Document:

<PAGE>

                                  EXHIBIT 10.1

                         Pooling and Servicing Agreement
                                  March 1, 2002

<PAGE>

                       FIRST HORIZON ASSET SECURITIES INC.

                                    Depositor

                       FIRST HORIZON HOME LOAN CORPORATION

                           Seller and Master Servicer

                                       and

                              THE BANK OF NEW YORK,

                                     Trustee

              _____________________________________________________

                         POOLING AND SERVICING AGREEMENT

                            Dated as of March 1, 2002

              _____________________________________________________

                FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2002-2

                MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2002-2

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                      Page
                                                                                                                      ----
<S>                                                                                                                   <C>
ARTICLE I - DEFINITIONS.........................................................................................         6

ARTICLE II -  CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES......................................        37
    SECTION 2.1   Conveyance of Mortgage Loans..................................................................        37
    SECTION 2.2   Acceptance by Trustee of the Mortgage Loans...................................................        40
    SECTION 2.3   Representations, Warranties and Covenants of the Seller and Master Servicer...................        42
    SECTION 2.4   Representations and Warranties of the Depositor as to the Mortgage Loans......................        44
    SECTION 2.5   Delivery of Opinion of Counsel in Connection with Substitutions...............................        44
    SECTION 2.6   Execution and Delivery of Certificates........................................................        45
    SECTION 2.7   REMIC Matters.................................................................................        45
    SECTION 2.8   Covenants of the Master Servicer..............................................................        47

ARTICLE III - ADMINISTRATION AND SERVICING OF MORTGAGE LOANS................................................        48
    SECTION 3.1   Master Servicer to Service Mortgage Loans.....................................................        48
    SECTION 3.2   Subservicing; Enforcement of the Obligations of Servicers.....................................        49
    SECTION 3.3   Rights of the Depositor and the Trustee in Respect of the Master Servicer.....................        49
    SECTION 3.4   Trustee to Act as Master Servicer.............................................................        49
    SECTION 3.5   Collection of Mortgage Loan Payments; Certificate Account; Distribution Account...............        50
    SECTION 3.6   Collection of Taxes, Assessments and Similar Items; Escrow Accounts...........................        53
    SECTION 3.7   Access to Certain Documentation and Information Regarding the Mortgage Loans..................        53
    SECTION 3.8   Permitted Withdrawals from the Certificate Account and Distribution Account...................        54
    SECTION 3.9   Maintenance of Hazard Insurance; Maintenance of Primary Insurance Policies....................        55
    SECTION 3.10  Enforcement of Due-on-Sale Clauses; Assumption Agreements.....................................        57
    SECTION 3.11  Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans...............        58
    SECTION 3.12  Trustee to Cooperate; Release of Mortgage Files...............................................        60
    SECTION 3.13  Documents Records and Funds in Possession of Master Servicer to be Held for the Trustee.......        61
    SECTION 3.14  Master Servicing Compensation.................................................................        61
    SECTION 3.15  Access to Certain Documentation...............................................................        62
    SECTION 3.16  Annual Statement as to Compliance.............................................................        62
    SECTION 3.17  Annual Independent Public Accountants' Servicing Statement; Financial Statements..............        62
    SECTION 3.18  Errors and Omissions Insurance; Fidelity Bonds................................................        63
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                                                                     <C>
ARTICLE IV - DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER..................................................         63
    SECTION 4.1   Advances......................................................................................         63
    SECTION 4.2   Priorities of Distribution....................................................................         64
    SECTION 4.3   Method of Distribution........................................................................         69
    SECTION 4.4   Allocation of Losses..........................................................................         70
    SECTION 4.5   Reserved......................................................................................         72
    SECTION 4.6   Monthly Statements to Certificateholders......................................................         72
    SECTION 4.7   Determination of Pass-Through Rates for LIBOR Certificates....................................         74
    SECTION 4.8   Principal Distributions on the Retail Certificates............................................         75

ARTICLE V - THE CERTIFICATES....................................................................................         80
    SECTION 5.1   The Certificates..............................................................................         80
    SECTION 5.2   Certificate Register; Registration of Transfer and Exchange Of Certificates...................         81
    SECTION 5.3   Mutilated, Destroyed, Lost or Stolen Certificates.............................................         85
    SECTION 5.4   Persons Deemed Owners.........................................................................         85
    SECTION 5.5   Access to List of Certificateholders' Names and Addresses.....................................         86
    SECTION 5.6   Maintenance of Office or Agency...............................................................         86

ARTICLE VI - THE DEPOSITOR AND THE MASTER SERVICER..............................................................         86
    SECTION 6.1   Respective Liabilities of the Depositor and the Master Servicer...............................         86
    SECTION 6.2   Merger or Consolidation of the Depositor or the Master Servicer...............................         86
    SECTION 6.3   Limitation on Liability of the Depositor, the Seller, the Master Servicer and Others..........         87
    SECTION 6.4   Limitation on Resignation of Master Servicer..................................................         87

ARTICLE VII - DEFAULT...........................................................................................         88
    SECTION 7.1   Events of Default.............................................................................         88
    SECTION 7.2   Trustee to Act; Appointment of Successor......................................................         89
    SECTION 7.3   Notification to Certificateholders............................................................         90

ARTICLE VIII - CONCERNING THE TRUSTEE...........................................................................         90
    SECTION 8.1   Duties of Trustee.............................................................................         90
    SECTION 8.2   Certain Matters Affecting the Trustee.........................................................         92
    SECTION 8.3   Trustee Not Liable for Certificates or Mortgage Loans.........................................         93
    SECTION 8.4   Trustee May Own Certificates..................................................................         94
    SECTION 8.5   Trustee's Fees and Expenses...................................................................         94
    SECTION 8.6   Eligibility Requirements for Trustee..........................................................         94
    SECTION 8.7   Resignation and Removal of Trustee............................................................         95
    SECTION 8.8   Successor Trustee.............................................................................         95
    SECTION 8.9   Merger or Consolidation of Trustee............................................................         96
    SECTION 8.10  Appointment of Co-Trustee or Separate Trustee.................................................         96
    SECTION 8.11  Tax Matters...................................................................................         97
    SECTION 8.12  Periodic Filings..............................................................................         99
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                                 <C>
ARTICLE IX - TERMINATION........................................................................................         99
    SECTION 9.1   Termination upon Liquidation or Purchase of all Mortgage Loans................................         99
    SECTION 9.2   Final Distribution on the Certificates........................................................        100
    SECTION 9.3   Additional Termination Requirements...........................................................        101

ARTICLE X - [RESERVED]..........................................................................................        102

ARTICLE XI - MISCELLANEOUS PROVISIONS...........................................................................        102
    SECTION 11.1  Amendment.....................................................................................        102
    SECTION 11.2  Recordation of Agreement; Counterparts........................................................        103
    SECTION 11.3  Governing Law.................................................................................        103
    SECTION 11.4  Intention of Parties..........................................................................        104
    SECTION 11.5  Notices.......................................................................................        105
    SECTION 11.6  Severability of Provisions....................................................................        105
    SECTION 11.7  Assignment....................................................................................        106
    SECTION 11.8  Limitation on Rights of Certificateholders....................................................        106
    SECTION 11.9  Inspection and Audit Rights...................................................................        106
    SECTION 11.10 Certificates Nonassessable and Fully Paid.....................................................        107
    SECTION 11.11 Limitations on Actions; No Proceedings........................................................        107

                                                      SCHEDULES

   Schedule I:        Mortgage Loan Schedule....................................................................      S-I-1
   Schedule II:       Representations and Warranties of the Seller/Master Servicer .............................     S-II-1
   Schedule III:      Representations and Warranties as to the Mortgage Loans ..................................    S-III-1
   Schedule IV:       Form of Monthly Master Servicer Report ...................................................     S-IV-1
   Schedule V:        Principal Balance Schedules ..............................................................      S-V-1

                                                      EXHIBITS

   Exhibit A:         Form of Senior Certificate ...............................................................        A-1
   Exhibit B:         Form of Subordinated Certificate .........................................................        B-1
   Exhibit C:         Form of Residual Certificate .............................................................        C-1
   Exhibit D:         Form of Reverse of Certificates ..........................................................        D-1
   Exhibit E:         Form of Initial Certification ............................................................        E-1
   Exhibit F:         Form of Delay Delivery Certification .....................................................        F-1
   Exhibit G:         Form of Final Certification of Custodian .................................................        G-1
   Exhibit H:         Transfer Affidavit .......................................................................        H-1
   Exhibit I:         Form of Transferor Certificate ...........................................................        I-1
   Exhibit J:         Form of Investment Letter [Non-Rule 144A] ................................................        J-1
   Exhibit K:         Form of Rule 144A Letter .................................................................        K-1
   Exhibit L:         Request for Release (for Trustee) ........................................................        L-1
   Exhibit M:         Request for Release (Mortgage Loan) ......................................................        M-1
</TABLE>

                                      iii

<PAGE>

         THIS POOLING AND SERVICING AGREEMENT, dated as of March 1, 2002, among
FIRST HORIZON ASSET SECURITIES INC., a Delaware corporation, as depositor (the
"Depositor"), FIRST HORIZON HOME LOAN CORPORATION, a Kansas corporation, as
seller (in such capacity, the "Seller") and as master servicer (in such
capacity, the "Master Servicer"), and THE BANK OF NEW YORK, a banking
corporation organized under the laws of the State of New York, as trustee (the
"Trustee").

                                 WITNESSETH THAT

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

                              PRELIMINARY STATEMENT

         The Depositor is the owner of the Trust Fund that is hereby conveyed to
the Trustee in return for the Certificates. The Trust Fund and any Rounding
Account for federal income tax purposes will consist of two separate REMICs. The
Certificates will represent the entire beneficial ownership interest in the
Trust Fund. The Regular Certificates will represent "regular interests" in the
Upper REMIC. The Class II-A-RU Certificates (also referred to as the Class A-RU
Certificates) will represent the sole class of residual interests in the Upper
REMIC and the Class II-A-RL Certificates (also referred to as the Class A-RL
Certificates) will represent the sole class of residual interests in the Lower
REMIC, as described in Section 2.7. The "latest possible maturity date" for
federal income tax purposes of all interests created hereby will be the Latest
Possible Maturity Date.

         The following table sets forth characteristics of the Certificates,
together with the minimum denominations and integral multiples in excess thereof
in which such Classes shall be issuable (except that one Certificate of each
Class of Certificates may be issued in a different amount and, in addition, one
Residual Certificate representing the Tax Matters Person Certificate may be
issued in a different amount):

                  [Remainder of Page Intentionally Left Blank]

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
       Class                  Initial Class          Pass-Through          Minimum         Integral Multiples in
     Designation           Certificate Balance           Rate            Denomination         in Excess  Minimum
--------------------------------------------------------------------------------------------------------------------
<S>                        <C>                       <C>                 <C>               <C>
      Class I-A-1             $   47,028,000.00         6.000%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

      Class I-A-2             $   74,844,000.00         6.000%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

      Class I-A-3             $    1,000,000.00         6.000%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-1             $  206,969,000.00         6.500%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-2             $   12,671,000.00         6.500%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-3             $   24,405,000.00         6.500%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-4             $   16,533,000.00     Variable/(1)/       $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-5             $        /(2)/        Variable/(3)/       $  8,266,500            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-6             $   11,125,000.00         6.500%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-7             $   21,278,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-8             $   10,273,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-9             $    8,449,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-10            $   10,639,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-11            $    2,568,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-12            $    2,568,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-13            $    1,725,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-14            $    2,500,000.00         6.500%          $      1,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-15            $   25,811,000.00         5.500%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-16            $   29,016,000.00         6.250%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-17            $   19,590,000.00         6.500%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-18            $    1,000,000.00         6.500%          $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-PO            $    1,302,362.57         /(4)/           $     25,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

     Class II-A-RU            $           50.00         6.500%          $         50                N/A
--------------------------------------------------------------------------------------------------------------------

     Class II-A-RL            $           50.00         6.500%          $         50                N/A
--------------------------------------------------------------------------------------------------------------------

       Class B-1              $    6,822,000.00     Variable /(5)/      $    100,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

       Class B-2              $    3,002,000.00     Variable /(5)/      $    100,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

       Class B-3              $    1,910,000.00     Variable /(5)/      $    100,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

       Class B-4              $      819,000.00     Variable /(5)/      $    100,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

       Class B-5              $    1,091,000.00     Variable /(5)/      $    100,000            $   1,000
--------------------------------------------------------------------------------------------------------------------

       Class B-6              $      819,462.09     Variable /(5)/      $    100,000            $   1,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       -2-

<PAGE>

______________________

     /(1)/ The Pass-Through Rate with respect to any Distribution Date (and the
related Interest Accrual Period) for the Class II-A-4 Certificates is the per
annum rate equal to (a) 2.14% with respect to the first Distribution Date, and
(b) thereafter, the lesser of (i) LIBOR plus 0.40% and (ii) 8.50%, subject to a
minimum rate of 0.40%.

     /(2)/ The Notional Amount with respect to any Distribution Date (and the
related Interest Accrual Period) of the Class II-A-5 Certificates will equal the
Class Certificate Balance of the Class II-A-4 Certificates immediately preceding
such Distribution Date.

     /(3)/ The Pass-Through Rate with respect to any Distribution Date (and the
related Interest Accrual Period) for the Class II-A-5 Certificates is the per
annum rate equal to (a) 6.36% with respect to the first Distribution Date, and
(b) thereafter, 8.10% minus LIBOR, subject to a minimum rate of 0.00%.

     /(4)/ The Class II-A-PO Certificates are principal only certificates and
will not accrue interest.

     /(5)/ The Pass-Through Rate on each Class of Subordinated Certificates is
variable and will be equal to the weighted average of the Designated Mortgage
Pool Rates, weighted on the basis of the Group Subordinate Amount for each
Mortgage Pool.

Accretion Directed
Certificates........................    None.

Accrual Certificates ...............    None.

Accrual Components .................    None.

Book-Entry Certificates ............    All Classes of Certificates other than
                                        the Physical Certificates.

Component Certificates .............    None.

Components .........................    For purposes of calculating
                                        distributions, the Component
                                        Certificates will be comprised of
                                        multiple payment components having the
                                        designations, Initial Component Balances
                                        and Pass-Through Rates set forth below:

<TABLE>
<CAPTION>
                                                           Initial
                                                          Component
                                        Designation         Balance                Pass-Through Rate
                                        -----------      -----------               -----------------
                                            N/A              N/A                          N/A
<S>                                     <C>              <C>                       <C>
Delay Certificates..................    All interest-bearing Classes of Certificates other than the
                                        Non-Delay Certificates, if any.

ERISA-Restricted
Certificates .......................    The Residual Certificates and the
                                        Private Certificates and, until an ERISA
                                        Qualifying Underwriting has occurred
                                        with respect to such Class, the Class
                                        II-A- PO Certificates.

