Document:

Exhibit 10.2

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                       GREENPOINT MORTGAGE SECURITIES LLC,
                                    Sponsor,

                       GREENPOINT MORTGAGE FUNDING, INC.,
                                    Servicer,

                    GREENPOINT HOME EQUITY LOAN TRUST 200_-_,
                                     Issuer,

                                       and

                              [INDENTURE TRUSTEE],
                                Indenture Trustee

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

                          SALE AND SERVICING AGREEMENT

                           Dated as of ________, 200_

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

                        Variable Rate Asset-Backed Notes

                                  Series 200_-_

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I DEFINITIONS..........................................................1
       Section 1.01.      Definitions..........................................1
       Section 1.02.      Other Definitional Provisions........................1
       Section 1.03.      Interest Calculations................................2

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF NOTES; TAX
               TREATMENT.......................................................2
       Section 2.01.      Conveyance of Mortgage Loans; Retention of
                          Obligation to Fund Advances Under Credit Line
                          Agreements...........................................2
       Section 2.02.      Further Encumbrance of Trust Property................6
       Section 2.03.      Acceptance by Indenture Trustee; Certain
                          Substitution of Mortgage Loans.......................7
       Section 2.04.      Representations and Warranties Regarding the
                          Servicer and the Sponsor.............................8
       Section 2.05.      Representations and Warranties of the Sponsor
                          Regarding the Mortgage Loans; Removal of Certain
                          Mortgage Loans......................................11
       Section 2.06.      Covenants of the Sponsor............................24
       Section 2.07.      Removal of Mortgage Loans at Election of Issuer.....25
       Section 2.08.      Execution and Authentication of Notes...............26
       Section 2.09.      Tax Treatment.......................................26
       Section 2.10.      [Reserved]..........................................26

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS....................26
       Section 3.01.      The Servicer........................................26
       Section 3.02.      Collection of Certain Mortgage Loan Payments........28
       Section 3.03.      Withdrawals from the Collection Account.............30
       Section 3.04.      Maintenance of Hazard Insurance; Property
                          Protection Expenses.................................30
       Section 3.05.      Assumption and Modification Agreements..............31
       Section 3.06.      Realization Upon Defaulted Mortgage Loans;
                          Repurchase of Certain Mortgage Loans................31
       Section 3.07.      Indenture Trustee to Cooperate......................32
       Section 3.08.      Servicing Compensation; Payment of Certain
                          Expenses by Servicer........................33
       Section 3.09.      Annual Statement as to Compliance...................33
       Section 3.10.      Annual Servicing Report.............................33
       Section 3.11.      Annual Opinion of Counsel...........................34
       Section 3.12.      Access to Certain Documentation and Information
                          Regarding the Mortgage Loans...........34
       Section 3.13.      Maintenance of Certain Servicing Insurance Policies.34
       Section 3.14.      Reports to the SEC..................................35
       Section 3.15.      Tax Returns.........................................35

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       Section 3.16.      Information Required by the Internal Revenue
                          Service Generally and Reports of Foreclosures
                          and Abandonments of Mortgaged Property..............36
       Section 3.17.      Reporting Requirements..............................36
       Section 3.18.      Matters Relating to MERS Loans......................36

ARTICLE IV SERVICING CERTIFICATE..............................................37
       Section 4.01.      Servicing Certificate...............................37
       Section 4.02.      Reserved............................................38
       Section 4.03.      Reserved............................................38
       Section 4.04.      Loan Data Remittance Report.........................38
       Section 4.05.      Reserved............................................38

ARTICLE V THE SERVICER AND THE SPONSOR........................................38
       Section 5.01.      Liability of the Servicer and the Sponsor...........38
       Section 5.02.      Merger or Consolidation of, or Assumption of the
                          Obligations of, the Servicer or the Sponsor.........39
       Section 5.03.      Limitation on Liability of the Servicer and Others..39
       Section 5.04.      Servicer Not to Resign..............................39
       Section 5.05.      Delegation of Duties................................40
       Section 5.06.      Indemnification of the Trust by the Servicer........40
       Section 5.07.      Indemnification of the Trust by the Sponsor.........40
       Section 5.08.      Limitation on Liability of the Sponsor..............41

ARTICLE VI SERVICING TERMINATION..............................................41
       Section 6.01.      Events of Servicing Termination.....................41
       Section 6.02.      Indenture Trustee to Act; Appointment of Successor..45
       Section 6.03.      Notification to Noteholders and Residual
                          Certificateholders..................................46

ARTICLE VII TERMINATION.......................................................46
       Section 7.01.      Termination.........................................46

ARTICLE VIII ADMINISTRATIVE DUTIES OF THE SERVICER............................47
       Section 8.01.      Administrative Duties...............................47
       Section 8.02.      Records.............................................49
       Section 8.03.      Additional Information to be Furnished to the
                          Issuer..............................................49

ARTICLE IX MISCELLANEOUS PROVISIONS...........................................49
       Section 9.01.      Amendment...........................................49
       Section 9.02.      Recordation of Agreement............................51
       Section 9.03.      Limitation on Rights of Noteholders.................51
       Section 9.04.      Governing Law.......................................52
       Section 9.05.      Notices.............................................52
       Section 9.06.      Severability of Provisions..........................52
       Section 9.07.      Assignment..........................................52
       Section 9.08.      Third-Party Beneficiaries...........................52

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       Section 9.09.      Counterparts........................................53
       Section 9.10.      Effect of Headings and Table of Contents............53
       Section 9.11.      Insurance Agreement.................................53
       Section 9.12.      Nonpetition Covenant................................53

EXHIBITS

EXHIBIT A:  MORTGAGE LOAN SCHEDULE...........................................A-1

EXHIBIT B:  FORM OF OPINION OF COUNSEL.......................................B-1

EXHIBIT C-1:  FORM OF OFFICER'S CERTIFICATE:  PERMANENT RELEASE..............C-1

EXHIBIT C-2:  FORM OF OFFICER'S CERTIFICATE: TEMPORARY RELEASE...............C-2

EXHIBIT D:  FORM OF CREDIT LINE AGREEMENT....................................D-1

EXHIBIT E:  FORM OF MORTGAGE NOTE (CLOSED END MORTGAGE LOANS)................E-1

EXHIBIT F:   FORM OF CERTIFICATE: LOAN LEVEL REPORTING.......................F-1

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                  SALE AND SERVICING AGREEMENT, dated as of ________, 200_, (the
"AGREEMENT")  among  GREENPOINT  HOME  EQUITY  LOAN  TRUST  200_-_,  a  Delaware
statutory trust (the "ISSUER" or "TRUST"), GREENPOINT MORTGAGE SECURITIES LLC, a
Delaware limited liability company (the "SPONSOR"), GREENPOINT MORTGAGE FUNDING,
INC., a New York  corporation  (the  "SERVICER"),  and [INDENTURE  TRUSTEE],  as
Indenture Trustee (the "INDENTURE TRUSTEE").

                  WHEREAS,  the  Issuer  desires  to  purchase  a  portfolio  of
Mortgage Loans arising in connection with Loan Agreements acquired by GreenPoint
Mortgage Funding, Inc.;

                  WHEREAS,  the Sponsor has purchased  such Mortgage  Loans from
GreenPoint Mortgage Funding,  Inc. and is willing to sell such Mortgage Loans to
the Issuer;

                  WHEREAS,  such  Mortgage  Loans consist of certain home equity
revolving lines of credit (the "HELOC MORTGAGE  LOANS") and certain second lien,
closed-end mortgage loans (the "CLOSED END MORTGAGE LOANS");

                  WHEREAS,  the Servicer is willing to service all such Mortgage
Loans;

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

                                   ARTICLE I

                                   DEFINITIONS

         Section 1.01. DEFINITIONS. All capitalized terms used in this Agreement
and not otherwise  defined herein,  shall have the meanings  assigned thereto in
Annex A to the Indenture dated as of ________,  200_, between the Issuer and the
Indenture  Trustee,  as the same may be amended  and  supplemented  from time to
time.

         Section 1.02. OTHER DEFINITIONAL PROVISIONS.

         (a) All terms defined in this Agreement shall have the defined meanings
when used in any  instrument  governed  hereby and in any  certificate  or other
document made or delivered pursuant hereto unless otherwise defined therein.

         (b) As used in this Agreement, in any instrument governed hereby and in
any certificate or other document made or delivered  pursuant hereto or thereto,
accounting  terms  not  defined  in this  Agreement  or in any such  instrument,
certificate  or other  document,  and  accounting  terms partly  defined in this
Agreement or in any such instrument, certificate or other document to the extent
not defined,  shall have the respective  meanings given to them under  generally
accepted accounting principles as in effect on the date of this Agreement or any
such  instrument,  certificate or other document,  as applicable.  To the extent
that  the  definitions  of  accounting  terms in this  Agreement  or in any such
instrument,  certificate or other document are inconsistent with the meanings of
such terms under  generally  accepted  accounting  principles,  the  definitions
contained in this  Agreement  or in any such  instrument,  certificate  or other
document shall control.

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         (c) 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 Principal  Balance of a Mortgage Loan
shall  be made on a daily  basis  using a  365-day  year.  All  calculations  of
interest on the Notes shall be made on the basis of the actual number of days in
an  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 360-day year
consisting of twelve 30-day  months.  All dollar  amounts  calculated  hereunder
shall be rounded to the nearest  penny with  one-half of one penny being rounded
down.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                           ORIGINAL ISSUANCE OF NOTES;
                                  TAX TREATMENT

         Section 2.01. CONVEYANCE OF MORTGAGE LOANS;  RETENTION OF OBLIGATION TO
FUND ADVANCES UNDER CREDIT LINE AGREEMENTS.

         (a) In consideration  of the Issuer's  delivery to or upon the order of
the Sponsor on the Closing Date of the net  proceeds  from the sale of the Notes
and the Residual  Certificates and the other amounts to be distributed from time
to time to the  Sponsor  in  accordance  with the terms of this  Agreement,  the
Sponsor,  concurrently with the execution and delivery of this Agreement, hereby
sells,  transfers,  assigns,  sets over and  otherwise  conveys  to the  Issuer,
without  recourse  (subject to Sections 2.03, 2.05 and 2.07),  all of its right,
title and interest in and to (i) each  Mortgage  Loan,  including  its Principal
Balance (including any Additional  Balances related thereto) and all collections
in  respect  thereof  received  after  the  Cut-Off  Date  (excluding   Interest
Collection  due on or prior to the Cut-Off  Date);  (ii) property that secured a
Mortgage Loan that is acquired by  foreclosure  or deed in lieu of  foreclosure;
(iii) all of the Sponsor's  rights under the Purchase  Agreement  (including all
representations  and  warranties  of the  Seller  contained  therein);  (iv) the
Sponsor's rights under the hazard insurance  policies;  (v) the Policy; (vi) the
Demand Note and the Collection Account;  and (vii) any proceeds of the foregoing
and any other Trust Property and all other assets  included or to be included in
the Trust for the benefit of Noteholders,  the Residual  Certificateholders  and
the Insurer;  PROVIDED,  HOWEVER,  neither the  Indenture  Trustee nor the Trust
assumes or shall  assume the  obligation  under any Credit Line  Agreement  that
provides for the funding of future  advances to the  Mortgagor  thereunder,  and
neither the Trust nor the  Indenture  Trustee shall be obligated or permitted to
fund any such  future  advances.  With  respect  to the  HELOC  Mortgage  Loans,
Additional  Balances  shall be part of the  related  Principal  Balance  and are
hereby  transferred  to the Trust on the Closing  Date  pursuant to this Section
2.01, and therefore part of the Trust Property. On or prior to the Closing Date,
the  Sponsor  shall  cause the  Insurer to deliver  the Policy to the  Indenture
Trustee for the benefit of the  Noteholders.  It is the intention of the Sponsor
that the transfer and assignment contemplated by this Agreement shall constitute
a sale of the Mortgage Loans and other Trust Property from

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the Sponsor to the Issuer and that such sale should  constitute a valid transfer
and  assignment of the Mortgage Loans and other Trust Property to the Issuer and
the  beneficial  interest in and title to the Mortgage Loans and the other Trust
Property shall not be part of the Sponsor's estate in the event of the filing of
a bankruptcy petition by or against the Sponsor under any bankruptcy law. In the
event  that,  notwithstanding  the  intent  of the  Sponsor,  the  transfer  and
assignment  contemplated  hereby is held not to be a sale,  this Agreement shall
constitute a grant of a security  interest in the  property  referred to in this
Section 2.01 for the benefit of the Noteholders, the Residual Certificateholders
and the  Insurer.  To the extent  that the fair market  value of any  Additional
Balance  is  greater  than the cash  consideration  paid by the  Issuer for such
Additional Balance, the difference between such fair market value and the amount
of such cash consideration shall be deemed to be a capital  contribution made to
the  Issuer  by the  Sponsor.  To the  extent  that the  Sponsor  receives  cash
consideration for the entire fair market value of such Additional Balance on any
future date, any  corresponding  capital  contribution  that had previously been
deemed to have been made to the  Issuer by the  Sponsor  shall be deemed to have
been redeemed.

         (b) Each of the Servicer and the Sponsor  agrees to take or cause to be
taken such actions and execute such documents  (including,  without  limitation,
the filing of all  necessary  continuation  statements  for the UCC-1  financing
statements   filed  in  the  States  of  California,   Delaware  and  New  York,
respectively,  which  shall  have  been  filed  on or as of  the  Closing  Date)
describing  the Cut-Off  Date  Principal  Balances and  Additional  Balances and
naming (i) the Servicer as debtor and the Sponsor as secured party, and (ii) the
Sponsor as debtor and the Issuer as secured  party and any  amendments  to UCC-1
financing  statements  required  to  reflect a change  in the name or  corporate
structure  of the  Issuer,  the  Servicer  or the  Sponsor  or the filing of any
additional UCC-1 financing  statements due to the change in the principal office
of the Servicer or the Sponsor (within 10 days of any event  necessitating  such
filing) as are  necessary  to  perfect  and  protect  the  Noteholders'  and the
Insurer's  interests  in each  Cut-Off  Date  Principal  Balance and  Additional
Balance and the  proceeds  thereof  (other than  maintaining  possession  by the
Indenture Trustee of the Mortgage Loans and the Mortgage Files).

         (c) In connection with such transfer and assignment, the Servicer shall
deliver  to the  Custodian  on behalf of the  Indenture  Trustee  the  following
documents  or  instruments  (each a "RELATED  DOCUMENT"  and  together  for each
Mortgage  Loan,  the "MORTGAGE  FILE") with respect to each Mortgage Loan on the
Closing Date:

                  (i) with respect to any Closed End Mortgage Loan, the original
         Mortgage  Note  endorsed  in blank  or  endorsed  with  the  following:
         "GreenPoint  Mortgage Funding,  Inc. to the GreenPoint Home Equity Loan
         Trust 200_-_, by [Indenture  Trustee],  as trustee, for the Home Equity
         Loan-Backed Notes, Series 200_-_ without recourse", and with respect to
         any HELOC Mortgage Loan, the original Credit Line Agreement;

                  (ii) for each Mortgage Loan that is not a MERS Mortgage  Loan,
         an unsigned and un-notarized but otherwise complete original Assignment
         of Mortgage in blank;

                  (iii) (A) for each  Mortgage  Loan that is not a MERS Mortgage
         Loan, the original

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         recorded  Mortgage or, if in  connection  with any Mortgage  Loan,  the
         original recorded Mortgage with evidence of recording thereon cannot be
         delivered  on or prior to the Closing Date because of a delay caused by
         the public  recording  office  where such  original  Mortgage  has been
         delivered for  recordation  or because such original  Mortgage has been
         lost,  the  Sponsor  shall  deliver  or  cause to be  delivered  to the
         Indenture Trustee,  a true and correct copy of such Mortgage,  together
         with (i) in the case of a delay caused by the public recording  office,
         an Officer's  Certificate  of the Sponsor  stating  that such  original
         Mortgage  has  been  dispatched  to the  appropriate  public  recording
         official  or (ii) in the  case of an  original  Mortgage  that has been
         lost, a certificate by the appropriate  county  recording  office where
         such  Mortgage is recorded,  and (B) in the case of each MERS  Mortgage
         Loan,  the  original  Mortgage,  noting the  presence of the  "Mortgage
         Identification Number" of such MERS Mortgage Loan;

                  (iv) if applicable,  the original intervening assignments,  if
         any ("INTERVENING  Assignments"),  with evidence of recording  thereon,
         showing a complete  chain of title to the Mortgage from the  originator
         to the GreenPoint Mortgage Funding,  Inc. (and the endorsed in blank in
         accordance with clause (ii) above) or, if any such original Intervening
         Assignment has not been returned from the applicable  recording  office
         or has been lost, a true and correct copy thereof, together with (i) in
         the case of a delay caused by the public recording office, an Officer's
         Certificate  of the  Sponsor  stating  that such  original  Intervening
         Assignment  has been  dispatched to the  appropriate  public  recording
         official for recordation or (ii) in the case of an original Intervening
         Assignment that has been lost, a certificate by the appropriate  county
         recording office where such Mortgage is recorded;

                  (v) either a title  policy or guaranty  title with  respect to
         the related Mortgaged Property;

                  (vi) the original of any guaranty  executed in connection with
         the Mortgage Note;

                  (vii)  the   original   of  each   assumption,   modification,
         consolidation  or  substitution  agreement,  if  any,  relating  to the
         Mortgage Loans; and

                  (viii) any security agreement,  chattel mortgage or equivalent
         instrument executed in connection with the Mortgage.

         The Sponsor hereby confirms to the Indenture Trustee that it has caused
the portions of the Electronic  Ledgers relating to the Mortgage Loans as of the
Closing Date to be clearly and unambiguously marked, and has made, or will make,
the appropriate  entries in its general accounting records to indicate that such
Mortgage Loans have been  transferred to the Trust. The Servicer hereby confirms
to the Indenture Trustee that it has clearly and unambiguously  made appropriate
entries in its general  accounting  records  indicating that such Mortgage Loans
constitute  part of the Trust and are  serviced  by it on behalf of the Trust in
accordance with the terms hereof.

         (d)  Notwithstanding  the  characterization  of the  Notes  as debt for
federal,  state and local income and franchise tax purposes,  the parties hereto
intend to treat the transfer of the

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Mortgage Loans to the Trust as provided  herein as a sale,  for certain  non-tax
purposes,  of all the Sponsor's right, title and interest in and to the Mortgage
Loans,  whether  now  existing  or  hereafter  created,  and the other  property
described above and all proceeds  thereof.  In the event such transfer is deemed
not to be a sale for such purposes,  the Sponsor grants to the Trust, a security
interest in all of such party's  right,  title and interest in, to and under the
Mortgage  Loans,  whether  now  existing  or  hereafter  created,  and the other
property  described  above and all proceeds  thereof;  and this Agreement  shall
constitute a security agreement under applicable law.

         (e) Within 90 days  following  delivery  of the  Mortgage  Files to the
Custodian  on behalf of the  Indenture  Trustee  pursuant to this  Section,  the
Indenture  Trustee  shall  cause the  Custodian  to review on its  behalf or the
Indenture  Trustee shall review each such  Mortgage  File to ascertain  that all
required  documents  set  forth in this  Section  2.01 have  been  executed  and
received, and that such documents relate to the Mortgage Loans identified on the
Mortgage  Loan Schedule and in so doing the Custodian on behalf of the Indenture
Trustee and/or the Indenture Trustee may rely on the purported due execution and
genuineness of any signature thereon. If within such 90-day period the Custodian
on behalf of the  Indenture  Trustee  and/or  the  Indenture  Trustee  finds any
document  constituting  a part of a Mortgage  File not to have been  executed or
received or to be unrelated to the Mortgage  Loans  identified  in said Mortgage
Loan Schedule or, if in the course of its review, the Custodian on behalf of the
Indenture  Trustee and/or the Indenture  Trustee  determines  that such Mortgage
File is otherwise defective in any material respect, the Indenture Trustee shall
promptly  upon the  conclusion  of its review or the  Custodian's  review on its
behalf  notify the Sponsor and the Insurer,  and the Sponsor shall have a period
of 90 days after such notice  within  which to correct or cure any such  defect.
Upon the  completion  of its  90-day  review,  the  Custodian  on  behalf of the
Indenture  Trustee and/or the Indenture Trustee shall also notify the Insurer of
any Mortgage  File with respect to which it has been  delivered  any items other
than the original recorded Mortgage with respect to Section 2.01(c)(iii).

         Neither  the  Custodian  on behalf  of the  Indenture  Trustee  nor the
Indenture Trustee shall have any  responsibility for reviewing any Mortgage File
except as expressly  provided in this Section  2.01.  In reviewing  any Mortgage
File pursuant to this Section, the Indenture Trustee and the Custodian on behalf
of the Indenture  Trustee shall have no responsibility  for determining  whether
any  document  is valid  and  binding,  whether  the text of any  assignment  or
endorsement is in proper or recordable form (except, if applicable, to determine
if the Indenture Trustee is the assignee or endorsee),  whether any document has
been  recorded  in  accordance   with  the   requirements   of  any   applicable
jurisdiction,  or whether a blanket  assignment  is permitted in any  applicable
jurisdiction,  whether any Person  executing any document is authorized to do so
or whether  any  signature  thereon is  genuine,  but shall only be  required to
determine  whether a document has been  executed,  that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded.

         Upon its  receipt of written  notice  from the  Servicer or the Insurer
that a  Recordation  Event has occurred  the  Indenture  Trustee  shall take all
necessary  steps to prepare and submit for recordation an Assignment of Mortgage
(or a blanket  Assignment of Mortgage  covering  multiple  Mortgage Loans if the
same is permitted in any applicable jurisdiction) at the expense of the Servicer
or, if the Servicer  fails to pay such  amounts or is no longer a party  hereto,
pursuant to Section 8.7(d)(ix) of the Indenture.

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         (f) The Sponsor shall sell,  assign,  transfer,  set over and otherwise
convey without recourse to the Indenture  Trustee all right,  title and interest
of the Sponsor in and to any Eligible  Substitute Mortgage Loan delivered to the
Indenture Trustee on behalf of the Trust by the Sponsor pursuant to Section 2.03
or Section  2.05  hereof  and all its right,  title and  interest  to  principal
collected and interest accruing on such Eligible Substitute Mortgage Loan on and
after the  applicable  Substitute  Cut-Off  Date;  PROVIDED,  HOWEVER,  that the
Sponsor  shall  reserve  and  retain  all right,  title and  interest  in and to
payments of interest due on such Eligible  Substitute Mortgage Loan prior to the
applicable  Substitute Cut-Off Date; PROVIDED,  FURTHER,  that neither the Trust
nor the Indenture  Trustee shall be obligated to fund any future advances to the
related Mortgagor under such Eligible Substitute Mortgage Loan.

         In  connection   with  any  transfer  and  assignment  of  an  Eligible
Substitute  Mortgage Loan to the Indenture  Trustee on behalf of the Trust,  the
Sponsor  agrees  to cause to be  delivered  to the  Custodian  on  behalf of the
Indenture  Trustee the items  described  in Section  2.01(c) on the date of such
transfer and  assignment  or, if a later  delivery  time is permitted by Section
2.01(c), then no later than such later delivery time.

         (g) Each Defective  Mortgage Loan that is required to be repurchased or
substituted  pursuant to the provisions this Agreement or the Purchase Agreement
shall,  upon such  repurchase or  substitution in accordance with the provisions
hereof,  be released from the Trust and from the lien created by the  Indenture.
As to each  Mortgage  Loan  released  from  the  Trust  in  connection  with the
repurchase  thereof or the  conveyance of an Eligible  Substitute  Mortgage Loan
therefor,  the Indenture Trustee will transfer,  assign,  set over and otherwise
convey without recourse,  to or upon the order of the Sponsor, all of its right,
title and  interest in and to such  released  Mortgage  Loan and all the Trust's
right title and interest to principal  collected  and interest  accruing on such
released Mortgage Loan on and after the first day of the calendar month in which
such Mortgage Loan is released;  PROVIDED, HOWEVER, that the Trust shall reserve
and retain all right,  title and  interest in and to payments of  principal  and
interest collected on such released Mortgage Loan prior to such date.

         Section 2.02. FURTHER ENCUMBRANCE OF TRUST PROPERTY.

         (a) Immediately  upon the conveyance to the Trust by the Sponsor of any
item of the Trust  Property  pursuant  to Section  2.01,  all  right,  title and
interest of the Sponsor in and to such item of Trust Property  shall  terminate,
and all such right,  title and interest  shall vest in the Trust,  in accordance
with the Trust  Agreement and Sections  3802 and 3805 of the Delaware  Statutory
Trust Act (12 Del. Code, ss. 3801 et seq.).

         (b)  Immediately  upon the vesting of the Trust  Property in the Trust,
the Trust shall have the sole right to pledge or otherwise encumber,  such Trust
Property.  Pursuant to the  Indenture and  contemporaneously  with such property
vesting in the Trust  pursuant  to (a) above,  the Trust  shall grant a security
interest in the Trust  Property to secure the  repayment  of the Issuer  Secured
Obligations.  The Residual Certificates shall represent the beneficial ownership
interest in the Trust  Property,  and the Residual  Certificateholders  shall be
entitled to receive distributions with respect thereto as set forth herein.

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         (c) Prior to the  payment  in full on the  Notes,  the  payment  of all
amounts due to the Insurer under the Insurance Agreement, the termination of the
Policy (as defined  therein) and the  surrender  of the Policy by the  Indenture
Trustee to the Insurer,  the Indenture  Trustee shall hold the Trust Property on
behalf of the Issuer Secured Parties. Following the payment in full of the Notes
and the payment of all amounts due to the Insurer under the Insurance Agreement,
and the release and  discharge  of the  Indenture,  all  covenants of the Issuer
under Article III of the Indenture shall,  until payment in full of the Residual
Certificates,  remain as covenants of the Issuer for the benefit of the Residual
Certificateholders,  enforceable by the Residual  Certificateholders to the same
extent as such  covenants were  enforceable  by the Insurer and the  Noteholders
prior to the discharge of the  Indenture.  Any rights of the  Indenture  Trustee
under Article III of the  Indenture,  following the discharge of the  Indenture,
shall vest in the Residual Certificateholders.

         Section 2.03. ACCEPTANCE BY INDENTURE TRUSTEE;  CERTAIN SUBSTITUTION OF
MORTGAGE LOANS.

         (a) The  Indenture  Trustee  shall,  at such time as there are no Notes
outstanding  and all  sums  due to (i) the  Indenture  Trustee  or any  agent or
counsel thereof pursuant to the Indenture,  (ii) the Indenture  Trustee pursuant
to this Agreement and (iii) the Insurer pursuant to the Insurance Agreement have
been paid, release any remaining portion of the Trust Property to the Sponsor.

         (b) The Issuer  hereby  acknowledges  its  receipt of the  Policy,  the
Demand Note and the Mortgage  Loans,  and declares  that the  Indenture  Trustee
holds and will hold such  instruments,  and to the extent that any documents are
delivered  to it pursuant to Section  2.01,  will hold such  documents,  and all
amounts received by it thereunder and hereunder, in trust, upon the terms herein
set forth,  for the use and benefit of all present and future  Noteholders,  and
the Insurer.  If the time to cure any defect in respect of any Mortgage  Loan of
which the  Indenture  Trustee or the Insurer has notified the Sponsor  following
the review  pursuant  to Section  2.01 has expired or if at any time any loss is
suffered by the Issuer or the Indenture  Trustee on behalf of the Noteholders or
the Insurer,  in respect of any Mortgage Loan as a result of (i) a defect in any
document  constituting  a part of its  Mortgage  File or (ii) an  Assignment  of
Mortgage  to the  Indenture  Trustee  not having  been  recorded  as required by
Section 2.01,  then on the next  succeeding  Business Day, the Sponsor shall (i)
substitute in lieu of such Mortgage Loan Eligible Substitute Mortgage Loans, and
deliver the Substitution  Amount applicable  thereto to the Servicer for deposit
in the  Collection  Account or (ii)  purchase  such  Mortgage Loan at a purchase
price equal to the Loan Purchase  Price  thereof,  which purchase price shall be
delivered to the Servicer for deposit in the Collection Account. Upon receipt of
any Mortgage Loan or of written  notification  signed by a Servicing  Officer to
the effect that the Loan Purchase Price in respect of a Defective  Mortgage Loan
has been deposited into the Collection Account, then as promptly as practicable,
the Indenture  Trustee shall execute such documents and  instruments of transfer
presented  by the  Sponsor,  in each case without  recourse,  representation  or
warranty,  and take such other  actions as shall  reasonably be requested by the
Sponsor to effect such  transfer by the Trust of such  Defective  Mortgage  Loan
pursuant to this Section. It is understood and agreed that the obligation of the
Sponsor to accept a transfer of a Defective  Mortgage  Loan and to either convey
an Eligible  Substitute  Mortgage  Loan or to make a deposit of any related Loan
Purchase

                                       7
<PAGE>

Price into the Collection  Account shall  constitute the sole remedy  respecting
such defect  available to  Noteholders  and the  Indenture  Trustee  against the
Sponsor.

         (c) As to any Eligible  Substitute Mortgage Loan, the Sponsor shall, if
required to deliver any such Eligible  Substitute  Mortgage Loan, deliver to the
Custodian  on behalf of the  Indenture  Trustee  with  respect to such  Eligible
Substitute  Mortgage Loan such  documents  and  agreements as are required to be
held  by the  Indenture  Trustee  in  accordance  with  Section  2.01.  For  any
Collection  Period  during which the Sponsor  substitutes  one or more  Eligible
Substitute  Mortgage Loans, the Servicer shall determine the Substitution Amount
which amount shall be deposited by the Sponsor in the Collection  Account at the
time of substitution. All amounts received in respect of the Eligible Substitute
Mortgage Loan during the  Collection  Period in which the  circumstances  giving
rise to such  substitution  occur shall not be a part of the Trust and shall not
be deposited by the Servicer in the Collection Account.  All amounts received by
the Servicer during the Collection Period in which the circumstances giving rise
to such substitution  occur in respect of any Defective Mortgage Loan so removed
by the Trust shall be deposited by the Servicer in the Collection Account.  Upon
such substitution, the Eligible Substitute Mortgage Loan shall be subject to the
terms of this Agreement in all respects,  and the Sponsor shall be deemed (i) to
have made with respect to such Eligible  Substitute Mortgage Loan as of the date
of  substitution,  the  covenants,  representations  and warranties set forth in
Section 2.05 and (ii) to have  certified  that such Mortgage Loan is an Eligible
Substitute  Mortgage Loan.  The  procedures  applied by the Sponsor in selecting
each Eligible  Substitute  Mortgage Loan shall not be materially  adverse to the
interests of the Indenture Trustee, the Noteholders or the Insurer.

         The Servicer,  promptly  following the transfer of a Defective Mortgage
Loan from, or an Eligible  Substitute  Mortgage  Loan to, the Trust  pursuant to
this  Section,  shall amend the  Mortgage  Loan  Schedule  and make  appropriate
entries in its general  account  records to reflect such transfer.  The Servicer
shall, following such transfer,  appropriately mark its records to indicate that
it is no  longer  servicing  such  Mortgage  Loan on behalf  of the  Trust.  The
Sponsor,   promptly  following  such  transfer,  shall  appropriately  mark  its
Electronic Ledger and make appropriate entries in its general account records to
reflect such transfer.

         Section 2.04. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER AND
THE SPONSOR.

         (a) The Servicer  represents and warrants to the Indenture  Trustee and
the Insurer that as of the Closing Date.

