Document:

POOLING AND SERVICING AGREEMENT

 

Exhibit 4.1

MORGAN STANLEY ABS CAPITAL I INC.,

as Depositor,

COUNTRYWIDE HOME LOANS SERVICING LP,

as Servicer,

CDC MORTGAGE CAPITAL INC.,

as Unaffiliated Seller,

and

DEUTSCHE BANK NATIONAL TRUST COMPANY,

as Trustee,

POOLING AND SERVICING AGREEMENT

Dated as of May 1, 2004

CDC MORTGAGE CAPITAL TRUST 2004-HE2

MORTGAGE PASS-THROUGH CERTIFICATES,

SERIES 2004-HE2

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page

	ARTICLE I DEFINITIONS
	 	 	9	 
	ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES
	 	 	53	 
	Section 2.01 Conveyance of Mortgage Loans
	 	 	53	 
	Section 2.02 Acceptance by the Trustee of the Mortgage Loans
	 	 	60	 
	Section 2.03 Representations, Warranties and Covenants of the Unaffiliated
Seller and the Servicer
	 	 	61	 
	Section 2.04 The Depositor and the Mortgage Loans
	 	 	64	 
	Section 2.05 Delivery of Opinion of Counsel in Connection with Substitutions
and Non-Qualified Mortgages
	 	 	64	 
	Section 2.06 Execution and Delivery of Certificates
	 	 	64	 
	Section 2.07 REMIC Matters
	 	 	64	 
	Section 2.08 Representations and Warranties of the Depositor
	 	 	65	 
	ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
	 	 	66	 
	Section 3.01 Servicer to Service Mortgage Loans
	 	 	66	 
	Section 3.02 Subservicing Agreements Between the Servicer and Subservicers
	 	 	68	 
	Section 3.03 Successor Subservicers
	 	 	69	 
	Section 3.04 Liability of the Servicer
	 	 	69	 
	Section 3.05 No Contractual Relationship Between Subservicers and the Trustee
	 	 	69	 
	Section 3.06 Assumption or Termination of Subservicing Agreements by Trustee
	 	 	70	 
	Section 3.07 Collection of Certain Mortgage Loan Payments; Establishment of
Certain Accounts
	 	 	70	 
	Section 3.08 Subservicing Accounts
	 	 	73	 
	Section 3.09 Collection of Taxes, Assessments and Similar Items; Escrow Accounts
	 	 	73	 
	Section 3.10 Collection Account
	 	 	74	 
	Section 3.11 Withdrawals from the Collection Account
	 	 	76	 
	Section 3.12 Investment of Funds in the Accounts
	 	 	77	 
	Section 3.13 Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage
	 	 	78	 
	Section 3.14 Enforcement of Due-On-Sale Clauses Assumption Agreements
	 	 	80	 
	Section 3.15 Realization Upon Defaulted Mortgage Loans
	 	 	81	 
	Section 3.16 Release of Mortgage Files
	 	 	82	 
	Section 3.17 Title, Conservation and Disposition of REO Property
	 	 	83	 
	Section 3.18 Notification of Adjustments
	 	 	85	 
	Section 3.19 Access to Certain Documentation and Information Regarding the
Mortgage Loans
	 	 	85	 
	Section 3.20 Documents, Records and Funds in Possession of the Servicer to be
Held for the Trustee
	 	 	85	 
	Section 3.21 Servicing Compensation
	 	 	86	 
	Section 3.22 Annual Statement as to Compliance
	 	 	86	 

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	 	 	Page

	Section 3.23 Annual Independent Public Accountants’ Servicing Statement;
Financial Statements
	 	 	87	 
	Section 3.24 Trustee to Act as Servicer
	 	 	87	 
	Section 3.25 Compensating Interest
	 	 	88	 
	Section 3.26 Credit Reporting; Gramm-Leach-Bliley Act
	 	 	88	 
	Section 3.27 Advance Facilities
	 	 	88	 
	ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE SERVICER
	 	 	90	 
	Section 4.01 Advances
	 	 	90	 
	Section 4.02 Priorities of Distribution
	 	 	91	 
	Section 4.03 Monthly Statements to Certificateholders
	 	 	99	 
	Section 4.04 Certain Matters Relating to the Determination of LIBOR
	 	 	102	 
	Section 4.05 The Certificate Insurance Policy
	 	 	103	 
	Section 4.06 Effect of Payments by the Certificate Insurer; Subrogation
	 	 	105	 
	Section 4.07 Allocation of Applied Realized Loss Amounts
	 	 	105	 
	ARTICLE V THE CERTIFICATES
	 	 	105	 
	Section 5.01 The Certificates
	 	 	105	 
	Section 5.02 Certificate Register; Registration of Transfer and Exchange of
Certificates
	 	 	106	 
	Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates
	 	 	111	 
	Section 5.04 Persons Deemed Owners
	 	 	111	 
	Section 5.05 Access to List of Certificateholders’ Names and Addresses
	 	 	112	 
	Section 5.06 Maintenance of Office or Agency
	 	 	112	 
	Section 5.07 Rights of the Certificate Insurer to Exercise Rights of Class
A-1 Certificateholders
	 	 	112	 
	Section 5.08 Trustee To Act Solely with Consent of the Certificate Insurer

	 	 	113	 
	Section 5.09 Mortgage Loans, Trust Fund and Accounts Held for Benefit of the
Certificate Insurer
	 	 	113	 
	Section 5.10 Certificate Insurer Default
	 	 	113	 
	ARTICLE VI THE DEPOSITOR AND THE SERVICER
	 	 	114	 
	Section 6.01 Respective Liabilities of the Depositor and the Servicer
	 	 	114	 
	Section 6.02 Merger or Consolidation of the Depositor or the Servicer
	 	 	114	 
	Section 6.03 Limitation on Liability of the Depositor, the Servicer and Others
	 	 	114	 
	Section 6.04 Limitation on Resignation of the Servicer
	 	 	116	 
	Section 6.05 Additional Indemnification by the Servicer; Third Party Claims
	 	 	116	 
	ARTICLE VII DEFAULT
	 	 	117	 
	Section 7.01 Events of Default
	 	 	117	 
	Section 7.02 Trustee to Act; Appointment of Successor
	 	 	119	 
	Section 7.03 Notification to Certificateholders
	 	 	120	 
	ARTICLE VIII CONCERNING THE TRUSTEE
	 	 	121	 
	Section 8.01 Duties of the Trustee
	 	 	121	 
	Section 8.02 Certain Matters Affecting the Trustee
	 	 	122	 
	Section 8.03 Trustee Not Liable for Certificates or Mortgage Loans
	 	 	123	 
	Section 8.04 Trustee May Own Certificates
	 	 	123	 

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	 	 	Page

	Section 8.05 Trustee’s Fees and Expenses
	 	 	123	 
	Section 8.06 Eligibility Requirements for the Trustee
	 	 	124	 
	Section 8.07 Resignation and Removal of the Trustee
	 	 	124	 
	Section 8.08 Successor Trustee
	 	 	125	 
	Section 8.09 Merger or Consolidation of the Trustee
	 	 	125	 
	Section 8.10 Appointment of Co-Trustee or Separate Trustee
	 	 	125	 
	Section 8.11 Tax Matters
	 	 	127	 
	Section 8.12 Periodic Filings
	 	 	129	 
	Section 8.13 Tax Classification of the Excess Reserve Fund Account
	 	 	131	 
	Section 8.14 Interest Rate Cap Agreements
	 	 	131	 
	ARTICLE IX TERMINATION
	 	 	131	 
	Section 9.01 Termination upon Liquidation or Purchase of the Mortgage Loans
	 	 	131	 
	Section 9.02 Final Distribution on the Certificates
	 	 	132	 
	Section 9.03 Additional Termination Requirements
	 	 	133	 
	ARTICLE X MISCELLANEOUS PROVISIONS
	 	 	134	 
	Section 10.01 Amendment
	 	 	134	 
	Section 10.02 Recordation of Agreement; Counterparts
	 	 	136	 
	Section 10.03 Governing Law
	 	 	136	 
	Section 10.04 Intention of Parties
	 	 	136	 
	Section 10.05 Notices
	 	 	137	 
	Section 10.06 Severability of Provisions
	 	 	138	 
	Section 10.07 Assignment
	 	 	138	 
	Section 10.08 Limitation on Rights of Certificateholders
	 	 	138	 
	Section 10.09 Inspection and Audit Rights
	 	 	139	 
	Section 10.10 Certificates Nonassessable and Fully Paid
	 	 	139	 
	Section 10.11 The Certificate Insurer Default
	 	 	139	 
	Section 10.12 Third Party Beneficiary
	 	 	140	 
	Section 10.13 Waiver of Jury Trial
	 	 	140	 

SCHEDULES

	 	 	 
	Schedule I

	 	Mortgage Loan Schedule
	Schedule IA

	 	Schedule of Countrywide Serviced Loans
	Schedule II

	 	Representations and Warranties of the Servicer
	Schedule IIA

	 	Further Representations and Warranties of the Servicer
	Schedule III

	 	Representations and Warranties as to the Unaffiliated Seller

EXHIBITS

	 	 	 
	Exhibit A

	 	Form of Class A-1, Class A-2, Class A-3, Class A-4, Class M-1, Class
M-2, Class M-3, Class B-1, Class B-2 and Class B-3 Certificate
	Exhibit B

	 	Form of Class B-4 Certificate
	Exhibit C

	 	Form of Class P Certificate
	Exhibit D

	 	Form of Class R Certificate

iii

 

	 	 	 
	Exhibit E

	 	Form of Class X Certificate
	Exhibit F

	 	Form of Initial Certification of Trustee
	Exhibit G

	 	Form of Final Certification of Trustee
	Exhibit H

	 	Form of Residual Transfer Affidavit
	Exhibit I

	 	Form of Transferor Certificate
	Exhibit J

	 	Form of Rule 144A Letter
	Exhibit K

	 	Form of Request for Release
	Exhibit L

	 	Form of Subsequent Transfer Agreement
	Exhibit M

	 	Depositor Certification
	Exhibit N

	 	Trustee/Servicer Certification to be provided to Depositor

iv

 

     THIS POOLING AND SERVICING AGREEMENT, dated as of May 1, 2004, among
MORGAN STANLEY ABS CAPITAL I INC., a Delaware corporation, as depositor (the
“Depositor”), COUNTRYWIDE HOME LOANS SERVICING LP, a Texas limited partnership,
as servicer (the “Servicer”), CDC MORTGAGE CAPITAL INC., a New York
corporation, as unaffiliated seller (the “Unaffiliated Seller”) and DEUTSCHE
BANK NATIONAL TRUST COMPANY, a national banking association, as trustee (the
“Trustee”),

WITNESSETH:

     In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:

PRELIMINARY STATEMENT

     The Trustee shall elect that three segregated asset pools within the Trust
Fund be treated for federal income tax purposes as comprising three REMICs
(each a “REMIC” or, in the alternative, the Lower Tier REMIC, the Middle Tier
REMIC and the Upper Tier REMIC, respectively). Each Class of Certificates,
other than the Class P and Class R Certificates and other than the right of
each Class of LIBOR Certificates to receive Basis Risk Carry Forward Amounts
and the right of the Class X Certificates to receive payments from the Interest
Rate Cap Agreements, represents ownership of one or more regular interests in
the Upper Tier REMIC for purposes of the REMIC Provisions. The Class P
Certificates represent beneficial ownership of the Prepayment Charges. The
Class R Certificate represents ownership of the sole class of residual interest
in each of the Lower Tier REMIC, Middle Tier REMIC and the Upper Tier REMIC for
purposes of the REMIC Provisions. Class UT-R, Class MT-R and Class LT-R
comprise the Class R Certificate. The Startup Day for each REMIC described
herein is the Closing Date. The latest possible maturity date for each regular
interest is the date referenced for such regular interest in this preliminary
statement.

     The Upper Tier REMIC shall hold as assets the several classes of
uncertificated Middle Tier Regular Interests. Each such Middle Tier Regular
Interest is hereby designated as a regular interest in the Middle Tier REMIC.
Class MT-A-1, Class MT-A-2, Class MT-A-3, Class MT-A-4, Class MT-M-1, Class
MT-M-2, Class MT-M-3, Class MT-B-1, Class MT-B-2, Class MT-B-3, and Class
MT-B-4 are hereby designated the MT Accretion Directed Classes. The Class P
Certificate represents beneficial ownership of the Prepayment Charges, which
portion of the Trust Fund shall be treated as a grantor trust.

     The Middle Tier REMIC shall hold as assets the several classes of
uncertificated Lower Tier Regular Interests. Each such Lower Tier Regular
Interest is hereby designated as a regular interest in the Lower Tier REMIC.

     The Lower Tier REMIC shall hold as assets all of the assets included in
the Trust Fund other than Prepayment Charges, the Excess Reserve Fund Account,
the Pre-Funding Accounts, the Capitalized Interest Account and the Interest
Rate Cap Agreements. The Lower Tier REMIC shall issue the following classes of
interests, and each Lower Tier Interest, other than the Class LT-R Interest, is
hereby designated as a regular interest in the Lower Tier REMIC.

1

 

	 	 	 	 	 	 	 
	Lower Tier Class	 	Tier Interest	 	Initial Tier Principal	 	 
	Designation
	 	Rate
	 	Amount
	 	Latest Possible Maturity Date

	Class LT-C
	 	(1)	 	$529,130,053.72	 	July 26, 2034
	Class LT-N
	 	(2)	 	(3)	 	July 26, 2034
	Class LT-PO
	 	(4)	 	$131,437,947.55	 	July 26, 2034
	Class LT-R
	 	(5)	 	(5)	 	July 26, 2034

	(1)	 	The interest rate with respect to any Distribution Date for this interest
is (i) during the Pre-Funding Period, an interest rate equal to a per
annum variable rate equal to the weighted average of the Adjusted Net
Mortgage Rates then in effect on the beginning of the related Due Period
on the Initial Mortgage Loans, and (ii) thereafter, a per annum variable
rate equal to the weighted average of the Adjusted Net Mortgage Rates then
in effect on the beginning of the related Due Period on the Mortgage
Loans.

	(2)	 	The interest rate with respect to any Distribution Date for the Class
LT-N is (i) during the Pre-Funding Period, all interest on the Subsequent
Mortgage Loans for such Distribution Date divided by $131,437,947.55, and
(ii) thereafter, 0.00%.

	(3)	 	The Class LT-N will have a notional principal balance equal to
$131,437,947.55.

	(4)	 	The interest rate with respect to any Distribution Date for the Class
LT-PO is (i) during the Pre-Funding Period, 0.00% and (ii) thereafter, a
per annum variable rate equal to the weighted average of the Adjusted Net
Mortgage Rates then in effect on the beginning of the related Due Period
on the Mortgage Loans.

	(5)	 	The Class LT-R is the sole class of residual interest in the Lower Tier
REMIC. The Class LT-R does not have a principal amount or an interest
rate.

     During the Pre-Funding Period, all principal payments (scheduled and
prepaid) and Realized Losses with respect to the Initial Mortgage Loans shall
be allocated to the Class LT-C, until such Class is paid in full or eliminated
by such losses. All principal payments (scheduled and prepaid) and Realized
Losses generated with respect to the Subsequent Mortgage Loans and any amounts
transferred from the Pre-Funding Accounts to the Lower Tier REMIC shall be
allocated to the Class LT-PO.

     On each Distribution Date thereafter, all principal payments (scheduled
and prepaid) and Realized Losses generated with respect to the Mortgage Loans
shall be allocated, pro rata, to the Class LT-C and Class LT-PO, until such
Classes are paid in full or eliminated by such losses.

     The Middle Tier REMIC shall issue the following classes of interests, and
each Middle Tier Interest, other than the Class MT-R Interest, is hereby
designated as a regular interest in the Middle Tier REMIC.

2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Tier	 	 	 	 	 	 
	Middle Tier Class	 	Interest	 	Initial Tier Principal	 	Corresponding	 	Latest Possible
	Designation
	 	Rate
	 	Amount
	 	Class
	 	Maturity Date

	Class MT-A-1

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class A-1
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-A-2

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class A-2
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-A-3

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class A-3
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-A-4

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class A-4
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-M-1

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class M-1
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-M-2

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class M-2
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-M-3

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class M-3
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-B-1

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class B-1
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-B-2

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class B-2
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-B-3

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class B-3
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-B-4

	 	 	(1	)	 	1/2 of the
Corresponding Class
initial principal
balance
	 	Class B-4
	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-Accrual

	 	 	(1	)	 	1/2 of the sum of
the Pool Stated
Principal Balance,
the Subordinated
Amount
	 	 	 	July 26, 2034

3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Tier	 	 	 	 	 	 
	Middle Tier Class	 	Interest	 	Initial Tier Principal	 	Corresponding	 	Latest Possible
	Designation
	 	Rate
	 	Amount
	 	Class
	 	Maturity Date

	

	 	 	 	 	 	and the
Pre-Funding Amount,
minus $100.
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-N

	 	 	(2	)	 	 	(3	)	 	 	 	July 26, 2034
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Class MT-R

	 	 	(4	)	 	 	(4	)	 	 	 	July 26, 2034

	(1)	 	The interest rate with respect to any Distribution Date for these
interests is (i) during the Pre-Funding Period, the weighted average
Pass-Through Rate of the Class LT-C and Class LT-PO, and (ii) thereafter,
a per annum variable rate equal to the weighted average of the Adjusted
Net Mortgage Rates then in effect on the beginning of the related Due
Period on the Mortgage Loans.

	(2)	 	The Class MT-N is entitled to all distributions of interest on the Class
LT-N.

	(3)	 	The Class MT-N will have a notional principal balance equal to the
notional principal balance of the Class LT-N.

	(4)	 	The Class MT-R is the sole class of residual interest in the Middle Tier
REMIC. The Class MT-R does not have a principal amount or an interest
rate.

     On each Distribution Date, 50% of the increase in the Subordinated Amount
will be payable as a reduction of the principal balances of the MT Accretion
Directed Classes and will be accrued and added to the principal balance of the
MT-Accrual Class. To this end, each MT Accretion Directed Class will be
reduced by an amount equal to 50% of any increase in the Subordinated Amount
that is attributable to a reduction in the principal balance of its
Corresponding Class. On each Distribution Date, the increase in the principal
balance of the MT-Accrual Class may not exceed interest accruals for such
Distribution Date for the MT-Accrual Class. If, with respect to any
Distribution Date, 50% of the increase in the Subordinated Amount exceeds
accrued interest on the MT-Accrual Class, the excess (accumulated with all such
excess for all prior Distribution Dates) will be added to any increase in the
Subordinated Amount for purposes of calculating accrued interest on the
MT-Accrual Class payable as principal on the MT Accretion Directed Classes on
the next Distribution Date.

     All principal payments (scheduled and prepaid) on the Mortgage Loans shall
be allocated 50% to the MT-Accrual Class and 50% to the MT Accretion Directed
Classes, until paid in full. To this end, principal payments shall be
allocated among such MT Accretion Directed Classes in an amount equal to 50% of
the principal amounts allocated to their respective Corresponding Classes.
Notwithstanding the foregoing, principal payments allocated to the Class X
Certificates that result in the reduction in the Subordinated Amount shall be
allocated to the MT-Accrual Class until paid in full. Realized Losses shall be
applied so that after all distributions have been made on each Distribution
Date (i) the principal balance of each MT Accretion Directed Class is equal to
50% of the principal balance of its Corresponding Class, and

4

 

(ii) the
MT-Accrual Class is equal to 50% of the sum of (1) the Pool Stated Principal
Balance, (2) the Subordinated Amount and (3) the Pre-Funding Amount, minus
$100.

     The Upper Tier REMIC shall issue the following classes of interests, and
each Upper Tier Interest, other than the Class UT-R Interest, is hereby
designated as a regular interest in the Upper Tier REMIC.

	 	 	 	 	 	 	 	 	 
	Upper Tier Class	 	Upper Tier	 	Initial Upper Tier	 	Corresponding	 	Latest Possible
	Designation
	 	Interest Rate
	 	Principal Amount
	 	Class
	 	Maturity Date

	Class A-1
	 	(1)	 	$301,739,000	 	Class A-1(17)	 	July 26, 2034
	Class A-2
	 	(2)	 	$125,000,000	 	Class A-2(17)	 	July 26, 2034
	Class A-3
	 	(3)	 	$59,321,000	 	Class A-3(17)	 	July 26, 2034
	Class A-4
	 	(4)	 	$49,000,000	 	Class A-4(17)	 	July 26, 2034
	Class M-1
	 	(5)	 	$40,295,000	 	Class M-1(17)	 	July 26, 2034
	Class M-2
	 	(6)	 	$36,331,000	 	Class M-2(17)	 	July 26, 2034
	Class M-3
	 	(7)	 	$9,909,000	 	Class M-3(17)	 	July 26, 2034
	Class B-1
	 	(8)	 	$9,909,000	 	Class B-1(17)	 	July 26, 2034
	Class B-2
	 	(9)	 	$8,257,000	 	Class B-2(17)	 	July 26, 2034
	Class B-3
	 	(10)	 	$7,596,000	 	Class B-3(17)	 	July 26, 2034
	Class B-4
	 	(11)	 	$4,954,000	 	Class B-4(17)	 	July 26, 2034
	Class X-1(16)
	 	(12)	 	(12)	 	Class X	 	July 26, 2034
	Class X-2(16)
	 	(13)	 	(14)	 	Class X	 	July 26, 2034
	Class UT-R
	 	(15)	 	(15)	 	Class R	 	July 26, 2034

	(1)	 	The Class A-1 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.230% or (y)
after the Optional Termination Date, 0.460%, (b) the Adjusted WAC Cap
minus the Premium Rate and (c) the Group I Loan Cap.
	 
	(2)	 	The Class A-2 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.120% or (y)
after the Optional Termination Date, 0.240%, (b) the Adjusted WAC Cap and
(c) the Group II Loan Cap.
	 
	(3)	 	The Class A-3 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.230% or (y)
after the Optional Termination Date, 0.460%, (b) the Adjusted WAC Cap and
(c) the Group II Loan Cap.

5

 

	(4)	 	The Class A-4 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional
Termination Date, 0.490% or (y) after the Optional Termination Date,
0.980%, (b) the Adjusted WAC Cap and (c) the Group II Loan Cap.
	 
	(5)	 	The Class M-1 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.530% or
(y) after the Optional Termination Date, 0.795% and (b) the Adjusted WAC
Cap.
	 
	(6)	 	The Class M-2 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 1.200% or (y)
after the Optional Termination Date, 1.800% and (b) the Adjusted WAC Cap.
	 
	(7)	 	The Class M-3 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 1.500% or (y)
after the Optional Termination Date, 2.250% and (b) the Adjusted WAC Cap.
	 
	(8)	 	The Class B-1 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 2.000% or (y)
after the Optional Termination Date, 3.000% and (b) the Adjusted WAC Cap.
	 
	(9)	 	The Class B-2 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 2.350% or (y)
after the Optional Termination Date, 3.525% and (b) the Adjusted WAC Cap.
	 
	(10)	 	The Class B-3 Certificates will bear interest during each Interest
Accrual Period at a variable rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 3.750% or (y)
after the Optional Termination Date, 5.625% and (b) the Adjusted WAC Cap.
	 
	(11)	 	The Class B-4 Certificates will bear interest during each Interest
Accrual Period at a variable rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 3.750% or (y)
after the Optional Termination Date, 5.625% and (b) the Adjusted WAC Cap.
	 
	(12)	 	The Class X has an initial principal balance of $8,257,001.27 but it will
not accrue interest on such balance but will accrue interest on a notional
principal balance. As of any Distribution Date, the Class X-1 shall have
a notional principal balance equal to the Pool Stated Principal Balance as
of the first day of the related Interest Accrual Period. With respect to
any Interest Accrual Period, the Class X-1 shall bear interest at a rate
equal to the excess, if any, of the Middle Tier WAC Cap over the product
of (i) 2 and (ii) the weighted average Pass-Through Rate of the Middle
Tier Regular Interests, where each MT Accretion Directed Class is subject
to a cap and a floor equal to the Pass-

6

 

	 	 	Through Rate on its Corresponding
Class, and the MT-Accrual Class is subject to a cap of zero. With respect
to any Distribution Date, interest that so accrues on the notional
principal balance of the Class X-1 shall be deferred in an amount equal
to any increase in the Subordinated Amount on such Distribution Date.
Such deferred interest shall not itself bear interest.
	 
	(13)	 	The Class X-2 is entitled to all distributions of interest on the Class
MT-N.
	 
	(14)	 	The Class X-2 will have a notional principal balance equal to the
notional principal balance of the Class MT-N.
	 
	(15)	 	The Class UT-R is the sole class of residual interest in the Upper Tier
REMIC. The Class UT-R does not have a principal amount or an interest
rate.
	 
	(16)	 	The Class X Certificates will represent two regular interests in the
Upper Tier REMIC, the Class X-1 and Class X-2.
	 
	(17)	 	Each of these Certificates will represent not only the ownership of the
Corresponding Class of Upper Tier Regular Interest but also the right to
receive payments from the Excess Reserve Fund Account in respect of any
Basis Risk Carry Forward Amounts. For federal income tax purposes, the
Trustee will treat a Certificateholder’s right to receive payments from
the Excess Reserve Fund Account as payments made pursuant to a notional
principal contract written by the Class X Certificateholders.

     The minimum denomination for each Class of Certificates, other than the
Class P, Class R and the Class X Certificates, will be $25,000 and integral
multiples of $1 in excess thereof. The Class P, Class R and the Class X
Certificates will each represent a 100% Percentage Interest in such class.

     Set forth below are designations of Classes of Certificates to the
categories used herein:

	 	 	 
	Book-Entry Certificates.

	 	All Classes of Certificates other than the Physical
Certificates.
	 
	 	 
	Subordinated Certificates.

	 	Class M-1, Class M-2, Class M-3, Class B-1, Class
B-2, Class B-3 and Class B-4 Certificates.
	 
	 	 
	Delay Certificates.

	 	None.
	 
	 	 
	ERISA-Restricted Certificates

	 	Class R Certificates, Class P Certificate and Class
X Certificate; any certificate with a rating below
the lowest applicable permitted rating under the
Underwriters’ Exemption.
	 
	 	 
	LIBOR Certificates.

	 	Class A-1, Class A-2, Class A-3, Class A-4 and
Subordinated Certificates.

7

 

	 	 	 
	Non-Delay Certificates.

	 	Class A-1, Class A-2, Class A-3, Class A-4, Class X
and Subordinated Certificates.
	 
	 	 
	Offered Certificates.

	 	All Classes of Certificates other than the Private
Certificates.
	 
	 	 
	Physical Certificates.

	 	Class P, Class X and Class R Certificates.
	 
	 	 
	Private Certificates.

	 	Class B-4, Class P, Class X and Class R Certificates.
	 
	 	 
	Rating Agencies.

	 	Moody’s, Fitch and Standard & Poor’s.
	 
	 	 
	Regular Certificates.

	 	All Classes of Certificates other than the Class P
and Class R Certificates.
	 
	 	 
	Residual Certificates.

	 	Class R Certificates.

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ARTICLE I

DEFINITIONS

     Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:

     60+ Day Delinquent Loan: Each Mortgage Loan with respect to which any
portion of a Scheduled Payment is, as of the last day of the prior Due Period,
two months or more past due (without giving effect to any grace period), each
Mortgage Loan in foreclosure, all REO Property and each Mortgage Loan for which
the Mortgagor has filed for bankruptcy.

     Aames: Aames Capital Corporation, a California corporation, and its
successors in interest.

     Aames Assignment Agreement: The Assignment and Recognition Agreement,
dated as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor
and Accredited, and each other Assignment and Recognition Agreement by and
among the Unaffiliated Seller, the Depositor and Accredited in connection with
any Subsequent Transfer of Accredited Mortgage Loans.

     Aames Mortgage Loan: A Mortgage Loan which was acquired from Aames by the
Unaffiliated Seller pursuant to the Aames Purchase Agreement, and which has
been acquired by the Trust Fund.

     Aames Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of June 23, 2003, as amended to date, by and between the
Unaffiliated Seller and Aames.

     Accepted Servicing Practices: With respect to any Mortgage Loan, those
mortgage servicing practices set forth in Section 3.01.

     Account: Any of the Capitalized Interest Account, the Collection Account,
the Distribution Account, any Escrow Account, the Excess Reserve Fund Account,
the Insurance Payment Account or the Pre-Funding Accounts. Each Account shall
be an Eligible Account.

     Accredited: Accredited Home Lenders, Inc., a California corporation, and
its successors in interest.

     Accredited Assignment Agreement: The Assignment and Recognition
Agreement, dated as of May 26, 2004, by and among the Unaffiliated Seller, the
Depositor and Accredited, and each other Assignment and Recognition Agreement
by and among the Unaffiliated Seller, the Depositor and Accredited in
connection with any Subsequent Transfer of Accredited Mortgage Loans.

9

 

     Accredited Mortgage Loan: A Mortgage Loan which was acquired from
Accredited by the Unaffiliated Seller pursuant to the Accredited Purchase
Agreement, and which has been acquired by the Trust Fund.

     Accredited Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of October 1, 2003, as amended to date, by and between the
Unaffiliated Seller and Accredited.

     Accrued Certificate Interest: With respect to any Distribution Date for
each Class of Certificates (other than the Class P, Class R and Class X
Certificates), the amount of interest accrued during the related Interest
Accrual Period at the applicable Pass-Through Rate on the related Class
Certificate Balance immediately prior to such Distribution Date, as reduced by
such Class’s share of Net Prepayment Interest Shortfalls and Relief Act
Shortfalls for the related Due Period allocated to such Class pursuant to
Section 4.02.

     Addition Notice: A written notice from the Unaffiliated Seller to the
Trustee, the Rating Agencies and the Certificate Insurer that the Unaffiliated
Seller desires to make a Subsequent Transfer.

     Adjustable Rate Mortgage Loan: A Mortgage Loan bearing interest at an
adjustable rate.

     Adjusted Mortgage Rate: As to each Mortgage Loan and at any time, the per
annum rate equal to the Mortgage Rate less the Servicing Fee Rate.

     Adjusted Net Mortgage Rate: As to each Mortgage Loan and at any time, the
per annum rate equal to the Mortgage Rate less the Expense Fee Rate.

     Adjusted WAC Cap: The weighted average of the Pass-Through Rates of the
Middle Tier Regular Interests (other than the Class MT-N).

     Adjustment Date: As to any Adjustable Rate Mortgage Loan, the first Due
Date on which the related Mortgage Rate adjusts as set forth in the related
Mortgage Note and each Due Date thereafter on which the Mortgage Rate adjusts
as set forth in the related Mortgage Note.

     Advances: Collectively, the P&I Advances and Servicing Advances.

     Advance Facility: As defined in Section 3.27.

     Advance Facility Trustee: As defined in Section 3.27.

     Advance Reimbursement Amount: As defined in Section 3.27.

     Advancing Person: As defined in Section 3.27.

     Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such first Person. For the purposes
of this definition, “control”

10

 

means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

     Agreement: This Pooling and Servicing Agreement and all amendments or
supplements hereto.

     Amount Held for Future Distribution: As to the Certificates on any
Distribution Date, the aggregate amount held in the Collection Account at the
close of business on the related Determination Date on account of (i) Principal
Prepayments, Insurance Proceeds, Condemnation Proceeds and Liquidation Proceeds
on the Mortgage Loans received after the end of the related Prepayment Period
and (ii) all Scheduled Payments on the Mortgage Loans due after the end of the
related Due Period.

     Applied Realized Loss Amount: With respect to any Distribution Date, the
amount, if any, by which the aggregate Class Certificate Balance of the LIBOR
Certificates after distributions of principal on such Distribution Date exceeds
the aggregate Stated Principal Balance of the Mortgage Loans for such
Distribution Date.

     Appraised Value: The value set forth in an appraisal made in connection
with the origination of the related Mortgage Loan as the value of the Mortgaged
Property.

     Assignment and Recognition Agreement: The Aames Assignment Agreement,
Accredited Assignment Agreement, the BNC Assignment Agreement, the Chapel
Mortgage Assignment Agreement, the CIT Assignment Agreement, the Encore
Assignment Agreement, the FGMC Assignment Agreement, the First Banc Assignment
Agreement, the Homeowners Assignment Agreement, the Impac Assignment Agreement,
the Lenders Direct Assignment Agreement, the Master Financial Assignment
Agreement, the Novelle Assignment Agreement, the Ownit Assignment Agreement,
the People’s Choice Assignment Agreement or the SIB Assignment Agreement, as
applicable.

     Assignment of Mortgage: An assignment of the Mortgage, notice of transfer
or equivalent instrument in recordable form (other than the assignee’s name and
recording information not yet returned from the recording office), reflecting
the sale of the Mortgage to the Trustee.

     Available Funds: With respect to any Distribution Date and the Mortgage
Loans, to the extent received by the Trustee (x) the sum of (i) the aggregate
amount of Scheduled Payments on the Mortgage Loans due on the related Due Date
(net of the related Expense Fees) and received by the Servicer on or prior to
the related Determination Date, together with any P&I Advance in respect
thereof, (ii) certain unscheduled payments in respect of the Mortgage Loans
received by the Servicer during the related Prepayment Period and remitted to
the Trustee, including all partial or full prepayments, Insurance Proceeds,
Condemnation Proceeds, Liquidation Proceeds, Substitute Adjustment Amounts and
proceeds from repurchase of those Mortgage Loans occurring during the related
Due Period at the Repurchase Price (excluding Prepayment Charges), (iii)
Compensating Interest payments from the Servicer to the Trustee in respect of
Prepayment Interest Shortfalls for that Distribution Date, (iv) for any
Distribution Date

11

 

on or prior to August 24, 2004, any funds required to be paid from the
Capitalized Interest Account to make up for any interest shortfalls on the
Initial Mortgage Loans and (v) immediately following the end of the Pre-Funding
Period, all amounts, if any, on deposit in the Pre-Funding Accounts reduced by
(y) amounts in reimbursement for Advances previously made with respect to the
Mortgage Loans and other amounts, in each case, as to which the Servicer, the
Depositor or the Trustee are entitled to be paid or reimbursed pursuant to the
Agreement.

     Average Net Proceeds: As defined in Exhibit M hereto.

     Balloon Loan: Any Mortgage Loan that provided on the date of origination
for an amortization schedule extending beyond its stated maturity date.

     Basic Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the aggregate Principal Remittance Amount for such
Distribution Date over (ii) the Excess Subordinated Amount, if any, for such
Distribution Date.

     Basis Risk Carry Forward Amount: With respect to each Class of LIBOR
Certificates, as of any Distribution Date, the sum of (A) if on such
Distribution Date the Pass-Through Rate for any Class of LIBOR Certificates is
based upon the Adjusted WAC Cap, the Group I Loan Cap or the Group II Loan Cap,
as applicable, the excess of (i) the amount of interest such Class of
Certificates would otherwise be entitled to receive on such Distribution Date
had such rate been calculated as the sum of LIBOR and the applicable
Pass-Through Margin on such Class of Certificates for such Distribution Date,
over (ii) the amount of interest payable on such Class of Certificates
calculated at the Adjusted WAC Cap, the Group I Loan Cap or the Group II Loan
Cap, as applicable, for such Distribution Date and (B) the Basis Risk Carry
Forward Amount for such Class of Certificates for all previous Distribution
Dates not previously paid, together with interest thereon at a rate equal to
the sum of LIBOR and the applicable Pass-Through Margin for such Class of
Certificates for such Distribution Date.

     Basis Risk Payment: For any Distribution Date, a payment in an amount
equal to any Basis Risk Carry Forward Amount; provided, however, that with
respect to any Distribution Date, the payment cannot exceed the amounts
otherwise available for distribution on the Class X Certificates plus any
Interest Rate Cap Payment with respect to such Distribution Date.

     Best’s: Best’s Key Rating Guide, as the same shall be amended from time
to time.

     BNC: BNC Mortgage, Inc., a Delaware corporation, and its successors in
interest.

     BNC Assignment Agreement: The Assignment and Recognition Agreement, dated
as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor and
BNC, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and BNC in connection with any Subsequent
Transfer of BNC Mortgage Loans.

     BNC Mortgage Loan: A Mortgage Loan which was acquired from BNC by the
Unaffiliated Seller pursuant to the BNC Purchase Agreements, and which has been
acquired by the Trust Fund.

12

 

          BNC Purchase Agreements: The Amended and Restated Mortgage Loan Purchase
and Warranties Agreement, dated as of February 26, 2002, as amended to date,
and the Second Amended and Restated Mortgage Loan Purchase and Warranties
Agreement, dated as of March 30, 2004, as amended to date, by and between the
Unaffiliated Seller and BNC.

          Book-Entry Certificates: As specified in the Preliminary Statement.

          Business Day: Any day other than (i) Saturday or Sunday, or (ii) a day on
which banking and savings and loan institutions, in (a) the States of New York,
Utah, New Jersey and Florida, (b) the applicable states in which the Servicer’s
servicing operations are located, or (c) the State in which the Trustee’s
operations are located, are authorized or obligated by law or executive order
to be closed.

          Cap Provider: Greenwich Capital Derivatives, Inc., a Delaware
corporation, and any successor thereto.

          Capitalized Interest Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(e) in the name of the
Trustee for the benefit of the LIBOR Certificateholders and designated
“Deutsche Bank National Trust Company, in trust for registered holders of CDC
Mortgage Capital Trust 2004-HE2, Mortgage Pass-Through Certificates, Series
2004-HE2”.

          Capitalized Interest Requirement: With respect to the Distribution Dates
occurring in June 2004, July 2004 and August 2004, the excess, if any, of (x)
the Accrued Certificate Interests for all classes of the LIBOR Certificates for
such Distribution Date over (y) all scheduled installments of interest (net of
the related Expense Fees) due on the Mortgage Loans in the related Due Period.
In no event will the Capitalized Interest Requirement be less than zero.

          Certificate: Any one of the Certificates executed by the Trustee in
substantially the forms attached hereto as exhibits.

          Certificate Balance: With respect to any Class of Certificates, other
than the Class X and Class R Certificates, at any date, the maximum dollar
amount of principal to which the Holder thereof is then entitled hereunder,
such amount being equal to the Denomination thereof minus all distributions of
principal previously made with respect thereto and in the case of any
Subordinated Certificates, reduced by any Applied Realized Loss Amounts
applicable to such Class of Subordinated Certificates; provided, however, that
immediately following the Distribution Date on which a Subsequent Recovery is
distributed, the Class Certificate Balances of any Class or Classes of
Subordinated Certificates that have been previously reduced by Applied Realized
Loss Amounts will be increased, in order of seniority, by the amount of the
Subsequent Recovery distributed on such Distribution Date (up to the amount of
Applied Realized Loss Amounts allocated to such Class or Classes). The Class X
and Class R Certificates have no Certificate Balance.

          Certificate Insurance Policy: The Financial Guaranty Insurance Policy No.
51520-N, and all endorsements thereto dated the Closing Date, issued by the
Certificate Insurer for the benefit of the Class A-1 Certificateholders.

13

 

          Certificate Insurer: Financial Security Assurance Inc., a monoline stock
insurance company organized and created under the laws of the State of New
York, and any successors thereto.

          Certificate Insurer Default: The existence and continuance of any of the
following:

          (a) the Certificate Insurer shall have failed to make a required
payment when due under the Certificate Insurance Policy;

          (b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the
New York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or

          (c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered
a final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent, or receiver for the Certificate Insurer or for
all or any material portion of its property or (ii) authorizing the
taking of possession by a custodian, trustee, agent, or receiver of the
Certificate Insurer or of all or any material portion of its property.

          Certificate Owner: With respect to a Book-Entry Certificate, the Person
who is the beneficial owner of such Book-Entry Certificate.

          Certificate Register: The register maintained pursuant to Section 5.02.

          Certificateholder or Holder: The person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in
the name of the Depositor or any Affiliate of the Depositor shall be deemed not
to be Outstanding and the Percentage Interest evidenced thereby shall not be
taken into account in determining whether the requisite amount of Percentage
Interests necessary to effect such consent has been obtained; provided,
however, that if any such Person (including the Depositor) owns 100% of the
Percentage Interests evidenced by a Class of Certificates, such Certificates
shall be deemed to be Outstanding for the purposes of any provision hereof that
requires the consent of the Holders of Certificates of a particular Class as a
condition to the taking of any action hereunder. The Trustee is entitled to
rely conclusively on a certification of the Depositor or any Affiliate of the
Depositor in determining which Certificates are registered in the name of an
Affiliate of the Depositor.

          Certification: As defined in Section 8.12(b).

          Chapel Mortgage: Chapel Mortgage Corporation, a New Jersey corporation,
and its successors in interest.

14

 

          Chapel Mortgage Assignment Agreement: The Assignment and Recognition
Agreement, dated as of May 26, 2004, by and among the Unaffiliated Seller, the
Depositor and Chapel Mortgage, and each other Assignment and Recognition
Agreement by and among the Unaffiliated Seller, the Depositor and Chapel
Mortgage in connection with any Subsequent Transfer of Chapel Mortgage Loans.

          Chapel Mortgage Loan: A Mortgage Loan which was acquired from Chapel
Mortgage by the Unaffiliated Seller pursuant to the Chapel Mortgage Purchase
Agreement, and which has been acquired by the Trust Fund.

          Chapel Mortgage Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of June 4, 2002, as amended to date, by and
between the Unaffiliated Seller and Chapel Mortgage.

          CIT: Collectively, The CIT Group/Consumer Finance, Inc., a Delaware
corporation, The CIT Group/Consumer Finance, Inc. (NY), a New York corporation,
and The CIT Group/Consumer Finance, Inc. (TN), a Delaware corporation, and
their successors in interest.

          CIT Assignment Agreement: The Assignment and Recognition Agreement, dated
as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor and
CIT, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and CIT in connection with any Subsequent
Transfer of CIT Mortgage Loans.

          CIT Mortgage Loan: A Mortgage Loan which was acquired from CIT by the
Unaffiliated Seller pursuant to the CIT Purchase Agreements, and which has been
acquired by the Trust Fund.

          CIT Purchase Agreements: The Mortgage Loan Purchase and Warranties
Agreement, dated as of October 29, 2003, as amended to date, and the Mortgage
Loan Purchase and Warranties Agreement, dated as of March 30, 2004, as amended
to date, by and between the Unaffiliated Seller and CIT.

          Class: All Certificates bearing the same class designation as set forth
in the Preliminary Statement.

          Class A Certificates: The Class A-1 Certificates and the Group II Class A
Certificates.

          Class A Principal Distribution Amount: With respect to any Distribution
Date, an amount equal to the excess of (x) the aggregate Class Certificate
Balances of the Class A Certificates immediately prior to such Distribution
Date over (y) the lesser of (A) the product of 62.00% of the Current Maximum
Amount and (B) the excess, if any, of the Current Maximum Amount over
$3,302,841.

          Class A-1 Certificates: All Certificates bearing the class designation of
“Class A-1.”

15

 

          Class A-1 Deficiency: With respect to any Distribution Date and the Class
A-1 Certificates, an amount equal to the sum of:

          (i) the Class A-1 Interest Deficit Amount; plus

          (ii) the Class A-1 Principal Parity Amount, if any, for such
Distribution Date; and

          (iii) the Class Certificate Balance of the Class A-1 Certificates to
the extent unpaid on the Final Scheduled Distribution Date (after giving
effect to any Class A-1 Principal Parity Amounts paid by the Certificate
Insurer prior to such date) or, if earlier, the date on which the final
distribution is made to the Class A-1 Certificateholders pursuant to
Article IX, in each case after giving effect to all distributions made on
such date from sources other than the Certificate Insurance Policy for
the Class A-1 Certificates.

          Class A-1 Interest Deficit Amount: With respect to any Distribution Date
and the Class A-1 Certificates, the product of (i) the Interest Deficit Amount
and (ii) a fraction, the numerator of which is the outstanding Class
Certificate Balance of the Class A-1 Certificates on such Distribution Date,
and the denominator of which is the aggregate outstanding Class Certificate
Balances of all Class A Certificates on such Distribution Date, in each case,
without taking into account any reduction of principal on such Certificates on
such Distribution Date.

          Class A-1 Principal Parity Amount: With respect to any Distribution Date,
the product of (i) the Principal Parity Deficit and (ii) a fraction, the
numerator of which is the initial Class Certificate Balance of the Class A-1
Certificates, and the denominator of which is the initial aggregate Class
Certificate Balances of all Class A Certificates.

          Class A-2 Certificates: All Certificates bearing the class designation of
“Class A-2.”

          Class A-3 Certificates: All Certificates bearing the class designation of
“Class A-3.”

          Class A-4 Certificates: All Certificates bearing the class designation of
“Class A-4.”

          Class B Interest Rate Cap Agreement: The interest rate cap agreement,
relating to the Class B Certificates, dated May 10, 2004 with the Cap Provider,
as “Party A” thereunder, and the Unaffiliated Seller, as “Party B” thereunder,
or any replacement thereof.

          Class B Interest Rate Cap Payment: On the 24th day of each month (subject
to adjustment in accordance with ISDA’s “Preceding Business Day Convention”),
with respect to the Class B Certificates, beginning on the first Distribution
Date and continuing through the immediately succeeding 34 Distribution Dates
thereafter, the amount, if any, equal to the product of (i) the excess, if any,
of the lesser of (A) one-month LIBOR rate as of the related reset date under
the Class B Interest Rate Cap Agreement for such Distribution Date over the
applicable cap strike rate set forth on Schedule A to such Interest Rate Cap
Agreement for such Distribution

16

 

Date, calculated on an “actual/360” basis; (ii) the applicable Class B
notional amount set forth on Schedule A to the Class B Interest Rate Cap
Agreement for that Distribution Date and (iii) the multiplier set forth on
Schedule A to such Interest Rate Cap Agreement.

          Class B-1 Certificates: All Certificates bearing the class designation of
“Class B-1.”

          Class B-1 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the aggregate Class Certificate Balances
of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), (B) the Class
Certificate Balance of the Class M-1 Certificates (after taking into account
the distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account the distribution of the Class M-2
Principal Distribution Amount on such Distribution Date), (D) the Class
Certificate Balance of the Class M-3 Certificates (after taking into account
the distribution of the Class M-3 Principal Distribution Amount on such
Distribution Date), and (E) the Class Certificate Balance of the Class B-1
Certificates immediately prior to such Distribution Date over (ii) the lesser
of (A) 91.20% of the Current Maximum Amount and (B) the excess, if any, of the
Current Maximum Amount over $3,302,841.

          Class B-2 Certificates: All Certificates bearing the class designation of
“Class B-2”.

          Class B-2 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the aggregate Class Certificate Balances
of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), (B) the Class
Certificate Balance of the Class M-1 Certificates (after taking into account
the distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account the distribution of the Class M-2
Principal Distribution Amount on such Distribution Date), (D) the Class
Certificate Balance of the Class M-3 Certificates (after taking into account
the distribution of the Class M-3 Principal Distribution Amount on such
Distribution Date), (E) the Class Certificate Balance of the Class B-1
Certificates (after taking into account the distribution of the Class B-1
Principal Distribution Amount on such Distribution Date), and (F) the Class
Certificate Balance of the Class B-2 Certificates immediately prior to such
Distribution Date over (ii) the lesser of (A) 93.70% of the Current Maximum
Amount and (B) the excess, if any, of the Current Maximum Amount over
$3,302,841.

          Class B-3 Certificates: All Certificates bearing the class designation of
“Class B-3”.

          Class B-3 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the aggregate Class Certificate Balances
of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), (B) the Class
Certificate Balance of the Class M-1

17

 

Certificates (after taking into account the distribution of the Class M-1
Principal Distribution Amount on such Distribution Date), (C) the Class
Certificate Balance of the Class M-2 Certificates (after taking into account
the distribution of the Class M-2 Principal Distribution Amount on such
Distribution Date), (D) the Class Certificate Balance of the Class M-3
Certificates (after taking into account the distribution of the Class M-3
Principal Distribution Amount on such Distribution Date), (E) the Class
Certificate Balance of the Class B-1 Certificates (after taking into account
the distribution of the Class B-1 Principal Distribution Amount on such
Distribution Date), (F) the Class Certificate Balance of the Class B-2
Certificates (after taking into account the distribution of the Class B-2
Principal Distribution Amount on such Distribution Date) and (G) the Class
Certificate Balance of the Class B-3 Certificates immediately prior to such
Distribution Date over (ii) the lesser of (A) 96.00% of the Current Maximum
Amount and (B) the excess, if any, of the Current Maximum Amount over
$3,302,841.

          Class B-4 Certificates: All Certificates bearing the class designation of
“Class B-4”.

          Class B-4 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the aggregate Class Certificate Balances
of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), (B) the Class
Certificate Balance of the Class M-1 Certificates (after taking into account
the distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account the distribution of the Class M-2
Principal Distribution Amount on such Distribution Date), (D) the Class
Certificate Balance of the Class M-3 Certificates (after taking into account
the distribution of the Class M-3 Principal Distribution Amount on such
Distribution Date), (E) the Class Certificate Balance of the Class B-1
Certificates (after taking into account the distribution of the Class B-1
Principal Distribution Amount on such Distribution Date), (F) the Class
Certificate Balance of the Class B-2 Certificates (after taking into account
the distribution of the Class B-2 Principal Distribution Amount on such
Distribution Date), (G) the Class Certificate Balance of the Class B-3
Certificates immediately prior to such Distribution Date and (H) the Class
Certificate Balance of the Class B-4 Certificates immediately prior to such
Distribution Date over (ii) the lesser of (A) 97.50% of the Current Maximum
Amount and (B) the excess, if any, of the Current Maximum Amount over
$3,302,841.

          Class Certificate Balance: With respect to any Class and as to any date
of determination, the aggregate of the Certificate Balances of all Certificates
of such Class as of such date.

          Class M Interest Rate Cap Agreement: The interest rate cap agreement,
relating to the Class M Certificates, dated May 10, 2004 with the Cap Provider,
as “Party A” thereunder, and the Unaffiliated Seller, as “Party B” thereunder,
or any replacement thereof.

          Class M Interest Rate Cap Payment: On the 24th day of each month(subject
to adjustment in accordance with ISDA’s “Preceding Business Day Convention”)
with respect to the Class M Certificates, beginning on the first Distribution
Date and continuing through the

18

 

immediately succeeding 34 Distribution Dates thereafter, the amount, if
any, equal to the product of (i) the excess, if any, of the lesser of (A)
one-month LIBOR rate as of the related reset date under the Class M Interest
Rate Cap Agreement and (B) the applicable cap ceiling rate set forth on
Schedule A to such Interest Rate Cap Agreement for such Distribution Date over
the applicable cap strike rate set forth on Schedule A to such Interest Rate
Cap Agreement for such Distribution Date, calculated on an “actual/360” basis;
(ii) the applicable Class M notional amount set forth on Schedule A to the
Class M Interest Rate Cap Agreement for that Distribution Date and (iii) the
multiplier set forth on Schedule A to such Interest Rate Cap Agreement;

          Class M-1 Certificates: All Certificates bearing the class designation of
“Class M-1”.

          Class M-1 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the aggregate Class Certificate Balances
of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), and (B) the
Class Certificate Balance of the Class M-1 Certificates immediately prior to
such Distribution Date over (ii) the lesser of (A) 74.20% of the Current
Maximum Amount and (B) the excess, if any, of the Current Maximum Amount over
$3,302,841.

          Class M-2 Certificates: All Certificates bearing the class designation of
“Class M-2.”

          Class M-2 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the aggregate Class Certificate Balances
of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), (B) the Class
Certificate Balance of the Class M-1 Certificates (after taking into account
the distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date), and (C) the Class Certificate Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (ii) the lesser
of (A) 85.20% of the Current Maximum Amount and (B) the excess, if any, of the
Current Maximum Amount over $3,302,841.

          Class M-3 Certificates: All Certificates bearing the class designation of
“Class M-3”.

          Class M-3 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the aggregate Class Certificate Balances
of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), (B) the Class
Certificate Balance of the Class M-1 Certificates (after taking into account
the distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account the distribution of the Class M-2
Principal Distribution Amount on such Distribution Date), and (D) the Class
Certificate Balance of the Class M-3 Certificates immediately prior to such
Distribution Date over (ii) 88.20% of the Current Maximum Amount and (B) the
excess, if any, of the Current Maximum Amount over $3,302,841.

19

 

          Class P Certificates: All Certificates bearing the class designation of
“Class P”.

          Class R Certificates: All Certificates bearing the class designation of
“Class R”.

          Class X Certificates: All Certificates bearing the class designation of
“Class X”.

          Class X Distributable Amount: On any Distribution Date, the sum of (i) as
a distribution in respect of interest, the amount of interest that has accrued
on the Class X Regular Interests and not applied as an Extra Principal
Distribution Amount on such Distribution Date, plus any such accrued interest
remaining undistributed from prior Distribution Dates, plus (ii) as a
distribution in respect of principal, any portion of the principal balance of
the Class X Regular Interest which is distributable as a Subordination
Reduction Amount, less (iii) any amounts paid as a Basis Risk Payment.

          Class X Regular Interest: The Upper Tier Regular Interest represented by
the Class X Certificates as specified and described in the Preliminary
Statement and the related footnote thereto.

          Closing Date: May 26, 2004.

          Code: The Internal Revenue Code of 1986, including any successor or
amendatory provisions.

          Collection Account: As defined in Section 3.10(a).

          Compensating Interest: For any Distribution Date, the lesser of (a) the
Prepayment Interest Shortfall, if any, for such Distribution Date, with respect
to voluntary Principal Prepayments in Full by the Mortgagor (excluding any
payments made upon liquidation of the Mortgage Loan) and (b) the Servicing Fee
payable to the Servicer for such Distribution Date.

          Condemnation Proceeds: All awards of settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation.

          Corporate Trust Office: The designated office of the Trustee in the State
of California at which at any particular time its corporate trust business with
respect to this Agreement is administered, which office at the date of the
execution of this Agreement is located at 1761 East St. Andrew Place, Santa
Ana, California 92705, Attn: Trust Administration DC04M2, facsimile no. (714)
247-6478 and which is the address to which notices to and correspondence with
the Trustee should be directed.

