the case may be, known to such
officer and the nature and status thereof.

                                       19

<PAGE>

        (b) The Master  Servicer  shall  deliver to the Issuer and the Indenture
Trustee,  with a copy to the Credit  Enhancer,  promptly  after having  obtained
knowledge  thereof,  but in no event later than five Business  Days  thereafter,
written notice by means of an Officer's  Certificate of any event which with the
giving of notice or the lapse of time or both, would become a Servicing Default.

        Section 3.11. Annual Independent Public Accountants' Servicing Report.
                      -------------------------------------------------------

        On or before the  earlier of (a) March 31 of each year,  beginning  with
the first March 31 that occurs at least six months  after the Cut-off  Date,  or
(b) with respect to any calendar year during which the Depositor's annual report
on Form 10-K is required to be filed in accordance with the Exchange Act and the
rules and  regulations  of the  Commission,  the date on which  the  Depositor's
annual  report  on Form  10-K is  required  to be filed in  accordance  with the
Exchange Act and the rules and  regulations of the Commission (or, in each case,
if such day is not a Business Day, the immediately  preceding Business Day), the
Master  Servicer  at its  expense  shall  cause  a firm  of  independent  public
accountants which shall be members of the American Institute of Certified Public
Accountants  to furnish a report to the Depositor,  the Credit  Enhancer and the
Indenture  Trustee  stating its  opinion  that,  on the basis of an  examination
conducted by such firm substantially in accordance with standards established by
the American  Institute of Certified  Public  Accountants,  the assertions  made
pursuant  to  Section  3.10  regarding  compliance  with the  minimum  servicing
standards  set forth in the Uniform  Single  Attestation  Program  for  Mortgage
Bankers  during the  preceding  calendar  year are fairly stated in all material
respects,  subject to such  exceptions  and other  qualifications  that,  in the
opinion of such  firm,  such  accounting  standards  require  it to  report.  In
rendering  such  statement,  such firm may rely,  as to matters  relating to the
direct servicing of mortgage loans by Subservicers,  upon comparable  statements
for examinations  conducted by independent public  accountants  substantially in
accordance  with standards  established  by the American  Institute of Certified
Public Accountants  (rendered within one year of such statement) with respect to
such Subservicers.

        Section 3.12. Access to Certain  Documentation and Information Regarding
the Home Loans. Whenever required by statute or regulation,  the Master Servicer
shall provide to the Credit Enhancer, any Securityholder upon reasonable request
(or a regulator  for a  Securityholder)  or the  Indenture  Trustee,  reasonable
access to the documentation  regarding the Home Loans such access being afforded
without charge but only upon reasonable request and during normal business hours
at the  offices  of the Master  Servicer.  Nothing  in this  Section  3.12 shall
derogate from the  obligation of the Master  Servicer to observe any  applicable
law  prohibiting  disclosure of  information  regarding the  Mortgagors  and the
failure of the Master  Servicer to provide  access as  provided in this  Section
3.12 as a result  of such  obligation  shall  not  constitute  a breach  of this
Section 3.12.

        Section 3.13.  Maintenance of Certain Servicing Insurance Policies.  The
Master  Servicer  shall  during the term of its service as servicer  maintain in
force (i) a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer  hereunder and (ii) a fidelity
bond in respect  of its  officers,  employees  or  agents.  Each such  policy or
policies and bond shall be at least equal to the coverage that would be required
by FNMA or FHLMC, whichever

                                       20

<PAGE>

is greater, for Persons performing servicing for loans similar to the Home Loans
purchased by such entity.

        Section 3.14.  Information  Required by the Internal Revenue Service and
Reports of  Foreclosures  and  Abandonments  of Mortgaged  Property.  The Master
Servicer  shall  prepare and deliver all federal and state  information  reports
when and as required by all  applicable  state and federal  income tax laws.  In
particular,  with respect to the requirement  under Section 6050J of the Code to
the effect  that the  Master  Servicer  or  Subservicer  shall  make  reports of
foreclosures and abandonments of any mortgaged  property for each year beginning
in 2003, the Master Servicer or Subservicer  shall file reports relating to each
instance  occurring  during  the  previous  calendar  year in which  the  Master
Servicer  (i) on behalf of the Issuer,  acquires  an  interest in any  Mortgaged
Property through  foreclosure or other comparable  conversion in full or partial
satisfaction  of a Home  Loan,  or (ii)  knows or has  reason  to know  that any
Mortgaged  Property has been abandoned.  The reports from the Master Servicer or
Subservicer  shall be in form and  substance  sufficient  to meet the  reporting
requirements  imposed by Section  6050J and Section 6050H  (reports  relating to
mortgage interest received) of the Code.

        Section   3.15.   Optional   Repurchase   of   Defaulted   Home   Loans.
Notwithstanding  any  provision  in  Section  3.07 to the  contrary,  the Master
Servicer, at its option and in its sole discretion, may repurchase any Home Loan
delinquent in payment for a period of 90 days or longer for a price equal to the
Repurchase Price.

        Section 3.16. Limited Home Loan Repurchase Right.
                      ----------------------------------

        The Limited  Repurchase Right Holder will have the irrevocable option at
any time to  purchase  any of the Home Loans at the  Repurchase  Price,  up to a
maximum of five Home Loans. In the event that this option is exercised as to any
five Home Loans in the aggregate,  this option will thereupon  terminate.  If at
any time the Limited  Repurchase  Right Holder makes a payment to the  Custodial
Account  covering the amount of the  Repurchase  Price for such a Home Loan, and
the  Limited  Repurchase  Right  Holder  provides  to the  Indenture  Trustee  a
certification  signed by a  Servicing  Officer  stating  that the amount of such
payment has been deposited in the Custodial Account, then, at the request of the
Limited  Repurchase  Right  Holder,  the  Indenture  Trustee  shall  execute the
assignment of such Home Loan, without recourse,  to the Limited Repurchase Right
Holder  which shall  succeed to all the  Indenture  Trustee's  right,  title and
interest  in and to such Home Loan,  and all  security  and  documents  relative
thereto.  Such assignment shall be an assignment  outright and not for security.
The Limited  Repurchase  Right Holder will thereupon own such Mortgage,  and all
such  security and  documents,  free of any further  obligation to the Indenture
Trustee with respect thereto.

                                       21

<PAGE>

                                   ARTICLE IV

                              Servicing Certificate

        Section 4.01.  Statements to  Securityholders.  (a) With respect to each
Payment Date, on the Business Day following the related  Determination  Date (or
with respect to any Payment Date for which a Credit  Enhancement  Draw Amount or
Dissolution Draw will occur, no later than 12:00 P.M. New York City time, on the
second Business Day prior to the applicable  Payment Date),  the Master Servicer
shall forward to the Indenture  Trustee and the  Indenture  Trustee  pursuant to
Section 3.26 of the Indenture  shall forward or cause to be forwarded by mail or
otherwise  make  available   electronically  at   www.jpmorgan.com/sfr  to  each
Certificateholder,  Noteholder,  the Credit Enhancer,  the Depositor,  the Owner
Trustee,  the  Certificate  Paying  Agent and each  Rating  Agency,  a statement
setting forth the following information (the "Servicing  Certificate") as to the
Notes and Certificates, to the extent applicable:

                (i)  the  aggregate  amount  of (a)  Interest  Collections,  (b)
        Principal Collections and (c) Substitution Adjustment Amounts;

                (ii)  the  amount  of  such  distribution  as  principal  to the
        Noteholders;

                (iii)  the  amount  of  such  distribution  as  interest  to the
        Noteholders,  separately  stating  the  portion  thereof  in  respect of
        overdue accrued interest;

                (iv) the number and Pool Balance of the Home Loans as of the end
        of the related Collection Period;