                  (i) The Servicer is a New York  corporation,  validly existing
         and in good standing  under the laws of the State of New York,  and has
         the  corporate  power to own its assets and to transact the business in
         which it is currently  engaged.  The  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
         any properties owned or leased by it requires such qualification and in
         which the failure so to qualify would have a material adverse effect on
         the business,  properties, assets, or condition (financial or other) of
         the Servicer;

                                       8
<PAGE>

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

                  (iii) The  Servicer  is not  required to obtain the consent of
         any other party 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 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,
         prior to the Closing Date;

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

                  (v) No  litigation or  administrative  proceeding of or before
         any court,  tribunal or governmental body is currently  pending,  or to
         the knowledge of the Servicer  threatened,  against the Servicer or any
         of its properties or with respect to this Agreement, or the Notes;

                  (vi)  The  Servicer  is  solvent  and  will  not  be  rendered
         insolvent by the transactions described herein and, after giving effect
         to the  transactions  described  herein,  will  not  be  left  with  an
         unreasonably  small  amount  of  capital  with  which to  engage in the
         ordinary  course of its business  and the  Servicer  does not intend to
         incur, nor does the Servicer believe that it has incurred, debts beyond
         its ability to pay as they mature.  The Servicer  does not  contemplate
         the   commencement   of  insolvency,   liquidation   or   consolidation
         proceedings or the appointment of a receiver, liquidator,  conservator,
         Indenture Trustee or similar official in respect of the Servicer or any
         of its respective assets; and

                  (vii) The Servicer is a member of MERS in good  standing,  and
         will comply in all material  respects with the rules and  procedures of
         MERS in connection with the servicing of the MERS Mortgage Loans for as
         long as such Mortgage Loans are registered with MERS.

The  representations  and  warranties  set forth in this Section  2.04(a)  shall
survive  the sale and  assignment  of the  Mortgage  Loans  to the  Trust.  Upon
discovery of a breach of any representations and warranties which materially and
adversely  affects the interests of the  Noteholders or the Insurer,  the person
discovering such breach shall give written notice within

                                       9
<PAGE>

five (5) days of discovery to the other parties and the Insurer.  Within 30 days
of its discovery or its receipt of notice of breach,  or, with the prior written
consent of a Responsible Officer of the Indenture Trustee and the Insurer,  such
longer period specified in such consent,  the Servicer shall cure such breach if
such  breach is curable  and no  material  adverse  effect  would  result to the
Insurer, the Trust or the Noteholders.

         (b) The Sponsor  represents  and warrants to the Indenture  Trustee and
the Insurer that as of the Closing Date:

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

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

                  (iii) The Sponsor is not required to obtain the consent of any
         other party 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 Agreement;

                  (iv) The execution, delivery and performance of this Agreement
         by the Sponsor  will not violate any  provision  of any existing law or
         regulation  or any  order or  decree  of any  court  applicable  to the
         Sponsor or any provision of the  certificate  of formation or operating
         agreement  of the  Sponsor,  or  constitute  a  material  breach of any
         mortgage,  Indenture,  contract or other agreement to which the Sponsor
         is a party or by which the Sponsor may be bound;

                  (v) No  litigation or  administrative  proceeding of or before
         any court,  tribunal or governmental body is currently  pending,  or to
         the knowledge of the Sponsor threatened,  against the Sponsor or any of
         its properties or with respect to this Agreement or the Notes; and

                  (vi) The Sponsor is solvent and will not be rendered insolvent
         by the  transactions  described  herein and, after giving effect to the
         transactions  described  herein,  will not be left with an unreasonably
         small amount of capital with which to engage in the

                                       10
<PAGE>

         ordinary  course of its  business  and the  Sponsor  does not intend to
         incur, nor does the Sponsor believe that it has incurred,  debts beyond
         its ability to pay as they mature. The Sponsor does not contemplate the
         commencement of insolvency, liquidation or consolidation proceedings or
         the  appointment  of a  receiver,  liquidator,  conservator,  Indenture
         Trustee or  similar  official  in respect of the  Sponsor or any of its
         respective assets.

The  representations  and  warranties  set forth in this Section  2.04(b)  shall
survive  the sale and  assignment  of the  Mortgage  Loans  to the  Trust.  Upon
discovery of a breach of any representations and warranties which materially and
adversely  affects the interests of the  Noteholders or the Insurer,  the person
discovering  such breach shall give prompt  written notice to the other parties,
and the  Insurer.  Within 30 days of its  discovery  or its receipt of notice of
breach,  or,  with the prior  written  consent of a  Responsible  Officer of the
Indenture Trustee and the Insurer, such longer period specified in such consent,
the  Sponsor  shall cure such  breach if such  breach is curable and no material
adverse effect would result to the Insurer, the Trust or the Noteholders.

         Section 2.05.  REPRESENTATIONS  AND WARRANTIES OF THE SPONSOR REGARDING
THE MORTGAGE LOANS; REMOVAL OF CERTAIN MORTGAGE LOANS.

         (a)  The  Sponsor  hereby  makes  the  following   representations  and
warranties  on which  the  Issuer is deemed  to have  relied  in  acquiring  the
Mortgage  Loans and upon  which the  Insurer  is deemed to rely in  issuing  the
Policy.  Such  representations  and  warranties  speak as of the  execution  and
delivery of this Agreement,  as of the Closing Date with respect to the Mortgage
Loans  and as of  the  related  Transfer  Date  with  respect  to  the  Eligible
Substitute Mortgage Loans, but shall survive the sale, transfer,  and assignment
of the  Mortgage  Loans to the Issuer and the  pledge  thereof to the  Indenture
Trustee pursuant to the Indenture,

                  (i) As of the Closing Date with respect to the Mortgage  Loans
         and as of the  related  Transfer  Date  with  respect  to any  Eligible
         Substitute  Mortgage Loans and with respect to any HELOC Mortgage Loan,
         as of the date any Additional  Balance is created,  the information set
         forth in the Mortgage Loan Schedule for such Mortgage Loans is true and
         correct in all material respects;

                  (ii) Each Mortgage Loan is being  serviced by the Servicer and
         is being serviced in compliance with applicable law;

                  (iii) The applicable  Cut-Off Date  Principal  Balance has not
         been assigned or pledged,  and the Sponsor is the sole owner and holder
         of such  Cut-Off Date  Principal  Balance free and clear of any and all
         liens,  claims,   encumbrances,   participation  interests,   equities,
         pledges,  charges or security  interests  of any  nature,  and has full
         right and  authority,  under all  governmental  and  regulatory  bodies
         having  jurisdiction  over the  ownership  of the  applicable  Mortgage
         Loans, to sell,  assign or transfer the same pursuant to this Agreement
         and upon its acquisition of the Mortgage Loans, as of the Closing Date,
         the Trust will be the sole owner and holder of such Mortgage Loans free
         and  clear of any and all  liens  claims,  encumbrances,  participating
         interests,  equities,  pledges,  charges,  or security interests of any
         nature;

                                       11
<PAGE>

                  (iv) Except with respect to liens released  immediately  prior
         to the transfer  herein  contemplated,  each Credit Line  Agreement and
         each  Mortgage  Note and  related  Mortgage  has not been  assigned  or
         pledged and  immediately  prior to the transfer and  assignment  herein
         contemplated,  the Sponsor held good, marketable and indefeasible title
         to, and was the sole owner and holder of, each Mortgage Loan subject to
         no  liens,  charges,   mortgages,   claims,   participation  interests,
         equities, pledges or security interests of any nature,  encumbrances or
         rights of others  (collectively,  a "LIEN"); the Sponsor has full right
         and  authority  under all  governmental  and  regulatory  bodies having
         jurisdiction over the Sponsor,  subject to no interest or participation
         of, or agreement  with, any party, to sell and assign the same pursuant
         to this Agreement;  and immediately  upon the transfers and assignments
         herein  contemplated,  the Sponsor  shall have  transferred  all of its
         right,  title and interest in and to each  Mortgage  Loan and the Trust
         will hold good,  marketable and indefeasible  title to, and be the sole
         owner of, each Mortgage Loan subject to no Liens;

                  (v) As of the Closing Date with respect to the Mortgage  Loans
         and  the  applicable   Transfer  Date  with  respect  to  any  Eligible
         Substitute Mortgage Loans, the related Mortgage is a valid, enforceable
         and subsisting  first or second lien, as set forth on the Mortgage Loan
         Schedule with respect to each related Mortgaged Property, and as of the
         applicable  Cut-Off  Date the  related  Mortgaged  Property is free and
         clear of all  encumbrances  and liens having priority over the first or
         second lien, as applicable,  of such Mortgage  except for liens for (i)
         real estate taxes and special assessments not yet delinquent;  (ii) any
         first mortgage loan secured by such Mortgaged Property and specified on
         the  Mortgage  Loan   Schedule;   (iii)   covenants,   conditions   and
         restrictions,  rights of way,  easements  and other  matters  of public
         record as of the date of  recording  that are  acceptable  to  mortgage
         lending  institutions   generally  or  specifically  reflected  in  the
         appraisals;  and (iv)  other  matters  to  which  like  properties  are
         commonly subject which do not materially interfere with the benefits of
         the security intended to be provided by such Mortgage;

                  (vi) As of and after the  Closing  Date  with  respect  to the
         Mortgage  Loans and as of and after the  applicable  Transfer Date with
         respect to any Eligible  Substitute  Mortgage Loans,  there is no valid
         right to rescission,  offset,  defense (including the defense of usury)
         or counterclaim of any obligor under any Loan Agreement or Mortgage;

                  (vii) As of the  Closing  Date with  respect  to the  Mortgage
         Loans and the  applicable  Transfer  Date with  respect to any Eligible
         Substitute  Mortgage Loans,  there is no delinquent  recording or other
         tax or fee or assessment lien against any related Mortgaged Property;

                  (viii) As of the  Closing  Date with  respect to the  Mortgage
         Loans and the  applicable  Transfer  Date with  respect to any Eligible
         Substitute Mortgage Loans, there is no proceeding pending or threatened
         for the total or partial condemnation of any Mortgaged Property, nor is
         such a proceeding  currently  occurring,  and such  property is in good
         repair and is undamaged by waste,  fire,  earthquake or earth movement,
         windstorm,  flood,  other  types  of  water  damage,  tornado  or other
         casualty, so as to affect adversely the

                                       12
<PAGE>

         value of the  Mortgaged  Property as security for the Mortgage  Loan or
         the use for which the premises were intended;

                  (ix) As of the Closing Date with respect to the Mortgage Loans
         and  the  applicable   Transfer  Date  with  respect  to  any  Eligible
         Substitute  Mortgage Loans, there are no mechanics' or similar liens or
         claims which have been filed for work, labor or material  affecting the
         related  Mortgaged  Property which are, or may be, liens prior or equal
         to the lien of the related Mortgage and no rights are outstanding which
         could give rise to such liens,  except  liens  which are fully  insured
         against  by the  title  insurance  policy  or  other  title  protection
         referred to in clause (xiv);

                  (x) No Minimum Monthly Payment is more than 59 days delinquent
         (measured on a contractual basis);

                  (xi) As of the Closing Date with respect to the Mortgage Loans
         and  the  applicable   Transfer  Date  with  respect  to  any  Eligible
         Substitute Mortgage Loans, for each Mortgage Loan, the related Mortgage
         File contains each of the  documents  and  instruments  specified to be
         included  therein  and such  Mortgage  File has been  delivered  to the
         Indenture Trustee;

                  (xii) The related Loan  Agreement and the related  Mortgage at
         origination  complied in all material  respects with applicable  local,
         state and federal laws and regulations,  including, without limitation,
         all   applicable   predatory   and   abusive   lending   laws,   usury,
         truth-in-lending,  real estate settlement  procedures,  consumer credit
         protection,  equal credit  opportunity,  recording or  disclosure  laws
         applicable to the Mortgage Loans,  and consummation of the transactions
         contemplated  hereby,  including  without  limitation  the  receipt  of
         interest, will not involve the violation of such laws;

                  (xiii) On the Closing Date with respect to the Mortgage  Loans
         and  to  the  extent  not  already  included  in  such  filing,  on the
         applicable  Transfer  Date  with  respect  to any  Eligible  Substitute
         Mortgage Loans,  the Sponsor has filed UCC-1 financing  statements with
         respect to such Mortgage Loans;

                  (xiv) A lender's policy of title  insurance,  expressClose.com
         lender master  protection  program  (standard  mortgage  guaranty) or a
         commitment  (binder) to issue the same or an attorney's  certificate or
         opinion of title was effective on the date of the  origination  of each
         mortgage loan and each such policy or  certificate  or opinion of title
         is valid and remains in full force and effect;

                  (xv) As of the Closing Date with respect to the Mortgage Loans
         and  the  applicable   Transfer  Date  with  respect  to  any  Eligible
         Substitute Mortgage Loans, none of the Mortgaged Properties is a mobile
         home or a manufactured housing unit;

                  (xvi) As of the Cut-Off  Date for the  Mortgage  Loans no more
         than approximately  ______% of the Mortgage Loans (by Pool Balance) are
         secured by Mortgaged Properties located in one United States postal zip
         code;

                                       13
<PAGE>

                  (xvii) The Combined Loan-to-Value Ratio for each Mortgage Loan
         was not in excess of 100%;

                  (xviii) No selection  procedure  that  identified the Mortgage
         Loans as  being  less  desirable  or  valuable  than  other  comparable
         mortgage  loans  originated  or acquired by the Sponsor was utilized in
         selecting the Mortgage Loans for sale to the Trust; PROVIDED,  HOWEVER,
         that the Mortgage  Loans were selected from the pool of mortgage  loans
         originated in connection with the Sponsor's  mortgage loan  origination
         program;

                  (xix) The Sponsor has not  transferred  the Mortgage  Loans to
         the  Trust  with any  intent to  hinder,  delay or  defraud  any of its
         creditors;

                  (xx) The Minimum  Monthly Payment with respect to any Mortgage
         Loan is not less than the interest  accrued at the applicable Loan Rate
         on the average  daily  Principal  Balance  during the  interest  period
         relating to the date on which such Minimum Monthly Payment is due;

                  (xxi) As of the  Closing  Date with  respect  to the  Mortgage
         Loans and the  applicable  Transfer  Date with  respect to any Eligible
         Substitute  Mortgage Loans,  each Loan Agreement and each Mortgage Loan
         is genuine and is a legal, valid, binding and enforceable obligation of
         the  related  Mortgagor,  except as the  enforceability  thereof may be
         limited  by  the  bankruptcy,  insolvency  or  similar  laws  affecting
         creditors' rights generally;

                  (xxii) As of the  Closing  Date with  respect to the  Mortgage
         Loans and the  applicable  Transfer  Date with  respect to any Eligible
         Substitute Mortgage Loans, there has been no default, breach, violation
         or event of  acceleration  of any  senior  mortgage  loan  related to a
         Mortgaged  Property  that has not been cured by a party  other than the
         Servicer;

                  (xxiii) The terms of each Mortgage Note and each Mortgage have
         not been  impaired,  altered or  modified in any  respect,  except by a
         written  instrument  which  (if  such  instrument  is  secured  by real
         property) has been recorded,  if necessary,  to protect the interest of
         the  Noteholders  and the Insurer and which has been  delivered  to the
         Indenture Trustee. The substance of any such alteration or modification
         is  reflected  on the  related  Mortgage  Loan  Schedule  and has  been
         approved by the primary mortgage guaranty insurer, if any;

                  (xxiv) The  definition  of "prime  rate" in each  Credit  Line
         Agreement  relating to a HELOC Mortgage Loan does not differ materially
         from the definition in the form of Credit Line Agreement in Exhibit D;

                  (xxv) The weighted  average  remaining term to maturity of the
         Mortgage  Loans  on a  contractual  basis  as of the  Cut-Off  Date  is
         approximately  210 months. On each date that the Loan Rates relating to
         HELOC Mortgage Loans have been adjusted,  interest rate  adjustments on
         the HELOC  Mortgage  Loans  were made in  compliance  with the  related
         Mortgages and Credit Line Agreement and applicable law and all required
         notices of interest rate  adjustments  were sent to each Mortgagor on a
         timely basis.  Over

                                       14
<PAGE>

         the term of each HELOC  Mortgage Loan, the Loan Rate may not exceed the
         related  Loan Rate Cap, if any. The Loan Rate Cap for each of the HELOC
         Mortgage Loans is _____%. With respect to the HELOC Mortgage Loans, the
         margins range between _____% and _____% and the weighted average margin
         is  approximately  _____% as of the Cut-Off Date. The Loan Rates on the
         Mortgage  Loans  range  between  _____% and  _____%,  and the  weighted
         average Loan Rate on the Mortgage Loans is approximately _____%;

                  (xxvi) As of the  Closing  Date with  respect to the  Mortgage
         Loans and the  applicable  Transfer  Date with  respect to any Eligible
         Substitute Mortgage Loans, each Mortgaged Property consists of a single
         parcel of real property with a one-to-four unit single family residence
         erected  thereon,  or an  individual  condominium  unit,  planned  unit
         development unit or townhouse;

                  (xxvii) No more than approximately _____% (by Pool Balance) of
         the Mortgage Loans are secured by real property  improved by individual
         condominium units,  planned development units,  manufactured housing or
         two-to-four  family  residences  erected  thereon,   and  approximately
         ______%  (by Pool  Balance) of the  Mortgage  Loans are secured by real
         property with a one-family residence erected thereon;

                  (xxviii) Each  Mortgage Note  evidencing a Closed End Mortgage
         Loan is  comprised  of one  original  promissory  note  and  each  such
         promissory  note  constitutes an  "instrument"  for purposes of Section
         9-102(A)(47)  of the  UCC.  There is no  obligation  on the part of the
         Sponsor or any other  party to make  payments in addition to those made
         by the Mortgagor with respect to the Closed End Mortgage Loans;

                  (xxix) The Credit  Limits on the HELOC  Mortgage  Loans  range
         between $_____ and $______ with an average of approximately $_____. The
         average Credit Limit Utilization Rate (weighted by Credit Limit) of the
         HELOC Mortgage Loans is approximately _____%. The Principal Balances on
         the Mortgage Loans range between approximately $______ and $______ with
         an average of approximately $______;

                  (xxx)  Approximately  _____% of the Mortgage  Loans are second
         liens, and either (A) no consent for each Mortgage Loan was required by
         the holder of the related  senior lien, if any,  prior to the making of
         such  Mortgage  Loan or (B)  such  consent  has  been  obtained  and is
         contained in the related Mortgage File;

                  (xxxi)  This  Agreement   constitutes  a  valid  transfer  and
         assignment to the Trust of all right, title and interest of the Sponsor
         in and to the  Cut-Off  Date  Principal  Balances  with  respect to the
         applicable Mortgage Loans, all monies due or to become due with respect
         thereto and all proceeds of such Cut-Off Date  Principal  Balances with
         respect to the  Mortgage  Loans and such funds as are from time to time
         deposited in the Collection Account (excluding any investment  earnings
         thereon) and all other property  specified in the definition of "Trust"
         as being part of the  corpus of the Trust  conveyed  to the Trust,  and
         upon  payment for the  Additional  Balances,  will  constitute  a valid
         transfer and  assignment to the Indenture  Trustee of all right,  title
         and  interest of the  Sponsor in and to the  Additional  Balances,  all
         monies due or to become due with respect thereto, and

                                       15
<PAGE>

         all  proceeds  of  such  Additional  Balances  and all  other  property
         specified  in the  definition  of "Trust"  relating  to the  Additional
         Balances;

                  (xxxii) As of the Closing Date no Mortgage Loan is the subject
         of foreclosure proceedings and, to the best of the Sponsor's knowledge,
         no  obligor  of any of the  Mortgage  Loans has  filed  for  bankruptcy
         protection.  As of the applicable Transfer Date, no Eligible Substitute
         Mortgage  Loan is the subject of  foreclosure  proceedings  and, to the
         best of the  Sponsor's  knowledge,  no obligor  of any of the  Eligible
         Substitute Mortgage Loans has filed for bankruptcy protection.

                  (xxxiii) The  proceeds of each Closed End  Mortgage  Loan have
         been fully  disbursed,  and there is no  obligation  on the part of the
         mortgagee to make future advances thereunder.  Any and all requirements
         as to  completion  of any  on-site or off-site  improvements  and as to
         disbursements of any escrow funds therefor have been complied with. All
         costs,  fees and  expenses  incurred in making or closing or  recording
         such Closed End Mortgage Loans were paid;

                  (xxxiv)  Each  Mortgage  contains  customary  and  enforceable
         provisions  which render the rights and remedies of the holder  thereof
         adequate for the realization  against the related Mortgaged Property of
         the benefits of the  security,  including (A) in the case of a Mortgage
         designated as a deed of trust,  by trustee's  sale and (B) otherwise by
         judicial  foreclosure.  Subject to  applicable  state law,  there is no
         homestead or other  exemption  available to the  Mortgagor  which would
         materially  interfere with the rights to sell the Mortgaged Property at
         a trustee's sale or the right to foreclose upon the related Mortgage;

                  (xxxv) As of the  Closing  Date with  respect to the  Mortgage
         Loans and the  applicable  Transfer  Date with  respect to any Eligible
         Substitute  Mortgage Loan, except for events  permissible under Section
         3.05 of this Agreement, there is no default, breach, violation or event
         of  acceleration  existing  under any Mortgage or the related  Mortgage
         Note and no event  which,  with the  passage of time or with notice and
         the expiration of any grace or cure period, would constitute a default,
         breach,  violation  or event of  acceleration;  and the Sponsor has not
         waived any default, breach, violation or event of acceleration;

                  (xxxvi) To the best  knowledge of the Sponsor,  all parties to
         the Mortgage  Note and the  Mortgage had legal  capacity to execute the
         Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
         been duly and  properly  executed by such  parties;  Each  Mortgage and
         Mortgage Note is the legal, valid and binding obligation of the related
         Mortgagor  and is  enforceable  by the Issuer  against the Mortgagor in
         accordance  with its  terms,  except  only as such  enforcement  may be
         limited by bankruptcy, insolvency, reorganization,  moratorium or other
         similar laws affecting the enforcement of creditors'  rights  generally
         and by law;  There is only one  originally  executed  Mortgage  Note or
         Credit Line  Agreement and  promissory  Note, as  applicable,  for each
         Mortgage Loan;

                  (xxxvii)  As of the  Cut-Off  Date no more than  approximately
         ____% of the Principal Balance of the Mortgage Loans represent Mortgage
         Loans with respect to

                                       16
<PAGE>

         which the related  Mortgagor  had a Credit  Score of ___ or less at the
         time of origination or whose Credit Score was unavailable.

                  (xxxviii)  As of the Closing Date with respect to the Mortgage
         Loans and the  applicable  Transfer  Date with  respect to any Eligible
         Substitute  Mortgage Loan, no Mortgagor has been released,  in whole or
         in part,  except in connection  with an assumption  agreement which has
         been approved by the applicable  title insurer (to the extent  required
         by such title insurer) and which is part of the Mortgage File delivered
         to the Indenture Trustee;

                  (xxxix) At the time of  origination of each Mortgage Loan, the
         related prior lien was not more than 30 days delinquent.  Additionally,
         as of the  Closing  Date,  no  senior  mortgage  loan  on  the  related
         Mortgaged Property was more than 59 days delinquent;

                  (xl) All required inspections,  licenses and certificates with
         respect  to the use  and  occupancy  of all  occupied  portions  of all
         property securing the Mortgages have been made,  obtained or issued, as
         applicable;

                  (xli) If the  improvements  securing a Mortgage Loan were in a
         federally  designated  special  flood  hazard  area  as of the  date of
         origination,  flood  insurance  to the extent  required in Section 3.04
         covers the related  Mortgaged  Property  (either by coverage  under the
         federal flood insurance program or by coverage by private insurers);

                  (xlii) With respect to each Mortgage  Loan,  the related prior
         lien does not provide for negative amortization;

                  (xliii) With respect to each Mortgage  Loan, the maturity date
         of the Mortgage Loan is prior to the maturity date of the related prior
         lien if such prior lien provides for a balloon payment;

                  (xliv)  All  amounts  received  after  the  Cut-Off  Date with
         respect to the Mortgage Loans to which the Sponsor is not entitled will
         be deposited into the Collection  Account within one Business Day after
         the Closing Date;

                  (xlv) Each  Mortgage  Loan is secured by a property  having an
         appraised value as of origination of $_________ or less;

                  (xlvi) Except for events  permissible under Section 3.05(a)(x)
         of this Agreement, there are no defaults in complying with the terms of
         the  Mortgage,  and  either (1) any  taxes,  governmental  assessments,
         insurance premiums,  water, sewer and municipal charges or ground rents
         which previously  became due and owing have been paid, or (2) an escrow
         of funds has been established in an amount  sufficient to pay for every
         such item which  remains  unpaid and which has been assessed but is not
         yet due and payable.  There are no defaults in complying with the terms
         of any senior mortgage on the related Mortgaged  Property that have not
         been cured by anyone  other than the  Servicer,  except for any payment
         defaults  of less than 30 days.  Except for  payments  in the nature of
         escrow  payments,  including  without  limitation,  taxes and insurance
         payments, the Sponsor has not advanced funds, or induced,  solicited or
         knowingly

                                       17
<PAGE>

         received  any  advance of funds by a party  other  than the  Mortgagor,
         directly or indirectly,  for the payment of any amount  required by the
         Mortgage  Note,  except  for  interest  accruing  from  the date of the
         Mortgage  Note  or  date  of  disbursement  of the  Mortgage  proceeds,
         whichever  is greater,  to the day which  precedes by one month the Due
         Date of the first installment of principal and interest;

                  (xlvii) With respect to each Mortgage Loan,  the  improvements
         upon each Mortgaged Property are covered by a valid and existing hazard
         insurance  policy with a carrier  generally  acceptable to the Servicer
         that provides for fire and extended coverage  representing coverage not
         less than (a) the Credit Limit of such HELOC  Mortgage  Loan or (b) the
         Cut-Off Date Principal  Balance of such Closed End Mortgage Loan or (c)
         the maximum insurable value of the Mortgaged Property;

                  (xlviii) No  misrepresentation  of a material fact or fraud in
         respect of the  origination,  modification or amendment of any Mortgage
         Loan has  taken  place on the part of any  person,  including,  without
         limitation,  the  related  Mortgagor,  any  appraiser,  any  builder or
         developer or any party  involved in the  origination  of such  Mortgage
         Loan;

                  (xlix) With  respect to the Mortgage  Loans,  the terms of the
         Mortgage  Note and the  Mortgage  have not been  impaired,  altered  or
         modified in any material respect,  except by a written instrument which
         has been recorded or is in the process of being recorded, if necessary,
         to protect the interests of the Insurer and the  Noteholders  and which
         has been or will be delivered to the Indenture Trustee on behalf of the
         Trust, no Mortgage has been satisfied, cancelled or rescinded, in whole
         or in part,  and the Mortgaged  Property  securing the Mortgage has not
         been released from the lien of the Mortgage,  in whole or in part,  nor
         has any  instrument  been  executed that would effect any such release,
         cancellation or rescission;

                  (l) As of the Cut-Off  Date,  no Mortgage Loan is more than 59
         days delinquent in payment of principal and interest;

                  (li) Except for Mortgage  Loans that are delinquent for a time
         period  less  than that set forth in (l)  above,  there is no  default,
         breach,  violation or event of acceleration existing under any Mortgage
         or the related  Mortgage  Note and no event which,  with the passage of
         time or with  notice and the  expiration  of any grace or cure  period,
         would constitute a default, breach, violation or event of acceleration;
         and neither the Sponsor,  nor any other entity  involved in originating
         or servicing a Mortgage Loan, has waived any default, breach, violation
         or event of acceleration;

                  (lii)  None  of the  Mortgage  Loans  is a  cooperative  share
         mortgage;

                  (liii)  Each  appraisal  of a  Mortgage  Loan that was used to
         determine the  appraised  value of the related  Mortgaged  Property was
         conducted  generally in  accordance  with the  Sponsor's  mortgage loan
         origination program(s) and customary industry standards and included an
         assessment of the fair market value of the related  mortgaged  property
         at the time of the  appraisal.  The Mortgage File contains an appraisal
         of the applicable Mortgaged Property;

                                       18
<PAGE>

                  (liv) All  individual  insurance  policies  contain a standard
         mortgagee  clause naming the Servicer,  its successors and assigns,  as
         mortgagee. All premiums thereon have been paid. Each Mortgage obligates
         the  Mortgagor  thereunder  to  maintain  all  such  insurance  at  the
         Mortgagor's  cost and expense,  and upon the Mortgagor's  failure to do
         so,  authorizes  the holder of the Mortgage to obtain and maintain such
         insurance at the Mortgagor's cost and expense and to seek reimbursement
         therefor from the Mortgagor;

                  (lv) Any  advances  made  after the date of  origination  of a
         Mortgage Loan but prior to the Cut-Off Date have been consolidated with
         the outstanding  principal amount secured by the related Mortgage,  and
         the secured principal amount, as consolidated,  bears a single interest
         rate and single repayment term reflected on the Mortgage Loan Schedule.
         The  consolidated   principal  amount  does  not  exceed  the  original
         principal amount of the related Mortgage Loan;

                  (lvi) No improvement located on or being part of any Mortgaged
         Property is in violation of any  applicable  zoning law or  regulation.
         All  inspections,  licenses  and  certificates  required  to be made or
         issued with respect to all occupied portions of each Mortgaged Property
         and, with respect to the use and occupancy of the same, including,  but
         not  limited  to,  certificates  of  occupancy  and  fire  underwriting
         certificates,   have  been  made  or  obtained  from  the   appropriate
         authorities and such Mortgaged  Property is lawfully occupied under the
         applicable law and all improvements which were included for the purpose
         of determining the appraised value of the Mortgaged Property lie wholly
         within the boundaries and building  restriction lines of such property,
         and no  improvements on adjoining  property  encroach upon the Mortgage
         Property;

                  (lvii) The  proceeds of each fixed rate and  balloon  Mortgage
         Loan have been fully  disbursed  and there is no obligation on the part
         of the  mortgagee to make future  advances  thereunder  and any and all
         requirements  as to completion of any on-site or off-site  improvements
         and as to  disbursement of any escrow funds therefor have been complied
         with.  All costs,  fees and  expenses  incurred  in making,  closing or
         recording  the  Mortgage  Loans  were  paid  and the  Mortgagor  is not
         entitled to any refund of amounts paid or due under the Mortgage Note;

                  (lviii) No Mortgage Loan has a shared appreciation feature, or
         other contingent interest feature;

                  (lix) All parties  which have had any interest in the Mortgage
         Loan, whether as originator, mortgagee, assignee, pledgee or otherwise,
         are (or,  during  the period in which  they held and  disposed  of such
         interest,  were):  (A) organized  under the laws of such state,  or (B)
         qualified to do business in such state, or (C) federal savings and loan
         associations or national banks having principal  offices in such state,
         or (D) not doing business in such state so as to require  qualification
         or licensing,  or (E) not otherwise required or licensed in such state.
         To the best of  Sponsor's  knowledge,  all  parties  which have had any
         interest  in the  Mortgage  Loan  were in  compliance  with any and all
         applicable licensing  requirements of the laws of the state wherein the
         Mortgaged  Property  is located or were not  required to be licensed in
         such state;

                                       19
<PAGE>

                  (lx) Each document or instrument in the related  Mortgage File
         is in a form  generally  acceptable  to prudent  mortgage  lenders that
         regularly  originate  or  purchase  mortgage  loans  comparable  to the
         Mortgage  Loans for sale to prudent  investors in the secondary  market
         that invest in mortgage loans such as the Mortgage Loans;

                  (lxi) Each original  Mortgage was recorded and all  subsequent
         assignments of the original  Mortgage (other than the assignment to the
         Indenture Trustee) have been recorded in the appropriate  jurisdictions
         wherein  such  recordation  is necessary to perfect the lien thereof as
         against  creditors  of the  Sponsor,  or is in  the  process  of  being
         recorded;

                  (lxii) No Mortgage Loan was originated under a buydown plan;

                  (lxiii) No Mortgage Loan is subject to the requirements of the
         Home  Ownership and Equity  Protection  Act of 1994  ("HOEPA") or is in
         violation of any state or municipal law comparable to HOEPA;

                  (lxiv) The Servicer for each Mortgage Loan will accurately and
         fully report its borrower credit files to all three credit repositories
         in a timely manner;

                  (lxv) No proceeds from any Mortgage Loan were used to purchase
         single-premium credit insurance policies;

                  (lxvi) No Mortgage  Loan has a prepayment  penalty term longer
         than five years after its origination;

                  (lxvii) Each Mortgage Loan conforms, and all Mortgage Loans in
         the aggregate conform,  in all material  respects,  to the descriptions
         thereof set forth in the Prospectus Supplement;

                  (lxviii)  Each  Mortgage  Loan  was  originated  on  or  after
         ________, 200_;

                  (lxix) The Sponsor  represents  and warrants that the Servicer
         currently operates or actively participates in an on-going business (A)
         to originate single family mortgage loans ("LOANS"), and/or (B) to make
         periodic purchases of Loans from originators or sellers,  and/or (C) to
         issue and/or  purchase  securities or bonds  supported by the Loans,  a
         portion of which Loans are made to borrowers who are:

                           (a) low-income families (families with incomes of 80%
                           or less of area median  income)  living in low-income
                           areas (a  census  tract or  block  numbering  area in
                           which the median income does not exceed 80 percent of
                           the area median income); or

                           (b) very low-income  families  (families with incomes
                           of 60% or less of area median income).