Floating Rate Certificates..........    The Class II-A-4 Certificates.
</TABLE>

                                      -3-

<PAGE>

Group I Senior Certificates...........     The Class I-A-1, Class I-A-2 and
                                           Class I-A-3 Certificates.

Group II Senior Certificates .........     The Class II-A-1, Class II-A-2, Class
                                           II-A-3, Class II-A-4, Class II-A-5,
                                           Class II-A-6, Class II-A-7, Class
                                           II-A-8, Class II-A-9, Class II-A-10,
                                           Class II-A-11 Class II-A-12, Class
                                           II-A-13, Class II-A-14, Class II-A-
                                           15, Class II-A-16, Class II-A-17,
                                           Class II-A-18, Class II-A-PO, Class
                                           II-A-RU and Class II-A-RL
                                           Certificates.

Insured Retail Certificates ..........     None.

Interest Only Certificates ...........     The Class II-A-5 Certificates.

Inverse Floating Rate
Certificates .........................     The Class II-A-5 Certificates.

COFI Certificates ....................     None.

LIBOR Certificates ...................     The Class II-A-4 and Class II-A-5
                                           Certificates.

Non-Delay Certificates ...............     The LIBOR Certificates.

Notional Principal Amount
Certificates .........................     The Class II-A-5 Certificates.

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

Physical Certificates ................     The Class II-A-PO Certificates, the
                                           Private Certificates and the Residual
                                           Certificates.

Planned Principal Classes ............     The Primary Planned Principal Classes
                                           and the Secondary Planned Principal
                                           Classes.

Primary Planned Principal
Classes ..............................     The Class II-A-4, Class II-A-15,
                                           Class II-A-16, Class II-A-17 and
                                           Class II-A-18 Certificates.

Principal Only Certificates ..........     The Class II-A-PO Certificates.

Private Certificates .................     The Class B-4, Class B-5 and Class
                                           B-6 Certificates.

Rating Agencies ......................     Moody's and Fitch.

Regular Certificates .................     All Classes of Certificates, other
                                           than the Residual Certificates.

Residual Certificates ................     The Class II-A-RU and Class II-A-RL
                                           Certificates (also referred to as the
                                           Class A-RU and Class A-RL
                                           Certificates, respectively).

                                      -4-

<PAGE>

Retail Certificates ..................     The Class II-A-14 Certificates.

Scheduled Principal Classes ..........     None.

Secondary Planned Principal Class ....     The Class II-A-6 Certificates.

Senior Certificates ..................     The Group I Senior Certificates and
                                           the Group II Senior Certificates,
                                           collectively.

Subordinated Certificates ............     The Class B-1, Class B-2, Class B-3,
                                           Class B-4, Class B-5 and Class B-6
                                           Certificates.

Support Classes ......................     The Class II-A-7, Class II-A-8, Class
                                           II-A-9, Class II-A-10, Class II-A-11,
                                           Class II-A- 12, Class II-A-13 and
                                           Class II-A-14 Certificates.

Targeted Principal Classes ...........     None.

Underwriter ..........................     UBS Warburg LLC.

         With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.

                                      -5-

<PAGE>

                                    ARTICLE I
                                   DEFINITIONS

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

         Accretion Directed Certificates:  As described in the Preliminary
Statement.

         Accrual Certificates:  As described in the Preliminary Statement.

         Accrued Certificate Interest: For any Class of Certificates for any
Distribution Date, the interest accrued during the related Interest Accrual
Period at the applicable Pass-Through Rate on the Class Certificate Balance (or
Notional Amount, in the case of any Interest Only Certificates) of such Class of
Certificates immediately prior to such Distribution Date, less such Class' share
of any Net Interest Shortfall, allocable among the outstanding Classes of Senior
Certificates of the related Certificate Group based on the Accrued Certificate
Interest otherwise distributable thereto, and allocable to the Subordinated
Certificates based on interest accrued on their related Apportioned Principal
Balances.

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

         Advance: The payment required to be made by the Master Servicer with
respect to any Distribution Date pursuant to Section 4.1, the amount of any such
payment being equal to the aggregate of payments of principal and interest (net
of the Master Servicing Fee and net of any net income in the case of any REO
Property) on the Mortgage Loans that were due on the related Due Date and not
received as of the close of business on the related Determination Date, less the
aggregate amount of any such delinquent payments that the Master Servicer has
determined would constitute a Nonrecoverable Advance if advanced.

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

         Allocable Share: With respect to any Class of Subordinated Certificates
on any Distribution Date, such Class' pro rata share (based on the Class
Certificate Balance of each Class entitled thereto) of each of the components of
the Subordinated Optimal Principal Amount for both Mortgage Pools; provided,
that, except as provided in this Agreement, no Subordinated Certificates (other
than the Class of Subordinated Certificates with the highest priority of
distribution) shall be entitled on any Distribution Date to receive
distributions pursuant to clauses (2), (3) and (5) of the definition of
Subordinated Optimal Principal Amount unless the Class Prepayment Distribution
Trigger for such Class is satisfied for such Distribution Date.

         Amount Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the applicable subaccount of the Certificate Account at
the close of business on the related

                                      -6-

<PAGE>

Determination Date on account of (i) Principal Prepayments on the related
Mortgage Pool received after the related Prepayment Period and Liquidation
Proceeds in the related Mortgage Pool received in the month of such Distribution
Date and (ii) all Scheduled Payments in the related Mortgage Pool due after the
related Due Date.

         Apportioned Principal Balance: For any Class of Subordinated
Certificates and any Distribution Date will equal the Class Certificate Balance
of that Class immediately prior to that Distribution Date multiplied by a
fraction, the numerator of which is the applicable Group Subordinate Amount for
that date and the denominator of which is the sum of the Group Subordinate
Amounts for that date.

         Appraised Value: With respect to any Mortgage Loan, the Appraised Value
of the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan
other than a Refinancing Mortgage Loan, the lesser of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the
time of the origination of such Mortgage Loan; (ii) with respect to a
Refinancing Mortgage Loan other than a Streamlined Documentation Mortgage Loan,
the value of the Mortgaged Property based upon the appraisal made at the time of
the origination of such Refinancing Mortgage Loan; and (iii) with respect to a
Streamlined Documentation Mortgage Loan, (a) if the loan-to-value ratio with
respect to the Original Mortgage Loan at the time of the origination thereof was
90% or less, the value of the Mortgaged Property based upon the appraisal made
at the time of the origination of the Original Mortgage Loan and (b) if the
loan-to-value ratio with respect to the Original Mortgage Loan at the time of
the origination thereof was greater than 90%, the value of the Mortgaged
Property based upon the appraisal (which may be a drive-by appraisal) made at
the time of the origination of such Streamlined Documentation Mortgage Loan.

         Available Funds:  For each Mortgage Pool, with respect to any
Distribution Date, an amount equal to the sum of:

         .   all scheduled installments of interest, net of the Master Servicing
             Fee, the Trustee Fee and any amounts due to First Horizon in
             respect of the Retained Yield on such Distribution Date, and all
             scheduled installments of principal due in respect of the Mortgage
             Loans in such Mortgage Pool on the Due Date in the month in which
             the Distribution Date occurs and received before the related
             Determination Date, together with any Advances in respect thereof;

         .   all Insurance Proceeds and all Liquidation Proceeds received in
             respect of the Mortgage Loans in such Mortgage Pool during the
             calendar month before the Distribution Date, which in each case is
             net of unreimbursed expenses incurred in connection with a
             liquidation or foreclosure and unreimbursed Advances, if any;

         .   all Principal Prepayments received in respect of the Mortgage Loans
             in such Mortgage Pool during the related Prepayment Period, plus
             interest received thereon, net of any Prepayment Interest Excess;

                                      -7-

<PAGE>

         .   any Compensating Interest in respect of Principal Prepayments in
             Full received in respect of the Mortgage Loans in such Mortgage
             Pool during the related Prepayment Period; and

         .   any Substitution Adjustment Amount or the Purchase Price for any
             Deleted Mortgage Loan in the related Mortgage Pool or a Mortgage
             Loan in the related Mortgage Pool repurchased by the Seller or the
             Master Servicer as of such Distribution Date, reduced by amounts in
             reimbursement for Advances previously made and other amounts that
             the Master Servicer is entitled to be reimbursed for out of the
             Certificate Account pursuant to this Agreement.

         Bankruptcy Code:  The United States Bankruptcy Reform Act of 1978, as
amended.

         Bankruptcy Coverage Termination Date: The date on which the Bankruptcy
Loss Coverage Amount is reduced to zero.

         Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
Valuation or Debt Service Reduction; provided, however, that a Bankruptcy Loss
shall not be deemed a Bankruptcy Loss hereunder so long as the Master Servicer
has notified the Trustee in writing that the Master Servicer is diligently
pursuing any remedies that may exist in connection with the related Mortgage
Loan and either (A) the related Mortgage Loan is not in default with regard to
payments due thereunder or (B) delinquent payments of principal and interest
under the related Mortgage Loan and any related escrow payments in respect of
such Mortgage Loan are being advanced on a current basis by the Master Servicer,
in either case without giving effect to any Debt Service Reduction or Deficient
Valuation.

         Bankruptcy Loss Coverage Amount: As of any Determination Date, the
Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses allocated to
the Certificates since the Cut-off Date and (ii) any permissible reductions in
the Bankruptcy Loss Coverage Amount as evidenced by a letter of each Rating
Agency to the Trustee to the effect that any such reduction will not result in a
downgrading of the then current ratings assigned to the Classes of Certificates
rated by it.

         Blanket Mortgage:  The mortgage or mortgages encumbering the
Cooperative Property.

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

         Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a
day on which banking institutions in the City of Dallas, or the State of Texas
or the city in which the Corporate Trust Office of the Trustee is located are
authorized or obligated by law or executive order to be closed.

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

         Certificate Account: The separate Eligible Account or Accounts created
and maintained by the Master Servicer pursuant to Section 3.5 with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of Certificateholders and designated "First Horizon

                                      -8-

<PAGE>

Home Loan Corporation in trust for the registered holders of First Horizon Asset
Securities Inc. Mortgage Pass-Through Certificates, Series 2002-2."

         Certificate Group: With respect to Pool I, the Class I-A-1, Class I-A-2
and Class I-A-3 Certificates, and with respect to Pool II, the Class II-A-1,
Class II-A-2, Class II-A-3, Class II-A-4, Class II-A-5, Class II-A-6, Class
II-A-7, Class II-A-8, Class II-A-9, Class II-A-10, Class II-A-11, Class II-A-12,
Class II-A-13, Class II-A-14, Class II-A-15, Class II-A-16, Class II-A-17, Class
II-A-18, Class II-A-PO, Class II-A-RU and Class II-A-RL Certificates. The
Subordinated Certificates correspond to both Mortgage Pools.

         Certificate Principal Balance: With respect to any Certificate (other
than the Class II-A-5 Certificates) and as of any Distribution Date, the
Certificate Principal Balance on the date of the initial issuance of such
Certificate, as reduced by:

         (1)   all amounts distributed on previous Distribution Dates on such
               Certificate on account of principal;

         (2)   the principal portion of all Realized Losses previously allocated
               to such Certificate; and

         (3)   in the case of a Subordinated Certificate, such Certificate's
               pro rata share, if any, of the Subordinated Certificate Writedown
               Amount for previous Distribution Dates.

         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 5.2
hereof.

         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 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.

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

         Class Certificate Balance: With respect to any Class of Certificates
(other than the Class II-A-5 Certificates) and as of any Distribution Date the
aggregate of the Certificate Principal Balances of all Certificates of such
Class as of such date.

                                      -9-

<PAGE>

         Class II-A-3 Distribution Percentage: 0% through the Distribution Date
in March 2007; 30% of the applicable Class II-A-3 Percentage thereafter through
the Distribution Date in March 2008; 40% of the applicable Class II-A-3
Percentage thereafter through the Distribution Date in March 2009; 60% of the
applicable Class II-A-3 Percentage thereafter through the Distribution Date in
March 2010; 80% of the applicable Class II-A-3 Percentage thereafter through the
Distribution Date in March 2011; and 100% of the applicable Class II-A-3
Percentage thereafter.

         Class II-A-3 Percentage: For any Distribution Date, the lesser of (x)
100% and (y) the percentage (carried to six places rounded up) obtained by
dividing (1) the aggregate Class Certificate Balance of the Class II-A-3
Certificates immediately preceding such Distribution Date by (2) the aggregate
Class Certificate Balances of the Group II Senior Certificates (other than the
Class II-A-PO Certificates) on such Distribution Date.

         Class II-A-3 Principal Distribution Amount: For any Distribution Date,
         the sum of:

                 (a) the total of the amounts described in clauses (1) and (4)
         of the definition of Senior Optimal Principal Amount for Pool II for
         such date multiplied by the Class II-A-3 Scheduled Distribution
         Percentage for such date; and

                 (b) the total of the amounts described in clauses (2),(3) and
         (5) of the definition of Senior Optimal Principal Amount for Pool II
         for such date multiplied by the Class II-A-3 Distribution Percentage
         for such date.

         Class II-A-3 Scheduled Distribution Percentage: As to any Distribution
Date, 0% through the Distribution Date in March 2007 and thereafter, the Class
II-A-3 Percentage for such date.

         Class II-A-PO Deferred Amount: With respect to any Distribution Date
through the Cross-over Date, the sum of (1) the applicable PO Percentage of the
principal portion of Non-Excess Losses on a Discount Mortgage Loan in Pool II
allocated to the Class II-A-PO Certificates on such Distribution Date, and (2)
all amounts previously allocated to the Class II-A-PO Certificates in respect of
such losses and not distributed to the Class II-A-PO Certificates on prior
Distribution Dates.

         Class II-A-PO Deferred Payment Writedown Amount: For any Distribution
Date, the amount, if any, distributed on such date in respect of the Class
II-A-PO Deferred Amount pursuant to Section 4.2(a)(iv).