          Corresponding Class: The class of interests in any REMIC created under
this Agreement that correspond to the class of interests in another such REMIC
or to a Class of Certificates in the manner set out below:

20

 

	 	 	 	 	 
	Corresponding Middle Tier	 	Corresponding Upper Tier	 	Corresponding
	Class Designation
	 	Interest
	 	Certificate

	Class MT-A-1

	 	Class A-1
	 	Class A-1
	Class MT -A-2

	 	Class A-2
	 	Class A-2
	Class MT -A-3

	 	Class A-3
	 	Class A-3
	Class MT -A-4

	 	Class A-4
	 	Class A-4
	Class MT -M-1

	 	Class M-1
	 	Class M-1
	Class MT -M-2

	 	Class M-2
	 	Class M-2
	Class MT -M-3

	 	Class M-3
	 	Class M-3
	Class MT -B-1

	 	Class B-1
	 	Class B-1
	Class MT -B-2

	 	Class B-2
	 	Class B-2
	Class MT -B-3

	 	Class B-3
	 	Class B-3
	Class MT -B-4

	 	Class B-4
	 	Class B-4

          Countrywide: Countrywide Home Loans Servicing LP, a Texas limited
partnership.

          Cumulative Loss Percentage: With respect to any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred from the Cut-off Date to the last day of the
preceding calendar month less any amounts received with respect to Realized
Losses on the related Mortgage Loans subsequent to the Final Recovery
Determination being made with respect to such Mortgage Loans and the
denominator of which is the Cut-off Date Pool Principal Balance of the Mortgage
Loans.

          Cumulative Loss Trigger Event: With respect to any Distribution Date, the
event that is in effect if the aggregate amount of Realized Losses incurred
since the related Cut-off Date through the last day of the related Prepayment
Period divided by the Maximum Pool Principal Balance exceeds the applicable
percentage as follows with respect to such Distribution Date: (a) 3.25% for
the Distribution Dates occurring from June 2007 to May 2008; (b) 5.00% for the
Distribution Dates occurring from June 2008 to May 2009; (c) 6.25% for the
Distribution Dates occurring from June 2009 to May 2010; and (d) 6.75% for the
Distribution Dates occurring in June 2010 and thereafter.

          Current Maximum Amount: With respect to any Distribution Date, the sum of
(i) the aggregate of the Stated Principal Balances of the Mortgage Loans in the
Trust at such time, and (ii) with respect to each Distribution Date on or prior
to August 24, 2004, the Pre-Funding Amount immediately prior to such
Distribution Date, net of investment earnings on deposit therein.

          Custodial File: With respect to each Mortgage Loan, the file retained by
the Trustee consisting of items (i) - (viii) of Section 2.01(b).

          Cut-off Date: With respect to the Initial Mortgage Loans, May 1, 2004,
and with respect to each Subsequent Mortgage Loan, the related Subsequent
Cut-off Date.

21

 

          Cut-off Date Pool Principal Balance: The aggregate Stated Principal
Balances of all Mortgage Loans as of the Cut-off Date (after giving effect to
payments of principal due on that date, whether or not received).

          Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated
Principal Balance thereof as of the close of business on the Cut-off Date.

          Data Tape Information: The information provided by the Unaffiliated
Seller as of May 1, 2004 to the Depositor setting forth the following
information with respect to each Mortgage Loan: (1) the Mortgagor’s name; (2)
as to each Mortgage Loan, the Scheduled Principal Balance as of the Cut-off
Date; (3) the Mortgage Rate Cap; (4) the Index; (5) a code indicating whether
the Mortgaged Property is owner-occupied; (6) the type of Mortgaged Property;
(7) the first date on which the Scheduled Payment was due on the Mortgage Loan
and, if such date is not consistent with the Due Date currently in effect, such
Due Date; (8) the “paid through date” based on payments received from the
related Mortgagor; (9) the original principal amount of the Mortgage Loan; (10)
with respect to Adjustable Rate Mortgage Loans, the Maximum Mortgage Rate; (11)
the type of Mortgage Loan (i.e., Fixed Rate Mortgage Loan, Adjustable Rate
Mortgage Loan, First Lien Mortgage Loan or Second Lien Mortgage Loan); (12) a
code indicating the purpose of the loan (i.e., purchase, rate and term
refinance, equity take-out refinance); (13) a code indicating the documentation
style (i.e., full, asset verification, income verification and no
documentation); (14) the credit risk score (FICO score); (15) the loan credit
grade classification (as described in the Underwriting Guidelines); (16) with
respect to each Adjustable Rate Mortgage Loan, the Minimum Mortgage Rate; (17)
the Mortgage Rate at origination; (18) with respect to each Adjustable Rate
Mortgage Loan, the first Adjustment Date immediately following the Cut-off
Date; (19) the value of the Mortgaged Property; (20) a code indicating the type
and term of Prepayment Charges applicable to such Mortgage Loan, if any; and
(21) with respect to each Adjustable Rate Mortgage Loan, the Periodic Mortgage
Rate Cap. With respect to the Mortgage Loans in the aggregate, the Data Tape
Information shall set forth the following information, as of the Cut-off Date:
(1) the number of Mortgage Loans; (2) the current aggregate outstanding
principal balance of the Mortgage Loans; (3) the weighted average Mortgage Rate
of the Mortgage Loans; and (4) the weighted average maturity of the Mortgage
Loans.

          Debt Service Reduction: With respect to any Mortgage Loan, a reduction by
a court of competent jurisdiction in a proceeding under the United States
Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of
principal.

          Deficient Valuation: With respect to any Mortgage Loan, a valuation of
the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then- outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the United States
Bankruptcy Code.

          Definitive Certificates: Any Certificate evidenced by a Physical
Certificate and any Certificate issued in lieu of a Book-Entry Certificate
pursuant to Section 5.02(e).

22

 

          Delay Certificates: As specified in the Preliminary Statement.

          Deleted Mortgage Loan: A Mortgage Loan that is repurchased by the
Unaffiliated Seller or the related Originator, as applicable, or replaced with
a Substitute Mortgage Loan in accordance with the terms hereof and the related
Mortgage Loan Purchase Agreement.

          Delinquency Trigger Event: With respect to a Distribution Date after the
Stepdown Date, the event that is in effect if the quotient (expressed as a
percentage) of (x) the three-month rolling daily average of the Stated
Principal Balance of 60+ Day Delinquent Loans as of the last day of the related
Due Period, over (y) the Current Maximum Amount of the Mortgage Loans as of the
last day of the related Due Period exceeds 42.00% of the prior period’s Senior
Enhancement Percentage.

          Delinquent: A mortgage loan is “Delinquent” if any Scheduled Payment due
on a due date is not made by the close of business on the next scheduled due
date for that mortgage loan (including all Mortgage Loans in foreclosure,
Mortgage Loans in respect of REO Properties and Mortgage Loans for which the
related Mortgagor has declared bankruptcy). A mortgage loan is “30 days
Delinquent” if the Scheduled Payment has not been received by the close of
business on the corresponding day of the month immediately succeeding the month
in which that Scheduled Payment was due or, if there was no corresponding date
(e.g., as when a 30-day month follows a 31-day month in which the payment was
due on the 31st day of that month), then on the last day of that immediately
preceding month; and similarly for “60 days Delinquent” and “90 days
Delinquent,” etc.

          Delivery Date: With respect to the Initial Mortgage Loans, the Closing
Date; with respect to any Subsequent Mortgage Loans, the related Subsequent
Transfer Date therefor.

          Denomination: With respect to each Certificate, the amount set forth on
the face thereof as the “Initial Certificate Balance of this Certificate” or
the Percentage Interest appearing on the face thereof.

          Depositor: Morgan Stanley ABS Capital I Inc., a Delaware corporation, and
its successors in interest.

          Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is CEDE & Co., as the registered Holder of the Book-Entry
Certificates. The Depository shall at all times be a “clearing corporation” as
defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of
New York.

          Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.

          Determination Date: With respect to each Remittance Date, the Business
Day immediately preceding such Remittance Date.

23

 

          Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(d) in the name of the
Trustee for the benefit of the Certificateholders and designated “Deutsche Bank
National Trust Company, in trust for registered holders of CDC Mortgage Capital
Trust 2004-HE2, Mortgage Pass-Through Certificates, Series 2004-HE2”. Funds in
the Distribution Account shall be held in trust for the Certificateholders for
the uses and purposes set forth in this Agreement.

          Distribution Date: The 25th day of each calendar month after the initial
issuance of the Certificates, or if such day is not a Business Day, the next
succeeding Business Day, commencing in June 2004.

          Document Certification and Exception Report: The report attached to
Exhibit F hereto.

          Due Date: The day of the month on which the Scheduled Payment is due on a
Mortgage Loan, exclusive of any days of grace.

          Due Period: With respect to each Distribution Date, the period commencing
on the second day of the calendar month preceding the month in which such
Distribution Date occurs and ending on the first day of the calendar month in
which such Distribution Date occurs.

          Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
commercial paper, short-term debt obligations, demand deposits or other
short-term deposits of which are rated in one of the two highest rating
categories by each of the Rating Agencies at the time any amounts are held on
deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC (to the limits established by such corporation), the
uninsured deposits in which account are otherwise secured such that, as
evidenced by an Opinion of Counsel delivered to each Rating Agency, the
Certificateholders will have a claim with respect to the funds in such account
or a perfected first priority security interest against such collateral (which
shall be limited to Permitted Investments) securing such funds that is superior
to claims of any other depositors or creditors of the depository institution
with which such account is maintained, (iii) a trust account or accounts
maintained with the trust department of a federal or state chartered depository
institution, national banking association or trust company acting in its
fiduciary capacity, (iv) an account otherwise acceptable to each Rating Agency
or (v) an account maintained with a “qualified depository” (as such term is
defined in the related Servicing Agreement). Eligible Accounts may bear
interest.

          Eligible Institution: A federal or state chartered depository institution
or trust company, which (x) with respect to any Eligible Account, the amounts
on deposit in which will be held for less than 30 days, the commercial paper,
short-term debt obligations, or other short-term deposits of which are rated at
least “F1” by Fitch, “P-1” by Moody’s, and either “A-1+” or “A-1”, if the
amounts on deposit represent less than 20% of the initial par value of the
securities, are not intended to be used as credit enhancement and are to be
held for less than 30 days, by Standard & Poor’s (or a comparable rating if
another Rating Agency is specified by the Depositor by written notice to the
Servicer and the Trustee) or (y) with respect to any Eligible Account, the
amounts on deposit in which will be held for no more than 365 days, the
long-term

24

 

unsecured debt obligations of which are rated at least “A” by Fitch, “A”
by Standard & Poor’s and “A2” by Moody’s (or a comparable rating if another
Rating Agency is specified by the Depositor by written notice to the Servicer
and the Trustee).

          Encore: Encore Credit Corporation, a California corporation, and its
successors in interest.

          Encore Assignment Agreement: The Assignment and Recognition Agreement,
dated as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor
and Encore, and each other Assignment and Recognition Agreement by and among
the Unaffiliated Seller, the Depositor and Encore in connection with any
Subsequent Transfer of Encore Mortgage Loans.

          Encore Mortgage Loan: A Mortgage Loan which was acquired from Encore by
the Unaffiliated Seller pursuant to the Encore Purchase Agreement, and which
has been acquired by the Trust Fund.

          Encore Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of December 1, 2002, as amended to date, by and between the
Unaffiliated Seller and Encore.

          ERISA: The Employee Retirement Income Security Act of 1974, as amended.

          ERISA-Restricted Certificate: As specified in the Preliminary Statement.

          Escrow Account: The Eligible Account or Accounts established and
maintained pursuant to Section 3.09(b).

          Escrow Payments: As defined in Section 3.09(b).

          Event of Default: As defined in Section 7.01.

          Excess Reserve Fund Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Sections 3.07(b) and 3.07(c) in the name
of the Trustee for the benefit of the Holders of the Regular Certificates and
designated “Deutsche Bank National Trust Company, in trust for registered
holders of CDC Mortgage Capital Trust 2004-HE2, Mortgage Pass-Through
Certificates, Series 2004-HE2”. Funds in the Excess Reserve Fund Account shall
be held in trust for the Holders of the Regular Certificates for the uses and
purposes set forth in this Agreement. Amounts on deposit in the Excess Reserve
Fund Account shall not be invested.

          Excess Subordinated Amount: With respect to any Distribution Date, the
excess, if any, of (a) the Subordinated Amount on such Distribution Date over
(b) the Specified Subordinated Amount for such Distribution Date.

          Exchange Act: As defined in Section 8.12(a).

          Expense Fees: As to each Mortgage Loan, the sum of the Servicing Fee and
the Trustee Fee.

25

 

          Expense Fee Rate: As to each Mortgage Loan, a per annum rate equal to the
sum of the Servicing Fee Rate and the Trustee Fee Rate.

          Extra Principal Distribution Amount: As of any Distribution Date, the
lesser of (x) the related Total Monthly Excess Spread for such Distribution
Date and (y) the Subordination Deficiency for such Distribution Date.

          Fannie Mae: The Federal National Mortgage Association, or any successor
thereto.

          Fannie Mae Guides: The Fannie Mae Sellers’ Guide and the Fannie Mae
Servicers’ Guide and all amendments or additions thereto.

          FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.

          FGMC: First Guaranty Mortgage Corporation, a Virginia corporation, and
its successors in interest.

          FGMC Assignment Agreement: The Assignment and Recognition Agreement,
dated as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor
and FGMC, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and FGMC in connection with any Subsequent
Transfer of FGMC Mortgage Loans.

          FGMC Mortgage Loan: A Mortgage Loan which was acquired from FGMC by the
Unaffiliated Seller pursuant to the FGMC Purchase Agreement, and which has been
acquired by the Trust Fund.

          FGMC Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of August 1, 2003, as amended to date, by and between the
Unaffiliated Seller and FGMC.

          FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of
the Emergency Home Finance Act of 1970, as amended, or any successor thereto.

          Final Certification: A certification submitted by the Trustee in
substantially the form of Exhibit G hereto.

          Final Recovery Determination: With respect to any defaulted Mortgage Loan
or any REO Property (other than a Mortgage Loan or REO Property purchased by an
Originator as contemplated by the Assignment and Recognition Agreements), a
determination made by the Servicer that all Insurance Proceeds, Condemnation
Proceeds, Liquidation Proceeds and other payments or recoveries which the
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.

          Final Scheduled Distribution Date: The Final Scheduled Distribution Date
for each Class of Certificates is the Distribution Date in each of the
following months:

26

 

	 	 	 	 	 
	 	 	Final Scheduled
	 	 	Distribution Date

	Class A-1 Certificates
	 	July 26, 2034
	Class A-2 Certificates
	 	July 26, 2034
	Class A-3 Certificates
	 	July 26, 2034
	Class A-4 Certificates
	 	July 26, 2034
	Class M-1 Certificates
	 	July 26, 2034
	Class M-2 Certificates
	 	July 26, 2034
	Class M-3 Certificates
	 	July 26, 2034
	Class B-1 Certificates
	 	July 26, 2034
	Class B-2 Certificates
	 	July 26, 2034
	Class B-3 Certificates
	 	July 26, 2034
	Class B-4 Certificates
	 	July 26, 2034
	Class X Certificates
	 	July 26, 2034
	Class P Certificates
	 	July 26, 2034
	Class R Certificates
	 	July 26, 2034

          First Banc: First Banc Mortgage, Inc., a Missouri corporation, and its
successors in interest.

          First Banc Assignment Agreement: The Assignment and Recognition Agreement,
dated as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor
and First Banc, and each other Assignment and Recognition Agreement by and
among the Unaffiliated Seller, the Depositor and First Banc in connection with
any Subsequent Transfer of First Banc Mortgage Loans.

          First Banc Mortgage Loan: A Mortgage Loan which was acquired from First
Banc by the Unaffiliated Seller pursuant to the First Banc Purchase Agreement,
and which has been acquired by the Trust Fund.

          First Banc Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of April 1, 2003, as amended to date, by and between the
Unaffiliated Seller and First Banc.

          First Lien Mortgage Loan: A Mortgage Loan secured by a first lien
Mortgage on the related Mortgaged Property.

          Fitch: Fitch, Inc. If Fitch is designated as a Rating Agency in the
Preliminary Statement, for purposes of Section 10.05(b) the address for notices
to Fitch shall be Fitch, Inc., One State St. Plaza, New York, New York 10004,
Attention: Residential Mortgage Surveillance Group - CDC Mortgage Capital
Trust 2004-HE2, or such other address as Fitch may hereafter furnish to the
Depositor and the Servicer.

          Fixed Rate Mortgage Loan: A Mortgage Loan bearing interest at a fixed
rate.

27

 

          Floor Amount: An amount equal to the product of (x) 0.50% and (y) the
Maximum Pool Principal Balance.

          Gross Margin: With respect to each Adjustable Rate Mortgage Loan, the
fixed percentage amount set forth in the related Mortgage Note to be added to
the applicable Index to determine the Mortgage Rate.

          Group I Allocation Percentage: With respect to any Distribution Date, the
percentage equivalent of a fraction, (i) the numerator of which is the Group I
Principal Remittance Amount for such Distribution Date and (ii) the denominator
of which is the Principal Remittance Amount for such Distribution Date.

          Group I Initial Pre-Funded Amount: $73,603,137.76.

          Group I Interest Remittance Amount: With respect to any Distribution
Date, the portion of the Interest Remittance Amount that was collected or
advanced on the Group I Mortgage Loans.

          Group I Loan Cap: The per annum rate equal to the weighted average gross
rate of the Group I Mortgage Loans then in effect on the beginning of the
related Due Period, less the applicable Expense Fee Rate and further reduced by
the Premium Rate in respect of the Class A-1 Certificates.

          Group I Mortgage Loans: The Mortgage Loans allocated to Group I which
primarily support the Class A-1 Certificates, as initially set forth on
Schedule I hereto.

          Group I Pre-Funding Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(f) in the name of the
Trustee for the benefit of the Certificateholders, and designated “Deutsche
Bank National Trust Company, in trust for registered holders of CDC Mortgage
Capital Trust 2004-HE2, Mortgage Pass-Through Certificates, Series 2004-HE2,”
the funds of which, during the Pre-Funding Period, shall be applied solely to
the purchase of Group I Subsequent Mortgage Loans.

          Group I Principal Remittance Amount: With respect to any Distribution
Date, that portion of the Principal Remittance Amount for such Distribution
Date that was collected or advanced on the Group I Mortgage Loans.

          Group I Subsequent Mortgage Loans: The Mortgage Loans hereafter
transferred and assigned to the Trust Fund and allocated to Group I pursuant to
Section 2.01(c), each of which shall have been purchased by the Unaffiliated
Seller under a Mortgage Loan Purchase Agreement.

          Group II Allocation Percentage: With respect to any Distribution Date,
the percentage equivalent of a fraction, (i) the numerator of which is the
Group II Principal Remittance Amount for such Distribution Date and (ii) the
denominator of which is the Principal Remittance Amount for such Distribution
Date.

28

 

          Group II Class A Certificates: The Class A-2, Class A-3 and Class A-4
Certificates.

          Group II Class A Interest Rate Cap Agreement: The interest rate cap
agreement, relating to the Group II Class A Certificates, dated May 10, 2004
with the Cap Provider, as “Party A” thereunder, and the Unaffiliated Seller, as
“Party B” thereunder, or any replacement thereof.

          Group II Class A Interest Rate Cap Payment: On the 24th day of each month
(subject to adjustment in accordance with ISDA’s “Preceding Business Day
Convention”). With respect to the Class A-2, Class A-3 and Class A-4
Certificates, beginning on the first Distribution Date and continuing through
the immediately succeeding 32 Distribution Dates thereafter, the amount, if
any, equal to the product of (i) the excess, if any, of the lesser of (A)
one-month LIBOR rate as of the related reset date under the Class A-2, Class
A-3 and Class A-4 Interest Rate Cap Agreement and (B) the applicable cap
ceiling rate set forth on Schedule A to such Interest Rate Cap Agreement for
such Distribution Date over the applicable cap strike rate set forth on
Schedule A to such Interest Rate Cap Agreement for such Distribution Date,
calculated on an “actual/360” basis, (ii) the applicable Class A-2 and Class
A-3 notional amount set forth on Schedule A to the Class A-2, Class A-3 and
Class A-4 Interest Rate Cap Agreement for that Distribution Date and (iii) the
multiplier set forth on Schedule A to such Interest Rate Cap Agreement.

          Group II Initial Pre-Funded Amount: $57,834,809.51.

          Group II Interest Remittance Amount: With respect to any Distribution
Date, the portion of the Interest Remittance Amount that was collected or
advanced on the Group II Mortgage Loans.

          Group II Loan Cap: The per annum rate equal to the weighted average gross
rate of the Group II Mortgage Loans then in effect on the beginning of the
related Due Period, less the applicable Expense Fee Rate.

          Group II Mortgage Loans: The Mortgage Loans allocated to Group II which
primarily support the Group II Class A Certificates, as initially set forth on
Schedule I hereto.

          Group II Pre-Funding Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.07(f) in the name of the
Trustee for the benefit of the Certificateholders, and designated “Deutsche
Bank National Trust Company, in trust for registered holders of CDC Mortgage
Capital Trust 2004-HE2, Mortgage Pass-Through Certificates, Series 2004-HE2,”
the funds of which, during the Pre-Funding Period, shall be applied solely to
the purchase of Group II Subsequent Mortgage Loans.

          Group II Principal Remittance Amount: With respect to any Distribution
Date, that portion of the Principal Remittance Amount for such Distribution
Date that was collected or advanced on the Group II Mortgage Loans.

          Group II Subsequent Mortgage Loans: The Mortgage Loans hereafter
transferred and assigned to the Trust Fund and allocated to Group II pursuant
to Section 2.01(c), each of

29

 

which shall have been purchased by the Unaffiliated Seller under a
Mortgage Loan Purchase Agreement.

          High Cost Loan: A Mortgage Loan classified as (a) a “high cost” loan
under the Home Ownership and Equity Protection Act of 1994 or (b) a “high
cost,” “threshold,” “covered”, “predatory” or similar loan under any other
applicable state, federal or local law.

          Homeowners: Homeowners Loan Corp., a Delaware corporation, and its
successors in interest.

          Homeowners Assignment Agreement: The Assignment and Recognition
Agreement, dated as of May 26, 2004, by and among the Unaffiliated Seller, the
Depositor and Homeowners, and each other Assignment and Recognition Agreement
by and among the Unaffiliated Seller, the Depositor and Homeowners in
connection with any Subsequent Transfer of Homeowners Mortgage Loans.

          Homeowners Mortgage Loan: A Mortgage Loan which was acquired from
Homeowners by the Unaffiliated Seller pursuant to the Homeowners Purchase
Agreement, and which has been acquired by the Trust Fund.

          Homeowners Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of February 1, 2004, as amended to date, by and between the
Unaffiliated Seller and Homeowners.

          I&I Payments: Payments due and owing under the Insurance and Indemnity
Agreement.

          Impac: Impac Funding Corporation, a California corporation, and its
successors in interest.

          Impac Assignment Agreement: The Assignment and Recognition Agreement,
dated as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor
and Impac, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and Impac in connection with any Subsequent
Transfer of Impac Mortgage Loans.

          Impac Mortgage Loan: A Mortgage Loan which was acquired from Impac by the
Unaffiliated Seller pursuant to the Impac Purchase Agreement, and which has
been acquired by the Trust Fund.

          Impac Purchase Agreement: The Amended and Restated Mortgage Loan Purchase
and Warranties Agreement, dated as of January 29, 2003, as amended to date, by
and between the Unaffiliated Seller and Impac.

          Index: As to each Adjustable Rate Mortgage Loan, the index from time to
time in effect for the adjustment of the Mortgage Rate set forth as such on the
related Mortgage Note.

          Initial Cut-off Date: May 1, 2004.

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          Initial Mortgage Loans: The Mortgage Loans delivered by the Depositor on
the Startup Date.

          Initial Pre-Funded Amount: The sum of the Group I Initial Pre-Funded
Amount and the Group II Initial Pre-Funded Amount.

          Insurance and Indemnity Agreement: The Insurance and Indemnity Agreement
dated as of May 1, 2004 among the Certificate Insurer, the Servicer and the
Unaffiliated Seller, as such agreement may be amended or supplemented in
accordance with the provisions thereof.

          Insurance Payment Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.05(c) in the name of the
Trustee for the benefit of the Class A-1 Certificateholders and the Certificate
Insurer, and designated “Deutsche Bank National Trust Company, in trust for
Financial Security Assurance Inc. and the registered holders of CDC Mortgage
Capital Trust 2004-HE2, Mortgage Pass-Through Certificates, Series 2004-HE2.”

          Insurance Policy: With respect to any Mortgage Loan included in the Trust
Fund, any insurance policy, including all riders and endorsements thereto in
effect, including any replacement policy or policies for any Insurance
Policies.

          Insurance Proceeds: With respect to each Mortgage Loan, proceeds of
insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.

          Insured Payment: With respect to any Distribution Date, the amount of the
Class A-1 Deficiency for that Distribution Date.

          Interest Accrual Period: With respect to any Distribution Date, the
period beginning with the immediately preceding Distribution Date (or in the
case of the first Distribution Date, the period from and including the Closing
Date to but excluding such first Distribution Date) and ending on the day
immediately preceding the current Distribution Date (on an actual/360 day count
basis).

          Interest Deficit Amount: With respect to any Distribution Date, the
excess of (i) the aggregate Accrued Certificate Interest for all Classes of the
Class A Certificates on such Distribution Date, over (ii) an amount of
Available Funds allocated to pay such aggregate Accrued Certificate Interest
pursuant to Section 4.02(a)(i)(B).

          Interest Rate Cap Agreement: The Group II Class A Interest Rate Cap
Agreement, the Class M Interest Rate Cap Agreement and/or the Class B Interest
Rate Cap Agreement, as applicable.

          Interest Rate Cap Payment: The Group II Class A Interest Rate Cap
Payment, the Class M Interest Rate Cap Payment and/or the Class B Interest Rate
Cap Payment, as applicable.

          Interest Remittance Amount: With respect to any Distribution Date, the
sum of (a) the sum, without duplication, of the following amounts received by
the Trustee from the Servicer on the related Remittance Date:

31

 

          (i) all installments of interest due on the Mortgage Loans during
the related Prepayment Period and received or advanced by the Servicer on
or prior to the related Remittance Date;

          (ii) Compensating Interest paid by the Servicer on such Remittance
Date;

          (iii) the interest component of all Substitution Adjustment Amounts
and Repurchase Prices received by the Servicer during the related
Prepayment Period;

          (iv) the interest component of all Condemnation Proceeds, Insurance
Proceeds and Liquidation Proceeds received by the Servicer during the
related Prepayment Period (in each case, net (but not to be reduced below
zero) of unreimbursed expenses incurred in connection with a liquidation
or foreclosure and unreimbursed Advances, if any); and

          (v) the interest component of the proceeds of any termination of the
Trust Fund;

reduced by the Servicing Fee for the related Prepayment Period, together with
amounts in reimbursement for Advances previously made with respect to the
Mortgage Loans and other amounts as to which the Servicer is entitled to be
reimbursed pursuant to the Agreement; and

(b) the Capitalized Interest Requirement, if any, deposited into the
Distribution Account on such Distribution Date.

          Investment Account: As defined in Section 3.12(a).

          Investor: With respect to each MERS Designated Mortgage Loan, the Person
named on the MERS System as the investor pursuant to the MERS Procedures
Manual.

          Late Collections: With respect to any Mortgage Loan and any Due Period,
all amounts received subsequent to the Determination Date immediately following
such Due Period, whether as late payments of Scheduled Payments or as Insurance
Proceeds, Condemnation Proceeds, Liquidation Proceeds or otherwise, which
represent late payments or collections of principal and/or interest due
(without regard to any acceleration of payments under the related Mortgage and
Mortgage Note) but delinquent for such Due Period and not previously recovered.

          Late Payment Rate: Has the meaning ascribed thereto in the Insurance and
Indemnity Agreement.

          Lenders Direct: Lenders Direct Capital Corporation, a California
corporation, and its successors in interest.

          Lenders Direct Assignment Agreement: The Assignment and Recognition
Agreement, dated as of May 26, 2004, by and among the Unaffiliated Seller, the
Depositor and Lenders Direct, and each other Assignment and Recognition
Agreement by and among the Unaffiliated Seller, the Depositor and Lenders
Direct in connection with any Subsequent Transfer of Lenders Mortgage Loans.

32

 

          Lenders Direct Mortgage Loan: A Mortgage Loan which was acquired from
Lenders Direct by the Unaffiliated Seller pursuant to the Lenders Direct
Purchase Agreement, and which has been acquired by the Trust Fund.

          Lenders Direct Purchase Agreement: The Amended and Restated Mortgage Loan
Purchase and Warranties Agreement, dated as of October 1, 2003, as amended to
date, by and between the Unaffiliated Seller and Lenders Direct.

          LIBOR: With respect to any Interest Accrual Period for the LIBOR
Certificates, the rate determined by the Trustee on the related LIBOR
Determination Date on the basis of the offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the rates at
which one-month U.S. dollar deposits are offered by the Reference Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the
London interbank market. In such event, the Trustee will request the principal
London office of each of the Reference Banks to provide a quotation of its
rate. If at least two such quotations are provided, the rate for that date
will be the arithmetic mean of the quotations (rounded upwards if necessary to
the nearest whole multiple of 1/16%). If fewer than two quotations are
provided as requested, the rate for that date will be the arithmetic mean of
the rates quoted by major banks in New York City, selected by the Trustee,
after consultation with the Depositor, at approximately 11:00 a.m. (New York
City time) on such date for one-month U.S. dollar loan to leading European
banks.

          LIBOR Certificates: As specified in the Preliminary Statement.

          LIBOR Determination Date: With respect to any Interest Accrual Period
(other than the initial Interest Accrual Period) for the LIBOR Certificates,
the second London Business Day preceding the commencement of such Interest
Accrual Period.

          Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in
the calendar month preceding the month of such Distribution Date and as to
which the Servicer has certified (in accordance with this Agreement) that it
has received all amounts it expects to receive in connection with the
liquidation of such Mortgage Loan including the final disposition of an REO
Property.

          Liquidation Event: With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from coverage under this Agreement by reason of its being
purchased, sold or replaced pursuant to or as contemplated by this Agreement.
With respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from coverage under this Agreement by reason of its being
purchased pursuant to this Agreement.

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          Liquidation Proceeds: Cash received in connection with the liquidation of
a Liquidated Mortgage Loan, whether through trustee’s sale, foreclosure sale or
otherwise, including any Subsequent Recoveries.

          Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the ratio
(expressed as a percentage) of the original outstanding principal amount of the
Mortgage Loan as of the Cut-off Date (unless otherwise indicated), to the
lesser of (a) the Appraised Value of the Mortgaged Property at origination, and
(b) if the Mortgage Loan was made to finance the acquisition of the related
Mortgaged Property, the purchase price of the Mortgaged Property.

          London Business Day: Any day on which dealings in deposits of United
States dollars are transacted in the London interbank market.

          Lower Tier Regular Interest: As described in the Preliminary Statement.

          Lower Tier REMIC: As described in the Preliminary Statement

          Master Financial: Master Financial, Inc., a California corporation, and
its successors in interest.

          Master Financial Assignment Agreement: The Assignment and Recognition
Agreement, dated as of May 26, 2004, by and among the Unaffiliated Seller, the
Depositor and Master Financial, and each other Assignment and Recognition
Agreement by and among the Unaffiliated Seller, the Depositor and Master
Financial in connection with any Subsequent Transfer of Master Financial
Mortgage Loans.

          Master Financial Mortgage Loan: A Mortgage Loan which was acquired from
Master Financial by the Unaffiliated Seller pursuant to the Master Financial
Purchase Agreement, and which has been acquired by the Trust Fund.

          Master Financial Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of June 1, 2003, as amended to date, by and
between the Unaffiliated Seller and Master Financial.

          Maximum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, a rate that (i) is set forth on the Data Tape Information and in the
related Mortgage Note and (ii) is the maximum interest rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be increased during the
lifetime of such Adjustable Rate Mortgage Loan.

          Maximum Pool Principal Balance: The aggregate Stated Principal Balances
of all Initial Mortgage Loans as of the Initial Cut-off Date plus the Initial
Pre-Funded Amount.

          MERS: Mortgage Electronic Registration System, Inc.

          MERS Designated Mortgage Loan: Mortgage Loans for which (a) the
Originators have designated or will designate MERS as, and have taken or will
take such action as is necessary to cause MERS to be, the mortgagee of record,
as nominee for the Originators, in

34

 

accordance with the MERS Procedure Manual and (b) the Originators have
designated or will designate the Trust as the Investor on the MERS® System.

          MERS Procedures Manual: The MERS Procedures Manual, as it may be amended,
supplemented or otherwise modified from time to time.

          MERS® System: MERS mortgage electronic registry system, as more
particularly described in the MERS Procedures Manual.

          Middle Tier Regular Interest: As described in the Preliminary Statement.

          Middle Tier REMIC: As described in the Preliminary Statement.

          Middle Tier WAC Cap: The weighted average of the Pass-Through Rates of
the Middle Tier Regular Interests (other than the Class MT-N) minus, in the
case of the Class MT-A-1 Interest, two times the Premium Rate.

          Minimum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, a rate that (i) is set forth on the Data Tape Information and in the
related Mortgage Note and (ii) is the minimum interest rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be decreased during the
lifetime of such Adjustable Rate Mortgage Loan.

          Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.03.

          Moody’s: Moody’s Investors Service, Inc. If Moody’s is designated as a
Rating Agency in the Preliminary Statement, for purposes of Section 10.05(b)
the address for notices to Moody’s shall be Moody’s Investors Service, Inc., 99
Church Street, New York, New York 10007, Attention: Residential Mortgage
Pass-Through Group, or such other address as Moody’s may hereafter furnish to
the Depositor and the Servicer.

          Mortgage: The mortgage, deed of trust or other instrument identified on
the Mortgage Loan Schedule as securing a Mortgage Note.

          Mortgage File: The items pertaining to a particular Mortgage Loan
contained in either the Servicing File or Custodial File.

          Mortgage Loan Purchase Agreement: The Aames Purchase Agreement, the
Accredited Purchase Agreement, the BNC Purchase Agreement, the CIT Mortgage
Purchase Agreement, the Chapel Mortgage Purchase Agreement, the Encore Purchase
Agreement, the FGMC Purchase Agreement, the First Banc Purchase Agreement, the
Homeowners Purchase Agreement, the Impac Purchase Agreement, the Lenders Direct
Purchase Agreement, the Master Financial Purchase Agreement, the Novelle
Purchase Agreement, the Ownit Purchase Agreement, the People’s Choice Purchase
Agreement or the SIB Purchase Agreement, as applicable.

          Mortgage Loan Schedule: A schedule of Mortgage Loans annexed hereto as
Schedule I, such schedule setting forth the following information with respect
to each Mortgage

35

 

Loan: (1) the Originator’s Mortgage Loan number; (2) the city, state and
zip code of the Mortgaged Property; (3) a code indicating whether the Mortgaged
Property is a single family residence, two-family residence, three-family
residence, four-family residence, PUD or condominium; (4) the current Mortgage
Rate; (5) the current net Mortgage Rate; (6) the current Scheduled Payment; (7)
with respect to each Adjustable Rate Mortgage Loan, the Gross Margin; (8) the
original term to maturity; (9) the scheduled maturity date; (10) the principal
balance of the Mortgage Loan as of the Cut-off Date after deduction of payments
of principal due on or before the Cut-off Date whether or not collected; (11)
the Loan-to-Value Ratio; (12) the next Interest Rate Adjustment Date; (13) with
respect to each Adjustable Rate Mortgage Loan, the lifetime Mortgage Interest
Rate Cap; (14) whether the Mortgage Loan is convertible or not; (15) a code
indicating the mortgage guaranty insurance company; (16) the Servicing Fee;
(17) the identity of the related Originator of such Mortgage Loan; (18) the
Mortgagor’s name; (19) the “paid-through” date (based on payments received from
the related Mortgagor) as of the Cut-off Date; (20) the Servicing Transfer
Date; (21) a Code indicating whether the Mortgage Loan is a Group I Mortgage
Loan or Group II Mortgage Loan; (22) a Code indicating whether the Mortgage
Loan has been 30 days Delinquent since the applicable Servicing Transfer Date;
and (23) whether such Mortgage Loan provides for a Prepayment Charge as well as
the term and amount of such Prepayment Charge, if any.

          Mortgage Loans: An individual Mortgage Loan which is the subject of this
Agreement, each Mortgage Loan originally sold and subject to this Agreement
being identified on the Mortgage Loan Schedule, which Mortgage Loan includes,
without limitation, the Mortgage File, the Scheduled Payments, Principal
Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds,
REO Disposition proceeds, Prepayment Charges, and all other rights, benefits,
proceeds and obligations arising from or in connection with such Mortgage Loan,
excluding replaced or repurchased Mortgage Loans. As applicable, “Mortgage
Loan” shall be deemed to refer to REO Property.

          Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor under a Mortgage Loan.

          Mortgage Rate: The annual rate of interest borne on a Mortgage Note,
which shall be adjusted from time to time with respect to Adjustable Rate
Mortgage Loans.

          Mortgage Rate Caps: With respect to an Adjustable Rate Mortgage Loan, the
Periodic Mortgage Rate Cap, the Maximum Mortgage Rate, and the Minimum Mortgage
Rate for such Mortgage Loan.

          Mortgaged Property: With respect to each Mortgage Loan, the real property
(or leasehold estate, if applicable) identified on the Mortgage Loan Schedule
as securing repayment of the debt evidenced by the related Mortgage Note.

          Mortgagor: The obligor(s) on a Mortgage Note.

          Net Monthly Excess Cash Flow: For any Distribution Date the amount
remaining for distribution pursuant to subsection 4.02(a)(iii) (before giving
effect to distributions pursuant to such subsection).

36

 

          Net Prepayment Interest Shortfall: For any Distribution Date, the amount
by which the sum of the Prepayment Interest Shortfalls exceeds the sum of the
Compensating Interest payments made on such Distribution Date.

          NIM Closing Date: On or about May 26, 2004.

          NIM Issuer: The entity established as the issuer of the NIM Securities.

          NIM Securities: Any debt securities secured or otherwise backed by some
or all of the Class X and Class P Certificates that are rated by Standard &
Poor’s.

          NIM Trustee: The trustee for the NIM Securities.

          Non-Delay Certificates: As specified in the Preliminary Statement.

          Non-Permitted Transferee: A Person other than a Permitted Transferee.

          Nonrecoverable P&I Advance: Any P&I Advance previously made or proposed
to be made in respect of a Mortgage Loan or REO Property that, in the good
faith business judgment of the Servicer, will not or, in the case of a proposed
P&I Advance, would not be ultimately recoverable from related late payments,
Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds or otherwise on
such Mortgage Loan or REO Property as provided herein.

          Nonrecoverable Servicing Advance: Any Servicing Advances previously made
or proposed to be made in respect of a Mortgage Loan or REO Property, which, in
the good faith business judgment of the Servicer, will not or, in the case of a
proposed Servicing Advance, would not, be ultimately recoverable from related
late payments, Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds
or otherwise on such Mortgage Loan or REO Property. The determination by the
Servicer that it has made a Nonrecoverable Servicing Advance or that any
proposed Servicing Advances, if made, would constitute a Nonrecoverable
Servicing Advance, shall be evidenced by an Officers’ Certificate delivered to
the Trustee.

          Note Account: As defined in the Indenture.

          Notice of Final Distribution: The notice to be provided pursuant to
Section 9.02 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.

          Novelle: Novelle Financial Services, Inc., a California corporation, and
its successors in interest.

          Novelle Assignment Agreement: The Assignment and Recognition Agreement,
dated as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor
and Novelle, and each other Assignment and Recognition Agreement by and among
the Unaffiliated Seller, the Depositor and Novelle in connection with any
Subsequent Transfer of Novelle Mortgage Loans.

37

 

     Novelle Mortgage Loan:
A Mortgage Loan which was acquired from Novelle by the Unaffiliated Seller
pursuant to the Novelle Purchase Agreement, and which has been acquired by the
Trust Fund.

     Novelle Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of September 27, 2002, as amended to date, by and between
the Unaffiliated Seller and Novelle.

     Offered Certificates: As specified in the Preliminary Statement.

     Officer’s Certificate: A certificate signed by an officer of the Servicer
with responsibility for the servicing of the Mortgage Loans and listed on a
list delivered to the Trustee pursuant to this Agreement.

     Opinion of Counsel: A written opinion of counsel, who may be in-house
counsel for the Servicer or the Subservicer, reasonably acceptable to the
Trustee and to the Certificate Insurer; provided that any Opinion of Counsel
relating to (a) qualification of the Mortgage Loans in a REMIC or (b)
compliance with the REMIC Provisions, must be (unless otherwise stated in such
Opinion of Counsel) an opinion of counsel who (i) is in fact independent of the
Servicer of the Mortgage Loans, (ii) does not have any material direct or
indirect financial interest in the Servicer of the Mortgage Loans or in an
affiliate of either and (iii) is not connected with the Servicer of the
Mortgage Loans as an officer, employee, director or person performing similar
functions.

     Optional Termination Date: means:

     (i) For so long as the Class X Certificates are 100% owned, either
directly or indirectly, by the Unaffiliated Seller or any Affiliate
thereof, then the Servicer may cause the Optional Termination Date to
occur on any Distribution Date when the aggregate Stated Principal
Balance of the Mortgage Loans is 10.00% or less of the Maximum Pool
Principal Balance; and

     (ii) If the Class X Certificates are not 100% owned, either directly
or indirectly, by the Unaffiliated Seller or any Affiliate thereof, then
the Holders of a majority in Class Certificate Balance of the Class X
Certificates may cause the Optional Termination Date to occur on any
Distribution Date when the aggregate Stated Principal Balance of the
Mortgage Loans is 10.00% or less of the Maximum Pool Principal Balance,
and, if such Class X Certificateholders do not do so, then the Servicer
shall also have such right.

     Originator: The party that originated or acquired a Mortgage Loan and,
more specifically, (i) with respect to any Aames Mortgage Loan, Aames, (ii)
with respect to any Accredited Mortgage Loan, Accredited, (iii) with respect to
any BNC Mortgage Loan, BNC, (iv) with respect to any CIT Mortgage Loan, CIT,
(v) with respect to any Chapel Mortgage Loan, Chapel Mortgage, (vi) with
respect to any Encore Mortgage Loan, Encore, (vii) with respect to any First
Banc Mortgage Loan, First Banc, (viii) with respect to any FGMC Mortgage Loan,
FGMC, (ix) with respect to any Homeowners Mortgage Loan, Homeowners, (x) with
respect to any Impac Mortgage Loan or Novelle Mortgage Loan, Impac or Novelle, as applicable, (xi) with respect to any
Lenders Direct Mortgage Loan, Lenders Direct, (xii) with

38

 

respect to any Master
Financial Mortgage Loan, Master Financial, (xiii) with respect to any Ownit
Mortgage Loan, Ownit, (xiv) with respect to any People’s Choice Mortgage Loan,
People’s Choice and (xv) with respect to any SIB Mortgage Loan, SIB.

     OTS: Office of Thrift Supervision, and any successor thereto.

     Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except:

     (i) Certificates theretofore canceled by the Trustee or delivered to
the Trustee for cancellation; and

     (ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee pursuant to
this Agreement.

     Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with a
Stated Principal Balance greater than zero which was not the subject of a
Principal Prepayment in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.

     Ownership Interest: As to any Residual Certificate, any ownership
interest in such Certificate including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect,
legal or beneficial.

     Ownit: Ownit Mortgage Solutions, Inc. (f/k/a Oakmont Mortgage Company,
Inc.), a California corporation, and its successors in interest.

     Ownit Assignment Agreement: The Assignment and Recognition Agreement,
dated as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor
and Ownit and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and Ownit in connection with any Subsequent
Transfer of Ownit Mortgage Loans.

     Ownit Mortgage Loan: A Mortgage Loan which was acquired from Ownit by the
Unaffiliated Seller pursuant to the Ownit Purchase Agreement, and which has
been acquired by the Trust Fund.

     Ownit Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of November 24, 2003, as amended to date, by and between
the Unaffiliated Seller and Ownit.

     P&I Advance: As to any Mortgage Loan or REO Property, any advance made by
the Servicer in respect of any Remittance Date with respect to any Mortgage
Loan representing the aggregate of all payments of principal and interest on
such Mortgage Loan, net of the related Servicing Fee, that were due during the
related Due Period on the Mortgage Loan, and that were delinquent or unpaid on
the related Determination Date, plus certain amounts representing assumed
payments not covered by any current net income on the Mortgaged Properties
acquired by foreclosure or deed in lieu of foreclosure as determined pursuant
to Section 4.01.

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     Pass-Through Margin: With respect to each Class of Regular Certificates,
on or prior to the Optional Termination Date the following percentages: Class
A-1, 0.230%; Class A-2, 0.120%; Class A-3, 0.230%; Class A-4, 0.490%; Class
M-1, 0.530%; Class M-2, 1.200%; Class M-3, 1.500%; Class B-1, 2.000%; Class
B-2, 2.350%; Class B-3, 3.750%; and Class B-4, 3.750%. On the first
Distribution Date after the Optional Termination Date, the Pass-Through Margins
shall increase to the following percentages: Class A-1, 0.460%; Class A-2,
0.240%; Class A-3, 0.460%; Class A-4, 0.980%; Class M-1, 0.795%; Class M-2,
1.800%; Class M-3, 2.250%; Class B-1, 3.000%; Class B-2, 3.525%; Class B-3,
5.625%; and Class B-4, 5.625%.

     Pass-Through Rate: For each Class of Certificates and each Lower Tier and
Middle Tier Regular Interest, the per annum rate set forth or calculated in the
manner described in the Preliminary Statement.

     People’s Choice: People’s Choice Home Loan, Inc., a Wyoming corporation,
and its successors in interest.

     People’s Choice Assignment Agreement: The Assignment and Recognition
Agreement, dated as of May 26, 2004 as amended to date, by and among the
Unaffiliated Seller, the Depositor and People’s Choice, and each other
Assignment and Recognition Agreement by and among the Unaffiliated Seller, the
Depositor and People’s Choice in connection with any Subsequent Transfer of
People’s Choice Mortgage Loans.

     People’s Choice Mortgage Loan: A Mortgage Loan which was acquired from
People’s Choice by the Unaffiliated Seller pursuant to the People’s Choice
Purchase Agreement, and which has been acquired by the Trust Fund.

     People’s Choice Purchase Agreement: The Amended and Restated Mortgage
Loan Purchase and Warranties Agreement, dated as of October 24, 2002, as
amended to date, by and between the Unaffiliated Seller and People’s Choice.

     Percentage Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made on the related Class,
such percentage interest being set forth on the face thereof or equal to the
percentage obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.

     Periodic Mortgage Rate Cap: With respect to an Adjustable Rate Mortgage
Loan, the periodic limit on each Mortgage Rate adjustment as set forth in the
related Mortgage Note.

     Permitted Investments: Any one or more of the following obligations or
securities acquired at a purchase price of not greater than par, regardless of
whether issued by the Servicer, the Trustee or any of their respective
Affiliates:

     (i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof; provided such obligations are backed
by the full faith and credit of the United States;

     (ii) demand and time deposits in, certificates of deposit of, or
bankers’ acceptances (which shall each have an original maturity of not
more than 90 days and, in

40

 

the case of bankers’ acceptances, shall in no
event have an original maturity of more than 365 days or a remaining
maturity of more than 30 days) denominated in United States dollars and
issued by, any Eligible Institution;

     (iii) repurchase obligations with respect to any security described
in clause (i) above entered into with an Eligible Institution (acting as
principal);

     (iv) securities bearing interest or sold at a discount that are
issued by any corporation incorporated under the laws of the United
States of America or any state thereof and that are rated by each Rating
Agency that rates such securities in its highest long-term unsecured
rating categories at the time of such investment or contractual
commitment providing for such investment;

     (v) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than 30 days after the date of acquisition
thereof) that is rated by each Rating Agency that rates such securities
in its highest short-term unsecured debt rating available at the time of
such investment;

     (vi) units of money market funds, including money market funds
advised by the Depositor or an Affiliate thereof, that have been rated
“Aaa” by Moody’s, “AAA” by Fitch and “AAA” by Standard & Poor’s; and

     (vii) if previously confirmed in writing to the Trustee and to the
Certificate Insurer, any other demand, money market or time deposit, or
any other obligation, security or investment, as may be acceptable to the
Rating Agencies as a permitted investment of funds backing “Aaa” or “AAA”
rated securities;

provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying
obligations.

     Permitted Transferee: Any Person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, international organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers’ cooperatives described in section 521 of the Code)
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) on any
excess inclusions (as defined in section 860E(c)(1) of the Code) with respect
to any Residual Certificate, (iv) rural electric and telephone cooperatives
described in section 1381(a)(2)(C) of the Code, (v) a Person that is not a U.S.
Person, (vi) an “electing large partnership” within the meaning of section 775
of the Code and (vii) any other Person so designated by the Depositor based
upon an Opinion of Counsel that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may cause any REMIC created hereunder to
fail to qualify as a REMIC at any time that the Certificates are outstanding.
The terms “United States,” “State” and

41

 

“international organization” shall have
the meanings set forth in section 7701 of the Code or successor provisions. A
corporation will not be treated as an instrumentality of the United States or
of any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of the Federal Home Loan
Mortgage Corporation, a majority of its board of directors is not selected by
such government unit.

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

     Physical Certificates: As specified in the Preliminary Statement.

     Plan: As defined in Section 5.02(b).

     Pool Stated Principal Balance: As to any Distribution Date, the aggregate
of the Stated Principal Balances of the Mortgage Loans for such Distribution
Date which were Outstanding Mortgage Loans as of the last day of the related
Due Period.

     Preference Amount: Any amounts distributed in respect of the Class A-1
Certificates that are recovered from any Holder of such Certificates as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code or other similar law in accordance with a final, nonappealable
order of a court having competent jurisdiction and which have not theretofore
been repaid to such Holder.

     Preference Claim: As defined in Section 4.05(f).

     Pre-Funding Account: The Group I Pre-Funding Account and the Group II
Pre-Funding Account, as applicable.

     Pre-Funding Amount: With respect to any date, the amount on deposit in
the Pre-Funding Accounts.

     Pre-Funding Earnings: The actual investment earnings realized on amounts
deposited in the Pre-Funding Accounts.

     Pre-Funding Period: The period commencing on the Startup Date and ending
on the earliest to occur of (i) the date on which the amount on deposit in each
Pre-Funding Account (exclusive of any investment earnings) is less than
$100,000, (ii) the date on which any Event of Default occurs and (iii) August
24, 2004.

     Premium Amount: The product of (i) the Premium Rate and (ii) the
Certificate Balance of the Class A-1 Certificates immediately prior to such
Distribution Date.

     Premium Rate: The rate at which the “Premium” is determined as described
in the letter dated May 26, 2004 between the Unaffiliated Seller and the
Certificate Insurer (a copy of which shall be provided by the Unaffiliated
Seller to the Trustee).

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     Prepayment Charge: Any prepayment premium, penalty or charge collected by
the Servicer with respect to a Mortgage Loan from a Mortgagor in connection
with any voluntary Principal Prepayment in Full pursuant to the terms of the
related Mortgage Note.

     Prepayment Interest Shortfall: With respect to any Remittance Date, the
sum of, for each Mortgage Loan that was during the related Prepayment Period
the subject of a Principal Prepayment in Full, that was applied by the Servicer
to reduce the outstanding principal balance of such Mortgage Loan on a date
preceding the Due Date in the succeeding Prepayment Period, an amount equal to
the product of (a) the Mortgage Rate net of the Servicing Fee Rate for such
Mortgage Loan, (b) the amount of the Principal Prepayment for such Mortgage
Loan, (c) 1/360 and (d) the number of days commencing on the date on which such
Principal Prepayment was applied and ending on the last day of the related
Prepayment Period.

     Prepayment Period: With respect to any Distribution Date, the calendar
month preceding the calendar month in which such Distribution Date occurs.

     Principal Distribution Amount: For any Distribution Date, the sum of (i)
the Basic Principal Distribution Amount for such Distribution Date and (ii) the
Extra Principal Distribution Amount for such Distribution Date.

     Principal Parity Deficit: With respect to any Distribution Date, the
excess of (i) the aggregate Class Certificate Balances of the Class A
Certificates on that Distribution Date, after taking into account any reduction
(and with respect to the Class A-1 Certificates, as reduced by any Class A-1
Principal Parity Amounts paid by the Certificate Insurer prior to such
Distribution Date), of those Class Certificate Balances on that Distribution
Date, less the excess of (a) any Principal Parity Deficits for all prior
Distribution Dates over (b) any Class A-1 Principal Parity Amount for all prior
Distribution Dates over (ii) the Current Maximum Amount for that Distribution
Date. For the first Distribution Date, the Principal Parity Deficit will equal
zero.

     Principal Prepayment: Any full or partial payment or other recovery of
principal on a Mortgage Loan (including upon liquidation of a Mortgage Loan)
which is received in advance of its scheduled Due Date, excluding any Prepayment
Charge thereon and which is not accompanied by an amount of interest
representing scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment.

     Principal Prepayment in Full: Any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.

     Principal Remittance Amount: With respect to any Distribution Date, the
amount equal to the sum (without duplication) with respect to the related Due
Period, of: (i) all scheduled installments of principal due on the Mortgage
Loans during the related Due Period and received by the Servicer on or prior to
the related Determination Date or advanced by the Servicer for the related
Remittance Date; (ii) the principal component of all Condemnation Proceeds,
Insurance Proceeds and Liquidation Proceeds during the related Due Period (in
each case, net of remaining (i.e., not deducted from the Interest Remittance
Amount) unreimbursed expenses incurred in connection with a liquidation or
foreclosure and unreimbursed Advances, if

43

 

any); (iii) all partial or full
prepayments on the Mortgage Loans received during the related Prepayment
Period; (iv) the principal component of all Substitution Adjustment Amounts and
Repurchase Prices received by the Servicer during the related Due Period; and
(v) the principal component of the proceeds of any termination of the Trust
Fund; reduced by remaining amounts (i.e., not deducted from the Interest
Remittance Amount) in reimbursement for Advances previously made with respect
to the Mortgage Loans and other amounts as to which the Servicer is entitled to
be reimbursed pursuant to this Agreement.

     Private Certificates: As specified in the Preliminary Statement.

     Prospectus Supplement: The Prospectus Supplement, dated May 24, 2004,
relating to the Offered Certificates.

     PTCE 95-60: As defined in Section 5.02(b).

     PUD: Planned Unit Development.

     Qualified Insurer: A mortgage guaranty insurance company duly qualified
as such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as a FNMA- or
FHLMC-approved mortgage insurer or having a claims paying ability rating of at
least “AA” or equivalent rating by a nationally recognized statistical rating
organization. Any replacement insurer with respect to a Mortgage Loan must
have at least as high a claims paying ability rating as the insurer it replaces
had on the Closing Date.