                  (lxx) Each Mortgage  contains a provision for the acceleration
         of the payment of the unpaid principal  balance of the related Mortgage
         Loan in the event the

                                       20
<PAGE>

         related  Mortgaged  Property is sold or  transferred  without the prior
         consent of the mortgagee thereunder;

                  (lxxi) Each  Mortgage  Loan was  originated  substantially  in
         accordance with Sponsor's underwriting  criteria,  which conform to the
         underwriting criteria set forth in the Prospectus Supplement.

                  (lxxii)  There  exists no  violation  of any  local,  state or
         federal  environmental  law,  rule  or  regulation  in  respect  of any
         Mortgaged Property which violation has or could have a material adverse
         effect on the market value of such Mortgaged  Property.  Sponsor has no
         knowledge of any pending  action or proceeding  directly  involving any
         such Mortgaged Property in which compliance with any environmental law,
         rule  or  regulation  is in  issue;  and,  to  the  best  of  Sponsor's
         knowledge,  nothing  further  remains to be done to satisfy in full all
         requirements  of each  such  law,  rule or  regulation  constituting  a
         prerequisite to the use and enjoyment of any such Mortgaged Property;

                  (lxxiii)  The Sponsor has caused or will cause to be performed
         any and all acts  required to be  performed  to preserve the rights and
         remedies of the Indenture Trustee in any insurance policies  applicable
         to the Mortgage  Loans  including,  without  limitation,  any necessary
         notifications of insurers, assignment of policies or interests therein,
         and establishments of co-insured, joint loss payee and mortgagee rights
         in favor of the Indenture Trustee;

                  (lxxiv)  The  related  Mortgage  Note is not and has not  been
         secured by any collateral, pledged account or other security except the
         lien of the corresponding Mortgage;

                  (lxxv)  There is no  obligation  on the part of the Sponsor or
         any other  party to make  payments  in  addition  to those  made by the
         Mortgagor;

                  (lxxvi) With respect to each Mortgage  constituting  a deed of
         trust, a trustee,  duly qualified  under existing law to serve as such,
         has been  properly  designated  and currently so serves and is named in
         such  Mortgage,  and no fees or expenses are or will become  payable by
         the  Noteholders  or the Trust to the trustee  under the deed of trust,
         except  in  connection  with a  trustee's  sale  after  default  by the
         Mortgagor;

                  (lxxvii) Each Mortgagor has executed a statement to the effect
         that such Mortgagor has received all disclosure materials including the
         notice  of  the  right  of  cancellation  or  rescission   required  by
         applicable  law with respect to the making of the Mortgage Loan and any
         waiver of any right of  cancellation  or  rescission  exercised  by the
         Mortgagor was in accordance  with  applicable law and is binding on the
         Mortgagor;

                  (lxxviii) The security  interest  created  pursuant to Section
         2.01 hereof is a valid and continuing  security interest (as defined in
         the UCC) in favor of the  Issuer  in the  property  sold,  transferred,
         assigned,  set over and  otherwise  conveyed  from the  Sponsor  to the
         Issuer pursuant to this Agreement,  which security interest is prior to
         all other Liens and is  enforceable  as such  against  creditors of and
         purchasers from the Sponsor;

                                       21
<PAGE>

                  (lxxix) The Sponsor  has not  authorized  the filing of and is
         not aware of any financing  statements against the Sponsor that include
         a description of collateral  covering the property  sold,  transferred,
         assigned,  set over and  otherwise  conveyed  from the  Sponsor  to the
         Issuer  pursuant to this Agreement  other than any financing  statement
         relating to the security  interest granted to the Issuer hereunder that
         has not been terminated;

                  (lxxx) The  Sponsor is not aware of any  judgment  or tax lien
         filings against it;

                  (lxxxi) None of the Mortgage  Notes has any marks or notations
         indicating that they have been pledged,  assigned or otherwise conveyed
         to any Person other than the Issuer;

                  (lxxxii)  The  pool  tape  from  which  the  selection  of the
         Mortgage Loans being acquired on the Closing Date was made available to
         the  accountants  that are providing a comfort letter to the Insurer in
         connection  with the  Prospectus  Supplement  and with  respect  to the
         Mortgage Loans as of the Closing Date, the information on the pool tape
         was complete and accurate as of its date and included a description  of
         the same Mortgage  Loans that are described on the Schedule of Mortgage
         Loans and the payments due thereunder as of the Closing Date;

                  (lxxxiii)  With respect to each  Mortgage  Loan,  the payments
         required of the related  Mortgagor  will be such that the Mortgage Loan
         will fully amortize over its amortization term; and

                  (lxxxiv) The sale, transfer,  assignment and conveyance of the
         Mortgage  Loans by the  Sponsor to the Issuer  pursuant to the Sale and
         Servicing  Agreement  is not subject to and will not result in any tax,
         fee or  governmental  charge  payable by the Seller,  the Sponsor,  the
         Issuer  or  the  Indenture  Trustee  to any  federal,  state  or  local
         governments  ("TRANSFER TAXES") other than Transfer Taxes which have or
         will have been paid by the Sponsor as due; PROVIDED,  that in the event
         that the Trust or the Indenture  Trustee  receives actual notice of any
         Transfer Taxes arising out of the transfer, assignment or conveyance of
         the Mortgage  Loans,  on written  demand by the Issuer or the Indenture
         Trustee,  or upon the Sponsor's otherwise being given notice thereof by
         the  Issuer or the  Indenture  Trustee,  the  Sponsor  shall  pay,  and
         otherwise  indemnify and hold the Issuer, the Indenture Trustee and the
         Insurer  harmless,  on an after-tax basis, from and against any and all
         Transfer Taxes, it being understood that the  Noteholders,  the Issuer,
         the  Indenture  Trustee and the Insurer shall have no obligation to pay
         any such Transfer Taxes.

With respect to the  representations  and  warranties  set forth in this Section
2.05  that are made to the best of the  Sponsor's  knowledge  or as to which the
Sponsor has no knowledge,  if it is discovered by the Sponsor, the Servicer, the
Insurer, or a Responsible Officer of the Indenture Trustee that the substance of
such  representation  and warranty is inaccurate and such inaccuracy  materially
and   adversely   affects  the  value  of  the  related   Mortgage   Loan  then,
notwithstanding the Sponsor's lack of knowledge with respect to the substance of
such representation and warranty being inaccurate at the time the representation
or warranty was made, such inaccuracy shall be

                                       22
<PAGE>

deemed a breach of the applicable  representation  or warranty.  Notwithstanding
the foregoing,  a breach of any of the  representations and warranties set forth
in  clauses  (lxiii)  through  (lxvi)  of this  Section  2.05  will be deemed to
materially and adversely affect the value of the related Mortgage Loan.

         (b) It is understood and agreed that the representations and warranties
set forth in this Section 2.05 shall survive delivery of the respective Mortgage
Files to the Indenture  Trustee  pursuant to Section 2.01 and the termination of
the rights and  obligations  of the  Servicer  pursuant to Section 5.04 or 6.02.
Upon  discovery  by the  Sponsor,  the  Servicer,  the Insurer or a  Responsible
Officer  of  the  Indenture  Trustee  of  a  breach  of  any  of  the  foregoing
representations  and  warranties,  without  regard to any  limitation  set forth
therein  concerning the knowledge of the Sponsor as to the facts stated therein,
which  materially  and  adversely  affects  the  interests  of the  Trust or the
Noteholders or the Insurer in the related Mortgage Loans, the party  discovering
such breach  shall give prompt  written  notice to the other  parties and to the
Insurer.  Within  90 days of its  discovery  or its  receipt  of  notice of such
breach,  the  Sponsor  shall use all  reasonable  efforts to cure such breach or
shall,  not later than the Business Day next  preceding  the Payment Date in the
month following the Collection  Period in which any such cure period expired (or
such later date that is acceptable  to the  Indenture  Trustee or the Insurer as
evidenced by their written  consents),  either (a) repurchase such Mortgage Loan
from  the  Trust at the  Loan  Purchase  Price  or (b)  substitute  an  Eligible
Substitute  Mortgage  Loan,  each in the same  manner  and  subject  to the same
conditions as set forth in Section 2.03 and the  representations  and warranties
set forth in Section 2.04; PROVIDED,  HOWEVER, that the cure for any breach of a
representation  and  warranty  relating to the  characteristics  of the Mortgage
Loans in the  aggregate  shall be a repurchase of or  substitution  for only the
Mortgage Loans necessary to cause such  characteristics to be in compliance with
the related representation and warranty. Upon accepting such transfer and making
any required deposit into the Collection  Account or substitution of an Eligible
Substitute  Mortgage Loans, as the case may be, the Sponsor shall be entitled to
receive an instrument  of  assignment or transfer from the Indenture  Trustee to
the same  extent as set forth in Section  2.03 with  respect to the  transfer of
Mortgage  Loans  under  that  Section.  The  Insurer  shall be  notified  of any
substitution of an Eligible Substitute Mortgage Loan.

         It is  understood  and agreed  that the  obligation  of the  Sponsor to
repurchase a Mortgage  Loan as to which a breach has occurred and is  continuing
and deposit in the  Collection  Account the Loan Purchase Price or to substitute
an Eligible  Substitute  Mortgage Loan, as the case may be, shall constitute the
sole remedy against the Sponsor respecting such breach available to Noteholders,
the  Indenture  Trustee  on behalf of  Noteholders  and the  Insurer;  PROVIDED,
HOWEVER,  that the Sponsor shall defend and indemnify the Indenture Trustee, the
Insurer and the Noteholders  against all reasonable costs and expenses,  and all
losses, damages, claims and liabilities,  including reasonable fees and expenses
of counsel and the amount of any settlement entered into with the consent of the
Sponsor (such consent not to be  unreasonably  withheld),  which may be asserted
against or incurred by any of them as a result of any third-party action arising
out of any breach of any such  representation and warranty.  Notwithstanding the
foregoing,  with regard to any breach of the  representation  and  warranty  set
forth in  Section  2.05(a)(xxxi),  the  Sponsor  shall pay to the Trust the Loan
Purchase Price.

         The  Sponsor  does  hereby  assign  to the Trust  the  benefits  of the
representations  and  warranties  made to it with respect to the Mortgage  Loans
under the Mortgage Loan Purchase

                                       23
<PAGE>

Agreement and the Trust may exercise the rights with respect thereto relating to
a Mortgage  Loan,  including  the right to require  repurchase in the event such
Mortgage Loan is not repurchased by the Sponsor

         Section 2.06.  COVENANTS OF THE SPONSOR.  The Sponsor hereby  covenants
that:

         (a) SECURITY  INTERESTS.  The Sponsor will not sell, pledge,  assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any Lien on any Mortgage Loans,  whether now existing or hereafter  created,  or
any  interest  therein;  the Sponsor will notify the  Indenture  Trustee and the
Insurer of the  existence of any Lien on any  Mortgage  Loans  immediately  upon
discovery  thereof;  and the Sponsor  will defend the Trust's  right,  title and
interest (including the Trust's security interest) in, to and under the Mortgage
Loans,  whether now existing or hereafter  created,  against all claims of third
parties claiming through or under the Sponsor;  PROVIDED,  HOWEVER, that nothing
in this Section  2.06(a) shall prevent or be deemed to prohibit the Sponsor from
suffering  to exist upon any of the  Mortgage  Loans any Liens for  municipal or
other local taxes and other  governmental  charges if such taxes or governmental
charges  shall  not at the  time  be due and  payable  or if the  Sponsor  shall
currently  be  contesting  the  validity  thereof in good  faith by  appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto.

         (b) UCC-1 FINANCING STATEMENTS. On the Closing Date with respect to the
Mortgage  Loans and, to the extent not already  included in such filing,  on the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loans,
the Sponsor will file UCC-1  financing  statements with respect to such Mortgage
Loans.

         (c) NEGATIVE PLEDGE. The Sponsor hereby agrees not to transfer, assign,
exchange,  pledge,  finance,  hypothecate,  grant  a  security  interest  in  or
otherwise  convey the Residual  Certificates  except in accordance with Sections
5.04 and 6.02 hereof and in  accordance  with the  Insurance  Agreement  and the
Trust Agreement.

         (d)  DOWNGRADING.  The Sponsor  will not engage in any  activity  which
would result in a downgrading  or withdrawal of the ratings on the Notes without
regard to the effect of the Policy.

         (e) AMENDMENT TO CERTIFICATE  OF FORMATION.  The Sponsor will not amend
its  certificate  of formation  without  prior  written  notice to the Indenture
Trustee and the Rating  Agencies  and the prior  written  consent of the Insurer
which consent shall not be unreasonably withheld.

         (f)  PRINCIPAL  PLACE OF BUSINESS.  The  Sponsor's  principal  place of
business is in California,  and the Sponsor will not change its principal  place
of business  without prior written notice to the Indenture  Trustee,  the Rating
Agencies and the Insurer.

         (g) NO  NOTIFICATION  OF  MORTGAGORS.  The Sponsor hereby agrees not to
notify  Mortgagors  of the  transfer of the  Mortgage  Loans to the Trust unless
required by the terms of the Mortgage Loans or applicable law.

                                       24
<PAGE>

         Section 2.07. REMOVAL OF MORTGAGE LOANS AT ELECTION OF ISSUER.  Subject
to the conditions  set forth below and Section 8.2 of the Indenture,  the Issuer
may, but shall not be obligated to, require the removal of Mortgage Loans,  from
time to time,  as of the close of business on a Payment  Date (each,  a "REMOVAL
DATE").  On the tenth  Business  Day (the  "REMOVAL  NOTICE  DATE") prior to the
Removal  Date  designated  in such notice,  the Issuer shall give the  Indenture
Trustee,  the Insurer and the  Servicer a notice of the  proposed  removal  that
contains a list of the Mortgage Loans in the Pool to be removed. Such removal of
Mortgage Loans shall be permitted upon satisfaction of the following conditions:

                  (i) A Rapid Amortization Event shall not have occurred;

                  (ii) On the Removal  Date,  the  Overcollateralization  Amount
         (after giving effect to the removal of the Mortgage  Loans  proposed to
         be  removed)  equals or  exceeds  the  Specified  Overcollateralization
         Amount;

                  (iii) The transfer of such Mortgage  Loans on any Removal Date
         during the Managed  Amortization  Period  shall not, in the  reasonable
         belief of the Sponsor,  cause a Rapid Amortization Event to occur or an
         event which with notice or lapse of time or both would  constitute such
         a Rapid  Amortization  Event  and a Rapid  Amortization  Event  has not
         occurred;

                  (iv) On or before the  Removal  Date,  the  Issuer  shall have
         delivered to the Indenture  Trustee a revised  Mortgage Loan  Schedule,
         reflecting the proposed transfer and the Removal Date, and the Servicer
         shall have marked the Electronic Ledger to show that the Mortgage Loans
         removed are no longer included in the Pool;

                  (v) The Seller shall  represent and warrant that its selection
         procedures are random and no selection  procedures  reasonably believed
         by the Seller to be adverse to the interests of the  Noteholders or the
         Insurer  were  utilized in selecting  the Mortgage  Loans to be removed
         from the Pool;

                  (vi) In  connection  with each such removal of Mortgage  Loans
         pursuant to this Section,  each Rating Agency shall have received on or
         prior to the  related  Removal  Notice  Date  notice  of such  proposed
         removal of Mortgage  Loans and,  prior to the Removal Date,  shall have
         notified  the  Indenture  Trustee and the Insurer in writing  that such
         removal of Mortgage Loans would not result in a reduction or withdrawal
         of its then current ratings of the Notes, without regard to the Policy;
         and

                  (vii) The Issuer shall have delivered to the Indenture Trustee
         and the Insurer an Officer's Certificate  certifying that the items set
         forth in subparagraphs (i) through (vi), inclusive, have been performed
         or are true and correct,  as the case may be. The Indenture Trustee and
         the Insurer may conclusively rely on such Officer's Certificate,  shall
         have no duty to make  inquiries  with  regard to the  matters set forth
         therein and shall incur no liability in so relying.

                  (viii) The  Insurer  shall have been given an  opportunity  to
         review any Mortgage Loans proposed to be removed by the Trust.

                                       25
<PAGE>

                  (ix) The Issuer shall have delivered a certificate in the form
         of Exhibit C-1 hereto to the Indenture Trustee.

         Upon receiving the requisite  information from the Issuer, the Servicer
shall perform in a timely manner those acts required of it, as specified  above.
Upon  satisfaction  of the above  conditions,  on the Removal Date the Indenture
Trustee shall deliver, or cause to be delivered, to the Issuer the Mortgage File
for each Mortgage  Loan being so  transferred,  and the Indenture  Trustee shall
execute and deliver to the Issuer such other documents prepared by the Issuer as
shall be reasonably  necessary to remove such Mortgage  Loans from the Pool. Any
such  removal of Mortgage  Loans shall be without  recourse,  representation  or
warranty by or of the Indenture  Trustee or the Trust to the Issuer.  The review
right given to the Insurer in clause (viii),  above,  must be completed prior to
the Removal Date.

         Section 2.08.  EXECUTION  AND  AUTHENTICATION  OF NOTES.  The Indenture
Trustee,  on behalf of the Issuer, has caused to be executed,  authenticated and
delivered  to or upon the order of the  Sponsor,  in  exchange  for the  Issuer,
concurrently  with the sale,  assignment and conveyance to the Indenture Trustee
of the Issuer,  one Class of Notes in authorized  denominations and the Residual
Certificates, evidencing the ownership of the Issuer.

         Section 2.09. TAX TREATMENT. It is the intention of the Sponsor and the
Residual  Certificateholders  that the Notes will be indebtedness of the Sponsor
for federal,  state and local income and franchise tax purposes and for purposes
of any other tax imposed on or measured by income.  The Sponsor,  the  Indenture
Trustee and each  Noteholder  (or Note Owner) by  acceptance of its Note (or, in
the case of a Note  Owner,  by  virtue  of such Note  Owner's  acquisition  of a
beneficial  interest therein) agrees to treat the Notes (or beneficial  interest
therein), for purposes of federal, state and local income or franchise taxes and
any other tax imposed on or measured by income,  as  indebtedness of the Sponsor
secured by the assets of the Trust and to report the  transactions  contemplated
by this Agreement on all applicable tax returns in a manner consistent with such
treatment. Each Noteholder agrees that it will cause any Note Owner acquiring an
interest in a Note  through it to comply with this  Agreement as to treatment of
the Notes as indebtedness for federal,  state and local income and franchise tax
purposes and for purposes of any other tax imposed on or measured by income. The
Indenture  Trustee  will  prepare  and file all tax reports  required  hereunder
consistent  with this  Agreement  except as may be  required  by or  provided in
Section 3.15.

         Section 2.10. [RESERVED].

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         Section 3.01. THE SERVICER.

         (a) The Servicer is hereby authorized to act as agent for the Trust and
in such capacity shall manage,  service,  administer and make collections on the
Mortgage Loans and perform the other actions under this Agreement.  The Servicer
shall service and administer the

                                       26
<PAGE>

Mortgage Loans in a manner  consistent with the terms of this Agreement and with
general industry practice 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 Servicer shall at all times remain responsible to
the Indenture Trustee, the Noteholders,  the Residual Certificateholders and the
Insurer  for  the  performance  of  its  duties  and  obligations  hereunder  in
accordance  with the terms hereof.  Any amounts  received by any  subservicer in
respect of a Mortgage Loan shall be deemed to have been received by the Servicer
whether or not actually  received by it. Without  limiting the generality of the
foregoing,  the Servicer shall continue,  and is hereby authorized and empowered
by the  Trust,  to execute  and  deliver,  on behalf of the  Trust,  any and all
instruments of  satisfaction or  cancellation,  or of partial or full release or
discharge  and all other  comparable  instruments,  with respect to the Mortgage
Loans and with respect to the Mortgaged  Properties  and to make deposits to and
withdrawals  from the Collection  Account.  The Indenture  Trustee and the Owner
Trustee  shall,  upon the written  request of a Servicing  Officer,  furnish the
Servicer  with  any  powers  of  attorney  and  other  documents   necessary  or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder and consistent with the Indenture  Trustee's internal policies.
The  Servicer in such  capacity may also consent to the placing of a lien senior
to that of any Mortgage on the related Mortgaged Property, provided that

                  (i) such Mortgage succeeded to a first lien position after the
         related  Mortgage  Loan was  conveyed  to the  Trust  and,  immediately
         following  the  placement  of such senior lien,  such  Mortgage is in a
         second  lien  position  and the  outstanding  principal  amount  of the
         mortgage loan secured by such subsequent senior lien is no greater than
         the outstanding principal amount of the senior mortgage loan secured by
         the  Mortgaged  Property as of the date the related  Mortgage  Loan was
         originated; or

                  (ii) the  Mortgage  relating  to such  Mortgage  Loan was in a
         second lien  position  as of the  Cut-Off  Date and the new senior lien
         secures a mortgage loan that refinances an existing first mortgage loan
         and the outstanding  principal amount of the replacement first mortgage
         loan  immediately  following  such  refinancing is not greater than the
         outstanding  principal  amount of such existing  first mortgage loan at
         the date of origination of such Mortgage Loan;

PROVIDED,  FURTHER,  that such senior lien does not secure a note that  provides
for negative amortization.

         The Servicer may also,  without prior approval from the Rating Agencies
or the Insurer, increase the Credit Limits on HELOC Mortgage Loans provided that
(i) new  appraisals  are obtained and the Combined  Loan-to-Value  Ratios of the
HELOC Mortgage Loans after giving effect to such increase are less than or equal
to the Combined  Loan-to-Value  Ratios of the  Mortgage  Loans as of the Cut-Off
Date and (ii) such  increases  are  consistent  with the  Servicer's  credit and
collection policies.  No material change or departure from the Servicer's credit
and  collection  policies with respect to any Mortgage  Loans as in effect as of
the Closing Date shall be  permitted  without the prior  written  consent of the
Insurer.

         In  addition,  the  Servicer  may  agree to  changes  in the terms of a
Mortgage Loan at the request of the Mortgagor; PROVIDED that (i) such changes do
not materially and adversely affect

                                       27
<PAGE>

the interests of Noteholders,  the Residual  Certificateholders  or the Insurer,
(ii) such changes are consistent with prudent and customary business practice as
evidenced  by a  certificate  signed by a  Servicing  Officer  delivered  to the
Indenture  Trustee and the Insurer and (iii) the Rating Agencies and the Insurer
are promptly notified of the changes.

         In addition to the  foregoing,  the Servicer may solicit  Mortgagors to
change any other terms of the related Mortgage Loans; PROVIDED that such changes
(i) do not  materially  and adversely  affect the interest of Noteholders or the
Insurer,  (ii) are consistent  with prudent and customary  business  practice as
evidenced  by a  certificate  signed by a  Servicing  Officer  delivered  to the
Indenture  Trustee and the Insurer and (iii) do not adjust the maturity  date of
such Mortgage  Loan past the date that is six months before the Final  Scheduled
Payment Date of the Notes.  Nothing herein shall limit the right of the Servicer
to solicit Mortgagors with respect to new loans (including  mortgage loans) that
are not Mortgage Loans.

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

         (b) In the  event  that  the  rights,  duties  and  obligations  of the
Servicer are  terminated  hereunder,  any  successor to the Servicer in its sole
discretion  may,  to the extent  permitted  by  applicable  law,  terminate  the
existing  subservicer  arrangements  with any  subservicer,  without charge,  or
assume the terminated  Servicer's  rights under such  subservicing  arrangements
which termination or assumption will not violate the terms of such arrangements.

         Section 3.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.

         (a)  Servicer  shall make  reasonable  efforts to collect all  payments
called for under the terms and provisions of the Mortgage  Loans,  and shall, to
the extent such procedures shall be consistent with this Agreement,  follow such
collection  procedures  as it follows  with  respect to home equity loans in its
servicing  portfolio  comparable  to the  Mortgage  Loans.  Consistent  with the
foregoing,  and without  limiting the generality of the foregoing,  the Servicer
may in its discretion  (i) waive any late payment charge or any assumption  fees
or other fees which may be collected in the  ordinary  course of servicing  such
Mortgage  Loans and (ii)  arrange with a Mortgagor a schedule for the payment of
interest due and unpaid;  PROVIDED that such  arrangement is consistent with the
Servicer's  policies  with  respect to the  Mortgage  Loans it owns or services;
PROVIDED,  FURTHER,  that  notwithstanding  such arrangement such Mortgage Loans
will be included in the  information  regarding  delinquent  Mortgage  Loans set
forth in the Servicing Certificate and monthly statement to Noteholders pursuant
to Section 4.01.

         (b) The Servicer  shall on the Closing Date deposit into the Collection
Account any amounts representing payments on, and any collections in respect of,
the Mortgage Loans received after the Cut-Off Date and prior to the Closing Date
(exclusive  of payments in respect of accrued  interest  due on or prior to such
Cut-Off Date) and thereafter the Servicer,  or the Sponsor,  as the case may be,
shall  deposit into the  Collection  Account  within one Business Day  following
receipt thereof the following  payments and  collections  received or made by it
(without duplication):

                                       28
<PAGE>

                  (i) all collections on and in respect of the Mortgage Loans;

                  (ii) the amounts,  if any, deposited to the Collection Account
         pursuant to Section 3.04;

                  (iii) Net Liquidation Proceeds;

                  (iv)  Insurance  Proceeds  (including,  for this purpose,  any
         amount  required to be credited  by the  Servicer  pursuant to the last
         sentence of Section 3.04 and  excluding  the portion  thereof,  if any,
         that has been  applied  to the  restoration  or repair  of the  related
         Mortgaged  Property or released to the related  Mortgagor in accordance
         with the normal servicing procedures of the Servicer);

                  (v) any amounts  required to be deposited  therein pursuant to
         Section 7.01;

                  (vi) any amounts  drawn  under the Policy  pursuant to Section
         8.4(f) of the  Indenture,  but only to be used for the  payment  of the
         items specified in Sections  8.7(d)(iii) and (vi) of the Indenture,  as
         applicable;

                  (vii) the amounts, if any, required to be deposited therein by
         the Sponsor pursuant to Section 2.05(b) hereof;

                  (viii) any amounts drawn pursuant to the Demand Note;

PROVIDED,  HOWEVER,  that with respect to each Collection  Period,  the Servicer
shall be  permitted  to retain  from  payments  in  respect of  interest  on the
Mortgage  Loans,  the Servicing Fee for such  Collection  Period.  The foregoing
requirements  respecting  deposits to the Collection  Account are exclusive,  it
being  understood that,  without  limiting the generality of the foregoing,  the
Servicer  need  not  deposit  in the  Collection  Account  amounts  representing
Foreclosure  Profits,  fees  (including  annual  fees) or late charge  penalties
payable by Mortgagors,  or amounts  received by the Servicer for the accounts of
Mortgagors for  application  towards the payment of taxes,  insurance  premiums,
assessments,  excess pay off amounts and similar items. The Servicer shall remit
all Foreclosure Profits to the Sponsor.

         The Indenture  Trustee shall hold amounts  deposited in the  Collection
Account as Indenture  Trustee for the Noteholders and the Insurer.  The Servicer
shall  notify  the  Indenture  Trustee  and  the  Insurer  in  writing  on  each
Determination  Date of the amount of payments and  collections in the Collection
Account  allocable to Interest  Collections  and Principal  Collections  for the
related  Payment  Date.  Following  such  notification,  the  Servicer  shall be
entitled to withdraw  from the  Collection  Account and retain any amounts  that
constitute  income and gain  realized  from the  investment of such payments and
collections.

         At the written  direction of the Servicer,  the Indenture Trustee shall
invest funds in the Collection Account in Eligible Investments specified in such
written direction.  All income and gain realized from any investment in Eligible
Investments of funds in the  Collection  Account shall be for the benefit of the
Servicer and shall be subject to its withdrawal 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  Collection  Account by the  Servicer out of its own
funds immediately as

                                       29
<PAGE>

realized. In the absence of written direction the Indenture Trustee shall invest
funds in the Collection Account as directed by the Sponsor.

         Section 3.03.  WITHDRAWALS  FROM THE COLLECTION  ACCOUNT.  From time to
time, withdrawals may be made from the Collection Account by the Servicer or the
Indenture Trustee for the following purposes:

                  (i) If  not  received  by the  Servicer  pursuant  to  Section
         3.02(b),  to the Servicer as payment for its  Servicing Fee pursuant to
         Section 3.08;

                  (ii)  To  pay  to  the  Servicer  amounts  on  deposit  in the
         Collection Account that are not to be included in the distributions and
         payments  pursuant  to  Section  8.7 of  the  Indenture  to the  extent
         provided  by the second to the last and the last  paragraph  of Section
         3.02(b);

                  (iii)  To make or to  permit  the  Indenture  Trustee  to make
         distributions and payments pursuant to Section 8.7 of the Indenture;

                  (iv) Prior to the Collection Period preceding the commencement
         of the Rapid  Amortization  Period, to pay to the Sponsor the amount of
         any Additional Balances related to HELOC Mortgage Loans included in the
         Pool  as  and  when  created  during  the  related  Collection  Period;
         PROVIDED,  that the aggregate  amount so paid to the Sponsor in respect
         of Additional  Balances with respect to the HELOC Mortgage Loans at any
         time  during  any  Collection  Period  shall not  exceed  the amount of
         Principal Collections theretofore received for such Collection Period;

                  (v) To  pay  to the  Servicer  any  Liquidation  Expenses  not
         reimbursed  prior to the  deposit of Net  Liquidation  Proceeds  to the
         Collection Account;

                  (vi)  Upon  termination  of the  Trust,  to make any  payments
         required by Section 7.01.

         If the  Servicer  deposits  in the  Collection  Account  any amount not
required  to be  deposited  therein  or any amount in  respect  of  payments  by
Mortgagors made by checks subsequently  returned for insufficient funds or other
reason  for  non-payment  it may at any  time  withdraw  such  amount  from  the
Collection Account, and any such amounts shall not be included in the amounts to
be  deposited  in the  Collection  Account  pursuant  to  Section  3.02(b),  any
provision herein to the contrary notwithstanding.

         Section 3.04.  MAINTENANCE  OF HAZARD  INSURANCE;  PROPERTY  PROTECTION
EXPENSES.  The Servicer  shall cause to be  maintained  for each  Mortgage  Loan
hazard  insurance naming the Servicer or its successors or assigns as loss payee
thereunder  providing  extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements  securing such
Mortgage Loan from time to time or (ii) the combined  principal balance owing on
such  Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Servicer shall also maintain on property acquired upon foreclosure,
or by deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the maximum  insurable value
from time to time of the

                                       30
<PAGE>

improvements  which are a part of such  property or (ii) the combined  principal
balance  owing  on such  Mortgage  Loan and any  mortgage  loan  senior  to such
Mortgage  Loan at the time of such  foreclosure  or deed in lieu of  foreclosure
plus  accrued  interest and the  good-faith  estimate of the Servicer of related
Liquidation Expenses to be incurred in connection  therewith.  Amounts collected
by the Servicer  under any such  policies  shall be deposited in the  Collection
Account  to the  extent  called  for by  Section  3.02.  In cases  in which  any
Mortgaged  Property is located in a federally  designated flood area, the hazard
insurance to be  maintained  for the related  Mortgage  Loan shall include flood
insurance.  All such flood  insurance  shall be in such  amounts as are required
under  applicable  guidelines of the Federal Flood  Emergency  Act. The 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
Mortgage 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 Servicer shall obtain and maintain a blanket policy  consistent with prudent
industry  standards  insuring against hazard losses on all of the Mortgage Loans
in  an  aggregate  amount  prudent  under  industry  standards,   it  shall  (a)
conclusively  be deemed to have  satisfied its  obligations  as set forth in the
first  sentence  of this  Section  3.04 and (b) if there  shall have been a loss
which would have been covered by such policy,  deposit in the Collection Account
without  right of  reimbursement,  as the case may be, the amount not  otherwise
payable under the blanket policy because of any deductible clause.