                (v)  the  amount  of  any  Credit  Enhancement  Draw  Amount  or
        Dissolution Draw, if any, for such Payment Date and the aggregate amount
        of prior draws thereunder not yet reimbursed;

                (vi) the number and aggregate Loan Balances of Home Loans (a) as
        to which the Monthly  Payment is Delinquent  for 30-59 days,  60-89 days
        and 90 or more days,  respectively,  (b) that are  foreclosed,  (c) that
        have become REO, and (d) that have been finally  liquidated due to being
        180 days or more  delinquent,  in each case as of the end of the related
        Collection Period; provided,  however, that such information will not be
        provided on the statements relating to the first Payment Date;

                (vii) the weighted average Loan Rate for the related  Collection
        Period;

                (viii)the aggregate Liquidation Loss Amounts with respect to the
        related   Collection   Period,   the  amount  of  any  Liquidation  Loss
        Distribution Amounts with respect to the Notes, and the aggregate of the
        Liquidation  Loss Amounts from all Collection  Periods to date expressed
        as  dollars  and as a  percentage  of the  aggregate  Cut-off  Date Loan
        Balance;

                                       22

<PAGE>

                (ix) the  aggregate  Excess  Loss  Amounts  with  respect to the
        related  Collection  Period and the aggregate of the Excess Loss Amounts
        from all Collection Periods to date;

                (x) the Note Balance of the Notes and the Certificate  Principal
        Balance of the  Certificates  after giving effect to the distribution of
        principal on such Payment Date;

                (xi) the  aggregate  Servicing  Fees for the related  Collection
        Period;

                (xii) the  Outstanding  Reserve  Amount and the  Reserve  Amount
        Target immediately following such Payment Date;

                (xiii)(a) the number and principal amount of release  agreements
        pursuant to Section  3.05(b)(iv)  entered into during the calendar  year
        and since the Closing Date, stated  separately,  for the Home Loans and,
        the aggregate  outstanding  principal amount of such release  agreements
        expressed as a percentage of the Pool Balance with information  provided
        separately  with respect to all  Unsecured  Loans and (b) the number and
        principal  amount  of   Capitalization   Workouts  pursuant  to  Section
        3.02(a)(v) entered into since the Closing Date;

                (xiv)  the  aggregate   amount   recovered  during  the  related
        Collection  Period  consisting of all subsequent  recoveries on any Home
        Loan that was 180 days or more delinquent; and

                (xv) the amount, if any, to be paid by a Derivative Counterparty
        under a Derivative Contract.

        In the case of information  furnished pursuant to clauses (ii) and (iii)
above,  the amounts shall be expressed as an aggregate dollar amount per Note or
Certificate, as applicable, with a $1,000 denomination.

        (b) In addition,  with respect to each Payment Date, on the Business Day
following the related  Determination  Date, the Master Servicer shall forward to
the Credit Enhancer and the Rating  Agencies the following  information for each
Capitalization Workout entered into during the related Collection Period:

                (i) the original Home Loan amount;

                (ii) the Home Loan amount after the Capitalization Workout;

                (iii) the original Monthly Payment amount;

                (iv)  the  Monthly  Payment  amount  after  the   Capitalization
Workout;

                (v) the  Capitalized  Amount as defined  in  Section  3.02(a)(v)
herein;

                                       23

<PAGE>

                (vi)   the   Combined   Loan-to-Value   Ratio   prior   to   the
Capitalization Workout;

                (vii) the Combined  Loan-to-Value Ratio after the Capitalization
Workout; and

                (viii)if  an  appraisal  was used in  determining  the  Combined
        Loan-to-Value  Ratio  referred to in (vii)  above,  the type and date of
        appraisal.

        The Master  Servicer  shall also  forward to the  Indenture  Trustee any
other  information  reasonably  requested by the Indenture  Trustee necessary to
make distributions pursuant to Section 3.05 of the Indenture. Prior to the close
of business on the Business Day next  succeeding  each  Determination  Date, the
Master  Servicer  shall furnish a written  statement to the  Certificate  Paying
Agent and the Indenture  Trustee setting forth the aggregate amounts required to
be withdrawn from the Custodial  Account and deposited into the Payment  Account
on the Business Day preceding the related Payment Date pursuant to Section 3.03.
The  determination  by the Master Servicer of such amounts shall, in the absence
of  obvious  error,  be  presumptively  deemed to be  correct  for all  purposes
hereunder  and the Owner  Trustee and  Indenture  Trustee  shall be protected in
relying  upon  the same  without  any  independent  check  or  verification.  In
addition,  upon the Issuer's written request, the Master Servicer shall promptly
furnish  information  reasonably  requested  by the  Issuer  that is  reasonably
available to the Master Servicer to enable the Issuer to perform its federal and
state income tax reporting obligations.

        The Master Servicer shall also forward to the Credit Enhancer and/or its
designees any additional  information,  including without  limitation,  loss and
delinquency  information  requested by the Credit Enhancer,  with respect to the
Home Loans.

        Section 4.02. Tax  Reporting.  So long as 100% of the  Certificates  are
owned by the same person,  then no separate federal and state income tax returns
and information returns or reports will be filed with respect to the Issuer, and
the  Issuer   will  be  treated   as  an  entity   disregarded   from  the  100%
Certificateholder.

        Section 4.03.  Calculation of Adjusted Issue Price.  The Master Servicer
shall  calculate  the  Adjusted  Issue  Price for  purposes of  calculating  the
Termination Price.

        Section 4.04.  Exchange Act Reporting.  The Master  Servicer  shall,  on
behalf of the Depositor and in respect of the Trust  Estate,  prepare,  sign and
cause to be filed with the Commission any periodic  reports required to be filed
under the  provisions of the Exchange Act, and the rules and  regulations of the
Commission  thereunder.  Neither the Master  Servicer nor the Indenture  Trustee
shall  have any  liability  with  respect to the  Master  Servicer's  failure to
properly prepare or file such periodic reports resulting from or relating to the
Master  Servicer's  inability or failure to obtain any information not resulting
from the Master Servicer's own negligence or willful  misconduct.  Any Form 10-K
filed with the  Commission in connection  with this Section 4.04 shall include a
certification, signed by the senior officer in charge of the servicing functions
of the Master  Servicer,  in the form attached as Exhibit D hereto or such other
form  as may  be  required  or  permitted  by the  Commission  (the  "Form  10-K
Certification"), in compliance with Rule 13a-14 and 15d-14 under the

                                       24

<PAGE>

Exchange Act and any additional directives of the Commission.  This Section 4.04
may be amended in accordance  with the  provisions of this  Servicing  Agreement
without the consent of the Securityholders.

                                       25

<PAGE>

                                    ARTICLE V

                                 Payment Account

        Section 5.01. Payment Account. The Indenture Trustee shall establish and
maintain a Payment Account titled  "JPMorgan  Chase Bank, as Indenture  Trustee,
for the benefit of the  Securityholders,  the  Certificate  Paying Agent and the
Credit  Enhancer  pursuant to the  Indenture,  dated as of  September  25, 2003,
between Home Loan Trust 2003-HI3 and JPMorgan Chase Bank".  The Payment  Account
shall be an Eligible  Account.  On each Payment Date,  amounts on deposit in the
Payment Account will be distributed by the Indenture  Trustee in accordance with
Section 3.05 of the Indenture. The Indenture Trustee shall, upon written request
from the  Master  Servicer,  invest or cause  the  institution  maintaining  the
Payment  Account  to  invest  the  funds in the  Payment  Account  in  Permitted
Investments  designated in the name of the Indenture Trustee, which shall mature
not later than the Business Day next  preceding the Payment Date next  following
the date of such  investment  (except that (i) any investment in the institution
with  which  the  Payment  Account  is  maintained  or a  fund  for  which  such
institution  serves as  custodian  may mature on such  Payment Date and (ii) any
other investment may mature on such Payment Date if the Indenture  Trustee shall
advance funds on such Payment Date to the Payment  Account in the amount payable
on such  investment on such Payment Date,  pending receipt thereof to the extent
necessary  to make  distributions  on the  Securities)  and shall not be sold or
disposed  of prior to  maturity.  All  income  and gain  realized  from any such
investment  shall be for the benefit of the Master Servicer and shall be subject
to its withdrawal or order from time to time. The amount of any losses  incurred
in respect of any such investments  shall be deposited in the Payment Account by
the Master Servicer out of its own funds immediately as realized.