         Class II-A-PO Principal Distribution Amount: With respect to each
Distribution Date, an amount equal to the sum of:

                 (1) the applicable PO Percentage of all Scheduled Payments of
         principal due on each Mortgage Loan in Pool II on the first day of the
         month in which the Distribution Date occurs, as specified in the
         amortization schedule at the time applicable thereto, after adjustment
         for previous principal prepayments and the principal portion of Debt
         Service Reductions after the Bankruptcy Loss Coverage Amount has been
         reduced to zero, but before any adjustment to such amortization
         schedule by reason of any other bankruptcy or similar proceeding or any
         moratorium or similar waiver or grace period;

                                      -10-

<PAGE>

                  (2) the applicable PO Percentage of the Stated Principal
         Balance of each Mortgage Loan in Pool II which was the subject of a
         prepayment in full received by the Master Servicer during the related
         Prepayment Period;

                  (3) the applicable PO Percentage of all partial prepayments of
         principal for each Mortgage Loan in Pool II received by the master
         servicer during the related Prepayment Period;

                  (4) the applicable PO Percentage of the sum of (a) the net
         Liquidation Proceeds allocable to principal on each Mortgage Loan in
         Pool II which became a Liquidated Mortgage Loan during the related
         Prepayment Period, other than Mortgage Loans described in clause (b),
         and (b) the Stated Principal Balance of each Mortgage Loan in Pool II
         that was purchased by a private mortgage insurer during the related
         Prepayment Period as an alternative to paying a claim under the related
         Insurance Policy; and

                  (5) the applicable PO Percentage of the sum of (a) the Stated
         Principal Balance of each Mortgage Loan in Pool II which was
         repurchased by the Seller in connection with such Distribution Date and
         (b) the difference, if any, between the Stated Principal Balance of a
         Mortgage Loan in Pool II that has been replaced by the Seller with a
         Substitute Mortgage Loan pursuant to Section 2.3(c) in connection with
         such Distribution Date and the Stated Principal Balance of such
         Substitute Mortgage Loan.

         For purposes of clauses (2) and (5) above, the Stated Principal Balance
of a Mortgage Loan shall be reduced by the amount of any Deficient Valuation
that occurred prior to the reduction of the Bankruptcy Loss Coverage Amount to
zero.

         Class Prepayment Distribution Trigger: For a Class of Subordinated
Certificates (other than the Class of Subordinated Certificates with the highest
priority of distribution), a trigger that is satisfied on any Distribution Date
on which a fraction (expressed as a percentage), the numerator of which is the
aggregate Class Certificate Balance of such Class and each Class subordinate
thereto, if any, and the denominator of which is the aggregate Pool Principal
Balance for both Mortgage Pools with respect to such Distribution Date, equals
or exceeds such percentage calculated as of the Closing Date.

         Closing Date: March 28, 2002.

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

         COFI: Not applicable.

         COFI Certificates: Not applicable.

         Compensating Interest: As to any Distribution Date and any Principal
Prepayment in respect of a Mortgage Loan that is received during the period from
the sixteenth day of the month prior to the month of such Distribution Date
through the last day of such month, an additional payment to the related
Mortgage Pool made by the Master Servicer, to the extent funds are available
from the Master

                                      -11-

<PAGE>

Servicing Fee, equal to the amount of interest at the Adjusted Net Mortgage Rate
for that Mortgage Loan from the date of the prepayment to the related Due Date;
provided that the aggregate of all such payments as to the Mortgage Loans in a
Mortgage Pool shall not exceed 0.0083% of the Pool Principal Balance of such
Mortgage Pool as of the related Determination Date, and provided further that if
a partial Principal Prepayment is applied after the first of the month following
the month of receipt, no additional payment is required for such Principal
Prepayment.

         Component: Not applicable.

         Component Balance: Not applicable.

         Component Certificates: Not applicable.

         Cooperative Corporation: The entity that holds title (fee or an
acceptable leasehold estate) to the real property and improvements constituting
the Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.

         Coop Shares:  Shares issued by a Cooperative Corporation.

         Cooperative Loan:  Any Mortgage Loan secured by Coop Shares and a
Proprietary Lease.

         Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, including the allocation of individual dwelling units
to the holders of the Coop Shares of the Cooperative Corporation.

         Cooperative Unit:  A single family dwelling located in a Cooperative
Property.

         Corporate Trust Office: The designated office of the Trustee in the
State of New York at which at any particular time its corporate trust business
with respect to this Agreement shall be administered, which office at the date
of the execution of this Agreement is located at The Bank of New York, 5 Penn
Plaza, 16/th/ Floor, New York, New York 10001 (Attn: Corporate Trust
Mortgage-Backed Securities Group, First Horizon Asset Securities Inc. Series
2002-2), facsimile no. (212) 328-7620, and which is the address to which notices
to and correspondence with the Trustee should be directed.

         Corresponding Classes of Certificates:  Not applicable.

         Cross-over Date: The Distribution Date on which the respective Class
Certificate Balances of each Class of Subordinated Certificates have been
reduced to zero.

         Custodial Agreement:  The Custodial Agreement dated as of March 28,
2002 by and among the Trustee, the Master Servicer and the Custodian.

         Custodian:  LaSalle Bank National Association, a national banking
association, and its successors and assigns, as custodian under the Custodial
Agreement.

                                      -12-

<PAGE>

         Cut-off Date:  March 1, 2002.

         Cut-off Date Pool Principal Balance: With respect to Pool I,
$126,217,185.44, and with respect to Pool II, $419,540,739.16.

         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.

         Debt Service Reduction: With respect to any Mortgage Loan, a reduction
by a court of competent jurisdiction in a proceeding under the 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.

         Deceased Holder: Defined in Section 4.8(b), with respect to a Holder of
any Retail Certificate.

         Defective Mortgage Loan: Any Mortgage Loan which is required to be
repurchased pursuant to Section 2.2 or 2.3.

         Deficient Valuation: With respect to any Mortgage Loan, a valuation by
a court of competent jurisdiction of the Mortgaged Property in an amount less
than the then-outstanding indebtedness under the Mortgage Loan, or any reduction
in the amount of principal to be paid in connection with any Scheduled Payment
that results in a permanent forgiveness of principal, which valuation or
reduction results from an order of such court which is final and non-appealable
in a proceeding under the 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 5.2(e).

         Delay Certificates:  As specified in the Preliminary Statement.

         Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a
portion of a related Mortgage File is not delivered to Trustee on the Closing
Date. The number of Delay Delivery Mortgage Loans shall not exceed 25% of the
aggregate number of Mortgage Loans as of the Closing Date.

         Deleted Mortgage Loan:  As defined in Section 2.3(c) hereof.

         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: First Horizon Asset Securities Inc., a Delaware corporation,
or its successor 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

                                      -13-

<PAGE>

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.

         Designated Mortgage Pool Rates:  With respect to Pool I, 6.00%, and
with respect to Pool II, 6.50%.

         Determination Date: As to any Distribution Date, the earlier of (i) the
third Business Day after the 15th day of each month, and (ii) the second
Business Day prior to the related Distribution Date.

         Discount Mortgage Loan:  Any Mortgage Loan in Pool II with an Adjusted
Net Mortgage Rate of less than 6.50% per annum.

         Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.5 in the name of the Trustee for
the benefit of the Certificateholders and designated "The Bank of New York, in
trust for registered Holders of First Horizon Asset Securities Inc. Mortgage
Pass-Through Certificates, Series 2002-2." Funds in the Distribution Account
shall be held in trust for the Certificateholders for the uses and purposes set
forth in this Agreement.

         Distribution Account Deposit Date:  As to any Distribution Date, 1:30
p.m. Central time on the Business Day immediately preceding such Distribution
Date.

         Distribution Date: The 25th day of each calendar month after the
initial issuance of the Certificates, or if such 25th day is not a Business Day,
the next succeeding Business Day, commencing in April 2002.

         Due Date: With respect to any Distribution Date, the first day of the
month in which the related 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
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF, as applicable) and the uninsured
deposits in which accounts are otherwise secured such that, as evidenced by an
Opinion of Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any 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 or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in its fiduciary
capacity or (iv) any other account

                                      -14-

<PAGE>

acceptable to each Rating Agency. Eligible Accounts may bear interest, and may
include, if otherwise qualified under this definition, accounts maintained with
the Trustee.

         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 3.6(a) hereof.

         Event of Default: As defined in Section 7.1 hereof.

         Excess Loss: With respect to a Mortgage Pool, the amount of any (i)
Fraud Loss realized after the Fraud Loss Coverage Termination Date, (ii) Special
Hazard Loss realized after the Special Hazard Coverage Termination Date or (iii)
Deficient Valuation realized after the Bankruptcy Coverage Termination Date.

         Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the sum of any Liquidation Proceeds of such Mortgage
Loan received in the calendar month in which such Mortgage Loan became a
Liquidated Mortgage Loan, net of any amounts previously reimbursed to the Master
Servicer as Nonrecoverable Advance(s) with respect to such Mortgage Loan
pursuant to Section 3.8(a)(iii), exceeds (i) the unpaid principal balance of
such Liquidated Mortgage Loan as of the Due Date in the month in which such
Mortgage Loan became a Liquidated Mortgage Loan plus (ii) accrued interest at
the Mortgage Rate from the Due Date as to which interest was last paid or
advanced (and not reimbursed) to Certificateholders up to the Due Date
applicable to the Distribution Date immediately following the calendar month
during which such liquidation occurred.

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

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

         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.

         FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989.

         First Horizon: First Horizon Home Loan Corporation, a Kansas
corporation and an indirect wholly owned subsidiary of First Tennessee National
Corporation, a Tennessee corporation.

         Fitch: Fitch Ratings or any successor thereto. If Fitch is designated
as a Rating Agency in the Preliminary Statement, for purposes of Section 11.5(b)
the address for notices to Fitch shall be Fitch, Inc., One State Street Plaza,
New York, New York 10004, Attention: Residential Mortgage Surveillance Group, or
such other address as Fitch may hereafter furnish to the Depositor and the
Master Servicer.

                                      -15-

<PAGE>

         FNMA: The Federal National Mortgage Association, a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, or any successor thereto.

         Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss has
occurred.

         Fraud Losses: Realized Losses on Mortgage Loans as to which a loss is
sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including a loss
by reason of the denial of coverage under any related Primary Insurance Policy
because of such fraud, dishonesty or misrepresentation.

         Fraud Loss Coverage Amount: As of the Closing Date, $10,915,158. As of
any Distribution Date from the first anniversary of the Cut-off Date and prior
to the third anniversary of the Cut-off Date, the Fraud Loss Coverage Amount
will equal $5,457,579 minus the aggregate amount of Fraud Losses that would have
been allocated to the Subordinated Certificates in the absence of the Loss
Allocation Limitation since the Cut-off Date. As of any Distribution Date from
the third to the fifth anniversaries of the Cut-off Date, the Fraud Loss
Coverage Amount will equal (1) the lesser of (a) the Fraud Loss Coverage Amount
as of the most recent anniversary of the Cut-off Date and (b) 0.5% of the
aggregate outstanding principal balance of all of the mortgage loans as of the
most recent anniversary of the Cut-off Date minus (2) the Fraud Losses that
would have been allocated to the Subordinated Certificates in the absence of the
Loss Allocation Limitation since the most recent anniversary of the Cut-off
Date. As of any Distribution Date on or after the earlier of the Cross-over Date
or the fifth anniversary of the Cut-off Date, the Fraud Loss Coverage Amount
shall be zero.

         Fraud Loss Coverage Termination Date: The point in time at which the
Fraud Loss Coverage Amount is reduced to zero.

         Group Subordinate Amount: For each Mortgage Pool and any Distribution
Date is the excess of the Pool Principal Balance of that Mortgage Pool for the
immediately preceding Distribution Date over the aggregate Class Certificate
Balance of the Senior Certificates of the related Certificate Group immediately
prior to that Distribution Date.

         Index:  Not applicable.

         Indirect Participant: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.

         Initial Bankruptcy Coverage Amount:  $120,000.

         Initial Component Balance:  Not applicable.

         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: Proceeds paid by an insurer pursuant to any
Insurance Policy, in each case other than any amount included in such Insurance
Proceeds in respect of Insured Expenses.

                                      -16-

<PAGE>

         Insured Expenses: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.

         Interest Only Certificates: As specified in the Preliminary Statement.

         Insured Retail Certificates: As specified in the Preliminary Statement.

         Interest Accrual Period: With respect to each Class of Delay
Certificates and any Distribution Date, the calendar month prior to the month of
such Distribution Date. With respect to any Non-Delay Certificates and any
Distribution Date, the one month period commencing on the 25th day of the month
preceding the month in which such Distribution Date occurs and ending on the
24th day of the month in which such Distribution Date occurs.

         Interest Determination Date: With respect to any Interest Accrual
Period for any LIBOR Certificates, the second Business Day prior to the first
day of such Interest Accrual Period.

         Latest Possible Maturity Date: As to each Class of Senior Certificates
in the Certificate Group corresponding to Pool I, the Distribution Date
following the third anniversary of the scheduled maturity date of the Mortgage
Loan in Pool I having the latest scheduled maturity date as of the Cut-off Date;
as to each Class of Subordinated Certificates and each Class of Senior
Certificates in the Certificate Group corresponding to Pool II, the Distribution
Date following the third anniversary of the scheduled maturity date of the
Mortgage Loan in Pool II having the latest scheduled maturity date as of the
Cut-off Date

         Lender PMI Mortgage Loan:  Not applicable.

         LIBOR: The London interbank offered rate for one-month United States
dollar deposits calculated in the manner described in Section 4.08.

         LIBOR Certificates:  As specified in the Preliminary Statement.

         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
Master Servicer has determined (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 Proceeds: Amounts, including Insurance Proceeds, received
in connection with the partial or complete liquidation of defaulted Mortgage
Loans, whether through trustee's sale, foreclosure sale or otherwise or amounts
received in connection with any condemnation or partial release of a Mortgaged
Property and any other proceeds received in connection with an REO Property,
less the sum of related unreimbursed Master Servicing Fees, Servicing Advances
and Advances.

         Living Holder: Any Certificate Owner of a Retail Certificate, other
than a Deceased Holder.

                                      -17-

<PAGE>

         Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any
date of determination, the fraction (expressed as a percentage) the numerator of
which is the principal balance of the related Mortgage Loan at such date of
determination and the denominator of which is the Appraised Value of the related
Mortgaged Property.

         Loss Allocation Limitation: As defined in Section 4.4(g).

         Lost Mortgage Note: Any Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.

         Lower REMIC: The segregated pool of assets consisting of the Trust Fund
and the Rounding Account but excluding the Retained Yield and the Lower REMIC
Interests. The Lower REMIC shall not include the Reserve Fund.

         Lower REMIC Interests: The regular REMIC interests issued by the Lower
REMIC as set forth in Section 2.7.

         Maintenance: With respect to any Cooperative Unit, the rent paid by the
Mortgagor to the Cooperative Corporation pursuant to the Proprietary Lease.

         Majority in Interest: As to any Class of Regular Certificates, the
Holders of Certificates of such Class evidencing, in the aggregate, at least 51%
of the Percentage Interests evidenced by all Certificates of such Class.

         Master Servicer: First Horizon Home Loan Corporation, a Kansas
corporation, and its successors and assigns, in its capacity as master servicer
hereunder.

         Master Servicer Advance Date: As to any Distribution Date, 1:30 p.m.
Central time on the Business Day immediately preceding such Distribution Date.

         Master Servicing Fee: As to each Mortgage Loan and any Distribution
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the Due
Date in the month of such Distribution Date (prior to giving effect to any
Scheduled Payments due on such Mortgage Loan on such Due Date), subject to
reduction as provided in Section 3.14.