     Rating Agency: Each of Standard & Poor’s, Fitch and Moody’s. If such
organization or a successor is no longer in existence, “Rating Agency” shall be
such nationally recognized statistical rating organization, or other comparable
Person, as is designated by the Depositor, notice of which designation shall be given to
the Trustee. References herein to a given rating or rating category of a
Rating Agency shall mean such rating category without giving effect to any
modifiers. For purposes of Section 10.05(b), the addresses for notices to each
Rating Agency shall be the address specified therefor in the definition
corresponding to the name of such Rating Agency, or such other address as such
Rating Agency may hereafter furnish to the Depositor and the Servicer.

     Realized Loss: The excess of the unpaid principal balance of a Liquidated
Mortgage Loan together with accrued and unpaid interest thereon over the
Liquidation Proceeds, net of customary out-of-pocket expenses incurred by the
Servicer in connection with the liquidation of such Liquidated Mortgage Loan
and net of the amount of any unreimbursed Servicing Advances with respect to
such Liquidated Mortgage Loan.

     Record Date: With respect to any Distribution Date, the close of business
on the Business Day immediately preceding such Distribution Date; provided,
however, that for any Certificate issued in definitive form, the Record Date
shall be the close of business on the last Business Day of the month
immediately preceding the month in which such applicable Distribution Date
occurs.

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     Reference Bank: As defined in Section 4.04.

     Regular Certificates: As specified in the Preliminary Statement.

     Reimbursement Amount: As of any Distribution Date, the sum of (a)(i) all
Insured Payments previously received by the Trustee and all Preference Amounts
previously paid by the Certificate Insurer and in each case not previously
repaid to the Certificate Insurer pursuant to Section 4.02(a) plus (ii)
interest accrued on each such Insured Payment and Preference Amounts not
previously repaid calculated at the Late Payment Rate from the date the Trustee
received the related Insured Payment or Preference Amounts were paid by the
Certificate Insurer and (b)(i) any amounts then due and owing to the
Certificate Insurer under the Insurance and Indemnity Agreement (excluding the
Premium Amount due on such Distribution Date), as certified to the Trustee by
the Certificate Insurer plus (ii) interest on such amounts at the rate
specified in the Insurance and Indemnity Agreement. The Certificate Insurer
shall notify the Trustee and the Unaffiliated Seller of the amount of any
Reimbursement Amount.

     Relief Act Shortfall: With respect to any Distribution Date and any
Mortgage Loan, any reduction in the amount of interest or principal collectible
on such Mortgage Loan for the most recently ended Due Period as a result of the
application of the Servicemembers Civil Relief Act and similar state laws.

     Remainder Amount: As defined in Section 9.01.

     REMIC: A “real estate mortgage investment conduit” within the meaning of
section 860D of the Code.

     REMIC Provisions: Provisions of the federal income tax law relating to
REMICs, which appear at sections 860A through 860G of Subchapter M of Chapter 1
of the Code, and related provisions, and regulations promulgated thereunder,
as the foregoing may be in effect from time to time as well as provisions of
applicable state laws.

     REMIC Trust: The segregated pool of assets consisting of the Trust Fund,
exclusive of Prepayment Charges and the Excess Reserve Fund Account.

     Remittance Date: The 18th day (or if such 18th day is not a Business Day,
the first Business Day immediately preceding such day) of any month.

     REO Disposition: The final sale by the Servicer of any REO Property.

     REO Imputed Interest: As to any REO Property, for any period, an amount
equivalent to interest (at the Mortgage Rate net of the Servicing Fee Rate that
would have been applicable to the related Mortgage Loan had it been
outstanding) on the unpaid principal balance of the Mortgage Loan as of the
date of acquisition thereof (as such balance is reduced pursuant to Section
3.17 by any income from the REO Property treated as a recovery of principal).

     REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.

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     Representative: Morgan Stanley & Co. Incorporated, as representative on
behalf of itself, CDC Securities LLC, and Countrywide Securities Corporation.

     Repurchase Price: With respect to any Mortgage Loan, an amount equal to
the sum (without duplication) of (i) the unpaid principal balance of such
Mortgage Loan as of the date of repurchase and (ii) (x) if such Mortgage Loan
is being repurchased by the Unaffiliated Seller, the sum of (A) interest on
such unpaid principal balance of such Mortgage Loan at the Mortgage Rate from
the last date through which interest has been paid and distributed to the
Trustee to the last day of the month in which such repurchase occurs, (B) all
unreimbursed P&I Advances and Servicing Advances, (C) all unpaid Servicing
Fees, (D) all expenses reasonably incurred by the Servicer, the Trustee, the
Certificate Insurer or the Unaffiliated Seller, as the case may be, in respect
of a breach or defect, including, without limitation, expenses arising out of
any such party’s enforcement of the Originator’s repurchase obligation, to the
extent not included in (B), and (E) all costs and expenses incurred by, or on
behalf of, the Trust Fund in connection with any violation by such Mortgage
Loan of a predatory or abusive-lending law or (y) if such Mortgage Loan is
being repurchased by the related Originator, all other amounts payable by such
Originator in accordance with the terms of the related Mortgage Loan Purchase
Agreement.

     Request for Release: The Request for Release submitted by the Servicer to
the Trustee, substantially in the form of Exhibit K.

     Residual Certificates: As specified in the Preliminary Statement.

     Responsible Officer: When used with respect to the Trustee, any vice
president, any assistant vice president, any assistant secretary, any assistant
treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers who at such
time shall be officers to whom, with respect to a particular matter, such
matter is referred because of such officer’s knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Agreement.

     Rule 144A Letter: As defined in Section 5.02(b).

     Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due
on any Due Date allocable to principal and/or interest on such Mortgage Loan
which, unless otherwise specified herein, shall give effect to any related Debt
Service Reduction and any Deficient Valuation that affects the amount of the
scheduled payment due on such Mortgage Loan.

     Scheduled Principal Balance: With respect to any Mortgage Loan: (a) as
of the Cut-off Date, the outstanding principal balance of such Mortgage Loan as
of such date, net of the principal portion of all unpaid Scheduled Payments, if
any, due on or before such date; (b) as of any Due Date subsequent to the
Cut-off Date up to and including the Due Date in the calendar month in which a
Liquidation Event occurs with respect to such Mortgage Loan, the Scheduled
Principal Balance of such Mortgage Loan as of the Cut-off Date, minus the sum
of (i) the principal portion of each Scheduled Payment due on or before such
Due Date but subsequent to

46

 

the Cut-off Date, whether or not received, (ii) all
Principal Prepayments received before such Due Date but after the Cut-off Date,
(iii) the principal portion of all Liquidation Proceeds and Insurance Proceeds
received before such Due Date but after the Cut-off Date, net of any portion
thereof that represents principal due (without regard to any acceleration of
payments under the related Mortgage and Mortgage Note) on a Due Date occurring
on or before the date on which such proceeds were received and (iv) any
reduction in the principal balance of such Mortgage Loan incurred with respect
thereto as a result of a Deficient Valuation occurring before such Due Date,
but only to the extent such reduction in principal balance represents a
reduction in the portion of principal of such Mortgage Loan not yet due
(without regard to any acceleration of payments under the related Mortgage and
Mortgage Note) as of the date of such Deficient Valuation; and (c) as of any
Due Date subsequent to the occurrence of a Liquidation Event with respect to
such Mortgage Loan, zero.

     SEC: As defined in Section 8.12(a).

     Second Lien Mortgage Loan: A Mortgage Loan secured by a second lien
Mortgage on the related Mortgaged Property.

     Securities Act: The Securities Act of 1933, as amended.

     Senior Enhancement Percentage: With respect to any Distribution Date, the
percentage obtained by dividing (x) the sum of (i) the aggregate Class
Certificate Balances of the Subordinated Certificates and (ii) the Subordinated Amount
(in each case after taking into account the distributions of the Principal
Distribution Amount for such Distribution Date) by (y) the Current Maximum
Amount for that Distribution Date.

     Senior Specified Enhancement Percentage: As of any date of determination,
38.00%.

     Servicer: Countrywide Home Loans Servicing LP, a Texas limited
partnership, and its successors and assigns, in its capacity as servicer
hereunder.

     Servicing Advances: The reasonable “out-of-pocket” costs and expenses
(including legal fees) incurred by the Servicer in the performance of its
servicing obligations in connection with a default, delinquency or other
unanticipated event, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures and litigation, in
respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property
and (iv) the performance of its obligations under Section 3.01, Section 3.09,
Section 3.13 and Section 3.15 hereof. Servicing Advances also include any
reasonable “out-of-pocket” costs and expenses (including legal fees) incurred
by the Servicer in connection with executing and recording instruments of
satisfaction, deeds of reconveyance or Assignments of Mortgage in connection
with any foreclosure in respect of any Mortgage Loan to the extent not
recovered from the Mortgagor or otherwise payable under this Agreement. The
Servicer shall not be required to make any Nonrecoverable Servicing Advances.

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     Servicing Fee: With respect to each Mortgage Loan and for any calendar
month, an amount equal to one month’s interest (or in the event of any payment
of interest which accompanies a Principal Prepayment in Full made by the
Mortgagor during such calendar month, interest for the number of days covered
by such payment of interest) at the Servicing Fee Rate on the applicable Stated
Principal Balance on such Mortgage Loan at the end of the related Due Period.
Such fee shall be payable monthly, and shall be pro rated for any portion of a
month during which the Mortgage Loan is serviced by the Servicer under this
Agreement. The Servicing Fee is payable solely from, the interest portion
(including recoveries with respect to interest from Liquidation Proceeds,
Insurance Proceeds, Condemnation Proceeds and proceeds received with respect to
REO Properties, to the extent permitted by Section 3.11) of such Scheduled
Payment collected by the Servicer, or as otherwise provided under Section 3.11.

     Servicing Fee Rate: With respect to each Mortgage Loan, 0.50% per annum.

     Servicing File: With respect to each Mortgage Loan, the file retained by
the Servicer consisting of originals or copies of all documents in the Mortgage
File which are not delivered to the Trustee in the Custodial File and copies of
each of the other Mortgage Loan documents required to be delivered by the
related Originator pursuant to the terms of the related Mortgage Loan Purchase
Agreement.

     Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished
to the Trustee by the Servicer on the Closing Date pursuant to this Agreement,
as such list may from time to time be amended.

     Servicing Transfer Date: With respect to each Mortgage Loan, the date on
which Countrywide commenced servicing such Mortgage Loan, as set forth on the
Mortgage Loan Schedule.

     SIB: SIB Mortgage Corp., a New Jersey corporation, and its successors in
interest.

     SIB Assignment Agreement: The Assignment and Recognition Agreement, dated
as of May 26, 2004, by and among the Unaffiliated Seller, the Depositor and
SIB, and each other Assignment and Recognition Agreement by and among the
Unaffiliated Seller, the Depositor and SIB in connection with any Subsequent
Transfer of SIB Mortgage Loans.

     SIB Mortgage Loan: A Mortgage Loan which was acquired from SIB by the
Unaffiliated Seller pursuant to the SIB Purchase Agreement, and which has been
acquired by the Trust Fund.

     SIB Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of July 11, 2002, as amended to date, by and between the
Unaffiliated Seller and SIB.

     Specified Subordinated Amount: With respect to any Distribution Date
prior to the Stepdown Date, an amount equal to 1.25% of the Maximum Pool
Principal Balance; and with respect to any Distribution Date on and after the
Stepdown Date, an amount equal to 2.50% of

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the Current Maximum Amount for that
Distribution Date subject to a minimum amount equal to 0.50% of the Maximum
Pool Principal Balance; provided, however, that if, on any Distribution Date, a
Trigger Event exists, the Specified Subordinated Amount shall not be reduced to
the applicable percentage of the Current Maximum Amount, but instead will
remain the same as the prior period’s Specified Subordinated Amount until the
Distribution Date on which a Trigger Event no longer exists. When the Class
Certificate Balance of each Class of LIBOR Certificates has been reduced to
zero, the Specified Subordinated Amount shall thereafter equal zero.

     Standard & Poor’s: Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc. If Standard & Poor’s is designated as a Rating
Agency in the Preliminary Statement, for purposes of Section 10.05(b) the
address for notices to Standard & Poor’s shall be Standard & Poor’s, 55 Water
Street, New York, New York 10041, Attention: Residential Mortgage Surveillance
Group - CDC Mortgage Capital Trust 2004-HE2, or such other address as Standard
& Poor’s may hereafter furnish to the Depositor and the Servicer.

     Startup Day: For each REMIC created hereunder, the Closing Date.

     Stated Principal Balance: As to each Mortgage Loan and as of any date of
determination, (i) the principal balance of the Mortgage Loan at the Cut-off
Date after giving effect to payments of principal due on or before such date,
to the extent actually received, minus (ii) all amounts previously remitted to
the Trustee with respect to the related Mortgage Loan representing payments or
recoveries of principal, including Advances in respect of Scheduled Payments of
principal. For purposes of any Distribution Date, the Stated Principal Balance
of any Mortgage Loan will give effect to any Scheduled Payments of principal
received by the Servicer on or prior to the related Determination Date or
advanced by the Servicer prior to the related Remittance Date and any
unscheduled principal payments and other unscheduled principal collections
received during the related Prepayment Period.

     Stepdown Date: The later to occur of (i) the earlier to occur of (a) the
Distribution Date in June 2007 and (b) the Distribution Date following the
Distribution Date on which the aggregate Class Certificate Balance of the Class
A Certificates have been reduced to zero and (ii) the first Distribution Date
on which the Senior Enhancement Percentage (calculated for this purpose only
after taking into account scheduled and unscheduled payments of principal on
the Mortgage Loans on the last day of the related Due Period but prior to any
applications of Principal Distribution Amount to the LIBOR Certificates on the
applicable Distribution Date) is greater than or equal to the Senior Specified
Enhancement Percentage.

     Subordinated Amount: As of any Distribution Date, the excess, if any, of
(a) the Current Maximum Amount for that Distribution Date on such Distribution
Date over (b) the aggregate of the Class Certificate Balances of the LIBOR
Certificates as of such Distribution Date plus the Class Certificate Balances
of the Class P Certificates (after giving effect to the payment of the
Principal Remittance Amount on such Certificates on such Distribution Date).

     Subordinated Certificates: As specified in the Preliminary Statement.

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     Subordination Deficiency: With respect to any Distribution Date, the
excess, if any, of (a) the Specified Subordinated Amount applicable to such
Distribution Date over (b) the Subordinated Amount applicable to such
Distribution Date.

     Subordination Reduction Amount: With respect to any Distribution Date on
or after the Stepdown Date on which no Trigger Event exists, an amount equal to
the lesser of (a) the Excess Subordinated Amount and (b) the Total Monthly
Excess Spread.

     Subsequent Recovery: With respect to any Mortgage Loan or related
Mortgaged Property that became a Liquidated Mortgage Loan or was otherwise
disposed of, all amounts received in respect of such Liquidated Mortgage Loan
after an Applied Realized Loss Amount related to such Mortgage Loan or
Mortgaged Property is allocated to reduce the Class Certificate Balance of any
Class of Subordinated Certificates. Any Subsequent Recovery that is received
during a Prepayment Period will be treated as Liquidation Proceeds and included
as part of the Principal Remittance Amount for the related Distribution Date.

     Subsequent Cut-off Date: As to any Subsequent Mortgage Loans, the date
specified in the Addition Notice delivered in connection therewith, which date
shall be the close of business on the first day of the month in which such
Subsequent Mortgage Loans will be conveyed to the Trust Fund.

     Subsequent Mortgage Loans: The Mortgage Loans hereafter transferred and
assigned to the Trust Fund pursuant to Section 2.01(c), each of which shall
have been purchased by the Unaffiliated Seller under a Mortgage Loan Purchase
Agreement.

     Subsequent Transfer: The transfer and assignment by the Depositor to the
Trust of the Subsequent Mortgage Loans pursuant to the terms hereof.

     Subsequent Transfer Agreement: A subsequent transfer agreement in
substantially the form of Exhibit L.

     Subsequent Transfer Date: The Business Day on which a Subsequent Transfer
occurs.

     Subservicer: As defined in Section 3.02(a).

     Subservicing Account: As defined in Section 3.08.

     Subservicing Agreement: As defined in Section 3.02(a).

     Substitute Mortgage Loan: A Mortgage Loan substituted by the Unaffiliated
Seller or an Originator for a Deleted Mortgage Loan in accordance with the
terms of this Agreement or the related Mortgage Loan Purchase Agreement, as
applicable, which must, on the date of such substitution, as confirmed in a
Request for Release, substantially in the form of Exhibit K, (i) have a Stated
Principal Balance, after deduction of the principal portion of the Scheduled
Payment due in the month of substitution, not in excess of, and not more than
10% less than, the Stated Principal Balance of the Deleted Mortgage Loan; (ii)
be accruing interest at a rate no lower than and not more than 1% per annum
higher than, that of the Deleted Mortgage

50

 

Loan; (iii) have a Loan-to-Value
Ratio no higher than that of the Deleted Mortgage Loan; (iv) have a remaining
term to maturity no greater than (and not more than one year less than that of)
the Deleted Mortgage Loan; and (v) comply with each representation and warranty
set forth in Sections 3.01(f), 3.01(h), 3.01(n), 3.01(p) and 3.03 of the
Unaffiliated Seller’s Agreement, each representation and warranty set forth in
the applicable Mortgage Loan Purchase Agreement and each of the requirements
set forth in Sections 2.01(c) hereof.

     Substitution Adjustment Amount: The meaning ascribed to such term
pursuant to Section 2.03.

     Tax Service Contract: As defined in Section 3.09(a).

     Telerate Page 3750: The display page currently so designated on the
Bridge Telerate Service (or such other page as may replace that page on that
service for displaying comparable rates or prices).

     Termination Price: As defined in Section 9.01.

     Total Monthly Excess Spread: As to any Distribution Date, an amount equal
to the excess if any, of (i) the interest collected (prior to the Remittance
Date) or advanced on the Mortgage Loans for Due Dates during the related Due
Period (net of Expense Fees, Premium Amount and Reimbursement Amounts, if any)
over (ii) the sum of the interest payable to the Classes of LIBOR Certificates
on such Distribution Date.

     Transfer: Any direct or indirect transfer or sale of any Ownership
Interest in a Residual Certificate.

     Transfer Affidavit: As defined in Section 5.02(b).

     Transferor Certificate: As defined in Section 5.02(b).

     Trigger Event: The occurrence of either a Delinquency Trigger Event or a
Cumulative Loss Trigger Event.

     Trust: The express trust created hereunder in Section 2.01(d).

     Trust Fund: The corpus of the trust created hereunder consisting of (i)
the Mortgage Loans and all interest and principal received on or with respect
thereto after the related Cut-off Date, other than such amounts which were due
on the Mortgage Loans on or before the related Cut-off Date; (ii) each Account,
and all amounts deposited therein pursuant to the applicable provisions of this
Agreement; (iii) property that secured a Mortgage Loan and has been acquired by
foreclosure, deed-in-lieu of foreclosure or otherwise; (iv) all rights of the
Depositor against the Unaffiliated Seller under the Unaffiliated Seller’s
Agreement; (v) all rights of the Depositor against each Originator under the
related Assignment and Recognition Agreement and the related Mortgage Loan
Purchase Agreement; (vi) the Certificate Insurance Policy; (vii) the Interest
Rate Cap Agreements, for the benefit of the Holders of the LIBOR Certificates
(other than the Class A-1 Certificateholders); and (viii) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing.

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     Trustee: Deutsche Bank National Trust Company, a national banking
association, and its successors in interest and, if a successor trustee is
appointed hereunder, such successor.

     Trustee Fee: As to any Distribution Date, an amount equal to the sum of
(a) the product of one-twelfth of the Trustee Fee Rate times the sum of (i) the
aggregate Stated Principal Balances of the Mortgage Loans at the end of the
prior Due Period, and (ii) the amount on deposit in the Pre-Funding Accounts at
the end of such prior Due Period and (b) any reasonable compensation and
expenses of a separate trustee or co-trustee to be paid pursuant to Section
8.10(d).

     Trustee Fee Rate: With respect to each Mortgage Loan, 0.0046% per annum.

     Unaffiliated Seller’s Agreement: The Unaffiliated Seller’s Agreement,
dated as of the date hereof, among the Unaffiliated Seller and the Depositor
relating to the sale of the Mortgage Loans from the Unaffiliated Seller to the
Depositor.

     Unpaid Interest Amounts: As of any Distribution Date and any Class of
Certificates, the sum of (a) the excess of (i) the sum of the Accrued
Certificate Interest for such Distribution Date and any portion of such Accrued
Certificate Interest from prior Distribution Dates remaining unpaid over (ii)
the amount in respect of interest on such Class of Certificates actually
distributed on that Distribution Date and (b) 30 days’ interest on the amount
in clause (a) above at the applicable Pass-Through Rate (to the extent
permitted by applicable law).

     Unpaid Realized Loss Amount: With respect to any Class of Subordinated
Certificates and as to any Distribution Date, is the excess of (i) Applied
Realized Loss Amounts with respect to such Class over (ii) the sum of (a) all
distributions in reduction of such Applied Realized Loss Amounts on all
previous Distribution Dates and (b) the amount by which the Class Certificate
Balance of such Class has been increased due to the distribution of any
Subsequent Recovery on all previous Distribution Dates. Any amounts
distributed to a Class of Subordinated Certificates in respect of any Unpaid
Realized Loss Amount will not be applied to reduce the Class Certificate
Balance of such Class.

     Upper Tier Regular Interest: As described in the Preliminary Statement.

     Upper Tier REMIC: As described in the Preliminary Statement.

     U.S. Person: Shall mean (i) a citizen or resident of the United States;
(ii) a corporation (or entity treated as a corporation for tax purposes)
created or organized in the United States or under the laws of the United
States or of any State thereof, including, for this purpose, the District of
Columbia; (iii) a partnership (or entity treated as a partnership for tax
purposes) organized in the United States or under the laws of the United States
or of any State thereof, including, for this purpose, the District of Columbia
(unless provided otherwise by future Treasury regulations); (iv) an estate
whose income is includible in gross income for United States income tax
purposes regardless of its source; or (v) a trust, if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more U.S. Persons have authority to control all substantial
decisions of the trust. Notwithstanding the last clause of the preceding
sentence, to the extent provided in Treasury

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regulations, certain trusts in
existence on August 20, 1996, and treated as U.S. Persons prior to such date,
may elect to continue to be U.S. Persons.

     Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 1% of all Voting Rights shall be allocated to the Class X
Certificates, if any (such Voting Rights to be allocated among the Holders of
Certificates of each such Class in accordance with their respective Percentage
Interests), (b) 1% of all Voting Rights shall be allocated to the Class P
Certificates, if any, and (c) the remaining Voting Rights shall be allocated
among Holders of the remaining Classes of Certificates in proportion to the
Certificate Balances of their respective Certificates on such date.

     WAC Cap: With respect to the Mortgage Loans as of any Distribution Date,
the product of (i) the weighted average of the Adjusted Net Mortgage Rates then
in effect on the beginning of the related Due Period on the Mortgage Loans, in
the case of the Class A-1 Certificates, minus the Premium Rate and (ii) a
fraction, the numerator of which is 30 and the denominator of which is the
actual number of days in the Interest Accrual Period related to such
Distribution Date.

ARTICLE II

CONVEYANCE OF MORTGAGE LOANS;

REPRESENTATIONS AND WARRANTIES

     Section 2.01 Conveyance of Mortgage Loans.

     (a) The Depositor, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the
Trustee for the benefit of the Certificateholders, without recourse, all the
right, title and interest of the Depositor in and to the Trust Fund and the
Trustee, on behalf of the Trust, hereby accepts the Trust Fund, other than any
Subsequent Mortgage Loans, which will be so sold, transferred, assigned,
set-over and conveyed on the related Subsequent Transfer Date. The Mortgage
Loans permitted by the terms of this Agreement to be included in the Trust Fund
are limited to (i) the Initial Mortgage Loans (which the Depositor acquired
pursuant to the Unaffiliated Seller’s Agreement, which contains, among other
representations and warranties, a representation and warranty of the
Unaffiliated Seller that no Mortgage Loan is a “High-Cost Home Loan” as defined
in the New Jersey Home Ownership Act effective November 27, 2003 or in the New
Mexico Home Loan Protection Act effective January 1, 2004), (ii) Subsequent
Mortgage Loans (which the Depositor is required hereunder to have acquired
pursuant to Subsequent Transfer Agreements, each of which shall contain, among
other representations and warranties, a representation and warranty of the
Unaffiliated Seller that no Mortgage Loan is a “High-Cost Home Loan” as defined
in the New Jersey Home Ownership Act effective November 27, 2003 or in the New
Mexico Home Loan Protection Act effective January 1, 2004) and (iii) Substitute
Mortgage Loans (which, by definition as set forth herein and referred to in the
Unaffiliated Seller’s Agreement and Subsequent Transfer Agreements, are
required to conform to, among other representations and warranties, the
representation and warranty of the Unaffiliated Seller that no Subsequent
Mortgage Loan is a “High-Cost Home Loan” as defined in the New Jersey Home
Ownership Act effective November 27, 2003 or in the New Mexico Home Loan
Protection Act effective January

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1, 2004, it is agreed and understood by the
parties hereto that it is not intended that any Mortgage Loan be included in
the Trust that is a “High-Cost Home Loan” as defined in the New Jersey Home
Ownership Act effective November 27, 2003 or in the New Mexico Home Loan
Protection Act effective January 1, 2004.

     (b) In connection with the transfer and assignment of each Mortgage Loan,
the Unaffiliated Seller has delivered or caused to be delivered to the Trustee
for the benefit of the Certificateholders the following documents or
instruments with respect to each Mortgage Loan so assigned (to the extent such
documents or instruments are required to be delivered by the related Originator
under each Mortgage Loan Purchase Agreement):

     (i) the original Mortgage Note bearing all intervening endorsements
evidencing a complete chain of assignment from the originator to the
related Originator, endorsed “Pay to the order of    , without
recourse” and signed in the name of the related Originator by an
authorized officer. To the extent that there is no room on the face of
the Mortgage Notes for endorsements, the endorsement may be contained on
an allonge, if state law so allows and the Trustee is so advised by the
related Originator that state law so allows. If the Mortgage Loan was
acquired by an Originator in a merger, the endorsement must be by
“[related Originator], successor by merger to [name of predecessor]”. If
the Mortgage Loan was acquired or originated by the related Originator
while doing business under another name, the endorsement must be by
“[related Originator], formerly known as [previous name]”;

     (ii) the original of any guarantee executed in connection with the
Mortgage Note;

     (iii) the original Mortgage with evidence of recording thereon. If
in connection with any Mortgage Loan, the original Mortgage with evidence
of recording thereon cannot be delivered on or prior to the related
Delivery Date because of a delay caused by the public recording office
where such Mortgage has been delivered for recordation or because such
Mortgage has been lost or because such public recording office retains
the original recorded Mortgage, then the related Originator, as required
by the terms of the related Mortgage Loan Purchase Agreement, will be
required to deliver to the Trustee a photocopy of such Mortgage and (i)
the original recorded Mortgage or a copy of such Mortgage certified by
such public recording office to be a true and complete copy of the
original recorded Mortgage promptly upon receipt thereof by the related
Originator (but in any event within 360 days from the related Delivery
Date); or (ii) in the case of a Mortgage where a public recording office
retains the original recorded Mortgage or in the case where a Mortgage is
lost after recordation in a public recording office, a copy of such
Mortgage certified by such public recording office to be a true and
complete copy of the original recorded Mortgage;

     (iv) the originals of all assumption, modification, consolidation or
extension agreements, if any, with evidence of recording thereon;

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     (v) the original Assignment of Mortgage for each Mortgage Loan
endorsed in blank, in form and substance acceptable for recording (except
with respect to MERS Designated Mortgage Loans);

     (vi) the originals of all intervening assignments of mortgage,
evidencing a complete chain of assignment from the originator (or MERS
with respect to each MERS Designated Mortgage Loan) to the related
Originator, with evidence of recording thereon or if any such intervening
assignment has not been returned from the applicable recording office or
has been lost or if such public recording office retains the original
recorded assignments of mortgage;

     (vii) the original or duplicate lender’s title policy and all riders
thereto or, if such original is unavailable, either an original title
binder or an original or copy of the title commitment, and if copies then
certified to be true and complete by the title company; and

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

     If any Mortgage has been recorded in the name of Mortgage Electronic
Registration System, Inc. (“MERS”) or its designee, no Assignment of Mortgage
in favor of the Trustee will be required to be prepared or delivered and
instead, the Servicer shall take all reasonable actions as are necessary at the
expense of the applicable Originator to the extent permitted under the related
Purchase Agreement and otherwise at the expense of the Depositor to cause the
Trust to be shown as the owner of the related Mortgage Loan on the records of
MERS for the purpose of the system of recording transfers of beneficial
ownership of mortgages maintained by MERS.

     From time to time, the Servicer shall forward to the Trustee additional
original documents, additional documents evidencing an assumption,
modification, consolidation or extension of a Mortgage Loan approved by the
Servicer, in accordance with the terms of this Agreement. All such mortgage
documents held by the Trustee as to each Mortgage Loan shall constitute the
“Custodial File”.

     On or prior to the related Delivery Date, the Unaffiliated Seller shall
deliver, or cause the related Originator to deliver, to the Trustee Assignments
of Mortgage, in blank, for each Mortgage Loan. If an Assignment of Mortgage is
required to be recorded pursuant to the terms hereof, the Trustee shall
promptly forward such Assignment of Mortgage to the Servicer for recording. No
later than thirty (30) Business Days following the date of receipt by the
Servicer of all necessary recording information for a Mortgage, the Servicer
shall promptly submit or cause to be submitted for recording, at the expense of
the Unaffiliated Seller (the Unaffiliated Seller to seek reimbursement from the
related Originator under the applicable Mortgage Loan Purchase Agreement) in
the appropriate public office for real property records, each Assignment of
Mortgage referred to in Section 2.01(b)(v). Notwithstanding the foregoing,
however, for administrative convenience and facilitation of servicing and to
reduce closing costs, the Assignment of Mortgage shall not be required to be
completed and submitted for recording with respect to any MERS Designated
Mortgage Loan or any Mortgage Loan (other than any

55

 

Mortgage Loan where the
Mortgaged Property is located in any state where recordation is required by any
Rating Agency to obtain the initial ratings on the Certificates, which states
as of the date hereof, are Florida and Maryland) until the earliest to occur of (i) direction by the Certificate Insurer or (ii) upon
a determination by the Servicer that recordation is necessary for the
enforcement of rights under, or satisfaction or assignment of, the related
Mortgage, at which time, the Servicer shall record any such Assignment of
Mortgage in accordance with the terms hereof. If any Assignment of Mortgage is
required to be recorded pursuant to the terms hereof, the Mortgage shall be
assigned from the related Originator, to “Deutsche Bank National Trust Company,
as trustee under the Pooling and Servicing Agreement dated as of May 1, 2004,
CDC Mortgage Capital Trust 2004-HE2.” In the event that any such assignment is
lost or returned unrecorded because of a defect therein, the Unaffiliated
Seller shall cause the related Originator to promptly prepare a substitute
assignment to cure such defect and thereafter cause each such assignment to be
duly recorded. In the event the Unaffiliated Seller does not pay or otherwise
reimburse the Servicer for any of the foregoing costs of recording any such
Assignment of Mortgage, the Servicer shall be entitled to be reimbursed from
the Trust Fund from amounts on deposit in the Collection Account. In the event
the related Originator fails to reimburse the Unaffiliated Seller for the
recording costs described above, upon receipt of written direction from the
Unaffiliated Seller, the Trustee shall assign its rights under the applicable
Mortgage Loan Purchase Agreement solely with respect to payment of such
expenses to the Unaffiliated Seller.

     The Unaffiliated Seller shall use commercially reasonable efforts to
assist the Servicer in causing the related Originator to deliver (at the
expense of such Originator pursuant to the related Mortgage Loan Purchase
Agreement) to the Servicer copies of all trailing documents required to be
included in the Custodial File at the same time the originals or certified
copies thereof are delivered to the Trustee, such documents, including, but not
limited to, the mortgagee policy of title insurance and any mortgage loan
documents upon return from the recording office. The Unaffiliated Seller shall
use commercially reasonable efforts to assist the Servicer in seeking
reimbursement from the related Originator pursuant to the related Mortgage Loan
Purchase Agreement for any fees or costs incurred by the Servicer in obtaining
such documents.

     On or prior to the Closing Date, the Unaffiliated Seller shall deliver to
the Trustee and the Servicer a copy of the Data Tape Information in
electronic, machine readable medium in a form mutually acceptable to the
Trustee and the Servicer. Within ten days of the Closing Date, the
Unaffiliated Seller shall deliver a copy of the complete Mortgage Loan Schedule
to the Trustee and the Servicer.

     In the event that such original or copy of any document submitted for
recordation to the appropriate public recording office is not so delivered to
the Trustee within 90 days following the related Delivery Date, and in the
event that the Originator does not cure such failure within 30 days of
discovery or receipt of written notification of such failure from the
Depositor, the Trustee or the Certificate Insurer, the Trustee shall notify the
related Originator to repurchase the Mortgage Loan pursuant to the related
Mortgage Loan Purchase Agreement, upon the request of the Depositor, the
Trustee or the Certificate Insurer, at the Repurchase Price and in the manner
specified in Section 2.03. The foregoing repurchase provision shall not apply
in the event that the related Originator cannot deliver such original or copy
of any document submitted for recordation to the appropriate public recording
office within the specified period due to a

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delay caused by the recording office in the applicable jurisdiction;
provided that the related Originator shall instead be required to deliver a
recording receipt of such recording office or, if such recording receipt is not
available, an officer’s certificate of a servicing officer of the Originator
confirming that such document has been accepted for recording.

     (c) Purchase and Sale of Subsequent Mortgage Loans.

     (i) Subject to the satisfaction of the conditions set forth in
paragraph (ii) below, and upon the Trustee’s receipt of a Subsequent
Transfer Agreement executed by all other parties thereto, in
consideration of the Trustee’s delivery on the related Subsequent
Transfer Dates to or upon the order of the Depositor of all or a portion
of the balance of funds in the related Pre-Funding Accounts, the
Depositor shall on any Subsequent Transfer Date sell, transfer, assign,
set over and convey to the Trustee without recourse but subject to terms
and provisions of this Agreement, all of the right, title and interest of
the Depositor in and to the Group I Subsequent Mortgage Loans or the
Group II Subsequent Mortgage Loans, as applicable, including the
outstanding principal of and interest due on such Subsequent Mortgage
Loans, and all other related assets included or to be included in the
Trust Fund with respect thereto.

     The amount released from the Group I Pre-Funding Account with
respect to a transfer of Group I Subsequent Mortgage Loans, or from the
Group II Pre-Funding Account with respect to a transfer of Group II
Subsequent Mortgage Loans, shall be one-hundred percent (100%) of the
aggregate Stated Principal Balances as of the related Subsequent Cut-off
Date of the Subsequent Mortgage Loans so transferred.

     (ii) The Subsequent Mortgage Loans and the other property and rights
related thereto described in paragraph (a) above shall be transferred by
the Depositor to the Trust Fund only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:

     (a) the Unaffiliated Seller shall have provided the
Depositor, the Trustee, the Rating Agencies and the Certificate
Insurer with a timely Addition Notice, which shall include a
Mortgage Loan Schedule, listing the Subsequent Mortgage Loans and
shall have provided any other information reasonably requested by
any of the foregoing with respect to the Subsequent Mortgage
Loans;

     (b) the Servicer shall have deposited in the Collection
Account all collections of (x) principal in respect of the
Subsequent Mortgage Loans received and due after the related
Subsequent Cut-off Date and (y) interest due on the Subsequent
Mortgage Loans after the related Subsequent Cut-off Date;

     (c) as of each Subsequent Transfer Date, the Unaffiliated
Seller was not insolvent nor will be made insolvent by such
transfer nor is the Unaffiliated Seller aware of any pending
insolvency;

     (d) such addition will not result in a “prohibited
transaction” (as defined in the REMIC Provisions) for any REMIC
held by the Trust Fund, and

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will not cause any REMIC held by the
Trust Fund to cease to qualify as a REMIC, as evidenced by an
Opinion of Counsel with respect to such matters (which may be a
blanket opinion dated the Closing Date);

     (e) the Pre-Funding Period shall not have terminated;

     (f) the Unaffiliated Seller shall have delivered to the
Trustee an executed Assignment and Recognition Agreement with
respect to each related Originator of Subsequent Mortgage Loans to
be added to the Trust Fund on such Subsequent Transfer Date (which
Assignment and Recognition Agreement shall include a
representation and warranty from the related Originator that none
of the Subsequent Mortgage Loans is a High Cost Loan, none of the
Subsequent Mortgage Loans is covered by the Home Ownership and
Equity Protection Act of 1994 and none of the Subsequent Mortgage
Loans is in violation of any comparable state law);

     (g) the Unaffiliated Seller shall have delivered to the
Trustee an Officer’s Certificate confirming the satisfaction of
each condition precedent specified in this paragraph (ii), and the
Opinion of Counsel referenced in clause (d);

     (h) the Unaffiliated Seller and the Depositor shall have
delivered to the Trustee an executed copy of a Subsequent Transfer
Agreement, substantially in the form of Exhibit L hereto; and

     (i) the Unaffiliated Seller shall have obtained the consent
of the Certificate Insurer.

     (iii) The obligation of the Trust Fund to purchase the Subsequent
Mortgage Loans on a Subsequent Transfer Date is subject to the
requirements that, following the purchase of such Subsequent Mortgage
Loans, with respect to the entire mortgage loan pool:

	(A)	 	no more than 3.00% may be second lien mortgage
loans;
	 
	(B)	 	no more than 23.00% and no less than 16.00% may
be Fixed Rate Mortgage Loans;
	 
	(C)	 	the weighted average original term to maturity
may not exceed 360 months;
	 
	(D)	 	the weighted average gross Mortgage Rate must
not be less than 7.35%, or more than 7.70%;
	 
	(E)	 	the weighted average LTV must not exceed
82.50%, and no more than 47.50% of the Mortgage Loans may
have LTVs in excess of 80.00%;

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	(F)	 	no Mortgage Loan may have a Stated Principal
Balance in excess of $1,000,000 as of the related Cut-off
Date;
	 
	(G)	 	at least 79.00% of the Mortgage Loans must have
Prepayment Charges;
	 
	(H)	 	the weighted average Gross Margin for the
Adjustable Rate Mortgage Loans must be at least 5.90%;
	 
	(I)	 	the weighted average credit score (FICO Score)
must be at least 610, and none of the Mortgage Loans may have
credit scores below 500;
	 
	(J)	 	No mortgage loan is classified as a “high cost”
loan under the Home Ownership and Equity Protection Act of
1994 (“HOEPA”) and no mortgage loan is in violation of, or
classified as a “high cost,” “threshold,” “predatory” or
similar loan under, any other applicable state, federal or
local law;
	 
	(K)	 	no Mortgage Loan originated on or after October
1, 2002 but before or on March 7, 2003 will be secured by
property located in the State of Georgia and no mortgage loan
originated on or after March 7, 2003 is a “high cost home
loan” as defined under the Georgia Fair Lending Act;
	 
	(L)	 	any Mortgage Loan originated on or after
November 27, 2003, which is secured by an owner-occupied
property located in the State of New Jersey, will be a
purchase money home loan, and no Mortgage Loan originated on
or after November 27, 2003, which is secured by
owner-occupied property located in the State of New Jersey,
will be a “covered” loan, “high cost” loan or a home
improvement loan or be secured by manufactured housing;
	 
	(M)	 	the weighted average Stated Documentation and
No Ratio Documentation percentage must not exceed 50.00%;
and
	 
	(N)	 	all of the Group I Subsequent Mortgage Loans
will conform with Freddie Mac Guidelines.

     Any of the requirements set forth in clauses (ii) and (iii) above
may be waived or modified in any respect with the consent of the
Certificate Insurer and the Rating Agencies.

     (iv) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Unaffiliated Seller shall satisfy the
document delivery requirements set forth in Section 2.01(b).

     (d) The Depositor does hereby establish, pursuant to the further
provisions of the Agreement and the laws of the State of New York, an express
trust (the “Trust”) to be known, for convenience, as “CDC MORTGAGE CAPITAL
TRUST 2004-HE2” and Deutsche Bank National Trust Company is hereby appointed as
Trustee in accordance with the provisions of this Agreement. The parties
hereto acknowledge and agree that it is the policy and intention

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of the Trust
to acquire only Mortgage Loans meeting the requirements set forth in this
Agreement.

     (e) The Trust shall have the capacity, power and authority, and the
Trustee on behalf of the Trust is hereby authorized, to accept the sale,
transfer, assignment, set over and conveyance by the Depositor to the Trust of
all the right, title and interest of the Depositor in and to the Trust Fund
(including, without limitation, the Mortgage Loans) pursuant to Section
2.01(a).

     Section 2.02 Acceptance by the Trustee of the Mortgage Loans.

     The Trustee shall acknowledge, on each Delivery Date, receipt of the
documents identified in the Initial Certification in the form annexed hereto as
Exhibit F, and declares that it holds and will hold such documents and the
other documents delivered to it pursuant to Section 2.01, and that it holds or
will hold such other assets as are included in the Trust Fund, in trust for the
exclusive use and benefit of all present and future Certificateholders and the
Certificate Insurer. The Trustee acknowledges that it will maintain possession
of the related Mortgage Notes in the State of California, unless otherwise
permitted by the Rating Agencies and the Certificate Insurer.

     In connection with each Delivery, the Trustee shall deliver via facsimile
(with original to follow the next Business Day) to the Depositor, the
Unaffiliated Seller, the Servicer and the Certificate Insurer an Initial
Certification on or prior to the related Delivery Date, certifying receipt of
the related Mortgage Notes and Assignments of Mortgage for each related
Mortgage Loan. The Trustee shall not be responsible to verify the validity,
sufficiency or genuineness of any document in any Custodial File.

     Within 120 days after the related Delivery Date, the Trustee shall
ascertain that all documents required to be reviewed by it are in its
possession, and shall deliver to the Depositor, the Unaffiliated Seller, the
Servicer and the Certificate Insurer a Final Certification to the effect that,
as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as an exception and not covered by such certification): (i) all
documents required to be reviewed by it are in its possession; (ii) such
documents have been reviewed by it and appear regular on their face and relate to
such Mortgage Loan; (iii) based on its examination and only as to the foregoing
documents, the information set forth in items (1), (2) and (18) of the Mortgage
Loan Schedule and items (1), (9) and (17) of the Data Tape Information
respecting such Mortgage Loan is correct; (iv) each Mortgage Note has been
endorsed as provided in Section 2.01 of this Agreement; and (v) with respect to
each MERS Designated Loan, the Trustee, on behalf of the Trust Fund, is the
beneficial owner of such MERS Designated Loan on the MERS System. The Trustee
shall not be responsible to verify the validity, sufficiency or genuineness of
any document in any Custodial File. Upon receipt of such Final Certification,
if the Depositor, the Unaffiliated Seller or the Certificate Insurer determines
that any noncompliance identified by the Trustee is a breach of a
representation or warranty relating to such Mortgage Loan, such party shall
give written notice to the Trustee thereof.

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     The Trustee shall retain possession and custody of each Custodial File in
accordance with and subject to the terms and conditions set forth herein. The
Servicer shall promptly deliver to the Trustee, upon the execution or receipt
thereof, the originals of such other documents or instruments constituting the
Custodial File as come into the possession of the Servicer from time to time.

     Section 2.03 Representations, Warranties and Covenants of the Unaffiliated
Seller and the Servicer.

     (a) The Servicer hereby makes the representations and warranties set forth
in (i) Schedule II hereto to the Depositor, the Unaffiliated Seller, the
Certificate Insurer and the Trustee and (ii) Schedule IIA hereto to the
Unaffiliated Seller and the Certificate Insurer, in each case, as of the
Closing Date, and with respect to Subsequent Mortgage Loans, as of the related
Subsequent Transfer Date; provided, however, that in the case of clause (ii),
the Servicer only makes representations and warranties with respect to those
Mortgage Loans on Schedule IA hereto for which the Servicing Transfer Date has
occurred prior to the Closing Date or the related Subsequent Transfer Date, as
applicable.

     (b) CDC Mortgage Capital Inc., in its capacity as the Unaffiliated Seller,
hereby makes the representations and warranties set forth in Schedule III
hereto to the Depositor, the Trustee and the Certificate Insurer, as of the
Closing Date.

     (c) It is understood and agreed by the Servicer and the Unaffiliated
Seller that the representations and warranties set forth in Section 2.03 shall
survive the transfer of the Mortgage Loans to the Trust Fund, and shall inure
to the benefit of the Trust Fund notwithstanding any restrictive or qualified
endorsement on any Mortgage Note or Assignment of Mortgage or the examination
or failure to examine any Mortgage File. Upon discovery by any of the
Depositor, the Unaffiliated Seller, the Certificate Insurer, the Trustee or the
Servicer of a breach by the Unaffiliated Seller of any of the foregoing
representations or any of the representations and warranties made pursuant to
Sections 3.01(f), 3.01(h), 3.01(n), 3.01(p) or 3.03 of the Unaffiliated
Seller’s Agreement or by any Originator of the representations and warranties
made pursuant to the related Assignment and Recognition Agreement, the party discovering such breach
shall give prompt written notice to the others.

     (d) Within 90 days of the earlier of either discovery by or notice to the
Unaffiliated Seller of any breach of a representation or warranty set forth in
Section 3.01(f), 3.01(h), 3.01(n), 3.01(p) or 3.03 of the Unaffiliated Seller’s
Agreement that materially and adversely affects the value of the Mortgage Loans
or the interest of the Trustee, the Certificate Insurer or the
Certificateholders therein, the Unaffiliated Seller shall use its best efforts
to cure such breach in all material respects and, if such breach cannot be
remedied, the Unaffiliated Seller shall, (i) if such 90-day period expires
prior to the second anniversary of the related Delivery Date, remove such
Mortgage Loan from the Trust Fund and substitute in its place a Substitute
Mortgage Loan, in the manner and subject to the conditions set forth in this
Section 2.03; or (ii) repurchase such Mortgage Loan at the Repurchase Price;
provided, however, that any such substitution pursuant to (i) above shall not
be effected prior to the delivery to the Trustee of the Opinion of Counsel
required by Section 2.05, if any, and a Request for Release

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substantially in
the form of Exhibit K, and the Mortgage File for any such Substitute Mortgage
Loan.

     With respect to any Substitute Mortgage Loan or Loans, the Unaffiliated
Seller shall deliver to the Trustee for the benefit of the Certificateholders
the Mortgage Note, the Mortgage, the related Assignment of the Mortgage, and
such other documents and agreements as are required by Section 2.01, with the
Mortgage Note endorsed and the Mortgage assigned as required by Section 2.01.
No substitution is permitted to be made in any calendar month after the
Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the Due Period of substitution shall not be part
of the Trust Fund and will be retained by the related Originator on the next
succeeding Distribution Date. For the Due Period of substitution,
distributions to Certificateholders will include the Scheduled Payment due on
any Deleted Mortgage Loan for such Due Period and thereafter the related
Originator shall be entitled to retain all amounts received in respect of such
Deleted Mortgage Loan.

     For any month in which the Unaffiliated Seller substitutes one or more
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer
will determine the amount (if any) by which the aggregate principal balance of
all such Substitute Mortgage Loans as of the date of substitution is less than
the aggregate Stated Principal Balance of all such Deleted Mortgage Loans
(after application of the scheduled principal portion of the Scheduled Payments
due in the Due Period of substitution). The Unaffiliated Seller shall deposit
the amount of such shortage (the “Substitution Adjustment Amount”) plus, an
amount equal to the aggregate of any unreimbursed Advances and accrued and
unpaid Servicing Fees with respect to such Deleted Mortgage Loans into the
Collection Account on or before the Remittance Date for the Distribution Date
in the month succeeding the calendar month during which the related Mortgage
Loan became required to be purchased or replaced hereunder.

     Upon discovery that any document does not comply with the requirements set
forth in clauses (i) through (iv) of the Trustee’s review of the Custodial
Files pursuant to Section 2.02 or receipt of written notice of a breach of a
representation and warranty, the Trustee shall in turn promptly notify the
applicable Originator (with a copy to the Servicer, the Certificate Insurer and
the Unaffiliated Seller) in writing of such non-compliance or breach and request that the related Originator cure such
non-compliance or breach within the time period set forth in the applicable
Mortgage Loan Purchase Agreement (but in any event, within 60 days from the
date the related Originator is notified of such non-compliance or breach) and
if the related Originator does not cure such non-compliance or breach in all
material respects during such period, the Trustee shall notify such Originator
to repurchase such Mortgage Loan from the Trust Fund at the Repurchase Price.
In the event the Trustee receives written notice of a breach by any Originator
of a representation and warranty that is subject to an automatic sixty-day
repurchase obligation pursuant to Section 9.03 of the related Mortgage Loan
Purchase Agreement, which representations and warranties relate to Prepayment
Fees, Predatory Lending Regulations, Single Premium Credit Insurance, the
Georgia Fair Lending Act, the Fair Credit Reporting Act, New York State Banking
Law or failure of a Mortgage Loan to constitute a “qualified mortgage” within
the meaning of Section 860G(a)(3) of the Code, the Trustee shall notify such
Originator to repurchase the Mortgage Loan at the Repurchase Price within sixty
(60) days of such Originator’s receipt of such notice.

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          (e) Upon delivery of the Final Certification with respect to each Mortgage
Loan, the Trustee will notify the related Originator within 5 Business Days of
such delivery of any missing documents from the Custodial File and if the
related Originator does not deliver such missing documents within 60 days from
the date the related Originator is notified of such noncompliance or breach,
the Trustee shall notify such Originator to repurchase such Mortgage Loan from
the Trust Fund at the Repurchase Price.

          (f) Based solely on information received with respect to any Substitute
Mortgage Loan from the Unaffiliated Seller or the related Originator, as
applicable, the Servicer shall amend the Mortgage Loan Schedule to reflect the
removal of such Deleted Mortgage Loan and the substitution of the Substitute
Mortgage Loan or Loans and the Servicer shall deliver the amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, the Substitute Mortgage Loan
or Loans shall be subject to the terms of this Agreement in all respects, and
the Unaffiliated Seller shall be deemed to have made with respect to such
Substitute Mortgage Loan or Loans, as of the date of substitution, the
representations and warranties made pursuant to Sections 3.01(f), 3.01(h),
3.01(n), 3.01(p) and 3.03 of the Unaffiliated Seller’s Agreement with respect
to such Mortgage Loan. Upon any such substitution and the deposit to the
Collection Account of the amount required to be deposited therein in connection
with such substitution as described in the following paragraph, the Trustee
shall release the Mortgage File relating to such Deleted Mortgage Loan to the
Unaffiliated Seller or the related Originator, as applicable, and shall execute
and deliver at the Unaffiliated Seller’s or related Originator’s direction, as
applicable, such instruments of transfer or assignment prepared by such party,
in each case without recourse, as shall be necessary to vest title in the
Unaffiliated Seller or the related Originator, or its designee, as applicable,
the Trustee’s interest in any Deleted Mortgage Loan substituted for pursuant to
this Section 2.03.

          (g) In the event that the Unaffiliated Seller or the related Originator,
as applicable, shall have repurchased a Mortgage Loan, the Repurchase Price
therefor shall be deposited in the Collection Account pursuant to Section 3.10
on or before the Remittance Date for the Distribution Date in the month
following the month during which the Unaffiliated Seller or the related
Originator, as applicable, became obligated hereunder to repurchase or replace
such Mortgage Loan and upon such deposit of the Repurchase Price, the delivery
of the Opinion of Counsel required by Section 2.05 and receipt of a Request for
Release in the form of Exhibit K hereto, the Trustee shall release the related
Custodial File to such Person as directed by the Servicer, and the Trustee
shall execute and deliver at such Person’s direction such instruments of
transfer or assignment prepared by such Person, in each case without recourse,
as shall be necessary to transfer title from the Trustee. It is understood and
agreed that the obligation under this Agreement of any Person to cure,
repurchase or replace any Mortgage Loan as to which a breach has occurred and
is continuing shall constitute the sole remedy against such Persons respecting
such breach available to Certificateholders, the Depositor, the Unaffiliated
Seller, the Certificate Insurer or the Trustee on their behalf. In the event
such required repurchase or replacement does not occur, the Trustee shall take
such actions as directed upon written direction from the Depositor or the
Certificate Insurer and the provision of reasonable indemnity satisfactory to
the Trustee in accordance with Sections 6.03 and 8.02.

          (h) If the Unaffiliated Seller is required to repurchase or replace a
Mortgage Loan pursuant to the terms hereof, upon receipt by the Trustee of
written direction from the

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Unaffiliated Seller and either the related Repurchase Price or Substitute
Mortgage Loan, as applicable, the Trustee shall assign to the Unaffiliated
Seller its rights under the related Mortgage Loan Purchase Agreement solely
with respect to such Mortgage Loan by an assignment in form and substance
mutually satisfactory to the Unaffiliated Seller and the Trustee.

          (i) The representations and warranties made pursuant to this Section 2.03
shall survive delivery of the respective Custodial Files to the Trustee.

          Section 2.04 The Depositor and the Mortgage Loans.

          The Depositor hereby represents and warrants to the Trustee and to the
Certificate Insurer with respect to each Mortgage Loan as of the date hereof or
such other date set forth herein that as of the related Delivery Date, and
following the transfer of the Mortgage Loans to it by the Unaffiliated Seller,
the Depositor had good title to the Mortgage Loans and the Mortgage Notes were
subject to no offsets, defenses or counterclaims.

          The Depositor hereby assigns, transfers and conveys to the Trustee all of
its rights with respect to the Initial Mortgage Loans and shall, on each
subsequent Transfer Date, convey all of its right, title and interest with
respect to the related subsequent Mortgage Loans.

          Section 2.05 Delivery of Opinion of Counsel in Connection with
Substitutions and Non-Qualified Mortgages.