                                       26

<PAGE>

                                   ARTICLE VI

                               The Master Servicer

        Section  6.01.  Liability of the Master  Servicer.  The Master  Servicer
shall be liable in  accordance  herewith  only to the extent of the  obligations
specifically imposed upon and undertaken by the Master Servicer herein.

        Section  6.02.   Merger  or  Consolidation  of,  or  Assumption  of  the
Obligations  of,  the Master  Servicer.  Any  corporation  into which the Master
Servicer may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger,  conversion or consolidation to which the
Master Servicer shall be a party, or any corporation  succeeding to the business
of  the  Master  Servicer,  shall  be the  successor  of  the  Master  Servicer,
hereunder,  without the  execution  or filing of any paper or any further act on
the  part  of  any  of the  parties  hereto,  anything  herein  to the  contrary
notwithstanding.

        The Master  Servicer  may assign its rights and  delegate its duties and
obligations under this Servicing  Agreement;  provided that the Person accepting
such  assignment or  delegation  shall be a Person which is qualified to service
mortgage  loans similar to those in the Trust Estate  (meaning,  mortgage  loans
used for home improvement or debt consolidation),  is reasonably satisfactory to
the Indenture Trustee (as pledgee of the Home Loans),  the Issuer and the Credit
Enhancer,  is willing to service the Home Loans and executes and delivers to the
Indenture Trustee and the Issuer an agreement,  in form and substance reasonably
satisfactory to the Credit Enhancer, the Indenture Trustee and the Issuer, which
contains an  assumption by such Person of the due and punctual  performance  and
observance  of each  covenant  and  condition to be performed or observed by the
Master  Servicer  under this  Servicing  Agreement;  provided  further that each
Rating  Agency's  rating of the Securities in effect  immediately  prior to such
assignment  and  delegation  will not be qualified,  reduced,  or withdrawn as a
result of such  assignment  and  delegation  (as  evidenced  by a letter to such
effect from each Rating  Agency),  if  determined  without  regard to the Credit
Enhancement Instrument;  and provided further that the Owner Trustee receives an
Opinion of Counsel to the effect that such  assignment or  delegation  shall not
cause the Owner Trust to be treated as a corporation for federal or state income
tax purposes.

        Section 6.03. Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of the directors or officers or employees or
agents of the Master  Servicer  shall be under any liability to the Issuer,  the
Owner Trustee, the Indenture Trustee or the Securityholders for any action taken
or for  refraining  from the taking of any action in good faith pursuant to this
Servicing Agreement,  provided,  however,  that this provision shall not protect
the Master  Servicer  or any such  Person  against  any  liability  which  would
otherwise  be imposed by reason of its willful  misfeasance,  bad faith or gross
negligence  in the  performance  of its  duties  hereunder  or by  reason of its
reckless disregard of its obligations and duties hereunder.  The Master Servicer
and any director or officer or employee or agent of the Master Servicer may rely
in good faith on any  document of any kind prima  facie  properly  executed  and
submitted by any Person  respecting any matters  arising  hereunder.  The Master
Servicer and any director or officer or employee or agent of the Master

                                       27

<PAGE>

Servicer shall be indemnified by the Issuer and held harmless  against any loss,
liability or expense  incurred in connection  with any legal action  relating to
this  Servicing  Agreement or the  Securities,  including any amount paid to the
Owner Trustee or the Indenture  Trustee pursuant to Section 6.06(b),  other than
any loss,  liability or expense  incurred by reason of its willful  misfeasance,
bad faith or gross  negligence in the performance of its duties  hereunder or by
reason of its reckless  disregard of its obligations and duties  hereunder.  The
Master  Servicer  shall not be under any  obligation to appear in,  prosecute or
defend any legal  action  which is not  incidental  to its duties to service the
Home Loans in accordance with this Servicing Agreement, and which in its opinion
may involve it in any expense or liability;  provided,  however, that the Master
Servicer may in its sole discretion  undertake any such action which it may deem
necessary or desirable in respect of this  Servicing  Agreement,  and the rights
and duties of the parties  hereto and the interests of the  Securityholders.  In
such  event,  the  reasonable  legal  expenses  and costs of such action and any
liability  resulting  therefrom shall be expenses,  costs and liabilities of the
Issuer, and the Master Servicer shall be entitled to be reimbursed therefor. The
Master  Servicer's right to indemnity or reimbursement  pursuant to this Section
6.03 shall  survive  any  resignation  or  termination  of the  Master  Servicer
pursuant to Section 6.04 or 7.01 with respect to any losses,  expenses, costs or
liabilities  arising prior to such  resignation or termination  (or arising from
events that occurred prior to such resignation or termination).

        Section 6.04.  Master Servicer Not to Resign.  Subject to the provisions
of Section 6.02, the Master  Servicer shall not resign from the  obligations and
duties hereby imposed on it except (i) upon  determination  that the performance
of  its  obligations  or  duties  hereunder  are  no  longer  permissible  under
applicable law or are in material  conflict by reason of applicable law with any
other activities  carried on by it or its subsidiaries or Affiliates,  the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master  Servicer or its  subsidiaries  or Affiliates at
the date of this Servicing  Agreement or (ii) upon satisfaction of the following
conditions:  (a) the Master  Servicer has  proposed a successor  servicer to the
Issuer and the Indenture Trustee in writing and such proposed successor servicer
is  reasonably  acceptable to the Issuer,  the Indenture  Trustee and the Credit
Enhancer;  (b) each Rating  Agency shall have  delivered a letter to the Issuer,
the Credit  Enhancer and the Indenture  Trustee prior to the  appointment of the
successor  servicer  stating that the  proposed  appointment  of such  successor
servicer  as Master  Servicer  hereunder  will not  result in the  reduction  or
withdrawal of the then current rating of the Securities,  if determined  without
regard to the Credit  Enhancement  Instrument;  and (c) such proposed  successor
servicer is  reasonably  acceptable  to the Credit  Enhancer,  as evidenced by a
letter to the Issuer and the Indenture Trustee; provided,  however, that no such
resignation by the Master  Servicer shall become  effective until such successor
servicer or, in the case of (i) above, the Indenture Trustee,  as pledgee of the
Home  Loans,  shall have  assumed  the Master  Servicer's  responsibilities  and
obligations  hereunder or the Indenture  Trustee,  as pledgee of the Home Loans,
shall have designated a successor  servicer in accordance with Section 7.02. Any
such resignation shall not relieve the Master Servicer of responsibility for any
of the  obligations  specified  in Sections  7.01 and 7.02 as  obligations  that
survive  the  resignation  or  termination  of the  Master  Servicer.  Any  such
determination  permitting  the  resignation  of the  Master  Servicer  shall  be
evidenced  by an Opinion of Counsel to such effect  delivered  to the  Indenture
Trustee and the Credit Enhancer.