         Master Servicing Fee Rate: For each Mortgage Loan, other than any
Mortgage Loan in Pool I with a Mortgage Rate less than 6.250%, a per annum rate
equal to 0.246%. For each Mortgage Loan in Pool I with a Mortgage Rate less than
6.250%, a per annum rate equal to the excess, if any, of the Mortgage Rate
thereof over 6.004%.

         Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.6.

         Moody's: Moody's Investors Service, Inc., or any successor thereto. If
Moody's is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 11.5(b) the

                                      -18-

<PAGE>

address for notices to Moody's shall be Moody's Investors Service, Inc., 99
Church Street, New York, New York 10007, Attention: Residential Pass-Through
Monitoring, or such other address as Moody's may hereafter furnish to the
Depositor or the Master Servicer.

         Mortgage: The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.

         Mortgage File: The mortgage documents listed in Section 2.1 hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.

         Mortgage Loan Schedule: The list of Mortgage Loans (as from time to
time amended by the Master Servicer to reflect the addition of Substitute
Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant to the
provisions of this Agreement) transferred to the Trustee as part of the Trust
Fund and from time to time subject to this Agreement, attached hereto as
Schedule I, setting forth the following information with respect to each
Mortgage Loan:

                    (i)   the loan number;

                    (ii)   the Mortgagor's name and the street address of the
         Mortgaged Property, including the zip code;

                    (iii)  the maturity date;

                    (iv)   the original principal balance;

                    (v)    the Cut-off Date Principal Balance;

                    (vi)   the first payment date of the Mortgage Loan;

                    (vii)  the Scheduled Payment in effect as of the Cut-off
         Date;

                    (viii) the Loan-to-Value Ratio at origination;

                    (ix)   a code indicating whether the residential dwelling at
         the time of origination was represented to be owner-occupied;

                    (x)    a code indicating whether the residential dwelling is
         either (a) a detached single family dwelling (b) a dwelling in a de
         minimis PUD, (c) a condominium unit or PUD (other than a de minimis
         PUD), (d) a two- to four-unit residential property or (e) a Cooperative
         Unit;

                  (xi)     the Mortgage Rate;

                  (xii)    the purpose for the Mortgage Loan;

                                      -19-

<PAGE>

               (xiii) the type of documentation program pursuant to which the
         Mortgage Loan was originated; and

               (xiv)  the Master Servicing Fee for the Mortgage Loan.

         Such schedule shall also set forth the total of the amounts described
under (iv) and (v) above for all of the Mortgage Loans.

         Mortgage Loans: Such of the mortgage loans transferred and assigned to
the Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund (including any REO Property), the mortgage loans so held
being identified in the Mortgage Loan Schedule, notwithstanding foreclosure or
other acquisition of title of the related Mortgaged Property.

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

         Mortgage Pool:  Either Pool I or Pool II.

         Mortgage Rate: The annual rate of interest borne by a Mortgage Note
from time to time, net of any insurance premium charged by the mortgagee to
obtain or maintain any Primary Insurance Policy.

         Mortgaged Property: The underlying property securing a Mortgage Loan,
which, with respect to a Cooperative Loan, is the related Coop Shares and
Proprietary Lease.

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

         National Cost of Funds Index: The National Monthly Median Cost of Funds
Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.

         Net Interest Shortfall: For any Distribution Date and each Mortgage
Pool, the sum of (a) the amount of interest which would otherwise have been
received for any Mortgage Loan that was the subject of (x) a Relief Act
Reduction or (y) a Special Hazard Loss, Fraud Loss, or Deficient Valuation,
after the exhaustion of the respective amounts of coverage for those types of
losses provided by the Subordinated Certificates; and (b) any Net Prepayment
Interest Shortfalls.

         Net Prepayment Interest Shortfalls: As to any Distribution Date and
each Mortgage Pool, the amount by which the aggregate of Prepayment Interest
Shortfalls during the related Prepayment Period exceeds an amount equal to the
Compensating Interest, if any, for such Distribution Date.

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

         Non-Discount Mortgage Loan: Any Mortgage Loan in Pool II with an
Adjusted Net Mortgage Rate that is equal to or greater than 6.50%.

         Non-Excess Loss:  Any Realized Loss other than an Excess Loss.

                                      -20-

<PAGE>

     Non-PO Percentage: As to any Discount Mortgage Loan in Pool II, a fraction
(expressed as a percentage) the numerator of which is the Adjusted Net Mortgage
Rate of such Discount Mortgage Loan and the denominator of which is 6.50%. As to
any Non-Discount Mortgage Loan in Pool II, 100%.

     Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not be ultimately recoverable by the Master Servicer
from the related Mortgagor, related Liquidation Proceeds or otherwise.

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

     Notional Principal Amount Certificates: As specified in the Preliminary
Statement.

     Offered Certificates: As specified in the Preliminary Statement.

     Officer's Certificate: A Certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing Officer, as the case may be, and delivered
to the Depositor and the Trustee, as the case may be, as required by this
Agreement.

     Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Depositor or the Master Servicer, including, in-house counsel, reasonably
acceptable to the Trustee; provided, however, that with respect to the
interpretation or application of the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Master Servicer, (ii) not have any
direct financial interest in the Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.

     Optional Termination: The termination of the trust created hereunder in
connection with the purchase of the Mortgage Loans pursuant to Section 9.1(a)
hereof.

     Original Mortgage Loan: The Mortgage Loan refinanced in connection with the
origination of a Refinancing Mortgage Loan.

     Original Subordinated Principal Balance: The aggregate of the Class
Certificate Balances of the Subordinated Certificates as of the Closing Date.

     OTS: The Office of Thrift Supervision.

     Outside Reference Date: Not applicable.

                                      -21-

<PAGE>

     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.

     Pass-Through Rate: For any interest bearing Class of Certificates or
Component, the per annum rate set forth or calculated in the manner described in
the Preliminary Statement.

     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.

     Permitted Investments: At any time, any one or more of the following
obligations and securities:

          (i)   obligations of the United States or any agency thereof, provided
     such obligations are backed by the full faith and credit of the United
     States;

          (ii)  general obligations of or obligations guaranteed by any state
     of the United States or the District of Columbia receiving the highest
     long-term debt rating of each Rating Agency, or such lower rating as will
     not result in the downgrading or withdrawal of the ratings then assigned to
     the Certificates by each Rating Agency;

          (iii) commercial or finance company paper which is then receiving the
     highest commercial or finance company paper rating of each Rating Agency,
     or such lower rating as will not result in the downgrading or withdrawal of
     the ratings then assigned to the Certificates by each Rating Agency;

          (iv)  certificates of deposit, demand or time deposits, or bankers'
     acceptances issued by any depository institution or trust company
     incorporated under the laws of the United States or of any state thereof
     and subject to supervision and examination by federal and/or state banking
     authorities, provided that the commercial paper and/or long term unsecured
     debt obligations of such depository institution or trust company (or in the
     case of the principal depository institution in a holding company system,
     the commercial paper or

                                      -22-

<PAGE>

     long-term unsecured debt obligations of such holding company, but only if
     Moody's is not a Rating Agency) are then rated one of the two highest
     long-term and the highest short-term ratings of each Rating Agency for such
     securities, or such lower ratings as will not result in the downgrading or
     withdrawal of the rating then assigned to the Certificates by either Rating
     Agency;

          (v)    demand or time deposits or certificates of deposit issued by
     any bank or trust company or savings institution to the extent that such
     deposits are fully insured by the FDIC;

          (vi)   guaranteed reinvestment agreements issued by any bank,
     insurance company or other corporation containing, at the time of the
     issuance of such agreements, such terms and conditions as will not result
     in the downgrading or withdrawal of the rating then assigned to the
     Certificates by either Rating Agency;

          (vii)  repurchase obligations with respect to any security described
     in clauses (i) and (ii) above, in either case entered into with a
     depository institution or trust company (acting as principal) described in
     clause (iv) above;

          (viii) securities (other than stripped bonds, stripped coupons or
     instruments sold at a purchase price in excess of 115% of the face amount
     thereof) bearing interest or sold at a discount issued by any corporation
     incorporated under the laws of the United States or any state thereof
     which, at the time of such investment, have one of the two highest ratings
     of each Rating Agency (except if the Rating Agency is Moody's, such rating
     shall be the highest commercial paper rating of Moody's for any such
     securities), or such lower rating as will not result in the downgrading or
     withdrawal of the rating then assigned to the Certificates by either Rating
     Agency as evidenced by a signed writing delivered by each Rating Agency;

          (ix)   units of a taxable money-market portfolio having the highest
     rating assigned by each Rating Agency (except if Fitch is a Rating Agency
     and has not rated the portfolio, the highest rating assigned by Moody's)
     and restricted to obligations issued or guaranteed by the United States of
     America or entities whose obligations are backed by the full faith and
     credit of the United States of America and repurchase agreements
     collateralized by such obligations; and

          (x)    such other investments bearing interest or sold at a discount
     acceptable to each Rating Agency as will not result in the downgrading or
     withdrawal of the rating then assigned to the Certificates by either Rating
     Agency, as evidenced by a signed writing delivered by each Rating Agency;

     provided that no such instrument shall be a Permitted Investment if such
     instrument evidences the right to receive interest only payments with
     respect to the obligations underlying such instrument.

     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

                                      -23-

<PAGE>

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)(l) 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) an "electing large
partnership" as defined in section 775 of the Code, (vi) a Person that is not
(a) a citizen or resident of the United States, (b) a corporation, partnership,
or other entity created or organized in or under the laws of the United States,
any state thereof or the District of Columbia, (c) an estate whose income from
sources without the United States is includible 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 or (d) 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 United States persons have the
authority to control all substantial decisions of the trust, unless such Person
has furnished the transferor and the Trustee with a duly completed Internal
Revenue Service Form W-8ECI or any applicable successor form, 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 the REMIC created hereunder to fail to qualify as a REMIC at
any time that the Certificates are outstanding; provided, however, that if a
                                                --------
person is classified as a partnership under the Code, such person shall only be
a Permitted Transferee if all of its beneficial owners are described in
subclauses (a), (b), (c) or (d) of clause (vi) and the governing documents of
such person prohibits a transfer of any interest in such person to any person
described in clause (vi). The terms "United States," "State" and "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, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.

     Physical Certificate: As specified in the Preliminary Statement.

     Planned Balance: With respect to a Planned Principal Class and any
Distribution Date, the balance for such Class and such Distribution Date as
reflected in the Principal Balance Schedule.

     Planned Principal Classes: As specified in the Preliminary Statement.

     Pool I: The aggregate of the Mortgage Loans identified on the Mortgage Loan
Schedule as being included in Pool I.

     Pool II: The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool II.

     Pool Principal Balance: For each Mortgage Pool, with respect to any
Distribution Date, the aggregate of the Stated Principal Balances of the
Mortgage Loans which were Outstanding Mortgage Loans on the Due Date in the
month preceding the month of such Distribution Date.

                                      -24-

<PAGE>

     PO Percentage: As to any Discount Mortgage Loan in Pool II, a fraction
(expressed as a percentage) the numerator of which is difference between (a)
6.50% and (b) the Adjusted Net Mortgage Rate of such Discount Mortgage Loan, and
the denominator of which is 6.50%. As to any Non-Discount Mortgage Loan in Pool
II, 0%.

     Prepayment Interest Excess: As to any Principal Prepayment received by the
Master Servicer from the first day through the fifteenth day of any calendar
month (other than the calendar month in which the Cut-off Date occurs), all
amounts paid by the related Mortgagor in respect of interest on such Principal
Prepayment. All Prepayment Interest Excess shall be paid to the Master Servicer
as additional master servicing compensation.

     Prepayment Interest Shortfall: As to any Distribution Date and each
Mortgage Pool, Mortgage Loan and Principal Prepayment received (a) during the
period from the sixteenth day of the month preceding the month of such
Distribution Date through the last day of such month, in the case of a Principal
Prepayment in full, or (b) during the month preceding the month of such
Distribution Date, in the case of a partial Principal Prepayment, the amount, if
any, by which one month's interest at the related Adjusted Mortgage Rate on such
Principal Prepayment exceeds the amount of interest actually paid by the
Mortgagor in connection with such Principal Prepayment.

     Prepayment Period: (a) With respect to any Principal Prepayments in Full
and any Distribution Date, the period from the sixteenth day of the month
preceding the month of such Distribution Date (or, in the case of the first
Distribution Date, from the Cut-off Date) through the fifteenth day of the month
of such Distribution Date, and (b) with respect to any other Principal
Prepayments and any Distribution Date, the month preceding the month of such
Distribution Date.

     Primary Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any Mortgage Loan.

     Primary Planned Principal Classes: As specified in the Preliminary
Statement.

     Principal Balance Schedules: The schedules attached hereto as Schedule V.

     Principal Prepayment: Any payment of principal by a Mortgagor on a Mortgage
Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.

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

     Private Certificate: As specified in the Preliminary Statement.

     Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Coop Shares.

     PUD: Planned Unit Development.

                                      -25-

<PAGE>

     Purchase Price: With respect to any Mortgage Loan required to be purchased
by the Seller pursuant to Section 2.2 or 2.3 hereof or purchased at the option
of the Master Servicer pursuant to Section 3.11, an amount equal to the sum of
(i) 100% of the unpaid principal balance of the Mortgage Loan on the date of
such purchase, and (ii) accrued interest thereon at the applicable Mortgage Rate
(or at the applicable Adjusted Mortgage Rate if (x) the purchaser is the Master
Servicer or (y) if the purchaser is the Seller and the Seller is the Master
Servicer) from the date through which interest was last paid by the Mortgagor to
the Due Date in the month in which the Purchase Price is to be distributed to
Certificateholders.

     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-approved mortgage insurer and 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.

     Random Lot: With respect to any Class of Retail Certificate and any
Distribution Date, the method by which the Depository will determine which
Retail Certificates of such Class will be paid, using its established random lot
procedures or, if such Class of Retail Certificates is no longer represented by
a Book-Entry Certificate, using the Trustee's procedures.

     Rating Agency: Each of the Rating Agencies specified in the Preliminary
Statement. If any 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 category of a Rating Agency shall mean such rating category
without giving effect to any modifiers.

     Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus
(ii) interest at the Adjusted Net Mortgage Rate from the Due Date as to which
interest was last paid or advanced (and not reimbursed) to Certificateholders up
to the Due Date in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Mortgage Loan
from time to time, minus (iii) the Liquidation Proceeds, if any, received during
the month in which such liquidation occurred, to the extent applied as
recoveries of interest at the Adjusted Net Mortgage Rate and to principal of the
Liquidated Mortgage Loan. With respect to each Mortgage Loan which has become
the subject of a Deficient Valuation, if the principal amount due under the
related Mortgage Note has been reduced, the difference between the principal
balance of the Mortgage Loan outstanding immediately prior to such Deficient
Valuation and the principal balance of the Mortgage Loan as reduced by the
Deficient Valuation.