         Section 3.05.  ASSUMPTION AND MODIFICATION  AGREEMENTS.  In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the  Servicer  shall  exercise  its right to  accelerate  the  maturity  of such
Mortgage  Loan  consistent  with the then  current  practice of the Servicer and
without regard to the inclusion of such Mortgage Loan in the Trust. If it elects
not to enforce its right to  accelerate  or if it is prevented  from doing so by
applicable  law,  the  Servicer  (so  long  as such  action  conforms  with  the
underwriting  standards generally acceptable in the industry at the time for new
origination) is authorized to take or enter into an assumption and  modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be  conveyed,  pursuant to which such Person  becomes  liable under the
Loan  Agreement  and, to the extent  permitted by applicable  law, the Mortgagor
remains liable thereon. The Servicer shall notify the Indenture Trustee that any
assumption  and  modification  agreement has been completed by delivering to the
Indenture  Trustee  an  Officer's  Certificate  signed  by a  Servicing  Officer
certifying  that such  agreement is in compliance  with this Section 3.05 and by
forwarding to the Indenture  Trustee the original  copy of such  assumption  and
modification  agreement.  Any such assumption and modification  agreement shall,
for all purposes,  be considered a part of the related Mortgage File to the same
extent as all other  documents and instruments  constituting a part thereof.  No
change in the terms of the related Loan Agreement may be made by the Servicer in
connection  with any such assumption to the extent that such change would not be
permitted to be made in respect of the original Loan  Agreement  pursuant to the
fourth  paragraph  of Section  3.01(a).  Any fee  collected  by the Servicer for
entering into any such  agreement will be retained by the Servicer as additional
servicing compensation.

         Section 3.06. REALIZATION UPON DEFAULTED MORTGAGE LOANS;  REPURCHASE OF
CERTAIN   MORTGAGE  LOANS.  The  Servicer  shall  foreclose  upon  or  otherwise
comparably  convert  to  ownership  Mortgaged  Properties  securing  such of the
Mortgage  Loans as come into and continue

                                       31
<PAGE>

in default  when,  in the opinion of the Servicer  based upon the  practices and
procedures referred to in the following sentence,  no satisfactory  arrangements
can be made for  collection  of  delinquent  payments  pursuant to Section 3.02;
PROVIDED,  that if the Servicer has  knowledge or  reasonably  believes 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 Servicer will not cause the Trust to acquire title to such
Mortgaged  Property in a foreclosure or similar  proceeding.  In connection with
such foreclosure or other  conversion,  the 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)  and  procedures  as it shall deem
necessary or advisable and as shall be normal and usual in its general  mortgage
servicing activities.  The foregoing is subject to the proviso that the Servicer
shall not incur any  Liquidation  Expenses or otherwise  expend its own funds in
connection  with any  foreclosure  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  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,  or to its  nominee on behalf of the
Trust.

         Section 3.07. INDENTURE TRUSTEE TO COOPERATE. On or before each Payment
Date,  the Servicer will notify the Indenture  Trustee of the payment in full of
the  Principal  Balance of any  Mortgage  Loan during the  preceding  Collection
Period,  which  notification  shall be by a certification  (which  certification
shall include a statement to the effect that all amounts  received in connection
with such payment which are required to be deposited in the  Collection  Account
pursuant to Section  3.02 have been so  deposited  or  credited)  of a Servicing
Officer.  Upon any such payment in full,  the Servicer is authorized to execute,
pursuant to the  authorization  contained in Section 3.01, if the assignments of
Mortgage have been recorded as required hereunder, an instrument of satisfaction
regarding  the related  Mortgage,  which  instrument  of  satisfaction  shall be
recorded by the Servicer if required by  applicable  law and be delivered to the
Person entitled  thereto.  It is understood and agreed that no expenses incurred
in  connection  with  such  instrument  of  satisfaction  or  transfer  shall be
reimbursed from amounts  deposited in the Collection  Account.  If the Indenture
Trustee is holding the Mortgage Files,  from time to time and as appropriate for
the servicing or  foreclosure  of any Mortgage  Loan, or in connection  with the
payment in full of the  Principal  Balance of any Mortgage  Loan,  the Indenture
Trustee  shall,  upon  request of the  Servicer  and  delivery to the  Indenture
Trustee of a Request for Release  substantially  in the form attached  hereto as
Exhibit C signed by a Servicing  Officer,  release the related  Mortgage File to
the Servicer and the  Indenture  Trustee shall  execute such  documents,  in the
forms provided by the Servicer,  as shall be necessary to the prosecution of any
such  proceedings or the taking of other servicing  actions.  Such trust receipt
shall obligate the Servicer to return the Mortgage File to the Indenture Trustee
when the need therefor by the Servicer no longer exists unless the Mortgage 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 by the Indenture Trustee.

         In order to facilitate  the  foreclosure  of the Mortgage  securing any
Mortgage  Loan that is in default  following  recordation  of the  Assignment of
Mortgage in accordance with the provisions  hereof, the Indenture Trustee shall,
if so requested in writing by the Servicer, execute

                                       32
<PAGE>

an appropriate  assignment in the form provided to the Indenture  Trustee by the
Servicer  to assign such  Mortgage  Loan for the  purpose of  collection  to the
Servicer or to the related  subservicer (any such assignment shall unambiguously
indicate that the assignment is for the purpose of collection  only),  and, upon
such  assignment,  the Servicer will thereupon bring all required actions in its
own name and  otherwise  enforce the terms of the Mortgage  Loan and deposit the
Net  Liquidation  Proceeds,  exclusive of  Foreclosure  Profits,  received  with
respect  thereto in the  Collection  Account.  In the event that all  delinquent
payments  due under any such  Mortgage  Loan are paid by the  Mortgagor  and any
other  defaults are cured,  then the Servicer  shall,  within two Business Days,
reassign  such  Mortgage  Loan to the  Indenture  Trustee and return the related
Mortgage  File  to  the  place  where  it  was  being  maintained.   After  such
reassignment, the Servicer, if requested by such Residual Certificateholders and
if  offered  suitable   indemnification  and  reimbursement  for  expenses,   is
authorized  to seek a  deficiency  judgment  if  permitted  by law  against  the
Mortgagor  under  such  Liquidated  Mortgage  Loan  on  behalf  of the  Residual
Certificateholders  to the extent of any losses on  liquidation  of any Mortgage
Loan.

         Section 3.08.  SERVICING  COMPENSATION;  PAYMENT OF CERTAIN EXPENSES BY
SERVICER.  The Servicer  shall be entitled to receive the Servicing Fee pursuant
to Section 3.03 as  compensation  for its services in connection  with servicing
the Mortgage Loans.  Moreover,  additional servicing compensation in the form of
late  payment  charges or other  receipts  not  required to be  deposited in the
Collection  Account  (other than  Foreclosure  Profits) shall be retained by the
Servicer.  The 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
Noteholders  and the Residual  Certificateholders)  and shall not be entitled to
reimbursement  therefor  except as  specifically  provided  herein.  Liquidation
Expenses  are  reimbursable  to the  Servicer  solely from  related  Liquidation
Proceeds of the related Mortgage Loan.

         Section 3.09. ANNUAL STATEMENT AS TO COMPLIANCE.

         (a) The Servicer will deliver to the Indenture Trustee, the Insurer and
the  Rating  Agencies,   on  or  before  __________  of  each  year,   beginning
___________,  200_,  an Officer's  Certificate  stating that (i) a review of the
activities  of the Servicer  during the  preceding  fiscal year (or such shorter
period as is applicable in the case of the first report) and of its  performance
under this Agreement has been made under such officer's  supervision and (ii) to
the best of such  officer's  knowledge,  based on such review,  the Servicer has
fulfilled all of its material  obligations under this Agreement  throughout such
fiscal  year,  or, if there has been a default  in the  fulfillment  of any such
obligation,  specifying  each such default  known to such officer and the nature
and status thereof.

         (b) The Servicer  shall deliver to the Indenture  Trustee,  the Insurer
and each of the  Rating  Agencies,  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  an Event of  Servicing
Termination.

         Section 3.10.  ANNUAL SERVICING  REPORT.  On or before  ____________ of
each year,  beginning  ___________,  200_, the Servicer,  at its expense,  shall
cause a firm of nationally

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<PAGE>

recognized independent public accountants (who may also render other services to
the Servicer) to furnish a report to the Indenture Trustee, the Insurer and each
Rating  Agency to the effect that such firm has examined  certain  documents and
records  relating  to the  servicing  of mortgage  loans  during the most recent
fiscal year then ended under  pooling and  servicing  agreements  (substantially
similar to this Agreement,  including this Agreement), that such examination was
conducted  substantially  in  compliance  with the  audit  guide  for  audits of
non-supervised  mortgagees  approved  by the  Department  of  Housing  and Urban
Development  for use by independent  public  accountants (to the extent that the
procedures in such audit guide are applicable to the servicing  obligations  set
forth in such  agreements)  and that such  examination has disclosed no items of
noncompliance  with the  provisions of this Agreement  which,  in the opinion of
such firm, are material,  except for such items of noncompliance as shall be set
forth in such report.

         Section 3.11.  ANNUAL OPINION OF COUNSEL.  On or before  ___________ of
each year,  beginning  ___________,  200_,  the Sponsor,  at its expense,  shall
deliver to the  Indenture  Trustee  and the Insurer  the  applicable  Opinion of
Counsel specified in Exhibit B hereto.

         Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS.

         (a) Servicer shall provide to the Indenture Trustee,  the Insurer,  any
Noteholders that are federally insured savings and loan associations, the Office
of Thrift  Supervision,  successor to the Federal Home Loan Bank Board, the FDIC
and the  supervisory  agents and  examiners of the Office of Thrift  Supervision
access to the documentation  regarding the Mortgage Loans required by applicable
regulations of the Office of Thrift Supervision and the FDIC (acting as operator
of the SAIF or the BIF), such access being afforded without charge but only upon
reasonable  request  and  during  normal  business  hours at the  offices of the
Servicer. Nothing in this Section 3.12 shall derogate from the obligation of the
Servicer to observe any  applicable  law  prohibiting  disclosure of information
regarding the  Mortgagors  and the failure of the 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.

         (b) The Servicer shall supply information in such form as the Indenture
Trustee shall  reasonably  request to the Indenture  Trustee and the Note Paying
Agent,  on or before the start of the  Determination  Date preceding the related
Payment Date, as is required in the Indenture  Trustee's  reasonable judgment to
enable the Note Paying Agent or the  Indenture  Trustee,  as the case may be, to
make  required  distributions  and  to  furnish  the  required  reports  to  the
Noteholders and to make any claim under the Policy.

         Section 3.13.  MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES. The
Servicer  shall  maintain,  at its own  expense,  a blanket  fidelity  bond (the
"FIDELITY  BOND")  and an errors  and  omissions  insurance  policy,  with broad
coverage with financially  responsible companies on all officers,  employees, or
other persons acting in any capacity with regard to the Mortgage Loans to handle
funds, money,  documents and papers relating to the Mortgage Loans. The Fidelity
Bond and  errors  and  omissions  insurance  policy  shall be in the form of the
Mortgage Banker's Blanket Bond and shall protect and insure the Servicer against
losses, including forgery, theft, embezzlement,  fraud, errors and omissions and
negligent acts of such persons. Such Fidelity

                                       34
<PAGE>

Bond shall also protect and insure the  Servicer  against  losses in  connection
with the failure to maintain any insurance  policies  required  pursuant to this
Agreement  and the release or  satisfaction  of a Mortgage  Loan without  having
obtained  payment in full of the indebtedness  secured thereby.  No provision of
this Section 3.13 requiring the Fidelity Bond and errors and omissions insurance
policy shall diminish or relieve the Servicer from its duties and obligations as
set  forth in this  Agreement.  The  minimum  coverage  under  any such bond and
insurance policy shall be at least equal to the  corresponding  amounts required
by the Federal Home Loan Mortgage  Corporation in the Federal Home Loan Mortgage
Corporation's  Seller/Servicer's Guide. Upon request of the Indenture Trustee or
the Insurer,  the Servicer shall cause to be delivered to the Indenture  Trustee
or the  Insurer  a  certified  true copy of the  Fidelity  Bond and  errors  and
omissions  insurance policy and a statement from the surety and the insurer that
such Fidelity Bond and errors and omissions  insurance  policy shall in no event
be terminated or materially  modified  without thirty days' prior written notice
to the Indenture Trustee and the Insurer.

         Section  3.14.  REPORTS TO THE SEC.  Within 15 days after each  Payment
Date, the Manager shall,  on behalf of the Trust and in accordance with industry
standards,  file with the SEC via the  Electronic  Data  Gathering and Retrieval
System (EDGAR), a Form 8-K with a copy of the report of the Noteholders for such
Payment Date as an exhibit thereto. Prior to ________, 200_ (and, if applicable,
prior to March 30 of each year),  the Manager shall,  on behalf of the Trust and
in accordance with industry  standards,  file with the SEC via EDGAR a Form 10-K
with  respect to the  Trust.  In  addition,  the  Sponsor  will cause its senior
officer in charge of securitization to execute the certification (the "Form 10-K
Certification")  required  pursuant  to Rile  13a-14  under the  Securities  and
Exchange  Act of 1934,  as  amended,  and file  the same  with the SEC  prior to
________,  200_ (and if  applicable,  prior to ________  of each  year).  To the
extent any information or exhibits  required to be included in the Form 10-K are
not available by March 30, the Manager shall,  on behalf of the Trust,  file one
or more  amended Form 10-K's to include  such  missing  information  or exhibits
promptly after receipt thereof by the Manager.  Promptly following the first day
legally permissible under applicable regulations and interpretations of the SEC,
the  Manager  shall,  on  behalf  of the Trust an in  accordance  with  industry
standards,  file with the SEC via EDGAR a Form 15 Suspension  Notification  with
respect to the Trust, if applicable.  Each of the Servicer,  the Sponsor and the
Indenture  Trustee agree to furnish to the Manager  promptly,  from time to time
upon request, such further information,  reports and financial statements within
its control  related to this  Agreement  and the  Mortgage  Loans as the Manager
reasonable deems  appropriate to prepare and file all necessary reports with the
SEC. The Manager shall have no responsibility to file any items other than those
specified in this section.

         Section 3.15. TAX RETURNS.  In accordance with Section 2.09 hereof, the
Servicer shall prepare and file any federal, state or local income and franchise
tax return for the Trust as well as any other applicable  return and apply for a
taxpayer  identification number on behalf of the Trust as provided in Article VI
of the Trust Agreement,  including, without limitation, forms 1099 and 1065. The
Sponsor shall treat the Mortgage Loans as its property for all federal, state or
local tax purposes and shall report all income earned thereon (including amounts
payable as fees to the Servicer) as its income for income tax  purposes.  In the
event  the  Trust  shall be  required  pursuant  to an  audit or  administrative
proceeding or change in applicable  regulations to file federal,  state or local
tax returns,  the Servicer  shall prepare and file or shall cause to be prepared
and filed any tax  returns  required  to be filed by the  Trust;  the  Indenture
Trustee  shall  promptly  sign such  returns  and  deliver  such  returns  after
signature to the Servicer and such returns shall be filed by the  Servicer.  The
Indenture Trustee shall also prepare or shall cause to be

                                       35
<PAGE>

prepared all tax  information  required by law to be distributed to Noteholders.
In no event  shall the  Indenture  Trustee  or the  Servicer  be liable  for any
liabilities,  costs or  expenses of the Trust,  the  Noteholders,  the  Residual
Certificateholders  or the Note  Owners  arising  under any tax law,  including,
without limitation, federal, state or local income and franchise or excise taxes
or any other tax imposed on or  measured  by income (or any  interest or penalty
with respect thereto or arising from a failure to comply therewith).

         Section  3.16.  INFORMATION  REQUIRED BY THE INTERNAL  REVENUE  SERVICE
GENERALLY AND REPORTS OF FORECLOSURES  AND  ABANDONMENTS OF MORTGAGED  PROPERTY.
The 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 Servicer shall make reports of foreclosures and abandonments
of any mortgaged  property for each year  beginning in 200_,  the Servicer shall
file reports relating to each instance  occurring  during the previous  calendar
year in which the Servicer (i) on behalf of the  Indenture  Trustee  acquires an
interest in any  Mortgaged  Property  through  foreclosure  or other  comparable
conversion in full or partial  satisfaction of a Mortgage Loan, or (ii) knows or
has reason to know that any Mortgaged  Property has been abandoned.  The reports
from  the  Servicer  shall  be in form  and  substance  sufficient  to meet  the
reporting requirements imposed by Section 6050J.

         Section  3.17.  REPORTING  REQUIREMENTS.  For each Mortgage  Loan,  the
Servicer will  accurately and fully report its borrower  credit files to each of
Equifax  Credit  Information  Services,  Inc.,  TransUnion,   LLC  and  Experion
Information Solution, Inc. (or their successors) in a timely manner on a monthly
basis.

         Section 3.18. MATTERS RELATING TO MERS LOANS.

         (a) The Servicer  further is authorized  and empowered by the Indenture
Trustee  and the  Insurer,  on behalf of the  Noteholders,  the  Insurer and the
Indenture Trustee,  in its own name or in the name of the subservicer,  when the
Servicer  believes it  appropriate in its best judgment to register any Mortgage
Loan on the MERS  System,  or cause the  removal  from the  registration  of any
Mortgage  Loan on the MERS  System,  to execute  and  deliver,  on behalf of the
Indenture  Trustee,  the Insurer and the Noteholders or any of them, any and all
instruments of assignment and other comparable  instruments with respect to such
assignment or re-recording of a Mortgage in the name of MERS,  solely as nominee
for the Indenture Trustee and its successors and assigns.

         (b) In  connection  with the sale and  assignment  of any MERS Mortgage
Loan by the Sponsor to the Issuer, the Sponsor agrees that it will cause, at the
Sponsor's  expense,  the MERS System to indicate that such  Mortgage  Loans have
been  assigned by the Sponsor to the Indenture  Trustee in  accordance  with the
Indenture  for the  benefit  of the Issuer  Secured  Parties  by  including  (or
deleting, in the case of Mortgage Loans which are repurchased in accordance with
this  Agreement) in such  computer  files the  information  required by the MERS
System  to  identify  the  series of the Notes  issued in  connection  with such
Mortgage Loans. The Sponsor further

                                       36
<PAGE>

agrees that it will not,  and will not permit the Seller or the Servicer to, and
the Seller and the  Servicer  agree  that they will not,  alter the  information
referenced in this  paragraph  with respect to any Mortgage Loan during the term
of this  Agreement  unless  and  until  such  Mortgage  Loan is  repurchased  in
accordance with the terms of this Agreement.  If at any time pursuant to Section
2.03,  2.05 or 2.07 the  Sponsor  repurchases  a  Mortgage  Loan  that is a MERS
Mortgage  Loan,  the Servicer shall either (i) cause MERS to execute and deliver
an assignment  of the Mortgage in recordable  form to transfer the Mortgage from
MERS  to  the  Sponsor  and  shall  cause  such  Mortgage  to  be  removed  from
registration  on the MERS System in accordance  with MERS' rules and regulations
or (ii) cause MERS to  designate  on the MERS  System the  Sponsor (or any party
indicated by the Sponsor) as the beneficial holder of such Mortgage Loan.

         (c) In connection  with the  termination or resignation of the Servicer
hereunder, either (i) the successor Servicer, including the Indenture Trustee if
the  Indenture  Trustee is acting as successor  Servicer,  shall  represent  and
warrant  that it is a member of MERS in good  standing and shall agree to comply
in all material  respects  with the rules and  procedures  of MERS in connection
with the servicing of the Mortgage Loans that are registered  with MERS, or (ii)
the predecessor  Servicer shall cooperate with the successor Servicer either (x)
in causing MERS to execute and deliver an  assignment  of Mortgage in recordable
form to transfer the Mortgage from MERS to the Indenture  Trustee and to execute
and  deliver  such other  notices,  documents  and other  instruments  as may be
necessary or desirable to effect a transfer of such  Mortgage  Loan or servicing
of such  Mortgage  Loan on the MERS System to the  successor  Servicer or (y) in
causing  MERS to  designate  on the MERS  System the  successor  Servicer as the
servicer of such Mortgage Loan.

                                   ARTICLE IV

                              SERVICING CERTIFICATE

         Section 4.01. SERVICING CERTIFICATE.  Not later than seven (7) Business
Days prior to the Payment  Date,  the Servicer  shall  deliver to the  Indenture
Trustee,  a  Servicing  Certificate  (in  written  form or the form of  computer
readable  media or such other form as may be agreed to by the Indenture  Trustee
and the  Servicer),  together with an Officer's  Certificate  to the effect that
such Servicing Certificate is true and correct in all material respects, stating
the related Collection Period, Payment Date, the series number of the Notes, the
date of this Agreement, and:

                  (i)  the  aggregate  amount  of  collections  received  on the
         Mortgage Loans on or prior to the Determination Date in respect of such
         Collection Period;

                  (ii) the aggregate amount of (a) Interest  Collections and (b)
         Principal Collections for such Collection Period;

                  (iii)  the  Principal   Collections  for  such  Payment  Date,
         separately stating the components thereof;

                  (iv) any  accrued  and  unpaid  Servicing  Fees  for  previous
         Collection Periods and the Servicing Fee for such Collection Period;

                                       37
<PAGE>

                  (v) the Pool Balance as of the end of the preceding Collection
         Period and as of the end of the second preceding Collection Period;

                  (vi) the  aggregate  amount  of  Additional  Balances  created
         during the previous Collection Period;

                  (vii) the number and aggregate  Principal Balances of Mortgage
         Loans (A) as to which the Minimum  Monthly  Payment is  delinquent  for
         30-59 days, 60-89 days, 90-119 days, 120-149 days, 150-179 days and 180
         or more days respectively and (B) that have become REO, in each case as
         of  the  end of  the  preceding  Collection  Period;  (C)  as to  which
         foreclosure proceedings have been commenced,  and (D) in bankruptcy and
         delinquent  as of the close of business on the last day of the calendar
         month preceding such Distribution Date;

                  (viii)  the  amount  to be paid to the  Servicer  pursuant  to
         Section 8.7(c)(xi) of the Indenture;

                  (ix) the number and Principal  Balances of any Mortgage  Loans
         removed to the Sponsor pursuant to Section 2.07;

         The Indenture  Trustee  shall  conclusively  rely upon the  information
contained  in a  Servicing  Certificate  for  purposes  of making  distributions
pursuant to Section  8.7 of the  Indenture,  shall have no duty to inquire  into
such  information  and shall have no  liability  in so  relying.  The format and
content of the Servicing  Certificate may be modified by the mutual agreement of
the Servicer,  the Indenture  Trustee and the Insurer.  The Servicer  shall give
notice of any such change to the Rating Agencies.

         Section 4.02. RESERVED.

         Section 4.03. RESERVED.

         Section 4.04. LOAN DATA REMITTANCE  REPORT. On the seventh Business Day
before  each  Payment  Date (the "LOAN DATA  REMITTANCE  DATE") by noon  Eastern
Standard time,  the Servicer  shall furnish a report (the "LOAN DATA  REMITTANCE
REPORT") in the form attached as Exhibit F to this  Agreement to the Insurer and
the  Indenture  Trustee by electronic  medium as agreed to by the Servicer,  the
Indenture Trustee and the Insurer.

         Section 4.05. [RESERVED].

                                   ARTICLE V

                          The Servicer and the Sponsor

         Section 5.01.  LIABILITY OF THE SERVICER AND THE SPONSOR.  The Servicer
shall be liable in  accordance  herewith  only to the extent of the  obligations
specifically  imposed upon and  undertaken by the Servicer  herein.  The Sponsor
shall be liable in  accordance  herewith  only to the extent of the  obligations
specifically imposed upon and undertaken by the Sponsor.

                                       38
<PAGE>

         Section  5.02.  MERGER  OR  CONSOLIDATION  OF,  OR  ASSUMPTION  OF  THE
OBLIGATIONS OF, THE SERVICER OR THE SPONSOR.  Any entity into which the Servicer
or the Sponsor may be merged or  consolidated,  or any entity resulting from any
merger,  conversion or  consolidation to which the Servicer or the Sponsor shall
be a party,  or any entity  succeeding  to the  business of the  Servicer or the
Sponsor,  shall be the successor of the Servicer or the Sponsor, as the case may
be,  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.

         Section  5.03.  LIMITATION  ON  LIABILITY  OF THE  SERVICER AND OTHERS.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust or the  Noteholders or
Residual  Certificateholders  for any action  taken or for  refraining  from the
taking of any action by the Servicer in good faith  pursuant to this  Agreement,
or for errors in judgment;  PROVIDED,  HOWEVER,  that this  provision  shall not
protect the  Servicer or any such Person  against any breach of  representations
and warranties  made herein,  or against any specific  liability  imposed on the
Servicer for a breach of its servicing under this Agreement or against liability
which would otherwise be imposed by reason of willful misfeasance,  bad faith or
negligence in the performance of duties of the Servicer or by reason of reckless
disregard of obligations and duties of the Servicer hereunder.  The Servicer and
any  director or officer or employee or agent of the  Servicer  may rely in good
faith on any document of any kind PRIMA FACIE properly executed and submitted by
any Person  respecting  any matters  arising  hereunder.  The  Servicer  and any
director or officer or employee or agent of the Servicer shall be indemnified by
the Trust,  in accordance with the priorities set forth in Section 8.7(b) of the
Indenture and held harmless  against any loss,  liability or expense incurred in
connection with any legal action relating to this Agreement or the Notes,  other
than any loss,  liability  or expense  related  to any  specific  Mortgage  Loan
(except as any such loss,  liability or expense shall be otherwise  reimbursable
pursuant  to this  Agreement)  and any loss,  liability  or expense  incurred by
reason  of  its  willful  misfeasance,  bad  faith  or  negligence,   breach  of
representations  and warranties made herein,  or against any specific  liability
imposed on the Servicer for a breach of its  servicing  under this  Agreement or
against in the  performance  of duties  hereunder  or by reason of its  reckless
disregard of obligations and duties  hereunder.  The Servicer shall not be under
any  obligation to appear in,  prosecute or defend any legal action which is not
incidental  to duties to service  the  Mortgage  Loans in  accordance  with this
Agreement,  and which in its opinion may involve it in any expense or liability;
PROVIDED,  HOWEVER,  that the Servicer may in its sole discretion  undertake any
such  action  which  it may deem  necessary  or  desirable  in  respect  of this
Agreement,  and the rights and duties of the parties hereto and the interests of
the Noteholders and Residual  Certificateholders  hereunder.  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 Trust and the Servicer
shall only be entitled to be reimbursed  therefor pursuant to Section 8.7(d)(ix)
of the Indenture. The Servicer's right to indemnity or reimbursement pursuant to
this Section 5.03 shall survive any  resignation  or termination of the Servicer
pursuant to Section 5.04 or 6.01 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  5.04.  SERVICER NOT TO RESIGN.  Subject to the  provisions  of
Section  5.02,  the 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

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<PAGE>

other activities  carried on by it or its subsidiaries or Affiliates,  the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement  or  (ii)  upon  satisfaction  of the  following  conditions:  (a) the
Servicer  has  proposed a successor  servicer to the  Indenture  Trustee and the
Insurer in writing and such proposed successor servicer is reasonably acceptable
to the Indenture  Trustee;  (b) each Rating Agency shall have delivered a letter
to the  Indenture  Trustee  and the  Insurer  prior  to the  appointment  of the
successor  servicer  stating that the  proposed  appointment  of such  successor
servicer as Servicer hereunder will not result in the  qualification,  reduction
or  withdrawal  of the then current  rating of the Notes  without  regard to the
Policy; and (c) such proposed successor servicer is reasonably acceptable to the
Insurer, as evidenced by a letter from each to the Indenture Trustee;  PROVIDED,
HOWEVER,  that no such  resignation by the Servicer shall become effective until
the  Indenture  Trustee or  successor  servicer  designated  by the  Servicer as
provided   above  shall  have  assumed  the  Servicer's   responsibilities   and
obligations hereunder or the Indenture Trustee shall have designated a successor
servicer in accordance with Section 6.02. Any such resignation shall not relieve
the Servicer of responsibility for any of the obligations  specified in Sections
6.01 and 6.02 as obligations  that survive the resignation or termination of the
Servicer.  Any such  determination  permitting  the  resignation of the Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect  delivered to the Indenture  Trustee and the Insurer.  The Servicer shall
have no claim  (whether by subrogation or otherwise) or other action against any
Noteholder  or Residual  Certificateholder  for any amounts paid by the Servicer
pursuant to any provision of this Agreement.

         Section 5.05. DELEGATION OF DUTIES. In the ordinary course of business,
the Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates, or any subservicer referred to in Section 3.01,
who agrees to conduct such duties in  accordance  with  standards  comparable to
those with which the Servicer complies pursuant to Section 3.01. Such delegation
shall not relieve the  Servicer of its  liabilities  and  responsibilities  with
respect to such duties and shall not constitute a resignation within the meaning
of Section 5.04. The Servicer's delegation of any of its duties hereunder to any
subservicer shall be subject to the prior approval of the Insurer.  The Servicer
shall terminate its delegation of any of its duties hereunder to any subservicer
at the Insurer's reasonable request.

         Section  5.06.  INDEMNIFICATION  OF  THE  TRUST  BY THE  SERVICER.  The
Servicer shall indemnify and hold harmless the Trust,  the Owner Trustee and the
Indenture  Trustee  from and against  any loss,  liability,  expense,  damage or
injury suffered or sustained by reason of the Servicer's activities or omissions
in servicing or administering the Mortgage Loans that are not in accordance with
this  Agreement  or  breach  of  representations  and  warranties  made  herein,
including,  but not  limited to, any  judgment,  award,  settlement,  reasonable
attorneys' fees and expenses and other costs or expenses  incurred in connection
with the defense of any actual or threatened  action,  proceeding or claim.  Any
such indemnification,  including any amounts the Issuer shall cause the Servicer
to pay pursuant to Section 6.7 of the  Indenture,  shall not be payable from the
assets of the Trust.  The provisions of this indemnity shall run directly to and
be  enforceable  by an injured  party  subject to the  limitations  hereof.  The
provisions of this Section 5.06 shall survive termination of this Agreement.

         Section   5.07.   INDEMNIFICATION   OF  THE   TRUST  BY  THE   SPONSOR.
Notwithstanding  anything  to the  contrary  contained  herein,  the Sponsor (i)
agrees to be liable directly to the

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<PAGE>

injured party for the entire amount of any losses, claims, damages,  liabilities
and expenses of the Trust (other than those  attributable  to a Noteholder  as a
result of defaults on the Mortgage  Loans) to the extent that the Sponsor  would
be liable if the Trust were a  partnership  under the Delaware  Revised  Uniform
Limited  Partnership  Act in which the  Sponsor  was a general  partner and (ii)
shall indemnify and hold harmless the Trust, the Owner Trustee and the Indenture
Trustee from and against any loss, liability,  expense,  damage, claim or injury
(other than those  attributable  to a Noteholder  as a result of defaults on the
Mortgage Loans) arising out of or based on this Agreement by reason of any acts,
omissions,  or alleged acts or omissions arising out of activities of the Trust,
the Owner  Trustee or the  Indenture  Trustee,  or the actions of the  Servicer,
including,  but not  limited to,  amounts  payable to the  Servicer  pursuant to
Section 5.03, any judgment,  award,  settlement,  reasonable attorneys' fees and
expenses and other costs or expenses  incurred in connection with the defense of
any actual or threatened action,  proceeding or claim; PROVIDED that the Sponsor
shall not  indemnify  the Owner  Trustee  or the  Indenture  Trustee  (but shall
indemnify any other injured party) if such loss, liability,  expense,  damage or
injury  is  due to the  Owner  Trustee's  or  the  Indenture  Trustee's  willful
misconduct,  bad faith or negligence,  breach of representations  and warranties
made herein,  or against any specific  liability imposed on the Owner Trustee or
Indenture Trustee for a breach of its obligations  hereunder.  The provisions of
this  indemnity  shall run directly to and be  enforceable  by an injured  party
subject to the limitations hereof.