                                       28

<PAGE>

        Section 6.05.  Delegation of Duties. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties  hereunder to any
Person,  including any of its  Affiliates,  who agrees to conduct such duties in
accordance  with  standards  comparable to those with which the Master  Servicer
complies  pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 6.04.

        Section  6.06.  Master  Servicer to Pay  Indenture  Trustee's  and Owner
Trustee's Fees and Expenses; Indemnification.  (a) The Master Servicer covenants
and agrees to pay to the Owner Trustee, the Indenture Trustee and any co-trustee
of the Indenture  Trustee or the Owner Trustee from time to time,  and the Owner
Trustee,  the Indenture  Trustee and any such  co-trustee  shall be entitled to,
reasonable  compensation  (which shall not be limited by any provision of law in
regard to the  compensation  of a trustee of an express  trust) for all services
rendered by each of them in the execution of the trusts  created under the Trust
Agreement and the Indenture  and in the exercise and  performance  of any of the
powers and duties under the Trust  Agreement or the  Indenture,  as the case may
be, of the Owner  Trustee,  the Indenture  Trustee and any  co-trustee,  and the
Master  Servicer will pay or reimburse the Indenture  Trustee and any co-trustee
upon request for all reasonable expenses, disbursements and advances incurred or
made by the Indenture  Trustee or any  co-trustee in accordance  with any of the
provisions of this Servicing Agreement except any such expense,  disbursement or
advance as may arise from its negligence, wilful misfeasance or bad faith.

        (b) The Master  Servicer  agrees to indemnify the Indenture  Trustee and
the Owner Trustee for, and to hold the Indenture  Trustee and the Owner Trustee,
as the case may be, harmless  against,  any loss,  liability or expense incurred
without negligence, bad faith or willful misconduct on the part of the Indenture
Trustee  or the  Owner  Trustee,  as the  case  may be,  arising  out of,  or in
connection with, the acceptance and  administration of the Issuer and the assets
thereof,  including the costs and expenses (including  reasonable legal fees and
expenses) of defending the Indenture  Trustee or the Owner Trustee,  as the case
may be, against any claim in connection  with the exercise or performance of any
of its powers or duties under any Basic Document (including, without limitation,
any claim  against  the  Indenture  Trustee  or the  Owner  Trustee  alleging  a
violation of the  Homeownership  and Equity Protection Act of 1994, as amended),
provided that:

                       (i) with respect to any such claim, the Indenture Trustee
        or Owner  Trustee,  as the case may be,  shall  have  given  the  Master
        Servicer written notice thereof promptly after the Indenture  Trustee or
        Owner Trustee, as the case may be, shall have actual knowledge thereof;

                       (ii) while maintaining control over its own defense,  the
        Issuer,  the  Indenture  Trustee or Owner  Trustee,  as the case may be,
        shall  cooperate and consult fully with the Master Servicer in preparing
        such defense; and

                       (iii)   notwithstanding   anything   in  this   Servicing
        Agreement to the contrary,  the Master  Servicer shall not be liable for
        settlement of any claim by the Indenture Trustee

                                       29

<PAGE>

        or the Owner Trustee, as the case may be, entered into without the prior
        consent of the Master Servicer.

No termination of this Servicing  Agreement shall affect the obligations created
by this Section 6.06 of the Master  Servicer to indemnify the Indenture  Trustee
and the Owner Trustee under the conditions and to the extent set forth herein.

        Notwithstanding  the  foregoing,  the  indemnification  provided  by the
Master Servicer in this Section 6.06(b) shall not pertain to any loss, liability
or expense of the Indenture  Trustee or the Owner  Trustee,  including the costs
and expenses of defending itself against any claim,  incurred in connection with
any actions taken by the Indenture Trustee or the Owner Trustee at the direction
of the  Noteholders or  Certificateholders,  as the case may be, pursuant to the
terms of this Servicing Agreement.

                                       30

<PAGE>

                                   ARTICLE VII

                                     Default

     Section  7.01.  Servicing  Default.  If any  one of  the  following  events
("Servicing Default") shall occur and be continuing:

                       (i) Any failure by the Master  Servicer to deposit in the
        Custodial  Account  or to remit to the Paying  Agent for  deposit in the
        Payment Account any deposit  required to be made under the terms of this
        Servicing  Agreement  which  continues  unremedied  for a period of five
        Business Days after the date upon which  written  notice of such failure
        shall  have  been  given to the  Master  Servicer  by the  Issuer or the
        Indenture  Trustee,  or to the  Master  Servicer,  the  Issuer  and  the
        Indenture Trustee by the Credit Enhancer; or

                       (ii) Failure on the part of the Master  Servicer  duly to
        observe  or perform  in any  material  respect  any other  covenants  or
        agreements of the Master Servicer set forth in the Securities or in this
        Servicing  Agreement,  which  failure,  in  each  case,  materially  and
        adversely  affects  the  interests  of  Securityholders  or  the  Credit
        Enhancer and which  continues  unremedied  for a period of 45 days after
        the date on which written notice of such failure,  requiring the same to
        be  remedied,  and  stating  that such  notice is a "Notice of  Default"
        hereunder, shall have been given to the Master Servicer by the Issuer or
        the Indenture  Trustee,  or to the Master  Servicer,  the Issuer and the
        Indenture Trustee by the Credit Enhancer; or

                       (iii) The entry  against the Master  Servicer of a decree
        or  order  by  a  court  or  agency  or  supervisory   authority  having
        jurisdiction   in  the  premises  for  the  appointment  of  a  trustee,
        conservator, receiver or liquidator in any insolvency,  conservatorship,
        receivership,   readjustment   of  debt,   marshalling   of  assets  and
        liabilities or similar proceedings, or for the winding up or liquidation
        of its  affairs,  and  the  continuance  of any  such  decree  or  order
        undischarged  or unstayed  and in effect for a period of 60  consecutive
        days; or

                       (iv)  The  Master  Servicer  shall  voluntarily  go  into
        liquidation,  consent to the  appointment  of a  conservator,  receiver,
        liquidator or similar person in any  insolvency,  readjustment  of debt,
        marshalling  of assets  and  liabilities  or similar  proceedings  of or
        relating   to  the  Master   Servicer  or  of  or  relating  to  all  or
        substantially  all of its  property,  or a  decree  or order of a court,
        agency or supervisory  authority having jurisdiction in the premises for
        the appointment of a conservator, receiver, liquidator or similar person
        in any  insolvency,  readjustment  of debt,  marshalling  of assets  and
        liabilities or similar proceedings, or for the winding-up or liquidation
        of its affairs,  shall have been entered against the Master Servicer and
        such decree or order shall have remained in force undischarged, unbonded
        or unstayed for a period of 60 days; or the Master  Servicer shall admit
        in writing its inability to pay its debts  generally as they become due,
        file a petition to take advantage of any applicable

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<PAGE>

        insolvency or reorganization statute, make an assignment for the benefit
        of its creditors or voluntarily suspend payment of its obligations.