     Recognition Agreement: With respect to any Cooperative Loan, an agreement
between the Cooperative Corporation and the originator of such Mortgage Loan
which establishes the rights of such originator in the Cooperative Property.

                                      -26-

<PAGE>

     Record Date: With respect to any Distribution Date, the close of business
on the last Business Day of the month preceding the month in which such
Distribution Date occurs.

     Reference Bank: A leading bank with an established place of business in
London engaged in transactions in Eurodollar deposits in the international
Eurocurrency market, not controlled by, or under the common control with, the
Trustee.

     Refinancing Mortgage Loan: Any Mortgage Loan originated in connection with
the refinancing of an existing mortgage loan.

     Regular Certificates: As specified in the Preliminary Statement.

     Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.

     Relief Act Reductions: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which interest
collectible on such Mortgage Loan for the most recently ended calendar month is
less than interest accrued thereon for such month pursuant to the Mortgage Note.

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

     REMIC Change of Law: Any proposed, temporary or final regulation, revenue
ruling, revenue procedure or other official announcement or interpretation
relating to REMICs and the REMIC Provisions issued after the Closing Date.

     REMIC Provisions: Provisions of the federal income tax law relating to real
estate mortgage investment conduits, 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.

     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.

     Request for Release: The Request for Release submitted by the Master
Servicer to the Trustee, substantially in the form of Exhibits L and M, as
appropriate.

     Required Coupon: With respect to Pool I, 6.25% per annum, and with respect
to Pool II, 6.75% per annum.

     Required Insurance Policy: With respect to any Mortgage Loan, any insurance
policy that is required to be maintained from time to time under this Agreement.

     Required Recordation States: The states of Florida, Maryland and
Mississippi.

     Residual Certificates: As specified in the Preliminary Statement.

                                      -27-

<PAGE>

     Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Agreement and also
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.

     Retail Certificates: As specified in the Preliminary Statement.

     Retained Yield: As to each Mortgage Loan and any Distribution Date, an
amount payable to First Horizon Home Loan Corporation out of each full payment
of interest received on such Mortgage Loan and equal to one-twelfth of the
Retained Yield Rate multiplied by the Stated Principal Balance of such Mortgage
Loan as of the Due Date in the month of such Distribution Date (prior to giving
effect to any Scheduled Payments due on such Mortgage Loan on such Due Date).

     Retained Yield Rate: For any Mortgage Loan, other than the Discount
Mortgage Loans, a per annum rate equal to the excess of (a) the applicable
Mortgage Rate over (b) the Required Coupon. For any Discount Mortgage Loan, 0%.

     Rounding Account: With respect to a Class of Retail Certificates, the
account created and maintained pursuant to Section 4.8(e).

     Scheduled Balances: Not applicable.

     Scheduled Classes: Not applicable.

     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 monthly
payment due on such Mortgage Loan.

     Scheduled Principal Classes: As specified in the Preliminary Statement.

     Secondary Planned Principal Classes: As specified in the Preliminary
Statement.

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

     Security Agreement: The security agreement with respect to a Cooperative
Loan.

     Seller: First Horizon Home Loan Corporation, a Kansas corporation, and its
successors and assigns, in its capacity as seller of the Mortgage Loans
hereunder.

     Senior Certificates: As specified in the Preliminary Statement.

     Senior Final Distribution Date: For each Certificate Group, the
Distribution Date on which the Class Certificate Balance of each Class of
related Senior Certificates has been reduced to zero.

                                      -28-

<PAGE>

     Senior Optimal Principal Amount: As to each Mortgage Pool and Distribution
Date, an amount equal to the sum of:

          (1)  the related Senior Percentage (or, in the case of Pool II, the
     applicable Non-PO Percentage) of all Scheduled Payments of principal due on
     each Mortgage Loan in such Mortgage Pool on the first day of the month in
     which the Distribution Date occurs, as specified in the amortization
     schedule at the time applicable thereto after adjustment for previous
     principal prepayments and the principal portion of Debt Service Reductions
     after the Bankruptcy Loss Coverage Amount has been reduced to zero, but
     before any adjustment to such amortization schedule by reason of any other
     bankruptcy or similar proceeding or any moratorium or similar waiver or
     grace period;

          (2)  the related Senior Prepayment Percentage (or, in the case of Pool
     II, the applicable Non-PO Percentage) of the Stated Principal Balance of
     each Mortgage Loan in such Mortgage Pool which was the subject of a
     prepayment in full received by the Master Servicer during the applicable
     Prepayment Period;

          (3)  the related Senior Prepayment Percentage (or, in the case of Pool
     II, the applicable Non-PO Percentage) of all partial prepayments of
     principal in respect of each Mortgage Loan in such Mortgage Pool received
     during the applicable Prepayment Period;

          (4)  the lesser of:

               (a) the related Senior Prepayment Percentage of the sum of (x)
          the net liquidation proceeds allocable to principal (or, in the case
          of Pool II, the applicable Non-PO Percentage thereof) on each Mortgage
          Loan in such Mortgage Pool which became a Liquidated Mortgage Loan
          during the related Prepayment Period, other than Mortgage Loans
          described in clause (y), and (y) the principal balance (or, in the
          case of Pool II, the applicable Non-PO Percentage thereof) of each
          Mortgage Loan in such Mortgage Pool that was purchased by a private
          mortgage insurer during the related Prepayment Period as an
          alternative to paying a claim under the related Insurance Policy; and

               (b) (i) the related Senior Percentage of the sum of (x) the
          Stated Principal Balance (or, in the case of Pool II, the applicable
          Non-PO Percentage thereof) of each Mortgage Loan in such Mortgage Pool
          which became a Liquidated Mortgage Loan during the related Prepayment
          Period, other than Mortgage Loans described in clause (y), and (y) the
          Stated Principal Balance (or, in the case of Pool II, the applicable
          Non-PO Percentage thereof) of each Mortgage Loan in such Mortgage Pool
          that was purchased by a private mortgage insurer during the related
          Prepayment Period as an alternative to paying a claim under the
          related Insurance Policy minus (ii) the related Senior Percentage of
          the applicable Non-PO Percentage of the principal portion of Excess
          Losses (other than Debt Service Reductions) for such Mortgage Pool
          during the related Prepayment Period; and

          (5)  the related Senior Prepayment Percentage (or in the case of Pool
     II, the applicable Non-PO Percentage) of the sum of (a) the Stated
     Principal Balance of each

                                      -29-

<PAGE>

     Mortgage Loan in such Mortgage Pool which was repurchased by the seller in
     connection with such Distribution Date and (b) the difference, if any,
     between the Stated Principal Balance of a Mortgage Loan in such Mortgage
     Pool that has been replaced by the seller with a Substitute Mortgage Loan
     pursuant to the agreement in connection with such Distribution Date and the
     Stated Principal Balance of such Substitute Mortgage Loan.

     Senior Percentage: On any Distribution Date for a Certificate Group, the
lesser of 100% and the percentage (carried to six places rounded up) obtained by
dividing the aggregate Class Certificate Balances of all Classes of Senior
Certificates (other than the Class II-A-PO Certificates) of such Certificate
Group immediately preceding such Distribution Date by the Pool Principal Balance
of the related Mortgage Pool (excluding, in the case of Pool II, the aggregate
of the applicable PO Percentage of the principal balance of each Discount
Mortgage Loan included therein) for the immediately preceding Distribution Date.

     Senior Prepayment Percentage: On any Distribution Date occurring during the
periods set forth below, and as to each Mortgage Pool, the Senior Prepayment
Percentages, described below:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
     Period (Dates Inclusive)                         Senior Prepayment Percentage
--------------------------------------------------------------------------------------------------------------------
<S>                                       <C>
April 2002 - March 2007                   100%
--------------------------------------------------------------------------------------------------------------------
April 2007 - March 2008                   the related Senior Percentage plus 70% of the related Subordinated
                                          Percentage
--------------------------------------------------------------------------------------------------------------------
April 2008 - March 2009                   the related Senior Percentage plus 60% of the related Subordinated
                                          Percentage
--------------------------------------------------------------------------------------------------------------------
April 2009 - March 2010                   the related Senior Percentage plus 40% of the related Subordinated
                                          Percentage
--------------------------------------------------------------------------------------------------------------------
April 2010 - March 2011                   the related Senior Percentage plus 20% of the related Subordinated
                                          Percentage
-------------------------------------------------------------------------------------------------------------------
April 2011 and thereafter                 the related Senior Percentage
--------------------------------------------------------------------------------------------------------------------
</TABLE>

     Notwithstanding the foregoing, if the Senior Percentage for a Certificate
Group on any Distribution Date exceeds the initial Senior Percentage, for that
Certificate Group, the related Senior Prepayment Percentage for such
Distribution Date will equal 100%.

     In addition, no reduction of the Senior Prepayment Percentage for a
Certificate Group below the level in effect for the most recent prior period
specified in the table above shall be effective on any Distribution Date unless,
as of the last day of the month preceding such Distribution Date, either:

          (A)(1) the aggregate Stated Principal Balance of Mortgage Loans in the
     related Mortgage Pool delinquent 60 days or more (including for this
     purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect
     to which the related Mortgaged Property has been acquired by the Trust
     Fund) does not exceed 50% of the related Group Subordinate Amount as of
     such date; and

                                      -30-

<PAGE>

          (2)  cumulative Realized Losses with respect to the Mortgage Loans in
     the related Mortgage Pool do not exceed:

               (a) 30% of the related Group Subordinate Amount as of the Cut-off
          Date (the "Original Group Subordinated Amount" with respect to such
          Mortgage Pool) if such Distribution Date occurs between and including
          April 2007 and March 2008;

               (b) 35% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including April 2008 and March
          2009;

               (c) 40% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including April 2009 and March
          2010;

               (d) 45% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including April 2010 and March
          2011; and

               (e) 50% of the Original Subordinated Principal Balance if such
          Distribution Date occurs during or after April 2011; or

          (B)  (1) the aggregate Stated Principal Balance of Mortgage Loans in
     the related Mortgage Pool delinquent 60 days or more (including for this
     purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect
     to which the related Mortgaged Property has been acquired by the Trust
     Fund), averaged over the last three months, as a percentage of the
     aggregate Stated Principal Balance of all Mortgage Loans in the related
     Mortgage Pool averaged over the last three months, does not exceed 4%; and

          (2)  cumulative Realized Losses with respect to the Mortgage Loans in
     the related Mortgage Pool do not exceed:

               (a) 10% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including April 2007 and March
          2008;

               (b) 15% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including April 2008 and March
          2009;

               (c) 20% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including April 2009 and March
          2010;

               (d) 25% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including April 2010 and March
          2011; and

               (e) 30% of the Original Subordinated Principal Balance if such
          Distribution Date occurs during or after April 2011.

     Servicing Advances: All customary, reasonable and necessary "out of pocket"
costs and expenses incurred in the performance by the Master Servicer of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged

                                      -31-

<PAGE>

Property, (ii) any expenses reimbursable to the Master Servicer pursuant to
Section 3.11 and any enforcement or judicial proceedings, including
foreclosures, (iii) the management and liquidation of any REO Property and (iv)
compliance with the obligations under Section 3.9.

     Servicing Officer: Any officer of the Master 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 Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.

     Special Hazard Coverage Termination Date: The point in time at which the
Special Hazard Loss Coverage Amount is reduced to zero.

     Special Hazard Loss: Any Realized Loss suffered by a Mortgaged Property on
account of direct physical loss but not including (i) any loss of a type covered
by a hazard insurance policy or a flood insurance policy required to be
maintained with respect to such Mortgaged Property pursuant to Section 3.9 to
the extent of the amount of such loss covered thereby, or (ii) any loss caused
by or resulting from:

          (a)  normal wear and tear;

          (b)  fraud, conversion or other dishonest act on the part of the
     Trustee, the Master Servicer or any of their agents or employees (without
     regard to any portion of the loss not covered by any errors and omissions
     policy);

          (c)  errors in design, faulty workmanship or faulty materials, unless
     the collapse of the property or a part thereof ensues and then only for the
     ensuing loss;

          (d)  nuclear or chemical reaction or nuclear radiation or radioactive
     or chemical contamination, all whether controlled or uncontrolled, and
     whether such loss be direct or indirect, proximate or remote or be in whole
     or in part caused by, contributed to or aggravated by a peril covered by
     the definition of the term "Special Hazard Loss";

          (e)  hostile or warlike action in time of peace and war, including
     action in hindering, combating or defending against an actual, impending or
     expected attack:

               1. by any government or sovereign power, de jure or de facto, or
          by any authority maintaining or using military, naval or air forces;
          or

               2. by military, naval or air forces; or

               3. by an agent of any such government, power, authority or
          forces;

          (f)  any weapon of war employing nuclear fission, fusion or other
     radioactive force, whether in time of peace or war; or

          (g)  insurrection, rebellion, revolution, civil war, usurped power or
     action taken by governmental authority in hindering, combating or defending
     against such an occurrence,

                                      -32-

<PAGE>

     seizure or destruction under quarantine or customs regulations,
     confiscation by order of any government or public authority or risks of
     contraband or illegal transportation or trade.

     Special Hazard Loss Coverage Amount: Upon the initial issuance of the
Certificates, $5,457,579. As of any Distribution Date, the Special Hazard Loss
Coverage Amount will equal the greater of

     .    1.00% (or if greater than 1.00%, the highest percentage of Mortgage
          Loans by principal balance secured by Mortgaged Properties in any
          single California zip code) of the outstanding principal balance of
          all the Mortgage Loans as of the related Determination Date; and

     .    twice the outstanding principal balance of the Mortgage Loan which has
          the largest outstanding principal balance as of the related
          Determination Date,

less, in each case, the aggregate amount of Special Hazard Losses that would
have been previously allocated to the subordinated certificates in the absence
of the Loss Allocation Limitation. As of any Distribution Date on or after the
Cross-over Date, the Special Hazard Loss Coverage Amount will be zero.

     Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to which a
Special Hazard Loss has occurred.

     S&P: Standard & Poor's Corporation, a division of The McGraw-Hill
Companies, Inc. If S&P is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 11.5(b) the address for notices to S&P shall
be Standard & Poor's, 55 Water Street, 41st Floor, New York, New York 10041,
Attention: Mortgage Surveillance Monitoring, or such other address as S&P may
hereafter furnish to the Depositor and the Master Servicer.

     Startup Day: The Closing Date.

     Stated Principal Balance: As to any Mortgage Loan and Due Date, the unpaid
principal balance of such Mortgage Loan as of such Due Date as specified in the
amortization schedule at the time relating thereto (before any adjustment to
such amortization schedule by reason of any moratorium or similar waiver or
grace period) after giving effect to any previous partial Principal Prepayments
and Liquidation Proceeds allocable to principal (other than with respect to any
Liquidated Mortgage Loan) and to the payment of principal due on such Due Date
and irrespective of any delinquency in payment by the related Mortgagor.