         Section  5.08.  LIMITATION  ON LIABILITY  OF THE  SPONSOR.  None of the
directors or officers or  employees or agents of the Sponsor  shall be under any
liability  to the  Trust,  the  Owner  Trustee  or the  Indenture  Trustee,  the
Noteholders or the Residual  Certificateholders,  it being expressly  understood
that all such liability is expressly  waived and released as a condition of, and
as  consideration  for, the execution of this  Agreement and the issuance of the
Notes; PROVIDED,  HOWEVER, that this provision shall not protect any such Person
against  any  liability  which would  otherwise  be imposed by reason of willful
misfeasance,  bad faith,  negligence or breach of representations and warranties
made  herein,  or against any specific  liability  imposed on such Person in the
performance  of the duties  hereunder.  Except as provided in Section 5.07,  the
Sponsor shall not be under any liability to the Trust,  the Owner Trustee or the
Indenture Trustee or the Noteholders or the Residual  Certificateholders for any
action taken or for refraining  from the taking of any action in its capacity as
Sponsor  pursuant to this  Agreement  whether  arising  from  express or implied
duties under this Agreement;  PROVIDED,  HOWEVER,  that this provision shall not
protect the Sponsor  against any liability  which would  otherwise be imposed by
reason of willful misconduct,  bad faith or negligence in the performance of its
duties  or by  reason  of  reckless  disregard  of its  obligations  and  duties
hereunder.  The Sponsor and any  director or officer or employee or agent of the
Sponsor 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.

                                   ARTICLE VI

                              Servicing Termination

         Section  6.01.  EVENTS  OF  SERVICING  TERMINATION.  If any  one of the
following  events  ("EVENTS  OF  SERVICING  TERMINATION")  shall  occur  and  be
continuing:

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<PAGE>

                  (i) Any failure by the  Servicer to deposit in the  Collection
         Account  any  deposit  required  to be made  under  the  terms  of this
         Agreement which  continues  unremedied for a period of one Business Day
         after the date upon which  written  notice of such  failure  shall have
         been given to the Servicer by the Indenture  Trustee or to the Servicer
         and the Indenture Trustee by the Insurer or Holders of Notes evidencing
         more than 25% of the Principal Balance of the Notes instruct otherwise;
         or

                  (ii)  Failure on the part of the  Servicer or the Sponsor duly
         to observe or perform any  covenants or  agreements  of the Servicer or
         Sponsor  set forth in the  Notes or in this  Agreement,  which  failure
         continues  unremedied  for a period of 15 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 Servicer by the Indenture  Trustee or to the Servicer
         and the  Indenture  Trustee  by the  Insurer  or the  Holders  of Notes
         evidencing  more  than  25%  of the  Principal  Balance  of the  Notes;
         PROVIDED,  that a failure on the part of the  Sponsor  to  perform  its
         obligations  under  Section 2.03 or 2.05 hereof shall not be subject to
         the 15 day cure period;

                  (iii) The entry against the 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 unstayed and in effect for
         a period of 60 consecutive days;

                  (iv) The  consent  by the  Servicer  to 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  of or relating to the
         Servicer or of or relating to substantially all of its property; or the
         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 insolvency or reorganization statute, make an assignment for
         the benefit of its  creditors,  or voluntarily  suspend  payment of its
         obligations;

                  (v) The entry  against  the  Sponsor 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 unstayed and in effect for
         a period of 60 consecutive days;

                  (vi)  The  consent  by the  Sponsor  to 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  of or relating to the
         Sponsor or of or relating to substantially all of its property;  or the
         Sponsor shall admit in writing its inability to pay its debts generally
         as they become due, file a petition to take advantage of any applicable
         insolvency or reorganization statute, make an

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<PAGE>

         assignment  for the benefit of its creditors,  or  voluntarily  suspend
         payment of its obligations;

                  (vii)  Aggregate  Realized  Losses  over any one  twelve-month
         period exceed _____% of the Initial Pool Balance;

                  (viii)  The  Three  Month  Rolling  Delinquency  Rate  exceeds
         _____%;

                  (ix)   Cumulative   Realized   Losses   exceed  the  following
         percentage of the Initial Pool Balance on any Payment Date as set forth
         below:

                                                 Cumulative Realized
                    Payment Date                   Loss Percentage
                    ------------                 -------------------
                  1st through __th                      ____%
                 ___th through __th                     ____%
                 __th through __th                      ____%
                __st and thereafter                     ____%

                  (x)  GreenPoint  Bank fails to maintain the capital  standards
         established  for  "well  capitalized"  institutions  under  the  prompt
         corrective  action  regulations  issued pursuant to the Federal Deposit
         Insurance Corporation Improvement Act of 1991, as amended;

                  (xi)  GreenPoint  Bank,  GreenPoint  Financial  Corp.  or  its
         affiliates fail to pay any principal amount of at least $1,000,000 when
         due, subject to the applicable grace period,  if any,  specified in the
         agreement or other instrument  relating to such debt and shall continue
         after the  applicable  grace  period if the  effect of such event is to
         accelerate  the maturity  and  repayment of such debt before the stated
         maturity thereof;

                  (xii) GreenPoint Bank shall no longer own 100% of the Servicer
         either directly or indirectly;

                  (xiii)  GreenPoint  Bank shall sell the servicing  platform of
         the  Servicer  to a  Person  not  affiliated  with  the Bank who is not
         acceptable to the Insurer;

                  (xiv)  A  subservicer   is  contracted  to  service  loans  in
         securitizations sponsored by the Sponsor and insured by the Insurer and
         such subservicer is not acceptable to the Insurer;

                  (xv) Any failure by the  Servicer to obtain the prior  written
         consent  of the  Insurer  prior to the merger or  consolidation  of the
         Servicer  with, or the  acquisition of the Servicer by, any entity that
         is not 100% owned,  directly or  indirectly,  by  GreenPoint  Financial
         Corp.

                  (xvi)  Any  governmental  authority,   including  the  Federal
         Deposit Insurance Corporation or any other governmental  authority with
         regulatory powers over the GreenPoint Bank,  GreenPoint Financial Corp.
         or its affiliates, shall take any mandatory

                                       43
<PAGE>

         or  discretionary  supervisory  action  against  the  GreenPoint  Bank,
         GreenPoint  Financial  Corp.  or  its  affiliates,  including,  without
         limitation,  by cease and desist order,  memorandum  or  understanding,
         capital directive or directive to take prompt corrective action,  which
         action, in the reasonable opinion of the Insurer, would have a material
         adverse impact on (A) the business,  operations or financial  condition
         of the GreenPoint Bank or the Servicer or (B) the ability of GreenPoint
         Bank or the Servicer to perform its  obligations  under any transaction
         document to which it is a party; or

                  (xvii)  GreenPoint Bank's credit ratings fall below investment
         grade by Moody's or Standard & Poor's;

then,  and in each  and  every  such  case,  so long as an  Event  of  Servicing
Termination  shall not have been remedied by the Servicer,  either the Indenture
Trustee,  the  Insurer or the Holders of Notes  evidencing  more than 50% of the
Outstanding  Amount of the Notes,  in each case with the consent of the Insurer,
by notice then given in writing to the Servicer (and to the Indenture Trustee if
given by the  Insurer or the Holders of Notes) may  terminate  all of the rights
and  obligations  of the  Servicer as servicer  under this  Agreement.  Any such
notice  to the  Servicer  shall  also be given  to each  Rating  Agency  and the
Insurer.  On or after the receipt by the  Servicer of such written  notice,  all
authority and power of the Servicer under this  Agreement,  whether with respect
to the Notes or the Mortgage Loans or otherwise,  shall pass to and be vested in
the  Indenture  Trustee  pursuant to and under this Section 6.01;  and,  without
limitation,  the Indenture Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the 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 Mortgage
Loan and related documents, or otherwise.  The Servicer agrees to cooperate with
the Indenture Trustee in effecting the termination of the  responsibilities  and
rights of the Servicer hereunder, including, without limitation, the transfer to
the  Indenture  Trustee for the  administration  by it of all cash  amounts that
shall  at  the  time  be  held  by the  Servicer  to be  deposited  by it in the
Collection  Account,  or  that  have  been  deposited  by  the  Servicer  in the
Collection  Account or  thereafter  received by the Servicer with respect to the
Mortgage Loans. All reasonable costs and expenses (including attorneys' fees and
expenses)  incurred in connection  with amending this  Agreement to reflect such
succession  as  Servicer  pursuant  to this  Section  6.01  shall be paid by the
predecessor  Servicer (or if the predecessor  Servicer is the Indenture Trustee,
the initial  Servicer) upon  presentation  of reasonable  documentation  of such
costs and expenses.

         Notwithstanding  the  foregoing,  a delay in or failure of  performance
under Section 6.01(i) for a period of one Business Day or under Section 6.01(ii)
for a period of 15 days, shall not constitute an Event of Servicing  Termination
if such delay or failure  could not be prevented  by the exercise of  reasonable
diligence  by the Servicer and such delay or failure was caused by an act of God
or the public  enemy,  acts of  declared or  undeclared  war,  public  disorder,
rebellion or  sabotage,  epidemics,  landslides,  lightning,  fire,  hurricanes,
earthquakes  or floods.  The preceding  sentence  shall not relieve the Servicer
from using its best efforts to perform its  respective  obligations  in a timely
manner in accordance  with the terms of this  Agreement  and the Servicer  shall
provide the Indenture Trustee,  the Sponsor, the Insurer and the Noteholders and
Residual  Certificateholders  with an Officer's Certificate giving prompt notice
of such failure or delay by it, together with a description of its efforts to so
perform its obligations. The Servicer shall

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<PAGE>

immediately  notify  the  Indenture  Trustee  and the  Insurer in writing of any
Events of Servicing Termination.

         Section 6.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

         (a) On and after the time the Servicer receives a notice of termination
pursuant to Section  6.01 or resigns  pursuant to Section  5.04,  the  Indenture
Trustee  shall be the  successor in all respects to the Servicer in its capacity
as servicer under this 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  Servicer by the terms and  provisions  hereof.
Notwithstanding  the  above,  if the  Indenture  Trustee  becomes  the  Servicer
hereunder,  it shall have no  responsibility  or obligation (i) of repurchase or
substitution  with  respect  to any  Mortgage  Loan,  (ii) with  respect  to any
representation or warranty of the Servicer, and (iii) for any act or omission of
either a predecessor or successor Servicer other than the Indenture Trustee.  As
compensation   therefor,  the  Indenture  Trustee  shall  be  entitled  to  such
compensation  as the Servicer  would have been  entitled to hereunder if no such
notice of termination had been given. In addition, the Indenture Trustee will be
entitled  to  compensation  with  respect to its  expenses  in  connection  with
conversion of certain information,  documents and record keeping, as provided in
Sections 6.7 and 6.8 of the  Indenture.  Notwithstanding  the above,  (i) if the
Indenture  Trustee is  unwilling to act as  successor  Servicer,  or (ii) if the
Insurer is unwilling to have the Indenture Trustee act as successor  Servicer or
(iii) if the  Indenture  Trustee  is  legally  unable so to act,  the  Indenture
Trustee  may with the  consent of the Insurer  (in the  situation  described  in
clauses  (i) or (ii)) or shall (in the  situation  described  in  clause  (iii))
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 with all licenses and permits  required to perform its
obligations  under  this  Agreement  and  having a net  worth  of not less  than
$15,000,000 as the successor to the Servicer  hereunder in the assumption of all
or any part of the  responsibilities,  duties  or  liabilities  of the  Servicer
hereunder;  PROVIDED that any such successor Servicer shall be acceptable to the
Insurer,  as evidenced by its prior written consent,  which consent shall not be
unreasonably withheld;  and PROVIDED,  FURTHER, that the appointment of any such
successor Servicer will not result in the qualification, reduction or withdrawal
of the ratings  assigned to the Notes by the Rating  Agencies  without regard to
the Policy. Pending appointment of a successor to the Servicer hereunder, unless
the Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act in such capacity as  hereinabove  provided.  In  connection  with such
appointment  and  assumption,   the  successor  shall  be  entitled  to  receive
compensation  out of  payments  on  Mortgage  Loans  in an  amount  equal to the
compensation  which the  Servicer  would  otherwise  have  received  pursuant to
Section  3.08 (or such lesser  compensation  as the  Indenture  Trustee and such
successor shall agree). The Indenture Trustee and such successor shall take such
action,  consistent with this Agreement, as shall be necessary to effectuate any
such succession.

         (b) Any successor,  including the Indenture Trustee, to the Servicer as
servicer  shall  during the term of its  service as  servicer  (i)  continue  to
service and administer  the Mortgage  Loans for the benefit of the  Noteholders,
Residual  Certificateholders and the Insurer and (ii) maintain in force a policy
or policies of insurance covering errors and omissions in the performance of its
obligations  as  Servicer  hereunder  and a  fidelity  bond  in  respect  of its
officers, employees and agents to the same extent as the Servicer is so required
pursuant to Section 3.13.

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<PAGE>

The  appointment  of a successor  Servicer shall not affect any liability of the
predecessor  Servicer  which may have arisen under this  Agreement  prior to its
termination as Servicer (including,  without limitation, any deductible under an
Insurance Policy pursuant to Section 3.04), nor shall any successor  Servicer be
liable for any acts or omissions of the  predecessor  Servicer or for any breach
by such Servicer of any of its representations or warranties contained herein.

         Section    6.03.    NOTIFICATION    TO    NOTEHOLDERS    AND   RESIDUAL
CERTIFICATEHOLDERS.  Upon any  termination  or appointment of a successor to the
Servicer  pursuant to this Article VI or Section  5.04,  the  Indenture  Trustee
shall  give  prompt  written  notice  thereof  to  the   Noteholders,   Residual
Certificateholders (at their respective addresses appearing in the Note Register
and in the Residual Certificate Register), the Insurer and each Rating Agency.

                                  ARTICLE VII

                                   TERMINATION

         Section 7.01. TERMINATION.

         (a) The respective  obligations and  responsibilities  of the Servicer,
the Sponsor and the Indenture  Trustee created hereby (other than the obligation
of the Indenture Trustee to make certain payments to Noteholders after the final
Payment  Date and the  obligation  of the  Servicer to send  certain  notices as
hereinafter set forth) shall terminate upon the last action required to be taken
by the Indenture  Trustee on the final Payment Date pursuant to this Article VII
following  the later of (A) the Payment  Date  following  payment in full of all
amounts owing to the Insurer under the Insurance  Agreement and (B) the earliest
of (i) the transfer,  under the conditions  specified in Section 7.01(b), to the
Sponsor of the  Noteholders'  interest in each  remaining  Mortgage Loan and all
property  acquired  in respect of any  remaining  Mortgage  Loans,  (ii) the day
following the Payment Date on which the  distribution  made to  Noteholders  has
reduced the Note Principal  Balance to zero and no other amounts are owed to the
Noteholders hereunder,  and no other amounts are owed to the Insurer pursuant to
the  Insurance  Agreement  and  Section  8.7 of the  Indenture,  (iii) the final
payment or other  liquidation  of the last Mortgage Loan  remaining in the Trust
(including,  without limitation,  the disposition of the Mortgage Loans pursuant
to Section 5.4 of the  Indenture) or the  disposition  of all property  acquired
upon  foreclosure  or deed in lieu of  foreclosure of any Mortgage Loan and (iv)
the Payment Date in _____ 20__;  PROVIDED,  HOWEVER,  that in no event shall the
trust created hereby continue beyond the expiration of 21 years from the date of
death  of the  last  surviving  descendants  of  Joseph  P.  Kennedy,  the  late
ambassador of the United  States to the Court of St.  James,  living on the date
hereof.  Upon  termination in accordance  with clause  (a)(B)(i) of this Section
7.01,  the Indenture  Trustee shall execute such  documents and  instruments  of
transfer presented by the Sponsor, in each case without recourse, representation
or warranty,  and take such other actions as the Sponsor may reasonably  request
to effect the transfer of the Mortgage Loans to the Sponsor.

         (b) Subject to Section  7.01(d),  the  Sponsor  shall have the right to
effect the transfer to the Sponsor of each  Mortgage Loan on any Payment Date on
or after the Payment  Date  immediately  prior to which the Pool Balance is less
than or equal to ten percent (10%) of the Initial Pool  Balance.  If the Sponsor
elects to  exercise  its right it will  notify the  Issuer,  the  Servicer,  the
Indenture  Trustee and the Insurer no later than  thirty-five (35) days prior to
the

                                       46
<PAGE>

Payment Date on which the transfer is to take place. The Indenture  Trustee will
make the transfer on such  Payment Date subject to Section  7.01(d) and provided
that the Redemption Price for the Notes has been deposited with it not less than
five (5) Business Days prior to such Payment Date.

         (c) The  Sponsor,  at its  expense,  shall  prepare  and deliver to the
Indenture  Trustee for execution,  at the time the related Mortgage Loans are to
be released to the Sponsor,  appropriate  documents assigning each such Mortgage
Loan from the Indenture  Trustee to the Sponsor and shall  promptly  record such
assignments.

         (d) The Sponsor shall not exercise its right to repurchase the Mortgage
Loans pursuant to Section 7.01(b) hereof if (a) such repurchase  would result in
a  draw  on the  Policy,  without  the  consent  of the  Insurer,  and  (b)  any
Reimbursement Amount due to the Insurer would not be fully satisfied pursuant to
the repurchase.

                                  ARTICLE VIII

                      ADMINISTRATIVE DUTIES OF THE SERVICER

         Section 8.01. ADMINISTRATIVE DUTIES.

         (a) DUTIES WITH RESPECT TO THE  INDENTURE.  The Servicer  shall perform
all its duties and the duties of the Issuer  under the  Indenture.  In addition,
the  Servicer  shall  consult  with the  Owner  Trustee  as the  Servicer  deems
appropriate regarding the duties of the Issuer under the Indenture. The Servicer
shall monitor the  performance  of the Issuer and shall advise the Owner Trustee
when action is necessary to comply with the Issuer's duties under the Indenture.
The  Servicer  shall  prepare  for  execution  by the Issuer or shall  cause the
preparation  by  other  appropriate  Persons  of all  such  documents,  reports,
filings,  instruments,  certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture.  In furtherance of
the foregoing,  the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture.

         (b) DUTIES WITH RESPECT TO THE ISSUER.

                  (i) In  addition  to the duties of the  Servicer  set forth in
         this  Agreement  or any of the  Basic  Documents,  the  Servicer  shall
         perform such calculations and shall prepare for execution by the Issuer
         or  the  Owner  Trustee  or  shall  cause  the   preparation  by  other
         appropriate   Persons  of  all  such   documents,   reports,   filings,
         instruments,  certificates  and opinions as it shall be the duty of the
         Issuer or the Owner  Trustee to  prepare,  file or deliver  pursuant to
         this Agreement or any of the Basic Documents or under state and federal
         tax and securities  laws, and at the request of the Owner Trustee shall
         take all  appropriate  action that it is the duty of the Issuer to take
         pursuant to this  Agreement or any of the Basic  Documents,  including,
         without  limitation,  pursuant  to  Sections  2.6 and 2.11 of the Trust
         Agreement. In accordance with the directions of the Issuer or the Owner
         Trustee,  the  Servicer  shall  administer,  perform or  supervise  the
         performance  of such other  activities in connection  with the Mortgage
         Loans  (including the Basic Documents) as are not covered by any of the
         foregoing provisions and as are expressly

                                       47
<PAGE>

         requested by the Issuer or the Owner Trustee and are reasonably  within
         the capability of the Servicer.

                  (ii) Notwithstanding  anything in this Agreement or any of the
         Basic Documents to the contrary,  the Servicer shall be responsible for
         promptly  notifying the Owner Trustee and the Indenture Trustee and the
         Insurer  in the  event  that  any  withholding  tax is  imposed  on the
         Issuer's   payments   (or   allocations   of   income)  to  a  Residual
         Certificateholder  (as defined in the Trust  Agreement) as contemplated
         by this Agreement.  Any such notice shall be in writing and specify the
         amount of any  withholding  tax  required  to be  withheld by the Owner
         Trustee or the Indenture Trustee pursuant to such provision.

                  (iii) Notwithstanding  anything in this Agreement or the Basic
         Documents  to the  contrary,  the  Servicer  shall be  responsible  for
         performance  of the  duties of the Issuer or the  Sponsor  set forth in
         Section  5.1(a),  (b), (c) and (d) of the Trust  Agreement with respect
         to,   among   other   things,   accounting   and  reports  to  Residual
         Certificateholders (as defined in the Trust Agreement).

                  (iv) The  Servicer  shall  perform  the duties of the  Sponsor
         specified  in  Section  11.2  of the  Trust  Agreement  required  to be
         performed in connection  with the  resignation  or removal of the Owner
         Trustee, and any other duties expressly required to be performed by the
         Servicer under this Agreement or any of the Basic Documents.

                  (v) In carrying out the  foregoing  duties or any of its other
         obligations   under  this  Agreement,   the  Servicer  may  enter  into
         transactions  with  or  otherwise  deal  with  any of  its  Affiliates;
         PROVIDED,  HOWEVER, that the terms of any such transactions or dealings
         shall be in accordance with any directions received from the Issuer and
         shall be, in the Servicer's opinion, no less favorable to the Issuer in
         any material respect.

         (c)  NON-MINISTERIAL  MATTERS.  With  respect  to  matters  that in the
reasonable judgment of the Servicer are non-ministerial,  the Servicer shall not
take any action  pursuant to this Article VIII unless  within a reasonable  time
before the taking of such  action,  the Servicer  shall have  notified the Owner
Trustee and the  Insurer of the  proposed  action and the Owner  Trustee and the
Insurer shall not have withheld  consent or provided an  alternative  direction.
For the  purpose of the  preceding  sentence,  "non-ministerial  matters"  shall
include:

                  (A) the amendment of or any supplement to the Indenture;

                  (B) the  initiation  of any claim or lawsuit by the Issuer and
         the  compromise of any action,  claim or lawsuit  brought by or against
         the  Issuer  (other  than in  connection  with  the  collection  of the
         Mortgage Loans);

                  (C) the amendment, change or modification of this Agreement or
         any of the Basic Documents;

                  (D) the  appointment of successor Note  Registrars,  successor
         Paying  Agents  and  successor   Indenture  Trustees  pursuant  to  the
         Indenture or the appointment of

                                       48
<PAGE>

         successor  Servicers  or the  consent  to the  assignment  by the  Note
         Registrar,  Paying Agent or Indenture  Trustee of its obligations under
         the Indenture; and

                  (E) the removal of the Indenture Trustee.

         (d)  EXCEPTIONS.  Notwithstanding  anything  to the  contrary  in  this
Agreement,  except as expressly provided herein or in the other Basic Documents,
the Servicer,  in its capacity  hereunder,  shall not be obligated to, and shall
not, (1) make any payments to the Noteholders or the Residual Certificateholders
under the Basic Documents,  (2) sell the Trust Property  pursuant to Section 5.4
of the Indenture, (3) take any other action that the Issuer directs the Servicer
not to take on its behalf or (4) in connection with its duties  hereunder assume
any indemnification obligation of any other Person.

         (e) The  Indenture  Trustee  or any  successor  Servicer  shall  not be
responsible for any obligations or duties of the Servicer under Section 8.01.

         Section 8.02. RECORDS. The Servicer shall maintain appropriate books of
account and records relating to services  performed under this Agreement,  which
books of account and records shall be accessible  for  inspection by the Issuer,
the Insurer and the Indenture Trustee at any time during normal business hours.

         Section 8.03. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Servicer shall furnish to the Issuer and the Indenture Trustee from time to time
such additional  information  regarding the Mortgage Loans as the Issuer and the
Indenture Trustee shall reasonably request.

                                   ARTICLE IX

                            MISCELLANEOUS PROVISIONS

         Section  9.01.  AMENDMENT.  This  Agreement may be amended from time to
time by agreement among the Sponsor, the Servicer, and the Indenture Trustee, in
each case without notice to or the consent of any of the Noteholders or Residual
Certificateholders,  but only with the  consent of the  Insurer  (which  consent
shall not be unreasonably withheld), (i) to cure any ambiguity,  (ii) to correct
any defective  provisions or to correct or supplement any provisions herein that
may be inconsistent with any other provisions herein, (iii) to add to the duties
of the Sponsor or the Servicer, (iv) to add any other provisions with respect to
matters or questions arising under this Agreement or the Policy, as the case may
be, which shall not be inconsistent  with the provisions of this Agreement,  (v)
to add or amend any  provisions  of this  Agreement  as  required  by any Rating
Agency or any other nationally  recognized  statistical  rating  organization in
order to maintain or improve any rating of the Notes (it being  understood that,
after obtaining the ratings in effect on the Closing Date, neither the Indenture
Trustee,  the  Sponsor  nor the  Servicer is  obligated  to obtain,  maintain or
improve any such rating) or (vi) to comply with any  requirement  imposed by the
Code; PROVIDED,  HOWEVER, that such action shall not, as evidenced by an Opinion
of Counsel, materially and adversely affect the interests of any Noteholder, any
Residual  Certificateholder,  or the Insurer;  and PROVIDED,  FURTHER,  that the
amendment  shall be deemed not to adversely  affect in any material  respect the
interests of the Noteholders and the

                                       49
<PAGE>

Residual  Certificateholders and no opinion referred to in the preceding proviso
shall be required to be delivered if the Person requesting the amendment obtains
a letter from each Rating Agency stating that the amendment  would not result in
the  downgrading  or withdrawal of the  respective  ratings then assigned to the
Notes without regard to the Policy.

         This Agreement also may be amended from time to time by agreement among
the  Servicer,  the Sponsor and the Indenture  Trustee,  with the consent of the
Insurer and the Holders of the Notes evidencing more than 50% of the Outstanding
Amount of the Notes and the Holders of the Residual Certificates evidencing more
than 50% of the percentage interest in the Residual  Certificates (which consent
of such  Holders  of Notes and  Residual  Certificates  given  pursuant  to this
Section  9.01 or  pursuant to any other  provision  of this  Agreement  shall be
conclusive and binding on such Holder and all future Holders of such  securities
and of any security issued upon the transfer  thereof or in exchange  thereof or
in lieu  thereof  whether  or not  notation  of such  consent  is made  upon the
security) for the purpose of adding any  provisions to or changing in any manner
or  eliminating  any of the  provisions of this Agreement or of modifying in any
manner  the  rights  of  the  Noteholders  or the  Residual  Certificateholders;
PROVIDED,  HOWEVER,  that no such  amendment  shall (i) reduce in any manner the
amount of, or delay the timing of,  payments  on the Notes or  distributions  or
payments  under the Policy which are required to be made on any Note without the
consent  of the  Holder of such Note or (ii)  reduce  the  aforesaid  percentage
required to consent to any such amendment, without the consent of the Holders of
all then outstanding  Notes and Residual  Certificates or (iii) adversely affect
in any material respect the interests of the Insurer.

         Following the execution and delivery of any such amendment hereto or to
the Policy,  either the Sponsor, if the Sponsor requested the amendment,  or the
Servicer,  if the Servicer requested the amendment,  shall reimburse the Insurer
for  the  reasonable  out-of-pocket  costs  and  expenses  incurred  by  each in
connection with such amendment.

         Prior  to the  execution  of  any  such  amendment,  the  party  hereto
requesting  any  such  amendment  shall  furnish  written  notification  of  the
substance of such amendment to each Rating Agency.  In addition,  promptly after
the execution of any such amendment made with the consent of the  Noteholders or
the Residual  Certificateholders,  the Indenture  Trustee shall furnish  written
notification  of the substance of such amendment to each Noteholder and Residual
Certificateholder  and fully executed  original  counterparts of the instruments
effecting such amendment to the Insurer.

         It shall not be necessary  for the consent of  Noteholders  or Residual
Certificateholders under this Section 9.01 to approve the particular form of any
proposed amendment or consent,  but it shall be sufficient if such consent shall
approve the  substance  thereof.  The manner of obtaining  such  consents and of
evidencing  the  authorization  of the  execution  thereof  by  Noteholders  and
Residual  Certificateholders shall be subject to such reasonable requirements as
the Indenture Trustee may prescribe.

         In  executing  any  amendment  permitted  by  this  Section  9.01,  the
Indenture Trustee shall be entitled to receive,  and shall be fully protected in
relying upon, an Opinion of Counsel stating that such amendment is authorized or
permitted hereby and that all conditions precedent to the execution and delivery
of such amendment have been satisfied.  The Indenture Trustee may, but

                                       50
<PAGE>

shall not be  obligated  to,  enter into any such  amendment  which  affects the
Indenture  Trustee's own rights,  duties or immunities  under this  Agreement or
otherwise.

         Section 9.02.  RECORDATION  OF AGREEMENT.  This Agreement is subject to
recordation in all appropriate  public offices for real property  records in all
the  counties  or other  comparable  jurisdictions  in  which  any or all of the
properties  subject to the Mortgages are situated,  and in any other appropriate
public  recording  office or elsewhere,  such  recordation to be effected by the
Servicer,  but only upon direction of  Noteholders  accompanied by an Opinion of
Counsel to the effect that such recordation  materially and beneficially affects
the interests of Noteholders.  The Noteholders requesting such recordation shall
bear all costs and expenses of such  recordation.  The  Indenture  Trustee shall
have no  obligation  to  ascertain  whether  such  recordation  so  affects  the
interests of the Noteholders.

         For the purpose of  facilitating  the  recordation of this Agreement as
herein  provided  and  for  other  purposes,  this  Agreement  may  be  executed
simultaneously in any number of counterparts,  each of which  counterparts shall
be deemed to be an original,  and such counterparts shall constitute but one and
the same instrument.

                  LIMITATION ON RIGHTS OF NOTEHOLDERS.  No Noteholder shall have
any right to vote (except as provided in Sections  6.01,  7.01,  and 9.01 herein
and  Section  5.4 of the  Indenture)  or in any  manner  otherwise  control  the
operation and management of the Trust, or the obligations of the parties hereto,
nor shall anything  herein set forth, or contained in the terms of the Notes, be
construed so as to constitute the  Noteholders  from time to time as partners or
members of an  association;  nor shall any  Noteholder be under any liability to
any third person by reason of any action taken by the parties to this  Agreement
pursuant to any provision hereof.

         No Noteholder  shall have any right by virtue or by availing  itself of
any provisions of this Agreement to institute any suit,  action or proceeding in
equity or at law upon or under or with  respect to this  Agreement,  unless such
Holder  previously shall have given to the Indenture Trustee a written notice of
default and of the continuance  thereof,  as hereinbefore  PROVIDED,  and unless
also the Holders of Notes evidencing more than 50% of the Outstanding  Amount of
the  Notes  shall  have made  written  request  upon the  Indenture  Trustee  to
institute such action,  suit or proceeding in its own name as Indenture  Trustee
hereunder  and shall  have  offered to the  Indenture  Trustee  such  reasonable
indemnity as it may require  against the costs,  expenses and  liabilities to be
incurred therein or thereby,  and the Indenture  Trustee,  for 60 days after its
receipt of such notice, request and offer of indemnity,  shall have neglected or
refused to institute any such action,  suit or proceeding;  it being  understood
and intended, and being expressly covenanted by each Noteholder with every other
Noteholder and the Indenture Trustee, that no one or more Holders of Notes shall
have any  right in any  manner  whatever  by  virtue  or by  availing  itself or
themselves of any provisions of this  Agreement to affect,  disturb or prejudice
the rights of the  Holders  of any other of the  Notes,  or to obtain or seek to
obtain  priority over or preference to any other such Holder,  or to enforce any
right under this  Agreement,  except in the manner  herein  provided and for the
equal,  ratable and common  benefit of all  Noteholders.  For the protection and
enforcement  of the provisions of this Section 9.03,  each and every  Noteholder
and the  Indenture  Trustee  shall be  entitled  to such  relief as can be given
either at law or in equity.