Then, and in every such case, so long as a Servicing Default shall not have been
remedied by the Master  Servicer,  either the Issuer or the  Indenture  Trustee,
with the consent of the Credit Enhancer,  or the Credit Enhancer, by notice then
given in  writing to the Master  Servicer  (and to the Issuer and the  Indenture
Trustee if given by the Credit  Enhancer)  may  terminate  all of the rights and
obligations of the Master  Servicer as servicer  under this Servicing  Agreement
other  than  its  right to  receive  servicing  compensation  and  expenses  for
servicing the Home Loans  hereunder  during any period prior to the date of such
termination  and the Issuer or the  Indenture  Trustee,  with the consent of the
Credit Enhancer,  or the Credit Enhancer may exercise any and all other remedies
available at law or equity. Any such notice to the Master Servicer shall also be
given to each Rating Agency, the Credit Enhancer and the Issuer. On or after the
receipt by the Master Servicer of such written  notice,  all authority and power
of the Master Servicer under this Servicing  Agreement,  whether with respect to
the  Securities or the Home Loans or  otherwise,  shall pass to and be vested in
the Indenture  Trustee as successor Master Servicer,  pursuant to and under this
Section  7.01;  and,  without  limitation,   the  Indenture  Trustee  is  hereby
authorized  and  empowered  to  execute  and  deliver,  on behalf of the  Master
Servicer,  as  attorney-in-fact  or  otherwise,  any and all documents and other
instruments,  and to do or  accomplish  all other  acts or things  necessary  or
appropriate  to effect the  purposes of such notice of  termination,  whether to
complete the transfer and  endorsement of each Home Loan and related  documents,
or otherwise. The Master Servicer agrees to cooperate with the Indenture Trustee
in effecting the  termination of the  responsibilities  and rights of the Master
Servicer hereunder, including, without limitation, the transfer to the Indenture
Trustee for the  administration  by it of all cash amounts  relating to the Home
Loans that shall at the time be held by the Master  Servicer and to be deposited
by it in the  Custodial  Account,  or that have  been  deposited  by the  Master
Servicer in the Custodial Account or thereafter  received by the Master Servicer
with respect to the Home Loans.  All reasonable  costs and expenses  (including,
but not limited to,  attorneys'  fees) incurred in connection with amending this
Servicing  Agreement to reflect such succession as Master  Servicer  pursuant to
this Section 7.01 shall be paid by the  predecessor  Master  Servicer (or if the
predecessor  Master  Servicer  is the  Indenture  Trustee,  the  initial  Master
Servicer)  upon  presentation  of  reasonable  documentation  of such  costs and
expenses.

        Notwithstanding any termination of the activities of the Master Servicer
hereunder,  the Master  Servicer  shall be entitled to receive,  out of any late
collection  of a  payment  on a Home  Loan  which  was due  prior to the  notice
terminating the Master Servicer's rights and obligations  hereunder and received
after such  notice,  that portion to which the Master  Servicer  would have been
entitled  pursuant to Sections 3.03 and 3.09 as well as its Master Servicing Fee
in  respect  thereof,  and any other  amounts  payable  to the  Master  Servicer
hereunder  the  entitlement  to  which  arose  prior to the  termination  of its
activities hereunder.

        Notwithstanding  the  foregoing,  a delay in or failure  of  performance
under  Section  7.01(i) or under Section  7.01(ii)  after the  applicable  grace
periods specified in such Sections,  shall not constitute a Servicing Default if
such delay or failure  could not be  prevented  by the  exercise  of  reasonable
diligence by the Master  Servicer and such delay or failure was caused by an act
of God

                                       32

<PAGE>

or the public  enemy,  acts of  declared or  undeclared  war,  public  disorder,
rebellion or  sabotage,  epidemics,  landslides,  lightning,  fire,  hurricanes,
earthquakes,  floods or similar causes. The preceding sentence shall not relieve
the Master  Servicer  from using  reasonable  efforts to perform its  respective
obligations  in a timely manner in accordance  with the terms of this  Servicing
Agreement  and the Master  Servicer  shall provide the  Indenture  Trustee,  the
Credit Enhancer and the Securityholders  with notice of such failure or delay by
it,  together with a description  of its efforts to so perform its  obligations.
The Master Servicer shall immediately notify the Indenture  Trustee,  the Credit
Enhancer and the Owner Trustee in writing of any Servicing Default.

        Section 7.02. Indenture Trustee to Act; Appointment of Successor. (a) On
and after the time the Master Servicer receives a notice of termination pursuant
to Section  7.01 or sends a notice  pursuant  to  Section  6.04,  the  Indenture
Trustee  shall be the  successor in all  respects to the Master  Servicer in its
capacity as servicer under this  Servicing  Agreement and the  transactions  set
forth or provided  for herein and shall be subject to all the  responsibilities,
duties and  liabilities  relating  thereto placed on the Master  Servicer by the
terms and provisions hereof. Nothing in this Servicing Agreement or in the Trust
Agreement  shall be construed to permit or require the Indenture  Trustee to (i)
succeed to the  responsibilities,  duties and  liabilities of the initial Master
Servicer in its capacity as Seller under the Home Loan Purchase Agreement,  (ii)
be  responsible or  accountable  for any act or omission of the Master  Servicer
prior to the issuance of a notice of  termination  hereunder,  (iii)  require or
obligate the Indenture Trustee, in its capacity as successor Master Servicer, to
purchase,  repurchase or substitute  any Home Loan,  (iv) fund any losses on any
Permitted Investment directed by any other Master Servicer or (v) be responsible
for the representations  and warranties of the Master Servicer.  As compensation
therefor,  the Indenture  Trustee shall be entitled to such  compensation as the
Master  Servicer  would have been  entitled  to  hereunder  if no such notice of
termination  had been given.  Notwithstanding  the above,  (i) if the  Indenture
Trustee  is  unwilling  to act as  successor  Master  Servicer,  or  (ii) if the
Indenture Trustee is legally unable so to act, the Indenture Trustee may (in the
situation  described  in clause  (i)) or shall (in the  situation  described  in
clause (ii))  appoint or petition a court of competent  jurisdiction  to appoint
any  established  housing and home finance  institution,  bank or other mortgage
loan  or  home  equity  loan  servicer  having  a net  worth  of not  less  than
$10,000,000 as the successor to the Master Servicer  hereunder in the assumption
of all or any part of the responsibilities,  duties or liabilities of the Master
Servicer  hereunder;  provided that any such successor  Master Servicer shall be
acceptable to the Credit Enhancer,  as evidenced by the Credit  Enhancer's prior
written  consent which consent shall not be  unreasonably  withheld and provided
further that the  appointment  of any such  successor  Master  Servicer will not
result in the qualification,  reduction or withdrawal of the ratings assigned to
the  Securities  by the Rating  Agencies,  if determined  without  regard to the
Credit Enhancement Instrument.  Pending appointment of a successor to the Master
Servicer  hereunder,  unless the Indenture  Trustee is prohibited by law from so
acting,  the  Indenture  Trustee  shall act in such  capacity  as  herein  above
provided.  In connection with such  appointment  and  assumption,  the successor
Master  Servicer  shall be entitled to receive  compensation  out of payments on
Home Loans in an amount  equal to the  compensation  which the  Master  Servicer
would  otherwise  have  received  pursuant  to  Section  3.09  (or  such  lesser
compensation  as the Indenture  Trustee and such  successor  shall  agree).  The
appointment of a successor Master Servicer shall not affect any liability of the
predecessor Master Servicer which may have arisen under this Servicing Agreement
prior to its

                                       33

<PAGE>

termination as Master Servicer (including, without limitation, the obligation to
purchase Home Loans  pursuant to Section 3.01,  to pay any  deductible  under an
insurance policy pursuant to Section 3.04 or to indemnify the Indenture  Trustee
pursuant to Section 6.06), nor shall any successor Master Servicer be liable for
any acts or omissions of the  predecessor  Master  Servicer or for any breach by
such  Master  Servicer of any of its  representations  or  warranties  contained
herein or in any related document or agreement.  The Indenture  Trustee and such
successor shall take such action,  consistent with this Servicing Agreement,  as
shall be necessary to effectuate any such succession.

        (b) Any  successor,  including  the  Indenture  Trustee,  to the  Master
Servicer  as  servicer  shall  during the term of its  service as  servicer  (i)
continue  to  service  and  administer  the Home  Loans for the  benefit  of the
Securityholders,  (ii)  maintain  in force a policy  or  policies  of  insurance
covering  errors and omissions in the  performance of its  obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same  extent as the Master  Servicer  is so  required  pursuant to
Section 3.13 and (iii) be bound by the terms of the Insurance Agreement.