     Streamlined Documentation Mortgage Loan: Any Mortgage Loan originated
pursuant to the Seller's Streamlined Loan Documentation Program then in effect.

     Subordinated Certificates: As specified in the Preliminary Statement.

     Subordinated Certificate Writedown Amount: As of any Distribution Date, the
amount by which (a) the sum of the Class Certificate Balances of all of the
Certificates, after giving effect to the distribution of principal and the
allocation of Realized Losses in reduction of the Class Certificate

                                      -33-

<PAGE>

Balances of all of the Certificates on such Distribution Date, exceeds (b) the
aggregate Pool Principal Balance for both Mortgage Pools on the first day of the
month of such Distribution Date less any Deficient Valuations occurring before
the Bankruptcy Loss Coverage Amount has been reduced to zero.

     Subordinated Optimal Principal Amount: With respect to each Mortgage Pool
and each Distribution Date, an amount equal to the sum of the following (but in
no event greater than the aggregate Class Certificate Balances of the
Subordinated Certificates immediately prior to such Distribution Date):

          (1) the related Subordinated Percentage of all Scheduled Payments of
     principal (or, in the case of Pool II, the applicable Non-PO Percentage
     thereof) due on each outstanding Mortgage Loan in the related Mortgage Pool
     on the first day of the month in which the Distribution Date occurs, as
     specified in the amortization schedule at the time applicable thereto,
     after adjustment for previous principal prepayments and the principal
     portion of Debt Service Reductions after the Bankruptcy Loss Coverage
     Amount has been reduced to zero, but before any adjustment to such
     amortization schedule by reason of any other bankruptcy or similar
     proceeding or any moratorium or similar waiver or grace period;

          (2) the related Subordinated Prepayment Percentage of the Stated
     Principal Balance of each Mortgage Loan in the related Mortgage Pool (or,
     in the case of Pool II, the applicable Non-PO Percentage thereof) which was
     the subject of a prepayment in full received by the Master Servicer during
     the related Prepayment Period;

          (3) the related Subordinated Prepayment Percentage of all partial
     prepayments of principal received in respect of each Mortgage Loan in the
     related Mortgage Pool (or, in the case of Pool II, the applicable Non-PO
     Percentage thereof) during the related Prepayment Period, plus, on the
     Senior Final Distribution Date, 100% of any related Senior Optimal
     Principal Amount remaining undistributed on such date;

          (4) the amount, if any, by which the sum of (a) the net Liquidation
     Proceeds allocable to principal received during the related Prepayment
     Period in respect of each Liquidated Mortgage Loan in the related Mortgage
     Pool (or, in the case of Pool II, the applicable Non-PO Percentage
     thereof), other than Mortgage Loans described in clause (b), and (b) the
     principal balance of each Mortgage Loan in the related Mortgage Pool (or,
     in the case of Pool II, the applicable Non-PO Percentage thereof) that was
     purchased by a private mortgage insurer during the related Prepayment
     Period as an alternative to paying a claim under the related Insurance
     Policy exceeds (c) the sum of the amounts distributable to the Senior
     Certificateholders (other than the Holders of the Class II-A-PO
     Certificates) under clause (4) of the definition of applicable Senior
     Optimal Principal Amount on such Distribution Date; and

          (5) the related Subordinated Prepayment Percentage of the sum of (a)
     the Stated Principal Balance of each Mortgage Loan in the related Mortgage
     Pool (or, in the case of Pool II, the applicable Non-PO Percentage thereof)
     which was repurchased by the seller in connection with such Distribution
     Date and (b) the difference, if any, between the Stated Principal Balance
     of each Mortgage Loan in the related Mortgage Pool that has been replaced

                                      -34-

<PAGE>

     by the seller with a Substitute Mortgage Loan pursuant to the Agreement in
     connection with such Distribution Date and the Stated Principal Balance of
     each such Substitute Mortgage Loan.

     Subordinated Percentage: For any Distribution Date and each Certificate
Group, 100% minus the related Senior Percentage.

         Subordinated Prepayment Percentage: For any Distribution Date, 100%
     minus the Senior Prepayment Percentage, except that on any Senior Final
Distribution Date, the related Subordinated Prepayment Percentage will equal
100%.

     Subservicer: Any person to whom the Master Servicer has contracted for the
servicing of all or a portion of the Mortgage Loans pursuant to Section 3.2
hereof.

     Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution, as confirmed
in a Request for Release, substantially in the form of Exhibit L, (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) have an Adjusted Net Mortgage Rate not lower than the applicable
Required Coupon, provided that the Master Servicing Fee for the Substitute
Mortgage Loan shall be equal to or greater than that of the Deleted Mortgage
Loan; (iii) be accruing interest at a rate no lower than and not more than 1%
per annum higher than, that of the Deleted Mortgage Loan; (iv) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (v) have a
remaining term to maturity no greater than (and not more than one year less than
that of) the Deleted Mortgage Loan; (vi) not be a Cooperative Loan unless the
Deleted Mortgage Loan was a Cooperative Loan and (vii) comply with each
representation and warranty set forth in Section 2.3 hereof.

     Substitution Adjustment Amount: The meaning ascribed to such term pursuant
to Section 2.3.

     Support Classes: As specified in the Preliminary Statement.

     Targeted Balances: Not applicable.

     Targeted Principal Classes: Not applicable.

     Tax Matters Person: The person designated as "tax matters person" in the
manner provided under Treasury regulation (S) 1.860F-4(d) and Treasury
regulation (S) 301.6231(a)(7)-1. Initially, the Tax Matters Person shall be the
Trustee.

     Tax Matters Person Certificate: The Class II-A-RU and Class II-A-RL
Certificate, each with a Denomination of $0.01.

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

                                      -35-

<PAGE>

     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 Cut-off Date to the extent not applied in computing the
Cut-off Date Principal Balance thereof; (ii) the Certificate Account and the
Distribution 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; and (iv) all proceeds of the conversion, voluntary or involuntary, of
any of the foregoing; provided that the Trust Fund shall exclude the Retained
Yield.

     Trustee: The Bank of New York and its successors and, if a successor
trustee is appointed hereunder, such successor.

     Trustee Fee: As to any Distribution Date and a Mortgage Pool, an amount
equal to one-twelfth of the Trustee Fee Rate multiplied by the applicable Pool
Principal Balance with respect to such Distribution Date.

     Trustee Fee Rate: With respect to each Mortgage Loan, the per annum rate
agreed upon in writing on or prior to the Closing Date by the Trustee and the
Depositor.

     Unanticipated Recovery: As defined in Section 4.2(f).

     Undercollateralized Distribution: As defined in Section 4.2(g).

     Undercollateralized Group: With respect to any Distribution Date, the
Senior Certificates of any Certificate Group as to which the aggregate
Certificate Principal Balance thereof, after giving effect to distributions
pursuant to Section 4.2(a) on such date, is greater than the Pool Principal
Balance of the related Mortgage Pool for such Distribution Date.

     Underwriter: As specified in the Preliminary Statement.

     Upper REMIC: The segregated pool of assets consisting of the Lower REMIC
Interests.

     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) 98%
of all Voting Rights will be allocated among all Holders of the Certificates,
other than the Class II-A-RU and Class II-A-RL Certificates, in proportion to
their then outstanding Class Certificate Balances; (b) 1% of all Voting Rights
shall be allocated among the Holders of the Class II-A-5 Certificates in
proportion to their then outstanding Notional Amounts; and (c) 0.50% of all
Voting Rights will be allocated among the Holders of each of the Class II-A-RU
and Class II-A-RL Certificates, in each case in proportion to their respective
outstanding Class Certificate Balances.

                                   ARTICLE II
                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

     SECTION 2.1 Conveyance of Mortgage Loans.

                                      -36-

<PAGE>

     (a) The Seller, concurrently with the execution and delivery hereof, hereby
sells, transfers, assigns, sets over and otherwise conveys to the Depositor,
without recourse, all the right, title and interest of the Seller in and to the
Mortgage Loans, including all interest and principal received or receivable by
the Seller on or with respect to the Mortgage Loans after the Cut-off Date and
all interest and principal payments on the Mortgage Loans received on or prior
to the Cut-off Date in respect of installments of interest and principal due
thereafter, but not including payments of principal and interest due and payable
on the Mortgage Loans on or before the Cut-off Date or amounts attributable to
Retained Yield. On or prior to the Closing Date, the Seller shall deliver to the
Depositor or, at the Depositor's direction, to the Trustee or the Custodian, the
Mortgage File for each Mortgage Loan listed in the Mortgage Loan Schedule
(except that, in the case of the Delay Delivery Mortgage Loans, such delivery
may take place within thirty (30) days following the Closing Date). Such
delivery of the Mortgage Files shall be made against payment by the Depositor of
the purchase price, previously agreed to by the Seller and the Depositor, for
the Mortgage Loans. With respect to any Mortgage Loan that does not have a first
payment date on or before the Due Date in the month of the first Distribution
Date, the Seller shall deposit into the Distribution Account on or before the
Distribution Account Deposit Date relating to the first Distribution Date, an
amount equal to one month's interest at the related Adjusted Mortgage Rate on
the Cut-off Date Principal Balance of such Mortgage Loan.

     (b) 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 together with the
Depositor's right to require the Seller to cure any breach of a representation
or warranty made herein by the Seller or to repurchase or substitute for any
affected Mortgage Loan in accordance herewith.

     (c) In connection with the transfer and assignment set forth in clause (b)
above, the Depositor has delivered or caused to be delivered to the Trustee or
the Custodian on its behalf (or, in the case of the Delay Delivery Mortgage
Loans, will deliver or cause to be delivered to the Trustee or the Custodian on
its behalf within thirty (30) days following the Closing Date) for the benefit
of the Certificateholders the following documents or instruments with respect to
each Mortgage Loan so assigned:

         (1)  (A)  the original Mortgage Note endorsed by manual or facsimile
     signature in blank in the following form: "Pay to the order of
     ________________, without recourse," with all intervening endorsements
     showing a complete chain of endorsement from the originator to the Person
     endorsing the Mortgage Note (each such endorsement being 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

               (B)  with respect to any Lost Mortgage Note, a lost note
     affidavit from the Seller stating that the original Mortgage Note was lost
     or destroyed, together with a copy of such Mortgage Note;

         (ii) except as provided below, the original recorded Mortgage or a copy
     of such Mortgage certified by the Seller as being a true and complete copy
     of the Mortgage;

                                      -37-

<PAGE>

          (iii) a duly executed assignment of the Mortgage in blank (which may
     be included in a blanket assignment or assignments), together with, except
     as provided below, all interim recorded assignments of such mortgage (each
     such assignment, when duly and validly completed, to be in recordable form
     and sufficient to effect the assignment of and transfer to the assignee
     thereof, under the Mortgage to which the assignment relates); provided
     that, if the related Mortgage has not been returned from the applicable
     public recording office, such assignment of the Mortgage may exclude the
     information to be provided by the recording office;

          (iv)  the original or copies of each assumption, modification, written
     assurance or substitution agreement, if any;

          (v)   either the original or duplicate original title policy
     (including all riders thereto) with respect to the related mortgaged
     property, if available, provided that the title policy (including all
     riders thereto) will be delivered as soon as it becomes available, and if
     the title policy is not available, and to the extent required pursuant to
     the second paragraph below or otherwise in connection with the rating of
     the Certificates, a written commitment or interim binder or preliminary
     report of the title issued by the title insurance or escrow company with
     respect to the mortgaged property, and

          (vi)  in the case of a Cooperative Loan, the originals of the
     following documents or instruments:

          (a)  The Coop Shares, together with a stock power in blank;

          (b)  The executed Security Agreement;

          (c)  The executed Proprietary Lease;

          (d)  The executed Recognition Agreement;

          (e)  The executed UCC-1 financing statement with evidence of recording
               thereon which have been filed in all places required to perfect
               the Seller's interest in the Coop Shares and the Proprietary
               Lease; and

          (f)  Executed UCC-3 financing statements or other appropriate UCC
               financing statements required by state law, evidencing a complete
               and unbroken line from the mortgagee to the Trustee with evidence
               of recording thereon (or in a form suitable for recordation).

     In the event that in connection with any Mortgage Loan the Depositor cannot
deliver (a) the original recorded Mortgage or (b) all interim recorded
assignments satisfying the requirements of clause (ii) or (iii) above,
respectively, concurrently with the execution and delivery hereof because such
document or documents have not been returned from the applicable public
recording office, the Depositor shall promptly deliver to the Trustee or the
Custodian on its behalf such original Mortgage or such interim assignment, as
the case may be, with evidence of recording indicated thereon upon receipt
thereof from the public recording office, or a copy thereof, certified, if
appropriate, by the

                                      -38-

<PAGE>

relevant recording office, but in no event shall any such delivery of the
original Mortgage and each such interim assignment or a copy thereof, certified,
if appropriate, by the relevant recording office, be made later than one year
following the Closing Date; provided, however, in the event the Depositor is
unable to deliver by such date each Mortgage and each such interim assignment by
reason of the fact that any such documents have not been returned by the
appropriate recording office, or, in the case of each such interim assignment,
because the related Mortgage has not been returned by the appropriate recording
office, the Depositor shall deliver such documents to the Trustee or the
Custodian on its behalf as promptly as possible upon receipt thereof and, in any
event, within 720 days following the Closing Date. The Depositor shall forward
or cause to be forwarded to the Trustee or the Custodian on its behalf (a) from
time to time additional original documents evidencing an assumption or
modification of a Mortgage Loan and (b) any other documents required to be
delivered by the Depositor or the Master Servicer to the Trustee. In the event
that the original Mortgage is not delivered and in connection with the payment
in full of the related Mortgage Loan and the public recording office requires
the presentation of a "lost instruments affidavit and indemnity" or any
equivalent document, because only a copy of the Mortgage can be delivered with
the instrument of satisfaction or reconveyance, the Master Servicer shall
execute and deliver or cause to be executed and delivered such a document to the
public recording office. In the case 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, the Seller shall deliver to the
Trustee a copy of such Mortgage certified by such public recording office to be
a true and complete copy of the original recorded Mortgage.