                                       51
<PAGE>

         Anything to the contrary  notwithstanding,  by accepting its Note, each
Noteholder  agrees that unless a Insurer Default exists,  the Insurer shall have
the right to exercise all rights of the Noteholder under this Agreement  without
any further consent of the Noteholder.

         Section  9.04.  GOVERNING  LAW.  THIS  AGREEMENT  SHALL BE CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE  STATE OF NEW  YORK  WITHOUT  REFERENCE  TO ITS
CONFLICT OF LAW  PROVISIONS  (OTHER THAN  SECTIONS  5-1401 AND 5-1402 OF THE NEW
YORK GENERAL  OBLIGATIONS LAW), AND THE OBLIGATIONS,  RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

         Section  9.05.  NOTICES.   All  demands,   notices  and  communications
hereunder  shall be in  writing  and shall be deemed to have been duly  given if
sent via facsimile  (receipt  confirmed),  personally  delivered at or mailed by
certified  mail,  return receipt  requested,  to (a) in the case of the Sponsor,
GreenPoint  Mortgage  Securities  LLC, 100 Wood Hollow Drive,  Doorstop  #32210,
Novato,  California  94945,  Attention:  S.A.  Ibrahim,  (b) in the  case of the
Servicer,  GreenPoint  Mortgage Funding,  Inc., 100 Wood Hollow Drive,  Doorstop
#32210, Novato, California 94945, Attention: Gilbert MacQuarrie, (c) in the case
of the Indenture Trustee,  at the Corporate Trust Office, (d) in the case of the
Insurer, [Insurer's Address] (telecopy number (___) ____-_____), (e) in the case
of [First Rating Agency],  [First Rating Agency's Address],  and (f) in the case
of [Second Rating  Agency],  [Second Rating  Agency's  Address],  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
Noteholder shall be given by first class mail,  postage prepaid,  at the address
of such Holder as shown in the Note  Register.  Any notice so mailed  within the
time prescribed in this Agreement  shall be  conclusively  presumed to have been
duly given, whether or not the Noteholder or Residual Certificateholder 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 best  efforts
basis and only as a matter  of  courtesy  and  accommodation  and the  Indenture
Trustee  shall have no liability  for failure to deliver such notice or document
to any Rating Agency.

         Section 9.06.  SEVERABILITY  OF  PROVISIONS.  If any one or more of the
covenants,  agreements,  provisions or terms of this 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 Agreement and shall in no way affect the validity or
enforceability  of the other provisions of this Agreement or of the Notes or the
rights of the Holders thereof.

         Section  9.07.  ASSIGNMENT.  Notwithstanding  anything to the  contrary
contained  herein,  except as provided in Sections 5.02 and 5.04, this Agreement
may not be  assigned by the Sponsor or the  Servicer  without the prior  written
consent of the Insurer and Holders of the Notes evidencing  Percentage Interests
aggregating not less than ___%.

         Section 9.08. THIRD-PARTY  BENEFICIARIES.  This Agreement will inure to
the  benefit  of  and  be  binding  upon  the  parties   hereto,   the  Residual
Certificateholders,  the  Note  Owners  or  the  Insurer  and  their  respective
successors  and  permitted  assigns.   Except  as  otherwise  provided  in  this
Agreement, no other Person will have any right or obligation hereunder.

                                       52
<PAGE>

         Section  9.09.  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 9.10. 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 9.11. INSURANCE AGREEMENT.  The Indenture Trustee is authorized
and directed to execute and deliver the  Insurance  Agreement and to perform the
obligations of the Indenture Trustee thereunder.

         Section 9.12.  NONPETITION COVENANT.  Until one year plus one day shall
have elapsed since the termination of the Trust in accordance with Section 7.01,
none of the Sponsor, the Company, the Servicer,  nor the Indenture Trustee shall
petition or otherwise  invoke the process of any court or  government  authority
for the purpose of  commencing  or  sustaining a case against the Sponsor or the
Trust  under any  federal or state  bankruptcy,  insolvency  or  similar  law or
appointing  a receiver,  liquidator,  assignee,  Indenture  Trustee,  custodian,
sequestrator  or other  similar  official  of the  Sponsor  or the  Trust or any
substantial  part of its property,  or ordering the winding up or liquidation of
the affairs of the Sponsor or the Trust.

                                       53
<PAGE>

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

                                   GREENPOINT MORTGAGE SECURITIES LLC,
                                      as Sponsor

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

                                   GREENPOINT MORTGAGE FUNDING, INC.,
                                      as Company and Servicer

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

                                   [INDENTURE TRUSTEE], not in its individual
                                      capacity but solely
                                      as Indenture Trustee

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

                                   GREENPOINT HOME EQUITY LOAN TRUST
                                      200_-_, as Issuer
                                      By: [Owner Trustee], not in its individual
                                      capacity but solely as Owner
                                      Indenture Trustee

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

                         [Sale and Servicing Agreement]

<PAGE>

State of  ________ )
                   ) ss.:
County of ________ )

         On the ___th day of _______, 200_ before me, a notary public in and for
the State of ________,  personally appeared _________________,  known to me who,
being   by  me  duly   sworn,   did   depose   and  say  that  he   resides   at
______________________;  that  he is  the  _____________________  of  GreenPoint
Mortgage  Securities  LLC,  a Delaware  limited  liability  company,  one of the
parties that executed the foregoing  instrument;  that he knows the seal of said
company;  that the seal affixed to said  instrument is such seal; that it was so
affixed  by order of the  members of said  company;  and that he signed his name
thereto by like order.

                                  ----------------------------------
                                  Notary Public

[Notarial Seal]

<PAGE>

State of  ________ )
                   ) ss.:
County of ________ )

         On the ___ day of _________, 200_ before me, a notary public in and for
the State of New York, personally appeared __________, known to me who, being by
me duly  sworn,  did depose  and say that he resides at  ______________________;
that he is the _____________________ of [Owner Trustee], one of the parties that
executed the foregoing  instrument;  that he knows the seal of said corporation;
that the seal affixed to said  instrument is such corporate seal; that it was so
affixed  by order of the Board of  Directors  of said  corporation;  and that he
signed his name thereto by like order.

                                  ----------------------------------
                                  Notary Public

[Notarial Seal]

<PAGE>

State of  ________ )
                   ) ss.:
County of ________ )

         On the ____ day of  _________,  200_ before me, a notary  public in and
for the State of ________, personally appeared  _____________________,  known to
me  who,  being  by me duly  sworn,  did  depose  and say  that  he  resides  at
_________________,  ____________,  ________ _____; that he is the ______________
of GreenPoint Mortgage Funding, Inc., a closely-held California corporation, one
of the parties that executed the foregoing instrument; that he knows the seal of
said  corporation;  that the seal affixed to said  instrument is such  corporate
seal;  that it was so  affixed  by  order  of the  Board  of  Directors  of said
corporation; and that he signed his name thereto by like order.

                                  ----------------------------------
                                  Notary Public

[Notarial Seal]

<PAGE>

State of  ________ )
                   ) ss.:
County of ________ )

         On the ___ day of _________, 200_ before me, a notary public in and for
the State of ________,  personally appeared _________________,  known to me who,
being by me duly sworn,  did depose and say that he resides at  _______________,
_______________  _____; that he is the _____________ of [Indenture  Trustee],  a
_____________,  one of the parties that executed the foregoing  instrument;  and
that he  signed  his name  thereto  by order of the Board of  Directors  of said
corporation.

                                  ----------------------------------
                                  Notary Public

[Notarial Seal]

<PAGE>

                                                                       EXHIBIT A

                             MORTGAGE LOAN SCHEDULE

                                      A-1
<PAGE>

                                                                       EXHIBIT B

                           FORM OF OPINION OF COUNSEL
                       WITH RESPECT TO SECTION 3.11 OF THE
                          SALE AND SERVICING AGREEMENT

The  opinions  set  forth  below  may  be  subject  to all  the  qualifications,
assumptions, limitations and exceptions taken or made in the opinions of counsel
to the Company  delivered on the Closing Date. Unless otherwise  indicated,  all
capitalized  terms used herein shall have the  meanings  ascribed to them in the
Sale  and  Servicing  Agreement  dated as of  ________,  200_  among  GreenPoint
Mortgage Funding,  Inc. (the "COMPANY" and the "SERVICER"),  GreenPoint Mortgage
Securities LLC (the "SPONSOR") and [Indenture  Trustee],  as Indenture  Trustee.
Terms used but not defined  herein shall have the meaning given to such terms in
the above-referenced Sale and Servicing Agreement.

         The Indenture  Trustee has a valid  perfected  first priority  security
interest with respect to the Sponsor's  right,  title and interest in and to the
Mortgage Loans (including all Eligible  Substitute  Mortgage Loans),  subject to
the exceptions and  qualifications  set forth in the Opinion of Counsel attached
to the Indenture as Exhibit B.

                                      B-1
<PAGE>

                                                                     EXHIBIT C-1

                          FORM OF OFFICER'S CERTIFICATE

                      REQUEST BY THE SERVICER FOR PERMANENT
                  RELEASE OF MORTGAGE LOANS AND MORTGAGE FILES

TO:  [Indenture Trustee],
       as Indenture Trustee
     [Indenture Trustee's Address]

Gentlemen:

In  connection  with the  payment in full of the  Mortgage  Loans held by you as
Indenture Trustee,  under the Sale and Servicing Agreement dated as of ________,
200_ among GreenPoint Mortgage Funding,  Inc., as Servicer,  GreenPoint Mortgage
Securities  LLC, as Sponsor,  and you, as  Indenture  Trustee,  the  undersigned
requests  the  release  of the  Mortgage  Loans and the  Mortgage  Files for the
Mortgage Loans identified in the schedule attached to this Request.

The undersigned  hereby  certifies that (i) the release of Collateral  requested
will not impair the  security  under the  Indenture,  (ii) any and all  payments
received on the  Mortgage  Loans  identified  in the  schedule  attached to this
Request which are required to be deposited in the Collection Account pursuant to
Section 3.02 of such Sale and Servicing Agreement have been so deposited,  (iii)
the  information  with respect to such factual  matters  necessary  for us to so
certify  is  in  our   possession   and  (iv)  I  am  qualified  to  make  these
certifications.

                                          GREENPOINT MORTGAGE FUNDING, INC.,
                                              as Servicer

                                          By:
                                              -------------------------------
                                              Name:
                                                   --------------------------
                                              Title:
                                                    -------------------------
                                              Date:
                                                   --------------------------
ACKNOWLEDGED BY:

[INDENTURE TRUSTEE],
  as Indenture Trustee

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

                                     C-1-1
<PAGE>

                                                                     EXHIBIT C-2

                          FORM OF OFFICER'S CERTIFICATE

                      REQUEST BY THE SERVICER FOR TEMPORARY
                  RELEASE OF MORTGAGE LOANS AND MORTGAGE FILES

TO:  [Indenture Trustee],
       as Indenture Trustee
     [Indenture Trustee's Address]

Gentlemen:

In  connection  with the  administration  of the  Mortgage  Loans held by you as
Indenture Trustee,  under the Sale and Servicing Agreement dated as of ________,
200_ among GreenPoint Mortgage Funding,  Inc., as Servicer,  GreenPoint Mortgage
Securities  LLC, as Sponsor,  and you, as  Indenture  Trustee,  the  undersigned
requests the temporary  release of the Mortgage  Loans and the related  Mortgage
Files  for the  Mortgage  Loans  identified  in the  schedule  attached  to this
Request.

                                          GREENPOINT MORTGAGE FUNDING, INC.,
                                              as Servicer

                                          By:
                                              -------------------------------
                                              Name:
                                                   --------------------------
                                              Title:
                                                    -------------------------
                                              Date:
                                                   --------------------------
ACKNOWLEDGED BY:

[INDENTURE TRUSTEE],
  as Indenture Trustee

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

                                     C-2-1
<PAGE>

                                                                       EXHIBIT D

                          FORM OF CREDIT LINE AGREEMENT

                                      D-1
<PAGE>

                                                                       EXHIBIT E

                            FORM OF MORTGAGE NOTE FOR
                            CLOSED END MORTGAGE LOANS

                                      E-1
<PAGE>

                                                                       EXHIBIT F

                              FORM OF CERTIFICATE:
                              LOAN LEVEL REPORTING

<TABLE>
<CAPTION>
DETAIL RECORD FIELDS:                                                 FILE NAME:  T0##MMYY.LNS

------------------------- -------- ----------------- --------------------------------------------------------------------------
      DATA:               FIELD         FORMAT       DEFINITION
  T0nnMMYY.LSN              NBR
------------------------- -------- ----------------- --------------------------------------------------------------------------
<S>                       <C>      <C>               <C>
Servicer Loan No.         1        13(X)             Unique loan number assigned to the mortgage by the Seller/Servicer
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Due Date of Last Paid     2        YYYYMMDD          DUE DATE of last full payment received from the borrower.
Installment  (DDLPI)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Last Payment Received     3        YYYYMMDD          RECEIPT DATE of the last fully paid monthly installment of
                                                     principal, interest, and escrow (if any) that was received from the
                                                     borrower. Note: Dates of partial payments should not be entered
                                                     here. {Data is when payment was actually received from the
                                                     borrower) IF THIS INFORMATION IS NOT AVAILABLE, THEN POPULATE THE
                                                     FIELD WITH THE DEFAULT VALUE OF 19000101.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Unpaid Principal          4        13.2              Unpaid Principal balance as of the end of the current period
Balance (UPB) 100%
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Interest Paid             5        13.2              Gross / Coupon Interest payment amount
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Principal Paid            6        13.2              Total principal paid down on the mortgage balance.

                                                     *   For approved payment reversals or principal applied incorrectly
                                                         in a prior cycle the amount of negative principal to bring the
                                                         mortgage balance in line with the correct UPB reported.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Draw Amount               7        13.2              Total draws made against the line of credit for the current month
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
</TABLE>

                                      F-1
<PAGE>

<TABLE>
<CAPTION>
------------------------- -------- ----------------- --------------------------------------------------------------------------
      DATA:               FIELD         FORMAT       DEFINITION
  T0nnMMYY.LSN              NBR
------------------------- -------- ----------------- --------------------------------------------------------------------------
<S>                       <C>      <C>               <C>
Exception Code            8        2(x)              This field should contain an exception code only when exception
                                                     activity occurs for that period, otherwise this field should
                                                     contain a 0.
                                                     DEFAULT  VALUE IS 0.
                                                     40  Inactivate loan, deemed the loan non-recoverable
                                                     60  Payoff - mortgage matured
                                                     61  Payoff - mortgage prepaid
                                                     65  Payoff - mortgage repurchased
                                                     69  Payoff - mortgage liquidated
                                                     70  Transfer to REO (status change exception)
                                                     72  Foreclosure (change of status from Active to Foreclosure)
                                                     80  Substituted Loan - Loan is added as a substitute for another loan
                                                     81  Reinstated Loan - Loan was previously delinquent, but the
                                                         borrower has brought it current.
                                                     90  Loan Modified - This is an exceptional activity code which is
                                                         reserved for future use. Modifications typically require
                                                         repurchase from the trust prior to modifying the loan.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Exception Date            9        YYYYMMDD          Date the exception occurred.  If an exception has not occurred, this
                                                     field should contain the default value of 19000101.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Mortgage Note Rate        10       6.3               Rate associated with the borrower's scheduled payment
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Mortgage P&I Amount       11       13.2              Principal and interest portion of the borrowers minimum installment.
                                                     Note:  100% of the principal and interest amount should be entered in
                                                     this field, including servicing and guarantee fees.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Realized Losses           12       13.2              Amount of realized losses for that period.  This field will also include
                                                     any supplemental claims or proceeds for loans liquidated in a previous
                                                     cycle.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Cumulative Principal      13       13.2              Total principal payments advanced by the Servicer and not repaid by the
Advances                                             borrower.
                                                     NOT APPLICABLE--DO NOT REPORT
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Interest Advances         14       13.2              Amount of interest payment advanced by the Servicer for that period.
                                                     NOT APPLICABLE--DO NOT REPORT
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Loan Status               15       1(X)              Pertains to activity in the prior reporting cycle.
                                                     0 - Active
                                                     4 - Foreclosure
                                                     5 - REO
                                                     6 - Closed  (PAYOFFS & REPURCHASES)
                                                     9 - Bankruptcy (OVERRIDES ACTIVE STATUS)
                                                     Note: 30,60 & 90 day delinquency status will be derived from the DDLPI
                                                     field.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Subservicer No.           16        6                Subservicer ID# - 6 digits
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Actual Loan Balance       17       13.2              Actual loan balance outstanding from the borrower.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
</TABLE>

                                      F-2
<PAGE>

<TABLE>
<CAPTION>
------------------------- -------- ----------------- --------------------------------------------------------------------------
      DATA:               FIELD         FORMAT       DEFINITION
  T0nnMMYY.LSN              NBR
------------------------- -------- ----------------- --------------------------------------------------------------------------
<S>                       <C>      <C>               <C>
Next Interest Rate        18       YYYYMMDD          Applies only to ARM loans and reflects the next pending interest rate
Change Date                                          adjustment date. DEFAULT IS 19000101.  SINCE LOANS ADJUST MONTHLY, ONLY
                                                     REPORT THE FIRST ADJUSTMENT DATE FOR LOANS WITH TEASER PERIOD.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Next Interest Payment     19       YYYYMMDD          Applies only to payment capped ARM loans and reflects the next pending
Change Date                                          payment adjustment date. DEFAULT IS 19000101.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Index Value at Reset      20       6.3               The index rate used in determining the ARM coupon.
Date                                                 DEFAULT VALUE IS 0 FOR AN ARM LOAN IF THE INDEX IS NOT CHANGING IN THE
                                                     CURRENT PERIOD.  ALSO POPULATE 0 IF THE LOAN IS A FIXED RATE LOAN.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Next Mortgage Rate        21       6.3               Should be populated in advance of the rate adjustment.. DEFAULT VALUE IS
expected at reset date                               0 FOR AN ARM LOAN IF THE RATE IS NOT CHANGING.  DEFAULT VALUE IS 0 IF
                                                     THE LOAN IS A FIXED RATE LOAN.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Collateral Group No. #    22       2                 This is a collateral grouping number for whole loan directed collateral
                                                     deals. DEFAULT VALUE IS 0.  REPORT THE HELOCS AND FIXED RATES SEPARATELY.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Current Arrearage Paid    23       13.2              The current amount of cashflow applied to the arrearage balance.
                                                     Applies to loans that have been or are currently in default.
                                                     DEFAULT VALUE IS 0.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Outstanding Arrearage     24       13.2              The total amount of outstanding interest accrued under forbearance
Balance                                              period, after current arrearage payment. DEFAULT VALUE IS 0.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Loan Number               25       13(X)             Loan number assigned to the mortgage by ___.  Used for disclosure.
------------------------- -------- ----------------- --------------------------------------------------------------------------
Blank                              1(x)
------------------------- -------- ----------------- --------------------------------------------------------------------------
Prepayment Premium        26       13.2              The borrowers penalty payment for prepaying his mortgage.  This amount
Amount                                               is allocated  in aggregate as a directed collateral amount to a specific
                                                     bond. DEFAULT VALUE IS 0.
------------------------- -------- ----------------- --------------------------------------------------------------------------
</TABLE>

The Notes:

o    File must be a text file (either space or tab delimited).

o    Any dates should be in YYYYMMDD format. They should not contain slashes (/)
     or dashes (-).

o    Number fields should NOT include commas.

o    Any negative number should be denoted by a "-" in front of the number, do
     not put the "-" after the number or use parentheses.

                                      F-3EXHIBIT 4.1

                             FIXED RATE SENIOR NOTE

REGISTERED                                                    REGISTERED
No. FXR                                                       U.S. $
                                                              CUSIP:

     Unless this certificate is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the
issuer or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company
and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.

                                      A-1

<PAGE>

<TABLE>
                                                  MORGAN STANLEY
                                     SENIOR GLOBAL MEDIUM-TERM NOTES, SERIES C
                                                   (Fixed Rate)

                                           STOCK PARTICIPATION ACCRETING
                                REDEMPTION QUARTERLY-PAY SECURITIES(SM) ("SPARQS")

                                          8% SPARQS(R) DUE NOVEMBER 30, 2004
                                             MANDATORILY EXCHANGEABLE
                                           FOR SHARES OF COMMON STOCK OF
                                          TEXAS INSTRUMENTS INCORPORATED

------------------------------------------------------------------------------------------------------------------
<S>                           <C>                          <C>                          <C>
ORIGINAL ISSUE DATE:          INITIAL REDEMPTION           INTEREST RATE:   % per       MATURITY DATE:
                                 DATE: See "Morgan            annum (equivalent            See "Maturity Date"
                                 Stanley Call Right"          to $     per annum per       below.
                                 below.                       SPARQS)
------------------------------------------------------------------------------------------------------------------
INTEREST ACCRUAL              INITIAL REDEMPTION           INTEREST PAYMENT             OPTIONAL
   DATE:                         PERCENTAGE: See              DATE(S): See "Interest       REPAYMENT
                                 "Morgan Stanley Call         Payment Dates" below.        DATE(S):  N/A
                                 Right" and "Call Price"
                                 below.
------------------------------------------------------------------------------------------------------------------
SPECIFIED CURRENCY:           ANNUAL REDEMPTION            INTEREST PAYMENT             APPLICABILITY OF
   U.S. dollars                  PERCENTAGE                   PERIOD: Quarterly            MODIFIED
                                 REDUCTION: N/A                                            PAYMENT UPON
                                                                                           ACCELERATION OR
                                                                                           REDEMPTION: See
                                                                                           "Alternate Exchange
                                                                                           Calculation in Case of
                                                                                           an Event of Default"
                                                                                           below.
------------------------------------------------------------------------------------------------------------------
IF SPECIFIED                  REDEMPTION NOTICE            APPLICABILITY OF             If yes, state Issue Price:
   CURRENCY OTHER                PERIOD: At least 10          ANNUAL INTEREST              N/A
   THAN U.S. DOLLARS,            days but no more than        PAYMENTS: N/A
   OPTION TO ELECT               30 days.  See "Morgan
   PAYMENT IN U.S.               Stanley Call Right" and
   DOLLARS: N/A                  "Morgan Stanley Notice
                                 Date" below.
------------------------------------------------------------------------------------------------------------------
EXCHANGE RATE                 TAX REDEMPTION               PRICE APPLICABLE             ORIGINAL YIELD TO
   AGENT: N/A                    AND PAYMENT OF               UPON OPTIONAL                MATURITY: N/A
                                 ADDITIONAL                   REPAYMENT: N/A
                                 AMOUNTS: N/A
------------------------------------------------------------------------------------------------------------------
OTHER PROVISIONS:             IF YES, STATE INITIAL
   See below.                    OFFERING DATE: N/A
------------------------------------------------------------------------------------------------------------------
</TABLE>

Issue Price.........................    $      per each $       principal amount
                                        of this SPARQS

Maturity Date.......................    November 30, 2004, subject to
                                        acceleration as described below in
                                        "Price Event Acceleration" and
                                        "Alternate Exchange Calculation in Case
                                        of an Event of Default"

                                       A-2
<PAGE>

                                        and subject to extension if the Final
                                        Call Notice Date is postponed in
                                        accordance with the following paragraph.

                                        If the Final Call Notice Date is
                                        postponed because it is not a Trading
                                        Day or due to a Market Disruption Event
                                        or otherwise and the Issuer exercises
                                        the Morgan Stanley Call Right, the
                                        Maturity Date shall be postponed so that
                                        the Maturity Date will be the tenth
                                        calendar day following the Final Call
                                        Notice Date. See "Final Call Notice
                                        Date" below.

                                        In the event that the Final Call Notice
                                        Date is postponed because it is not a
                                        Trading Day or due to a Market
                                        Disruption Event or otherwise, the
                                        Issuer shall give notice of such
                                        postponement as promptly as possible,
                                        and in no case later than two Business
                                        Days following the scheduled Final Call
                                        Notice Date, (i) to the holder of this
                                        SPARQS by mailing notice of such
                                        postponement by first class mail,
                                        postage prepaid, to the holder's last
                                        address as it shall appear upon the
                                        registry books, (ii) to the Trustee by
                                        telephone or facsimile confirmed by
                                        mailing such notice to the Trustee by
                                        first class mail, postage prepaid, at
                                        its New York office and (iii) to The
                                        Depository Trust Company (the
                                        "Depositary") by telephone or facsimile
                                        confirmed by mailing such notice to the
                                        Depositary by first class mail, postage
                                        prepaid. Any notice that is mailed in
                                        the manner herein provided shall be
                                        conclusively presumed to have been duly
                                        given, whether or not the holder of this
                                        SPARQS receives the notice. Notice of
                                        the date to which the Maturity Date has
                                        been rescheduled as a result of
                                        postponement of the Final Call Notice
                                        Date, if applicable, shall be included
                                        in the Issuer's notice of exercise of
                                        the Morgan Stanley Call Right.

Interest Payment Dates..............    If the scheduled Maturity Date is
                                        postponed due to a Market Disruption
                                        Event or otherwise, the Issuer will pay
                                        interest on the Maturity Date as
                                        postponed, but no interest will accrue
                                        on this SPARQS or on such payment during
                                        the period from or after the scheduled
                                        Maturity Date.

Record Date.........................    Notwithstanding the definition of
                                        "Record Date" on page 21 hereof, the
                                        Record Date for each Interest Payment
                                        Date, including the Interest Payment
                                        Date scheduled to occur on the Maturity
                                        Date, shall be the date 5 calendar

                                       A-3
<PAGE>

                                        days prior to such scheduled Interest
                                        Payment Date, whether or not that date
                                        is a Business Day; provided, however,
                                        that in the event that the Issuer
                                        exercises the Morgan Stanley Call Right,
                                        no Interest Payment Date shall occur
                                        after the Morgan Stanley Notice Date,
                                        except for any Interest Payment Date for
                                        which the Morgan Stanley Notice Date
                                        falls on or after the "ex-interest" date
                                        for the related interest payment, in
                                        which case the related interest payment
                                        shall be made on such Interest Payment
                                        Date; and provided, further, that
                                        accrued but unpaid interest payable on
                                        the Call Date, if any, shall be payable
                                        to the person to whom the Call Price is
                                        payable. The "ex-interest" date for any
                                        interest payment is the date on which
                                        purchase transactions in the SPARQS no
                                        longer carry the right to receive such
                                        interest payment.

                                        In the event that the Issuer exercises
                                        the Morgan Stanley Call Right and the
                                        Morgan Stanley Notice Date falls before
                                        the "ex-interest" date for an interest
                                        payment, so that as a result a scheduled
                                        Interest Payment Date will not occur,
                                        the Issuer shall cause the Calculation
                                        Agent to give notice to the Trustee and
                                        to the Depositary, in each case in the
                                        manner and at the time described in the
                                        second and third paragraphs under
                                        "Morgan Stanley Call Right" below, that
                                        no Interest Payment Date will occur
                                        after such Morgan Stanley Notice Date.

Denominations.......................    $         and integral multiples thereof

Morgan Stanley Call Right...........    On any scheduled Trading Day on or after
                                        June    , 2004 or on the Maturity Date
                                        (including the Maturity Date as it may
                                        be extended and regardless of whether
                                        the Maturity Date is a Trading Day), the
                                        Issuer may call the SPARQS, in whole but
                                        not in part, for mandatory exchange for
                                        the Call Price paid in cash (together
                                        with accrued but unpaid interest) on the
                                        Call Date.

                                        On the Morgan Stanley Notice Date, the
                                        Issuer shall give notice of the Issuer's
                                        exercise of the Morgan Stanley Call
                                        Right (i) to the holder of this SPARQS
                                        by mailing notice of such exercise,
                                        specifying the Call Date on which the
                                        Issuer shall effect such exchange, by
                                        first class mail, postage prepaid, to
                                        the holder's last address as it shall
                                        appear upon the registry books, (ii) to
                                        the Trustee by telephone or facsimile
                                        confirmed by mailing such notice to the
                                        Trustee by first class mail, postage
                                        prepaid, at its New York office and
                                        (iii) to the Depositary in accordance

                                       A-4
<PAGE>

                                        with the applicable procedures set forth
                                        in the Blanket Letter of Representations
                                        prepared by the Issuer. Any notice which
                                        is mailed in the manner herein provided
                                        shall be conclusively presumed to have
                                        been duly given, whether or not the
                                        holder of this SPARQS receives the
                                        notice. Failure to give notice by mail
                                        or any defect in the notice to the
                                        holder of any SPARQS shall not affect
                                        the validity of the proceedings for the
                                        exercise of the Morgan Stanley Call
                                        Right with respect to any other SPARQS.

                                        The notice of the Issuer's exercise of
                                        the Morgan Stanley Call Right shall
                                        specify (i) the Call Date, (ii) the Call
                                        Price payable per SPARQS, (iii) the
                                        amount of accrued but unpaid interest
                                        payable per SPARQS on the Call Date,
                                        (iv) whether any subsequently scheduled
                                        Interest Payment Date shall no longer be
                                        an Interest Payment Date as a result of
                                        the exercise of the Morgan Stanley Call
                                        Right, (v) the place or places of
                                        payment of such Call Price, (vi) that
                                        such delivery will be made upon
                                        presentation and surrender of this
                                        SPARQS, (vii) that such exchange is
                                        pursuant to the Morgan Stanley Call
                                        Right and (viii) if applicable, the date
                                        to which the Maturity Date has been
                                        extended due to a Market Disruption
                                        Event as described under "Maturity Date"
                                        above.

                                        The notice of the Issuer's exercise of
                                        the Morgan Stanley Call Right shall be
                                        given by the Issuer or, at the Issuer's
                                        request, by the Trustee in the name and
                                        at the expense of the Issuer.

                                        If this SPARQS is so called for
                                        mandatory exchange by the Issuer, then
                                        the cash Call Price and any accrued but
                                        unpaid interest on this SPARQS to be
                                        delivered to the holder of this SPARQS
                                        shall be delivered on the Call Date
                                        fixed by the Issuer and set forth in its
                                        notice of its exercise of the Morgan
                                        Stanley Call Right, upon delivery of
                                        this SPARQS to the Trustee. The Issuer
                                        shall, or shall cause the Calculation
                                        Agent to, deliver such cash to the
                                        Trustee for delivery to the holder of
                                        this SPARQS.

                                        If this SPARQS is not surrendered for
                                        exchange on the Call Date, it shall be
                                        deemed to be no longer Outstanding
                                        under, and as defined in, the Senior
                                        Indenture after the Call Date, except
                                        with respect to the holder's right to
                                        receive cash due in connection with the
                                        Morgan Stanley Call Right.

                                       A-5
<PAGE>

Morgan Stanley Notice Date..........    The scheduled Trading Day on which the
                                        Issuer issues its notice of mandatory
                                        exchange, which must be at least 10 but
                                        not more than 30 days prior to the Call
                                        Date.

Final Call Notice Date..............    November 20, 2004; provided that if
                                        November 20, 2004 is not a Trading Day
                                        or if a Market Disruption Event occurs
                                        on such day, the Final Call Notice Date
                                        will be the immediately succeeding
                                        Trading Day on which no Market
                                        Disruption Event occurs.

Call Date...........................    The day specified in the Issuer's notice
                                        of mandatory exchange, on which the
                                        Issuer shall deliver cash to the holder
                                        of this SPARQS, for mandatory exchange,
                                        which day may be any scheduled Trading
                                        Day on or after June    , 2004 or the
                                        Maturity Date (including the Maturity
                                        Date as it may be extended and
                                        regardless of whether the Maturity Date
                                        is a scheduled Trading Day). See
                                        "Maturity Date" above.

Call Price..........................    The Call Price with respect to any Call
                                        Date is an amount of cash per each $
                                        principal amount of this SPARQS, as
                                        calculated by the Calculation Agent,
                                        such that the sum of the present values
                                        of all cash flows on each $ principal
                                        amount of this SPARQS to and including
                                        the Call Date (i.e., the Call Price and
                                        all of the interest payments, including
                                        accrued and unpaid interest payable on
                                        the Call Date), discounted to the
                                        Original Issue Date from the applicable
                                        payment date at the Yield to Call rate
                                        of    % per annum computed on the basis
                                        of a 360-day year of twelve 30-day
                                        months, equals the Issue Price, as
                                        determined by the Calculation Agent.