        (c) Any successor  Master  Servicer,  including  the Indenture  Trustee,
shall not be deemed in default or to have  breached its duties  hereunder if the
predecessor  Master  Servicer shall fail to deliver any required  deposit to the
Custodial Account or otherwise cooperate with any required servicing transfer or
succession hereunder.

        Section 7.03.  Notification to Securityholders.  Upon any termination of
or  appointment of a successor to the Master  Servicer  pursuant to this Article
VII or Section 6.04,  the Indenture  Trustee  shall give prompt  written  notice
thereof to the Securityholders,  the Credit Enhancer, the Issuer and each Rating
Agency.

        Section 7.04. Servicing Trigger; Removal of Master Servicer.
                      ---------------------------------------------

               (a) Upon  determination  by the Credit  Enhancer that a Servicing
Trigger has occurred,  the Credit  Enhancer  shall give notice of such Servicing
Trigger to the Master Servicer, the Depositor, the Indenture Trustee and to each
Rating Agency.

               (b) At any time after such  determination  and while a  Servicing
Trigger is continuing,  the Credit Enhancer may direct the Indenture  Trustee to
remove the Master Servicer if the Credit Enhancer makes a determination that the
manner  of  master  servicing  was a  factor  contributing  to the  size  of the
delinquencies or losses incurred in the Trust Estate.

               (c) Upon  receipt of  directions  to remove  the Master  Servicer
pursuant to the  preceding  clause (b), the  Indenture  Trustee shall notify the
Master  Servicer that it has been  terminated  and the Master  Servicer shall be
terminated in the same manner as specified in Sections 7.01 and 7.02.

               (d) After notice of  occurrence  of a Servicing  Trigger has been
given and while a Servicing  Trigger is continuing,  until and unless the Master
Servicer  has been  removed as  provided  in clause  (b),  the  Master  Servicer
covenants and agrees to act as the Master Servicer for a term from

                                       34

<PAGE>

the  occurrence of the Servicing  Trigger to the end of the calendar  quarter in
which such Servicing  Trigger  occurs,  which term may at the Credit  Enhancer's
discretion be extended by notice to the Indenture  Trustee for successive  terms
of three (3) calendar  months each,  until the  termination of the Trust Estate.
The Master  Servicer will,  upon the receipt of each such notice of extension (a
"Master  Servicer  Extension  Notice") become bound for the duration of the term
covered by such Master Servicer  Extension Notice to continue as Master Servicer
subject to and in accordance with this Agreement. If, as of the fifteenth (15th)
day  prior to the last day of any term as the  Master  Servicer,  the  Indenture
Trustee shall not have received any Master  Servicer  Extension  Notice from the
Credit  Enhancer,  the Indenture  Trustee  shall,  within five (5) Business Days
thereafter,  give written notice of such  nonreceipt to the Credit  Enhancer and
the  Master  Servicer.  If any such  term  expires  without  a  Master  Servicer
Extension  Notice  then the  Indenture  Trustee  shall act as  successor  Master
Servicer as provided in Section 7.02.

               (e) No  provision  of this  Section 7.04 shall have the effect of
limiting the rights of the Depositor, the Indenture Trustee, the Securityholders
or the Credit Enhancer under Section 7.01.

                                       35

<PAGE>

                                  ARTICLE VIII

                            Miscellaneous Provisions

        Section 8.01.  Amendment.  This Servicing  Agreement may be amended from
time to time by the parties  hereto,  provided that any amendment be accompanied
by a letter from the Rating  Agencies that the amendment  will not result in the
downgrading  or  withdrawal of the rating then  assigned to the  Securities,  if
determined without regard to the Credit Enhancement Instrument,  and the consent
of the Credit Enhancer and the Indenture  Trustee.  Promptly after the execution
by the Master Servicer, the Issuer and the Indenture Trustee of any amendment of
this Servicing  Agreement  pursuant to this Section 8.01, the Indenture  Trustee
shall  provide the Custodian  with written  copies  thereof.  Any failure of the
Indenture  Trustee  to mail such  notice,  or any  defect  therein,  shall  not,
however, in any way impair or affect the validity of any such amendment.

        SECTION 8.02.        GOVERNING LAW. THIS SERVICING AGREEMENT SHALL
BE  CONSTRUED  IN  ACCORDANCE  WITH  THE  LAWS OF THE  STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

        Section 8.03. 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 certified mail,  return receipt  requested,  to (a) in
the case of the Master Servicer,  2255 North Ontario Street, Suite 400, Burbank,
California 91504-3120,  Attention: Addition Director - Bond Administration,  (b)
in the case of the  Credit  Enhancer,  Ambac  Assurance  Corporation,  One State
Street  Plaza,  19th  Floor,  New  York,  New York  10004,  Attention:  Consumer
Asset-Backed  Securities  Group, (c) in the case of Moody's,  Home Mortgage Loan
Monitoring Group, 99 Church Street,  4th Floor, New York, New York 10007, (d) in
the case of Standard & Poor's,  55 Water Street - 41st Floor, New York, New York
10041,  Attention:  Residential Mortgage  Surveillance Group, (e) in the case of
the Owner Trustee,  Wilmington  Trust Company,  Rodney Square North,  1100 North
Market Street,  Wilmington,  Delaware  19890-0001,  Attention:  Corporate  Trust
Administration,  (f) in the case of the Issuer, to Home Loan Trust 2003-HI3, c/o
Owner Trustee,  Wilmington Trust Company, Rodney Square North, 1100 North Market
Street,   Wilmington,   Delaware   19890-0001,    Attention:   Corporate   Trust
Administration, (g) in the case of the Indenture Trustee, JPMorgan Chase Bank, 4
New York Plaza,  6th Floor, New York, New York 10004,  Attention:  Institutional
Trust Services/Structured Finance Services - Home Loan Trust 2003-HI3 and (h) in
the case of the  Underwriters  c/o the  Representative,  at Bear,  Stearns & Co.
Inc., 383 Madison  Avenue,  New York, New York 10179;  or, as to each party,  at
such other address as shall be  designated by such party in a written  notice to
each  other  party.  Any  notice  required  or  permitted  to  be  mailed  to  a
Securityholder  shall be given by first  class  mail,  postage  prepaid,  at the
address of such  Securityholder  as shown in the Register.  Any notice so mailed
within the time  prescribed in this Servicing  Agreement  shall be  conclusively
presumed to have been duly  given,  whether or not the  Securityholder  receives
such notice.  Any notice or other document required to be delivered or mailed by
the  Indenture  Trustee  to any  Rating  Agency  shall be given on a  reasonable
efforts  basis  and only as a  matter  of  courtesy  and  accommodation  and the
Indenture Trustee shall have no liability for failure to delivery such notice or
document to any Rating Agency.

                                       36

<PAGE>

        Section  8.04.  Severability  of  Provisions.  If any one or more of the
covenants, agreements,  provisions or terms of this Servicing Agreement shall be
for any  reason  whatsoever  held  invalid,  then  such  covenants,  agreements,
provisions  or terms shall be deemed  severable  from the  remaining  covenants,
agreements,  provisions or terms of this Servicing Agreement and shall in no way
affect the validity or  enforceability of the other provisions of this Servicing
Agreement or of the Securities or the rights of the Securityholders thereof.

        Section 8.05. Third-Party  Beneficiaries.  This Servicing Agreement will
inure  to  the  benefit  of  and  be  binding  upon  the  parties  hereto,   the
Securityholders,  the Credit  Enhancer,  the Owner Trustee and their  respective
successors and permitted assigns. Except as otherwise provided in this Servicing
Agreement, no other Person will have any right or obligation hereunder.