          Notwithstanding any contrary provision of this Agreement, no substitution
pursuant to Section 2.03 shall be made more than 30 days after the related
Delivery Date unless the Unaffiliated Seller delivers, or causes the related
Originator to deliver, as applicable, to the Trustee an Opinion of Counsel, at
the expense of the Unaffiliated Seller or the related Originator, as
applicable, addressed to the Trustee, to the effect that such substitution will
not (i) result in the imposition of the tax on “prohibited transactions” on the
Trust Fund or contributions after the Startup Day, as defined in Sections
860F(a)(2) and 860G(d) of the Code, respectively, or (ii) cause the Trust Fund
to fail to qualify as one or more REMICs at any time that any Certificates are
outstanding.

          Section 2.06 Execution and Delivery of Certificates.

          The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates, and for the benefit of the Certificate Insurer.

          Section 2.07 REMIC Matters.

          The Preliminary Statement sets forth the designations for federal income
tax purposes of all interests created hereby. The “Startup Day” for purposes
of the REMIC Provisions shall be the Closing Date. The “latest possible
maturity date” is July 26, 2034, which is the sixth Distribution Date following
the latest Mortgage Loan maturity date.

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          Section 2.08 Representations and Warranties of the Depositor.

          The Depositor hereby represents, warrants and covenants to the Trustee,
the Servicer and to the Certificate Insurer that as of the date of this
Agreement or as of such date specifically provided herein:

          (a) The Depositor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware;

          (b) The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by, this Agreement;

          (c)This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes or will constitute the legal, valid and binding
agreement of the Depositor, enforceable against the Depositor in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);

          (d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any of the transactions
contemplated hereby, except as have been made on or prior to the Closing Date;

          (e) None of the execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby or thereby, or the fulfillment of or
compliance with the terms and conditions of this Agreement, (i) conflicts or
will conflict with or results or will result in a breach of, or constitutes or
will constitute a default or results or will result in an acceleration under
(A) the charter or by-laws of the Depositor, or (B) of any term, condition or
provision of any material indenture, deed of trust, contract or other agreement
or instrument to which the Depositor or any of its subsidiaries is a party or
by which it or any of its subsidiaries is bound; (ii) results or will result in
a violation of any law, rule, regulation, order, judgment or decree applicable
to the Depositor of any court or governmental authority having jurisdiction
over the Depositor or its subsidiaries; or (iii) results in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans;

          (f) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of the Depositor,
threatened, before any court, administrative agency or other tribunal, and no
notice of any such action, which, in the Depositor’s reasonable judgment, might
materially and adversely affect the performance by the Depositor of its
obligations under this Agreement, or the validity or enforceability of this
Agreement;

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          (g) The Depositor is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal
or governmental agency that may materially and adversely affect its performance
hereunder; and

          (h) Immediately prior to the transfer and assignment by the Depositor to
the Trustee, the Depositor had, or, with respect to the subsequent Mortgage
Loans, will have, good title to, and was, or will be, the sole owner of each
Mortgage Loan, free of any interest of any other Person, and the Depositor has
transferred, or shall transfer, all right, title and interest in each Mortgage
Loan to the Trustee. The transfer of the Mortgage Note and the Mortgage as and
in the manner contemplated by this Agreement is sufficient either (i) fully to
transfer to the Trustee, for the benefit of the Certificateholders and for the
benefit of the Certificate Insurer, all right, title, and interest of the
Depositor thereto as note holder and mortgagee or (ii) to grant to the Trustee,
for the benefit of the Certificateholders and for the benefit of the
Certificate Insurer, the security interest referred to in Section 10.04.

          It is understood and agreed that the representations, warranties and
covenants set forth in this Section 2.08 shall survive delivery of the
respective Custodial Files to the Trustee or to a custodian, as the case may
be, and shall inure to the benefit of the Trustee.

ARTICLE III

ADMINISTRATION AND SERVICING

OF MORTGAGE LOANS

          Section 3.01 Servicer to Service Mortgage Loans.

          (a)For and on behalf of the Certificateholders, and for the benefit of
the Certificate Insurer, the Servicer shall service and administer the Mortgage
Loans in accordance with the terms of this Agreement and the respective
Mortgage Loans and, to the extent consistent with such terms, in the same
manner in which it services and administers similar mortgage loans for its own
portfolio, giving due consideration to customary and usual standards of
practice of prudent mortgage lenders and loan servicers administering similar
mortgage loans but without regard to:

     (i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the related
Mortgagor;

     (ii) the ownership or non-ownership of any Certificate by the
Servicer or any Affiliate of the Servicer;

     (iii) the Servicer’s obligation to make P&I Advances or Servicing
Advances; or

     (iv) the Servicer’s or any Subservicer’s right to receive
compensation for its services hereunder or with respect to any particular
transaction.

          To the extent consistent with the foregoing, the Servicer shall seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only

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to the above-described servicing standards and the terms of this Agreement
and of the respective Mortgage Loans, the Servicer shall have full power and
authority, acting alone or through Subservicers as provided in Section 3.02, to
do or cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer in its own name or in the name of a
Subservicer is hereby authorized and empowered by the Trustee when the Servicer
believes it appropriate in its best judgment in accordance with the servicing
standards set forth above, to execute and deliver 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 the
Mortgaged Properties and to institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure so as to convert the ownership of such properties,
and to hold or cause to be held title to such properties, on behalf of the
Trustee. The Servicer shall service and administer the Mortgage Loans in
accordance with applicable state and federal law and shall provide to the
Mortgagors any reports required to be provided to them thereby. The Servicer
covenants that its computer and other systems used in servicing the Mortgage
Loans operate in a manner such that the Servicer can service the Mortgage Loans
in accordance with the terms of this Agreement. The Servicer shall also comply
in the performance of this Agreement with all reasonable rules and requirements
of each insurer under any standard hazard insurance policy. Subject to Section
3.15, the Trustee shall execute, at the written request of the Servicer, and
furnish to the Servicer and any Subservicer such documents as are necessary or
appropriate to enable the Servicer or any Subservicer to carry out their
servicing and administrative duties hereunder, and the Trustee hereby grants to
the Servicer, and this Agreement shall constitute, a power of attorney to carry
out such duties including a power of attorney to take title to Mortgaged
Properties after foreclosure on behalf of the Trustee. The Trustee shall
execute a separate power of attorney in favor of the Servicer for the purposes
described herein to the extent necessary or desirable to enable the Servicer to
perform its duties hereunder. The Trustee shall not be liable for the actions
of the Servicer or any Subservicers under such powers of attorney.

          (b) Subject to Section 3.09(b), in accordance with the standards of the
preceding paragraph, the Servicer shall advance or cause to be advanced funds
as necessary for the purpose of effecting the timely payment of taxes and
assessments on the Mortgaged Properties, which advances shall be Servicing
Advances reimbursable in the first instance from related collections from the
Mortgagors pursuant to Section 3.09(b), and further as provided in Section
3.11. Any cost incurred by the Servicer or by Subservicers in effecting the
timely payment of taxes and assessments on a Mortgaged Property shall not be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit.

          (c) Notwithstanding anything in this Agreement to the contrary, the
Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.01) and the Servicer shall not (i) permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan (except for a reduction of interest payments resulting from the
application of the Servicemembers Civil Relief Act or any similar state
statutes) or (ii) permit any modification, waiver or amendment of any term of
any Mortgage Loan that would both (A) effect an exchange or reissuance of such
Mortgage Loan under Section 1001 of the Code (or final, temporary or

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proposed Treasury regulations promulgated thereunder) and (B) cause any
REMIC to fail to qualify as a REMIC under the Code or the imposition of any tax
on “prohibited transactions” or “contributions after the startup day” under the
REMIC Provisions, or (iii) except as provided in Section 3.07(a), waive any
Prepayment Charges.

          (d) The Servicer may delegate its responsibilities under this Agreement;
provided, however, that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this Agreement.

          Section 3.02 Subservicing Agreements Between the Servicer and
Subservicers.

          (a) Subject to the consent of the Certificate Insurer (so long as no
Certificate Insurer Default has occurred and is continuing), which consent
shall not be unreasonably withheld, the Servicer may enter into subservicing
agreements with Subservicers (each, a “Subservicer”), for the servicing and
administration of the Mortgage Loans.

          Unless otherwise approved by the Certificate Insurer (so long as no
Certificate Insurer Default has occurred and is continuing), each Subservicer
shall be (i) authorized to transact business in the state or states in which
the related Mortgaged Properties it is to service are situated, if and to the
extent required by applicable law to enable the Subservicer to perform its
obligations hereunder and under the Subservicing Agreement, (ii) an institution
approved as a mortgage loan originator by the Federal Housing Administration or
an institution that has deposit accounts insured by the FDIC and (iii) a
Freddie Mac or Fannie Mae approved mortgage servicer. Each Subservicing
Agreement must impose on the Subservicer requirements conforming to the
provisions set forth in Section 3.08 and provide for servicing of the Mortgage
Loans consistent with the terms of this Agreement. The Servicer will examine
each Subservicing Agreement and will be familiar with the terms thereof. The
terms of any Subservicing Agreement will not be inconsistent with any of the
provisions of this Agreement. The Servicer and the Subservicers may enter into
and make amendments to the Subservicing Agreements or enter into different
forms of Subservicing Agreements; provided, however, that any such amendments
or different forms shall be consistent with and not violate the provisions of
this Agreement, and that no such amendment or different form shall be made or
entered into which could be reasonably expected to be materially adverse to the
interests of the Trustee, without the consent of the Trustee. Any variation
without the consent of the Trustee from the provisions set forth in Section
3.08 relating to insurance or priority requirements of Subservicing Accounts,
or credits and charges to the Subservicing Accounts or the timing and amount of
remittances by the Subservicers to the Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Servicer shall
deliver to the Trustee, the Unaffiliated Seller, the Certificate Insurer and
the Depositor copies of all Subservicing Agreements, and any amendments or
modifications thereof, promptly upon the Servicer’s execution and delivery of
such instruments.

          (b) As part of its servicing activities hereunder, the Servicer (except as
otherwise provided in the last sentence of this paragraph), for the benefit of
the Trustee, shall enforce the obligations of each Subservicer under the
related Subservicing Agreement, including, without limitation, any obligation
to make advances in respect of delinquent payments as required by a
Subservicing Agreement. Such enforcement, including, without limitation, the

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legal prosecution of claims, termination of Subservicing Agreements, and
the pursuit of other appropriate remedies, shall be in such form and carried
out to such an extent and at such time as the Servicer, in its good faith
business judgment, would require were it the owner of the related Mortgage
Loans. The Servicer shall pay the costs of such enforcement at its own
expense, and shall be reimbursed therefor only (i) from a general recovery
resulting from such enforcement, to the extent, if any, that such recovery
exceeds all amounts due in respect of the related Mortgage Loans or (ii) from a
specific recovery of costs, expenses or attorneys’ fees against the party
against whom such enforcement is directed.

          Section 3.03 Successor Subservicers.

          The Servicer shall be entitled to terminate any Subservicing Agreement and
the rights and obligations of any Subservicer pursuant to any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement. In the event of termination of any Subservicer, all servicing
obligations of such Subservicer shall be assumed simultaneously by the Servicer
without any act or deed on the part of such Subservicer or the Servicer, and
the Servicer either shall service directly the related Mortgage Loans or shall
enter into a Subservicing Agreement with a successor Subservicer which
qualifies under Section 3.02.

          Any Subservicing Agreement shall include the provision that such agreement
may be immediately terminated by the Depositor or the Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Servicer
shall, for any reason, no longer be the Servicer (including termination due to
an Event of Default).

          Section 3.04 Liability of the Servicer.

          Notwithstanding any Subservicing Agreement, any of the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Trustee for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of Section 3.01 without diminution of such obligation or liability
by virtue of such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. The Servicer shall be entitled to enter into any agreement
with a Subservicer for indemnification of the Servicer by such Subservicer and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.

          Section 3.05 No Contractual Relationship Between Subservicers and the
Trustee.

          Any Subservicing Agreement that may be entered into and any transactions
or services relating to the Mortgage Loans involving a Subservicer in its
capacity as such shall be deemed to be between the Subservicer and the Servicer
alone, and the Trustee (or any successor Servicer) shall not be deemed a party
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Subservicer except as set forth in Section 3.06. The
Servicer

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shall be solely liable for all fees owed by it to any Subservicer,
irrespective of whether the Servicer’s compensation pursuant to this Agreement
is sufficient to pay such fees.

          Section 3.06 Assumption or Termination of Subservicing Agreements by
Trustee.

          In the event the Servicer at any time shall for any reason no longer be
the Servicer (including by reason of the occurrence of a Event of Default), the
Trustee or its designee shall thereupon assume all of the rights and
obligations of the Servicer under each Subservicing Agreement that the Servicer
may have entered into, with copies thereof provided to the Trustee prior to the
Trustee assuming such rights and obligations, unless the Trustee elects to
terminate any Subservicing Agreement in accordance with its terms as provided
in Section 3.03.

          Upon such assumption, the Trustee, its designee or the successor servicer
shall be deemed, subject to Section 3.03, to have assumed all of the Servicer’s
interest therein and to have replaced the Servicer as a party to each
Subservicing Agreement to the same extent as if each Subservicing Agreement had
been assigned to the assuming party, except that (i) the Servicer shall not
thereby be relieved of any liability or obligations under any Subservicing
Agreement that arose before it ceased to be the Servicer and (ii) none of the
Depositor, the Trustee, their designees or any successor Servicer shall be
deemed to have assumed any liability or obligation of the Servicer that arose
before it ceased to be the Servicer.

          The Servicer at its expense shall, upon request of the Trustee, deliver to
the assuming party all documents and records relating to each Subservicing
Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by or on behalf of it, and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.

          Section 3.07 Collection of Certain Mortgage Loan Payments; Establishment
of Certain Accounts.

          (a) The 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 and the
terms and provisions of any applicable Insurance Policies, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing and Accepted Servicing Practices, the Servicer may (i) waive any
late payment charge or, if applicable, any penalty interest, or (ii) extend the
due dates for the Scheduled Payments due on a Mortgage Note for a period of not
greater than 180 days; provided that any extension pursuant to clause (ii)
above shall not affect the amortization schedule of any Mortgage Loan for
purposes of any computation hereunder, except as provided below. In the event
of any such arrangement pursuant to clause (ii) above, the Servicer shall make
timely advances on such Mortgage Loan during such extension pursuant to Section
4.01 and in accordance with the amortization schedule of such Mortgage Loan
without modification thereof by reason of such arrangements, subject to Section
4.01(d) pursuant to which the Servicer shall not be required to make any such
advances that are Nonrecoverable P&I Advances. Notwithstanding the foregoing,
the Servicer may not waive, in whole or in part, a Prepayment

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Charge, except under the following circumstances: (i) such waiver relates
to a default or a reasonably foreseeable default and would, in the reasonable
judgment of the Servicer, maximize recovery of total proceeds taking into
account the value of such Prepayment Charge and the related Mortgage Loan, and
doing so is standard and customary in servicing mortgage loans similar to the
Mortgage Loans (including any waiver of a Prepayment Charge in connection with
a refinancing of a Mortgage Loan that is related to a default or a reasonably
foreseeable default), and in no event will the Servicer waive a Prepayment
Charge in connection with a refinancing of a Mortgage Loan that is not related
to a default or a reasonably foreseeable default or (ii) such Prepayment Charge
is not permitted to be collected by applicable law. If a Prepayment Charge is
waived other than as permitted by the prior sentence, then the Servicer is
required to pay the amount of such waived Prepayment Charge, for the benefit of
the Holders of the Class P Certificates, by depositing such amount into the
Collection Account together with and at the time that the amount prepaid on the
related Mortgage Loan is required to be deposited into the Collection Account.
Notwithstanding any provision in this Agreement to the contrary, in the event
the Prepayment Charge payable under the terms of the Mortgage Note is less than
the amount of the Prepayment Charge set forth in the Mortgage Loan Schedule or
other information provided to the Servicer, the Servicer shall not have any
liability or obligation with respect to such difference, and in addition shall
not have any liability or obligation to pay the amount of any uncollected
Prepayment Charge if the failure to collect such amount is the direct result of
inaccurate or incomplete information on the Mortgage Loan Schedule.

          (b)(i) The Trustee shall establish and maintain the Excess Reserve Fund
Account, on behalf of the Class X Certificateholders to receive any Basis Risk
Payment and any Interest Rate Cap Payments and, to secure their limited
recourse obligation to pay to the LIBOR Certificateholders Basis Risk Carry
Forward Amounts.

        
      (ii) On each Distribution Date, the Trustee shall deposit the amount of
any Basis Risk Payment made for the benefit of the Certificateholders and any
Interest Rate Cap Payment made for the benefit of the LIBOR Certificates for
such date into the Excess Reserve Fund Account.

          (c) (i) On each Distribution Date on which there exists a Basis Risk Carry
Forward Amount on any Class of Certificates, the Trustee shall (1) withdraw
from the Distribution Account and deposit in the Excess Reserve Fund Account,
as set forth in Section 4.02(a)(iii)(P), the lesser of (a) the sum of (x) the
Class X Distributable Amount (without regard to the reduction in the definition
thereof with respect to the Basis Risk Payment) (to the extent remaining after
the distributions specified in Sections 4.02(a)(iii)(A)-(O), and (y) each
Interest Rate Cap Payment, if any, with respect to such Distribution Date, and
(b) the Basis Risk Carry Forward Amount and (2) withdraw from the Excess
Reserve Fund Account amounts necessary to pay to such Class or Classes of
Certificates the Basis Risk Carry Forward Amount. Such payments shall be
allocated to those Classes on a pro rata basis based upon the amount of Basis
Risk Carry Forward Amount owed to each such Class and shall be paid in the
priority set forth in Section 4.02(a)(iii)(Q).

             (ii) The Trustee shall account for the Excess Reserve Fund Account as an
outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h) and
not as an asset of any REMIC created pursuant to this Agreement. The
beneficial owner of the Excess

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Reserve Fund Account are the Class X Certificateholders. For all federal
tax purposes, amounts transferred by the Upper Tier REMIC to the Excess Reserve
Fund Account shall be treated as distributions by the Trustee to the Class X
Certificateholders.

               (iii) Any Basis Risk Carry Forward Amounts paid by the Trustee to the
LIBOR Certificateholders shall be accounted for by the Trustee as amounts paid
first to the Holders of the Class X Certificates and then to the respective
Class or Classes of LIBOR Certificates. In addition, the Trustee shall account
for the LIBOR Certificateholders’ rights to receive payments of Basis Risk
Carry Forward Amounts as rights in a limited recourse interest rate cap
contract written by the Class X Certificateholders in favor of the LIBOR
Certificateholders.

               (iv) Notwithstanding any provision contained in this Agreement, the
Trustee shall not be required to make any payments from the Excess Reserve Fund
Account except as expressly set forth in this Section 3.07(c) and Sections
4.02(a)(iii)(Q)-(R).

          (d) The Trustee shall establish and maintain the Distribution Account on
behalf of the Certificateholders. The Trustee shall, promptly upon receipt,
deposit in the Distribution Account and retain therein the following:

     (i)the aggregate amount remitted by the Servicer to the Trustee pursuant to Section 3.11;

     (ii)any amount deposited by the Servicer pursuant to Section 3.10 in connection with
any losses on Permitted Investments; and

     (iii)any other amounts deposited hereunder which are required to be deposited in the Distribution Account.

          In the event that the Servicer shall remit any amount not required to be remitted,
it may at any time direct the Trustee in writing to withdraw such amount from the Distribution Account,
any provision herein to the contrary notwithstanding. Such direction may be accomplished by delivering
notice to the Trustee which describes the amounts deposited in error in the Distribution Account.
All funds deposited in the Distribution Account shall be held by the Trustee in trust for the
Certificateholders until disbursed in accordance with this Agreement or withdrawn in accordance
with Section 4.02. In no event shall the Trustee incur liability for withdrawals from the
Distribution Account at the direction of the Servicer.

          (e) The Trustee shall establish and maintain the Capitalized Interest Account,
on behalf of the Certificateholders. On the Closing Date, the Trustee shall deposit
$588,758.30 into the Capitalized Interest Account from the proceeds of the sale of the
LIBOR Certificates. Withdrawals from the Capitalized Interest Account shall be made
in accordance with Sections 4.02(c) and (d). The Trustee shall account for the Capitalized
Interest Account as an outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h)
and not as an asset of any REMIC created pursuant to this Agreement.
The beneficial owner of the Capitalized Interest Account shall be the Unaffiliated Seller.

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          (f) The Trustee shall establish and maintain the Pre-Funding Accounts on
behalf of the Certificateholders. On the Closing Date, the Trustee shall
deposit the Group I Initial Pre-Funded Amount into the Group I Pre-Funding
Account and the Group II Initial Pre-Funded Amount into the Group II
Pre-Funding Account, in each case from the proceeds of the sale of the
LIBOR Certificates. Withdrawals from the Pre-Funding Accounts shall be
made in accordance with Sections 4.02(e) and (f).

          (g) The Servicer or the Trustee (if directed in writing by the Servicer)
may invest the funds in the Accounts with respect to the Collection
Account and the Distribution Account or by the Unaffiliated Seller,
with respect to the Pre-Funding Accounts and the Capitalized Interest
Account in each case, in Permitted Investments, which directions shall
be in accordance with Section 3.12. Amounts on deposit in the Excess
Reserve Fund Account shall not be invested.

          (h) The Servicer shall give prior written notice to the Trustee,
each Rating Agency and the Depositor of any proposed change of
the location of the Collection Account.

          (j) In order to comply with its duties under the U.S. Patriot Act,
the Trustee shall obtain and verify certain information and documentation
from the owners of the accounts that the Trustee establishes pursuant
to this Agreement including, but not limited to, each account owner’s name,
address and other identifying information.

          Section 3.08 Subservicing Accounts.

          In those cases where a Subservicer is servicing a Mortgage Loan pursuant
to a Subservicing Agreement, the Subservicer will be required to establish
and maintain one or more accounts (collectively, the “Subservicing Account”).
The Subservicing Account shall be an Eligible Account and shall otherwise
be acceptable to the Servicer. The Subservicer shall deposit in the
clearing account (which account must be an Eligible Account) in which
it customarily deposits payments and collections on mortgage loans in
connection with its mortgage loan servicing activities on a daily basis,
and in no event more than one Business Day after the Subservicer’s receipt
thereof, all proceeds of Mortgage Loans received by the Subservicer less
its servicing compensation to the extent permitted by the Subservicing Agreement,
and shall thereafter deposit such amounts in the Subservicing Account,
in no event more than two Business Days after the deposit of such funds into
the clearing account. The Subservicer shall thereafter deposit such proceeds
in the Collection Account or remit such proceeds to the Servicer for deposit in
the Collection Account not later than two Business Days after the deposit of such
amounts in the Subservicing Account. For purposes of this Agreement, the Servicer
shall be deemed to have received payments on the Mortgage Loans when the Subservicer
receives such payments.

          Section 3.09 Collection of Taxes, Assessments and Similar Items; Escrow Accounts.

          (a) The Servicer shall ensure that each of the Mortgage Loans
shall be covered by a paid-in-full, life-of-the-loan tax service
contract with a nationally recognized provider acceptable to the Servicer
(each, a “Tax Service Contract”). Each Tax Service Contract

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shall be assigned to the Trustee, or its designee, at the Servicer’s expense
in the event that the Servicer is terminated as Servicer of the related Mortgage Loan.

          (b) To the extent that the services described in this paragraph (b) are not otherwise provided
pursuant to the Tax Service Contracts described in paragraph (a) hereof, the Servicer undertakes
to perform such functions. The Servicer shall establish and maintain, or cause to be established
and maintained, one or more accounts (the “Escrow Accounts”), which shall be Eligible Accounts.
The Servicer shall deposit in the clearing account (which account must be an Eligible Account)
in which it customarily deposits payments and collections on mortgage loans in connection with
its mortgage loan servicing activities on a daily basis, and in no event more than one Business
Day after the Servicer’s receipt thereof, all collections from the Mortgagors (or related advances
from Subservicers) for the payment of taxes, assessments, hazard insurance premiums and comparable items
for the account of the Mortgagors (“Escrow Payments”) collected on account of the Mortgage Loans and shall
thereafter deposit such Escrow Payments in the Escrow Accounts, in no event more than two Business Days after
the deposit of such funds in the clearing account, for the purpose of effecting the payment of any such items
as required under the terms of this Agreement. Withdrawals of amounts from an Escrow Account may be made only
to (i) effect payment of taxes, assessments, hazard insurance premiums, and comparable items; (ii) reimburse
the Servicer (or a Subservicer to the extent provided in the related Subservicing Agreement) out
of related collections for any advances made pursuant to Section 3.01 (with respect to taxes and assessments)
and Section 3.13 (with respect to hazard insurance); (iii) refund to Mortgagors any sums
as may be determined to be overages; (iv) pay interest, if required and as described below, to
Mortgagors on balances in the Escrow Account, and the Servicer shall be entitled to withdraw
from the Escrow Account any interest earned and not required to be paid to Mortgagors; (v)
clear and terminate the Escrow Account at the termination of the Servicer’s obligations and
responsibilities in respect of the Mortgage Loans under this Agreement; or (vi) recover
amounts deposited in error. As part of its servicing duties, the Servicer or Subservicers
shall pay to the Mortgagors interest on funds in Escrow Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Escrow Accounts is insufficient,
to pay such interest from its or their own funds, without any reimbursement therefor. To the
extent that a Mortgage does not provide for Escrow Payments, the Servicer shall determine
whether any such payments are made by the Mortgagor in a manner and at a time that avoids
the loss of the Mortgaged Property due to a tax sale or the foreclosure of a tax lien.
The Servicer assumes full responsibility for the payment of all such bills within such
time and shall effect payments of all such bills irrespective of the Mortgagor’s faithful
performance in the payment of same or the making of the Escrow Payments and shall make advances
from its own funds to effect such payments; provided, however, that such advances are deemed to
be Servicing Advances.

          Section 3.10 Collection Account.

          (a) On behalf of the Trustee, the Servicer shall establish and maintain, or cause to be
established and maintained, one or more Eligible Accounts (such account or accounts, the “Collection Account”),
held in trust for the benefit of the Trustee entitled “Deutsche Bank National Trust Company on behalf of CDC
Mortgage Capital Trust 2004-HE2”. On behalf of the Trustee, the Servicer shall deposit or cause to be deposited
in the clearing account (which account must be an Eligible Account) in which it customarily deposits payments

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and collections on mortgage loans in connection with its mortgage loan servicing activities
on a daily basis, and in no event more than one Business Day after the Servicer’s receipt thereof,
and shall thereafter deposit in the Collection Account, in no event more than two Business Days
after the deposit of such funds into the clearing account, as and when received or as otherwise
required hereunder, the following payments and collections received or made by it subsequent
to the related Cut-off Date (other than in respect of principal or interest on the related
Mortgage Loans due on or before the related Cut-off Date, and except for $309,558.00 in interest,
which is being retained by the Unaffiliated Seller), or payments (other than Principal
Prepayments) received by it on or prior to the related Cut-off Date but allocable to
a Due Period subsequent thereto:

     (i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;

     (ii) all payments on account of interest (net of the related
Servicing Fee) on each Mortgage Loan;

     (iii) all Insurance Proceeds and Condemnation Proceeds to the extent
such Insurance Proceeds and Condemnation Proceeds are not to be applied
to the restoration of the related Mortgaged Property or released to the
related Mortgagor in accordance with the express requirements of law or
in accordance with Accepted Servicing Practices, and Liquidation
Proceeds;

     (iv) any amounts required to be deposited pursuant to Section 3.12
in connection with any losses realized on Permitted Investments with
respect to funds held in the Collection Account;

     (v) any amounts required to be deposited by the Servicer pursuant to
the second paragraph of Section 3.13(a) in respect of any blanket policy
deductibles;

     (vi) all proceeds of any Mortgage Loan repurchased or purchased in
accordance with this Agreement; and

     (vii) all Prepayment Charges collected by the Servicer.

          The foregoing requirements for deposit in the Collection Accounts shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges, NSF fees,
reconveyance fees, assumption fees and other similar fees and charges need not
be deposited by the Servicer in the Collection Account and shall, upon
collection, belong to the Servicer as additional compensation for its servicing
activities. In the event the Servicer shall deposit in the Collection Account
any amount not required to be deposited therein, it may at any time withdraw
such amount from the Collection Account, any provision herein to the contrary
notwithstanding.

          (b) Funds in the Collection Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. The
Servicer shall give notice to the Trustee and the Depositor of the location of
the Collection Account maintained by it when established and prior to any
change thereof.

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          Section 3.11 Withdrawals from the Collection Account.

          (a) The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.01:

     (i) On or prior to the Remittance Date, to remit to the Trustee the
Interest Remittance Amount and the Principal Remittance Amount in respect
of the related Distribution Date together with all amounts representing
Prepayment Charges from the Mortgage Loans received during the related
Prepayment Period;

     (ii) to reimburse the Servicer for unreimbursed P&I Advances, but
only to the extent of amounts received which represent Late Collections
(net of the related Servicing Fees) of Scheduled Payments on Mortgage
Loans with respect to which such P&I Advances were made in accordance
with the provisions of Section 4.01;

     (iii) to pay the Servicer or any Subservicer (a) any unpaid
Servicing Fees or (b) any unreimbursed Servicing Advances with respect to
each Mortgage Loan, but only to the extent of any Late Collections or
other amounts as may be collected by the Servicer from the related
Mortgagor, or otherwise received with respect to such Mortgage Loan (or
the related REO Property);

     (iv) to pay to the Servicer as servicing compensation (in addition
to the Servicing Fee) on the Remittance Date any interest or investment
income earned on funds deposited in the Collection Account;

     (v) to pay to the Unaffiliated Seller or the related Originator, as
applicable, with respect to each Mortgage Loan that has previously been
purchased or replaced by the Unaffiliated Seller or such Originator, as
applicable, pursuant to this Agreement, all amounts received thereon
subsequent to the date of purchase or substitution, as the case may be;

     (vi) to reimburse the Servicer for (a) any P&I Advance or Servicing
Advance previously made which the Servicer has determined to be a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance in
accordance with the provisions of Section 4.01 and (b) any unpaid
Servicing Fees to the extent not recoverable from Late Collections or
other amounts received with respect to the related Mortgage Loan under
Section 3.11(a)(iii); provided, that this clause (b) shall only apply
with respect to Servicing Fees to second lien Mortgage Loans;

     (vii) to pay, or to reimburse the Servicer for advances in respect
of, expenses incurred in connection with any Mortgage Loan pursuant to
Section 3.15;

     (viii) to reimburse the Servicer, the Depositor or the Trustee for
expenses incurred by or reimbursable to the Servicer, the Depositor or
the Trustee, as the case may be, pursuant to Section 6.03;

     (ix) to reimburse the Servicer, the Unaffiliated Seller, the
Depositor, the Certificate Insurer or the Trustee, as the case may be,
for expenses reasonably incurred in

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respect of the breach or defect giving rise to the repurchase
obligation under Section 2.03 of this Agreement that were included in the
Repurchase Price of the Mortgage Loan, including any expenses arising out
of the enforcement of the repurchase obligation to the extent not
otherwise paid pursuant to the terms hereof;

     (x) to withdraw any amounts deposited in the Collection Account in
error; and

     (xi) to clear and terminate the Collection Account upon termination
of this Agreement.

          (b) The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (a)(ii), (iii), (v), (vi), (vii), (viii) and (ix)
above. The Servicer shall provide written notification to the Trustee, on or
prior to the next succeeding Remittance Date, upon making any withdrawals from
the Collection Account pursuant to subclause (a)(vii) above.

          Section 3.12 Investment of Funds in the Accounts.

          (a) The Servicer may direct the investment of funds in the Collection
Account and may direct the Trustee to invest funds in the Distribution Account,
and the Unaffiliated Seller may direct the Trustee to invest the funds in the
Pre-Funding Accounts and the Capitalized Interest Account (each of such
Accounts, for purposes of this Section 3.12, an “Investment Account”), in one
or more Permitted Investments bearing interest or sold at a discount, and
maturing, unless payable on demand no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement. All such investment directions shall be in
writing and if the Trustee does not receive such written instructions no
investment shall be made. All such Permitted Investments shall be held to
maturity, unless payable on demand. Any investment of funds in an Investment
Account shall be made in the name of the Trustee. The Trustee shall be
entitled to sole possession (except with respect to investment direction of
funds held in the related Account and any income and gain realized thereon)
over each such investment, and any certificate or other instrument evidencing
any such investment shall be delivered directly to the Trustee or its agent,
together with any document of transfer necessary to transfer title to such
investment to the Trustee. In the event amounts on deposit in an Investment
Account are at any time invested in a Permitted Investment payable on demand,
the Trustee may:

	(x)	 	consistent with any notice required to be given
thereunder, demand that payment thereon be made on the last
day such Permitted Investment may otherwise mature hereunder
in an amount equal to the lesser of (1) all amounts then
payable thereunder and (2) the amount required to be withdrawn
on such date; and
	 
	(y)	 	demand payment of all amounts due thereunder that
such Permitted Investment would not constitute a Permitted
Investment in respect of funds thereafter on deposit in the
Investment Account.

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     (b) (i) All income and gain realized from the investment of funds
deposited in the Collection Account and the Distribution Account held by
or on behalf of the Servicer, shall be for the benefit of the Servicer
and shall be subject to its withdrawal in the manner set forth in Section
3.11 in the case of income in the Collection Account, and on each
Distribution Date, the Trustee shall withdraw from the Distribution
Account, and remit to the Servicer all amounts in respect of such income
and gain in the Distribution Account. Whether in regard to the
Collection Account or the Distribution Account, the Servicer shall
deposit in the Collection Account or the Distribution Account, as
applicable, the amount of any loss of principal incurred in respect of
any such Permitted Investment directed by the Servicer made with funds in
such accounts immediately upon realization of such loss.

        (ii) All income and gain realized from the investment of funds
deposited in the Pre-Funding Accounts and the Capitalized Interest
Account held by or on behalf of the Unaffiliated Seller shall be retained
in such Investment Account, subject to withdrawal as provided in Section
4.02. Whether in regard to the Pre-Funding Accounts or the Capitalized
Interest Account, the Unaffiliated Seller shall deposit in the
Pre-Funding Accounts or the Capitalized Interest Account, as applicable,
the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.

    
               (c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment,
or if a default occurs in any other performance required under any Permitted
Investment, the Trustee shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings. The Trustee shall not be liable for the amount of any
loss incurred in respect of any investment or lack of investment of funds held
in any Investment Account or the Distribution Account if made in accordance
with this Section 3.12.

          (d) The Trustee or its Affiliates are permitted to receive additional
compensation that could be deemed to be in the Trustee’s economic self-interest
for (i) serving as investment adviser, administrator, shareholder, servicing
agent, custodian or sub-custodian with respect to certain of the Permitted
Investments, (ii) using Affiliates to effect transactions in certain Permitted
Investments and (iii) effecting transactions in certain Permitted Investments.
Such compensation shall not be considered an amount that is reimbursable or
payable pursuant to this Agreement.

          Section 3.13 Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.

          (a) The Servicer shall cause to be maintained for each Mortgage Loan fire
insurance with extended coverage on the related Mortgaged Property in an amount
which is at least equal to the least of (i) the outstanding principal balance
of such Mortgage Loan, (ii) the amount necessary to fully compensate for any
damage or loss to the improvements that are a part of such property on a
replacement cost basis and (iii) the maximum insurable value of the
improvements which are a part of such Mortgaged Property, in each case in an
amount not less than such amount as is necessary to avoid the application of
any coinsurance clause contained in

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the related hazard insurance policy. The Servicer shall also cause to be
maintained fire insurance with extended coverage on each REO Property in an
amount which is at least equal to the lesser of (i) the maximum insurable value
of the improvements which are a part of such property and (ii) the outstanding
principal balance of the related Mortgage Loan at the time it became an REO
Property, plus accrued interest at the Mortgage Rate and related Servicing
Advances. The Servicer will comply in the performance of this Agreement with
all reasonable rules and requirements of each insurer under any such hazard
policies. Any amounts to be collected by the Servicer under any such policies
(other than amounts to be applied to the restoration or repair of the property
subject to the related Mortgage or amounts to be released to the Mortgagor in
accordance with the procedures that the Servicer would follow in servicing
loans held for its own account, subject to the terms and conditions of the
related Mortgage and Mortgage Note) shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 3.11. Any cost incurred by
the Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to the Trustee, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit. It is understood and agreed that no earthquake or
other additional insurance is to be required of any Mortgagor 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 Mortgaged
Property or REO Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards and flood insurance has been made available, the Servicer will cause to
be maintained a flood insurance policy in respect thereof. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid principal
balance of the related Mortgage Loan and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program).

          In the event that the Servicer shall obtain and maintain a blanket policy
with an insurer having a General Policy Rating of A:X or better in Best’s (or
such other rating that is comparable to such rating) insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first two sentences of this
Section 3.13, it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property or REO
Property a policy complying with the first two sentences of this Section 3.13,
and there shall have been one or more losses which would have been covered by
such policy, deposit to the Collection Account from its own funds the amount
not otherwise payable under the blanket policy because of such deductible
clause. In connection with its activities as administrator and servicer of the
Mortgage Loans, the Servicer agrees to prepare and present, on behalf of
itself, the Trustee claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.

          (b) The Servicer shall keep in force during the term of this Agreement a
policy or policies of insurance covering errors and omissions for failure in
the performance of the Servicer’s obligations under this Agreement, which
policy or policies shall be in such form and amount that would meet the
requirements of Fannie Mae or Freddie Mac if it were the purchaser of the
Mortgage Loans, unless the Servicer has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The Servicer shall also maintain a fidelity
bond in the form and amount that would meet the requirements of Fannie Mae or
Freddie Mac, unless the Servicer

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has obtained a waiver of such requirements from Fannie Mae or Freddie Mac.
The Servicer shall provide the Trustee with copies of any such insurance
policies and fidelity bond. The Servicer shall be deemed to have complied with
this provision if an Affiliate of the Servicer has such errors and omissions
and fidelity bond coverage and, by the terms of such insurance policy or
fidelity bond, the coverage afforded thereunder extends to the Servicer. Any
such errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days’ prior written notice to the Trustee. The
Servicer shall also cause each Subservicer to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements.

          Section 3.14 Enforcement of Due-On-Sale Clauses Assumption Agreements.

          The Servicer will, to the extent it has knowledge of any conveyance or
prospective conveyance of any Mortgaged Property by any Mortgagor (whether by
absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains or is to remain liable under the Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Mortgage Loan under the
“due-on-sale” clause, if any, applicable thereto; provided, however, that the
Servicer shall not be required to take such action if, in its sole business
judgment, the Servicer believes it is not in the best interests of the Trust
Fund and shall not exercise any such rights if prohibited by law from doing so.
If the Servicer reasonably believes it is unable under applicable law to
enforce such “due-on-sale” clause or if any of the other conditions set forth
in the proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Servicer is
also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note; provided that no such substitution shall be effective unless
such person satisfies the underwriting criteria of the Servicer, and such
substitution is in the best interest of the Certificateholders as determined by
the Servicer. In connection with any assumption, modification or substitution,
the Servicer shall apply such underwriting standards and follow such practices
and procedures as shall be normal and usual in its general mortgage servicing
activities and as it applies to other mortgage loans owned solely by it. The
Servicer shall not take or enter into any assumption and modification
agreement, however, unless (to the extent practicable in the circumstances) it
shall have received confirmation, in writing, of the continued effectiveness of
any applicable hazard insurance policy, or a new policy meeting the
requirements of this Section is obtained. Any fee collected by the Servicer in
respect of an assumption or substitution of liability agreement will be
retained by the Servicer as additional servicing compensation. In connection
with any such assumption, no material term of the Mortgage Note (including, but
not limited to, the related Mortgage Rate and the amount of the Scheduled
Payment) may be amended or modified, except as otherwise required pursuant to
the terms thereof. The Servicer shall notify the Trustee that any such
substitution, modification or assumption agreement has been completed by
forwarding to the Trustee the executed original of such substitution or
assumption agreement, which document shall be added to the related Mortgage
File and shall, for all purposes, be considered a part of such Mortgage File to
the same extent as all other documents and instruments constituting a part
thereof.

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          Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatsoever. For purposes of this Section 3.14, the term “assumption” is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.

          Section 3.15 Realization Upon Defaulted Mortgage Loans.

          The Servicer shall use its best efforts, consistent with Accepted
Servicing Practices, to foreclose upon or otherwise comparably convert (which
may include an acquisition of REO Property) the ownership of properties
securing such of the Mortgage Loans as come into and continue in default and as
to which no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Section 3.07, and which are not released from this
Agreement pursuant to any other provision hereof. The Servicer shall use
reasonable efforts to realize upon such defaulted Mortgage Loans in such manner
as will maximize the receipt of principal and interest by the Trustee, taking
into account, among other things, the timing of foreclosure proceedings. The
foregoing is subject to the provisions that, in any case in which Mortgaged
Property shall have suffered damage from an uninsured cause, the Servicer shall
not be required to expend its own funds toward the restoration of such property
unless it shall determine in its sole discretion (i) that such restoration will
increase the net proceeds of liquidation of the related Mortgage Loan to the
Trustee, after reimbursement to itself for such expenses, and (ii) that such
expenses will be recoverable by the Servicer through Insurance Proceeds,
Condemnation Proceeds or Liquidation Proceeds from the related Mortgaged
Property, as contemplated in Section 3.11. The Servicer shall be responsible
for all other costs and expenses incurred by it in any such proceedings;
provided, however, that it shall be entitled to reimbursement thereof from the
related property, as contemplated in Section 3.11.

          The proceeds of any liquidation or REO Disposition, as well as any
recovery resulting from a partial collection of Insurance Proceeds,
Condemnation Proceeds or Liquidation Proceeds or any income from an REO
Property, will be applied in the following order of priority: first, to
reimburse the Servicer or any Subservicer for any related unreimbursed
Servicing Advances, pursuant to Section 3.11 or 3.17; second, to reimburse the
Servicer for any related unreimbursed P&I Advances, pursuant to Section 3.11;
third, to accrued and unpaid interest on the Mortgage Loan or REO Imputed
Interest, at the Mortgage Rate, to the date of the liquidation or REO
Disposition, or to the Due Date prior to the Remittance Date on which such
amounts are to be distributed if not in connection with a liquidation or REO
Disposition and fourth, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery so allocated to interest is less than a full
recovery thereof, that amount will be allocated as follows: first, to unpaid
Servicing Fees; and second, as interest at the Mortgage Rate (net of the
Servicing Fee Rate). The portion of the recovery so allocated to unpaid
Servicing Fees shall be reimbursed to the Servicer or any Subservicer pursuant
to Section 3.11 or 3.17. The portions of the recovery so allocated to interest
at the Mortgage Rate (net of the Servicing Fee Rate) and to principal of the
Mortgage Loan shall be applied as follows: first, to reimburse the Servicer or
any Subservicer for any related unreimbursed Servicing Advances in accordance
with Section 3.11 or 3.17, and

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second, to the Trustee in accordance with the provisions of Section 4.02,
subject to the last paragraph of Section 3.17 with respect to certain excess
recoveries from an REO Disposition.

          Notwithstanding anything to the contrary contained herein, in connection
with a foreclosure or acceptance of a deed in lieu of foreclosure, in the event
the Servicer has received actual notice of, or has actual knowledge of the
presence of, hazardous or toxic substances or wastes on the related Mortgaged
Property, or if the Trustee otherwise requests, the Servicer shall cause an
environmental inspection or review of such Mortgaged Property to be conducted
by a qualified inspector. Upon completion of the inspection, the Servicer
shall promptly provide the Trustee with a written report of the environmental
inspection.

          After reviewing the environmental inspection report, the Servicer shall
determine how to proceed with respect to the Mortgaged Property. In the event
(a) the environmental inspection report indicates that the Mortgaged Property
is contaminated by hazardous or toxic substances or wastes and (b) the Servicer
determines to proceed with foreclosure or acceptance of a deed in lieu of
foreclosure, the Servicer shall be reimbursed for all reasonable costs
associated with such foreclosure or acceptance of a deed in lieu of foreclosure
and any related environmental clean-up costs, as applicable, from the related
Liquidation Proceeds, or if the Liquidation Proceeds are insufficient to fully
reimburse the Servicer, the Servicer shall be entitled to be reimbursed from
amounts in the Collection Account pursuant to Section 3.11 hereof. In the
event the Servicer determines not to proceed with foreclosure or acceptance of
a deed in lieu of foreclosure, the Servicer shall be reimbursed from general
collections for all Servicing Advances made with respect to the related
Mortgaged Property from the Collection Account pursuant to Section 3.11 hereof.

          Section 3.16 Release of Mortgage Files.

          (a) Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full shall be escrowed in a manner
customary for such purposes, the Servicer will, within five (5) Business Days
of the payment in full, notify the Trustee by a certification (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 3.10 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Custodial File. Upon receipt of such certification and Request for Release,
the Trustee shall promptly release the related Custodial File to the Servicer
within five (5) Business Days. No expenses incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to the
Collection Account.

          (b) From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, including, for this purpose, collection under any
Insurance Policy relating to the Mortgage Loans, the Trustee shall, upon
request of the Servicer and delivery to the Trustee, of a Request for Release,
release the related Custodial File to the Servicer, and the Trustee shall, at
the direction of the Servicer, execute such documents as shall be necessary to
the prosecution of any such proceedings and the Servicer shall retain the
Mortgage File in trust for the benefit of the Trustee. Such Request for
Release shall obligate the Servicer to return each and every document
previously requested from the Custodial File to the Trustee when the need
therefor by the Servicer no longer exists, unless the Mortgage Loan has been
liquidated and the Liquidation

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Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or the Mortgage File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by
law, for purposes of initiating or pursuing legal action or other proceedings
for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Servicer has delivered to the Trustee a certificate of
a Servicing Officer certifying as to the name and address of the Person to
which such Mortgage File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of a certificate of a Servicing
Officer stating that such Mortgage Loan was liquidated and that all amounts
received or to be received in connection with such liquidation that are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, a copy of the Request for
Release of documents shall be released by the Trustee to the Servicer or its
designee.

          Upon written certification of a Servicing Officer, the Trustee shall
execute and deliver to the Servicer any court pleadings, requests for trustee’s
sale or other documents reasonably necessary to the foreclosure or trustee’s
sale in respect of a Mortgaged Property or to any legal action brought to
obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or in
equity, or shall exercise and deliver to the Servicer a power of attorney
sufficient to authorize the Servicer to execute such documents on its behalf.
Each such certification shall include a request that such pleadings or
documents be executed by the Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Trustee will not invalidate or otherwise affect the lien of the
Mortgage, except for the termination of such a lien upon completion of the
foreclosure or trustee’s sale.

          Upon receipt of a Request for Release under this Section 3.16, the Trustee
shall deliver the related Custodial File to the Servicer by regular mail,
unless the Servicer requests that the Trustee deliver such Custodial File to
the Servicer by overnight courier (in which case such delivery shall be at the
Servicer’s expense). To the extent that the Servicer requires an overnight
courier for such delivery and incurs the related expense due to the Servicer
not having previously received copies of the documents required to be delivered
to the Servicer hereunder, the Unaffiliated Seller shall use commercially
reasonable efforts to assist the Servicer in causing the related Originator
pursuant to the related Mortgage Loan Purchase Agreement to reimburse the
Servicer for such expense.

          Section 3.17 Title, Conservation and Disposition of REO Property.

          (a) This Section shall apply only to REO Properties acquired for the
account of the Trustee and shall not apply to any REO Property relating to a
Mortgage Loan which was purchased or repurchased from the Trustee pursuant to
any provision hereof. In the event that title to any such REO Property is
acquired, the Servicer shall cause the deed or certificate of sale to be issued
in the name of the Trustee, on behalf of the Certificateholders.

          (b) The Servicer shall manage, conserve, protect and operate each REO
Property for the Trustee solely for the purpose of its prompt disposition and
sale. The Servicer, either itself or through an agent selected by the
Servicer, shall manage, conserve, protect and operate the REO Property in the
same manner that it manages, conserves, protects and operates

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other foreclosed property for its own account, and in the same manner that
similar property in the same locality as the REO Property is managed. The
Servicer shall attempt to sell the same (and may temporarily rent the same for
a period not greater than one year, except as otherwise provided below) on such
terms and conditions as the Servicer deems to be in the best interest of the
Trustee. The Servicer shall notify the Trustee from time to time as to the
status of each REO Property.

          (c) [Reserved].

          (d) [Reserved].

          (e) The Servicer shall segregate and hold all funds collected and received
in connection with the operation of any REO Property separate and apart from
its own funds and general assets and shall deposit such funds in the Collection
Account.

          (f) The Servicer shall deposit net of reimbursement to the Servicer for
any related outstanding P&I Advances, Servicing Advances and unpaid Servicing
Fees provided in Section 3.11 hereof, or cause to be deposited, on a daily
basis in the Collection Account all revenues received with respect to the
related REO Property and shall withdraw therefrom funds necessary for the
proper operation, management and maintenance of the REO Property.

          (g) The Servicer, upon an REO Disposition, shall be entitled to
reimbursement for any related unreimbursed P&I Advances and Servicing Advances
as well as any unpaid Servicing Fees from proceeds received in connection with
the REO Disposition, as further provided in Section 3.11.

          (h) Any net proceeds from a REO Disposition which are in excess of the
applicable Stated Principal Balance plus all unpaid REO Imputed Interest
thereon through the date of the REO Disposition shall be retained by the
Servicer as additional servicing compensation.

          (i) The Servicer shall use its reasonable best efforts to sell, or cause
the Subservicer to sell, any REO Property as soon as possible, but in no event
later than the conclusion of the third calendar year beginning after the year
of its acquisition by the REMIC unless (i) the Servicer applies for an
extension of such period from the Internal Revenue Service pursuant to the
REMIC Provisions and Code Section 856(e)(3), in which event such REO Property
shall be sold within the applicable extension period, or (ii) the Servicer
obtains for the Trustee an Opinion of Counsel, addressed to the Depositor, the
Trustee and the Servicer, to the effect that the holding by the REMIC of such
REO Property subsequent to such period will not result in the imposition of
taxes on “prohibited transactions” as defined in Section 860F of the Code or
cause the REMIC to fail to qualify as a REMIC under the REMIC Provisions or
comparable provisions of relevant state laws at any time. The Servicer shall
manage, conserve, protect and operate each REO Property for the Trustee solely
for the purpose of its prompt disposition and sale in a manner which does not
cause such REO Property to fail to qualify as “foreclosure property” within the
meaning of Section 860G(a)(8) or result in the receipt by the REMIC of any
“income from non-permitted assets” within the meaning of Section 860F(a)(2)(B)
of the Code or any “net income from foreclosure property” which is subject to
taxation under

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Section 860G(a)(1) of the Code. Pursuant to its efforts to sell such REO
Property, the Servicer shall either itself or through an agent selected by the
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the
Trustee on behalf of the Certificateholders, rent the same, or any part
thereof, as the Servicer deems to be in the best interest of the Trustee on
behalf of the Certificateholders for the period prior to the sale of such REO
Property; provided, however, that any rent received or accrued with respect to
such REO Property qualifies as “rents from real property” as defined in Section
856(d) of the Code.

          Section 3.18 Notification of Adjustments.

          With respect to each Adjustable Rate Mortgage Loan, the Servicer shall
adjust the Mortgage Rate on the related Adjustment Date and shall adjust the
Scheduled Payment on the related mortgage payment adjustment date, if
applicable, in compliance with the requirements of applicable law and the
related Mortgage and Mortgage Note. The Servicer shall execute and deliver any
and all necessary notices required under applicable law and the terms of the
related Mortgage Note and Mortgage regarding the Mortgage Rate and Scheduled
Payment adjustments. The Servicer shall promptly, upon written request
therefor, deliver to the Trustee such notifications and any additional
applicable data regarding such adjustments and the methods used to calculate
and implement such adjustments. Upon the discovery by the Servicer or the
receipt of notice from the Trustee that the Servicer has failed to adjust a
Mortgage Rate or Scheduled Payment in accordance with the terms of the related
Mortgage Note, the Servicer shall deposit in the Collection Account from its
own funds the amount of any interest loss caused as such interest loss occurs.

          Section 3.19 Access to Certain Documentation and Information Regarding the
Mortgage Loans.

          The Servicer shall provide, or cause the Subservicer to provide, to the
Depositor, the Unaffiliated Seller, the Certificate Insurer, the Trustee, the
OTS or the FDIC and the examiners and supervisory agents thereof access to the
documentation regarding the Mortgage Loans in its possession. Such access
shall be afforded without charge, but only upon reasonable and prior written
request and during normal business hours at the offices of the Servicer or any
Subservicer. Nothing in this Section shall derogate from the obligation of any
such party to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors and the failure of any such party to provide access as
provided in this Section as a result of such obligation shall not constitute a
breach of this Section.

          Section 3.20 Documents, Records and Funds in Possession of the Servicer to
be Held for the Trustee.

          The Servicer shall account fully to the Trustee for any funds received by
the Servicer or which otherwise are collected by the Servicer as Liquidation
Proceeds, Condemnation Proceeds or Insurance Proceeds in respect of any
Mortgage Loan. All Mortgage Files and funds collected or held by, or under the
control of, the Servicer in respect of any Mortgage Loans, whether from the
collection of principal and interest payments or from

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Liquidation Proceeds, including, but not limited to, any funds on deposit
in the Collection Account, shall be held by the Servicer for and on behalf of
the Trustee and shall be and remain the sole and exclusive property of the
Trustee, subject to the applicable provisions of this Agreement. The Servicer
also agrees that it shall not create, incur or subject any Mortgage File or any
funds that are deposited in any Account, or any funds that otherwise are or may
become due or payable to the Trustee for the benefit of the Certificateholders,
to any claim, lien, security interest, judgment, levy, writ of attachment or
other encumbrance, or assert by legal action or otherwise any claim or right of
setoff against any Mortgage File or any funds collected on, or in connection
with, a Mortgage Loan, except, however, that the Servicer shall be entitled to
set off against and deduct from any such funds any amounts that are properly
due and payable to the Servicer under this Agreement.

          Section 3.21 Servicing Compensation.

          (a) As compensation for its activities hereunder, the Servicer shall, with
respect to each Mortgage Loan, be entitled to retain from deposits to the
Collection Account and from Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds and REO Proceeds related to such Mortgage Loan, the
Servicing Fee with respect to each Mortgage Loan (less any portion of such
amounts retained by any Subservicer). In addition, the Servicer shall be
entitled to recover unpaid Servicing Fees out of related late collections and
as otherwise permitted under Section 3.11. The right to receive the Servicing
Fee may not be transferred in whole or in part except in connection with the
transfer of all of the Servicer’s responsibilities and obligations under this
Agreement; provided, however, that the Servicer may pay from the Servicing Fee
any amounts due to a Subservicer pursuant to a Subservicing Agreement entered
into under Section 3.02.