Exchange at Maturity................    At maturity, subject to a prior call of
                                        this SPARQS for cash in an amount equal
                                        to the Call Price by the Issuer as
                                        described under "Morgan Stanley Call
                                        Right" above or any acceleration of the
                                        SPARQS, upon delivery of this SPARQS to
                                        the Trustee, each $     principal amount
                                        of this SPARQS shall be applied by the
                                        Issuer as payment for a number of shares
                                        of the common stock of Texas Instruments
                                        Incorporated ("Texas Instruments Stock")
                                        at the Exchange Ratio, and the Issuer
                                        shall deliver with respect to each $
                                        principal amount of this SPARQS an
                                        amount of Texas Instruments Stock equal
                                        to the Exchange Ratio.

                                        The amount of Texas Instruments Stock to
                                        be delivered

                                       A-6
<PAGE>

                                        at maturity shall be subject to any
                                        applicable adjustments (i) to the
                                        Exchange Ratio (including, as
                                        applicable, any New Stock Exchange Ratio
                                        or any Basket Stock Exchange Ratio, each
                                        as defined in paragraph 5 under
                                        "Antidilution Adjustments" below) and
                                        (ii) in the Exchange Property, as
                                        defined in paragraph 5 under
                                        "Antidilution Adjustments" below, to be
                                        delivered instead of, or in addition to,
                                        such Texas Instruments Stock as a result
                                        of any corporate event described under
                                        "Antidilution Adjustments" below, in
                                        each case, required to be made through
                                        the close of business on the third
                                        Trading Day prior to maturity.

                                        The Issuer shall, or shall cause the
                                        Calculation Agent to, provide written
                                        notice to the Trustee at its New York
                                        Office and to the Depositary, on which
                                        notice the Trustee and Depositary may
                                        conclusively rely, on or prior to 10:30
                                        a.m. on the Trading Day immediately
                                        prior to maturity of this SPARQS (but if
                                        such Trading Day is not a Business Day,
                                        prior to the close of business on the
                                        Business Day preceding maturity of this
                                        SPARQS), of the amount of Texas
                                        Instruments Stock (or the amount of
                                        Exchange Property) or cash to be
                                        delivered with respect to each $
                                        principal amount of this SPARQS and of
                                        the amount of any cash to be paid in
                                        lieu of any fractional share of Texas
                                        Instruments Stock (or of any other
                                        securities included in Exchange
                                        Property, if applicable); provided that
                                        if the maturity date of this SPARQS is
                                        accelerated (x) because of a Price Event
                                        Acceleration (as described under "Price
                                        Event Acceleration" below) or (y)
                                        because of an Event of Default
                                        Acceleration (as defined under
                                        "Alternate Exchange Calculation in Case
                                        of an Event of Default" below), the
                                        Issuer shall give notice of such
                                        acceleration as promptly as possible,
                                        and in no case later than (A) in the
                                        case of an Event of Default
                                        Acceleration, two Trading Days following
                                        such deemed maturity date or (B) in the
                                        case of a Price Event Acceleration,
                                        10:30 a.m. on the Trading Day
                                        immediately prior to the date of
                                        acceleration (as defined under "Price
                                        Event Acceleration" below), (i) to the
                                        holder of this SPARQS by mailing notice
                                        of such acceleration by first class
                                        mail, postage prepaid, to the holder's
                                        last address as it shall appear upon the
                                        registry books, (ii) to the Trustee by
                                        telephone or facsimile confirmed by
                                        mailing such notice to the Trustee by
                                        first class mail, postage prepaid, at
                                        its New York office and (iii) to the
                                        Depositary by telephone or facsimile
                                        confirmed by mailing such notice

                                       A-7
<PAGE>

                                        to the Depositary by first class mail,
                                        postage prepaid. Any notice that is
                                        mailed in the manner herein provided
                                        shall be conclusively presumed to have
                                        been duly given, whether or not the
                                        holder of this SPARQS receives the
                                        notice. If the maturity of this SPARQS
                                        is accelerated, no interest on the
                                        amounts payable with respect to this
                                        SPARQS shall accrue for the period from
                                        and after such accelerated maturity
                                        date; provided that the Issuer has
                                        deposited with the Trustee the Texas
                                        Instruments Stock, the Exchange Property
                                        or any cash due with respect to such
                                        acceleration by such accelerated
                                        maturity date.

                                        The Issuer shall, or shall cause the
                                        Calculation Agent to, deliver any such
                                        shares of Texas Instruments Stock (or
                                        any Exchange Property) and cash in
                                        respect of interest and any fractional
                                        share of Texas Instruments Stock (or any
                                        Exchange Property) and cash otherwise
                                        due upon any acceleration described
                                        above to the Trustee for delivery to the
                                        holder of this Note. References to
                                        payment "per SPARQS" refer to each
                                        $       principal amount of this SPARQS.

                                        If this SPARQS is not surrendered for
                                        exchange at maturity, it shall be deemed
                                        to be no longer Outstanding under, and
                                        as defined in, the Senior Indenture,
                                        except with respect to the holder's
                                        right to receive the Texas Instruments
                                        Stock (and, if applicable, any Exchange
                                        Property) and any cash in respect of
                                        interest and any fractional share of
                                        Texas Instruments Stock (or any Exchange
                                        Property) and any other cash due at
                                        maturity as described in the preceding
                                        paragraph under this heading.

Price Event Acceleration............    If on any two consecutive Trading Days
                                        during the period prior to and ending on
                                        the third Business Day immediately
                                        preceding the Maturity Date, the product
                                        of the Market Price per share of Texas
                                        Instruments Stock and the Exchange Ratio
                                        is less than $2.00, the Maturity Date of
                                        this SPARQS shall be deemed to be
                                        accelerated to the third Business Day
                                        immediately following such second
                                        Trading Day (the "date of
                                        acceleration"). Upon such acceleration,
                                        the holder of each $      principal
                                        amount of this SPARQS shall receive per
                                        SPARQS on the date of acceleration:

                                           (i) a number of shares of Texas
                                           Instruments Stock at the then current
                                           Exchange Ratio;

                                       A-8
<PAGE>

                                           (ii) accrued but unpaid interest on
                                           each $      principal amount of this
                                           SPARQS to but excluding the date of
                                           acceleration; and

                                           (iii) an amount of cash as determined
                                           by the Calculation Agent equal to the
                                           sum of the present values of the
                                           remaining scheduled payments of
                                           interest on each $        principal
                                           amount of this SPARQS (excluding the
                                           amounts included in clause (ii)
                                           above) discounted to the date of
                                           acceleration. The present value of
                                           each remaining scheduled payment will
                                           be based on the comparable yield that
                                           the Issuer would pay on a
                                           non-interest bearing, senior
                                           unsecured debt obligation of the
                                           Issuer having a maturity equal to the
                                           term of each such remaining scheduled
                                           payment, as determined by the
                                           Calculation Agent.

No Fractional Shares................    Upon delivery of this SPARQS to the
                                        Trustee at maturity, the Issuer shall
                                        deliver the aggregate number of shares
                                        of Texas Instruments Stock due with
                                        respect to this SPARQS, as described
                                        above, but the Issuer shall pay cash in
                                        lieu of delivering any fractional share
                                        of Texas Instruments Stock in an amount
                                        equal to the corresponding fractional
                                        Market Price of such fraction of a share
                                        of Texas Instruments Stock as determined
                                        by the Calculation Agent as of the
                                        second scheduled Trading Day prior to
                                        maturity of this SPARQS.

Exchange Ratio......................    1.0, subject to adjustment for corporate
                                        events relating to Texas Instruments
                                        Incorporated ("Texas Instruments")
                                        described under "Antidilution
                                        Adjustments" below.

Market Price........................    If Texas Instruments Stock (or any other
                                        security for which a Market Price must
                                        be determined) is listed on a national
                                        securities exchange, is a security of
                                        the Nasdaq National Market or is
                                        included in the OTC Bulletin Board
                                        Service ("OTC Bulletin Board") operated
                                        by the National Association of
                                        Securities Dealers, Inc. (the "NASD"),
                                        the Market Price for one share of Texas
                                        Instruments Stock (or one unit of any
                                        such other security) on any Trading Day
                                        means (i) the last reported sale price,
                                        regular way, of the principal trading
                                        session on such day on the principal
                                        United States securities exchange
                                        registered under the Securities Exchange
                                        Act of 1934, as amended (the "Exchange
                                        Act"), on which Texas Instruments Stock
                                        is listed or admitted to trading (which
                                        may be the Nasdaq National Market if it
                                        is then a national securities

                                       A-9
<PAGE>

                                        exchange) or (ii) if not listed or
                                        admitted to trading on any such
                                        securities exchange or if such last
                                        reported sale price is not obtainable
                                        (even if Texas Instruments Stock is
                                        listed or admitted to trading on such
                                        securities exchange), the last reported
                                        sale price of the principal trading
                                        session on the over-the-counter market
                                        as reported on the Nasdaq National
                                        Market (if it is not then a national
                                        securities exchange) or OTC Bulletin
                                        Board on such day. If the last reported
                                        sale price of the principal trading
                                        session is not available pursuant to
                                        clause (i) or (ii) of the preceding
                                        sentence because of a Market Disruption
                                        Event or otherwise, the Market Price for
                                        any Trading Day shall be the mean, as
                                        determined by the Calculation Agent, of
                                        the bid prices for Texas Instruments
                                        Stock obtained from as many dealers in
                                        such security, but not exceeding three,
                                        as will make such bid prices available
                                        to the Calculation Agent. Bids of Morgan
                                        Stanley & Co. Incorporated ("MS & Co.")
                                        or any of its affiliates may be included
                                        in the calculation of such mean, but
                                        only to the extent that any such bid is
                                        the highest of the bids obtained. A
                                        "security of the Nasdaq National Market"
                                        shall include a security included in any
                                        successor to such system, and the term
                                        "OTC Bulletin Board Service" shall
                                        include any successor service thereto.

Trading Day.........................    A day, as determined by the Calculation
                                        Agent, on which trading is generally
                                        conducted on the New York Stock
                                        Exchange, Inc. ("NYSE"), the American
                                        Stock Exchange LLC, the Nasdaq National
                                        Market, the Chicago Mercantile Exchange
                                        and the Chicago Board of Options
                                        Exchange and in the over-the-counter
                                        market for equity securities in the
                                        United States.

Calculation Agent...................    MS & Co. and its successors.

                                        All calculations with respect to the
                                        Exchange Ratio and Call Price for the
                                        SPARQS shall be rounded to the nearest
                                        one hundred-thousandth, with five
                                        one-millionths rounded upward (e.g.,
                                        .876545 would be rounded to .87655); all
                                        dollar amounts related to the Call Price
                                        resulting from such calculations shall
                                        be rounded to the nearest ten-
                                        thousandth, with five one
                                        hundred-thousandths rounded upward
                                        (e.g., .76545 would be rounded to
                                        .7655); and all dollar amounts paid with
                                        respect to the Call Price on the
                                        aggregate number of SPARQS shall be
                                        rounded to the nearest cent, with
                                        one-half cent rounded upward.

                                      A-10
<PAGE>

                                        All determinations made by the
                                        Calculation Agent shall be at the sole
                                        discretion of the Calculation Agent and
                                        shall, in the absence of manifest error,
                                        be conclusive for all purposes and
                                        binding on the holder of this SPARQS and
                                        the Issuer.

Antidilution Adjustments............    The Exchange Ratio shall be adjusted as
                                        follows:

                                           1. If Texas Instruments Stock is
                                        subject to a stock split or reverse
                                        stock split, then once such split has
                                        become effective, the Exchange Ratio
                                        shall be adjusted to equal the product
                                        of the prior Exchange Ratio and the
                                        number of shares issued in such stock
                                        split or reverse stock split with
                                        respect to one share of Texas
                                        Instruments Stock.

                                           2. If Texas Instruments Stock is
                                        subject (i) to a stock dividend
                                        (issuance of additional shares of Texas
                                        Instruments Stock) that is given ratably
                                        to all holders of shares of Texas
                                        Instruments Stock or (ii) to a
                                        distribution of Texas Instruments Stock
                                        as a result of the triggering of any
                                        provision of the corporate charter of
                                        Texas Instruments, then once the
                                        dividend has become effective and Texas
                                        Instruments Stock is trading
                                        ex-dividend, the Exchange Ratio shall be
                                        adjusted so that the new Exchange Ratio
                                        shall equal the prior Exchange Ratio
                                        plus the product of (i) the number of
                                        shares issued with respect to one share
                                        of Texas Instruments Stock and (ii) the
                                        prior Exchange Ratio.

                                           3. If Texas Instruments issues rights
                                        or warrants to all holders of Texas
                                        Instruments Stock to subscribe for or
                                        purchase Texas Instruments Stock at an
                                        exercise price per share less than the
                                        Market Price of Texas Instruments Stock
                                        on both (i) the date the exercise price
                                        of such rights or warrants is determined
                                        and (ii) the expiration date of such
                                        rights or warrants, and if the
                                        expiration date of such rights or
                                        warrants precedes the maturity of this
                                        SPARQS, then the Exchange Ratio shall be
                                        adjusted to equal the product of the
                                        prior Exchange Ratio and a fraction, the
                                        numerator of which shall be the number
                                        of shares of Texas Instruments Stock
                                        outstanding immediately prior to the
                                        issuance of such rights or warrants plus
                                        the number of additional shares of Texas
                                        Instruments Stock offered for
                                        subscription or purchase pursuant to
                                        such rights or warrants and the
                                        denominator of which shall be the number
                                        of shares of Texas Instruments Stock
                                        outstanding

                                      A-11
<PAGE>

                                        immediately prior to the issuance of
                                        such rights or warrants plus the number
                                        of additional shares of Texas
                                        Instruments Stock which the aggregate
                                        offering price of the total number of
                                        shares of Texas Instruments Stock so
                                        offered for subscription or purchase
                                        pursuant to such rights or warrants
                                        would purchase at the Market Price on
                                        the expiration date of such rights or
                                        warrants, which shall be determined by
                                        multiplying such total number of shares
                                        offered by the exercise price of such
                                        rights or warrants and dividing the
                                        product so obtained by such Market
                                        Price.

                                           4. There shall be no adjustments to
                                        the Exchange Ratio to reflect cash
                                        dividends or other distributions paid
                                        with respect to Texas Instruments Stock
                                        other than distributions described in
                                        paragraph 2, paragraph 3 and clauses
                                        (i), (iv) and (v) of the first sentence
                                        of paragraph 5 and Extraordinary
                                        Dividends. "Extraordinary Dividend"
                                        means each of (a) the full amount per
                                        share of Texas Instruments Stock of any
                                        cash dividend or special dividend or
                                        distribution that is identified by Texas
                                        Instruments as an extraordinary or
                                        special dividend or distribution, (b)
                                        the excess of any cash dividend or other
                                        cash distribution (that is not otherwise
                                        identified by Texas Instruments as an
                                        extraordinary or special dividend or
                                        distribution) distributed per share of
                                        Texas Instruments Stock over the
                                        immediately preceding cash dividend or
                                        other cash distribution, if any, per
                                        share of Texas Instruments Stock that
                                        did not include an Extraordinary
                                        Dividend (as adjusted for any subsequent
                                        corporate event requiring an adjustment
                                        hereunder, such as a stock split or
                                        reverse stock split) if such excess
                                        portion of the dividend or distribution
                                        is more than 5% of the Market Price of
                                        Texas Instruments Stock on the Trading
                                        Day preceding the "ex-dividend date"
                                        (that is, the day on and after which
                                        transactions in Texas Instruments Stock
                                        on an organized securities exchange or
                                        trading system no longer carry the right
                                        to receive that cash dividend or other
                                        cash distribution) for the payment of
                                        such cash dividend or other cash
                                        distribution (such Market Price, the
                                        "Base Market Price") and (c) the full
                                        cash value of any non-cash dividend or
                                        distribution per share of Texas
                                        Instruments Stock (excluding Marketable
                                        Securities, as defined in paragraph 5
                                        below). Subject to the following
                                        sentence, if any cash dividend or
                                        distribution of such other property with
                                        respect to Texas Instruments Stock
                                        includes an Extraordinary Dividend, the
                                        Exchange Ratio with respect

                                      A-12
<PAGE>

                                        to Texas Instruments Stock shall be
                                        adjusted on the ex-dividend date so
                                        that the new Exchange Ratio shall equal
                                        the product of (i) the prior Exchange
                                        Ratio and (ii) a fraction, the numerator
                                        of which is the Base Market Price, and
                                        the denominator of which is the amount
                                        by which the Base Market Price exceeds
                                        the Extraordinary Dividend. If any
                                        Extraordinary Dividend is at least 35%
                                        of the Base Market Price, then, instead
                                        of adjusting the Exchange Ratio, the
                                        amount payable upon exchange at maturity
                                        shall be determined as described in
                                        paragraph 5 below, and the Extraordinary
                                        Dividend shall be allocated to Reference
                                        Basket Stocks in accordance with the
                                        procedures for a Reference Basket Event
                                        as described in clause 3(b) of paragraph
                                        5 below. The value of the non-cash
                                        component of an Extraordinary Dividend
                                        shall be determined on the ex-dividend
                                        date for such distribution by the
                                        Calculation Agent, whose determination
                                        shall be conclusive in the absence of
                                        manifest error. A distribution on Texas
                                        Instruments Stock described in clause
                                        (i), (iv) or (v) of the first sentence
                                        of paragraph 5 below shall cause an
                                        adjustment to the Exchange Ratio
                                        pursuant only to clause (i), (iv) or (v)
                                        of the first sentence of paragraph 5, as
                                        applicable.

                                           5. Any of the following shall
                                        constitute a Reorganization Event: (i)
                                        Texas Instruments Stock is reclassified
                                        or changed, including, without
                                        limitation, as a result of the issuance
                                        of any tracking stock by Texas
                                        Instruments, (ii) Texas Instruments has
                                        been subject to any merger, combination
                                        or consolidation and is not the
                                        surviving entity, (iii) Texas
                                        Instruments completes a statutory
                                        exchange of securities with another
                                        corporation (other than pursuant to
                                        clause (ii) above), (iv) Texas
                                        Instruments is liquidated, (v) Texas
                                        Instruments issues to all of its
                                        shareholders equity securities of an
                                        issuer other than Texas Instruments
                                        (other than in a transaction described
                                        in clause (ii), (iii) or (iv) above) (a
                                        "spinoff stock") or (vi) Texas
                                        Instruments Stock is the subject of a
                                        tender or exchange offer or going
                                        private transaction on all of the
                                        outstanding shares. If any
                                        Reorganization Event occurs, in each
                                        case as a result of which the holders of
                                        Texas Instruments Stock receive any
                                        equity security listed on a national
                                        securities exchange or traded on The
                                        Nasdaq National Market (a "Marketable
                                        Security"), other securities or other
                                        property, assets or cash (collectively
                                        "Exchange Property"), the amount payable
                                        upon exchange at maturity with respect
                                        to each $       principal

                                      A-13
<PAGE>

                                        amount of this SPARQS following the
                                        effective date for such Reorganization
                                        Event (or, if applicable, in the case of
                                        spinoff stock, the ex-dividend date for
                                        the distribution of such spinoff stock)
                                        shall be determined in accordance with
                                        the following:

                                        (1) if Texas Instruments Stock continues
                                        to be outstanding, Texas Instruments
                                        Stock (if applicable, as reclassified
                                        upon the issuance of any tracking stock)
                                        at the Exchange Ratio in effect on the
                                        third Trading Day prior to the scheduled
                                        Maturity Date (taking into account any
                                        adjustments for any distributions
                                        described under clause (3)(a) below);
                                        and

                                        (2) for each Marketable Security
                                        received in such Reorganization Event
                                        (each a "New Stock"), including the
                                        issuance of any tracking stock or
                                        spinoff stock or the receipt of any
                                        stock received in exchange for Texas
                                        Instruments Stock where Texas
                                        Instruments is not the surviving entity,
                                        the number of shares of the New Stock
                                        received with respect to one share of
                                        Texas Instruments Stock multiplied by
                                        the Exchange Ratio for Texas Instruments
                                        Stock on the Trading Day immediately
                                        prior to the effective date of the
                                        Reorganization Event (the "New Stock
                                        Exchange Ratio"), as adjusted to the
                                        third Trading Day prior to the scheduled
                                        Maturity Date (taking into account any
                                        adjustments for distributions described
                                        under clause (3)(a) below); and

                                        (3) for any cash and any other property
                                        or securities other than Marketable
                                        Securities received in such
                                        Reorganization Event (the "Non-Stock
                                        Exchange Property"),

                                           (a) if the combined value of the
                                           amount of Non-Stock Exchange Property
                                           received per share of Texas
                                           Instruments Stock, as determined by
                                           the Calculation Agent in its sole
                                           discretion on the effective date of
                                           such Reorganization Event (the
                                           "Non-Stock Exchange Property Value"),
                                           by holders of Texas Instruments Stock
                                           is less than 25% of the Market Price
                                           of Texas Instruments Stock on the
                                           Trading Day immediately prior to the
                                           effective date of such Reorganization
                                           Event, a number of shares of Texas
                                           Instruments Stock, if applicable, and
                                           of any New Stock received in
                                           connection with such Reorganization
                                           Event, if applicable, in proportion
                                           to the relative Market Prices of
                                           Texas Instruments Stock

                                      A-14
<PAGE>

                                           and any such New Stock, and with an
                                           aggregate value equal to the
                                           Non-Stock Exchange Property Value
                                           based on such Market Prices, in each
                                           case as determined by the Calculation
                                           Agent in its sole discretion on the
                                           effective date of such Reorganization
                                           Event; and the number of such shares
                                           of Texas Instruments Stock or any New
                                           Stock determined in accordance with
                                           this clause (3)(a) shall be added at
                                           the time of such adjustment to the
                                           Exchange Ratio in subparagraph (1)
                                           above and/or the New Stock Exchange
                                           Ratio in subparagraph (2) above, as
                                           applicable, or

                                           (b) if the Non-Stock Exchange
                                           Property Value is equal to or exceeds
                                           25% of the Market Price of Texas
                                           Instruments Stock on the Trading Day
                                           immediately prior to the effective
                                           date relating to such Reorganization
                                           Event or, if Texas Instruments Stock
                                           is surrendered exclusively for
                                           Non-Stock Exchange Property (in each
                                           case, a "Reference Basket Event"), an
                                           initially equal-dollar weighted
                                           basket of three Reference Basket
                                           Stocks (as defined below) with an
                                           aggregate value on the effective date
                                           of such Reorganization Event equal to
                                           the Non-Stock Exchange Property
                                           Value. The "Reference Basket Stocks"
                                           shall be the three stocks with the
                                           largest market capitalization among
                                           the stocks that then comprise the S&P
                                           500 Index (or, if publication of such
                                           index is discontinued, any successor
                                           or substitute index selected by the
                                           Calculation Agent in its sole
                                           discretion) with the same primary
                                           Standard Industrial Classification
                                           Code ("SIC Code") as Texas
                                           Instruments; provided, however, that
                                           a Reference Basket Stock shall not
                                           include any stock that is subject to
                                           a trading restriction under the
                                           trading restriction policies of
                                           Morgan Stanley or any of its
                                           affiliates that would materially
                                           limit the ability of Morgan Stanley
                                           or any of its affiliates to hedge the
                                           SPARQS with respect to such stock (a
                                           "Hedging Restriction"); provided
                                           further that if three Reference
                                           Basket Stocks cannot be identified
                                           from the S&P 500 Index by primary SIC
                                           Code for which a Hedging Restriction
                                           does not exist, the remaining
                                           Reference Basket Stock(s) shall be
                                           selected by the Calculation Agent
                                           from the largest market
                                           capitalization stock(s) within the
                                           same Division and Major Group
                                           classification (as defined by the
                                           Office of

                                      A-15
<PAGE>

                                           Management and Budget) as the primary
                                           SIC Code for Texas Instruments. Each
                                           Reference Basket Stock shall be
                                           assigned a Basket Stock Exchange
                                           Ratio equal to the number of shares
                                           of such Reference Basket Stock with a
                                           Market Price on the effective date of
                                           such Reorganization Event equal to
                                           the product of (a) the Non-Stock
                                           Exchange Property Value, (b) the
                                           Exchange Ratio in effect for Texas
                                           Instruments Stock on the Trading Day
                                           immediately prior to the effective
                                           date of such Reorganization Event and
                                           (c) 0.3333333.

                                        Following the allocation of any
                                        Extraordinary Dividend to Reference
                                        Basket Stocks pursuant to paragraph 4
                                        above or any Reorganization Event
                                        described in this paragraph 5, the
                                        amount payable upon exchange at maturity
                                        with respect to each $       principal
                                        amount of this SPARQS shall be the sum
                                        of:

                                           (i)  if applicable, Texas Instruments
                                                Stock at the Exchange Ratio then
                                                in effect; and

                                           (ii) if applicable, for each New
                                                Stock, such New Stock at the New
                                                Stock Exchange Ratio then in
                                                effect for such New Stock; and

                                          (iii) if applicable, for each
                                                Reference Basket Stock, such
                                                Reference Basket Stock at the
                                                Basket Stock Exchange Ratio then
                                                in effect for such Reference
                                                Basket Stock.

                                        In each case, the applicable Exchange
                                        Ratio (including for this purpose, any
                                        New Stock Exchange Ratio or Basket Stock
                                        Exchange Ratio) shall be determined by
                                        the Calculation Agent on the third
                                        Trading Day prior to the scheduled
                                        Maturity Date.

                                        For purposes of paragraph 5 above, in
                                        the case of a consummated tender or
                                        exchange offer or going-private
                                        transaction involving Exchange Property
                                        of a particular type, Exchange Property
                                        shall be deemed to include the amount of
                                        cash or other property paid by the
                                        offeror in the tender or exchange offer
                                        with respect to such Exchange Property
                                        (in an amount determined on the basis of
                                        the rate of exchange in such tender or
                                        exchange offer or going-private
                                        transaction). In the event of a tender
                                        or exchange offer or a going-private
                                        transaction with respect to

                                      A-16
<PAGE>

                                        Exchange Property in which an offeree
                                        may elect to receive cash or other
                                        property, Exchange Property shall be
                                        deemed to include the kind and amount of
                                        cash and other property received by
                                        offerees who elect to receive cash.

                                        Following the occurrence of any
                                        Reorganization Event referred to in
                                        paragraphs 4 or 5 above, (i) references
                                        to "Texas Instruments Stock" under "No
                                        Fractional Shares," "Market Price" and
                                        "Market Disruption Event" shall be
                                        deemed to also refer to any New Stock or
                                        Reference Basket Stock, and (ii) all
                                        other references in this SPARQS to
                                        "Texas Instruments Stock" shall be
                                        deemed to refer to the Exchange Property
                                        into which this SPARQS is thereafter
                                        exchangeable and references to a "share"
                                        or "shares" of Texas Instruments Stock
                                        shall be deemed to refer to the
                                        applicable unit or units of such
                                        Exchange Property, including any New
                                        Stock or Reference Basket Stock, unless
                                        the context otherwise requires. The New
                                        Stock Exchange Ratio(s) or Basket Stock
                                        Exchange Ratios resulting from any
                                        Reorganization Event described in
                                        paragraph 5 above or similar adjustment
                                        under paragraph 4 above shall be subject
                                        to the adjustments set forth in
                                        paragraphs 1 through 5 hereof.

                                        If a Reference Basket Event occurs, the
                                        Issuer shall, or shall cause the
                                        Calculation Agent to, provide written
                                        notice to the Trustee at its New York
                                        office, on which notice the Trustee may
                                        conclusively rely, and to DTC of the
                                        occurrence of such Reference Basket
                                        Event and of the three Reference Basket
                                        Stocks selected as promptly as possible
                                        and in no event later than five Business
                                        Days after the date of the Reference
                                        Basket Event.

                                        No adjustment to any Exchange Ratio
                                        (including for this purpose, any New
                                        Stock Exchange Ratio or Basket Stock
                                        Exchange Ratio) shall be required unless
                                        such adjustment would require a change
                                        of at least 0.1% in the Exchange Ratio
                                        then in effect. The Exchange Ratio
                                        resulting from any of the adjustments
                                        specified above will be rounded to the
                                        nearest one hundred-thousandth, with
                                        five one-millionths rounded upward.
                                        Adjustments to the Exchange Ratios will
                                        be made up to the close of business on
                                        the third Trading Day prior to the
                                        Maturity Date.

                                      A-17
<PAGE>

                                        No adjustments to the Exchange Ratio or
                                        method of calculating the Exchange Ratio
                                        shall be made other than those specified
                                        above.

                                        The Calculation Agent shall be solely
                                        responsible for the determination and
                                        calculation of any adjustments to the
                                        Exchange Ratio, any New Stock Exchange
                                        Ratio or Basket Stock Exchange Ratio or
                                        method of calculating the Exchange
                                        Property Value and of any related
                                        determinations and calculations with
                                        respect to any distributions of stock,
                                        other securities or other property or
                                        assets (including cash) in connection
                                        with any corporate event described in
                                        paragraphs 1 through 5 above, and its
                                        determinations and calculations with
                                        respect thereto shall be conclusive in
                                        the absence of manifest error.

                                        The Calculation Agent shall provide
                                        information as to any adjustments to the
                                        Exchange Ratio or to the method of
                                        calculating the amount payable upon
                                        exchange at maturity of the SPARQS made
                                        pursuant to paragraphs 1 through 5 above
                                        upon written request by any holder of
                                        this SPARQS.

Market Disruption Event.............    "Market Disruption Event" means, with
                                        respect to Texas Instruments Stock:

                                           (i) a suspension, absence or material
                                           limitation of trading of Texas
                                           Instruments Stock on the primary
                                           market for Texas Instruments Stock
                                           for more than two hours of trading or
                                           during the one-half hour period
                                           preceding the close of the principal
                                           trading session in such market; or a
                                           breakdown or failure in the price and
                                           trade reporting systems of the
                                           primary market for Texas Instruments
                                           Stock as a result of which the
                                           reported trading prices for Texas
                                           Instruments Stock during the last
                                           one-half hour preceding the close of
                                           the principal trading session in such
                                           market are materially inaccurate; or
                                           the suspension, absence or material
                                           limitation of trading on the primary
                                           market for trading in options
                                           contracts related to Texas
                                           Instruments Stock, if available,
                                           during the one-half hour period
                                           preceding the close of the principal
                                           trading session in the applicable
                                           market, in each case as determined by
                                           the Calculation Agent in its sole
                                           discretion; and

                                      A-18
<PAGE>

                                           (ii) a determination by the
                                           Calculation Agent in its sole
                                           discretion that any event described
                                           in clause (i) above materially
                                           interfered with the ability of the
                                           Issuer or any of its affiliates to
                                           unwind or adjust all or a material
                                           portion of the hedge with respect to
                                           the SPARQS due November 30, 2004,
                                           Mandatorily Exchangeable for Shares
                                           of Common Stock of Texas Instruments
                                           Incorporated.

                                        For purposes of determining whether a
                                        Market Disruption Event has occurred:
                                        (i) a limitation on the hours or number
                                        of days of trading shall not constitute
                                        a Market Disruption Event if it results
                                        from an announced change in the regular
                                        business hours of the relevant exchange,
                                        (ii) a decision to permanently
                                        discontinue trading in the relevant
                                        options contract shall not constitute a
                                        Market Disruption Event, (iii)
                                        limitations pursuant to NYSE Rule 80A
                                        (or any applicable rule or regulation
                                        enacted or promulgated by the NYSE, any
                                        other self-regulatory organization or
                                        the Securities and Exchange Commission
                                        of scope similar to NYSE Rule 80A as
                                        determined by the Calculation Agent) on
                                        trading during significant market
                                        fluctuations shall constitute a
                                        suspension, absence or material
                                        limitation of trading, (iv) a suspension
                                        of trading in options contracts on Texas
                                        Instruments Stock by the primary
                                        securities market trading in such
                                        options, if available, by reason of (a)
                                        a price change exceeding limits set by
                                        such securities exchange or market, (b)
                                        an imbalance of orders relating to such
                                        contracts or (c) a disparity in bid and
                                        ask quotes relating to such contracts
                                        shall constitute a suspension, absence
                                        or material limitation of trading in
                                        options contracts related to Texas
                                        Instruments Stock and (v) a suspension,
                                        absence or material limitation of
                                        trading on the primary securities market
                                        on which options contracts related to
                                        Texas Instruments Stock are traded shall
                                        not include any time when such
                                        securities market is itself closed for
                                        trading under ordinary circumstances.