        Section  8.06.  Counterparts.  This  instrument  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.

        Section 8.07. Effect of Headings and Table of Contents.  The Article and
Section  headings herein and the Table of Contents are for convenience  only and
shall not affect the construction hereof.

        Section  8.08.  Termination  Upon  Purchase  by the Master  Servicer  or
Liquidation  of  All  Home  Loans;   Partial  Redemption.   (a)  The  respective
obligations  and  responsibilities  of the Master  Servicer,  the Issuer and the
Indenture  Trustee  created hereby shall terminate upon the last action required
to be taken by the Issuer  pursuant to the Trust  Agreement and by the Indenture
Trustee pursuant to the Indenture following the earlier of:

               (i) the date on or before which the Indenture or Trust  Agreement
        is terminated, or

                (ii) the purchase by the Master  Servicer from the Issuer of all
        Home Loans and all  property  acquired  in respect of any Home Loan at a
        price equal to the Termination Price.

The right of the Master  Servicer to purchase the assets of the Issuer  pursuant
to clause (ii) above on any Payment  Date is  conditioned  upon the Pool Balance
(after applying payments received in the related  Collection  Period) as of such
Payment  Date being less than ten percent of the  aggregate  of the Cut-off Date
Loan  Balances  of the Home  Loans.  If such  right is  exercised  by the Master
Servicer,  the Master  Servicer shall deposit the Termination  Price  calculated
pursuant to clause  (ii) above with the  Indenture  Trustee  pursuant to Section
4.10 of the  Indenture  and,  upon the receipt of such  deposit,  the  Indenture
Trustee or Custodian shall release to the Master Servicer,  the files pertaining
to the Home Loans being purchased.

        (b) The Master  Servicer,  at its expense,  shall prepare and deliver to
the  Indenture  Trustee  for  execution,  at the time the Home  Loans  are to be
released to the Master Servicer, appropriate

                                       37

<PAGE>

documents assigning each such Home Loan from the Indenture Trustee or the Issuer
to the Master Servicer or the appropriate party.

        (c) The Master  Servicer shall give the Indenture  Trustee not less than
seven  Business  Days' prior  written  notice of the  Payment  Date on which the
Master  Servicer  anticipates  that  the  final  distribution  will  be  made to
Noteholders. Notice of any termination, specifying the anticipated Final Insured
Payment Date or other  Payment Date (which shall be a date that would  otherwise
be a Payment Date) upon which the  Noteholders  may surrender their Notes to the
Indenture  Trustee (if so required by the terms hereof) for payment of the final
distribution and cancellation, shall be given promptly by the Master Servicer to
the Indenture Trustee specifying:

                (i) the anticipated  Final Insured Payment Date or other Payment
        Date upon which  final  payment of the Notes is  anticipated  to be made
        upon  presentation and surrender of Notes at the office or agency of the
        Indenture Trustee therein designated; and

                (ii) the amount of any such final payment, if known.

        Section 8.09. Certain Matters Affecting the Indenture  Trustee.  For all
purposes of this Servicing Agreement, in the performance of any of its duties or
in the exercise of any of its powers  hereunder,  the Indenture Trustee shall be
subject to and entitled to the benefits of Article VI of the Indenture.

        Section  8.10.  Owner  Trustee  Not Liable for  Related  Documents.  The
recitals contained herein shall be taken as the statements of the Depositor, and
the Owner Trustee assumes no  responsibility  for the correctness  thereof.  The
Owner Trustee makes no representations as to the validity or sufficiency of this
Servicing  Agreement,  of any Basic Document or of the Certificates  (other than
the signatures of the Owner Trustee on the Certificates) or the Notes, or of any
Related Documents. The Owner Trustee shall at no time have any responsibility or
liability  with  respect to the  sufficiency  of the Owner  Trust  Estate or its
ability to generate the payments to be distributed to  Certificateholders  under
the Trust  Agreement or the  Noteholders  under the  Indenture,  including,  the
compliance  by the  Depositor or the Seller with any warranty or  representation
made under any Basic Document or in any related  document or the accuracy of any
such warranty or representation,  or any action of the Certificate Paying Agent,
the  Certificate  Registrar or the  Indenture  Trustee  taken in the name of the
Owner Trustee.

                                       38

<PAGE>

        IN WITNESS WHEREOF,  the Master Servicer,  the Indenture Trustee and the
Issuer  have  caused  this  Servicing  Agreement  to be duly  executed  by their
respective  officers or  representatives  all as of the day and year first above
written.

RESIDENTIAL FUNDING CORPORATION,
        as Master Servicer

By:     /s/ Julie Steinhagen
        ----------------------------------------------------------
Name:   Julie Steinhagen
Title:  Director

                            HOME LOAN TRUST 2003-HI3

By:     Wilmington Trust Company, not in its
        individual capacity but solely as Owner
        Trustee

By:     /s/
        ------------------------------------------------------------------
Name:
Title:

JPMORGAN CHASE BANK, as Indenture Trustee

By:     /s/
        -------------------------------------
Name:
Title:

<PAGE>

               IN WITNESS WHEREOF,  the Master Servicer,  the Indenture  Trustee
and the Issuer have caused this Servicing Agreement to be duly executed by their
respective  officers or  representatives  all as of the day and year first above
written.

RESIDENTIAL FUNDING CORPORATION,
        as Master Servicer

By:     ___________________________________
Name:   Michael Mead
Title:  Associate

HOME LOAN TRUST 2003-HI3

By:     Wilmington Trust Company, not in its
        individual capacity but solely as Owner
        Trustee

By:     ___________________________________
Name:
Title:

JPMORGAN CHASE BANK, as Indenture Trustee

By:     ___________________________________
Name:
Title:

<PAGE>

                                   EXHIBIT A-1

                               HOME LOAN SCHEDULE

<PAGE>

                                          EXHIBIT B
                                  LIMITED POWER OF ATTORNEY

KNOW ALL MEN BY THESE PREMISES:

That  JPMorgan  Chase Bank,  as  Indenture  Trustee (the  "Trustee"),  under the
Indenture (the "Indenture") among  ________________________________________  and
the Indenture  Trustee,  a national banking  association  organized and existing
under the laws of the State of New York, and having its principal office located
at 4 New York  Plaza,  in the City of New York in the  State of New  York,  hath
made, constituted and appointed, and does by these presents make, constitute and
appoint Residential Funding  Corporation,  a corporation  organized and existing
under the laws of the State of Delaware,  its true and lawful  Attorney-in-Fact,
with full power and authority to sign, execute,  acknowledge,  deliver, file for
record, and record any instrument on its behalf and to perform such other act or
acts  as  may  be  customarily  and  reasonably  necessary  and  appropriate  to
effectuate  the  following  enumerated  transactions  in  respect  of any of the
mortgages  or  deeds  of  trust  (the  "Mortgages"  and the  "Deeds  of  Trust",
respectively)  creating  a trust  or  second  lien or an  estate  in fee  simple
interest in real  property  securing a Home Loan and  promissory  notes  secured
thereby (the "Mortgage  Notes") for which the undersigned is acting as Indenture
Trustee for various Securityholders (whether the undersigned is named therein as
mortgagee or beneficiary or has become mortgagee by virtue of Endorsement of the
Mortgage  Note  secured  by any such  Mortgage  or Deed of Trust)  and for which
Residential  Funding  Corporation  is acting as master  servicer  pursuant  to a
Servicing Agreement, dated as of September 25, 2003 (the "Servicing Agreement").
This  appointment  shall  apply  only  to  transactions  which  the  Trustee  is
authorized to enter into under the Indenture, but in no event shall apply to any
transactions other than the following enumerated transactions only:

        1.     The  modification or re-recording of a Mortgage or Deed of Trust,
               where said  modification  or  re-recording  is for the purpose of
               correcting  the  Mortgage or Deed of Trust to conform same to the
               original intent of the parties thereto or to correct title errors
               discovered  after  such  title  insurance  was  issued  and  said
               modification  or  re-recording,  in  either  instance,  does  not
               adversely  affect  the lien of the  Mortgage  or Deed of Trust as
               insured.