          (b) Additional servicing compensation in the form of assumption or
modification fees, late payment charges, NSF fees, reconveyance fees and other
similar fees and charges (other than Prepayment Charges) shall be retained by
the Servicer only to the extent such fees or charges are received by the
Servicer. The Servicer shall also be entitled pursuant to Section 3.11(a)(iv)
to withdraw from the Collection Account and the Distribution Account, as
additional servicing compensation, interest or other income earned on deposits
therein.

          (c) The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including payment of
premiums for any blanket policy insuring against hazard losses pursuant to
Section 3.13, servicing compensation of the Subservicer to the extent not
retained by it and the fees and expenses of independent accountants and any
agents appointed by the Servicer), and shall not be entitled to reimbursement
therefor except as specifically provided in Section 3.11.

          Section 3.22 Annual Statement as to Compliance.

          The Servicer will deliver or cause to be delivered to the Depositor, the
Rating Agencies, the Unaffiliated Seller, the Certificate Insurer, and the
Trustee on or before March 15th of each calendar year, commencing in 2005, an
Officer’s Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Servicer during the preceding calendar year and of
performance under this Agreement has been made under such officer’s
supervision,

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and (ii) to the best of such officer’s knowledge, based on such review,
the Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof.

          Section 3.23 Annual Independent Public Accountants’ Servicing Statement;
Financial Statements.

          (a) Not later than March 15th of each calendar year commencing in 2005,
the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Depositor, the
Unaffiliated Seller, the Certificate Insurer, the Rating Agencies and the
Trustee a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Servicer which includes an
assertion that the Servicer has complied with certain minimum residential
mortgage loan servicing standards, identified in the Uniform Single Attestation
Program for Mortgage Bankers established by the Mortgage Bankers Association of
America, with respect to the servicing of residential mortgage loans during the
most recently completed calendar year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that may be appropriate. In rendering its report such firm may rely, as to
matters relating to the direct servicing of residential mortgage loans by
Subservicers, upon comparable reports of firms of independent certified public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Subservicers.

          (b) As soon as available, and in any event within 90 days after the close
of each fiscal year of the Servicer, the Servicer, at its expense, shall cause
the audited balance sheets of the Servicer, as of the end of such fiscal year
and the audited statements of income, changes in equity and cash flows of the
Servicer, for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period
in the preceding fiscal year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the certificate
of the nationally recognized firm of independent certified public accountants
to be delivered to the Certificate Insurer.

          Section 3.24 Trustee to Act as Servicer.

          In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of an Event of Default), except as
provided under Section 7.02, the Trustee or its successor shall thereupon
assume all of the rights and obligations of the Servicer hereunder arising
thereafter (except that the Trustee shall not be (i) liable for losses of the
Servicer pursuant to Section 3.10 or any acts or omissions of the predecessor
Servicer hereunder, (ii) obligated to make Advances if it is prohibited from
doing so by applicable law, (iii) obligated to effectuate repurchases or
substitutions of Mortgage Loans hereunder, including, but not limited to,
repurchases or substitutions pursuant to Section 2.03, (iv) responsible for
expenses of the predecessor Servicer pursuant to Section 2.03 or (v) deemed to
have made any representations and warranties of the Servicer hereunder). Any
such assumption shall be subject to Section 7.02.

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          Every subservicing agreement entered into by the Servicer shall contain a
provision giving the successor Servicer the option to terminate such agreement
in the event a successor Servicer is appointed.

          If the Servicer shall for any reason no longer be the Servicer (including
by reason of any Event of Default), the Trustee (or any other successor
Servicer) may, at its option, succeed to any rights and obligations of the
Servicer under any subservicing agreement in accordance with the terms thereof;
provided that the Trustee (or any other successor Servicer) shall not incur any
liability or have any obligations in its capacity as successor Servicer under a
subservicing agreement arising prior to the date of such succession unless it
expressly elects to succeed to the rights and obligations of the Servicer
thereunder; and the Servicer shall not thereby be relieved of any liability or
obligations under the subservicing agreement arising prior to the date of such
succession.

          The Servicer shall, upon request of the Trustee, but at the expense of the
Servicer, deliver to the assuming party all documents and records relating to
each subservicing agreement (if any) and the Mortgage Loans then being serviced
thereunder and an accounting of amounts collected and held by it and otherwise
use its best efforts to effect the orderly and efficient transfer of the
subservicing agreement to the assuming party.

          Section 3.25 Compensating Interest.

          The Servicer shall remit to the Trustee on each Remittance Date an amount
from its own funds equal to the Compensating Interest payable by the Servicer
for the related Distribution Date.

          Section 3.26 Credit Reporting; Gramm-Leach-Bliley Act.

          (a) With respect to each Mortgage Loan, the Servicer agrees to fully
furnish, in accordance with the Fair Credit Reporting Act and its implementing
regulations, accurate and complete information (i.e., favorable and
unfavorable) on its borrower credit files to Equifax, Experian, and Trans Union
Credit Information Company (three of the credit repositories), on a monthly
basis.

          (b) The Servicer shall comply with Title V of the Gramm-Leach-Bliley Act
of 1999 and all applicable regulations promulgated thereunder, relating to the
Mortgage Loans and the related borrowers and shall provide all required notices
thereunder.

          Section 3.27 Advance Facilities.

          With the prior written consent of the Certificate Insurer, the Servicer is
hereby authorized to enter into a financing or other facility (an “Advance
Facility”) under which (l) the Servicer sells, assigns or pledges to another
Person (an “Advancing Person”) the Servicer’s rights under this Agreement to be
reimbursed for any Advances and/or (2) an Advancing Person agrees to fund some
or all P&I Advances or Servicing Advances required to be made by the Servicer
pursuant to this Agreement. Except as provided in the preceding sentence, no
consent of any party is required before the Servicer may enter into an Advance
Facility. Notwithstanding the existence of any Advance Facility under which an
Advancing Person agrees to fund P&I

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Advances and/or Servicing Advances on the Servicer’s behalf, the Servicer
shall remain obligated pursuant to this Agreement to make P&I Advances and
Servicing Advances pursuant to and as required by this Agreement, and shall not
be relieved of such obligations by virtue of such Advance Facility.

          Reimbursement amounts (“Advance Reimbursement Amounts”) shall consist
solely of amounts in respect of P&I Advances and/or Servicing Advances made
with respect to the Mortgage Loans for which the Servicer would be permitted to
reimburse itself in accordance with this Agreement, assuming the Servicer had
made the related P&I Advance(s) and/or Servicing Advance(s).

          The Servicer shall maintain and provide to any successor Servicer a
detailed accounting on a loan-by-loan basis as to amounts advanced by, pledged
or assigned to, and reimbursed to any Advancing Person. The successor Servicer
shall be entitled to rely on any such information provided by the predecessor
Servicer, and the successor Servicer shall not be liable for any errors in such
information.

          An Advancing Person who purchases or receives an assignment or pledge of
the rights to be reimbursed for P&I Advances and/or Servicing Advances, and/or
whose obligations hereunder are limited to the funding of P&I Advances and/or
Servicing Advances shall not be required to meet the criteria for qualification
of a subservicer set forth in this Agreement.

          The documentation establishing any Advance Facility shall require that
Advance Reimbursement Amounts distributed with respect to each Mortgage Loan be
allocated to outstanding unreimbursed P&I Advances or Servicing Advances (as
the case may be) made with respect to that Mortgage Loan on a “first-in, first
out” (FIFO) basis. Such documentation shall also require the Servicer to
provide to the related Advancing Person or its designee loan-by-loan
information with respect to each Advance Reimbursement Amount distributed to
such Advancing Person or to a trustee or custodian (an “Advance Facility
Trustee”) on each Distribution Date, to enable the Advancing Person or Advance
Facility Trustee to make the FIFO allocation of each Advance Reimbursement
Amount with respect to each Mortgage Loan. The Servicer shall remain entitled
to be reimbursed pursuant to the Advance Facility by the Advancing Person or
Advance Facility Trustee for all P&I Advances and Servicing Advances funded by
the Servicer to the extent the related rights to be reimbursed therefor have
not been sold, assigned or pledged to an Advancing Person.

          Any amendment to this Section 3.27 or to any other provision of this
Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 3.27, including
amendments to add provisions relating to a successor Servicer, may be entered
into by the Trustee, the Depositor, the Unaffiliated Seller and the Servicer
without the consent of any Certificateholder, but with the consent of the
Certificate Insurer, notwithstanding anything to the contrary in this
Agreement. Prior to entering into an Advance Facility, the Servicer shall
notify the lender under such facility in writing that: (a) the Advances
financed by and/or pledged to the lender are obligations owed to the Servicer
on a non-recourse basis payable only from the cash flows and proceeds received
under this Agreement for reimbursement of such Advances only to the extent
provided herein, and the Trustee is not otherwise obligated or liable to repay
any Advances financed by the lender; (b) the

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Servicer will be responsible for remitting to the lender the applicable
amounts collected by it as reimbursement for Advances funded by the lender,
subject to the restrictions and priorities created in this Agreement; (c) the
Trustee shall not have any responsibility to track or monitor the
administration of the financing arrangement between the Servicer and the
lender; (d) if the Servicer is replaced by a successor servicer, the lender
shall continue to be entitled to receive reimbursements as provided in clause
(a) above but shall have no further right to make advances with respect to the
transaction subject to this Agreement; and (e) (i) the pledge, if any, of
Servicer’s rights to the lender under the facility conveys no rights (such as a
right to fees after the removal of the Servicer or the right to become a
substitute servicer) under this Agreement, or against the Trust Fund, any
investor in or guarantor of securities issued hereunder, or any person other
than the Servicer, (ii) the Servicer is only pledging assets and rights that it
owns and any purported pledge of any assets or rights that are not property of
the Servicer shall be of force and effect and will not be deemed to create any
additional rights or assets of either the lender or the Servicer and (iii) the
lender shall take such steps as are reasonably necessary to confirm to a
successor servicer that it has no rights in any collateral due or payable on or
after the date of servicing transfer other than the Servicer’s rights to
reimbursement of Advances (to be repaid pursuant to the terms of this
Agreement) for Advances made prior to such servicing transfer.

ARTICLE IV

DISTRIBUTIONS AND

ADVANCES BY THE SERVICER

          Section 4.01 Advances.

          (a) The amount of P&I Advances to be made by the Servicer for any
Remittance Date shall equal, subject to Section 4.01(c), the sum of (i) with
respect to the Mortgage Loans, the aggregate amount of Scheduled Payments (with
each interest portion thereof net of the related Servicing Fee), due on the Due
Date immediately preceding such Remittance Date in respect of such Mortgage
Loans, which Scheduled Payments were not received as of the related
Determination Date, plus (ii) with respect to each REO Property, which REO
Property was acquired during or prior to the related Prepayment Period and as
to which such REO Property an REO Disposition did not occur during the related
Prepayment Period, an amount equal to the excess, if any, of the Scheduled
Payments (with each interest portion thereof net of the related Servicing Fee)
that would have been due on the related Due Date in respect of the related
Mortgage Loans, over the net income from such REO Property transferred to the
Collection Account for distribution on such Remittance Date.

          (b) On the Remittance Date, the Servicer shall remit in immediately
available funds to the Trustee an amount equal to the aggregate amount of P&I
Advances, if any, to be made in respect of the Mortgage Loans and REO
Properties for the related Remittance Date either (i) from its own funds, (ii)
from the Collection Account, to the extent of funds held therein for future
distribution (in which case, it will cause to be made an appropriate entry in
the records of Collection Account that Amounts Held For Future Distribution
have been, as permitted by this Section 4.01, used by the Servicer in discharge
of any such P&I Advance) or (iii) in the form of any combination of (i) and
(ii) aggregating the total amount of P&I Advances to be made by the Servicer
with respect to the Mortgage Loans and REO Properties. Any Amounts Held For

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Future Distribution and so used shall be appropriately reflected in the
Servicer’s records and replaced by the Servicer by deposit in the Collection
Account on or before any future Remittance Date to the extent required.

          (c) The obligation of the Servicer to make such P&I Advances is mandatory,
notwithstanding any other provision of this Agreement but subject to (d) below,
and, with respect to any Mortgage Loan or REO Property, shall continue until a
Final Recovery Determination in connection therewith or the removal thereof
from coverage under this Agreement, except as otherwise provided in this
Section.

          (d) Notwithstanding anything herein to the contrary, no P&I Advance or
Servicing Advance shall be required to be made hereunder by the Servicer if
such P&I Advance or Servicing Advance would, if made, constitute a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance. The
determination by the Servicer that it has made a Nonrecoverable P&I Advance or
a Nonrecoverable Servicing Advance or that any proposed P&I Advance or
Servicing Advance, if made, would constitute a Nonrecoverable P&I Advance or a
Nonrecoverable Servicing Advance, respectively, shall be evidenced by an
Officers’ Certificate of the Servicer delivered to the Trustee.

          (e) Except as otherwise provided herein, the Servicer shall be entitled to
reimbursement pursuant to Section 3.11 hereof for P&I Advances and Servicing
Advances from recoveries from the related Mortgagor or from all Liquidation
Proceeds and other payments or recoveries (including Insurance Proceeds and
Condemnation Proceeds) with respect to the related Mortgage Loan.

          Section 4.02 Priorities of Distribution.

          (a) On each Distribution Date, the Trustee will make the disbursements and
transfers from amounts then on deposit in the Distribution Account in the
following order of priority and to the extent of the Available Funds remaining:

	(i)	 	from the Interest Remittance Amount, in the following order of
priority:
	 
	(A)	 	to the Certificate Insurer, the Premium Amount
for such Distribution Date;
	 
	(B)	 	concurrently, with equal priority of payment:

	(1)	 	payable solely from the Group I
Interest Remittance Amount for that Distribution Date,
to the Holders of the Class A-1 Certificates, the
Accrued Certificate Interest and any Unpaid Interest
Amounts for the Class A-1 Certificates, and to the
extent that the Group I Interest Remittance Amount is
less than the Accrued Certificate Interest and any
Unpaid Interest Amounts for the Class A-1 Certificates,
payable from any Group II Interest Remittance Amount for
that Distribution Date remaining after payment of the
Accrued Certificate Interest, any Unpaid Interest
Amounts and related administrative fees with respect to
the Group II Class A Certificates, to the Holders of the
Class A-1 Certificates, the

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	 	 	unpaid portion of the Accrued Certificate Interest and
any Unpaid Interest Amounts for the Class A-1
Certificates;
	 
	(2)	 	payable solely from the Group II
Interest Remittance Amount for that Distribution Date,
to the Holders of the Group II Class A Certificates, pro
rata, the Accrued Certificate Interest and any Unpaid
Interest Amounts for the Group II Class A Certificates,
and to the extent that the Group II Interest Remittance
Amount is less than the Accrued Certificate Interest and
any Unpaid Interest Amounts for the Group II Class A
Certificates, payable from any Group I Interest
Remittance for that Distribution Date remaining after
payment of the Accrued Certificate Interest, any Unpaid
Interest Amounts and related administrative fees with
respect to the Class A-1 Certificates, to the Holders of
each class of the Group II Class A Certificates, pro
rata, the unpaid portion of the Accrued Certificate
Interest and any Unpaid Interest Amounts for the Group
II Class A Certificates;

	(C)	 	payable from any remaining Interest Remittance
Amounts, to the Certificate Insurer, any Reimbursement Amount
then owing to it on account of a prior draw relating to
interest on the Class A-1 Certificates;
	 
	(D)	 	payable from any remaining Interest Remittance
Amounts, to the Class M-1 Certificates, the Accrued
Certificate Interest for such Class on such Distribution Date;
	 
	(E)	 	payable from any remaining Interest Remittance
Amounts, to the Class M-2 Certificates, the Accrued
Certificate Interest for such class on such Distribution Date;
	 
	(F)	 	payable from any remaining Interest Remittance
Amounts, to the Class M-3 Certificates, the Accrued
Certificate Interest for such Class on such Distribution Date;
	 
	(G)	 	payable from any remaining Interest Remittance
Amounts, to the Class B-1 Certificates, the Accrued
Certificate Interest for such Class on such Distribution Date;
	 
	(H)	 	payable from any remaining Interest Remittance
Amounts, to the Class B-2 Certificates, the Accrued
Certificate Interest for such Class on such Distribution Date;
	 
	(I)	 	payable from any remaining Interest Remittance
Amounts, to the Class B-3 Certificates, the Accrued
Certificate Interest for such Class on such Distribution Date;
and

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	(J)	 	payable from any remaining Interest Remittance
Amounts, to the Class B-4 Certificates, the Accrued
Certificate Interest for such Class on such Distribution Date;

    
 (ii) (x) on each Distribution Date (A) before the related Stepdown
Date or (B) with respect to which a Trigger Event is in effect, to the
Holders of the Class or Classes of LIBOR Certificates then entitled to
distributions of principal as set forth below, and to the Certificate
Insurer, from the amounts remaining on deposit in the Distribution
Account after making distributions pursuant to clause (i) above, an
amount equal to the Principal Distribution Amount in the following order
of priority:

	(A)	 	concurrently, with equal priority of payment:

	(1)	 	to the Holders of the Class A-1
Certificates, the Group I Allocation Percentage of the
Principal Distribution Amount, until the Certificate
Balance of the Class A-1 Certificates has been reduced
to zero; and
	 
	(2)	 	to the Holders of the Group II Class
A Certificates, the Group II Allocation Percentage of
the Principal Distribution Amount, first, to the Class
A-2 Certificates until those Certificates are reduced to
zero, second, to the Class A-3 Certificates until those
Certificates are reduced to zero and third, to the Class
A-4 Certificates until those Certificates are reduced to
zero;

	(B)	 	to the Certificate Insurer, the amount of any
Reimbursement Amount then owing to the Certificate Insurer on
account of a prior draw relating to principal on the Class A-1
Certificates;
	 
	(C)	 	concurrently, with equal priority of payment:

      (1) if the Class Certificate Balance of the Class A-1
Certificates has been reduced to zero, then to the Holders of
the Group II Class A Certificates, the amount of any remaining
Principal Distribution Amount, until the Class Certificate
Balance of each Class of the Class A Certificates has been
reduced to zero, such amount to be allocated first, to the Class
A-2 Certificates until those Certificates are reduced to zero,
second, to the Class A-3 Certificates until those Certificates
are reduced to zero and third, to the Class A-4 Certificates
until those Certificates are reduced to zero; provided, however,
that on and after the Distribution Date on which the aggregate
Class Certificate Balances of the Subordinated Certificates and
the principal balance of the Class X Certificates have been
reduced to zero, any principal distributions allocated to the
Group II Class A Certificates shall be allocated pro rata among
the Class A-2, Class A-3 and Class A-4 Certificates, based on
their respective Class Certificate Balances, and distributed
concurrently to the Class A-2, Class A-3 and Class A-4
Certificates; or

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      (2) if the Class Certificate Balance of each Class of the
Group II Class A Certificates has been reduced to zero, then to
the Holders of the Class A-1 Certificates, the amount of any
remaining Principal Distribution Amount, until the Class
Certificate Balance of the Class A-1 Certificates has been
reduced to zero;

	(D)	 	sequentially, to the Class M-1, Class M-2, Class
M-3, Class B-1, Class B-2, Class B-3 and Class B-4
Certificates, in that order, until the respective Class
Certificate Balances are reduced to zero;

          (y) on each Distribution Date (1) on and after the related Stepdown
Date and (2) as long as a Trigger Event is not in effect, to the Holders
of the related Class or Classes of LIBOR Certificates then entitled to
distribution of principal, from amounts remaining on deposit in the
Distribution Account after making distributions pursuant to clause (i)
above, an amount equal to, in the aggregate, the Principal Distribution
Amount in the following amounts and order of priority:

	(A)	 	concurrently, with equal priority of payment:

	(1)	 	to the Holders of the Class A-1
Certificates, the Group I Allocation Percentage of the
lesser of the Principal Distribution Amount and the
Class A Principal Distribution Amount, until the Class
Certificate Balance of the Class A-1 Certificates has
been reduced to zero; and
	 
	(2)	 	to the Holders of the Group II Class
A Certificates, the Group II Allocation Percentage of
the lesser of the Principal Distribution Amount and the
Class A Principal Distribution Amount, until the Class
Certificate Balance of each Class of Group II Class A
Certificates has been reduced to zero, with amounts
allocated to the Group II Class A Certificates allocated
first, to the Class A-2 Certificates until those
Certificates are reduced to zero, second, to the Class
A-3 Certificates until those Certificates are reduced to
zero and third, to the Class A-4 Certificates until
those Certificates are reduced to zero;

	(B)	 	to the Certificate Insurer, the amount of any
Reimbursement Amount then owing to the Certificate Insurer on
account of a prior draw relating to principal on the Class A-1
Certificates;
	 
	(C)	 	concurrently, with equal priority of payment:

      (1) if the Class Certificate Balance of the Class A-1
Certificates has been reduced to zero, then to the Holders of
the Group II Class A Certificates, any remaining amounts
allocable but not required to be distributed pursuant to clauses
(A)(1) or (B) above, until the Class Certificate Balance of each
Class of the Class A Certificates has been reduced to zero, such
amount to be allocated first, to the Class A-2 Certificates
until those Certificates are reduced

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to zero, second, to the Class A-3 Certificates until those
Certificates are reduced to zero and third, to the Class A-4
Certificates until those Certificates are reduced to zero;
provided, however, that on and after the Distribution Date on
which the aggregate Class Certificate Balances of the
Subordinated Certificates and the principal balance of the Class
X Certificates have been reduced to zero, any principal
distributions allocated to the Group II Class A Certificates
shall be allocated pro rata among the Class A-2, Class A-3 and
Class A-4 Certificates, based on their respective Class
Certificate Balances, and distributed concurrently to the Class
A-2, Class A-3 and Class A-4 Certificates; or

      (2) if the Class Certificate Balance of each Class of the
Group II Class A Certificates has been reduced to zero, then to
the Holders of the Class A-1 Certificates, any remaining amounts
allocable but not required to be distributed pursuant to clauses
(A)(2) or (B) above, until the Class Certificate Balance of the
Class A-1 Certificates has been reduced to zero;

	(D)	 	to the Class M-1 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class M-1
Principal Distribution Amount, until the Class Certificate
Balance thereof has been reduced to zero;
	 
	(E)	 	to the Class M-2 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class M-2
Principal Distribution Amount, until the Class Certificate
Balance thereof has been reduced to zero;
	 
	(F)	 	to the Class M-3 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class M-3
Principal Distribution Amount, until the Class Certificate
Balance thereof has been reduced to zero;
	 
	(G)	 	to the Class B-1 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class B-1
Principal Distribution Amount, until the Class Certificate
Balance thereof has been reduced to zero;
	 
	(H)	 	to the Class B-2 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class B-2
Principal Distribution Amount, until the Class Certificate
Balance thereof has been reduced to zero;
	 
	(I)	 	to the Class B-3 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class B-3
Principal Distribution Amount, until the Class Certificate
Balance thereof has been reduced to zero; and
	 
	(J)	 	to the Class B-4 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class B-4
Principal Distribution Amount, until the Class Certificate
Balance thereof has been reduced to zero;

     (iii) any amount remaining in the Distribution Account after the
distributions in clauses (i) and (ii) above, plus as specifically
indicated below, from amounts on

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deposit in the Excess Reserve Fund Account, shall be distributed in
the following order of priority:

	(A)	 	to the Certificate Insurer, to the extent of any
remaining Reimbursement Amount then owing to it;
	 
	(B)	 	to the Holders of the Class M-1 Certificates, any
Unpaid Interest Amounts for such Class;
	 
	(C)	 	to the Holders of the Class M-1 Certificates, any
Unpaid Realized Loss Amounts for such Class;
	 
	(D)	 	to the Holders of the Class M-2 Certificates, any
Unpaid Interest Amounts for such Class;
	 
	(E)	 	to the Holders of the Class M-2 Certificates, any
Unpaid Realized Loss Amounts for such Class;
	 
	(F)	 	to the Holders of the Class M-3 Certificates, any
Unpaid Interest Amounts for such Class;
	 
	(G)	 	to the Holders of the Class M-3 Certificates, any
Unpaid Realized Loss Amounts for such Class;
	 
	(H)	 	to the Holders of the Class B-1 Certificates, any
Unpaid Interest Amounts for such Class;
	 
	(I)	 	to the Holders of the Class B-1 Certificates, any
Unpaid Realized Loss Amounts for such Class;
	 
	(J)	 	to the Holders of the Class B-2 Certificates, any
Unpaid Interest Amounts for such Class;
	 
	(K)	 	to the Holders of the Class B-2 Certificates, any
Unpaid Realized Loss Amounts for such Class;
	 
	(L)	 	to the Holders of the Class B-3 Certificates, any
Unpaid Interest Amounts for such Class;
	 
	(M)	 	to the Holders of the Class B-3 Certificates, any
Unpaid Realized Loss Amounts for such Class;
	 
	(N)	 	to the Holders of the Class B-4 Certificates, any
Unpaid Interest Amounts for such Class;
	 
	(O)	 	to the Holders of the Class B-4 Certificates, any
Unpaid Realized Loss Amounts for such Class;

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	(P)	 	to the Excess Reserve Fund Account, the amount of
any Basis Risk Payment for such Distribution Date;
	 
	(Q)	 	(i) from any Group II Class A Interest Rate Cap
Payment on deposit in the Excess Reserve Fund Account with
respect to that Distribution Date, an amount equal to any
unpaid remaining Basis Risk Carry Forward Amount with respect
to the Group II Class A Certificates for that Distribution
Date, allocated (a) first, between the Class A-2, Class A-3
and Class A-4 Certificates pro rata, based upon their
respective Class Certificate Balances and (b) second, any
remaining amounts to the Class A-2, Class A-3 and Class A-4
Certificates, pro rata, based on any Basis Risk Carry Forward
Amounts remaining unpaid, in order to reimburse such unpaid
amounts, (ii) from any Class M Interest Rate Cap Payment on
deposit in the Excess Reserve Fund Account with respect to
that Distribution Date, an amount equal to any unpaid
remaining Basis Risk Carry Forward Amount with respect to the
Class M Certificates for that Distribution Date, allocated (a)
first, among the Class M-1, Class M-2 and Class M-3
Certificates pro rata, based upon their respective Class
Certificate Balances and (b) second, any remaining amounts to
the Class M-1, Class M-2 and Class M-3 Certificates, pro rata,
based on any Basis Risk Carry Forward Amounts remaining
unpaid, in order to reimburse such unpaid amounts, and (iii)
from any Class B Interest Rate Cap Payment on deposit in the
Excess Reserve Fund Account with respect to that Distribution
Date, an amount equal to any unpaid remaining Basis Risk Carry
Forward Amount with respect to the Class B Certificates for
that Distribution Date, allocated (a) first, among the Class
B-1, Class B-2, Class B-3 and Class B-4 Certificates pro rata,
based upon their respective Class Certificate Balances and (b)
second, any remaining amounts to the Class B-1, Class B-2,
Class B-3 and Class B-4 Certificates, pro rata, based on any
Basis Risk Carry Forward Amounts remaining unpaid, in order to
reimburse such unpaid amounts;
	 
	(R)	 	from amounts on deposit in the Excess Reserve
Fund Account (not including any Interest Rate Cap Payments
included in that account) with respect to such Distribution
Date, an amount equal to any remaining Basis Risk Carry
Forward Amount with respect to any LIBOR Certificate for such
Distribution Date to the LIBOR Certificates in the same order
and priority in which Accrued Certificate Interest is
allocated among those Classes of Certificates;
	 
	(S)	 	to the Holders of the Class P Certificates, the
outstanding principal balance thereof, if any, and to the
Holders of the Class X Certificates, the remainder of the
Class X Distributable Amount not distributed pursuant to
Sections 4.02(a)(iii)(A)-® (to the extent stated in clause
(i) of the definition of Class X Distributable Amount, as
interest, and to the extent stated in clause (ii) of the
definition of Class X Distributable Amount, as principal);
and

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	(T)	 	to the Holders of the Class R Certificates, any
remaining amount.

     In furtherance of the foregoing, any amounts payable to the Class A-1 or
Group II Class A Certificates from remaining Interest Remittance Amounts on
mortgage loans included in loan groups not related to such Class of
Certificates, will be distributed pro rata among such non-related Class A
Certificates based on the remaining Accrued Certificate Interest for such Class
of Class A Certificates (after taking into account payments of Accrued
Certificate Interest from Interest Remittance Amount from the related loan
group) over the total amount of remaining Accrued Certificate Interest for all
such non-related Class of Class A Certificates (after taking into account
payments of Accrued Certificate Interest from Interest Remittance Amount from
the related loan groups).

          (b) On each Distribution Date prior to any distributions on any other
Class of Certificates, all amounts representing Prepayment Charges from the
Mortgage Loans received during the related Prepayment Period shall be
distributed by the Trustee to the Holders of the Class P Certificates.

          (c) On the June 2004, July 2004 and August 2004 Distribution Dates, the
Trustee shall transfer from the Capitalized Interest Account to the
Distribution Account the Capitalized Interest Requirement, if any, for such
Distribution Date.

          (d) On the Distribution Date following either the final Subsequent
Transfer Date or August 24, 2004, whichever date is earlier, any amounts
remaining in the Capitalized Interest Account and all Pre-Funding Earnings in
the Pre-Funding Accounts, after taking into account the transfers in respect of
the Distribution Date described in clause (c) above, shall be paid by the
Trustee to the Unaffiliated Seller.

          (e) On each Subsequent Transfer Date, the Unaffiliated Seller shall
instruct in writing the Trustee to withdraw from related Pre-Funding Account an
amount equal to 100% of the aggregate Stated Principal Balances as of the
related Subsequent Cut-off Date of the Subsequent Mortgage Loans sold to the
Trust Fund on such Subsequent Transfer Date and pay such amount to or upon the
order of the Unaffiliated Seller upon satisfaction of the conditions set forth
in Section 2.01(c) with respect to such transfer. The Trustee may conclusively
rely on such written instructions from the Unaffiliated Seller.

          (f) If the Pre-Funding Amount available in any Pre-Funding Account
(exclusive of Pre-Funding Earnings) has been reduced to $100,000 or less by the
close of business on July 1, 2004 then, on the July 25, 2004 Distribution Date,
after giving effect to any reductions in such Pre-Funding Amount on such date,
the Trustee shall withdraw from the related Pre-Funding Account on such date
and deposit in the Distribution Account the amount on deposit in such
Pre-Funding Account other than any Pre-Funding Earnings; if the Pre-Funding
Amount available in such Pre-Funding Account has not been reduced to zero by
the close of business on August 24, 2004, the Trustee shall withdraw from such
Pre-Funding Account the amount on deposit therein, other than the Pre-Funding
Earnings, and deposit such amount on the August 25, 2004 Distribution Date into
the Distribution Account. Any amount deposited into the Distribution Account
pursuant to the preceding sentence from the Group I Pre-Funding Account shall
be distributed first, to the Holders of the Class A-1 Certificates until those
Certificates are

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reduced to zero, second, to the Holders of the Class A-2 Certificates
until those Certificates are reduced to zero, third, to the Holders of the
Class A-3 Certificates until those Certificates are reduced to zero, fourth, to
the Holders of the Class A-4 Certificates until those Certificates are reduced
to zero and fifth, pro rata based on their relative Class Certificate Balances
immediately prior to the related Distribution Date, to the Holders of the Class
M Certificates and the Class B Certificates, as a separate payment of
principal, on the related Distribution Date. Any amount deposited into the
Distribution Account pursuant to the preceding sentence from the Group II
Pre-Funding Account shall be distributed first, to the Holders of the Class A-2
Certificates until those Certificates are reduced to zero, second, to the
Holders of the Class A-3 Certificates until those Certificates are reduced to
zero, third, to the Holders of the Class A-4 Certificates until those
Certificates are reduced to zero, fourth, to the Holders of the Class A-1
Certificates until those Certificates are reduced to zero and fifth, pro rata
based on their relative Class Certificate Balances immediately prior to the
related Distribution Date, to the Holders of the Class M Certificates and Class
B Certificates, as a separate payment of principal, on the related Distribution
Date.

          (g) On any Distribution Date, any Relief Act Shortfalls and Net Prepayment
Interest Shortfalls for such Distribution Date will be allocated as a reduction
in the following order:

          (1) first, to the amount of interest payable to the Class X
Certificates; and

     (2) second, pro rata, as a reduction of the Accrued Certificate
Interest for the Class A-1, Class A-2, Class A-3, Class A-4, Class M-1,
Class M-2, Class M-3, Class B-1, Class B-2, Class B-3 Certificates and
Class B-4, based on the amount of interest to which such Classes would
otherwise be entitled.

          Section 4.03 Monthly Statements to Certificateholders.

          (a) Not later than each Distribution Date, the Trustee shall make
available to each Certificateholder, the Servicer, the Depositor, the
Unaffiliated Seller, the Certificate Insurer and each Rating Agency a statement
setting forth with respect to the related distribution:

     (i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and
Liquidation Proceeds included therein;

     (ii) the amount thereof allocable to interest, any Unpaid Interest
Amounts included in such distribution and any remaining Unpaid Interest
Amounts after giving effect to such distribution, any Basis Risk Carry
Forward Amount for such Distribution Date and the amount of all Basis
Risk Carry Forward Amount covered by withdrawals from the Excess Reserve
Fund Account on such Distribution Date;

     (iii) if the distribution to the Holders of such Class of
Certificates is less than the full amount that would be distributable to
such Holders if there were sufficient funds available therefor, the
amount of the shortfall and the allocation thereof as between principal
and interest, including any Basis Risk Carry Forward Amount not covered
by amounts in the Excess Reserve Fund Account;

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     (iv) the Class Certificate Balance of each Class of Certificates
after giving effect to the distribution of principal on such Distribution
Date;

     (v) the Pool Stated Principal Balance for the following Distribution
Date;

     (vi) the amount of the Servicing Fees paid to or retained by the
Servicer or Subservicer (with respect to the Subservicers, in the
aggregate) with respect to such Distribution Date;

     (vii) the Pass-Through Rate for each such Class of Certificates with
respect to such Distribution Date;

     (viii) the amount of Advances included in the distribution on such
Distribution Date and the aggregate amount of Advances reported by the
Servicer as outstanding as of the close of business on such Distribution
Date;

     (ix) the number and aggregate Scheduled Principal Balances of
Mortgage Loans (1) as to which the Scheduled Payment is delinquent 31 to
60 days, 61 to 90 days and 91 or more days, (2) that have become REO
Property, (3) that are in foreclosure and (4) that are in bankruptcy, in
each case as of the close of business on the last Business Day of the
immediately preceding month;

     (x) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number and Stated Principal
Balance of such Mortgage Loan as of the close of business on the
Determination Date preceding such Distribution Date and the date of
acquisition thereof;

     (xi) the total number and aggregate principal balance of any REO
Properties (and market value, if available) as of the close of business
on the Determination Date preceding such Distribution Date;

     (xii) whether a Trigger Event has occurred and is continuing
(including the calculation of thereof and the aggregate outstanding
balance of all 60+ Day Delinquent Loans);

     (xiii) the amount on deposit in the Excess Reserve Fund Account
(after giving effect to distributions on such Distribution Date);

     (xiv) the aggregate amount of Applied Realized Loss Amounts incurred
during the preceding calendar month and aggregate Applied Realized Loss
Amounts through such Distribution Date;

     (xv) the aggregate amount of Subsequent Recoveries incurred during
the preceding calendar month and aggregate Subsequent Recoveries through
such Distribution Date;

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     (xvi) the amount of any Net Monthly Excess Cash Flow on such
Distribution Date and the allocation thereof to the Certificateholders
with respect to Applied Realized Loss Amounts and Unpaid Interest
Amounts;

     (xvii) the Subordinated Amount and Specified Subordinated Amount;

     (xviii) the Interest Remittance Amount, the Principal Remittance
Amount and the Prepayment Charges remitted by Servicer with respect to
that Distribution Date;

     (xix) the Pre-Funded Amount as of the end of the prior Due Period;

     (xx) the amount of any principal prepayment on the Certificates
resulting from the application of unused moneys in the Pre-Funding
Accounts;

     (xxi) the Class A-1 Deficiency and the Insured Payment for such
Distribution Date;

     (xxii) the Reimbursement Amount immediately prior to such
Distribution Date, and the amount of any payments to the Certificate
Insurer on account thereof on such Distribution Date; and

     (xxiii) the Group II Class A Interest Rate Cap Payment, if any, the
Class M Interest Rate Cap Payment, if any, and the Class B Interest Rate
Cap Payment, if any, for such Distribution Date.

          (b) The Trustee’s responsibility for providing the above statement is
limited to the availability, timeliness and accuracy of the information derived
from the Servicer pursuant to Section 4.03(d) below or, in the case of the
Reimbursement Amount, from the Certificate Insurer. The Trustee will provide
the above statement via the Trustee’s internet website, except that the Trustee
shall deliver a hard copy of such statement to the Certificate Insurer on each
Distribution Date. The Trustee’s website will initially be located at
https://www.corporatetrust.db.com and assistance in using the website can be
obtained by calling the Trustee’s investor relations desk at 1-800-735-7777. A
paper copy of the statement will also be made available upon request.

          (c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall cause to be furnished to each Person who at any time
during the calendar year was a Certificateholder, a statement containing the
information set forth in clauses (a)(i), (a)(ii) and (a)(vii) of this Section
4.03 aggregated for such calendar year or applicable portion thereof during
which such Person was a Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.

          (d) Not later than the Determination Date, the Servicer shall furnish to
the Trustee a monthly remittance advice statement containing such information
as shall be reasonably requested by the Trustee to provide the reports required
by Section 4.03(a) as to the accompanying remittance and the period ending on
the close of business on the last Business Day of the immediately preceding
month.

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          The Servicer shall furnish to the Trustee an individual loan accounting
report, as of the last Business Day of each month, to document Mortgage Loan
payment activity on an individual Mortgage Loan basis. With respect to each
month, the corresponding individual loan accounting report (in electronic
format) shall be received by the Trustee no later than the related
Determination Date, which report shall contain the following:

     (i) with respect to each Scheduled Payment, the amount of such
remittance allocable to principal (including a separate breakdown of any
Principal Prepayment, including the date of such prepayment, and any
Prepayment Charges, along with a detailed report of interest on principal
prepayment amounts remitted in accordance with Section 3.25);

     (ii) with respect to each Scheduled Payment, the amount of such
remittance allocable to interest and assumption fees;

     (iii) the amount of servicing compensation received by the Servicer
during the prior distribution period;

     (iv) the individual and aggregate Stated Principal Balance of the
Mortgage Loans (combined and for each of the Group I and Group II
Mortgage Loans);

     (v) the individual and aggregate Scheduled Principal Balances of the
Mortgage Loans (combined and for each of the Group I and Group II
Mortgage Loans);

     (vi) the aggregate of any expenses reimbursed to the Servicer during
the prior distribution period pursuant to Section 3.05 and 3.11;

     (vii) the number and aggregate Scheduled Principal Balances of Group
I Mortgage Loans (a) as to which the Scheduled Payment is delinquent (1)
31 to 60 days, (2) 61 to 90 days and (3) 91 days or more; (b) as to which
foreclosure has commenced; (c) as to which REO Property has been acquired
and (d) that are in bankruptcy; and

     (viii) the number and aggregate Scheduled Principal Balances of
Group II Mortgage Loans (a) as to which the Scheduled Payment is
delinquent (1) 31 to 60 days, (2) 61 to 90 days and (3) 91 days or more;
(b) as to which foreclosure has commenced; (c) as to which REO Property
has been acquired and (d) that are in bankruptcy.

          Section 4.04 Certain Matters Relating to the Determination of LIBOR.

          LIBOR shall be calculated by the Trustee in accordance with the definition
of LIBOR. Until all of the LIBOR Certificates are paid in full, the Trustee
will at all times retain at least four Reference Banks for the purpose of
determining LIBOR with respect to each LIBOR Determination Date. The Trustee,
after consultation with the Depositor, initially shall designate the Reference
Banks. Each “Reference Bank” shall be a leading bank engaged in transactions
in Eurodollar deposits in the international Eurocurrency market, shall not
control, be controlled by, or be under common control with, the Trustee and
shall have an established place of business in London. If any such Reference
Bank should be unwilling or unable to act as such or if the Trustee should
terminate a Reference Bank, the Trustee, after consultation with the Depositor,

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shall promptly appoint or cause to be appointed another Reference Bank.
The Trustee shall have no liability or responsibility to any Person for (i) the
selection of any Reference Bank for purposes of determining LIBOR or (ii) any
inability to retain at least four Reference Banks which is caused by
circumstances beyond its reasonable control.

          The Pass-Through Rate for each Class of LIBOR Certificates for each
Interest Accrual Period shall be determined by the Trustee on each LIBOR
Determination Date so long as the LIBOR Certificates are outstanding on the
basis of LIBOR and the respective formulae appearing in footnotes corresponding
to the LIBOR Certificates in the table relating to the Certificates in the
Preliminary Statement. The Trustee shall not have any liability or
responsibility to any Person for its inability, following a good-faith
reasonable effort, to obtain quotations from the Reference Banks or to
determine the arithmetic mean referred to in the definition of LIBOR, all as
provided for in this Section 4.04 and the definition of LIBOR. The
establishment of LIBOR and each Pass-Through Rate for the LIBOR Certificates by
the Trustee shall (in the absence of manifest error) be final, conclusive and
binding upon each Holder of a Certificate and the Trustee.

          Section 4.05 The Certificate Insurance Policy.

          (a) Within two (2) days following each Remittance Date, the Trustee shall
determine with respect to the immediately following Distribution Date, the
amount to be on deposit in the Distribution Account on such Distribution Date
as a result of the (i) Servicer’s remittance of the Interest Remittance Amount
and the Principal Remittance Amount on the related Remittance Date, and (ii)
any transfers to the Distribution Account made from the Capitalized Interest
Account and/or the Pre-Funding Accounts relating to such Distribution Date
pursuant to Section 4.02 hereof, excluding the amount of any Insured Payment.

          (b) If on any Distribution Date there is a Class A-1 Deficiency, the
Trustee shall complete a Notice in the form of Exhibit A to the Certificate
Insurance Policy and submit such notice to the Certificate Insurer no later
than 12:00 noon New York City time on the second Business Day preceding such
Distribution Date as a claim for an Insured Payment in an amount equal to such
Class A-1 Deficiency.

          (c) The Trustee shall establish a separate Eligible Account for the
benefit of Holders of the Class A-1 Certificates and the Certificate Insurer,
referred to herein as the “Insurance Payment Account,” over which the Trustee
shall have exclusive control and sole right of withdrawal. The Trustee shall
deposit upon receipt any amount paid under the Certificate Insurance Policy in
the Insurance Payment Account and distribute such amount only for purposes of
payment to the Class A-1 Certificateholders of the Insured Amount and such
amount may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Trustee or the Trust Fund. Amounts paid under the Certificate
Insurance Policy, to the extent needed to pay the Insured Amount, shall be
transferred to the Distribution Account on the related Distribution Date and
disbursed by the Trustee to the Class A-1 Certificateholders in accordance with
Section 4.02. It shall not be necessary for such payments to be made by checks
or wire transfers separate from the checks or wire transfers used to pay other
distributions to the Class A-1 Certificateholders with other funds available to
make such payment. However, the amount of any payment of principal or of
interest on the Class A-1 Certificates to be paid from funds transferred from
the

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Insurance Payment Account shall be noted as provided in paragraph (d)
below in the Certificate Register and in the statement to be furnished to
Holders of such Certificates pursuant to Section 4.03(a). Funds held in the
Insurance Payment Account shall not be invested. Any funds remaining in the
Insurance Payment Account on the first Business Day following a Distribution
Date shall be returned to the Certificate Insurer pursuant to the written
instructions of the Certificate Insurer by the end of such Business Day.

          (d) The Trustee shall keep a complete and accurate record of the amount of
interest and principal paid in respect of any Class A-1 Certificate from moneys
received under the Certificate Insurance Policy. The Certificate Insurer shall
have the right to inspect such records at reasonable times during normal
business hours upon one Business Day’s prior notice to the Trustee.

          (e) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any Insured Payment has been voided in
whole or in part as a preference payment under applicable bankruptcy law, the
Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to the Class A-1
Certificateholders of the affected Certificates that, in the event any Class
A-1 Certificateholder’s Insured Payment is so recovered, such Class A-1
Certificateholder will be entitled to payment pursuant to the Certificate
Insurance Policy, a copy of which shall be made available through the Trustee,
the Certificate Insurer or the Certificate Insurer’s fiscal agent, if any, and
the Trustee shall furnish to the Certificate Insurer or its fiscal agent, if
any, its records evidencing the payments which have been made by the Trustee
and subsequently recovered from the Class A-1 Certificateholders, and dates on
which such payments were made.

          (f) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership or similar law
(a “Preference Claim”) of any distribution made with respect to the Class A-1
Certificates. Each Class A-1 Certificateholder, by its purchase of Class A-1
Certificates, the Servicer and the Trustee agree that the Certificate Insurer
(so long as no Certificate Insurer Default exists) may at any time during the
continuation of any proceeding relating to a Preference Claim direct all
matters relating to such Preference Claim, including, without limitation, (i)
the direction of any appeal of any order relating to such Preference Claim and
(ii) the posting of any surety, supersedes or performance bond pending any such
appeal. In addition and without limitation of the foregoing, the Certificate
Insurer shall be subrogated to, and each Class A-1 Certificateholder, the
Servicer and the Trustee hereby delegate and assign to the Certificate Insurer,
to the fullest extent permitted by law, the rights of the Trustee, the Servicer
and each Class A-1 Certificateholder in the conduct of any such Preference
Claim, including, without limitation, all rights of any party to any adversary
proceeding or action with respect to any court order issued in connection with
any such Preference Claim.

          (g) The Trustee shall, once the Certificate Balance of the Class A-1
Certificates has been reduced to zero (after giving effect to all payments
including any payments made under the Certificate Insurance Policy), furnish to
the Certificate Insurer a notice of such

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retirement, and, upon retirement of the Class A-1 Certificates and the
expiration of the term of the Certificate Insurance Policy, surrender the
Certificate Insurance Policy to the Certificate Insurer for cancellation. Such
cancellation shall in not way reduce the rights of the Certificate Insurer to
amounts subrogated to the Certificate Insurer or to be reimbursed for any
Reimbursement Amounts.

          Section 4.06 Effect of Payments by the Certificate Insurer; Subrogation.

          Anything herein to the contrary notwithstanding, any payment with respect
to principal of or interest on the Class A-1 Certificates which is made with
moneys received pursuant to the terms of the Certificate Insurance Policy shall
not be considered payment of the Class A-1 Certificates from the Trust Fund.
The Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Class A-1 Certificate agrees, that without the need for any
further action on the part of the Certificate Insurer, the Depositor, the
Servicer, the Trustee or the Certificate Registrar (a) to the extent the
Certificate Insurer makes payments, directly or indirectly, on account of
principal of or interest on the Class A-1 Certificates to the Holders of such
Class A-1 Certificates, the Certificate Insurer will be fully subrogated to,
and each Class A-1 Certificateholder, the Servicer and the Trustee hereby
delegate and assign to the Certificate Insurer, to the fullest extent permitted
by law, the rights of such Holders to receive such principal and interest from
the Trust Fund, including, without limitation, any amounts due to the Class A-1
Certificateholders in respect of securities law violations arising from the
offer and sale of the Class A-1 Certificates, and (b) the Certificate Insurer
shall be paid such amounts from the sources and in the manner provided herein
for the payment of such amounts and as provided in the Insurance and Indemnity
Agreement. The Trustee and the Servicer shall cooperate in all respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer’s rights or interests under this Agreement
without limiting the rights or affecting the interests of the Holders as
otherwise set forth herein.

          Section 4.07 Allocation of Applied Realized Loss Amounts.

          Any Applied Realized Loss Amounts will be allocated to the most junior
Class of Subordinated Certificates then outstanding in reduction of the Class
Certificate Balance thereof.

ARTICLE V

THE CERTIFICATES

          Section 5.01 The Certificates.

          The Certificates shall be substantially in the forms attached hereto as
exhibits. The Certificates shall be issuable in registered form, in the
minimum denominations, integral multiples in excess thereof (except that one
Certificate in each Class may be issued in a different amount which must be in
excess of the applicable minimum denomination) and aggregate denominations per
Class set forth in the Preliminary Statement.

          The Depositor hereby directs the Trustee to register the Class X
Certificates and the Class P Certificates initially to “CDC Mortgage Capital
Inc.” and then on the Closing Date as follows: “Deutsche Bank National Trust
Company, as Indenture Trustee on behalf of the

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Noteholders of the CDC Mortgage Capital Inc. NIM Trust 2004-HE2N”, and to
deliver such Class X Certificates and Class P Certificates on the NIM Closing
Date to Deutsche Bank National Trust Company, as NIM Trustee for the NIM
Securities, or as otherwise directed by the Depositor.

          Subject to Section 9.02 respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by
wire transfer in immediately available funds to the account of such holder at a
bank or other entity having appropriate facilities therefor, if such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date or (y) by check mailed by first class mail to such Certificateholder at
the address of such holder appearing in the Certificate Register.

          The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased
to be so authorized prior to the authentication and delivery of any such
Certificates or did not hold such offices at the date of such Certificate. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless authenticated by the Trustee by manual signature, and
such authentication upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly executed and delivered
hereunder. All Certificates shall be dated the date of their authentication.
On the Closing Date, the Trustee shall authenticate the Certificates to be
issued at the direction of the Depositor, or any affiliate thereof.

          The Depositor shall provide, or cause to be provided, to the Trustee on a
continuous basis, an adequate inventory of Certificates to facilitate
transfers.

          Section 5.02 Certificate Register; Registration of Transfer and Exchange
of Certificates.

          (a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.06, a Certificate Register for the Trust Fund
in which, subject to the provisions of subsections (b) and (c) below and to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. Upon surrender for registration of transfer of any
Certificate, the Trustee shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and aggregate Percentage Interest.

          At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee. Whenever any Certificates
are so surrendered for exchange, the Trustee shall execute, authenticate, and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form

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satisfactory to the Trustee duly executed by the holder thereof or his
attorney duly authorized in writing.

          No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates may be required.

          All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee in accordance with
the Trustee’s customary procedures.

          (b) No transfer of a Private Certificate shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such state securities laws.
Except with respect to (i) the transfer of the Class X and Class P Certificates
to the NIM Issuer or the NIM Trustee or (ii) a transfer of the Class X or Class
P Certificates from the NIM Issuer or the NIM Trustee to the Depositor,
Unaffiliated Seller or an Affiliate of the Depositor or the Unaffiliated
Seller, in the event that a transfer of a Private Certificate which is a
Physical Certificate is to be made in reliance upon an exemption from the
Securities Act and such laws, in order to assure compliance with the Securities
Act and such laws, the Certificateholder desiring to effect such transfer shall
certify to the Trustee in writing the facts surrounding the transfer in
substantially the form set forth in Exhibit I (the “Transferor Certificate”)
and either (i) there shall be delivered to the Trustee a letter in
substantially the form of Exhibit J (the “Rule 144A Letter”) or (ii) there
shall be delivered to the Trustee at the expense of the transferor an Opinion
of Counsel that such transfer may be made without registration under the
Securities Act. In the event that a transfer of a Private Certificate which is
a Book-Entry Certificate is to be made in reliance upon an exemption from the
Securities Act and such laws, in order to assure compliance with the Securities
Act and such laws, the Certificateholder desiring to effect such transfer will
be deemed to have made as of the transfer date each of the certifications set
forth in the Transferor Certificate in respect of such Certificate and the
transferee will be deemed to have made as of the transfer date each of the
certifications set forth in the Rule 144A Letter in respect of such
Certificate, in each case as if such Certificate were evidenced by a Physical
Certificate. The Depositor shall provide to any Holder of a Private
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A. The Trustee and the Servicer shall cooperate
with the Depositor in providing the Rule 144A information referenced in the
preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Private Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee,
the Depositor and the Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

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          Except with respect to (i) the transfer of the Class X and Class P
Certificates to the NIM Issuer or the NIM Trustee on the Closing Date or (ii) a
transfer of the Class X or Class P Certificates from the NIM Issuer or the NIM
Trustee to the Depositor, Unaffiliated Seller or an Affiliate of the Depositor
or the Unaffiliated Seller, no transfer of an ERISA-Restricted Certificate
shall be made unless the Trustee shall have received a representation letter
from the transferee in substantially the form of Exhibit J, to the effect that
either (A) such transferee is not an employee benefit plan or arrangement
subject to Title I of ERISA, Section 4975 of the Code or any Federal, state or
local law materially similar to the foregoing provisions of ERISA or the Code
(each, a “Plan”), and is not acting on behalf of any Plan or using the assets
of any Plan to effect such transfer or (B) with respect to the transfer of an
ERISA-Restricted Certificate that is not a Class P, Class X or Class R
Certificate, such transferee is an insurance company that is purchasing the
Certificate with funds contained in an “insurance company general account” (as
such term is defined in Section V(e) of Prohibited Transaction Class Exemption
95-60 (“PTCE 95-60”) and the conditions for exemptive relief under Sections I
and III of PTCE 95-60 are satisfied with respect to the purchase and holding of
such Certificate. For purposes of the preceding sentence, with respect to (i)
the transfer of an ERISA-Restricted Certificate that is not a Physical
Certificate and (ii) the transfer of the Class X or Class P Certificates from
the NIM Issuer or the NIM Trustee to an Affiliate of the Depositor or
Unaffiliated Seller, in the event the representation letter referred to in the
preceding sentence is not furnished, such representation shall be deemed to
have been made to the Trustee by the transferee’s (including an initial
acquiror’s) acceptance of the ERISA-Restricted Certificate. In the event that
such representation is violated, such attempted transfer or acquisition shall
be void and of no effect.

          To the extent permitted under applicable law (including, but not limited
to, ERISA), the Trustee shall be under no liability to any Person for any
registration of transfer of any ERISA-Restricted Certificate that is in fact
not permitted by this Section 5.02(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.