         In addition, in the event that in connection with any Mortgage Loan the
Depositor cannot deliver the original or duplicate original lender's title
policy (together with all riders thereto), satisfying the requirements of clause
(v) above, concurrently with the execution and delivery hereof because the
related Mortgage has not been returned from the applicable public recording
office, the Depositor shall promptly deliver to the Trustee or the Custodian on
its behalf such original or duplicate original lender's title policy (together
with all riders thereto) upon receipt thereof from the applicable title insurer,
but in no event shall any such delivery of the original or duplicate original
lender's title policy be made later than one year following the Closing Date;
provided, however, in the event the Depositor is unable to deliver by such date
the original or duplicate original lender's title policy (together with all
riders thereto) because the related Mortgage has not been returned by the
appropriate recording office, the Depositor shall deliver such documents to the
Trustee or the Custodian on its behalf as promptly as possible upon receipt
thereof and, in any event, within 720 days following the Closing Date.
Notwithstanding the preceding, in connection with any Mortgage
Loan for which either the original or duplicate original title policy
has not been delivered to the Trust, if at any time during the term of this
Agreement the parent company of the Seller does not have a long term senior debt
rating of A- or higher from S&P and A- or higher from Fitch (if rated by Fitch),
then the Depositor shall within 30 days deliver to the Trustee or the Custodian
on its behalf (if it has not previously done so) a written commitment or interim
binder or preliminary report of the title issued by the title insurance or
escrow company with respect to the mortgaged property.

         Subject to the immediately following sentence, as promptly as
practicable subsequent to such transfer and assignment, and in any event, within
thirty (30) days thereafter, the Master Servicer shall (i) complete each
assignment of Mortgage, as follows: "First Horizon Mortgage Pass-Through
Certificates, Series 2002-2, The Bank of New York, as trustee for the holders of
the Certificates", (ii) cause such assignment to be in proper form for recording
in the appropriate public office for real

                                      -39-

<PAGE>

property records and (iii) cause to be delivered for recording in the
appropriate public office for real property records the assignments of the
Mortgages to the Trustee, except that, with respect to any assignments of
Mortgage as to which the Master Servicer has not received the information
required to prepare such assignment in recordable form, the Master Servicer's
obligation to do so and to deliver the same for such recording shall be as soon
as practicable after receipt of such information and in any event within thirty
(30) days after receipt thereof. Notwithstanding the foregoing, the Master
Servicer need not cause to be recorded any assignment which relates to a
Mortgage Loan in any state other than the Required Recordation States.

         In the case of Mortgage Loans that have been prepaid in full as of the
Closing Date, the Depositor, in lieu of delivering the above documents to the
Trustee or the Custodian on its behalf, will deposit in the Certificate Account
the portion of such payment that is required to be deposited in the Certificate
Account pursuant to Section 3.8 hereof.

         Notwithstanding anything to the contrary in this Agreement, within
thirty days after the Closing Date, the Seller shall either (i) deliver to the
Trustee or the Custodian on its behalf the Mortgage File as required pursuant to
this Section 2.1 for each Delay Delivery Mortgage Loan or (ii) (A) substitute a
Substitute Mortgage Loan for the Delay Delivery Mortgage Loan or (B) repurchase
the Delay Delivery Mortgage Loan, which substitution or repurchase shall be
accomplished in the manner and subject to the conditions set forth in Section
2.3 (treating each Delay Delivery Mortgage Loan as a Deleted Mortgage Loan for
purposes of such Section 2.3), provided, however, that if the Seller fails to
deliver a Mortgage File for any Delay Delivery Mortgage Loan within the
thirty-day period provided in the prior sentence, the Seller shall use its best
reasonable efforts to effect a substitution, rather than a repurchase of, such
Deleted Mortgage Loan and provided further that the cure period provided for in
Section 2.2 or in Section 2.3 shall not apply to the initial delivery of the
Mortgage File for such Delay Delivery Mortgage Loan, but rather the Seller shall
have five (5) Business Days to cure such failure to deliver. At the end of such
thirty-day period, the Trustee or the Custodian, on behalf of the Trustee shall
send a Delay Delivery Certification for the Delay Delivery Mortgage Loans
delivered during such thirty-day period in accordance with the provisions of
Section 2.2. Notwithstanding anything to the contrary contained in this
Agreement, none of the Mortgage Loans in the Trust Fund is or will be Delay
Delivery Mortgage Loans.

         SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.

         The Trustee or the Custodian, on behalf of the Trustee acknowledges
receipt of the documents identified in the Initial Certification in the form
annexed hereto as Exhibit E and declares
that it or the Custodian holds and will hold such documents and the
other documents delivered to it constituting the Mortgage Files, and that it or
the Custodian 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. The Trustee acknowledges that the Custodian will maintain
possession of the Mortgage Notes in the State of Illinois, unless otherwise
permitted by the Rating Agencies.

         The Trustee agrees to execute and deliver or to cause the Custodian to
execute and deliver on the Closing Date to the Depositor, the Master Servicer
and the Seller an Initial Certification in the form annexed hereto as Exhibit E.
Based on its or the Custodian's review and examination, and only as to the
documents identified in such Initial Certification, the Custodian, on behalf of
the Trustee acknowledges that such documents appear regular on their face and
relate to such Mortgage Loan.

                                      -40-

<PAGE>

Neither the Trustee nor the Custodian shall be under any duty or obligation to
inspect, review or examine said documents, instruments, certificates or other
papers to determine that the same are genuine, enforceable or appropriate for
the represented purpose or that they have actually been recorded in the real
estate records or that they are other than what they purport to be on their
face.

         On or about the thirtieth (30th) day after the Closing Date, the
Trustee shall deliver or shall cause the Custodian to deliver to the Depositor,
the Master Servicer and the Seller a Delay Delivery Certification in the form
annexed hereto as Exhibit F, with any applicable exceptions noted thereon.
Notwithstanding anything to the contrary contained in this Agreement, none of
the Mortgage Loans in the Trust Fund is or will be Delay Delivery Mortgage
Loans.

         Not later than 90 days after the Closing Date, the Trustee shall
deliver or shall cause the Custodian to deliver to the Depositor, the Master
Servicer and the Seller a Final Certification in the form annexed hereto as
Exhibit G, with any applicable exceptions noted thereon.

         If, in the course of such review, the Trustee or the Custodian, on
behalf of the Trustee finds any document constituting a part of a Mortgage File
which does not meet the requirements of Section 2.1, the Trustee shall list or
shall cause the Custodian to list such as an exception in the Final
Certification; provided, however that neither the Trustee nor the Custodian
shall make any determination 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 is sufficient to effect the assignment of and transfer to the
assignee thereof under the mortgage to which the assignment relates. The Seller
shall promptly correct or cure such defect within 90 days from the date it was
so notified of such defect and, if the Seller does not correct or cure such
defect within such period, the Seller shall either (a) substitute for the
related Mortgage Loan a Substitute Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.3, or (b) purchase such Mortgage Loan from the Trustee within 90 days from the
date the Seller was notified of such defect in writing at the Purchase Price of
such Mortgage Loan; provided, however, that in no event shall such substitution
or purchase occur more than 540 days from the Closing Date, except that if the
substitution or purchase of a Mortgage Loan pursuant to this provision is
required by reason of a delay in delivery of any documents by the appropriate
recording office, and there is a dispute between either the Master Servicer or
the Seller and the Trustee over the location or status of the recorded document,
then such substitution or purchase shall occur within 720 days from the Closing
Date. The Trustee shall deliver written notice to each Rating Agency within 270
days from the Closing Date indicating each Mortgage Loan (a) which has not been
returned by the appropriate recording office or (b) as to which there is a
dispute as to location or status of such Mortgage Loan. Such notice shall be
delivered every 90 days thereafter until the related Mortgage Loan is returned
to the Trustee or the Custodian on its behalf. Any such substitution pursuant to
(a) above or purchase pursuant to (b) above shall not be effected prior to the
delivery to the Trustee of the Opinion of Counsel required by Section 2.5
hereof, if any, and any substitution pursuant to (a) above shall not be effected
prior to the additional delivery to the Trustee of a Request for Release
substantially in the form of Exhibit L. No substitution is permitted to be made
in any calendar month after the Determination Date for such month. The Purchase
Price for any such Mortgage Loan shall be deposited by the Seller in the
Certificate Account on or prior to the Distribution Account Deposit Date for the
Distribution Date in the month following the month of repurchase and, upon
receipt of such deposit and certification with respect thereto in the form of
Exhibit M hereto, the Trustee shall cause the Custodian to release

                                      -41-

<PAGE>

the related Mortgage File to the Seller and shall execute and deliver at the
Seller's request such instruments of transfer or assignment prepared by the
Seller, in each case without recourse, as shall be necessary to vest in the
Seller, or a designee, the Trustee's interest in any Mortgage Loan released
pursuant hereto.

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

         It is understood and agreed that the obligation of the Seller to
substitute for or to purchase any Mortgage Loan which does not meet the
requirements of Section 2.1 above shall constitute the sole remedy respecting
such defect available to the Trustee, the Depositor and any Certificateholder
against the Seller.

         SECTION 2.3 Representations, Warranties and Covenants of the Seller and
Master Servicer.

         (a) First Horizon Home Loan Corporation, in its capacities as Seller
and Master Servicer, hereby makes the representations and warranties set forth
in Schedule II hereto, respectively, and by this reference incorporated herein,
to the Depositor and the Trustee, as of the Closing Date, or if so specified
therein, as of the Cut-off Date.

         (b) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to the Depositor and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.

         (c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2.3(b) that materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
the party discovering such breach shall give prompt notice thereof to the other
parties. The Seller hereby covenants that within 90 days of the earlier of its
discovery or its receipt of written notice from any party of a breach of any
representation or warranty made pursuant to Section 2.3(b) which materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
it shall cure such breach in all material respects, and if such breach is not so
cured, shall, (i) if such 90-day period expires prior to the second anniversary
of the Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from
the Trust Fund and substitute in its place a Substitute Mortgage Loan, in the
manner and subject to the conditions set (3) forth in this Section; or (ii)
repurchase the affected Mortgage Loan or Mortgage Loans from the Trustee at the
Purchase Price in the manner set forth below; 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 2.5 hereof, if any,
and any such substitution pursuant to (i) above shall not be effected prior to
the additional delivery to the Trustee or the Custodian on its behalf of a
Request for Release substantially in the form of Exhibit M and the Mortgage File
for any such Substitute Mortgage Loan. The Seller shall promptly reimburse the
Master Servicer and the Trustee for any expenses reasonably incurred by the
Master Servicer or the Trustee in respect of enforcing the remedies for such
breach. With respect to the representations and warranties described in this
Section which are made to the best of the Seller's knowledge, if it is
discovered by either the

                                      -42-

<PAGE>

Depositor, the Seller or the Trustee that the substance of such representation
and warranty is inaccurate and such inaccuracy materially and adversely affects
the value of the related Mortgage Loan or the interests of the
Certificateholders therein, notwithstanding the Seller's lack of knowledge with
respect to the substance of such representation or warranty, such inaccuracy
shall be deemed a breach of the applicable representation or warranty.

         With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee or the Custodian on its behalf 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
2.1, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.1. 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 month of substitution shall not be part of the
Trust Fund and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Certificateholders will include the monthly payment due on any Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Master Servicer
shall amend the Mortgage Loan Schedule for the benefit of the Certificateholders
to reflect the removal of such Deleted Mortgage Loan and the substitution of the
Substitute Mortgage Loan or Loans and the Master 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 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 Section 2.3(b)
with respect to such Mortgage Loan. Upon any such substitution and the deposit
to the Certificate Account of the amount required to be deposited therein in
connection with such substitution as described in the following paragraph, the
Trustee shall release or shall cause the Custodian to release the Mortgage File
held for the benefit of the Certificateholders relating to such Deleted Mortgage
Loan to the Seller and shall execute and deliver at the Seller's direction such
instruments of transfer or assignment prepared by the Seller, in each case
without recourse, as shall be necessary to vest title in the Seller, or its
designee, the Trustee's interest in any Deleted Mortgage Loan substituted for
pursuant to this Section 2.3.

         For any month in which the Seller substitutes one or more Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master 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 monthly payments due in
the month of substitution). The amount of such shortage (the "Substitution
Adjustment Amount") plus an amount equal to the aggregate of any unreimbursed
Advances with respect to such Deleted Mortgage Loans shall be deposited in the
Certificate Account by the Seller on or before the Distribution Account Deposit
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.

         In the event that the Seller shall have repurchased a Mortgage Loan,
the Purchase Price therefor shall be deposited in the Certificate Account
pursuant to Section 3.5 on or before the Distribution Account Deposit Date for
the Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price, the delivery of the Opinion of Counsel
required by Section 2.5

                                      -43-

<PAGE>

and receipt of a Request for Release in the form of Exhibit M hereto, the
Trustee shall release or shall cause the Custodian to release the related
Mortgage File held for the benefit of the Certificateholders to such Person, and
the Trustee shall execute and deliver or shall cause the Custodian to 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 the Seller to cure, repurchase or replace
any Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy against the Seller respecting such breach available
to Certificateholders, the Depositor or the Trustee on their behalf.

         The representations and warranties made pursuant to this Section 2.3
shall survive delivery of the respective Mortgage Files to the Trustee or the
Custodian for the benefit of the Certificateholders.

         SECTION 2.4 Representations and Warranties of the Depositor as to the
Mortgage Loans.

         The Depositor hereby represents and warrants to the Trustee with
respect to each Mortgage Loan as of the date hereof or such other date set forth
herein that as of the Closing Date, and following the transfer of the Mortgage
Loans to it by the 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 Mortgage Loans including, without limitation,
the representations and warranties of the Seller made pursuant to Section 2.3(b)
hereof, together with all rights of the Depositor to require the Seller to cure
any breach thereof or to repurchase or substitute for any affected Mortgage Loan
in accordance with this Agreement.

         It is understood and agreed that the representations and warranties set
forth in this Section 2.4 shall survive delivery of the Mortgage Files to the
Trustee. Upon discovery by the Depositor or the Trustee of a breach of any of
the foregoing representations and warranties set forth in this Section 2.4
(referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders, the party discovering such
breach shall give prompt written notice to the others and to each Rating Agency.

         SECTION 2.5 Delivery of Opinion of Counsel in Connection with
Substitutions.

         (a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.2 or Section 2.3 shall be made more than 90
days after the Closing Date unless the Seller delivers to the Trustee an Opinion
of Counsel, which Opinion of Counsel shall not be at the expense (1) of either
the Trustee or the Trust Fund, 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 Date, as
defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively, or (ii)
cause the REMIC created hereunder to fail to qualify as a REMIC at any time that
any Certificates are outstanding.

         (b) Upon discovery by the Depositor, the Seller, the Master Servicer or
the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section

                                      -44-

<PAGE>

860G(a)(3) of the Code, the party discovering such fact
shall promptly (and in any event within five (5) Business Days of discovery)
give written notice thereof to the other parties. In connection therewith, the
Trustee shall require the Seller, at the Seller's option, to either (i)
substitute, if the conditions in Section 2.3(c) with respect to substitutions
are satisfied, a Substitute Mortgage Loan for the affected Mortgage Loan, or
(ii) repurchase the affected Mortgage Loan within 90 days of such discovery in
the same manner as it would a Mortgage Loan for a breach of representation or
warranty made pursuant to Section 2.3. The Trustee shall reconvey or shall cause
the Custodian to reconvey to the Seller the Mortgage Loan to be released
pursuant hereto in the same manner, and on the same terms and conditions, as it
would a Mortgage Loan repurchased for breach of a representation or warranty
contained in Section 2.3.