        2.     The  subordination  of the lien of a Mortgage or Deed of Trust to
               an easement in favor of a public utility  company or a government
               agency or unit with powers of eminent domain;  this section shall
               include,   without   limitation,   the   execution   of   partial
               satisfactions/releases, partial reconveyances or the execution of
               requests to trustees to accomplish same.

        3.     With respect to a Mortgage or Deed of Trust, the foreclosure, the
               taking of a deed in lieu of  foreclosure,  or the  completion  of
               judicial or non-judicial foreclosure or termination, cancellation
               or  rescission  of  any  such  foreclosure,   including,  without
               limitation, any and all of the following acts:

<PAGE>

               a.     The  substitution  of  trustee(s)  serving under a Deed of
                      Trust, in accordance with state law and the Deed of Trust;

               b.     Statements of breach or non-performance;

               c.     Notices of default;

               d.     Cancellations/rescissions  of notices  of  default  and/or
                      notices of sale;

               e.     The taking of a deed in lieu of foreclosure; and

               f.     Such other documents and actions as may be necessary under
                      the terms of the  Mortgage,  Deed of Trust or state law to
                      expeditiously complete said transactions.

         4.    The conveyance of the properties to the mortgage insurer,  or the
               closing  of the  title to the  property  to be  acquired  as real
               estate owned, or conveyance of title to real estate owned.

        5.     The completion of loan assumption agreements.

        6.     The full  satisfaction/release  of a Mortgage or Deed of Trust or
               full  reconveyance upon payment and discharge of all sums secured
               thereby,  including,  without  limitation,  cancellation  of  the
               related Mortgage Note.

        7.     The  assignment  of any Mortgage or Deed of Trust and the related
               Mortgage Note, in connection with the repurchase of the Home Loan
               secured and evidenced  thereby  pursuant to the requirements of a
               Residential Funding Corporation Seller Contract.

        8.     The full  assignment  of a Mortgage or Deed of Trust upon payment
               and discharge of all sums secured thereby in conjunction with the
               refinancing   thereof,   including,   without   limitation,   the
               endorsement of the related Mortgage Note.

        9.     The  modification or re-recording of a Mortgage or Deed of Trust,
               where said modification or re-recording is for the purpose of any
               modification pursuant to Section 3.01 of the Servicing Agreement.

        10.    The  subordination  of the lien of a  Mortgage  or Deed of Trust,
               where said  subordination  is in connection with any modification
               pursuant  to Section  3.01 of the  Servicing  Agreement,  and the
               execution of partial  satisfactions/releases  in connection  with
               such same Section 3.01.

The undersigned gives said  Attorney-in-Fact full power and authority to execute
such instruments and to do and perform all and every act and thing necessary and
proper to carry into effect the power

<PAGE>

or powers  granted by or under this  Limited  Power of  Attorney as fully as the
undersigned  might or could do, and hereby  does  ratify and confirm to all that
said Attorney-in-Fact shall lawfully do or cause to be done by authority hereof.

<PAGE>

Third  parties  without  actual  notice may rely upon the  exercise of the power
granted  under this Limited  Power of Attorney;  and may be satisfied  that this
Limited Power of Attorney  shall  continue in full force and effect has not been
revoked  unless an  instrument  of  revocation  has been made in  writing by the
undersigned.

                                                JPMORGAN  CHASE BANK, not in its
                                                individual capacity,  but solely
                                                as Indenture  Trustee  under the
                                                Servicing   Agreement   and  the
                                                Indenture

-------------------------------------           ----------------------------

Name: ______________________________            Name: ______________________
Title: _______________________________          Title: ______________________

<PAGE>

STATE OF                     )
                             SS.
COUNTY OF                    )

        On this __ day of  _______________,  2003,  before  me the  undersigned,
Notary Public of said State, personally appeared _______________________________
personally  known to me to be duly  authorized  officers of JPMorgan  Chase Bank
that executed the within instrument and personally known to me to be the persons
who  executed  the within  instrument  on behalf of JPMorgan  Chase Bank therein
named,  and  acknowledged  to me such  JPMorgan  Chase Bank  executed the within
instrument pursuant to its by-laws.

                                            WITNESS my hand and official seal.

                                            -------------------------------
                                            Notary Public in and for the
                                            State of ___________________

After recording, please mail to:
=============================
-----------------------------
Attn:  ________________________

<PAGE>

                                          EXHIBIT C

                                 FORM OF REQUEST FOR RELEASE

DATE:

TO:

RE:            REQUEST FOR RELEASE OF DOCUMENTS

In connection with your administration of the Home Loans, we request the release
of the Mortgage File described below.

Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one)   Home Loan     Prepaid in Full

                                                          Home Loan Repurchased

"We hereby  certify  that all amounts  received or to be received in  connection
with such  payments  which are required to be deposited  have been or will be so
deposited as provided in the Servicing Agreement."

-------------------------------------
Residential Funding Corporation
Authorized Signature
******************************************************************
TO CUSTODIAN/INDENTURE  TRUSTEE:  Please acknowledge this request, and check off
documents  being  enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.

        Enclosed Documents:         [ ]     Promissory Note
                                    [ ]     Mortgage or Deed of Trust
                                    [ ]     Assignment(s) of Mortgage or
                                            Deed of Trust
                                    [ ]     Title Insurance Policy
                                    [ ]     Other: ___________________________

-----------------
Name
-----------------
Title
-----------------
Date

<PAGE>

                                          EXHIBIT D

                                FORM OF FORM 10-K CERTIFICATE

        I, [identify the certifying individual], certify that:

        1. I have  reviewed  the annual  report on Form 10-K for the fiscal year
[___], and all reports on Form 8-K containing  distribution or servicing reports
filed in respect of periods  included in the year covered by that annual report,
of the trust (the "Trust")  created  pursuant to the Amended and Restated  Trust
Agreement dated September 25, 2003 (the "Trust Agreement")  between  Residential
Funding  Mortgage  Securities  II, Inc. (the  "Company")  and  Wilmington  Trust
Company (the "Owner Trustee");

        2. Based on my knowledge,  the information in these reports,  taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a  material  fact  necessary  to make  the  statements  made,  in  light  of the
circumstances  under which such  statements  were made, not misleading as of the
last day of the period covered by that annual report;

        3. Based on my  knowledge,  the  servicing  information  required  to be
provided to by the Master Servicer under the Servicing  Agreement is included in
these reports;

        4. I am responsible for reviewing the activities performed by the Master
Servicer under the Servicing  Agreement and based upon the review required under
the  Servicing  Agreement,  and except as  disclosed  in the report,  the Master
Servicer has fulfilled its obligations under the Servicing Agreement; and

        5. I have disclosed to the Company's  certified  public  accountants all
significant  deficiencies  relating the Master  Servicer's  compliance  with the
minimum servicing  standards in accordance with a review conducted in compliance
with the Uniform Single Attestation Program for Mortgage Bankers as set forth in
the Servicing Agreement.

        In  giving  the  certifications  above,  I  have  reasonably  relied  on
information provided tome by the following unaffiliated parties.

Date:____________

                                                   By:________________________
                                                   Name:______________________
                                                   Company:___________________
                                                   Title:_____________________

<PAGE>

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