Alternate Exchange Calculation
in Case of an Event of Default......    In case an event of default with respect
                                        to the SPARQS shall have occurred and be
                                        continuing, the amount declared due and
                                        payable per each $        principal
                                        amount of this SPARQS upon any
                                        acceleration of this SPARQS (an "Event
                                        of Default Acceleration") shall be
                                        determined by the Calculation Agent and
                                        shall be an amount in cash equal to the
                                        lesser of (i) the product of (x) the
                                        Market

                                      A-19
<PAGE>

                                        Price of Texas Instruments Stock (and/or
                                        the value of any Exchange Property) as
                                        of the date of such acceleration and (y)
                                        the then current Exchange Ratio and (ii)
                                        the Call Price calculated as though the
                                        date of acceleration were the Call Date
                                        (but in no event less than the Call
                                        Price for the first Call Date), in each
                                        case plus accrued but unpaid interest to
                                        but excluding the date of acceleration;
                                        provided that if the Issuer has called
                                        the SPARQS in accordance with the Morgan
                                        Stanley Call Right, the amount declared
                                        due and payable upon any such
                                        acceleration shall be an amount in cash
                                        for each $      principal amount of this
                                        SPARQS equal to the Call Price for the
                                        Call Date specified in the Issuer's
                                        notice of mandatory exchange, plus
                                        accrued but unpaid interest to but
                                        excluding the date of acceleration.

Treatment of SPARQS for
United States Federal
Income Tax Purposes.................    The Issuer, by its sale of this SPARQS,
                                        and the holder of this SPARQS (and any
                                        successor holder of, or holder of a
                                        beneficial interest in, this SPARQS), by
                                        its respective purchase hereof, agree
                                        (in the absence of an administrative
                                        determination or judicial ruling to the
                                        contrary) to characterize each $
                                        principal amount of this SPARQS for all
                                        tax purposes as an investment unit
                                        consisting of (A) a terminable contract
                                        (the "Terminable Forward Contract") that
                                        (i) requires the holder of this SPARQS
                                        (subject to the Morgan Stanley Call
                                        Right) to purchase, and the Issuer to
                                        sell, for an amount equal to $
                                        (the "Forward Price"), Texas Instruments
                                        Stock at maturity and (ii) allows the
                                        Issuer, upon exercise of the Morgan
                                        Stanley Call Right, to terminate the
                                        Terminable Forward Contract by returning
                                        to such holder the Deposit (as defined
                                        below) and paying to such holder an
                                        amount of cash equal to the difference
                                        between the Deposit and the Call Price
                                        and (B) a deposit with the Issuer of a
                                        fixed amount of cash, equal to the Issue
                                        Price per each $       principal amount
                                        of this SPARQS, to secure the holder's
                                        obligation to purchase Texas Instruments
                                        Stock pursuant to the Terminable Forward
                                        Contract (the "Deposit"), which Deposit
                                        bears an annually compounded yield of
                                           % per annum.

                                      A-20
<PAGE>

         Morgan Stanley, a Delaware corporation (together with its successors
and assigns, the "Issuer"), for value received, hereby promises to pay to CEDE
& CO., or registered assignees, the amount of Texas Instruments Stock (or other
Exchange Property), as determined in accordance with the provisions set forth
under "Exchange at Maturity" above, due with respect to the principal sum of
U.S. $             (UNITED STATES DOLLARS                ) on the Maturity Date
specified above (except to the extent redeemed or repaid prior to maturity) and
to pay interest thereon at the Interest Rate per annum specified above, from and
including the Interest Accrual Date specified above until the principal hereof
is paid or duly made available for payment weekly, monthly, quarterly,
semiannually or annually in arrears as specified above as the Interest Payment
Period on each Interest Payment Date (as specified above), commencing on the
Interest Payment Date next succeeding the Interest Accrual Date specified above,
and at maturity (or on any redemption or repayment date); provided, however,
that if the Interest Accrual Date occurs between a Record Date, as defined
below, and the next succeeding Interest Payment Date, interest payments will
commence on the second Interest Payment Date succeeding the Interest Accrual
Date to the registered holder of this Note on the Record Date with respect to
such second Interest Payment Date; and provided, further, that if this Note is
subject to "Annual Interest Payments," interest payments shall be made annually
in arrears and the term "Interest Payment Date" shall be deemed to mean the
first day of March in each year.

         Interest on this Note will accrue from and including the most recent
date to which interest has been paid or duly provided for, or, if no interest
has been paid or duly provided for, from and including the Interest Accrual
Date, until but excluding the date the principal hereof has been paid or duly
made available for payment. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, subject to certain
exceptions described herein, be paid to the person in whose name this Note (or
one or more predecessor Notes) is registered at the close of business on the
date 15 calendar days prior to such Interest Payment Date (whether or not a
Business Day (as defined below)) (each such date, a "Record Date"); provided,
however, that interest payable at maturity (or any redemption or repayment
date) will be payable to the person to whom the principal hereof shall be
payable. As used herein, "Business Day" means any day, other than a Saturday or
Sunday, (a) that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to close (x) in
The City of New York or (y) if this Note is denominated in a Specified Currency
other than U.S. dollars, euro or Australian dollars, in the principal financial
center of the country of the Specified Currency, or (z) if this Note is
denominated in Australian dollars, in Sydney and (b) if this Note is
denominated in euro, that is also a day on which the Trans-European Automated
Real-time Gross Settlement Express Transfer System ("TARGET") is operating (a
"TARGET Settlement Day").

         Payment of the principal of this Note, any premium and the interest
due at maturity (or any redemption or repayment date), unless this Note is
denominated in a Specified Currency other than U.S. dollars and is to be paid
in whole or in part in such Specified Currency, will be made in immediately
available funds upon surrender of this Note at the office or agency of the
Paying Agent, as defined on the reverse hereof, maintained for that purpose in
the Borough of Manhattan, The City of New York, or at such other paying agency
as the Issuer may determine, in U.S. dollars. U.S. dollar payments of interest,
other than interest due at maturity or on any date of redemption or repayment,
will be made by U.S. dollar check mailed to the address of the person entitled
thereto as such address shall appear in the Note register. A holder of U.S.
$10,000,000 (or the equivalent in a Specified Currency) or more in aggregate
principal amount of Notes having the same Interest

                                      A-21
<PAGE>

Payment Date, the interest on which is payable in U.S. dollars, shall be
entitled to receive payments of interest, other than interest due at maturity
or on any date of redemption or repayment, by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received by
the Paying Agent in writing not less than 15 calendar days prior to the
applicable Interest Payment Date.

         If this Note is denominated in a Specified Currency other than U.S.
dollars, and the holder does not elect (in whole or in part) to receive payment
in U.S. dollars pursuant to the next succeeding paragraph, payments of
interest, principal or any premium with regard to this Note will be made by
wire transfer of immediately available funds to an account maintained by the
holder hereof with a bank located outside the United States if appropriate wire
transfer instructions have been received by the Paying Agent in writing, with
respect to payments of interest, on or prior to the fifth Business Day after
the applicable Record Date and, with respect to payments of principal or any
premium, at least ten Business Days prior to the Maturity Date or any
redemption or repayment date, as the case may be; provided that, if payment of
interest, principal or any premium with regard to this Note is payable in euro,
the account must be a euro account in a country for which the euro is the
lawful currency, provided, further, that if such wire transfer instructions are
not received, such payments will be made by check payable in such Specified
Currency mailed to the address of the person entitled thereto as such address
shall appear in the Note register; and provided, further, that payment of the
principal of this Note, any premium and the interest due at maturity (or on any
redemption or repayment date) will be made upon surrender of this Note at the
office or agency referred to in the preceding paragraph.

         If so indicated on the face hereof, the holder of this Note, if
denominated in a Specified Currency other than U.S. dollars, may elect to
receive all or a portion of payments on this Note in U.S. dollars by
transmitting a written request to the Paying Agent, on or prior to the fifth
Business Day after such Record Date or at least ten Business Days prior to the
Maturity Date or any redemption or repayment date, as the case may be. Such
election shall remain in effect unless such request is revoked by written
notice to the Paying Agent as to all or a portion of payments on this Note at
least five Business Days prior to such Record Date, for payments of interest,
or at least ten calendar days prior to the Maturity Date or any redemption or
repayment date, for payments of principal, as the case may be.

         If the holder elects to receive all or a portion of payments of
principal of, premium, if any, and interest on this Note, if denominated in a
Specified Currency other than U.S. dollars, in U.S. dollars, the Exchange Rate
Agent (as defined on the reverse hereof) will convert such payments into U.S.
dollars. In the event of such an election, payment in respect of this Note will
be based upon the exchange rate as determined by the Exchange Rate Agent based
on the highest bid quotation in The City of New York received by such Exchange
Rate Agent at approximately 11:00 a.m., New York City time, on the second
Business Day preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the Exchange Rate Agent unless
such Exchange Rate Agent is an affiliate of the Issuer) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on
such payment date in the amount of the Specified Currency payable in the
absence of such an election to such holder and at which the applicable dealer
commits to execute a contract. If such bid quotations are not available, such
payment will be made in the Specified Currency. All currency exchange costs
will be borne by the holder of this Note by deductions from such payments.

                                      A-22
<PAGE>

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

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

                                      A-23
<PAGE>

         IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed.

DATED:
                                              MORGAN STANLEY

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

TRUSTEE'S CERTIFICATE
   OF AUTHENTICATION

This  is one of the Notes referred
   to in the within-mentioned
   Senior Indenture.

JPMORGAN CHASE BANK,
   as Trustee

By:
   ---------------------------------
   Authorized Officer

                                      A-24
<PAGE>

                               REVERSE OF SECURITY

         This Note is one of a duly authorized issue of Senior Global
Medium-Term Notes, Series C, having maturities more than nine months from the
date of issue (the "Notes") of the Issuer. The Notes are issuable under an
Amended and Restated Senior Indenture, dated as of May 1, 1999, between the
Issuer and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as
Trustee (the "Trustee," which term includes any successor trustee under the
Senior Indenture) (as may be amended or supplemented from time to time, the
"Senior Indenture"), to which Senior Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities of the Issuer, the Trustee and
holders of the Notes and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Issuer has appointed JPMorgan Chase Bank at
its corporate trust office in The City of New York as the paying agent (the
"Paying Agent," which term includes any additional or successor Paying Agent
appointed by the Issuer) with respect to the Notes. The terms of individual
Notes may vary with respect to interest rates, interest rate formulas, issue
dates, maturity dates, or otherwise, all as provided in the Senior Indenture.
To the extent not inconsistent herewith, the terms of the Senior Indenture are
hereby incorporated by reference herein.

         Unless otherwise indicated on the face hereof, this Note will not be
subject to any sinking fund and, unless otherwise provided on the face hereof
in accordance with the provisions of the following two paragraphs, will not be
redeemable or subject to repayment at the option of the holder prior to
maturity.

         If so indicated on the face hereof, this Note may be redeemed in whole
or in part at the option of the Issuer on or after the Initial Redemption Date
specified on the face hereof on the terms set forth on the face hereof,
together with interest accrued and unpaid hereon to the date of redemption. If
this Note is subject to "Annual Redemption Percentage Reduction," the Initial
Redemption Percentage indicated on the face hereof will be reduced on each
anniversary of the Initial Redemption Date by the Annual Redemption Percentage
Reduction specified on the face hereof until the redemption price of this Note
is 100% of the principal amount hereof, together with interest accrued and
unpaid hereon to the date of redemption. Notice of redemption shall be mailed
to the registered holders of the Notes designated for redemption at their
addresses as the same shall appear on the Note register not less than 30 nor
more than 60 calendar days prior to the date fixed for redemption or within the
Redemption Notice Period specified on the face hereof, subject to all the
conditions and provisions of the Senior Indenture. In the event of redemption
of this Note in part only, a new Note or Notes for the amount of the unredeemed
portion hereof shall be issued in the name of the holder hereof upon the
cancellation hereof.

         If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments
of $1,000 or, if this Note is denominated in a Specified Currency other than
U.S. dollars, in increments of 1,000 units of such Specified Currency (provided
that any remaining principal amount hereof shall not be less than the minimum
authorized denomination hereof) at the option of the holder hereof at a price
equal to 100% of the principal amount to be repaid, together with interest
accrued and unpaid hereon to the date of repayment, provided that if this Note
is issued with original issue discount, this Note will be repayable on the
applicable Optional Repayment Date or Dates at

                                      A-25

<PAGE>

the price(s) specified on the face hereof. For this Note to be repaid at the
option of the holder hereof, the Paying Agent must receive at its corporate
trust office in the Borough of Manhattan, The City of New York, at least 15 but
not more than 30 calendar days prior to the date of repayment, (i) this Note
with the form entitled "Option to Elect Repayment" below duly completed or (ii)
a telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange or the National Association of Securities Dealers,
Inc. or a commercial bank or a trust company in the United States setting forth
the name of the holder of this Note, the principal amount hereof, the
certificate number of this Note or a description of this Note's tenor and
terms, the principal amount hereof to be repaid, a statement that the option to
elect repayment is being exercised thereby and a guarantee that this Note,
together with the form entitled "Option to Elect Repayment" duly completed,
will be received by the Paying Agent not later than the fifth Business Day
after the date of such telegram, telex, facsimile transmission or letter;
provided, that such telegram, telex, facsimile transmission or letter shall
only be effective if this Note and form duly completed are received by the
Paying Agent by such fifth Business Day. Exercise of such repayment option by
the holder hereof shall be irrevocable. In the event of repayment of this Note
in part only, a new Note or Notes for the amount of the unpaid portion hereof
shall be issued in the name of the holder hereof upon the cancellation hereof.

         Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or any earlier
redemption or repayment date), as the case may be. Unless otherwise provided on
the face hereof, interest payments for this Note will be computed and paid on
the basis of a 360-day year of twelve 30-day months.

         In the case where the Interest Payment Date or the Maturity Date (or
any redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest on such
payment shall accrue for the period from and after the Interest Payment Date or
the Maturity Date (or any redemption or repayment date) to such next succeeding
Business Day.

         This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured
and unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.

         This Note, and any Note or Notes issued upon transfer or exchange
hereof, is issuable only in fully registered form, without coupons, and, if
denominated in U.S. dollars, unless otherwise stated above, is issuable only in
denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess
thereof. If this Note is denominated in a Specified Currency other than U.S.
dollars, then, unless a higher minimum denomination is required by applicable
law, it is issuable only in denominations of the equivalent of U.S. $1,000
(rounded to an integral multiple of 1,000 units of such Specified Currency), or
any amount in excess thereof which is an integral multiple of 1,000 units of
such Specified Currency, as determined by reference to the noon dollar buying
rate in The City of New York for cable transfers of such Specified Currency
published by the Federal Reserve Bank of New York (the "Market Exchange Rate")
on the Business Day immediately preceding the date of issuance.

                                      A-26
<PAGE>

         The Trustee has been appointed registrar for the Notes, and the
Trustee will maintain at its office in The City of New York a register for the
registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Trustee by surrendering this Note for cancellation,
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon
the Trustee shall issue in the name of the transferee or transferees, in
exchange herefor, a new Note or Notes having identical terms and provisions and
having a like aggregate principal amount in authorized denominations, subject
to the terms and conditions set forth herein; provided, however, that the
Trustee will not be required (i) to register the transfer of or exchange any
Note that has been called for redemption in whole or in part, except the
unredeemed portion of Notes being redeemed in part, (ii) to register the
transfer of or exchange any Note if the holder thereof has exercised his right,
if any, to require the Issuer to repurchase such Note in whole or in part,
except the portion of such Note not required to be repurchased, or (iii) to
register the transfer of or exchange Notes to the extent and during the period
so provided in the Senior Indenture with respect to the redemption of Notes.
Notes are exchangeable at said office for other Notes of other authorized
denominations of equal aggregate principal amount having identical terms and
provisions. All such exchanges and transfers of Notes will be free of charge,
but the Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge in connection therewith. All Notes surrendered for
exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee and executed by the registered
holder in person or by the holder's attorney duly authorized in writing. The
date of registration of any Note delivered upon any exchange or transfer of
Notes shall be such that no gain or loss of interest results from such exchange
or transfer.

         In case this Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and this Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, the Issuer in its discretion may execute a new Note
of like tenor in exchange for this Note, but, if this Note is destroyed, lost
or stolen, only upon receipt of evidence satisfactory to the Trustee and the
Issuer that this Note was destroyed or lost or stolen and, if required, upon
receipt also of indemnity satisfactory to each of them. All expenses and
reasonable charges associated with procuring such indemnity and with the
preparation, authentication and delivery of a new Note shall be borne by the
owner of the Note mutilated, defaced, destroyed, lost or stolen.

         The Senior Indenture provides that (a) if an Event of Default (as
defined in the Senior Indenture) due to the default in payment of principal of,
premium, if any, or interest on, any series of debt securities issued under the
Senior Indenture, including the series of Senior Medium-Term Notes of which
this Note forms a part, or due to the default in the performance or breach of
any other covenant or warranty of the Issuer applicable to the debt securities
of such series but not applicable to all outstanding debt securities issued
under the Senior Indenture shall have occurred and be continuing, either the
Trustee or the holders of not less than 25% in aggregate principal amount of
the outstanding debt securities of each affected series, voting as one class,
by notice in writing to the Issuer and to the Trustee, if given by the
securityholders, may then declare the principal of all debt securities of all
such series and interest accrued thereon to be due and payable immediately and
(b) if an Event of Default due to a default in the performance of any other of
the covenants or agreements in the Senior Indenture applicable to all
outstanding debt securities issued

                                      A-27
<PAGE>

thereunder, including this Note, or due to certain events of bankruptcy,
insolvency or reorganization of the Issuer, shall have occurred and be
continuing, either the Trustee or the holders of not less than 25% in aggregate
principal amount of all outstanding debt securities issued under the Senior
Indenture, voting as one class, by notice in writing to the Issuer and to the
Trustee, if given by the securityholders, may declare the principal of all such
debt securities and interest accrued thereon to be due and payable immediately,
but upon certain conditions such declarations may be annulled and past defaults
may be waived (except a continuing default in payment of principal or premium,
if any, or interest on such debt securities) by the holders of a majority in
aggregate principal amount of the debt securities of all affected series then
outstanding.

         If the face hereof indicates that this Note is subject to "Modified
Payment upon Acceleration or Redemption," then (i) if the principal hereof is
declared to be due and payable as described in the preceding paragraph, the
amount of principal due and payable with respect to this Note shall be limited
to the aggregate principal amount hereof multiplied by the sum of the Issue
Price specified on the face hereof (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the Interest
Accrual Date to the date of declaration, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration), (ii) for the
purpose of any vote of securityholders taken pursuant to the Senior Indenture
prior to the acceleration of payment of this Note, the principal amount hereof
shall equal the amount that would be due and payable hereon, calculated as set
forth in clause (i) above, if this Note were declared to be due and payable on
the date of any such vote and (iii) for the purpose of any vote of
securityholders taken pursuant to the Senior Indenture following the
acceleration of payment of this Note, the principal amount hereof shall equal
the amount of principal due and payable with respect to this Note, calculated
as set forth in clause (i) above.

         If the face hereof indicates that this Note is subject to "Tax
Redemption and Payment of Additional Amounts," this Note may be redeemed, as a
whole, at the option of the Issuer at any time prior to maturity, upon the
giving of a notice of redemption as described below, at a redemption price
equal to 100% of the principal amount hereof, together with accrued interest to
the date fixed for redemption (except that if this Note is subject to "Modified
Payment upon Acceleration or Redemption," such redemption price would be
limited to the aggregate principal amount hereof multiplied by the sum of the
Issue Price specified on the face hereof (expressed as a percentage of the
aggregate principal amount) plus the original issue discount amortized from the
Interest Accrual Date to the date of redemption, which amortization shall be
calculated using the "interest method" (computed in accordance with generally
accepted accounting principles in effect on the date of redemption) (the
"Amortized Amount")), if the Issuer determines that, as a result of any change
in or amendment to the laws, or any regulations or rulings promulgated
thereunder, of the United States or of any political subdivision or taxing
authority thereof or therein affecting taxation, or any change in official
position regarding the application or interpretation of such laws, regulations
or rulings, which change or amendment becomes effective on or after the Initial
Offering Date hereof, the Issuer has or will become obligated to pay Additional
Amounts, as defined below, with respect to this Note as described below. Prior
to the giving of any notice of redemption pursuant to this paragraph, the
Issuer shall deliver to the Trustee (i) a certificate stating that the Issuer
is entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to the right of the Issuer to so redeem
have occurred, and (ii) an opinion of independent legal counsel satisfactory to
the Trustee to such effect based on such statement of facts; provided that no
such

                                      A-28
<PAGE>

notice of redemption shall be given earlier than 60 calendar days prior to the
earliest date on which the Issuer would be obligated to pay such Additional
Amounts if a payment in respect of this Note were then due.

         Notice of redemption will be given not less than 30 nor more than 60
calendar days prior to the date fixed for redemption or within the Redemption
Notice Period specified on the face hereof, which date and the applicable
redemption price will be specified in the notice.

         If the face hereof indicates that this Note is subject to "Tax
Redemption and Payment of Additional Amounts," the Issuer will, subject to
certain exceptions and limitations set forth below, pay such additional amounts
(the "Additional Amounts") to the holder of this Note who is a United States
Alien as may be necessary in order that every net payment of the principal of
and interest on this Note and any other amounts payable on this Note, after
withholding or deduction for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of such payment
by the United States, or any political subdivision or taxing authority thereof
or therein, will not be less than the amount provided for in this Note to be
then due and payable. The Issuer will not, however, make any payment of
Additional Amounts to any such holder who is a United States Alien for or on
account of:

         (a) any present or future tax, assessment or other governmental charge
     that would not have been so imposed but for (i) the existence of any
     present or former connection between such holder, or between a fiduciary,
     settlor, beneficiary, member or shareholder of such holder, if such holder
     is an estate, a trust, a partnership or a corporation for United States
     federal income tax purposes, and the United States, including, without
     limitation, such holder, or such fiduciary, settlor, beneficiary, member
     or shareholder, being or having been a citizen or resident thereof or
     being or having been engaged in a trade or business or present therein or
     having, or having had, a permanent establishment therein or (ii) the
     presentation by or on behalf of the holder of this Note for payment on a
     date more than 15 calendar days after the date on which such payment
     became due and payable or the date on which payment thereof is duly
     provided for, whichever occurs later;

         (b) any estate, inheritance, gift, sales, transfer, excise or personal
     property tax or any similar tax, assessment or governmental charge;

         (c) any tax, assessment or other governmental charge imposed by reason
     of such holder's past or present status as a personal holding company or
     foreign personal holding company or controlled foreign corporation or
     passive foreign investment company with respect to the United States or as
     a corporation which accumulates earnings to avoid United States federal
     income tax or as a private foundation or other tax-exempt organization or
     a bank receiving interest under Section 881(c)(3)(A) of the Internal
     Revenue Code of 1986, as amended;

         (d) any tax, assessment or other governmental charge that is payable
     otherwise than by withholding or deduction from payments on or in respect
     of this Note;

         (e) any tax, assessment or other governmental charge required to be
     withheld by any Paying Agent from any payment of principal of, or interest
     on, this Note, if such payment can be made without such withholding by any
     other Paying Agent in a city in Western Europe;

                                      A-29
<PAGE>

         (f) any tax, assessment or other governmental charge that would not
     have been imposed but for the failure to comply with certification,
     information or other reporting requirements concerning the nationality,
     residence or identity of the holder or beneficial owner of this Note, if
     such compliance is required by statute or by regulation of the United
     States or of any political subdivision or taxing authority thereof or
     therein as a precondition to relief or exemption from such tax, assessment
     or other governmental charge;

         (g) any tax, assessment or other governmental charge imposed by reason
     of such holder's past or present status as the actual or constructive owner
     of 10% or more of the total combined voting power of all classes of stock
     entitled to vote of the Issuer or as a direct or indirect subsidiary of the
     Issuer; or

         (h) any combination of items (a), (b), (c), (d), (e), (f) or (g).

In addition, the Issuer shall not be required to make any payment of Additional
Amounts (i) to any such holder where such withholding or deduction is imposed
on a payment to an individual and is required to be made pursuant to any law
implementing or complying with, or introduced in order to conform to, any
European Union Directive on the taxation of savings; or (ii) by or on behalf of
a holder who would have been able to avoid such withholding or deduction by
presenting this Note or the relevant coupon to another Paying Agent in a member
state of the European Union. Nor shall the Issuer pay Additional Amounts with
respect to any payment on this Note to a United States Alien who is a fiduciary
or partnership or other than the sole beneficial owner of such payment to the
extent such payment would be required by the laws of the United States (or any
political subdivision thereof) to be included in the income, for tax purposes,
of a beneficiary or settlor with respect to such fiduciary or a member of such
partnership or a beneficial owner who would not have been entitled to the
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the holder of this Note.

         The Senior Indenture permits the Issuer and the Trustee, with the
consent of the holders of not less than a majority in aggregate principal
amount of the debt securities of all series issued under the Senior Indenture
then outstanding and affected (voting as one class), to execute supplemental
indentures adding any provisions to or changing in any manner the rights of the
holders of each series so affected; provided that the Issuer and the Trustee
may not, without the consent of the holder of each outstanding debt security
affected thereby, (a) extend the final maturity of any such debt security, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any amount payable on redemption
thereof, or change the currency of payment thereof, or modify or amend the
provisions for conversion of any currency into any other currency, or modify or
amend the provisions for conversion or exchange of the debt security for
securities of the Issuer or other entities or for other property or the cash
value of the property (other than as provided in the antidilution provisions or
other similar adjustment provisions of the debt securities or otherwise in
accordance with the terms thereof), or impair or affect the rights of any
holder to institute suit for the payment thereof or (b) reduce the aforesaid
percentage in principal amount of debt securities the consent of the holders of
which is required for any such supplemental indenture.

                                      A-30
<PAGE>

         Except as set forth below, if the principal of, premium, if any, or
interest on this Note is payable in a Specified Currency other than U.S.
dollars and such Specified Currency is not available to the Issuer for making
payments hereon due to the imposition of exchange controls or other
circumstances beyond the control of the Issuer or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions within the international banking community,
then the Issuer will be entitled to satisfy its obligations to the holder of
this Note by making such payments in U.S. dollars on the basis of the Market
Exchange Rate on the date of such payment or, if the Market Exchange Rate is
not available on such date, as of the most recent practicable date; provided,
however, that if the euro has been substituted for such Specified Currency, the
Issuer may at its option (or shall, if so required by applicable law) without
the consent of the holder of this Note effect the payment of principal of,
premium, if any, or interest on, any Note denominated in such Specified
Currency in euro in lieu of such Specified Currency in conformity with legally
applicable measures taken pursuant to, or by virtue of, the Treaty establishing
the European Community, as amended. Any payment made under such circumstances
in U.S. dollars or euro where the required payment is in an unavailable
Specified Currency will not constitute an Event of Default. If such Market
Exchange Rate is not then available to the Issuer or is not published for a
particular Specified Currency, the Market Exchange Rate will be based on the
highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the date of such payment from three recognized foreign exchange
dealers (the "Exchange Dealers") for the purchase by the quoting Exchange
Dealer of the Specified Currency for U.S. dollars for settlement on the payment
date, in the aggregate amount of the Specified Currency payable to those
holders or beneficial owners of Notes and at which the applicable Exchange
Dealer commits to execute a contract. One of the Exchange Dealers providing
quotations may be the Exchange Rate Agent unless the Exchange Rate Agent is an
affiliate of the Issuer. If those bid quotations are not available, the
Exchange Rate Agent shall determine the market exchange rate at its sole
discretion.

         The "Exchange Rate Agent" shall be Morgan Stanley & Co. Incorporated,
unless otherwise indicated on the face hereof.

         All determinations referred to above made by, or on behalf of, the
Issuer or by, or on behalf of, the Exchange Rate Agent shall be at such
entity's sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes and coupons.

         So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in said Borough of
Manhattan for the registration, transfer and exchange as aforesaid of the
Notes. The Issuer may designate other agencies for the payment of said
principal, premium and interest at such place or places (subject to applicable
laws and regulations) as the Issuer may decide. So long as there shall be such
an agency, the Issuer shall keep the Trustee advised of the names and locations
of such agencies, if any are so designated. If any European Union Directive on
the taxation of savings comes into force, the Issuer will, to the extent
possible as a matter of law, maintain a Paying Agent in a member state of the
European Union that will not be obligated to withhold or deduct tax pursuant to
any such Directive or any law implementing or complying with, or introduced in
order to conform to, such Directive.

                                      A-31
<PAGE>

         With respect to moneys paid by the Issuer and held by the Trustee or
any Paying Agent for payment of the principal of or interest or premium, if
any, on any Notes that remain unclaimed at the end of two years after such
principal, interest or premium shall have become due and payable (whether at
maturity or upon call for redemption or otherwise), (i) the Trustee or such
Paying Agent shall notify the holders of such Notes that such moneys shall be
repaid to the Issuer and any person claiming such moneys shall thereafter look
only to the Issuer for payment thereof and (ii) such moneys shall be so repaid
to the Issuer. Upon such repayment all liability of the Trustee or such Paying
Agent with respect to such moneys shall thereupon cease, without, however,
limiting in any way any obligation that the Issuer may have to pay the
principal of or interest or premium, if any, on this Note as the same shall
become due.

         No provision of this Note or of the Senior Indenture shall alter or
impair the obligation of the Issuer, which is absolute and unconditional, to
pay the principal of, premium, if any, and interest on this Note at the time,
place, and rate, and in the coin or currency, herein prescribed unless
otherwise agreed between the Issuer and the registered holder of this Note.

         Prior to due presentment of this Note for registration of transfer,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat
the holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.

         No recourse shall be had for the payment of the principal of, premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Senior Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any
successor corporation, either directly or through the Issuer or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.

         This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.

         As used herein, the term "United States Alien" means any person who
is, for United States federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a nonresident alien fiduciary of
a foreign estate or trust or (iv) a foreign partnership one or more of the
members of which is, for United States federal income tax purposes, a
nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.

         All terms used in this Note which are defined in the Senior Indenture
and not otherwise defined herein shall have the meanings assigned to them in
the Senior Indenture.

                                      A-32
<PAGE>

                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

           TEN COM - as tenants in common
           TEN ENT - as tenants by the entireties
           JT TEN  - as joint tenants with right of survivorship and not as
                     tenants in common

         UNIF GIFT MIN ACT - ____________________  Custodian ___________________
                                   (Minor)                       (Cust)

         Under Uniform Gifts to Minors Act _____________________________________
                                                        (State)

         Additional abbreviations may also be used though not in the above list.

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

                                      A-33
<PAGE>

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto

----------------------------------------
[PLEASE INSERT SOCIAL SECURITY OR OTHER
     IDENTIFYING NUMBER OF ASSIGNEE]

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

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

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[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.

Dated: ____________________________

NOTICE:  The signature to this assignment must correspond with the name as
         written upon the face of the within Note in every particular without
         alteration or enlargement or any change whatsoever.

                                      A-34
<PAGE>

                            OPTION TO ELECT REPAYMENT

         The undersigned hereby irrevocably requests and instructs the Issuer
to repay the within Note (or portion thereof specified below) pursuant to its
terms at a price equal to the principal amount thereof, together with interest
to the Optional Repayment Date, to the undersigned at

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

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

--------------------------------------------------------------------------------
         (Please print or typewrite name and address of the undersigned)

         If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
___________; and specify the denomination or denominations (which shall not be
less than the minimum authorized denomination) of the Notes to be issued to the
holder for the portion of the within Note not being repaid (in the absence of
any such specification, one such Note will be issued for the portion not being
repaid): ___________ .

Dated:______________________________    ________________________________________
                                        NOTICE: The signature on this Option to
                                        Elect Repayment must correspond with the
                                        name as written upon the face of the
                                        within instrument in every particular
                                        without alteration or enlargement.

                                      A-35

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