          (c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

     (i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall promptly
notify the Trustee of any change or impending change in its status as a
Permitted Transferee;

     (ii) No Ownership Interest in a Residual Certificate may be
registered on the Closing Date or thereafter transferred, and the Trustee
shall not register the Transfer of any Residual Certificate unless, in
addition to the certificates required to be delivered to the Trustee
under subparagraph (b) above, the Trustee shall have been furnished with
an affidavit (a “Transfer Affidavit”) of the initial owner or the
proposed transferee in the form attached hereto as Exhibit H;

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     (iii) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall agree (A) to obtain a Transfer Affidavit from
any other Person to whom such Person attempts to Transfer its Ownership
Interest in a Residual Certificate, (B) to obtain a Transfer Affidavit
from any Person for whom such Person is acting as nominee, trustee or
agent in connection with any Transfer of a Residual Certificate, and (C)
not to Transfer its Ownership Interest in a Residual Certificate or to
cause the Transfer of an Ownership Interest in a Residual Certificate to
any other Person if it has actual knowledge that such Person (i) is a
Non-Permitted Transferee;

     (iv) Any attempted or purported Transfer of any Ownership Interest
in a Residual Certificate in violation of the provisions of this Section
5.02(c) shall be absolutely null and void and shall vest no rights in the
purported Transferee. If any purported transferee shall become a Holder
of a Residual Certificate in violation of the provisions of this Section
5.02(c), then the last preceding Permitted Transferee shall be restored
to all rights as Holder thereof retroactive to the date of registration
of Transfer of such Residual Certificate. The Trustee shall be under no
liability to any Person for any registration of Transfer of a Residual
Certificate that is in fact not permitted by Section 5.02(b) and this
Section 5.02(c) or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such Holder
under the provisions of this Agreement so long as the Transfer was
registered after receipt of the related Transfer Affidavit, Transferor
Certificate and the Rule 144A Letter. The Trustee shall be entitled but
not obligated to recover from any Holder of a Residual Certificate that
was in fact a Non-Permitted Transferee at the time it became a Holder or,
at such subsequent time as it became a Non-Permitted Transferee, all
payments made on such Residual Certificate at and after either such time.
Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Permitted Transferee of
such Certificate; and

     (v) The Depositor shall use its best efforts to make available, upon
receipt of written request from the Trustee, all information necessary to
compute any tax imposed under Section 860E(e) of the Code as a result of
a Transfer of an Ownership Interest in a Residual Certificate to any
Holder who is a Non-Permitted Transferee.

          The restrictions on Transfers of a Residual Certificate set forth in this
Section 5.02(c) shall cease to apply (and the applicable portions of the legend
on a Residual Certificate may be deleted) with respect to Transfers occurring
after delivery to the Trustee of an Opinion of Counsel, which Opinion of
Counsel shall not be an expense of the Trust Fund, the Trustee, the
Unaffiliated Seller or the Servicer, to the effect that the elimination of such
restrictions will not cause the transfer to be disregarded under Treasury
Regulation 1.860E-1(c), cause the Trust Fund hereunder to fail to qualify as a
REMIC at any time that the Certificates are outstanding or result in the
imposition of any tax on the Trust Fund, a Certificateholder or another Person.
Each Person holding or acquiring any Ownership Interest in a Residual
Certificate hereby consents to any amendment of this Agreement which, based on
an Opinion of Counsel furnished to the Trustee, is reasonably necessary (a) to
ensure that the record ownership of, or any beneficial interest in, a Residual
Certificate is not transferred, directly or indirectly, to a Person that is a
Non-Permitted Transferee and (b) to provide for a means to compel the Transfer
of a Residual

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Certificate which is held by a Person that is a Non-Permitted Transferee
to a Holder that is a Permitted Transferee.

          (d) The preparation and delivery of all certificates and opinions referred
to above in this Section 5.02 in connection with transfer shall be at the
expense of the parties to such transfers.

          (e) Except as provided below, the Book-Entry Certificates shall at all
times remain registered in the name of the Depository or its nominee and at all
times: (i) registration of the Certificates may not be transferred by the
Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and transfers of such Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository, Depository Participants and indirect participating firms as
representatives of the Certificate Owners of the Book-Entry Certificates for
purposes of exercising the rights of Holders under this Agreement, and requests
and directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.

          All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners it represents or of brokerage firms for which it acts as
agent in accordance with the Depository’s normal procedures.

          If (x) (i) the Depository or the Depositor advises the Trustee in writing
that the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (ii) the Trustee or the Depositor is unable
to locate a qualified successor, (y) the Depositor at its option (but with the
Trustee’s consent) notifies the Depository of its intent to terminate the
book-entry system through the Depository and, upon receipt of notice of such
intent from the Depository, the Depository Participants holding beneficial
interests in the Book-Entry Certificates agree to initiate such termination or
(z) after the occurrence of an Event of Default, Certificate Owners
representing at least 51% of the Certificate Balance of the Book-Entry
Certificates together advise the Trustee and the Depository through the
Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
definitive, fully-registered Certificates (the “Definitive Certificates”) to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
related Class of Certificates by the Depository, accompanied by the
instructions from the Depository for registration, the Trustee shall issue the
Definitive Certificates. Neither the Servicer, the Depositor nor the Trustee
shall be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in

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relying on, such instructions. The Depositor shall provide the Trustee
with an adequate inventory of Certificates to facilitate the issuance and
transfer of Definitive Certificates. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder; provided, that the Trustee shall
not by virtue of its assumption of such obligations become liable to any party
for any act or failure to act of the Depository.

          (f) Each Private Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
and accompanied by IRS Form W-8ECI, W-8BEN, W-8IMY (and all appropriate
attachments) or W-9 in form satisfactory to the Trustee, duly executed by the
Certificateholder or his attorney duly authorized in writing. Each Certificate
presented or surrendered for registration of transfer or exchange shall be
canceled and subsequently disposed of by the Trustee in accordance with its
customary practice. No service charge shall be made for any registration of
transfer or change of Private Certificates, but the Trustee may require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of private Certificates.

          Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.

          If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Depositor, the Servicer,
the Certificate Insurer and the Trustee such security or indemnity as may be
required by them to hold each of them harmless, then, in the absence of notice
to the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute, authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Class, tenor and Percentage Interest. In connection with
the issuance of any new Certificate under this Section 5.03, the Trustee may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith. Any
replacement Certificate issued pursuant to this Section 5.03 shall constitute
complete and indefeasible evidence of ownership, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.

          Section 5.04 Persons Deemed Owners.

          The Servicer, the Trustee, the Depositor, the Certificate Insurer and any
agent of the Servicer, the Depositor, the Certificate Insurer or the Trustee
may treat the Person in whose name any Certificate is registered as the owner
of such Certificate for the purpose of receiving distributions as provided in
this Agreement and for all other purposes whatsoever, and neither the Servicer,
the Trustee, the Depositor, the Certificate Insurer nor any agent of the
Servicer, the Depositor, the Certificate Insurer or the Trustee shall be
affected by any notice to the contrary.

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          Section 5.05 Access to List of Certificateholders’ Names and Addresses.

          If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Servicer or such Certificateholders at
such recipients’ expense the most recent list of the Certificateholders of such
Trust Fund held by the Trustee, if any. The Depositor and every
Certificateholder, by receiving and holding a Certificate, agree that the
Trustee shall not be held accountable by reason of the disclosure of any such
information as to the list of the Certificateholders hereunder, regardless of
the source from which such information was derived.

          Section 5.06 Maintenance of Office or Agency.

          The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates the offices of its agent for such purposes located at c/o DTC
Transfer Agent Services, 55 Water Street, Jeanette Park Entrance, New York, New
York 10041. The Trustee shall give prompt written notice to the
Certificateholders of any change in such location of any such office or agency.

          Section 5.07 Rights of the Certificate Insurer to Exercise Rights of Class
A-1 Certificateholders.

          By accepting its Class A-1 Certificate, each Class A-1 Certificateholder
agrees that unless a Certificate Insurer Default exists, the Certificate
Insurer shall be deemed to be the Class A-1 Certificateholders for all purposes
(other than with respect to the receipt of payment on the Class A-1
Certificates) and shall have the right to exercise all rights of the Class A-1
Certificateholders under this Agreement and under the Class A-1 Certificates
without any further consent of the Class A-1 Certificateholders, including,
without limitation:

          (a) the right to require the Unaffiliated Seller to repurchase Mortgage
Loans pursuant to Section 2.03 to the extent set forth in such Section;

          (b) the right to give notices of breach or to terminate the rights and
obligations of the Servicer as servicer pursuant to Section 7.01;

          (c) the right to direct the actions of the Trustee during the continuance
of a Servicer default pursuant to Sections 3.24, 7.01 and 7.02;

          (d) the right to institute proceedings against the Servicer pursuant to
Section 7.01;

          (e) the right to direct the Trustee to investigate certain matters
pursuant to Sections 8.01 and 8.02;

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     (f) the right to remove the Trustee pursuant to Section 8.07; and

     (g) any rights or remedies expressly given the Class A-1
Certificateholders.

     In addition, each Certificateholder agrees that, subject to Section 10.11,
unless a Certificate Insurer Default exists, the rights specifically enumerated
above may only be exercised by the Certificateholders with the prior written
consent of the Certificate Insurer.

     Section 5.08 Trustee To Act Solely with Consent of the Certificate
Insurer.

     Unless a Certificate Insurer Default exists, the Trustee shall not,
without the Certificate Insurer’s consent or unless directed by the Certificate
Insurer:

     (a) terminate the rights and obligations of the Servicer as Servicer
pursuant to Section 7.01;

     (b) agree to any amendment pursuant to Section 10.01; or

     (c) undertake any litigation.

     The Certificate Insurer may, in writing and in its sole discretion
renounce all or any of its rights under this Agreement or any requirement for
the Certificate Insurer’s consent for any period of time.

     Section 5.09 Mortgage Loans, Trust Fund and Accounts Held for Benefit of
the Certificate Insurer.

     (a) The Trustee shall hold the Trust Fund and the Custodial Files for the
benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement and in the Certificates to the benefit of Holders
of the Certificates shall be deemed to include the Certificate Insurer. The
Trustee shall follow all reasonable instructions and requests of the
Certificate Insurer to assist it to take action to preserve or enforce the
Certificate Insurer’s rights or interests under this Agreement unless a
Certificate Insurer Default exists.

     (b) The Servicer hereby acknowledges and agrees that it shall service the
Mortgage Loans for the benefit of the Certificateholders and for the benefit of
the Certificate Insurer, and all references in this Agreement to the benefit of
or actions on behalf of the Certificateholders shall be deemed to include the
Certificate Insurer.

     Section 5.10 Certificate Insurer Default.

     Notwithstanding anything elsewhere in this Agreement or in the
Certificates to the contrary, if a Certificate Insurer Default exists, or if
and to the extent the Certificate Insurer has delivered its written
renunciation of all of its rights under this Agreement, all provisions of this
Agreement which (a) permit the Certificate Insurer to exercise rights of the
Class A-1 Certificateholders, (b) restrict the ability of the
Certificateholders, the Servicer or the Trustee to act without the consent or
approval of the Certificate Insurer, (c) provide that a particular act or thing
must be acceptable to the Certificate Insurer, (d) permit the Certificate
Insurer to direct (or

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otherwise to require) the actions of the Trustee, the Servicer or the
Certificateholders, (e) provide that any action or omission taken with the
consent, approval or authorization of the Certificate Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
such action to any liability hereunder or (f) which have a similar effect,
shall be of no further force and effect and the Trustee shall administer the
Trust Fund and perform its obligations hereunder solely for the benefit of the
Holders of the Certificates. Nothing in the foregoing sentence, nor any action
taken pursuant thereto or in compliance therewith, shall be deemed to have
released the Certificate Insurer from any obligation or liability it may have
to any party or to the Class A-1 Certificateholders hereunder, under any other
agreement, instrument or document (including, without limitation, the
Certificate Insurance Policy) or under applicable law.

ARTICLE VI

THE DEPOSITOR AND THE SERVICER

     Section 6.01 Respective Liabilities of the Depositor and the Servicer.

     The Depositor and the Servicer shall each be liable in accordance herewith
only to the extent of the obligations specifically and respectively imposed
upon and undertaken by them herein.

     Section 6.02 Merger or Consolidation of the Depositor or the Servicer.

     The Depositor and the Servicer will each keep in full effect its
existence, rights and franchises as a corporation or limited partnership, as
the case may be, under the laws of the United States or under the laws of one
of the states thereof and will each obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its respective duties under this Agreement.

     Any Person into which the Depositor or the Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Servicer shall be a party, or any person succeeding to the
business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, 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; provided, however,
that the successor or surviving Person to the Servicer shall be qualified to
sell mortgage loans to, and to service mortgage loans on behalf of, Fannie Mae
or FHLMC.

     The Servicer is and shall continue to be an institution which is a Fannie
Mae and FHLMC approved seller/servicer in good standing and shall maintain a
net worth of at least $30,000,000.

     Section 6.03 Limitation on Liability of the Depositor, the Servicer and
Others.

     Neither the Depositor, the Servicer, the Trustee nor any of their
respective directors, officers, employees or agents shall be under any
liability to the Certificateholders for any action taken or for refraining from
the taking of any action in good faith pursuant to this

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Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Depositor, the Servicer, the Trustee or any
such Person against any breach of representations or warranties made by it
herein or protect the Depositor, the Servicer, the Trustee or any such Person
from any liability which would otherwise be imposed by reasons of willful
misfeasance, bad faith or negligence (or with respect to the Depositor, gross
negligence) in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Depositor and any director, officer,
employee or agent of the Depositor 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 Depositor, the Servicer, the Trustee and
any director, officer, employee or agent of the Depositor, the Servicer or the
Trustee shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense incurred in connection with any audit, controversy
or judicial proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Certificates (including, as to the
Trustee, the undertaking of actions as directed by the Unaffiliated Seller or
the Certificate Insurer pursuant to Section 2.03), other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence (or with respect to the Depositor, gross negligence) in the
performance of their respective duties hereunder or by reason of reckless
disregard of their respective obligations and duties hereunder. The Depositor
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its respective duties hereunder and which in
its opinion may involve it in any expense or liability; provided, however, that
the Depositor may in its discretion undertake any such action (or direct the
Trustee to undertake any such actions pursuant to Section 2.03 hereof for the
benefit of the Certificateholders) that it may deem necessary or desirable in
respect of this Agreement and the rights and duties of the parties hereto and
interests of the Trustee and the Certificateholders hereunder. In such event,
the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor shall be entitled to be reimbursed therefor out of the Collection
Account.

     Neither the Servicer nor any of the officers, employees or agents of the
Servicer shall be under any liability to the Trustee or the Depositor for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement; provided, however, that this provision shall not
protect the Servicer or any such person against any breach of warranties or
representations made herein, or failure to perform its obligations in
compliance with the terms of this Agreement, or any liability which would
otherwise be imposed by reason of any breach of the terms and conditions of
this Agreement. The Servicer and any officer, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its duties to
service the Mortgage Loans in accordance with this Agreement and which in its
opinion may involve it in any expenses or liability; provided, however, that
the Servicer may undertake any such action which it may deem necessary or
desirable in respect to this Agreement and the rights and duties of the parties
hereto. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust Fund, and the Servicer shall be entitled to be reimbursed therefor out of
the Collection Account. In the event the Servicer agrees, at the request of
the Depositor, to act on behalf of the Depositor in any litigation relating to
the origination of a Mortgage Loan, the Depositor shall pay all

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expenses associated with the defense and management of such claim (without
reimbursement from the Trust Fund).

     Section 6.04 Limitation on Resignation of the Servicer.

     The Servicer shall not assign this Agreement or resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Certificate Insurer, the Depositor and the Trustee or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Servicer. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Depositor and the Trustee
which Opinion of Counsel shall be in form and substance acceptable to the
Depositor and the Trustee. No such resignation shall become effective until a
successor shall have assumed the Servicer’s responsibilities and obligations
hereunder. Notwithstanding anything to the contrary herein, the Servicer may
pledge or assign as collateral all its rights, title and interest under this
Agreement to a lender (the “Lender”); provided that the Lender may only
terminate the Servicer under this Agreement if there has been an Event of
Default under this Agreement, in which event the Lender may replace the
Servicer in the same manner and subject to the same conditions applicable in
the event the Servicer is appointing a successor Servicer upon a servicer
termination pursuant to Section 7.02.

     Section 6.05 Additional Indemnification by the Servicer; Third Party
Claims.

     The Servicer shall indemnify the Depositor (and its Affiliate, Morgan
Stanley Mortgage Capital Inc.), the Unaffiliated Seller and the Trustee and any
director, officer, employee, or agent of the Depositor (or its Affiliate,
Morgan Stanley Mortgage Capital Inc.), the Unaffiliated Seller and the Trustee
and hold them harmless against any and all claims, losses, damages, penalties,
fines, forfeitures, reasonable and necessary legal fees and related costs,
judgments, and any other costs, fees and expenses that any of them may sustain
in any way related to any breach by the Servicer, of any of its representations
and warranties referred to in Section 2.03(a)(i) or the failure of the Servicer
to perform its duties and service the Mortgage Loans in compliance with the
terms of this Agreement. The Servicer shall indemnify the Unaffiliated Seller
and any director, officer, employee, or agent of the Unaffiliated Seller and
the Trust Fund and hold it harmless against any and all claims, losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments, and any other costs, fees and expenses that it may
sustain in any way related to any breach by the Servicer, of any of its
representations and warranties referred to in Section 2.03(a)(ii). The
Servicer immediately shall notify the Depositor, the Unaffiliated Seller and
the Trustee if a claim is made by a third party with respect to any such breach
or failure by the Servicer under this Agreement, assume (with the prior written
consent of the Depositor, the Unaffiliated Seller and the Trustee) the defense
of any such claim and pay all expenses in connection therewith, including
reasonable counsel fees, and promptly pay, discharge and satisfy any judgment
or decree which may be entered against it or the Depositor, the Unaffiliated
Seller or the Trustee in respect of such claim; provided, that if it is
determined that the Servicer is not obligated to indemnify such parties in
accordance with this Section 6.05, each such party (or the Trust Fund, if
applicable) shall promptly reimburse the Servicer in connection with each of
the foregoing payments made to such party by the Servicer.

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ARTICLE VII

DEFAULT

     Section 7.01 Events of Default.

     “Event of Default,” wherever used herein, means any one of the following
events:

     (a) any failure by the Servicer to remit to the Trustee any payment
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, requiring the same to be remedied, shall have been
given to the Servicer by the Depositor, by the Certificate Insurer or by the
Trustee or to the Trustee by Certificateholders entitled to at least 25% of the
Voting Rights in the Certificates; or

     (b) failure on the part of the Servicer duly to observe or perform in any
material respect any other of the covenants or agreements on the part of the
Servicer set forth in this Agreement which continues unremedied for a period of
forty-five days (except that such number of days shall be fifteen in the case
of a failure to pay any premium for any insurance policy required to be
maintained under this Agreement) after the earlier of (i) the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Depositor, by the Certificate Insurer, or by
the Trustee, or to the Trustee by Certificateholders entitled to at least 25%
of the Voting Rights in the Certificates and (ii) actual knowledge of such
failure by a Servicing Officer of the Servicer; or

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

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

     (e) 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; or

     (f) Fitch reduces its servicer rating of the Servicer to “RPS2-” or lower,
Moody’s reduces its servicer rating of the Servicer to “SQ3” or lower, or
Standard & Poor’s reduces its servicer rating of the Servicer to “Average” or
lower; or

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     (g) any failure of the Servicer to make any P&I Advance on any Remittance
Date required to be made from its own funds pursuant to Section 4.01 which
continues unremedied for one Business Day immediately following the Remittance
Date; or

     (h) a breach of any representation and warranty of the Servicer referred
to in Section 2.03(a), which materially and adversely affects the interests of
the Certificateholders or the Certificate Insurer and which continues
unremedied for a period of thirty days after the earlier of (i) the date upon
which written notice of such breach is given to the Servicer by the Trustee or
the Depositor, or to the Servicer, the Depositor, the Certificate Insurer and
the Trustee by any Certificateholders entitled to at least 25% of the Voting
Rights in the Certificates or by the Certificate Insurer and (ii) actual
knowledge of such breach by a Servicing Officer of the Servicer; or

     (i) any reduction, withdrawal or qualification of the Servicer’s servicer
rating by any Rating Agency which results in the Servicer being deemed
unacceptable by any Rating Agency to act as a primary servicer for this
transaction or a primary servicer or a special servicer for any other
mortgage-backed or asset-backed transaction rated or to be rated by any such
Rating Agency; or

     (j) the Certificate Insurer notifies the Trustee in writing of any uncured
“event of default” (as such term is used in the Insurance and Indemnity
Agreement) by the Servicer under the Insurance and Indemnity Agreement.

     If an Event of Default shall occur, then, and in each and every such case,
so long as such Event of Default shall not have been remedied, the Trustee may,
subject to Section 5.08(a), or at the direction of the Certificate Insurer, or
of Holders holding a majority of the Voting Rights, the Trustee shall, by
notice in writing to the Servicer (with a copy to each Rating Agency),
terminate all of the rights and obligations of the Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof, other than
its rights as a Certificateholder hereunder; provided, however, that the
Trustee shall not be required to give written notice to the Servicer of the
occurrence of an Event of Default described in clauses (b) through (i) of this
Section 7.01 unless and until a Responsible Officer of the Trustee has actual
knowledge of the occurrence of such an Event of Default. In the event that a
Responsible Officer of the Trustee has actual knowledge of the occurrence of an
event of default described in clause (a) of this Section 7.01, the Trustee
shall give written notice to the Servicer of the occurrence of such an event
within one Business Day of the first day on which such Responsible Officer
obtains actual knowledge of such occurrence; provided, however, that the
failure of the Trustee to provide such notice within one Business Day will not
affect the rights of the Depositor, the Certificate Insurer or the
Certificateholders to provide notice as required pursuant to clause (a) of this
Section 7.01. On and after the receipt by the Servicer of such written notice,
all authority and power of the Servicer hereunder, whether with respect to the
Mortgage Loans or otherwise, shall pass to and be vested in the Trustee. The
Trustee as successor Servicer shall make any P&I Advance which the Servicer
failed to make subject to Section 4.01, whether or not the obligations of the
Servicer have been terminated pursuant to this Section. The 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

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complete the transfer and endorsement or assignment of the Mortgage Loans
and related documents, or otherwise. Unless expressly provided in such written
notice, no such termination shall affect any obligation of the Servicer to pay
amounts owed pursuant to Article VIII. The Servicer agrees to cooperate with
the Trustee in effecting the termination of the Servicer’s responsibilities and
rights hereunder, including, without limitation, the transfer to the Trustee of
all cash amounts which shall at the time be credited to the Collection Account,
or thereafter be received with respect to the Mortgage Loans.

     Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to the
notice terminating such Servicer’s rights and obligations as Servicer hereunder
and received after such notice, that portion thereof to which such Servicer
would have been entitled pursuant to Section 3.11, and any other amounts
payable to such Servicer hereunder the entitlement to which arose prior to the
termination of its activities hereunder in accordance with Section 3.11 and in
the time period specified in Section 3.11. The Servicer shall continue to be
entitled to the benefits of Section 6.03, notwithstanding any termination
hereunder, with respect to events occurring prior to such termination.

     Section 7.02 Trustee to Act; Appointment of Successor.

     On and after the time the Servicer receives a notice of termination
pursuant to Section 3.24 or Section 7.01, subject to the third paragraph of
this Section 7.02, the Trustee shall, unless the Certificate Insurer shall have
named an alternative successor Servicer and given written notice thereof to the
Trustee of at least 30 days prior to the effective date of the transfer of
servicing to such successor, subject to and to the extent provided in Section
3.05, be the successor 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 and applicable law
including the obligation to make P&I Advances and Servicing Advances pursuant
to Section 4.01. As compensation therefor, the Trustee shall be entitled to
all funds relating to the Mortgage Loans that the Servicer would have been
entitled to charge to the Collection Account or Distribution Account if the
Servicer had continued to act hereunder including, if the Servicer was
receiving the Servicing Fee, the Servicing Fee and the income on investments or
gain related to the Collection Account and Distribution Account.

     Notwithstanding the foregoing, if the Trustee has become the successor to
the Servicer in accordance with Section 7.01, the Trustee may, if it shall be
unwilling to so act, or shall, if it is prohibited by applicable law from
making P&I Advances and Servicing Advances pursuant to Section 4.01 or if it is
otherwise unable to so act, appoint, or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution
the appointment of which does not adversely affect the then current rating of
the Certificates by each Rating Agency, 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. Any successor to the Servicer shall
be an institution which is a Fannie Mae and FHLMC approved seller/servicer in
good standing, which has a net worth of at least $30,000,000, which is willing
to service the Mortgage Loans and which executes and delivers to the Depositor
and the Trustee an agreement accepting such delegation and assignment,
containing an assumption by such Person of the rights, powers,

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duties, responsibilities, obligations and liabilities of the Servicer
(other than liabilities of the Servicer under Section 6.03 incurred prior to
termination of the Servicer under Section 7.01), with like effect as if
originally named as a party to this Agreement; provided that each Rating Agency
acknowledges that its rating of the Certificates in effect immediately prior to
such assignment and delegation will not be qualified or reduced, as a result of
such assignment and delegation. Pending appointment of a successor to the
Servicer hereunder, the Trustee, unless the Trustee is prohibited by law from
so acting, shall, subject to Section 3.05, act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Trustee may
make such arrangements for the compensation of such successor out of payments
on Mortgage Loans as it and such successor shall agree; provided, however, that
no such compensation shall be in excess of the Servicing Fee Rate and amounts
paid to the Servicer from investments. The Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. Neither the Trustee nor any other successor
Servicer shall be deemed to be in default hereunder by reason of any failure to
make, or any delay in making, any distribution hereunder or any portion thereof
or any failure to perform, or any delay in performing, any duties or
responsibilities hereunder, in either case caused by the failure of the
Servicer to deliver or provide, or any delay in delivering or providing, any
cash, information, documents or records to it.

     Notwithstanding any provision in this Agreement to the contrary, prior to
the 20th day following the notice of termination of the Servicer and with the
consent of the Certificate Insurer (such consent not to be unreasonably
withheld, delayed or conditioned), the terminated Servicer may appoint a
successor Servicer that satisfies the eligibility criteria of a successor
Servicer set forth in this Section 7.02; provided such successor Servicer
agrees to fully effect the servicing transfer within 90 days following the
termination of the Servicer and to make all P&I Advances and Servicing Advances
that would otherwise be made by the Trustee under this Section 7.02 as of the
date of such appointment and prior thereto, the terminated Servicer makes all
P&I Advances and Servicing Advances; otherwise the Trustee shall appoint a
successor Servicer as otherwise set forth in this Section 7.02. Any proceeds
received in connection with the appointment of such successor Servicer shall be
the property of the terminated Servicer or its designee.

     Any successor to the Servicer as servicer shall give notice to the
Mortgagors of such change of servicer and shall, during the term of its service
as servicer, maintain in force the policy or policies that the Servicer is
required to maintain pursuant to Section 3.13.

     Section 7.03 Notification to Certificateholders.

     (a) Upon any termination of or appointment of a successor to the Servicer,
the Trustee shall give prompt written notice thereof to Certificateholders, the
Certificate Insurer, the Unaffiliated Seller and to each Rating Agency.

     (b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders, the Certificate
Insurer, the Unaffiliated Seller and each Rating Agency notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.

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ARTICLE VIII

CONCERNING THE TRUSTEE

     Section 8.01 Duties of the Trustee.

     The Trustee, before the occurrence of an Event of Default and after the
curing of all Events of Default that may have occurred, shall undertake to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person’s own affairs.

     The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement shall examine them to determine whether they are in
the form required by this Agreement. The Trustee shall not be responsible for
the accuracy or content of any resolution, certificate, statement, opinion,
report, document, order, or other instrument.

     No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act
or its own willful misconduct.

     Unless an Event of Default known to the Trustee has occurred and is
continuing,

     (a) the duties and obligations of the Trustee shall be determined solely
by the express provisions of this Agreement, the Trustee shall not be liable
except for the performance of the duties and obligations specifically set forth
in this Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee, and the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming to
the requirements of this Agreement which it believed in good faith to be
genuine and to have been duly executed by the proper authorities respecting any
matters arising hereunder;

     (b) the Trustee shall not be liable for an error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless
it is finally proven that the Trustee was negligent in ascertaining the
pertinent facts; and

     (c) the Trustee shall not be liable with respect to any action taken,
suffered, or omitted to be taken by it in good faith in accordance with the
direction of the Certificate Insurer, or of Holders of Certificates evidencing
not less than 25% of the Voting Rights of Certificates relating to the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee under this
Agreement.

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     Section 8.02 Certain Matters Affecting the Trustee.

     Except as otherwise provided in Section 8.01:

     (a) the Trustee may request and rely upon and shall be protected in acting
or refraining from acting upon any resolution, Officer’s Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties and the Trustee shall have no
responsibility to ascertain or confirm the genuineness of any signature of any
such party or parties;

     (b) the Trustee may consult with counsel, financial advisers or
accountants and the advice of any such counsel, financial advisers or
accountants and any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;

     (c) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement;

     (d) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Certificate Insurer,
or by Holders of Certificates evidencing not less than 25% of the Voting Rights
allocated to each Class of Certificates;

     (e) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
accountants or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agents, accountants or attorneys
appointed with due care by it hereunder;

     (f) the Trustee shall not be required to risk or expend its own funds or
otherwise incur any financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers hereunder if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it;

     (g) the Trustee shall not be liable for any loss on any investment of
funds pursuant to this Agreement (other than as issuer of the investment
security);

     (h) except as otherwise provided in Section 7.01, the Trustee shall not be
deemed to have knowledge of an Event of Default until a Responsible Officer of
the Trustee shall have received written notice thereof; and

     (i) the Trustee shall be under no obligation to exercise any of the
trusts, rights or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders, pursuant to this
Agreement, unless such Certificateholders shall have offered to the Trustee

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reasonable security or indemnity satisfactory to the Trustee against the
costs, expenses and liabilities which may be incurred therein or thereby.

     Section 8.03 Trustee Not Liable for Certificates or Mortgage Loans.

     The recitals contained herein and in the Certificates shall be taken as
the statements of the Depositor and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document other than with respect to the Trustee’s execution and
authentication of the Certificates. The Trustee shall not be accountable for
the use or application by the Depositor or the Servicer of any funds paid to
the Depositor or the Servicer in respect of the Mortgage Loans or deposited in
or withdrawn from the Collection Account by the Depositor or the Servicer.

     The Trustee shall have no responsibility for filing or recording any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder (unless the Trustee shall have become the successor
Servicer).

     The Trustee executes the Certificates not in its individual capacity but
solely as Trustee of the Trust Fund created by this Agreement, in the exercise
of the powers and authority conferred and vested in it by this Agreement. Each
of the undertakings and agreements made on the part of the Trustee on behalf of
the Trust Fund in the Certificates is made and intended not as a personal
undertaking or agreement by the Trustee but is made and intended for the
purpose of binding only the Trust Fund.

     Section 8.04 Trustee May Own Certificates.

     The Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates with the same rights as it would have if it were not
the Trustee.

     Section 8.05 Trustee’s Fees and Expenses.

     (a) As compensation for its activities under this Agreement, the Trustee
may withdraw from the Distribution Account on each Distribution Date the
Trustee Fee for the Distribution Date. The Trustee and any director, officer,
employee, or agent of the Trustee shall be indemnified by the Servicer against
any loss, liability, or expense (including reasonable attorney’s fees)
resulting from any failure by the Servicer to perform its obligations under
this Agreement. This indemnity shall survive the termination of this Agreement
or the resignation or removal of the Trustee under this Agreement.

     The Trustee shall not be entitled to payment or reimbursement from the
Unaffiliated Seller for any routine ongoing expenses incurred by the Trustee in
the ordinary course of its duties as Trustee, Registrar, or paying agent under
this Agreement or for any other expenses, including indemnification payments,
except as set forth herein.

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     Section 8.06 Eligibility Requirements for the Trustee.

     The Trustee hereunder shall at all times be a corporation or association
organized and doing business under the laws of a state or the United States of
America, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50,000,000, subject to supervision
or examination by federal or state authority and with a credit rating which
would not cause any of the Rating Agencies to reduce their respective then
current ratings of the Certificates (or having provided such security from time
to time as is sufficient to avoid such reduction) as evidenced in writing by
each Rating Agency. If such corporation or association publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 8.06 the combined capital and surplus of such corporation or
association shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with this Section 8.06, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07. The entity serving as Trustee may have normal banking and trust
relationships with the Depositor and its affiliates or the Servicer and its
affiliates; provided, however, that such entity cannot be an affiliate of the
Depositor, the Unaffiliated Seller or the Servicer other than the Trustee in
its role as successor to the Servicer.

     Section 8.07 Resignation and Removal of the Trustee.

     The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor, the
Servicer, the Certificate Insurer, the Unaffiliated Seller, each Rating Agency
not less than 60 days before the date specified in such notice, when, subject
to Section 8.08, such resignation is to take effect, and acceptance by a
successor trustee in accordance with Section 8.08 meeting the qualifications
set forth in Section 8.06. If no successor trustee meeting such qualifications
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice or resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor trustee.

     If at any time the Trustee shall cease to be eligible in accordance with
Section 8.06 and shall fail to resign after written request thereto by the
Depositor, or if at any time the Trustee shall become incapable of acting, or
shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, or a tax is imposed with respect
to the Trust Fund by any state in which the Trustee or the Trust Fund is
located and the imposition of such tax would be avoided by the appointment of a
different trustee, then the Depositor or the Servicer may remove the Trustee
and appoint a successor trustee reasonably acceptable to the Certificate
Insurer by written instrument, in triplicate, one copy of which shall be
delivered to the Trustee, one copy to the Servicer and one copy to the
successor trustee.

     The Certificate Insurer or the Holders of Certificates entitled to at
least a majority of the Voting Rights may at any time remove the Trustee and
appoint a successor trustee by written instrument or instruments, in
triplicate, signed by such Holders or their attorneys-in-fact

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duly authorized, one complete set of which shall be delivered by the
successor Trustee to the Servicer, one complete set to the Trustee so removed
and one complete set to the successor so appointed. The successor trustee
shall notify each Rating Agency of any removal of the Trustee.

     Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to this Section 8.07 shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 8.08.

     Section 8.08 Successor Trustee.

     Any successor trustee appointed as provided in Section 8.07 shall execute,
acknowledge and deliver to the Depositor and to its predecessor trustee and the
Servicer an instrument accepting such appointment hereunder and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The Depositor, the Certificate Insurer, the Servicer and the
predecessor trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for more fully and certainly vesting
and confirming in the successor trustee all such rights, powers, duties, and
obligations.

     No successor trustee shall accept appointment as provided in this Section
8.08 unless at the time of its acceptance, the successor trustee is eligible
under Section 8.06 and its appointment does not adversely affect the then
current rating of the Certificates.

     Upon acceptance of appointment by a successor trustee as provided in this
Section 8.08, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates. If the Depositor fails to mail such
notice within 10 days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of
the Depositor.

     Section 8.09 Merger or Consolidation of the Trustee.

     Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor
of the Trustee hereunder; provided that such corporation shall be eligible
under Section 8.06 without the execution or filing of any paper or further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

     Section 8.10 Appointment of Co-Trustee or Separate Trustee.

     Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing any Mortgage Note may at the time
be located, the Servicer and the Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and

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to vest in such Person or Persons, in such capacity and for the benefit of
the Certificateholders, such title to the Trust Fund or any part thereof,
whichever is applicable, and, subject to the other provisions of this Section
8.10, such powers, duties, obligations, rights and trusts as the Servicer and
the Trustee may consider appropriate. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request to do so,
or in the case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 8.06 and no notice to Certificateholders
of the appointment of any co-trustee or separate trustee shall be required
under Section 8.08.

     Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

     (a) To the extent necessary to effectuate the purposes of this Section
8.10, all rights, powers, duties and obligations conferred or imposed upon the
Trustee, except for the obligation of the Trustee under this Agreement to
advance funds on behalf of the Servicer, shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act), except
to the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed (whether as Trustee hereunder or as successor
to the Servicer hereunder), the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the applicable Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Trustee;

     (b) No trustee hereunder shall be held personally liable because of any
act or omission of any other trustee hereunder and such appointment shall not,
and shall not be deemed to, constitute any such separate trustee or co-trustee
as agent of the Trustee;

     (c) The Trustee may at any time accept the resignation of or remove any
separate trustee or co-trustee; and

     (d) The Trustee, and not the Servicer, shall be liable for the payment of
reasonable compensation and expenses to any such separate trustee or co-trustee
from the Trustee Fee payable to the Trustee on each Distribution Date.

     Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the separate trustees and co-trustees, when and
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection and indemnity to, the Trustee. Every such instrument shall be filed
with the Trustee and a copy thereof given to the Servicer and the Depositor.

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     Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the appointment of a
new or successor trustee.

     Section 8.11 Tax Matters.

     As set forth in the Preliminary Statement, the assets within the Trust
Fund for which any REMIC election is to be made shall constitute, and the
conduct of matters relating to such assets shall be consistent with the
treatment of such assets as, a REMIC. To this end, the Trustee covenants and
agrees to act as agent (and the Trustee is hereby appointed to act as agent) on
behalf of any REMIC created hereunder, and that in such capacity it shall:

     (a) prepare and file in a timely manner, a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066 or any successor form adopted
by the Internal Revenue Service) and prepare and file with the Internal Revenue
Service and applicable state or local tax authorities income tax or information
returns for each taxable year with respect to any REMIC described in the
Preliminary Statement containing such information and at the times and in the
manner as may be required by the Code or state or local tax laws, regulations,
or rules, and furnish to Certificateholders the schedules, statements or
information at such times and in such manner as may be required thereby;

     (b) within thirty days of the Closing Date, furnish to the Internal
Revenue Service on Form 8811 or as otherwise may be required by the Code, the
name, title, address, and telephone number of the person that the Holders of
the Certificates may contact for tax information relating thereto, together
with such additional information as may be required by such Form, and update
such information at the time or times in the manner required by the Code;

     (c) make an election that each of the Lower Tier REMIC, the Middle Tier
REMIC and the Upper Tier REMIC be treated as a REMIC on the federal tax return
for its first taxable year (and, if necessary, under applicable state law);

     (d) prepare and forward to the Certificateholders and to the Internal
Revenue Service and, if necessary, state tax authorities, all information
returns and reports as and when required to be provided to them in accordance
with the REMIC Provisions, including the calculation of any original issue
discount using the Prepayment Assumption (as defined in the Prospectus
Supplement);

     (e) provide information necessary for the computation of tax imposed on
the transfer of a Residual Certificate to a Person that is a Non-Permitted
Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of
computing and furnishing such information may be charged to the Person liable
for such tax);

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     (f) to the extent that they are under its control, conduct matters
relating to such assets at all times that any Certificates are outstanding so
as to maintain the status as a REMIC under the REMIC Provisions;

     (g) not knowingly or intentionally take any action or omit to take any
action that would cause the termination of the REMIC status of any REMIC
created hereunder;

     (h) pay, from the sources specified in the last paragraph of this Section
8.11, the amount of any federal or state tax, including prohibited transaction
taxes as described below, imposed on any REMIC created hereunder before its
termination when and as the same shall be due and payable (but such obligation
shall not prevent the Trustee or any other appropriate Person from contesting
any such tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings);

     (i) cause federal, state or local income tax or information returns to be
signed by the Trustee or such other person as may be required to sign such
returns by the Code or state or local laws, regulations or rules;

     (j) maintain records relating to each REMIC created hereunder, including
the income, expenses, assets, and liabilities thereof on a calendar year basis
and on the accrual method of accounting and the fair market value and adjusted
basis of the assets determined at such intervals as may be required by the
Code, as may be necessary to prepare the foregoing returns, schedules,
statements or information; and

     (k) as and when necessary and appropriate, represent each REMIC created
hereunder in any administrative or judicial proceedings relating to an
examination or audit by any governmental taxing authority, request an
administrative adjustment as to any taxable year of each REMIC created
hereunder, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any tax item of any REMIC
created hereunder, and otherwise act on behalf of the REMIC in relation to any
tax matter or controversy involving it.

     The Trustee shall treat the rights of the Class P Certificateholders to
Prepayment Charges as the beneficial ownership of interests in a grantor trust,
and not as an obligation of any REMIC created hereunder, for federal income tax
purposes.

     To enable the Trustee to perform its duties under this Agreement, the
Depositor shall provide to the Trustee within ten days after the Closing Date
all information or data that the Trustee requests in writing and determines to
be relevant for tax purposes to the valuations and offering prices of the
Certificates, including the price, yield, prepayment assumption, and projected
cash flows of the Certificates and the Mortgage Loans. Moreover, the Depositor
shall provide information to the Trustee concerning the value to each Class of
Certificates of the right to receive Basis Risk Carry Forward Amounts from the
Excess Reserve Fund Account. Thereafter, the Depositor shall provide to the
Trustee promptly upon written request therefor any additional information or
data that the Trustee may, from time to time, reasonably request to enable the
Trustee to perform its duties under this Agreement. The Depositor hereby

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indemnifies the Trustee for any losses, liabilities, damages, claims, or
expenses of the Trustee arising from any errors or miscalculations of the
Trustee that result from any failure of the Depositor to provide, or to cause
to be provided, accurate information or data to the Trustee on a timely basis.

     If any tax is imposed on “prohibited transactions” of any REMIC created
hereunder as defined in Section 860F(a)(2) of the Code, on the “net income from
foreclosure property” of such REMIC as defined in Section 860G(c) of the Code,
on any contribution to the REMIC after the Startup Day pursuant to Section
860G(d) of the Code, or any other tax is imposed, including any minimum tax
imposed on the REMIC pursuant to Sections 23153 and 24874 of the California
Revenue and Taxation Code, if not paid as otherwise provided for herein, the
tax shall be paid by (i) the Trustee if such tax arises out of or results from
negligence of the Trustee in the performance of any of its obligations under
this Agreement, (ii) the Servicer if such tax arises out of or results from a
breach by the Servicer of any of its obligations under this Agreement, (iii)
the Unaffiliated Seller shall pay if such tax arises out of or results from the
Unaffiliated Seller’s obligation to repurchase a Mortgage Loan pursuant to
Section 2.03, or (iv) in all other cases, or if the Trustee, the Servicer or
the Unaffiliated Seller fails to honor its obligations under the preceding
clauses (i) or (ii), any such tax will be paid with amounts otherwise to be
distributed to the Certificateholders, as provided in Section 4.02(a).

     Section 8.12 Periodic Filings.

     (a) The Trustee and the Servicer shall reasonably cooperate with the
Depositor in connection with the Trust’s satisfying the reporting requirements
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The Trustee shall prepare on behalf of the Trust any Forms 8-K and 10-K
customary for similar securities as required by the Exchange Act and the Rules
and Regulations of the Securities and Exchange Commission (the “SEC”)
thereunder, and the Trustee shall file (via the SEC’s Electronic Data Gathering
and Retrieval System) such Forms with the SEC on behalf of the Depositor. The
Depositor hereby grants to the Trustee a limited power of attorney to execute
and file each such Form 8-K but only to the extent no accompanying
certification is required to be filed on behalf of the Depositor. Such power
of attorney shall continue until either the earlier of (i) receipt by the
Trustee from the Depositor of written termination of such power of attorney and
(ii) the termination of the Trust. The Depositor shall execute the Form 10-K.
The Trustee shall have no liability with respect to any failure to properly
prepare or file such periodic reports resulting from or relating to the
Trustee’s inability or failure to obtain any information not resulting from its
own negligence or willful misconduct.

     (b) Each Form 8-K shall be filed by the Trustee with the SEC within 15
days after each Distribution Date, including a Form 8-K with a copy of the
statement to the Certificateholders for such Distribution Date as an exhibit
thereto. Prior to March 30th of each year (or such earlier date as may be
required by the Exchange Act and the Rules and Regulations of the SEC), the
Trustee shall file a Form 10-K, in substance as required by applicable law or
the SEC’s staff interpretations. Such Form 10-K shall include as exhibits the
Servicer’s annual statement of compliance described under Section 3.22 (upon
which the Trustee may rely) and the accountant’s report described under Section
3.23, in each case to the extent they have been timely delivered to the
Trustee. If they are not so timely delivered, the Trustee shall file an

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amended Form 10-K including such documents as exhibits reasonably promptly
after they are delivered to the Trustee. The Form 10-K shall also include a
certification in the form attached hereto as Exhibit M (the “Certification”),
which shall be signed by the senior officer of the Depositor in charge of
securitization. The Trustee shall prepare and deliver each Form 10-K to the
Depositor for execution no later than March 20th (or if such day is not a
Business Day, the immediately preceding Business Day) of each year. The
Depositor shall return the executed Form 10-K to the Trustee for filing no
later than March 25th (or if such day is not a Business Day, the immediately
preceding Business Day) of each year.

     (c) Notwithstanding that the Certification is to be signed by an officer
of the Depositor, a Responsible Officer of the Trustee shall sign a
certification, in the form attached hereto as Exhibit N for the benefit of the
Depositor and its officers, directors and Affiliates in respect of items 1
through 3 thereof of the Certification (provided, however, that the Trustee
shall not undertake an analysis of the accountant’s report attached as an
exhibit to the Form 10-K), and a Servicing Officer of the Servicer who is
responsible for the servicing and administration of the Mortgage Loans shall
sign a certification in the form attached hereto as Exhibit N for the benefit
of the Depositor, the Trustee and their respective officers, directors and
Affiliates in respect of items 4 and 5 of the Certification. Each such
certification shall be delivered to the Depositor and the Trustee (as
applicable), no later than March 15th of each year (or if such day is not a
Business Day, the immediately preceding Business Day) and the Depositor shall
deliver the Certification to be filed to the Trustee no later than
March 20th of each year (or if such day is not a Business Day, the immediately preceding
Business Day). In the event that prior to the filing date of the Form 10-K in
March of each year, the Trustee or the Servicer has actual knowledge of
information material to the Certification, that party shall promptly notify the
Depositor and each of the other parties signing the certifications. In
addition, (i) the Trustee shall indemnify and hold harmless the Depositor and
its officers, directors, employees, agents and Affiliates from and against any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments and other costs and expenses arising out of
or based upon any breach of the Trustee’s obligations under this Section
8.12(c) or the Trustee’s negligence, bad faith or willful misconduct in
connection therewith and (ii) the Servicer shall indemnify and hold harmless
the Depositor, the Trustee and their respective officers, directors, employees,
agents and Affiliates from and against any losses, damages, penalties, fines,
forfeitures, reasonable and necessary legal fees and related costs, judgments
and other costs and expenses arising out of or based upon any breach of the
Servicer’s obligations under this Section 8.12(c) or any material misstatement
or omission, negligence, bad faith or willful misconduct of the Servicer in
connection therewith. If the indemnification provided for herein is
unavailable or insufficient to hold harmless the indemnified party then (i) the
Trustee agrees in connection with a breach of the Trustee’s obligations under
this Section 8.12(c) or the Trustee’s negligence, bad faith or willful
misconduct in connection therewith that it shall contribute to the amount paid
or payable by the Depositor as a result of the losses, claims, damages or
liabilities of the Depositor in such proportion as is appropriate to reflect
the relative fault of the Depositor on the one hand and the Trustee on the
other and (ii) the Servicer agrees that it shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities of such indemnified party in such proportion as is appropriate
to reflect the relative fault of such indemnified party, as the case may be, on
the one hand and the Servicer on the other in connection with a breach of the
Servicer’s obligations

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under this Section 8.12(c) or any material misstatement or omission,
negligence, bad faith or willful misconduct of the Servicer in connection
therewith.

     (d) Upon any filing with the Securities and Exchange Commission, the
Trustee shall promptly deliver to the Depositor a copy of any such executed
report, statement or information.

     (e) Prior to January 30 of the first year in which the Trustee is able to
do so under applicable law, the Trustee shall, in accordance with applicable
law, file a Form 15D Suspension Notification with respect to the Trust Fund in
a timely manner.

     Section 8.13 Tax Classification of the Excess Reserve Fund Account.

     For federal income tax purposes, the Trustee shall treat the Excess
Reserve Fund Account as an outside reserve fund, within the meaning of Treasury
Regulation § 1.860G-2(h), that is beneficially owned by the holder of the Class
X Certificate. The Trustee shall treat the rights that each Class of LIBOR
Certificates has to receive payments of Basis Risk Carry Forward Amounts from
the Excess Reserve Fund Account as rights to receive payments under an interest
rate cap contract written by the Class X Certificateholder in favor of each
Class. Accordingly, each Class of Certificates (excluding the Class X, Class P
and Class R Certificates) will be comprised of two components — an Upper Tier
Regular Interest and an interest in a notional principal contract. The Trustee
shall allocate the issue price for a Class of Certificates between such two
components for purposes of determining the issue price of the Upper Tier
Regular Interest component based on information received from the Depositor.

     Section 8.14 Interest Rate Cap Agreements.

     The Trustee is hereby authorized and directed to execute and deliver the
Interest Rate Cap Agreements and to acknowledge the provisions thereof.

ARTICLE IX

TERMINATION

     Section 9.01 Termination upon Liquidation or Purchase of the Mortgage
Loans.

     Subject to Section 9.03, the obligations and responsibilities of the
Depositor, the Servicer and the Trustee created hereby with respect to the
Trust Fund shall terminate upon the earlier of (a) the purchase, on or after
the applicable Optional Termination Date, by the Servicer or the Class X
Certificateholders of all Mortgage Loans (and REO Properties) at the price
equal to the sum of (i) 100% of the unpaid principal balance of each Mortgage
Loan (other than in respect of REO Property) plus accrued and unpaid interest
thereon at the applicable Mortgage Rate, (ii) the lesser of (x) the appraised
value of any REO Property as determined by the higher of two appraisals
completed by two independent appraisers selected by the party exercising the
optimal termination at the expense of the party exercising the optimal
termination plus, accrued and unpaid interest on each Mortgage Loan at the
applicable Mortgage Rate and (y) the unpaid principal balance of each Mortgage
Loan related to any REO Property, in each case plus accrued and unpaid interest
thereon at the applicable Mortgage Rate and (iii) all costs and expenses

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incurred by, or on behalf of, the Trust Fund, of which the Trustee has
actual knowledge, in connection with any violation by such Mortgage Loan of any
predatory or abusive-lending law (the “Termination Price”) and (b) the later of
(i) the maturity or other liquidation (or any Advance with respect thereto) of
the last Mortgage Loan remaining in the Trust Fund and the disposition of all
REO Property and (ii) the distribution to Certificateholders of all amounts
required to be distributed to them pursuant to this Agreement. In no event
shall the trusts created hereby continue beyond the expiration of 21 years from
the death of the survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James’s, living on the date
hereof.

     Notwithstanding the foregoing, if Standard & Poor’s has rated a class of
debt securities (“NIM Securities”) that are backed by the Class X Certificates
and Class P Certificates and that are outstanding on any date on which the
Servicer intends to exercise its option to purchase the Mortgage Loans, the
Servicer will be permitted to exercise such option only if one of the following
additional conditions is met: (i) after distribution of the Termination Price
to the Certificateholders (other than the Holders of the Class X Certificates,
Class P Certificates and Class R Certificates) to redeem the related
Certificates, the remainder of the Termination Price (the “Remainder Amount”)
is distributed to the Holders of the Class X Certificates and Class P
Certificates and is sufficient to pay the outstanding principal amount of and
accrued and unpaid interest on the NIM Securities to the extent the NIM
Securities are then outstanding; or (ii) (A) at the same time that the Servicer
remits the Termination Price to the Trustee, it also remits to the Trustee an
additional amount which, in combination with the Remainder Amount, is
sufficient to pay the outstanding principal amount of and accrued and unpaid
interest on the NIM Securities, to the extent the NIM Securities are then
outstanding, and (B) the Trustee remits the Remainder Amount to the Holders of
the Class X Certificates and Class P Certificates and remits that additional
amount directly to the NIM Trustee (plus any outstanding fees and expenses due
and owing to the NIM Trustee) under the indenture creating the NIM Securities.

     No purchase under this Section 9.01 will be permitted without the consent
of the Certificate Insurer, unless no draw on the Certificate Insurance Policy
would be made and no amounts due to the Certificate Insurer would remain
unreimbursed on the final Distribution Date.

     Section 9.02 Final Distribution on the Certificates.

     If on any Determination Date, the Servicer determines that there are no
Outstanding Mortgage Loans and no other funds or assets in the Trust Fund other
than the funds in the Collection Account, the Servicer shall direct the Trustee
promptly to send a Notice of Final Distribution to each Certificateholder. If
the Servicer or the Class X Certificateholder elects to terminate the Trust
Fund pursuant to clause (a) of Section 9.01, at least 20 days prior to the date
the Notice of Final Distribution is to be mailed to the affected
Certificateholders such electing party shall notify the Depositor and the
Trustee of the date the Servicer or the Class X Certificateholder intends to
terminate the Trust Fund and of the applicable repurchase price of the Mortgage
Loans and REO Properties.

     A Notice of Final Distribution, specifying the Distribution Date on which
Certificateholders may surrender their Certificates for payment of the final
distribution and cancellation, shall be given promptly by the Trustee by letter
to Certificateholders mailed not

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earlier than the 10th day and not later than the 15th day of the month
next preceding the month of such final distribution. Any such Notice of Final
Distribution shall specify (a) the Distribution Date upon which final
distribution on the Certificates will be made upon presentation and surrender
of Certificates at the office therein designated, (b) the amount of such final
distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being
made only upon presentation and surrender of the Certificates at the office
therein specified. The Trustee will give such Notice of Final Distribution to
each Rating Agency at the time such Notice of Final Distribution is given to
Certificateholders.

     In the event such Notice of Final Distribution is given, the Servicer
shall cause all funds in the Collection Account to be remitted to the Trustee
for deposit in the Distribution Account on the Business Day prior to the
applicable Distribution Date in an amount equal to the final distribution in
respect of the Certificates. Upon such final deposit with respect to the Trust
Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee shall promptly release to the Servicer the Custodial Files for the
Mortgage Loans.

     Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class (after
reimbursement of all amounts due to the Servicer, the Certificate Insurer, the
Depositor and the Trustee hereunder), in each case on the final Distribution
Date and in the order set forth in Section 4.02, in proportion to their
respective Percentage Interests, with respect to Certificateholders of the same
Class, up to an amount equal to (i) as to each Class of Regular Certificates
(except the Class X Certificates), the Certificate Balance thereof plus for
each such Class and the Class X Certificates accrued interest thereon in the
case of an interest-bearing Certificate and all other amounts to which such
Classes are entitled pursuant to Section 4.02 and (ii) as to the Residual
Certificates, the amount, if any, which remains on deposit in the Distribution
Account (other than the amounts retained to meet claims) after application
pursuant to clause (i) above.

     In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If
within six months after the second notice all the applicable Certificates shall
not have been surrendered for cancellation, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets which remain a
part of the Trust Fund. If within one year after the second notice all
Certificates shall not have been surrendered for cancellation, the Class R
Certificateholders shall be entitled to all unclaimed funds and other assets of
the Trust Fund which remain subject hereto.

     Section 9.03 Additional Termination Requirements.

     In the event the Servicer or the Class X Certificateholder, as applicable,
exercises its purchase option with respect to the Mortgage Loans as provided in
Section 9.01, the Trust Fund shall be terminated in accordance with the
following additional requirements, unless the Trustee has been supplied with an
Opinion of Counsel, at the expense of the Servicer or the Class

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X Certificateholder, as applicable, to the effect that the failure to
comply with the requirements of this Section 9.03 will not (i) result in the
imposition of taxes on “prohibited transactions” on either REMIC as defined in
Section 860F of the Code, or (ii) cause either the Lower Tier REMIC, the Middle
Tier REMIC or the Upper Tier REMIC to fail to qualify as a REMIC at any time
that any Certificates are outstanding:

     (a) The Trustee shall sell all of the assets of the Trust Fund to the
Servicer or the Class X Certificateholder, as applicable, and, within 90 days
of such sale, shall distribute to the Certificateholders the proceeds of such
sale in complete liquidation of each of the Lower Tier REMIC, the Middle Tier
REMIC and the Upper Tier REMIC.

     (b) The Trustee shall attach a statement to the final federal income tax
return for each of the Lower Tier REMIC, the Middle Tier REMIC and the Upper
Tier REMIC stating that pursuant to Treasury Regulations Section 1.860F-1, the
first day of the 90-day liquidation period for each such REMIC was the date on
which the Trustee sold the assets of the Trust Fund to the Servicer or the
Class X Certificateholder, as applicable.

ARTICLE X

MISCELLANEOUS PROVISIONS

     Section 10.01 Amendment.

     This Agreement may be amended from time to time (x) by the Depositor, the
Servicer and the Trustee, with the prior written consent of the Certificate
Insurer, (y) with the consent of the Unaffiliated Seller unless the Trustee
receives an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund) stating that the amendment will not
adversely affect the Unaffiliated Seller, but (z) without the consent of any of
the Certificateholders (i) to cure any ambiguity or mistake, (ii) to correct
any defective provision herein or to supplement any provision herein which may
be inconsistent with any other provision herein, (iii) to add to the duties of
the Depositor or the Servicer, (iv) to add any other provisions with respect to
matters or questions arising hereunder or (v) to modify, alter, amend, add to
or rescind any of the terms or provisions contained in this Agreement;
provided, that any action pursuant to clauses (iv) or (v) above shall not, as
evidenced by an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund), adversely affect in any material
respect the interests of any Certificateholder; and provided, further, that any
such action pursuant to clause (iv) or (v) above shall not be deemed to
adversely affect in any material respect the interests of the
Certificateholders 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
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating.

     In addition, this Agreement may also be amended from time to time (x) by
the Trustee, the Depositor and the Servicer, with the prior written consent of
the Certificate Insurer, and (y) with the consent of the Unaffiliated Seller
unless the Trustee receives an Opinion of

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Counsel (which Opinion of Counsel shall not be an expense of the Trustee
or the Trust Fund) stating that the amendment will not adversely affect the
Unaffiliated Seller, but (z) without the consent of the Certificateholders, to
modify, eliminate or add to any of its provisions to such extent as shall be
necessary or helpful to (i) maintain the qualification of the Lower Tier REMIC,
the Middle Tier REMIC and the Upper Tier REMIC under the Code, (ii) avoid or
minimize the risk of the imposition of any tax on the Lower Tier REMIC, the
Middle Tier REMIC or the Upper Tier REMIC pursuant to the Code that would be a
claim at any time prior to the final redemption of the Certificates or (iii)
comply with any other requirements of the Code; provided, that the Trustee has
been provided an Opinion of Counsel, which opinion shall be an expense of the
party requesting such opinion but in any case shall not be an expense of the
Trustee or the Trust Fund, to the effect that such action is necessary or
helpful to, as applicable, (i) maintain such qualification, (ii) avoid or
minimize the risk of the imposition of such a tax or (iii) comply with any such
requirements of the Code.

     This Agreement may also be amended from time to time (x) by the Depositor,
the Servicer and the Trustee, with the prior written consent of the Certificate
Insurer, (y) with the consent of the Unaffiliated Seller unless the Trustee
receives an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund) stating that the amendment will not
adversely affect the Unaffiliated Seller, and (z), except as set forth in
Section 3.27, with the consent of the Holders of Certificates evidencing
Percentage Interests aggregating not less than 66-2/3% of each Class of
Certificates (based on the aggregate outstanding principal balance of such
class at such time) affected thereby, 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 Holders of
Certificates; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments required to be
distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in
(i), without the consent of the Holders of Certificates of such Class
evidencing, as to such Class, Percentage Interests aggregating not less than
66-2/3%, or (iii) reduce the aforesaid percentages of Certificates the Holders
of which are required to consent to any such amendment, without the consent of
the Holders of all such Certificates then outstanding.

     Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC or the Certificateholders or cause any REMIC
to fail to qualify as a REMIC at any time that any Certificates are
outstanding.

     Notwithstanding the foregoing provisions of this Section 10.01, with
respect to any amendment that significantly modifies the permitted activities
of the Trustee or the Servicer, any Certificate beneficially owned by the
Depositor, the Unaffiliated Seller or any of their respective Affiliates shall
be deemed not to be outstanding (and shall not be considered when determining
the percentage of Certificateholders consenting or when calculating the total
number of Certificates entitled to consent) for purposes of determining if the
requisite consents of Certificateholders under this Section 10.01 have been
obtained.

135

 

     Promptly after the execution of any amendment to this Agreement requiring
the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to the Cap Provider,
each Certificateholder and each Rating Agency.

     It shall not be necessary for the consent of Certificateholders under this
Section 10.01 to approve the particular form of any proposed amendment, 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 Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

     Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be
an expense of the Trustee or the Trust Fund), satisfactory to the Trustee that
(i) such amendment is permitted and is not prohibited by this Agreement and
that all requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material respect
the interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

     Section 10.02 Recordation of Agreement; Counterparts.

     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 Mortgaged Properties are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at its expense, but only upon receipt of an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders.

     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.

     Section 10.03 Governing Law.

     THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

     Section 10.04 Intention of Parties.

     It is the express intent of the parties hereto that the conveyance (i) of
the Mortgage Loans by the Depositor and (ii) of the Trust Fund by the Depositor
to the Trustee each be, and be construed as, an absolute sale thereof. It is,
further, not the intention of the parties that such conveyances be deemed a
pledge thereof. However, in the event that, notwithstanding the intent of the
parties, such assets are held to be the property of the Depositor, as the case
may be,

136

 

or if for any other reason this Agreement is held or deemed to create a
security interest in either such assets, then (i) this Agreement shall be
deemed to be a security agreement within the meaning of the Uniform Commercial
Code of the State of New York and (ii) the conveyances provided for in this
Agreement shall be deemed to be an assignment and a grant by the Depositor to
the Trustee, for the benefit of the Certificateholders, of a security interest
in all of the assets transferred, whether now owned or hereafter acquired.

     The Depositor for the benefit of the Certificateholders and of the
Certificate Insurer shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this Agreement were deemed
to create a security interest in the Trust Fund, such security interest would
be deemed to be a perfected security interest of first priority under
applicable law and will be maintained as such throughout the term of the
Agreement. The Depositor shall arrange for filing any Uniform Commercial Code
continuation statements in connection with any security interest granted or
assigned to the Trustee for the benefit of the Certificateholders.

     Section 10.05 Notices.

     (a) The Trustee shall use its best efforts to promptly provide notice to
each Rating Agency with respect to each of the following of which it has actual
knowledge:

     1. Any material change or amendment to this Agreement;

     2. The occurrence of any Event of Default that has not been cured;

     3. The resignation or termination of the Servicer or the Trustee and the
appointment of any successor;

     4. The repurchase or substitution of Mortgage Loans pursuant to Section
2.03; and

     5. The final payment to Certificateholders.

     (b) In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:

     1. Each report to Certificateholders described in Section 4.03; and

     2. Any notice of a purchase of a Mortgage Loan pursuant to Section 2.02,
2.03 or 3.11.

     All directions, demands, consents and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in
the case of the Depositor or the Representative, Morgan Stanley ABS Capital I
Inc. or Morgan Stanley & Co. Incorporated, 1221 Avenue of the Americas, New
York, New York, 10020, Attention: Valerie Kay, with a copy to Michelle Wilke,
Esq., (b) in the case of the Servicer, Countrywide Home Loans Servicing LP, 450
Park Granada, Calabasas, California, 91302, Attention: Secretary, or such other
address as may be hereafter furnished to the parties hereto in writing, (c) in
the case of the Trustee to the

137

 

Corporate Trust Office, Deutsche Bank National Trust Company, 1761 East
St. Andrew Place, Santa Ana, California 92705-4934, Attention: Trust
Administration DC04M2, or such other address as the Trustee may hereafter
furnish to the parties hereto, (d) in the case of the Unaffiliated Seller, CDC
Mortgage Capital, Inc., 9 West 57th Street, New York, New York 10019,
Attention: General Counsel, or such other address as the Unaffiliated Seller
may hereafter furnish to the parties hereto, (e) in the case of each of the
Rating Agencies, the address specified therefor in the definition corresponding
to the name of such Rating Agency and (f) in the case of any Originator, the
address specified therefor in the applicable Mortgage Loan Purchase Agreement.
Notices to Certificateholders shall be deemed given when mailed, first class
postage prepaid, to their respective addresses appearing in the Certificate
Register.

     Section 10.06 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 Certificates or the rights of the Holders thereof.

     Section 10.07 Assignment.

     Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Servicer
without the prior written consent of the Trustee, the Certificate Insurer and
Depositor; provided, however, that, subject to Section 3.27, the Servicer may
pledge or sell its interest in any reimbursements for P&I Advances or Servicing
Advances hereunder.

     Section 10.08 Limitation on Rights of Certificateholders.

     The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder’s legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

     No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of
an association; nor shall any Certificateholder be under any liability to any
third party by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.

     No Certificateholder 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 Trustee a written notice of an
Event of Default and of the continuance thereof, as herein provided, and unless
the Holders of Certificates evidencing not less than 25% of the Voting

138

 

Rights evidenced by the Certificates, and the Certificate Insurer, shall
also have made written request to the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs,
expenses, and liabilities to be incurred therein or thereby, and the 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 Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates 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 Certificates, 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 common benefit of
all Certificateholders. For the protection and enforcement of the provisions
of this Section 10.08, each and every Certificateholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.

     Section 10.09 Inspection and Audit Rights.

     The Servicer agrees that, on reasonable prior notice, it will permit any
representative of the Depositor, the Unaffiliated Seller, the Certificate
Insurer or the Trustee during the Servicer’s normal business hours, to examine
all the books of account, records, reports and other papers of the Servicer
relating to the Mortgage Loans, to make copies and extracts therefrom, to cause
such books to be audited by independent certified public accountants selected
by the party conducting the inspection and to discuss its affairs, finances and
accounts relating to the Mortgage Loans with its officers, employees and
independent public accountants (and by this provision the Servicer hereby
authorizes said accountants to discuss with such representative such affairs,
finances and accounts), all at such reasonable times and as often as may be
reasonably requested. Any customary out-of-pocket expense of the Servicer
incident to the exercise by the Depositor, the Unaffiliated Seller, the
Certificate Insurer or the Trustee of any right under this Section 10.09 shall
be borne by the Servicer.

     Section 10.10 Certificates Nonassessable and Fully Paid.

     It is the intention of the Depositor that Certificateholders shall not be
personally liable for obligations of the Trust Fund, that the interests in the
Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof
by the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

     Section 10.11 The Certificate Insurer Default.

     Any right conferred to the Certificate Insurer shall be suspended during
any period in which a Certificate Insurer Default exists. At such time as the
Class A-1 Certificates are no longer outstanding hereunder, and no amounts owed
to the Certificate Insurer hereunder remain unpaid, the Certificate Insurer’s
rights hereunder shall terminate.

139

 

     Section 10.12 Third Party Beneficiary.

     The parties agree that the Certificate Insurer is intended and shall have
all rights of a third-party beneficiary of this Agreement.

     Section 10.13 Waiver of Jury Trial.

     EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, WAIVES (TO THE
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF
ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

140

 

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

	 	 	 	 	 
	 	 	MORGAN STANLEY ABS CAPITAL I INC.,
as Depositor
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Name: 
	

	 	 	 	Title:
	 
	 	 	 	 
	 	 	DEUTSCHE BANK NATIONAL
TRUST COMPANY,

     solely as Trustee and not in its
individual capacity
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	 	 	COUNTRYWIDE HOME LOANS SERVICING LP, as
Servicer
	 
	 	 	 	 
	

	 	 	 	By: COUNTRYWIDE GP, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	 	 	CDC MORTGAGE CAPITAL INC.,
as Unaffiliated Seller
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Name:
	

	 	 	 	Title:

141

 

SCHEDULE I

Mortgage Loan Schedule

[On File with Dewey Ballantine LLP]

I-A-1

 

SCHEDULE IA

Schedule of Countrywide Serviced Loans

[On File with Dewey Ballantine LLP]

IA-1

 

SCHEDULE II

CDC MORTGAGE CAPITAL TRUST 2004-HE2

Mortgage Pass-Through Certificates,

Series 2004-HE2

Representations and Warranties of the Servicer

     (1) The Servicer is duly organized as a limited partnership and is
validly existing and in good standing under the laws of the state of
Texas and is licensed and qualified to transact any and all business
contemplated by this Pooling and Servicing Agreement to be conducted by
the Servicer in any state in which a Mortgaged Property securing a
Mortgage Loan is located or is otherwise not required under applicable
law to effect such qualification and, in any event, is in compliance with
the doing business laws of any such State, to the extent necessary to
ensure its ability to enforce each Mortgage Loan and to service the
Mortgage Loans in accordance with the terms of this Pooling and Servicing
Agreement;

     (2) The Servicer has the full power and authority to service each
Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Pooling and Servicing
Agreement and has duly authorized by all necessary action on the part of
the Servicer the execution, delivery and performance of this Pooling and
Servicing Agreement; and this Pooling and Servicing Agreement, assuming
the due authorization, execution and delivery thereof by the other
parties thereto, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its terms,
except to the extent that (a) the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, receivership and other similar
laws relating to creditors’ rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought;

     (3) The execution and delivery of this Pooling and Servicing
Agreement by the Servicer, the servicing of the Mortgage Loans by the
Servicer hereunder, the consummation by the Servicer of any other of the
transactions herein contemplated, and the fulfillment of or compliance
with the terms hereof are in the ordinary course of business of the
Servicer and will not (A) result in a breach of any term or provision of
the organizational documents of the Servicer or (B) conflict with, result
in a breach, violation or acceleration of, or result in a default under,
the terms of any other material agreement or instrument to which the
Servicer is a party or by which it may be bound, or any statute, order or
regulation applicable to the Servicer of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the
Servicer; and the Servicer is not a party to, bound by, or in breach or
violation of any indenture or other agreement or instrument, or subject
to or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it, which materially and adversely affects or, to the
Servicer’s

II-1

 

knowledge, would in the future materially and adversely affect, (x)
the ability of the Servicer to perform its obligations under this Pooling
and Servicing Agreement or (y) the business, operations, financial
condition, properties or assets of the Servicer taken as a whole;

     (4) The Servicer is an approved seller/servicer for Fannie Mae or
Freddie Mac in good standing;

     (5) No action, suit, proceeding or investigation is pending or, to
the best of the Servicer’s knowledge, threatened against the Servicer,
before any court, administrative agency or other tribunal asserting the
invalidity of this Pooling and Servicing Agreement, seeking to prevent
the consummation of any of the transactions contemplated by this Pooling
and Servicing Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in business,
operations, financial conditions, properties or assets of the Servicer,
or in any material impairment of the right or ability of the Servicer to
carry on its business substantially as now conducted, or in any material
liability on the part of the Servicer, or which would draw into question
the validity of this Pooling and Servicing Agreement or the Mortgage
Loans or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or which would be likely
to impair materially the ability of the Servicer to perform under the
terms of this Pooling and Servicing Agreement;

     (6) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Pooling and Servicing Agreement or the consummation by the Servicer of
the transactions contemplated by this Pooling and Servicing Agreement,
except for such consents, approvals, authorizations or orders, if any,
that have been obtained prior to the Closing Date; and

     (7) The Servicer represents that its computer and other systems used
in servicing the Mortgage Loans operate in a manner such that the
Servicer can service the Mortgage Loans in accordance with the terms of
this Pooling and Servicing Agreement.

     (8) With respect to each Mortgage Loan, to the extent the Servicer
serviced such Mortgage Loan and to the extent the Servicer provided
monthly reports to the three credit repositories, the Servicer has fully
furnished, in accordance with the Fair Credit Reporting Act and its
implementing regulation, accurate and compete information (i.e.,
favorable and unfavorable) on its borrower credit files to Equifax,
Experian, and Trans Union Credit Information Company (three of the credit
repositories), on a monthly basis.

II-2

 

SCHEDULE IIA

Further Representations and Warranties of the Servicer

     (1) Mortgage Loan Schedule. With respect to each Mortgage Loan, as of the
applicable Cut-off Date, each of (1) the last Due Date on which a payment was
actually applied to the outstanding principal balance of each Mortgage Loan;
(2) the Stated Principal Balance of each Mortgage Loan, after deduction of
payments of principal due and collected on or before the applicable Cut-off
Date; and (3) the Servicing Transfer Date for each Mortgage Loan, in each case,
as listed on the Mortgage Loan Schedule, is true and correct;

     (2) Payments Current. Unless otherwise indicated on the related Mortgage
Loan Schedule, with respect to each Mortgage Loan, no Scheduled Payment is 30
days or more Delinquent as of the Cut-off Date nor has any Payment been 30 days
or more Delinquent at any time from and after the Servicing Transfer Date
through the Cut-off Date;

     (3) Original Terms Unmodified. With respect to each Mortgage Loan, the
terms of the Mortgage Note and Mortgage have not been impaired, waived, altered
or modified by or on behalf of the Servicer from and after the Servicing
Transfer Date;

     (4) No Satisfaction of Mortgage. With respect to each Mortgage Loan,
since the related Servicing Transfer Date and except for prepayments in full,
the Mortgage has not been satisfied, cancelled, subordinated or rescinded, in
whole or in part, and the Mortgaged Property 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, subordination or rescission.
From and after the Servicing Transfer Date, the Servicer has not waived the
performance by the Mortgagor of any action, if the Mortgagor’s failure to
perform such action would cause the Mortgage Loan to be in default, nor has the
Servicer waived any default resulting from any action or inaction by the
Mortgagor;

     (5) No Defaults. With respect to each Mortgage Loan, to the best
knowledge of the Servicer, other than payments due but not yet 30 days
Delinquent, there is no material default, breach, violation or event which
would permit acceleration existing under the Mortgage or the Mortgage Note;

     (6) Mortgaged Property Undamaged; No Condemnation Proceedings. With
respect to each Mortgage Loan, to the best knowledge of the Servicer and except
as the Servicer has previously notified the Unaffiliated Seller in writing,
there is no proceeding pending or threatened for the total or partial
condemnation of the Mortgaged Property, the related Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect adversely the value of the related
Mortgaged Property as security for the Mortgage Loan or the use for which the
premises were intended and each related Mortgaged Property is in good repair;

     (7) Escrow Payments/Interest Rate Adjustments. With respect to each
Mortgage Loan, since the Servicing Transfer Date, the servicing and collection
practices used by the Servicer with respect to such Mortgage Loan have been in
all material respects in compliance with Accepted Servicing Practices,
applicable laws and regulations, and have been in all material

II-A-1

 

respects legal and proper. With respect to escrow deposits and Escrow
Payments, if any, all such deposits and payments received by the Servicer are
in the possession of, or under the control of, the Servicer and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All Escrow Payments have been collected
in full compliance with state and federal law and the provisions of the related
Mortgage Note and Mortgage (to the extent not otherwise prohibited by law).
From and after the Servicing Transfer Date, all Mortgage Rate adjustments (if
any) have been made in strict compliance with state and federal law and the
terms of the related Mortgage Note;

     (8) Other Insurance Policies. The improvements upon each Mortgaged
Property are covered by a valid and existing hazard insurance policy with a
generally acceptable carrier that provides for fire and extended coverage and
coverage for such other hazards as are customary in the area where the
Mortgaged Property is located;

     (9) No Violation of Environmental Laws. With respect to each Mortgage
Loan, to the best knowledge of the Servicer and except as the Servicer has
previously notified the Unaffiliated Seller in writing, there is no pending
action or proceeding directly involving the related Mortgaged Property in which
compliance with any environmental law, rule or regulation is an issue and there
is no violation of any environmental law, rule or regulation with respect to
the related Mortgaged Property; and

     (10) Servicemembers Civil Relief Act. With respect to each Mortgage Loan,
from and after the Servicing Transfer Date, no Mortgagor has notified the
Servicer, and the Servicer has no knowledge, of any relief requested or allowed
to the Mortgagor under the Servicemembers Civil Relief Act or any similar state
or local law.

II-A-2

 

SCHEDULE III

	(a)	 	Due Organization and Authority. The Unaffiliated Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the state of New York and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in good
standing in each state wherein it owns or leases any material properties
or where a Mortgaged Property is located, if the laws of such state
require licensing or qualification in order to conduct business of the
type conducted by the Unaffiliated Seller, and in any event the
Unaffiliated Seller is in compliance with the laws of any such state to
the extent necessary; the Unaffiliated Seller has the full corporate
power, authority and legal right to execute and deliver this Agreement and
to perform its obligations hereunder; the execution, delivery and
performance of this Agreement by the Unaffiliated Seller and the
consummation of the transactions contemplated hereby have been duly and
validly authorized; this Agreement and all agreements contemplated hereby
have been duly executed and delivered and constitute the valid, legal,
binding and enforceable obligations of the Unaffiliated Seller, regardless
of whether such enforcement is sought in a proceeding in equity or at law;
and all requisite corporate action has been taken by the Unaffiliated
Seller to make this Agreement and all agreements contemplated hereby valid
and binding upon the Unaffiliated Seller in accordance with their terms;
	 
	(b)	 	No Conflicts. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the fulfillment
of or compliance with the terms and conditions of this Agreement, will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Unaffiliated Seller’s charter or by-laws or any legal
restriction or any agreement or instrument to which the Unaffiliated
Seller is now a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, except such
unfulfillment, non-compliance or default or acceleration does not in the
aggregate have a material adverse effect on the operation, business,
condition (business or otherwise) of the Unaffiliated Seller or result in
the violation of any law, rule, regulation, order, judgment or decree to
which the Unaffiliated Seller or its property is subject, except such
violation does not in the aggregate have a material adverse effect on the
operation, business, condition (business or otherwise) of the Unaffiliated
Seller or result in the creation or imposition of any lien, charge or
encumbrance that would have an adverse effect upon any of its properties
pursuant to the terms of any mortgage, contract, deed of trust or other
instrument;
	 
	(c)	 	No Litigation Pending. There is no action, suit, proceeding or
investigation pending nor, to the Unaffiliated Seller’s knowledge,
threatened against the Unaffiliated Seller, before any court,
administrative agency or other tribunal asserting the invalidity of this
Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in
the aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Unaffiliated
Seller, or in any material impairment of the right or ability of the
Unaffiliated Seller to carry on its business substantially as now
conducted, or which would draw into question the validity of this
Agreement or of any action taken or to be taken in connection with the
obligations of the Unaffiliated Seller contemplated herein, or

III-1

 

	 	 	which would be likely to impair materially the ability of the
Unaffiliated Seller to perform under the terms of this Agreement;
	 
	(d)	 	No Consent Required. No consent, approval, authorization or order of, or
registration or filing with, or notice to any court or governmental agency
or body including HUD, the FHA or the VA is required for the execution,
delivery and performance by the Unaffiliated Seller of or compliance by
the Unaffiliated Seller with this Agreement or the consummation of the
transactions contemplated by this Agreement, or if required, such approval
has been obtained prior to the Closing Date;

III-2

 

EXHIBIT A

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

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
OWNERSHIP OF A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT
CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) AND CERTAIN OTHER
ASSETS.

	 	 	 	 	 
	Certificate No.

	 	:
	 	[A-1-1/A-2-1/A-3-1/A-4-1/M-1-1/

M-2-1/M-3-1/B-1-1/B-2-1/B-3-1]
	 
	 	 	 	 
	Cut-off Date

	 	:
	 	May 1, 2004
	 
	 	 	 	 
	First Distribution Date

	 	:
	 	June 25, 2004
	 
	 	 	 	 
	Initial Certificate Balance of
this Certificate (“Denomination”)

	 	:	 	 
	 
	 	 	 	 
	Initial Certificate Balances of
all Certificates of this Class

	 	:	 	 
	 
	 	 	 	 
	CUSIP

	 	:	 	 
	 
	 	 	 	 
	ISIN

	 	:	 	 

A-1

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

[Class A-1] [Class A-2] [Class A-3][Class A-4] [Class M-1] [Class M-2]

[Class M-3] [Class B-1] [Class B-2] [Class B-3]

     evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class.

     Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Unaffiliated Seller, any Originator, the Servicer or the Trustee
referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any
governmental agency or instrumentality.

     This certifies that CEDE & CO., is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination
of this Certificate by the aggregate of the denominations of all Certificates
of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the “Agreement”) among Morgan Stanley ABS Capital
I Inc., as depositor (the “Depositor”), Countrywide Home Loans Servicing LP, as
servicer (the “Servicer”), CDC Mortgage Capital Inc., as unaffiliated seller
(the “Unaffiliated Seller”) and Deutsche Bank National Trust Company, as
trustee (the “Trustee”). To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

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

     This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually authenticated by an authorized
signatory of the Trustee.

*   *   *

A-2

 

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

	 	 	 	 	 	 	 
	 	 	DEUTSCHE BANK NATIONAL TRUST COMPANY,
	 	 	 	 	not in its individual
capacity, but solely as Trustee
	

	 	By:	 	 	 	 
	

	 	 	

Authenticated:

	 	 	 
	By:
	 	 
	

	 	

	

	 	Authorized Signatory of
	

	 	DEUTSCHE BANK NATIONAL TRUST COMPANY,
	

	 	not in its individual capacity,
	

	 	but solely as Trustee

A-3

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

     This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2004-HE2 Mortgage Pass-Through
Certificates, Series 2004-HE2 (herein collectively called the “Certificates”),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

     The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the “Distribution Date”), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name
this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to
each Distribution Date is the Business Day immediately preceding such
Distribution Date; provided, however, that for any Definitive Certificates, the
Record Date shall be the last Business Day of the month next preceding the
month of such Distribution Date.

     Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the offices designated by the
Trustee for such purposes, or such other location specified in the notice to
Certificateholders of such final distribution.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any
time by the parties thereto, and Financial Security Assurance Inc., as
Certificate Insurer, with the consent of the Holders of Certificates affected
by such amendment evidencing the requisite Percentage Interest, as provided in
the Agreement.

A-4

 

Any such consent by the Holder of this Certificate shall be conclusive and
binding on such Holder and upon all future Holders of this Certificate and of
any Certificate issued upon the transfer hereof or in exchange therefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes,
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by the holder hereof or
such holder’s attorney duly authorized in writing, and thereupon one or more
new Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest in the Trust Fund will be issued to the
designated transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest, as
requested by the Holder surrendering the same.

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

     The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

     On any Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans, as of the last day of the related Due Period, is less
than or equal to 10% of the Maximum Pool Principal Balance, the Servicer and/or
the Class X Certificateholders will have the option to repurchase, in whole,
from the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans at a purchase price determined as provided in the
Agreement. The obligations and responsibilities created by the Agreement will
terminate as provided in Section 9.01 of the Agreement.

     Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

A-5

 

ASSIGNMENT

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

(Please print or typewrite name and address including postal zip code of
assignee)
 

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

     I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such
Certificate to the following address:

	 	 
	

	  .

Dated:

	 	 	 
	 

	 	

	

	 	Signature by or on behalf of assignor

A-6

 

DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to  _______________________,
____________________________________________________________________________________________________,
for the account of _____________________________________________________________________________________,
account number ______________, or, if mailed by check, to ___________________________________________________,
Applicable statements should be mailed to _________________________________________________________________,
____________________________________________________________________________________________________.

     This information is provided by _______________________________________________________________________,
the assignee named above, or ___________________________________________________________________________,
as its agent.

A-7

 

EXHIBIT B

IF THIS CERTIFICATE IS A PHYSICAL CERTIFICATE, NEITHER THIS CERTIFICATE NOR ANY
INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE PROPOSED TRANSFEROR DELIVERS TO
THE TRUSTEE A TRANSFEROR LETTER (THE “TRANSFEROR LETTER”) IN THE FORM OF
EXHIBIT I TO THE AGREEMENT REFERRED TO HEREIN AND EITHER (I) THE TRUSTEE
RECEIVES A RULE 144A LETTER (THE “144A LETTER”) IN THE FORM OF EXHIBIT J TO THE
AGREEMENT REFERRED TO HEREIN OR (II) THE TRUSTEE RECEIVES AN OPINION OF
COUNSEL, DELIVERED AT THE EXPENSE OF THE TRANSFEROR, THAT SUCH TRANSFER MAY BE
MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

IF THIS CERTIFICATE IS A BOOK-ENTRY CERTIFICATE, THE PROPOSED TRANSFEROR WILL
BE DEEMED TO HAVE MADE EACH OF THE CERTIFICATIONS SET FORTH IN THE TRANSFEROR
LETTER AND THE PROPOSED TRANSFEREE WILL BE DEEMED TO HAVE MADE EACH OF THE
CERTIFICATIONS SET FORTH IN THE RULE 144A LETTER, IN EACH CASE AS IF SUCH
CERTIFICATE WERE EVIDENCED BY A PHYSICAL CERTIFICATE

IF THIS CERTIFICATE IS A PHYSICAL CERTIFICATE, NEITHER THIS CERTIFICATE NOR ANY
INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE DELIVERS TO THE
TRUSTEE A REPRESENTATION LETTER TO THE EFFECT THAT EITHER (I) SUCH TRANSFEREE
IS NOT AN EMPLOYEE BENEFIT PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR ANY
FEDERAL, STATE OR LOCAL LAW MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS OF
ERISA OR THE CODE (EACH, A “PLAN”), AND IS NOT ACTING ON BEHALF OF ANY PLAN OR
USING THE ASSETS OF ANY PLAN TO ACQUIRE THIS CERTIFICATE, OR (II) SUCH
TRANSFEREE IS AN INSURANCE COMPANY AND IS PURCHASING THIS CERTIFICATE WITH
FUNDS CONTAINED IN AN “INSURANCE COMPANY GENERAL ACCOUNT” (AS SUCH TERM IS
DEFINED IN SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 (“PTCE
95-60”)) AND THE CONDITIONS FOR EXEMPTIVE RELIEF UNDER SECTIONS I AND III OF
PTCE 95-60 ARE SATISFIED WITH RESPECT TO ITS PURCHASE AND HOLDING OF THIS
CERTIFICATE. IF THIS CERTIFICATE IS A BOOK-ENTRY CERTIFICATE, EACH TRANSFEREE
WILL BE DEEMED TO HAVE MADE THE FOREGOING REPRESENTATION.

-viii-

 

 

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

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
OWNERSHIP OF A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT
CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) AND CERTAIN OTHER
ASSETS.

	 	 	 	 	 	 	 
	Certificate No.

	 	:
	 	B-4-1	 	 
	 
	 	 	 	 	 	 
	Cut-off Date

	 	:
	 	May 1, 2004

	 
	 	 	 	 	 	 
	First Distribution Date

	 	:
	 	June 25, 2004

	 
	 	 	 	 	 	 
	Initial Certificate Balance of this Certificate
(“Denomination”)

	 	:	 	 	 	 
	 
	 	 	 	 	 	 
	Initial Certificate Balances of all Certificates of
this Class

	 	:
	$	4,954,000	 	 
	 
	 	 	 	 	 	 
	CUSIP
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	ISIN:
	 	 	 	 	 	 

B-1

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

Class B-4

     evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class.

     Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Unaffiliated Seller, any Originator, the Servicer or the Trustee
referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any
governmental agency or instrumentality.

     This certifies that CEDE & CO., is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination
of this Certificate by the aggregate of the denominations of all Certificates
of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the “Agreement”) among Morgan Stanley ABS Capital
I Inc., as depositor (the “Depositor”), Countrywide Home Loans Servicing LP, as
servicer (the “Servicer”), CDC Mortgage Capital Inc., as unaffiliated seller
(the “Unaffiliated Seller”) and Deutsche Bank National Trust Company, as
trustee (the “Trustee”). To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

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

     This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually authenticated by an authorized
signatory of the Trustee.

*     *     *

B-2

 

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

	 	 	 	 	 	 	 
	 	 	DEUTSCHE BANK NATIONAL
TRUST COMPANY,
	 	 	 	not in its individual capacity, but
solely as Trustee
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	

	 	 	

Authenticated:

	 	 	 
	By:
	 	 
	

	 	

	

	 	Authorized Signatory of
	

	 	DEUTSCHE BANK NATIONAL TRUST COMPANY,
	

	 	not in its individual capacity,
	

	 	but solely as Trustee

B-3

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

     This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2004-HE2 Mortgage Pass-Through
Certificates, Series 2004-HE2 (herein collectively called the “Certificates”),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

     The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the “Distribution Date”), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name
this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to
each Distribution Date is the Business Day immediately preceding such
Distribution Date; provided, however, that for any Definitive Certificates, the
Record Date shall be the last Business Day of the month next preceding the
month of such Distribution Date.

     Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the offices designated by the
Trustee for such purposes, or such other location specified in the notice to
Certificateholders of such final distribution.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any
time by the parties thereto, and Financial Security Assurance Inc., as
Certificate Insurer, with the consent of the Holders of Certificates affected
by such amendment evidencing the requisite Percentage Interest, as provided in
the Agreement.

B-4

 

Any such consent by the Holder of this Certificate shall be conclusive and
binding on such Holder and upon all future Holders of this Certificate and of
any Certificate issued upon the transfer hereof or in exchange therefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes,
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by the holder hereof or
such holder’s attorney duly authorized in writing, and thereupon one or more
new Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest in the Trust Fund will be issued to the
designated transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest, as
requested by the Holder surrendering the same.

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

     The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

     On any Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans, as of the last day of the related Due Period, is less
than or equal to 10% of the Maximum Pool Principal Balance, the Servicer and/or
the Class X Certificateholders will have the option to repurchase, in whole,
from the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans at a purchase price determined as provided in the
Agreement. The obligations and responsibilities created by the Agreement will
terminate as provided in Section 9.01 of the Agreement.

     Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

B-5

 

ASSIGNMENT

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

(Please print or typewrite name and address including postal zip code of
assignee) 

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

     I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such
Certificate to the following address:

	
	.

Dated:

	 	 	 
	 

	 	

	

	 	Signature by or on behalf of assignor

B-6

 

DISTRIBUTION INSTRUCTIONS

The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to  ____________________________________,
_________________________________________________________________________________________________________________,
for the account of __________________________________________________________________________________________________,
account number ______________, or, if mailed by check, to ________________________________________________________________,
Applicable statements should be mailed to ______________________________________________________________________________,
_________________________________________________________________________________________________________________.

     This
information is provided by ____________________________________________________________________________________,
the assignee named above, or _________________________________________________________________________________________,
as its agent.

B-7

 

EXHIBIT C

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEROR DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT H TO THE AGREEMENT REFERRED TO HEREIN AND EITHER (I) THE TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE AGREEMENT REFERRED
TO HEREIN OR (II) THE TRUSTEE RECEIVES AN OPINION OF COUNSEL, DELIVERED AT THE
EXPENSE OF THE TRANSFEROR, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT AS PROVIDED IN THE AGREEMENT, NEITHER THIS CERTIFICATE NOR ANY INTEREST
HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE DELIVERS TO THE TRUSTEE A
REPRESENTATION LETTER TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR ANY FEDERAL, STATE OR LOCAL
LAW MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE, (EACH,
A “PLAN”), AND IS NOT ACTING ON BEHALF OF ANY PLAN OR USING THE ASSETS OF ANY
PLAN TO EFFECT SUCH TRANSFER. ANY PURPORTED TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE TRANSFER RESTRICTIONS SET FORTH IN THE AGREEMENT SHALL BE VOID
AND OF NO EFFECT.

	 	 	 	 	 	 	 
	Certificate No.

	 	:
	 	1	 	 
	 
	 	 	 	 	 	 
	Cut-off Date

	 	:
	 	May 1, 2004

	 
	 	 	 	 	 	 
	First Distribution Date

	 	:
	 	June 25, 2004

	 
	 	 	 	 	 	 
	Percentage Interest of this Certificate
(“Denomination”)

	 	:
	 	100%	 	 
	 
	 	 	 	 	 	 
	Principal Balance

	 	:
	 	$100	 	 
	 
	 	 	 	 	 	 
	CUSIP

	 	:
	 	N/A	 	 

C-1

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

Class P

	 	 	evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class.

     Distributions in respect of this Certificate are distributable monthly as
set forth herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor, the Unaffiliated Seller,
any Originator, the Servicer or the Trustee referred to below or any of their
respective affiliates. Neither this Certificate nor the Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality.

     This certifies that                    , is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the “Agreement”) among Morgan Stanley ABS Capital
I Inc., as depositor (the “Depositor”), Countrywide Home Loans Servicing LP, as
servicer (the “Servicer”), CDC Mortgage Capital Inc., as unaffiliated seller
(the “Unaffiliated Seller”) and Deutsche Bank National Trust Company, as
trustee (the “Trustee”). To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

     This Certificate does not have a Pass-Through Rate and will be entitled to
distributions only to the extent set forth in the Agreement. In addition, any
distribution of the proceeds of any remaining assets of the Trust will be made
only upon presentment and surrender of this Certificate at the offices
designated by the Trustee for such purposes, or such other location specified
in the notice to Certificateholders of such final distribution.

     No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the “1933 Act”), and any applicable state securities laws
or is made in accordance with the 1933 Act and such laws. In the event of any
such transfer, the Trustee shall require the transferor to execute a transferor
certificate (in substantially the form attached to the Agreement) and deliver
either (i) a Rule 144A Letter, in either case substantially in the form
attached to the Agreement, or (ii) a written Opinion of Counsel to the Trustee
that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor, from the 1933 Act or is being made
pursuant to the 1933 Act, which Opinion of Counsel shall be an expense of the
transferor.

     Except as provided in the Agreement, no transfer of a Certificate of this
Class shall be made unless the Trustee shall have received a representation
letter from the transferee of

C-2

 

this Certificate, acceptable to and in form and substance satisfactory to
the Trustee, to the effect that such transferee is not a Plan, and is not
acting on behalf of any Plan or using the assets of any Plan to effect such
transfer. Any purported transfer of a Certificate of this Class in violation
of the transfer restrictions set forth in the Agreement shall be void and of no
effect.

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

     This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually authenticated by an authorized
signatory of the Trustee.

* * *

C-3

 

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

     Dated:

	 	 	 	 	 
	 	DEUTSCHE BANK NATIONAL TRUST	 
	 	 	COMPANY,

not in its individual capacity, but solely as
 Trustee

 	 
	 	By:  	 	 

Authenticated:

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	

	 	Authorized Signatory of

DEUTSCHE BANK NATIONAL TRUST COMPANY,

not in its individual capacity,

but solely as Trustee	 	 

C-4

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

     This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2004-HE2 Mortgage Pass-Through
Certificates, Series 2004-HE2 (herein collectively called the “Certificates”),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

     The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the “Distribution Date”), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name
this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to
each Distribution Date is the last Business Day of the month next preceding the
month of such Distribution Date.

     Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the offices designated by the
Trustee for such purposes or such other location specified in the notice to
Certificateholders of such final distribution.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any
time by the parties thereto, and Financial Security Assurance Inc., Certificate
Insurer with the consent of the Holders of Certificates affected by such
amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the

C-5

 

transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

     As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in New York, New York, accompanied
by a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder’s
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest, as
requested by the Holder surrendering the same.

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

     The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

     On any Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans, as of the last day of the related Due Period, is less
than or equal to 10% of the Maximum Pool Principal Balance, the Servicer and/or
the Class X Certificateholders will have the option to repurchase, in whole,
from the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans at a purchase price determined as provided in the
Agreement. The obligations and responsibilities created by the Agreement will
terminate as provided in Section 9.01 of the Agreement.

     Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

C-6

 

ASSIGNMENT

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

(Please print or typewrite name and address including postal zip code of
assignee) 

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

     I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such
Certificate to the following address:

	
	.

Dated:

	 	 	 
	 

	 	

	

	 	Signature by or on behalf of assignor

C-7

 

DISTRIBUTION INSTRUCTIONS

The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to  ____________________________________,
_________________________________________________________________________________________________________________,
for the account of __________________________________________________________________________________________________,
account number ______________, or, if mailed by check, to ________________________________________________________________,
Applicable statements should be mailed to ______________________________________________________________________________,
_________________________________________________________________________________________________________________.

     This
information is provided by ____________________________________________________________________________________,
the assignee named above, or _________________________________________________________________________________________,
as its agent.

C-8

 

EXHIBIT D

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS THREE
“RESIDUAL INTERESTS” IN THREE “REAL ESTATE MORTGAGE INVESTMENT CONDUITS,” AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE A REPRESENTATION LETTER TO THE EFFECT THAT
SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR ARRANGEMENT SUBJECT TO TITLE
I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”),
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR
ANY FEDERAL, STATE OR LOCAL LAW MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS
OF ERISA OR THE CODE (EACH, A “PLAN”), AND IS NOT ACTING ON BEHALF OF ANY PLAN
OR USING THE ASSETS OF ANY PLAN TO EFFECT SUCH TRANSFER. ANY PURPORTED
TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE TRANSFER RESTRICTIONS SET
FORTH IN THE AGREEMENT SHALL BE VOID AND OF NO EFFECT.

	 	 	 	 	 	 	 
	Certificate No.

	 	:
	 	1	 	 
	 
	 	 	 	 	 	 
	Cut-off Date

	 	:
	 	May 1, 2004

	 
	 	 	 	 	 	 
	First Distribution Date

	 	:
	 	June 25, 2004

	 
	 	 	 	 	 	 
	Percentage Interest of this Certificate
(“Denomination”)

	 	:
	 	100%	 	 
	 
	 	 	 	 	 	 
	CUSIP

	 	:
	 	N/A	 	 

D-1

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

Class R

	 	 	evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class.

     Distributions in respect of this Certificate is distributable monthly as
set forth herein. This Class R Certificate has no Certificate Balance and is
not entitled to distributions in respect of principal or interest. This
Certificate does not evidence an obligation of, or an interest in, and is not
guaranteed by the Depositor, the Unaffiliated Seller, any Originator, the
Servicer or the Trustee referred to below or any of their respective
affiliates. Neither this Certificate nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

     This certifies that    is the registered owner of the
Percentage Interest specified above of any monthly distributions due to the
Class R Certificates pursuant to a Pooling and Servicing Agreement dated as of
the Cut-off Date specified above (the “Agreement”) among Morgan Stanley ABS
Capital I Inc., as depositor (the “Depositor”), Countrywide Home Loans
Servicing LP, as servicer (the “Servicer”), CDC Mortgage Capital Inc., as
unaffiliated seller (the “Unaffiliated Seller”) and Deutsche Bank National
Trust Company, as trustee (the “Trustee”). To the extent not defined herein,
the capitalized terms used herein have the meanings assigned in the Agreement.
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

     Any distribution of the proceeds of any remaining assets of the Trust Fund
will be made only upon presentment and surrender of this Class R Certificate at
the offices designated by the Trustee for such purposes or such other location
specified in the notice to Certificateholders of such final distribution.

     No transfer of a Class R Certificate shall be made unless the Trustee
shall have received a representation letter from the transferee of this
Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not a Plan, and is not acting on
behalf of any Plan or using the assets of any Plan to effect such transfer.
Any purported transfer of a Class R Certificate in violation of the transfer
restrictions set forth in the Agreement shall be void and of no effect.

     Each Holder of this Class R Certificate shall be deemed by the acceptance
or acquisition an Ownership Interest in this Class R Certificate to have agreed
to be bound by the following provisions, and the rights of each Person
acquiring any Ownership Interest in this Class R Certificate are expressly
subject to the following provisions: (i) each Person holding or acquiring any
Ownership Interest in this Class R Certificate shall be a Permitted Transferee
and shall promptly notify the Trustee of any change or impending change in its
status as a Permitted Transferee, (ii) no Ownership Interest in this Class R
Certificate may be registered on the Closing Date or thereafter transferred,
and the Trustee shall not register the Transfer of this

D-2

 

Certificate unless, in addition to the certificates required to be
delivered to the Trustee under Section 5.02(b) of the Agreement, the Trustee
shall have been furnished with a Transfer Affidavit of the initial owner or the
proposed transferee in the form attached as Exhibit H to the Agreement, (iii)
each Person holding or acquiring any Ownership Interest in this Class R
Certificate shall agree (A) to obtain a Transfer Affidavit from any other
Person to whom such Person attempts to Transfer its Ownership Interest this
Class R Certificate, (B) to obtain a Transfer Affidavit from any Person for
whom such Person is acting as nominee, trustee or agent in connection with any
Transfer of this Class R Certificate and (C) not to Transfer the Ownership
Interest in this Class R Certificate or to cause the Transfer of the Ownership
Interest in this Class R Certificate to any other Person if it has actual
knowledge that such Person is a Non-Permitted Transferee and (iv) any attempted
or purported Transfer of the Ownership Interest in this Class R Certificate in
violation of the provisions herein shall be absolutely null and void and shall
vest no rights in the purported Transferee.

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

     This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually authenticated by an authorized
signatory of the Trustee.

D-3

 

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

	 	 	 	 	 
	 	DEUTSCHE BANK NATIONAL TRUST	 
	 	 	COMPANY,

not in its individual capacity, but solely as
 Trustee

 	 
	 	By:  	 	 

Authenticated:

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	

	 	Authorized Signatory of

DEUTSCHE BANK NATIONAL TRUST COMPANY,

not in its individual capacity,

but solely as Trustee	 	 

D-4

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

     This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2004-HE2 Mortgage Pass-Through
Certificates, Series 2004-HE2 (herein collectively called the “Certificates”),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

     The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such day is not a Business Day, the Business Day
immediately following (the “Distribution Date”), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name
this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to
each Distribution Date is the last Business Day of the month next preceding the
month of such Distribution Date.

     Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the offices designated by the
Trustee for such purposes or such other location specified in the notice to
Certificateholders of such final distribution.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any
time by the parties thereto, and Financial Security Assurance Inc., as
Certificate Insurer with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the

D-5

 

transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

     As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in New York, New York, accompanied
by a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder’s
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest, as
requested by the Holder surrendering the same.

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

     The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

     On any Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans, as of the last day of the related Due Period, is less
than or equal to 10% of the Maximum Pool Principal Balance, the Servicer and/or
the Class X Certificateholder will have the option to repurchase, in whole,
from the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans at a purchase price determined as provided in the
Agreement. The obligations and responsibilities created by the Agreement will
terminate as provided in Section 9.01 of the Agreement.

     Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

D-6

 

ASSIGNMENT

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

(Please print or typewrite name and address including postal zip code of
assignee) 

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

     I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such
Certificate to the following address:

	
	.

Dated:

	 	 	 
	 

	 	

	

	 	Signature by or on behalf of assignor

D-7

 

DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to  ____________________________________,
_________________________________________________________________________________________________________________,
for the account of __________________________________________________________________________________________________,
account number ______________, or, if mailed by check, to ________________________________________________________________,
Applicable statements should be mailed to ______________________________________________________________________________,
_________________________________________________________________________________________________________________.

     This
information is provided by ____________________________________________________________________________________,
the assignee named above, or _________________________________________________________________________________________,
as its agent.

D-8

 

EXHIBIT E

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
OWNERSHIP OF TWO “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT
CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEROR DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT I TO THE AGREEMENT REFERRED TO HEREIN AND EITHER (I) THE TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT J TO THE AGREEMENT REFERRED
TO HEREIN OR (II) THE TRUSTEE RECEIVES AN OPINION OF COUNSEL, DELIVERED AT THE
EXPENSE OF THE TRANSFEROR, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT AS PROVIDED IN THE AGREEMENT, NEITHER THIS CERTIFICATE NOR ANY INTEREST
HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE DELIVERS TO THE TRUSTEE A
REPRESENTATION LETTER TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR ANY FEDERAL, STATE OR LOCAL
LAW MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (EACH,
A “PLAN”), AND IS NOT ACTING ON BEHALF OF ANY PLAN OR USING THE ASSETS OF ANY
PLAN TO EFFECT SUCH TRANSFER. ANY PURPORTED TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE TRANSFER RESTRICTIONS SET FORTH IN THE AGREEMENT SHALL BE VOID
AND OF NO EFFECT.

	 	 	 	 	 	 	 
	Certificate No.

	 	:
	 	X-1	 	 
	 
	 	 	 	 	 	 
	Cut-off Date

	 	:
	 	May 1, 2004

	 
	 	 	 	 	 	 
	First Distribution Date

	 	:
	 	June 25, 2004

	 
	 	 	 	 	 	 
	Percentage Interest of this Certificate
(“Denomination”)

	 	:
	 	100%	 	 
	 
	 	 	 	 	 	 
	CUSIP

	 	:
	 	N/A	 	 

E-1

 

MORGAN STANLEY ABS CAPITAL
I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

Class X

	 	 	evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class.

     Distributions in respect of this Certificate are distributable monthly as
set forth herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor, the Unaffiliated Seller,
any Originator, the Servicer or the Trustee referred to below or any of their
respective affiliates. Neither this Certificate nor the Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality.

     This certifies that    , is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the “Agreement”) among Morgan Stanley ABS Capital
I Inc., as depositor (the “Depositor”), Countrywide Home Loans Servicing LP, as
servicer (the “Servicer”), CDC Mortgage Capital Inc., as unaffiliated seller
(the “Unaffiliated Seller”) and Deutsche Bank National Trust Company, as
trustee (the “Trustee”). To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

     This Certificate does not have a Certificate Balance or a Pass-Through
Rate and will be entitled to distributions only to the extent set forth in the
Agreement. In addition, any distribution of the proceeds of any remaining
assets of the Trust will be made only upon presentment and surrender of this
Certificate at the offices designated by the Trustee for such purposes, or such
other location specified in the notice to Certificateholders of such final
distribution.

     No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the “1933 Act”), and any applicable state securities laws
or is made in accordance with the 1933 Act and such laws. In the event of any
such transfer, the Trustee shall require the transferor to execute a transferor
certificate (in substantially the form attached to the Agreement) and deliver
either (i) a Rule 144A Letter, in either case substantially in the form
attached to the Agreement, or (ii) a written Opinion of Counsel to the Trustee
that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor, from the 1933 Act or is being
made pursuant to the 1933 Act, which Opinion of Counsel shall be an expense of
the transferor.

E-2

 

     Except as provided in the Agreement, no transfer of a Certificate of this
Class shall be made unless the Trustee shall have received a representation
letter from the transferee of this Certificate, acceptable to and in form and
substance satisfactory to the Trustee, to the effect that such transferee is
not a Plan, and is not acting on behalf of any Plan or using the assets of any
Plan to effect such transfer. Any purported transfer of a Certificate of this
Class in violation of the transfer restrictions set forth in the Agreement
shall be void and of no effect.

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

     This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually authenticated by an authorized
signatory of the Trustee.

* * *

E-3

 

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

     Dated:

	 	 	 	 	 
	 	DEUTSCHE BANK NATIONAL TRUST	 
	 	 	COMPANY,

not in its individual capacity, but solely as
 Trustee

 	 
	 	By:  	 	 

Authenticated:

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	

	 	Authorized Signatory of

DEUTSCHE BANK NATIONAL TRUST COMPANY,

not in its individual capacity,

but solely as Trustee	 	 

E-4

 

MORGAN STANLEY ABS CAPITAL I INC.

CDC Mortgage Capital Trust 2004-HE2

Mortgage Pass-Through Certificates, Series 2004-HE2

     This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2004-HE2 Mortgage Pass-Through
Certificates, Series 2004-HE2 (herein collectively called the “Certificates”),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

     The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

     This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.

     Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the “Distribution Date”), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name
this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to
each Distribution Date is the last Business Day of the month next preceding the
month of such Distribution Date.

     Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the offices designated by the
Trustee for such purposes or such other location specified in the notice to
Certificateholders of such final distribution.

     The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any
time by the parties thereto, and Financial Security Assurance Inc., as
Certificate Insurer with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest, as provided in the Agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the

E-5

 

transfer hereof or in exchange therefor or in lieu hereof whether or
not notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

     As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in New York, New York, accompanied
by a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder’s
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

     The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest, as
requested by the Holder surrendering the same.

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

     The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

     On any Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans, as of the last day of the related Due Period, is less
than or equal to 10% of the Maximum Principal Balance, the Servicer and/or the
Class X Certificateholders will have the option to repurchase, in whole, from
the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans at a purchase price determined as provided in the
Agreement. The obligations and responsibilities created by the Agreement will
terminate as provided in Section 9.01 of the Agreement.

     Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

E-6

 

ASSIGNMENT

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

 

(Please print or typewrite name and address including postal zip code of
assignee) 

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

     I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such
Certificate to the following address:

	
	.

Dated:

	 	 	 
	 

	 	

	

	 	Signature by or on behalf of assignor

E-7

 

DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to  ____________________________________,
_________________________________________________________________________________________________________________,
for the account of __________________________________________________________________________________________________,
account number ______________, or, if mailed by check, to ________________________________________________________________,
Applicable statements should be mailed to ______________________________________________________________________________,
_________________________________________________________________________________________________________________.

     This
information is provided by ____________________________________________________________________________________,
the assignee named above, or _________________________________________________________________________________________,
as its agent.

E-8

 

EXHIBIT F

FORM OF INITIAL CERTIFICATION OF TRUSTEE

[date]

Morgan Stanley ABS Capital I Inc.

1221 Avenue of the Americas

New York, New York 10020

Countrywide Home Loans Servicing LP

7105 Corporate Drive

Plano, Texas 75024

CDC Mortgage Capital Inc.

9 West 57th Street, 36th Floor

New York, New York 10019

Financial Security Assurance Inc.

350 Park Avenue

New York, New York 10022

                                          

                                          

	 	 	 
	Re:

	 	Pooling and Servicing Agreement dated as of May
1, 2004 among Morgan Stanley ABS Capital I Inc., as Depositor,
Countrywide Home Loans Servicing LP, as Servicer, CDC Mortgage
Capital Inc., as Unaffiliated Seller and Deutsche Bank
National Trust Company, as Trustee, CDC Mortgage Capital Trust
Series 2004-HE2

Gentlemen:

               In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the “Pooling and Servicing Agreement”), for each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan listed
in the attached schedule), it has received:

     (i) the original Mortgage Note, endorsed as provided in the
following form: “Pay to the order of                , without recourse”; and

     (ii) a duly executed assignment of the Mortgage.

               Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.

F-1

 

               The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the Pooling
and Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, perfection, priority, effectiveness or suitability of any such
Mortgage Loan. Notwithstanding anything herein to the contrary, the Trustee
has made no determination and makes no representations as to whether (i) any
endorsement is sufficient to transfer all right, title and interest of the
party so endorsing, as Noteholder or assignee thereof, in and to that Mortgage
Note or (ii) any assignment is in recordable form or sufficient to effect the
assignment of and transfer to the assignee thereof, under the Mortgage to which
the assignment relates.

               Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

	 	 	 	 	 
	 	 	DEUTSCHE BANK
NATIONAL TRUST COMPANY,
	

	 	 	 	as Trustee
	 
	 	 	 	 
	

	 	By:	 	
	

	 	 	 	

	

	 	 	 	Name:
	

	 	 	 	Title:

F-2

 

EXHIBIT G

FORM OF FINAL CERTIFICATION OF TRUSTEE

[date]

Morgan Stanley ABS Capital I Inc.

1221 Avenue of the Americas

New York, New York 10020

Countrywide Home Loans Servicing LP

450 Park Granada

Calabasas, California 91302

CDC Mortgage Capital Inc.

9 West 57th Street, 36th Floor

New York, New York 10019

Financial Security Assurance Inc.

350 Park Avenue

New York, New York 10022

                                            

                                            

	 	 	 
	Re:

	 	Pooling and Servicing Agreement dated as of May
1, 2004 among Morgan Stanley ABS Capital I Inc., as Depositor,
Countrywide Home Loans Servicing LP, as Servicer, CDC Mortgage
Capital Inc., as Unaffiliated Seller and Deutsche Bank
National Trust Company, as Trustee, CDC Mortgage Capital Trust
Series 2004-HE2

Gentlemen:

               In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the “Pooling and Servicing Agreement”), the undersigned,
as Trustee, hereby certifies that as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attached Document Exception Report) it has received:

     (i) The original Mortgage Note, endorsed in the form provided in
Section 2.01 of the Pooling and Servicing Agreement, with all intervening
endorsements showing a complete chain of endorsement from the originator
to the last endorsee.

     (ii) The original recorded Mortgage.

     (iii) A duly executed assignment of the Mortgage in the form
provided in Section 2.01 of the Pooling and Servicing Agreement; or, if
the Unaffiliated Seller has certified or the Trustee otherwise knows that
the related Mortgage has not been returned

G-1

 

from the applicable recording office, a copy of the assignment of
the Mortgage (excluding information to be provided by the recording
office).

     (iv) The original or duplicate original recorded assignment or
assignments of the Mortgage showing a complete chain of assignment from
the originator to the last endorsee.

     (v) The original or duplicate lender’s title policy and all riders
thereto or, if such original is unavailable, any one of an original title
binder, either an original title binder or an original or copy of the
title commitment, and if copies then certified to be true and complete by
the title company.

               Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (1), (2) and (18) of
the Mortgage Loan Schedule and items (1), (9) and (17) of the Data Tape
Information accurately reflects information set forth in the Custodial File.

               The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review of the Custodial File specifically
required in the Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in each Mortgage File of any
of the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, perfection, priority, effectiveness or
suitability of any such Mortgage Loan. Notwithstanding anything herein to the
contrary, the Trustee has made no determination and makes no representations as
to whether (i) any endorsement is sufficient to transfer all right, title and
interest of the party so endorsing, as Noteholder or assignee thereof, in and
to that Mortgage Note or (ii) any assignment is in recordable form or
sufficient to effect the assignment of and transfer to the assignee thereof,
under the Mortgage to which the assignment relates.

               Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

	 	 	 	 	 
	 	 	DEUTSCHE BANK
NATIONAL TRUST COMPANY,
	

	 	 	 	as Trustee
	 
	 	 	 	 
	

	 	By:
	 	 
	

	 	 	 	

	

	 	 	 	Name:
	

	 	 	 	Title:

G-2

 

EXHIBIT H

RESIDUAL TRANSFER AFFIDAVIT

CDC MORTGAGE CAPITAL Trust 2004-HE2,

Mortgage Pass-Through Certificates,

Series 2004-HE2

STATE OF                               )

                                                   ) ss.:

COUNTY OF                           )

               The undersigned, being first duly sworn, deposes and says as follows:

               1. The undersigned is an officer of                            , the proposed
Transferee of an Ownership Interest in a Class R Certificate (the
“Certificate”) issued pursuant to the Pooling and Servicing Agreement, (the
“Agreement”), relating to the above-referenced Series, by and among Morgan
Stanley ABS Capital I Inc., as depositor (the “Depositor”), Countrywide Home
Loans Servicing LP, as servicer, CDC Mortgage Capital Inc., as unaffiliated
seller (the “Unaffiliated Seller”) and Deutsche Bank National Trust Company, as
Trustee. Capitalized terms used, but not defined herein or in Exhibit 1
hereto, shall have the meanings ascribed to such terms in the Agreement. The
Transferee has authorized the undersigned to make this affidavit on behalf of
the Transferee for the benefit of the Depositor and the Trustee.

               2. The Transferee is not, as of the date hereof, and will not be, as of
the date of the Transfer, a “disqualified organization” within the meaning of
Section 860E(e)(5) of the Internal Revenue Code of 1986. The Transferee will
endeavor to remain other than a disqualified organization for so long as it
retains its Ownership Interest in the Certificate.

               3. The Transferee has historically paid its debts as they came due and
will continue to pay its debts as they come due in the future.

               4. The Transferee has no present knowledge or expectation that it will be
unable to pay any United States taxes owed by it or become insolvent or subject
to a bankruptcy proceeding for so long as the Certificate remains outstanding.

               5. The Transferee has been advised of, and understands that as the holder
of a noneconomic residual interest it may incur tax liabilities in excess of
any cash flows generated by the interest. The Transferee intends to pay such
taxes associated with holding the Certificate as they become due.

               6. The Transferee will not cause income from the Certificate to be
attributable to a foreign permanent establishment or fixed base (within the
meaning of an applicable income tax treaty) of the Transferee or another U.S.
taxpayer.

H-1

 

               17. [A. Formula Test] The Transferee agrees that the present value of the
anticipated tax liabilities associated with holding the Certificate does not
exceed the sum of the present value of any consideration given to the
Transferee to acquire the Certificate, the present value of the expected future
distributions on the Certificate, and the present value of the anticipated tax
savings associated with holding the interest as the REMIC generates losses.
The Transferee agrees that it complied with U.S. Treasury Regulations Section
1.860E-1(c)(8) in making such representation.

                    The Transferee agrees that it is not a foreign permanent establishment or
fixed base (within the meaning of an applicable income tax treaty) of the
Transferor or another U.S. taxpayer.

                    [B. Asset Test] The Transferee, at the time of the transfer, and at the
close of the Transferee’s two fiscal years preceding the year of the transfer,
had gross assets for financial reporting purposes in excess of $100 million and
net assets in excess of $10 million (excluding any obligation of a person
related to the Transferee within the meaning of U.S. Treasury Regulations
Section 1.860E-1(c)(6)(ii) or any other asset if a principle purpose for
holding or acquiring the other asset was to permit the Transferee to satisfy
the above stated minimum asset requirements).

               The Transferee is an “eligible corporation,” as defined in U.S. Treasury
Regulations Section 1.860E-1(c)(6)(i). The Transferee agrees, in connection
with any subsequent transfer of its Ownership Interest in the Certificate, to
transfer its Ownership Interest only to another “eligible corporation,” as
defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i), and to honor
the restrictions on subsequent transfers of the Certificate by transferring its
Ownership Interest only in a transaction that satisfies the requirements of
U.S. Treasury Regulations Section 1.860E-1(c)(4)(i), (ii) (iii) and U.S.
Treasury Regulations Section 1.860E-1(c)(5).

               The Transferee determined the consideration paid to it to acquire the
Certificate in good faith and based on reasonable market assumptions
(including, but not limited to, borrowing and investment rates, prepayment and
loss assumptions, expense and reinvestment assumptions, tax rates and other
factors specific to the Transferee).

               8. The Transferee is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate
or trust whose income from sources without the United States is includable in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.

               9. The
Transferee’s taxpayer identification number is                            .

	 	 	1 Insert either section 7A or 7B.

H-2

 

               10. The Transferee is not a Plan and is not acting on behalf of any Plan,
or using the assets of any Plan to effect the Transfer.

               11. The Transferee has reviewed the provisions of Section 5.02(c) of the
Agreement and understands the legal consequences of the acquisition of an
Ownership Interest in the Certificate, including, without limitation, the
restrictions on subsequent Transfers and the provisions regarding voiding the
Transfer and mandatory sales. The Transferee expressly agrees to be bound by
and to abide by the provisions of Section 5.02(c) of the Agreement and the
restrictions noted on the face of the Certificate. The Transferee understands
and agrees that any breach of any of the representations included herein shall
render the Transfer to the Transferee contemplated hereby null and void.

               12. The Transferee consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a
reasonable arrangement to ensure that the Certificate will only be owned,
directly or indirectly, by a Transferee that is not a disqualified
organization.

               13. The Transferee will not transfer its interest in the Certificate for
the purpose of impeding the assessment or collection of any tax.

               14. The Transferee will not transfer such Certificate unless (i) it has
received from any subsequent transferee an affidavit in substantially the same
form as this affidavit containing the same representations set forth herein,
and (ii) as of the time of the transfer, it does not have actual knowledge that
such affidavit is false. The Transferee will deliver such affidavit to the
Trustee upon receipt.

* * *

H-3

 

               IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this
                day of                           , 20                  .

	 	 	 	 	 
	 	 	

	 	 	Print Name of Transferee
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:

[Corporate Seal]

ATTEST:

[Assistant] Secretary

               Personally
appeared before me the above-named                 , known or proved
to me to be the same person who executed the foregoing instrument and to be the
                of the Transferee, and acknowledged that he executed the same as
his free act and deed and the free act and deed of the Transferee.

               Subscribed and sworn before me this         day of                , 20         .

	 	 	 
	 

	 	

	

	 	NOTARY PUBLIC
	 
	 	 
	

	 	My Commission expires the    day
	

	 	of         , 20    

H-4

 

EXHIBIT I

FORM OF TRANSFEROR CERTIFICATE

         ,
20     

Morgan Stanley ABS Capital I Inc.

1221 Avenue of the Americas

New York, New York 10020

Deutsche Bank National Trust Company,

as Trustee,

1761 East St. Andrew Place

Santa Ana, California 92705

	 	 	 
	Re:

	 	CDC Mortgage Capital Trust, Series 2004-HE2,
Mortgage Pass-Through Certificates, Series 2004-HE2, Class     

Ladies and Gentlemen:

               In connection with our disposition of the above Certificates we certify
that (a) we understand that the Certificates have not been registered under the
Securities Act of 1933, as amended (the “Act”), and are being disposed by us in
a transaction that is exempt from the registration requirements of the Act, (b)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, in a manner that would be deemed, or taken any
other action which would result in, a violation of Section 5 of the Act and (c)
to the extent we are disposing of a Residual Certificate, we have no knowledge
the Transferee is a Non-Permitted Transferee.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	

	 	 	Print Name of Transferor
	 
	

	 	By:
	 	

	

	 	 	 	Authorized Officer

I-1

 

EXHIBIT J

FORM OF RULE 144A LETTER

         , 20     

Morgan Stanley ABS Capital I Inc.

1221 Avenue of the Americas

New York, New York 10020

Deutsche Bank National Trust Company,

as Trustee,

1761 East St. Andrew Place

Santa Ana, California 92705

	 	 	 
	Re:

	 	CDC Mortgage Capital Trust, Series 2004-HE2,
Mortgage Pass-Through Certificates, Series 2004-HE2, Class

Ladies and Gentlemen:

               In connection with our acquisition of the above Certificates we certify
that (a) we understand that the Certificates are not being registered under the
Securities Act of 1933, as amended (the “Act”), or any state securities laws
and are being transferred to us in a transaction that is exempt from the
registration requirements of the Act and any such laws, (b) we have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan or
arrangement that is subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), Section 4975 of the Internal
Revenue Code of 1986, as amended (the “Code”), or any federal, state or local
law materially similar to the foregoing provisions of ERISA or the Code, and we
are not acting on behalf of any Plan or using the assets of any Plan to effect
our purchase of the Certificates or, with respect to any Certificates other
than Class P, Class R and Class X Certificates, we are an insurance company and
are purchasing the Certificates with funds contained in an “insurance company
general account” (as defined term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 (“PTCE 95-60”)), and the conditions for
exemptive relief under Sections I and III of PTCE 95-60 [     ], (e) we
have not, nor has anyone acting on our behalf offered, transferred, pledged,
sold or otherwise disposed of the Certificates, any interest in the
Certificates or any other similar security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the Certificates, any
interest in the

J-1

 

Certificates or any other similar security from, or otherwise approached
or negotiated with respect to the Certificates, any interest in the
Certificates or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Certificates under the Securities Act or that would render the disposition of
the Certificates a violation of Section 5 of the Securities Act or require
registration pursuant thereto, nor will act, nor has authorized or will
authorize any person to act, in such manner with respect to the Certificates,
and (f) we are a “qualified institutional buyer” as that term is defined in
Rule 144A under the Securities Act and have completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are
aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge
or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the Securities Act.

J-2

 

ANNEX 1 TO EXHIBIT J

QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

[For Transferees Other Than Registered Investment Companies]

               The undersigned (the “Buyer”) hereby certifies as follows to the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates with respect to the Certificates described therein:

               1. As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.

               2. In connection with purchases by the Buyer, the Buyer is a “qualified
institutional buyer” as that term is defined in Rule 144A under the Securities
Act of 1933, as amended (“Rule 144A”) because (i) the Buyer owned and/or
invested on a discretionary basis $     in securities (except for the
excluded securities referred to below) as of the end of the Buyer’s most recent
fiscal year (such amount being calculated in accordance with Rule 144A and (ii)
the Buyer satisfies the criteria in the category marked below.

	 	 	 
	     

	 	loan association or similar institution), Massachusetts or similar business
trust, partnership, or charitable organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended.
	 
	 	 
	     

	 	Bank. The Buyer (a) is a national bank or banking institution organized under
the laws of any State, territory or the District of Columbia, the business of
which is substantially confined to banking and is supervised by the State or
territorial banking commission or similar official or is a foreign bank or
equivalent institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial statements, a copy
of which is attached hereto.
	 
	 	 
	     

	 	Savings and Loan. The Buyer (a) is a savings and loan association, building
and loan association, cooperative bank, homestead association or similar
institution, which is supervised and examined by a State or Federal authority
having supervision over any such institutions or is a foreign savings and loan
association or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial statements, a
copy of which is attached hereto.
	 
	 	 
	     

	 	Broker-dealer. The Buyer is a dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934.

J-3

 

	 	 	 
	     

	 	Insurance Company. The Buyer is an insurance company whose primary and
predominant business activity is the writing of insurance or the reinsuring of
risks underwritten by insurance companies and which is subject to supervision
by the insurance commissioner or a similar official or agency of a State,
territory or the District of Columbia.
	 
	 	 
	     

	 	State or Local Plan. The Buyer is a plan established and maintained by a
State, its political subdivisions, or any agency or instrumentality of the
State or its political subdivisions, for the benefit of its employees.
	 
	 	 
	     

	 	ERISA Plan. The Buyer is an employee benefit plan within the meaning of Title
I of the Employee Retirement Income Security Act of 1974.
	 
	 	 
	     

	 	Investment Advisor. The Buyer is an investment advisor registered under the
Investment Advisors Act of 1940.
	 
	 	 
	     

	 	Small Business Investment Company. Buyer is a small business investment
company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958.
	 
	 	 
	     

	 	Business Development Company. Buyer is a business development company as
defined in Section 202(a)(22) of the Investment Advisors Act of 1940.

               3. The term “securities” as used herein does not include (i) securities of
issuers that are affiliated with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but subject
to a repurchase agreement and (viii) currency, interest rate and commodity
swaps.

               4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence
applies, the securities may be valued at market. Further, in determining such
aggregate amount, the Buyer may have included securities owned by subsidiaries
of the Buyer, but only if such subsidiaries are consolidated with the Buyer in
its financial statements prepared in accordance with generally accepted
accounting principles and if the investments of such subsidiaries are managed
under the Buyer’s direction. However, such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another enterprise and
the Buyer is not itself a reporting company under the Securities Exchange Act
of 1934, as amended.

J-4

 

               5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

               6. Until the date of purchase of the Rule 144A Securities, the Buyer will
notify each of the parties to which this certification is made of any changes
in the information and conclusions herein. Until such notice is given, the
Buyer’s purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.

	 	 	 	 	 
	 	 	

	 	 	Print Name of Transferee
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	

	 	Date:
	 	

J-5

 

ANNEX 2 TO EXHIBIT J

QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

[For Transferees That are Registered Investment Companies]

               The undersigned (the “Buyer”) hereby certifies as follows to the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates with respect to the Certificates described therein:

               1. As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the Buyer or, if the Buyer is a “qualified
institutional buyer” as that term is defined in Rule 144A under the Securities
Act of 1933, as amended (“Rule 144A”) because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.

               2. In connection with purchases by Buyer, the Buyer is a “qualified
institutional buyer” as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer’s Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer’s most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer’s Family of Investment Companies, the cost of such
securities was used, except (i) where the Buyer or the Buyer’s Family of
Investment Companies reports its securities holdings in its financial
statements on the basis of their market value, and (ii) no current information
with respect to the cost of those securities has been published. If clause
(ii) in the preceding sentence applies, the securities may be valued at market.

	 	 	 
	     

	 	The Buyer owned $     in securities (other than the excluded securities
referred to below) as of the end of the Buyer’s most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
	 
	 	 
	     

	 	The Buyer is part of a Family of Investment Companies which owned in the
aggregate $     in securities (other than the excluded securities referred
to below) as of the end of the Buyer’s most recent fiscal year (such amount
being calculated in accordance with Rule 144A).

               3. The term “Family of Investment Companies” as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

               4. The term “securities” as used herein does not include (i) securities of
issuers that are affiliated with the Buyer or are part of the Buyer’s Family of
Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements,

J-6

 

(vi) securities owned but subject to a repurchase agreement and (vii)
currency, interest rate and commodity swaps.

               5. The Buyer is familiar with Rule 144A and understands that the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer will be in reliance on Rule 144A. In
addition, the Buyer will only purchase for the Buyer’s own account.

               6. Until the date of purchase of the Certificates, the undersigned will
notify the parties listed in the Rule 144A Transferee Certificate to which this
certification relates of any changes in the information and conclusions herein.
Until such notice is given, the Buyer’s purchase of the Certificates will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.

	 	 	 	 	 
	 	 	

	 	 	Print Name of Transferee
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	 	 	IF AN ADVISER:
	 
	 	 	 	 
	 	 	

	 	 	Print Name of Buyer

	 
	 	 	 	 
	

	 	Date:
	 	

J-7

 

EXHIBIT K

FORM OF REQUEST FOR RELEASE

(for Trustee)

     To: [Address]

               Re:

               In connection with the administration of the Mortgage Loans held by you as
the Trustee on behalf of the Certificateholders, we request the release, and
acknowledge receipt, of the (Custodial File/[specify documents]) for the
Mortgage Loan described below, for the reason indicated.

Mortgagor’s Name, Address & Zip Code:

Mortgage Loan Number:

Send Custodial File to:

Reason for Requesting Documents (check one)

	 	 	 
	     

	 	1. Mortgage Loan Paid in Full. (The Company hereby certifies that all amounts
received in connection therewith have been credited to the Collection Account
as provided in the Pooling and Servicing Agreement.)
	 
	 	 
	     

	 	2. Mortgage Loan Repurchase Pursuant to Subsection 2.03 of the Pooling and
Servicing Agreement. (The Company hereby certifies that the repurchase price
has been credited to the Collection Account as provided in the Pooling and
Servicing Agreement.)
	 
	 	 
	     

	 	3. Mortgage Loan Liquidated By          . (The Company hereby
certifies that all proceeds of foreclosure, insurance, condemnation or other
liquidation have been finally received and credited to the Collection Account
pursuant to the Pooling and Servicing Agreement.)
	 
	 	 
	     

	 	4. Mortgage Loan in Foreclosure.
	 
	 	 
	     

	 	5. Other (explain).

               If box 1, 2 or 3 above is checked, and if all or part of the Custodial
File was previously released to us, please release to us our previous request
and receipt on file with you, as well as any additional documents in your
possession relating to the specified Mortgage Loan.

K-1

 

               If box 4 or 5 above is checked, upon our return of all of the above
documents to you as the Trustee, please acknowledge your receipt by signing in
the space indicated below, and returning this form.

	 	 	 	 	 
	 	 	COUNTRYWIDE HOME LOANS SERVICING
	

	 	 	 	LP
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	

	 	 	 	Date:

K-2

 

EXHIBIT L

FORM OF SUBSEQUENT TRANSFER AGREEMENT

CDC MORTGAGE CAPITAL TRUST 2004-HE2

               Pursuant to separate Mortgage Loan Purchase Agreements, Encore Credit
Corp. (“Encore”), BNC Mortgage, Inc. (“BNC”), Homeowners Loan Corp.
(“Homeowners”), Lenders Direct Capital Corporation (“Lenders Direct”), Chapel
Mortgage Corporation (“Chapel”), Impac Funding Corporation (“Impac”) (and its
affiliate, Novelle Financial Services, Inc. (“Novelle”)), The CIT
Group/Consumer Finance Inc. (and its affiliates) (collectively, “CIT”), First
Banc Mortgage, Inc. (“First Banc”), People’s Choice Home Loan, Inc. (“People’s
Choice”), Master Financial, Inc. (“Master Financial”), Ownit Mortgage
Solutions, Inc. (“Ownit”), Aames Capital Corporation (“Aames”), Accredited Home
Lenders, Inc. (“Accredited”), SIB Mortgage Corp. (“SIB”) and First Guaranty
Mortgage Corporation (“FGMC” and together with Encore, BNC, Homeowners,
Lenders Direct, Chapel, Impac, Novelle, CIT, First Banc, People’s Choice,
Master Financial, Ownit, Aames, Accredited and SIB, the “Originators”) have
agreed to sell to CDC Mortgage Capital Inc. (the “Unaffiliated Seller”) certain
mortgage loans (each, a “Mortgage Loan”). These Mortgage Loans may in turn be
sold by the Unaffiliated Seller to Morgan Stanley Abs Capital I Inc. (the
“Depositor”) and then sold by the Depositor to the CDC Mortgage Capital Trust
2004-HE2 (the “Trust Fund”). The Trust Fund was established pursuant to a
Pooling and Servicing Agreement, dated as of May 1, 2004 (the “Pooling and
Servicing Agreement”) among the Unaffiliated Seller, the Depositor, Countrywide
Home Loans Servicing LP, as servicer (the “Servicer”) and Deutsche Bank
National Trust Company, as trustee (the “Trustee”). The Pooling and Servicing
Agreement permits a Pre-Funding feature, allowing for the acquisition by the
Trust Fund of Subsequent Mortgage Loans during the Pre-Funding Period.
Representations and warranties with respect to the Mortgage Loans have been
made by the Originators pursuant to separate Assignment and Recognition
Agreements.

               Capitalized terms used herein and not defined herein have their respective
meanings as set forth in the Pooling and Servicing Agreement.

               Conveyance of Subsequent Mortgage Loans.

               The Unaffiliated Seller does hereby irrevocably sell, transfer, assign,
set over and otherwise convey to the Depositor, without recourse (except as
otherwise explicitly provided for herein) all of its right, title and interest
in and to the Subsequent Mortgage Loans, exclusive of the obligations of the
Unaffiliated Seller or any other Person with respect to the Subsequent Mortgage
Loans but including specifically, without limitation, the Mortgages, the
Custodial Files and all other documents, materials and properties appurtenant
thereto and the Mortgage Notes, including all interest and principal collected
by the Unaffiliated Seller on or with respect to the Subsequent Mortgage Loans
after the related Subsequent Cut-off Date, together with all of its right,
title and interest in and to the proceeds received after such Subsequent
Cut-off Date of any related insurance policies on behalf of the Depositor.

               The Depositor does hereby irrevocably sell, transfer, assign, set over and
otherwise convey to the Trust Fund, without recourse (except as otherwise
explicitly provided

L-1

 

for herein) all of its right, title and interest in and to the Subsequent
Mortgage Loans, exclusive of the obligations of the Depositor or any other
Person with respect to the Subsequent Mortgage Loans but including
specifically, without limitation, the Mortgages, the Custodial Files and all
other documents, materials and properties appurtenant thereto and the Mortgage
Notes, including all interest and principal collected by the Depositor on or
with respect to the Subsequent Mortgage Loans after the related Subsequent
Cut-off Date, together with all of its right, title and interest in and to the
proceeds received after such Subsequent Cut-off Date of any related insurance
policies on behalf of the Trust Fund.

               The expenses and costs relating to the delivery of the Subsequent Mortgage
Loans specified in this Subsequent Transfer Agreement and the Pooling and
Servicing Agreement shall be borne by the Unaffiliated Seller.

               The Unaffiliated Seller hereby affirms the representation and warranty set
forth in Sections 3.01(f), 3.01(h), 3.01(n), 3.01(p) and 3.03 of the
Unaffiliated Seller’s Agreement with respect to the Subsequent Mortgage Loans
as of the date hereof. The Unaffiliated Seller hereby delivers notice and
confirms that each of the conditions set forth in Section 2.01(c) of the
Pooling and Servicing Agreement are satisfied as of the date hereof.

               The Servicer hereby affirms the representations and warranties set forth
in Schedule IIA to the Pooling and Servicing Agreement with respect to the
Subsequent Mortgage Loans as of the date hereof.

               Additional terms of the sale are attached hereto as Attachment A.

               To the extent permitted by applicable law, this Subsequent Transfer
Agreement, or a memorandum thereof if permitted under applicable law, is
subject to recordation in all appropriate public offices for real property
records in all 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 at the Unaffiliated Seller’s expense, but only when
accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Certificateholders or
is necessary for the administration or servicing of the Mortgage Loans.

               This Agreement shall be construed in accordance with the laws of the State
of New York and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws, without giving effect to the
principles of conflicts of laws.

               This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.

               All terms and conditions of the Pooling and Servicing Agreement are hereby
ratified, confirmed and incorporated herein; provided, that in the event of any
conflict the provisions of this Subsequent Transfer Agreement shall control
over the conflicting provisions of the Pooling and Servicing Agreement.

[Remainder of Page Intentionally Left Blank]

L-2

 

	 	 	 	 	 
	 	 	CDC MORTGAGE CAPITAL INC.,
	

	 	 	 	as Unaffiliated Seller
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	 	 	MORGAN STANLEY ABS CAPITAL I INC.,
	

	 	 	 	as Depositor
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	 	 	COUNTRYWIDE HOME LOANS SERVICING LP,
	

	 	 	 	as Servicer
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	 	 	DEUTSCHE BANK NATIONAL TRUST COMPANY,
	

	 	 	 	as Trustee
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:
	 
	 	 	 	 
	

	 	By:
	 	

	

	 	 	 	Name:
	

	 	 	 	Title:

L-3

 

EXHIBIT M

FORM OF CERTIFICATION TO BE

PROVIDED TO DEPOSITOR

	 	 	 
	Re:

	 	CDC Mortgage Capital Trust 2004-HE2 Mortgage Pass-Through Certificates,
Series 2004-HE2, issued pursuant to the Pooling and Servicing Agreement,
dated as of May 1, 2004 (the “Pooling and Servicing Agreement”), among
Morgan Stanley ABS Capital I Inc., as depositor (the “Depositor”, CDC
Mortgage Capital Inc., as unaffiliated seller, Deutsche Bank National
Trust Company, as trustee (the “Trustee”), and Countrywide Home Loans
Servicing LP, as servicer (the “Servicer”).

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

	1.	 	I have reviewed this annual report on Form 10-K (“Annual
Report”), and all reports on Form 8-K containing distribution or
servicing reports (collectively with this Annual Report, the
“Reports”) filed in respect of periods included in the year covered
by this Annual Report of the Depositor relating to the
above-referenced trust and series of certificates;
	 
	2.	 	Based on my knowledge, the information in the Reports, taken
as a whole, does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were
made, not misleading as of the last day of the period covered by
this Annual Report;
	 
	3.	 	Based on my knowledge, the distribution or servicing
information required to be provided to the Trustee by the Servicer
under the Pooling and Servicing Agreement for inclusion in the
Reports is included in these Reports;
	 
	4.	 	Based on my knowledge and upon the annual compliance
statement included in this Annual Report and required to be
delivered to the Trustee in accordance with the terms of the Pooling
and Servicing Agreement, and except as disclosed in the Reports, the
Servicer has fulfilled its obligations under the Pooling and
Servicing Agreement; and

M-1

 

	5.	 	The Reports disclose all significant deficiencies relating to
the Servicer’s compliance with the minimum servicing standards based
upon the report provided by an independent public accountant, after
conducting a review in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or similar procedure, as
set forth in the Pooling and Servicing Agreement, that is included
in the Reports.

In giving the certifications above, I have reasonably relied on information
provided to me by the following unaffiliated parties: the Trustee and the
Servicer.

	 	 	 
	Date:

	 	

	

	[Signature]
	[Title]
	 	 

M-2

 

EXHIBIT N

Trustee/Servicer Certifications to be provided to Depositor

Re:    CDC Mortgage Capital Trust 2004-HE2 Mortgage Pass-Through Certificates,
Series 2004-HE2, issued pursuant to the Pooling and Servicing Agreement, dated
as of May 1, 2004 (the “Pooling and Servicing Agreement”), among Morgan Stanley
ABS Capital I Inc., as depositor (the “Depositor,” CDC Mortgage Capital Inc.,
as unaffiliated seller (the “Unaffiliated Seller”), Deutsche Bank National
Trust Company, as trustee (the “Trustee”), and Countrywide Home Loans Servicing
LP, as servicer (the “Servicer”).

I, [identify the certifying individual], certify to the Depositor and the
Trustee, as applicable, and its officers, directors and affiliates, and with
the knowledge and intent that they will rely upon this certification, that:

	1.	 	[To be certified by the Trustee] I have reviewed the annual
report on Form 10-K for the fiscal year 20   (the “Annual Report”),
and all reports on Form 8-K containing distribution date reports
filed in respect of periods included in the year covered by the
Annual Report (collectively with this Annual Report, the “Reports”),
of the Depositor relating to the above-referenced trust;
	 
	2.	 	[To be certified by the Trustee] Based on my knowledge, the
information in the Reports, taken as a whole, does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading as of the last
day of the period covered by the Annual Report;
	 
	3.	 	[To be certified by the Trustee] Based on my knowledge, the
distribution or servicing information required to be provided to the
Trustee by the Servicer under the Pooling and Servicing Agreement
for inclusion in the Reports is included in the Reports;
	 
	4.	 	[To be certified by the Servicer] I am responsible for
reviewing the activities performed by the Servicer under the Pooling
and Servicing Agreement during the calendar year immediately
preceding the date of this certificate (the “Relevant Year”). Based
upon the review required by the Pooling and Servicing Agreement and
except as disclosed in the annual compliance statement or the
accountant’s statement provided pursuant to Section 3.23 of the
Pooling and Servicing Agreement, to the best of my knowledge, the
Servicer has fulfilled its obligations under the Pooling and
Servicing Agreement throughout the Relevant Year; and
	 
	5.	 	[To be certified by the Servicer] All significant
deficiencies relating to the Servicer’s compliance with the minimum
servicing standards for purposes of the report provided by an
independent public accountant, after conducting a review conducted
in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or similar procedure, as set forth in the Pooling
and Servicing

N-1

 

	 	 	Agreement, have been disclosed to such accountant and are included in such reports.

	 	 	 
	Date:

	 	

	

	[Signature]
	[Title]
	 	 

N-2<PAGE>
                                                                     EXHIBIT 4.1

                            GX TECHNOLOGY CORPORATION
                           EMPLOYEE STOCK OPTION PLAN

      1. Purpose. This 1994 Stock Option Plan (the "Plan") is intended to
encourage stock ownership by employees and directors of GX TECHNOLOGY
CORPORATION, a Texas corporation (the "Corporation"), and its Subsidiary
Corporations, including in the Section 4.2 below a specified contractor, so that
they may acquire or increase their proprietary interest in the Corporation; and
to encourage such employees and directors to remain in the employ of the
Corporation and to put forth maximum efforts for the success of the business. It
is further intended that options granted by the Committee (as defined in Section
2 below) pursuant to Section 5 hereof shall constitute "incentive stock options"
("Incentive Stock Options") within the meaning of IRC Section 422, as amended,
and the Regulations issued thereunder (the "Code"), and options granted by the
Committee pursuant to Section 6 hereof shall constitute "nonqualified stock
options" ("Nonqualified Stock Options") that, together with Incentive Stock
Options, are referred to herein as "Options".

      2. Administration. The Plan shall be administered by the Stock Option and
Compensation Committee (the "Committee"), consisting of not less than two
members of the Board of Directors of the Corporation (the "Board"), none of whom
are or shall have been for at least one year prior to such appointment, eligible
to participate in the Plan or any other plan of the Corporation or any of its
predecessor entities entitling the participants therein to acquire stock, stock
options or stock appreciation rights of the Corporation or any of said entities.
The initial Committee shall consist of Thomas D. Barrow and the Board designee
of Nationsbanc Capital Corporation pursuant to the Securityholders Agreement
with the Corporation dated November 2, 1994, presently Douglas C. Williamson.

      2.1 Authority. The Committee shall have the authority in its discretion,
subject to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan, or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
grant Options; to determine which Options shall constitute Incentive Stock
Options and which Options shall constitute Nonqualified Stock Options; to
determine the purchase price of the shares of Common Stock covered by each
Option (the "Option Price"); to determine the persons to whom, and the time or
times at which, Options shall be granted; to determine the number of shares of
Common Stock to be covered by each Option; to interpret the Plan; to prescribe,
amend and rescind rules and Regulations relating to the Plan; to determine the
terms and provisions of the Option Agreements (which need not be identical)
evidencing Options granted under the Plan; and to make all other determinations
deemed necessary or advisable for the administration of the Plan. This authority
does not extend to the Common Stock or the granting of the Nonqualified Stock
Options of Sections 4.2 and 6 hereof respectively, said Options being those
granted as of October 31, 1994 to meet contractual commitments of employees and
a contractor of GX Technology L.P. The Committee may delegate to one or more of
its members or to one or more agents such administrative duties as it may deem
advisable, and the Committee or any delegate may employ one or more persons to
render advice with respect to any responsibility the Committee or such person
may have under the Plan.
<PAGE>
      2.2 Rules. The Board shall fill all vacancies, however caused, in the
Committee. The Board may from time to time appoint additional members to the
Committee, and may at any time remove one or more Committee members and
substitute others. One member of the Committee shall be selected by the Board as
chairman. The Committee shall hold its meeting at such times and places as it
shall deem advisable. All determinations of the Committee shall be made by a
majority of its members either present in person or participating by conference
telephone at a meeting or by written consent. The Committee may appoint a
secretary and make such rules and regulations for the conduct of its business as
it shall deem advisable, and shall keep minutes of its meetings.

      2.3 Liability. No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan or any
Option.

      3. Eligibility. Options may be granted to employees, Directors of the
Corporation or its present or future divisions and Subsidiary Corporations,
including in the Section 4.2 below a specified contractor. In determining the
persons to whom Options shall be granted and the number of shares to be covered
by each Option, the Committee shall take into account the duties of the
respective persons, their present and potential contributions to the success of
the Corporation sad such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan. A person to whom an
Option has been granted is sometimes referred to herein as an "Optionee." An
Optionee shall be eligible to receive more than one Option during the term of
the Plan, but only on the terms and subject to the restrictions hereinafter set
forth.

      4. Shares. The shares subject to Options hereunder shall be shares of the
Corporation's Common Stock (the "Common Stock"). Such shares may, in whole or in
part, be authorized but unissued shares or, shares that shall have been or that
may be reacquired by the Corporation.

      4.1 The aggregate number of shares of Common Stock as to which Incentive
Stock Options of Section 5 hereof may be granted from time to time under the
Plan shall not exceed 137,628 shares, provided also that a portion of these
shares shall be reserved for non-employee directors, new employees and other
members of management that are not currently shareholders of the Corporation and
that a portion of these shares may be granted to the Managers as defined in the
Stock Purchase Agreement dated November 2, 1994. The limitation established by
the preceding sentence shall be subject to adjustment as provided in Section 7.9
hereof. If any outstanding Incentive Stock Option expires or is terminated
without having been exercised in full, the shares of Common Stock allocable to
the unexercised portion of such Option shall (unless the Plan shall have been
terminated) become available for subsequent grants of Incentive Stock Options.

      4.2 The aggregate number of shares of Common Stock as to which
Nonqualified Stock Options of Section 6 hereof may be granted under the Plan
shall not exceed 261,500 shares, with the same to be issued within five (5) days
of approval of this Plan by the shareholder or shareholders of the Corporation
to the former owners of the Restricted Units under the Restricted Partnership
Unit Plan and the former owners of the Unit Options under the Employee Unit
Purchase Plan of GX Technology L.P., as a predecessor entity of the Corporation.

                                       2
<PAGE>
      5. Incentive Stock Options. Options granted pursuant to this Section 5 are
intended to constitute Incentive Stock Options and shall be subject to the
following special terms and conditions, in addition to the general terms and
conditions specified in Section 7 hereof.

      5.1 Value of Shares. The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which Options granted under this Plan and all other option plans of
the Corporation and any Subsidiary Corporation become exercisable for the first
time by an Optionee during any calendar year shall not exceed $100,000.

      5.2 Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a 10% Stockholder, (a) the Option Price shall not be less than 110%
of the Fair Market Value of the shares of Common Stock of the Corporation on the
date of grant of such Incentive Stock Option, and (b) the exercise period shall
not exceed 5 years from the date of grant of such Incentive Stock Option.

      5.3 Vesting of Options. The Incentive Stock Options shall have a minimum
vesting of twenty-five percent (25%) over each of the four (4) years following
the date such an Option is granted.

      6. Nonqualified Stock Options. Options greeted pursuant to this Section 6
are intended to constitute Nonqualified Stock Options to be valid for a period
of ten (10) years from date of granting, the vesting and exercise prices per
share to be in accordance with the specific provisions of the Nonqualified
Option Agreements as set forth below, and shall be subject to the general terms
and conditions specified in Section 7 hereof.

      6.1 The Nonqualified Stock Options that are to be issued to replace the
Restricted Units noted in Section 4.2 above shall have an exercise price of five
cents ($.05) per share and shall have the same vesting period(s) as provided in
the Restricted Unit Agreements undertaken in connection with the granting of
said Restricted Units to the employees, Directors or a contractor of GX
Technology L.P. as a predecessor entity of the Company.

      6.2 The Nonqualified Stock Options that are to be issued to replace the
Option Units noted in Section 4.2 above shall have an exercise price of five
dollars ($5.00) per share and shall have the same vesting period(s) as provided
in the Employee Unit Purchase Agreements undertaken in connection with the
granting of said Unit Options to the employees and Directors of GX Technology
L.P. as a predecessor entity of the Company.

      7. Terms and Conditions of Options. Each Option shall be evidenced by a
written Option Agreement between the Corporation and the Optionee, which
agreement shall comply with and be subject to the following terms and
conditions:

      7.1 Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.

      7.2 Type of Option. Each Option Agreement shall specifically identify the
portion, if any, of the Option which constitutes an Incentive Stock Option and
the portion, if any, which constitutes a Nonqualified Stock Option.

                                       3
<PAGE>
      7.3 Option Price. Each Option Agreement shall state the Option Price
which, in the case of Incentive Stock Options, shall be not less than 100% of
the Fair Market Value of the shares of Common Stock of the Corporation on the
date of grant of the Option. The Option Price shall be subject to adjustment as
provided in Section 7.9 hereof. The date on which the Committee adopts a
resolution expressly granting an Option shall be considered the day on which
such Option is granted.

      7.4 Medium and Time of Payment. The Option Price shall be paid in full, at
the time of exercise, in cash or in shares of Common Stock having a Fair Market
Value equal to such Option Price or in a combination of cash and such shares,
and may be effected in whole or in part (a) with monies received from the
Corporation at the time of exercise as a compensatory cash payment, or (b) with
monies borrowed from the Corporation pursuant to repayment terms and conditions
as shall be determined from time to time by the Committee, in its discretion,
separately with respect to each exercise of Options and each Optionee; provided,
however, that each such method and time for payment and each such borrowing and
terms and conditions of repayment shall be permitted by and be in compliance
with applicable law, and provided, further, if the Option Price is paid with
monies borrowed from the Corporation, such fact shall be noted conspicuously on
the certificate evidencing such shares in accordance with applicable law.

      7.5 Term and Exercise of Options. Options shall be exercisable over the
exercise period as and at the times and upon the conditions that the Committee
may determine, as reflected in the Option Agreement; provided, however, that the
Committee shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it, in its sole
discretion, deems appropriate. The exercise period shall be determined by the
Committee for all Options; provided, however that such exercise period shall not
exceed 10 years from the date of grant of such Option. The exercise period shall
be subject to earlier termination as provided in Sections 7.6 and 7.7 hereof. An
Option may be exercised, as to any or all full shares of Common Stock as to
which the Option has become exercisable, by giving written notice of such
exercise to the Committee; provided, however, that an Option may not be
exercised at any one time as to fewer than 100 shares (or such number of shares
as to which the Option is then exercisable if such number of shares is less than
100).

      7.6 Termination. Except as provided in Section 7.5 and in this Section 7.6
hereof, an Option may not be exercised unless the Optionee is then in the employ
of the Corporation or a division or Subsidiary Corporation (or a corporation
issuing or assuming the Option in a transaction to which IRC Section 424(a)
applies), and unless the Optionee has remained continuously so employed since
the date of grant of the Option. If the employment of an Optionee shall
terminate (other than by reason of death, disability or retirement), all Options
of such Optionee that are exercisable at the time of such termination may,
unless earlier terminated in accordance with their terms, be exercised within
three months after such termination; provided, however, that if the employment
of an Optionee shall terminate for cause, all Options theretofore granted to
such Optionee shall, to the extent not theretofore exercised, terminate
forthwith. Nothing in the Plan or in any Option shall confer upon an individual
any right to continue in the employ of the Corporation or any of its divisions
or Subsidiary Corporations or interfere in any way with the right of the
Corporation or any such division or Subsidiary Corporation to terminate such
employment.

                                       4
<PAGE>
      7.7 Death, Disability, or Retirement. If an Optionee shall die while
employed by the Corporation, or a Subsidiary Corporation thereof, or within
three months after the termination of such Optionee's employment, other than for
cause, or if the Optionee's employment shall terminate by reason of disability
or retirement, all Options theretofore granted to such Optionee (to the extent
otherwise exercisable) may, unless earlier terminated in accordance with their
terms, be exercised by the Optionee or by the Optionee's estate or by a person
who acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of the death or disability of the Optionee, at any time
within one year after the date of death, disability or retirement of the
Optionee.

      7.8 Nontransferability of Options. Options granted under the Plan shall
not be transferable otherwise than (a) by will; or (b) by the laws of descent
and distribution. Options may be exercised, during the lifetime of the Optionee,
only by the Optionee, his or her guardian, or legal representative.

      7.9 Effect of Certain Changes.

            (1) If there is any change in the number of shares of Common Stock
      through the declaration of stock dividends, or through recapitalization
      resulting in stock splits, or combinations or exchanges of such shares,
      the number of shares of Common stock available for Options, the number of
      such shares covered by outstanding Options and the price per share of such
      Options shall be proportionately adjusted by the Committee to reflect any
      increase or decrease in the number of issued shares of Common Stock;
      provided, however, that any fractional shares resulting from such
      adjustment shall be eliminated.

            (2) In the event of the proposed dissolution or liquidation of the
      Corporation, in the event of any corporate separation or division,
      including, but not limited to, split-up, split-off or spin-off, or in the
      event of a merger or consolidation of the Corporation with another
      corporation, the Committee may provide that the holder of each Option then
      exercisable shall have the right to exercise such Option (at its then
      Option Price) solely for the kind and amount of shares of stock and other
      securities, property, cash or any combination thereof receivable upon such
      dissolution, liquidation, or corporate separation or division, or merger
      or consolidation by a holder of the number of shares of Common Stock for
      which such Option might have been exercised immediately prior to such
      dissolution, liquidation, or corporate separation or division, or merger
      or consolidation; or the Committee may provide, in the alternative, that
      each Option granted under the Plan shall terminate as of a date to be
      fixed by the Committee; provided, however, that not less than 30-days'
      written notice of the date so fixed shall be given to each Optionee, who
      shall have the right, during the period of 30 days preceding such
      termination, to exercise the Options as to all or any part of the shares
      of Common Stock covered thereby, including shares as to which such Options
      would not otherwise be exercisable; provided, further, that failure to
      provide such notice shall not invalidate or affect the action with respect
      to which such notice was required.

            (3) If while unexercised Options remain outstanding under the Plan,
      the stockholders of the Corporation approve a definitive agreement to
      merge or consolidate

                                       5
<PAGE>
      the Corporation with or into another corporation or to sell or otherwise
      dispose of all or substantially all of its assets, or adopt a plan of
      liquidation (each, a "Disposition Transaction"), then the Committee may
      (a) make an appropriate adjustment to the number and class of shares
      available for options, and to the amount and kind of shares or other
      securities or property (including cash) receivable upon exercise of any
      outstanding options after the effective date of such transaction, and the
      price thereof, or, in lieu of such adjustment, provide for the
      cancellation of all options outstanding at or prior to the effective date
      of such transaction; (b) provide that exercisability of all Options shall
      be accelerated, whether or not otherwise exercisable; or (c) in its
      discretion, permit Optionees to surrender outstanding options for
      cancellation; provided, however, that if the stockholders approve such
      Disposition Transaction within five years of the date of adoption of this
      Plan and before the Corporation is taken public, the Committee shall
      provide for the alternative in (b) above. Upon any cancellation of an
      outstanding Option pursuant to this Section, the Optionee shall be
      entitled to receive, in exchange therefor, a cash payment under any such
      Option in an amount per share determined by the Committee in its sole
      discretion, but not less than the difference between the per share
      exercise price of such Option and the Fair Market Value of a share of the
      Corporation Common Stock on such date as the Committee shall determine.

            (4) Paragraphs (2) and (3) of this Section 7.9 shall not apply to a
      merger or consolidation in which the Corporation is the surviving
      corporation and shares of Common Stock are not converted into or exchanged
      for stock, securities of any other corporation, cash or any other thing of
      value. Notwithstanding the preceding sentence, in case of any
      consolidation or merger of another corporation into the Corporation in
      which the Corporation is the surviving corporation and in which there is a
      reclassification or change (including a change to the right to receive
      cash or other property) of the shares of Common Stock (other than a change
      in par value, or from par value to no par value, or as a result of a
      subdivision or combination, but including any change in such shares into
      two or more classes or series of shares), the Committee may provide that
      the holder of each Option then exercisable shall have the right to
      exercise such Option solely for the kind and amount of shares of stock and
      other securities (including those of any new direct or indirect parent of
      the Corporation), property, cash or any combination thereof receivable
      upon such reclassification, change, consolidation or merger by the holder
      of the number of shares of Common Stock for which such Option might have
      been exercised.

            (5) In the event of a change in the Common Stock of the Corporation
      as presently constituted which is limited to a change of all of its
      authorized shares with par value into the same number of shares with a
      different par value or without par value, the shares resulting from any
      such change shall be deemed to be the Common Stock within the meaning of
      the Plan.

            (6) To the extent that the foregoing adjustments relate to stock or
      securities of the Corporation, such adjustments shall be made by the
      Committee, whose determination in that respect shall be final, binding and
      conclusive, provided that each Incentive Stock Option granted pursuant to
      this Plan shall not be adjusted in a manner that causes such option to
      fail to continue to qualify as an Incentive Stock Option within the
      meaning of IRC Section 422.

                                       6
<PAGE>
            (7) Except as hereinbefore expressly provided in this Section 7.9,
      the Optionee shall have no rights by reason of any subdivision or
      consolidation of shares of stock or any class or the payment of any stock
      dividend or any other increase or decrease in the number of shares of
      stock of any class or by reason of any dissolution, liquidation, merger,
      or consolidation or spin-off of assets or stock of another corporation;
      and any issue by the Corporation of shares of stock of any class shall not
      affect, and no adjustment by reason thereof shall be made with respect to,
      the number or price of shares of Common Stock subject to the Option. The
      grant of an Option pursuant to the Plan shall not affect in any way the
      right or power of the Corporation to make adjustments, reclassifications,
      reorganizations or changes of its capital or business structures or to
      merge or to consolidate or to dissolve, liquidate or sell, or transfer all
      or part of its business or assets.

      7.10 Rights as a Shareholder. An Optionee or a transferee of an Option
shall have no rights as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a certificate evidencing such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution of other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 7.9 hereof.

      7.11 Other Provisions. The Option Agreements authorized under the Plan
shall contain such other provisions, including, without limitation, (a) the
imposition of restrictions upon the exercise of an Option; (b) in the case of an
Incentive Stock Option, the inclusion of any condition not inconsistent with
such Option qualifying as an Incentive Stock Option; and (c) conditions relating
to compliance with applicable federal and state securities laws, as the
Committee shall deem advisable.

      8. Agreement By Optionee Regarding Withholding Taxes. If the Committee
shall so require, as a condition of the exercise, each Optionee shall agree that
(a) no later than the date of exercise of any Option, the Optionee will pay to
the Corporation or make arrangements satisfactory to the Committee regarding
payment of any federal, state or local taxes of any kind required by law to be
withheld upon the exercise of such Options, and (b) the Corporation shall, to
the extent permitted or required by law, have the right to deduct federal, state
and local taxes of any kind required by law to be withheld upon the exercise of
such Option from any payment of any kind otherwise due to the Optionee.

      9. Term of Plan. Options may be granted pursuant to the Plan from time to
time within a period of 10 years from the date the Plan is approved by the
stockholders of the Corporation.

      10. Definitions. As used in this Plan, the following words and phrases
shall have the meanings indicated:

            (a) "DISABILITY" shall mean an Optionee's inability to engage in any
      substantial gainful activity by reason of any medically determinable
      physical or mental impairment that can be expected to result in death or
      that has lasted or can be expected to last for a continuous period of not
      less than twelve (12) months.

                                       7
<PAGE>
            (b) "FAIR MARKET VALUE" per share as of a particular date shall mean
      (i) the closing sales price per share of Common Stock on a national
      securities exchange for the last preceding date on which there was a sale
      of such Common Stock an such exchange; or (ii) if the shares of Common
      Stock are then traded on an over-the-counter market, the average of the
      closing bid and asked prices for the shares of Common Stock in such
      over-the-counter market for the last preceding date on which there was a
      sale of such Common Stock in such market; or (iii) in case no reported
      sale takes place, the average of the closing bid and asked prices on the
      National Association of Securities Dealers' Automated Quotations System
      ("NASDAQ") or any comparable system, or if the shares of Common Stock are
      not listed on NASDAQ or comparable system, the closing sale price or, in
      case no reported sale takes place, the average of the closing bid and
      asked prices, as furnished by any member of the National Association of
      Securities Dealers, Inc. selected from time to time by the Corporation for
      that purpose; or (iv) if the shires of Common Stock are not then listed on
      a national securities exchange or traded in an over-the-counter market,
      such value as the Committee in its discretion may determine using
      reasonable valuation methodology, which may include the use of an expert
      professional appraiser(s).

            (c) "PARENT CORPORATION" shall mean any corporation (other than the
      Corporation) in an unbroken chain of corporations ending with the employer
      corporation if, at the time of granting an Option, each of the
      corporations other than the employer corporation owns stock possessing 50%
      or more of the total combined voting power of all classes of stock in one
      of the other corporations in such chain.

            (d) "SUBSIDIARY CORPORATION" shall mean any corporation (other than
      the Corporation) in an unbroken chain of corporations beginning with the
      employer corporation if, at the time of granting an Option, each of the
      corporations other than the last corporation in the unbroken chain owns
      stock possessing 50% or more of the total combined voting power of all
      classes of stock in one of the other corporations in such chain.

            (e) "TEN PERCENT STOCKHOLDER" shall mean an Optionee who, at the
      time an Incentive Stock Option is granted, owns stock possessing more than
      10% of the total combined voting power of all classes of stock of the
      Corporation or of its Parent or Subsidiary Corporations.

      11. Amendment and Termination of the Plan. The Board at any time and from
time to time may suspend, terminate, modify or amend the Plan; provided,
however, that any amendment that would materially increase the aggregate number
of shares of Common Stock as to which Options may be granted under the Plan or
materially increase the benefits accruing to participants under the Plan or
materially modify the requirements as to eligibility for participation in the
Plan shall be subject to the approval of the holders of a majority of the Common
Stock issued and outstanding, except that any such increase or modification that
may result from adjustments authorized by section 7.9 hereof shall not require
such approval. Except as provided in Section 7 hereof, no suspension,
termination, modification or amendment of the Plan may adversely affect any
Option previously granted, unless the written consent of the Optionee is
obtained.

                                       8
<PAGE>
      12. Approval of Stockholders. The Plan shall take effect upon the approval
of the holders of a majority of the issued and outstanding shires of Common
Stock of the Corporation.

      13. Effect of Headings. The section and subsection headings contained
herein are for convenience only and shall not affect the construction hereof.

Approved by the Written Consent of Sole Shareholder in lieu of Special Meeting
of the Shareholders on October 31, 1994.

                                       9

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