         SECTION 2.6 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 to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.

         SECTION 2.7 REMIC Matters.

         The Preliminary Statement sets forth the designations and "latest
possible maturity date" for federal income tax purposes of all interests created
hereby in the Upper REMIC. Each interest identified in the table below by a
designation beginning with "L" shall be a "regular interest" in the Lower REMIC
and the Class II-A-RL Certificates shall be the sole class of residual interest
in the Lower REMIC. The Lower REMIC Interests shall be uncertificated and shall
be held by the Trustee as assets of the Upper REMIC. The assets of the Lower
REMIC shall be as set forth in the definition thereof. The assets of the Upper
REMIC shall be as set forth in the definition thereof. The "Startup Day" for
purposes of the REMIC Provisions shall be the Closing Date. The Tax Matters
Person with respect to each REMIC hereunder shall be the Trustee and the Trustee
shall hold the Tax Matters Person Certificate. Each REMIC's taxable year shall
be the calendar year and its accounts shall be maintained using the accrual
method.

                                      -45-

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
   Lower REMIC                           Lower REMIC                                            Latest Possible
   Interest or           Lower REMIC       Interest                                         Maturity Date (Payment
   Certificate         Interest Balance      Rate      Corresponding Class of Certificates         Date in)
                                                       ------------------------------------
                                                            Interest          Principal
--------------------------------------------------------------------------------------------------------------------
<S>                 <C>                  <C>           <C>                 <C>              <C>
      LTI-A-1         $    47,028,00.00     6.000%           I-A-1              I-A-1           April 25, 2020
--------------------------------------------------------------------------------------------------------------------
      LTI-A-2         $   74,844,000.00     6.000%           I-A-2              I-A-2           April 25, 2020
--------------------------------------------------------------------------------------------------------------------
     LTII-A-3         $    1,000,000.00     6.000%           I-A-3              I-A-3           April 25, 2020
--------------------------------------------------------------------------------------------------------------------
     LTII-A-1         $  206,969,000.00     6.500%           II-A-1            II-A-1            May 25, 2035
--------------------------------------------------------------------------------------------------------------------
     LTII-A-2         $   12,671,000.00     6.500%           II-A-2            II-A-2            May 25, 2035
--------------------------------------------------------------------------------------------------------------------
     LTII-A-3         $   24,405,000.00     6.500%           II-A-3            II-A-3            May 25, 2035
--------------------------------------------------------------------------------------------------------------------
     LTII-A-4         $   16,533,000.00     8.500%         II-A-4/(1)/,        II-A-4            May 25, 2035
                                                         II-A-5/(2),(3)/
--------------------------------------------------------------------------------------------------------------------
     LTII-A-6         $   11,125,000.00     6.500%           II-A-6            II-A-6            May 25, 2035
--------------------------------------------------------------------------------------------------------------------
     LTII-A-7         $   21,278,000.00     6.500%           II-A-7            II-A-7            May 25, 2035
--------------------------------------------------------------------------------------------------------------------
     LTII-A-8         $   10,273,000.00     6.500%           II-A-8            II-A-8            May 25, 2035
--------------------------------------------------------------------------------------------------------------------
     LTII-A-9         $    8,449,000.00     6.500%           II-A-9            II-A-9            May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-10         $   10,639,000.00     6.500%          II-A-10            II-A-10           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-11         $    2,568,000.00     6.500%          II-A-11            II-A-11           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-12         $    2,568,000.00     6.500%          II-A-12            II-A-12           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-13         $    1,725,000.00     6.500%          II-A-13            II-A-13           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-14         $    2,500,000.00     6.500%          II-A-14            II-A-14           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-15         $   25,811,000.00     5.500%          II-A-15            II-A-15           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-16         $   29,016,000.00     6.250%          II-A-16            II-A-16           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-17         $   19,590,000.00     6.500%          II-A-17            II-A-17           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-18         $    1,000,000.00     6.500%          II-A-18            II-A-18           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-PO         $    1,302,362.57     /(4)/             N/A              II-A-PO           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
    LTII-A-RU         $           50.00     6.500%          II-A-RU            II-A-RU           May 25, 2035
--------------------------------------------------------------------------------------------------------------------
  Class II-A-RL       $           50.00     6.500%            N/A                N/A                  N/A
--------------------------------------------------------------------------------------------------------------------
      LTB-1           $    6,822,000.00     /(5)/             B-1                B-1             May 25, 2035
--------------------------------------------------------------------------------------------------------------------
      LTB-2           $    3,002,000.00     /(5)/             B-2                B-2             May 25, 2035
--------------------------------------------------------------------------------------------------------------------
      LTB-3           $    1,910,000.00     /(5)/             B-3                B-3             May 25, 2035
--------------------------------------------------------------------------------------------------------------------
      LTB-4           $      819,000.00     /(5)/             B-4                B-4             May 25, 2035
--------------------------------------------------------------------------------------------------------------------
      LTB-5           $    1,091,000.00     /(5)/             B-5                B-5             May 25, 2035
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -46-

<PAGE>

<TABLE>
<S>                       <C>                <C>             <C>                <C>              <C>
--------------------------------------------------------------------------------------------------------------------
      LTB-6               $  819,462.09      /(5)/            B-6                B-6             May 25, 2035
--------------------------------------------------------------------------------------------------------------------
</TABLE>

____________________

(1)      The Pass-Through Rate with respect to any Distribution Date (and the
         related Interest Accrual Period) for the Class II-A-4 Certificates is
         the per annum rate equal to (a) 2.14% with respect to the first
         Distribution Date, and (b) thereafter, the lesser of (i) LIBOR plus
         0.40% and (ii) 8.50%, subject to a minimum rate of 0.40%.

(2)      The Notional Amount with respect to any Distribution Date (and the
         related Interest Accrual Period) of the Class II-A-5 Certificates will
         equal the Class Certificate Balance of the Class II-A-4 Certificates
         immediately preceding such Distribution Date.

(3)      The Pass-Through Rate with respect to any Distribution Date (and the
         related Interest Accrual Period) for the Class II-A-5 Certificates is
         the per annum rate equal to (a) 6.36% with respect to the first
         Distribution Date, and (b) thereafter, 8.10% minus LIBOR, subject to a
         minimum rate of 0.00%.

(4)      The Class II-A-PO Certificates are principal only certificates and will
         not accrue interest.

(5)      The Pass-Through Rate on each Class of Subordinated Certificates is
         variable and will be equal to the weighted average of the Designated
         Mortgage Pool Rates, weighted on the basis of the Group Subordinate
         Amount for each Mortgage Pool.

____________________

         On each Distribution Date Available Funds shall be distributed with
respect to the Lower REMIC Interests and the Class II-A-RL Certificate in a
manner such that:

         (i)      interest accrued on each Lower REMIC Interest is distributed
                  with respect to each such Lower REMIC Interest in the same
                  manner that Accrued Certificate Interest is distributed with
                  respect to the Corresponding Class or Classes of Certificates
                  pursuant to Section 4.2(a)(i) and (ii);

         (ii)     interest accrued on the Class II-A-RU and Class II-A-RL
                  Certificates is distributed in the manner provided in Section
                  4.2(a)(i) and (ii);

         (iii)    principal is distributed on each Lower REMIC Interest, such
                  that the principal balance of each such Lower REMIC Interest
                  always equals the principal balance of its Corresponding Class
                  of Certificates; and

         (iv)     principal is distributed on the Class II-AR-U and Class
                  II-A-RL Certificates as provided in Section 4.2(b)(ii)(1).

         Losses allocated to the Certificates pursuant to Section 4.4 shall be
allocated to the corresponding class of Lower REMIC Interest as set forth in the
above table.

         SECTION 2.8 Covenants of the Master Servicer.

         The Master Servicer hereby covenants to the Depositor and the Trustee
as follows:

                                      -47-

<PAGE>

     (a) the Master Servicer shall comply in the performance of its obligations
under this Agreement with all reasonable rules and requirements of the insurer
under each Required Insurance Policy; and

     (b) no written information, certificate of an officer, statement furnished
in writing or written report delivered to the Depositor, any affiliate of the
Depositor or the Trustee and prepared by the Master Servicer pursuant to this
Agreement will contain any untrue statement of a material fact or omit to state
a material fact necessary to make such information, certificate, statement or
report not misleading.

                                   ARTICLE III
                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         SECTION 3.1   Master Servicer to Service Mortgage Loans.

         For and on behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with the terms of this
Agreement and customary and usual standards of practice of prudent mortgage loan
servicers. In connection with such servicing and administration, the Master
Servicer shall have full power and authority, acting alone and/or through
Subservicers as provided in Section 3.2 hereof, to do or cause to be done any
and all things that it may deem necessary or desirable in connection with such
servicing and administration, including but not limited to, the power and
authority, subject to the terms hereof (i) to execute and deliver, on behalf of
the Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan; provided that the Master Servicer shall not take any action that
is inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders under this Agreement. The
Master Servicer shall represent and protect the interests of the Trust Fund in
the same manner as it protects its own interests in mortgage loans in its own
portfolio in any claim, proceeding or litigation regarding a Mortgage Loan, and
shall not make or permit any modification, waiver or amendment of any Mortgage
Loan which would cause the REMIC created hereunder to fail to qualify as a REMIC
or result in the imposition of any tax under Section 860F(a) or Section 860G(d)
of the Code. Without limiting the generality of the foregoing, the Master
Servicer, in its own name or in the name of the Depositor and the Trustee, is
hereby authorized and empowered by the Depositor and the Trustee, when the
Master Servicer believes it appropriate in its reasonable judgment, to execute
and deliver, on behalf of the Trustee, the Depositor, the Certificateholders or
any of them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable instruments, with
respect to the Mortgage Loans, and with respect to the Mortgaged Properties held
for the benefit of the Certificateholders. The Master Servicer shall prepare and
deliver to the Depositor and/or the Trustee such documents requiring execution
and delivery by either or both of them as are necessary or appropriate to enable
the Master Servicer to service and administer the Mortgage Loans to the extent
that the Master Servicer is not permitted to execute and deliver such

                                      -48-

<PAGE>

documents pursuant to the preceding sentence. Upon receipt of such documents,
the Depositor and/or the Trustee shall execute such documents and deliver them
to the Master Servicer.

         In accordance with the standards of the preceding paragraph, the Master
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.6, and further as
provided in Section 3.8. The costs incurred by the Master Servicer, if any, in
effecting the timely payments of taxes and assessments on the Mortgaged
Properties and related insurance premiums shall not, for the purpose of
calculating monthly distributions to the Certificateholders, be added to the
Stated Principal Balances of the related Mortgage Loans, notwithstanding that
the terms of such Mortgage Loans so permit.

         SECTION 3.2  Subservicing; Enforcement of the Obligations of Servicers.

         (a) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement; provided,
however, that such subservicing arrangement and the terms of the related
subservicing agreement must provide for the servicing of such Mortgage Loans in
a manner consistent with the servicing arrangements contemplated hereunder.
Unless the context otherwise requires, references in this Agreement to actions
taken or to be taken by the Master Servicer in servicing the Mortgage Loans
include actions taken or to be taken by a Subservicer on behalf of the Master
Servicer. Notwithstanding the provisions of any subservicing agreement, any of
the provisions of this Agreement relating to agreements or arrangements between
the Master Servicer and a Subservicer or reference to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and liable
to the Depositor, the Trustee and the Certificateholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement 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 Master Servicer alone were servicing and administering the Mortgage Loans.
All actions of each Subservicer performed pursuant to the related subservicing
agreement shall be performed as an agent of the Master Servicer with the same
force and effect as if performed directly by the Master Servicer.

         (b) For purposes of this Agreement, the Master Servicer shall be deemed
to have received any collections, recoveries or payments with respect to the
Mortgage Loans that are received by a Subservicer regardless of whether such
payments are remitted by the Subservicer to the Master Servicer.

         SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the
Master Servicer.

         The Depositor may, but is not obligated to, enforce the obligations of
the Master Servicer hereunder and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Master Servicer
hereunder and in connection with any such defaulted obligation to exercise the
related rights of the Master Servicer hereunder; provided that the Master
Servicer shall not be relieved of any of its obligations hereunder by virtue of
such performance by the Depositor or its designee. Neither the Trustee nor the
Depositor shall have any responsibility or liability for any

                                      -49-

<PAGE>

action or failure to act by the Master Servicer nor shall the Trustee or the
Depositor be obligated to supervise the performance of the Master Servicer
hereunder or otherwise.

         SECTION 3.4 Trustee to Act as Master Servicer.

         In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its successor shall thereupon
assume all of the rights and obligations of the Master Servicer
hereunder arising thereafter (except that the Trustee shall not be (i) liable
for losses of the Master Servicer pursuant to Section 3.9 hereof or any acts or
omissions of the predecessor Master 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 of Mortgage Loans pursuant to
Section 2.2 or 2.3 hereof, (iv) responsible for expenses of the Master Servicer
pursuant to Section 2.3 or (v) deemed to have made any representations and
warranties of the Master Servicer hereunder). Any such assumption shall be
subject to Section 7.2 hereof. If the Master Servicer shall for any reason no
longer be the Master Servicer (including by reason of any Event of Default), the
Trustee or its successor shall succeed to any rights and obligations of the
Master Servicer under each subservicing agreement.

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

         SECTION 3.5 Collection of Mortgage Loan Payments; Certificate Account;
Distribution Account.

         (a) The Master Servicer shall make reasonable efforts in accordance
with the customary and usual standards of practice of prudent mortgage servicers
to collect all payments called for under the terms and provisions of the
Mortgage Loans to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any related Required Insurance Policy.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any late payment charge or any prepayment charge or penalty interest in
connection with the prepayment of a Mortgage Loan and (ii) extend the due dates
for payments due on a Mortgage Note for a period not greater than 180 days;
provided, however, that the Master Servicer cannot extend the maturity of any
such Mortgage Loan past the date on which the final payment is due on the latest
maturing Mortgage Loan as of the Cut-off Date. In the event of any such
arrangement, the Master Servicer shall make Advances on the related Mortgage
Loan in accordance with the provisions of Section 4.1 during the scheduled
period in accordance with the amortization schedule of such Mortgage Loan
without modification thereof by reason of such arrangements. The Master Servicer
shall not be required to institute or join in litigation with respect to
collection of any payment (whether under a Mortgage, Mortgage Note or otherwise
or against any public or governmental authority with respect to a taking

                                      -50-

<PAGE>

or condemnation) if it reasonably believes that enforcing the provision of the
Mortgage or other instrument pursuant to which such payment is required is
prohibited by applicable law.

     (b) The Master Servicer shall establish and maintain the Certificate
Account. The Certificate Account shall consist of two separate subaccounts, each
of which shall relate to a particular Mortgage Pool. No later than two Business
Days after receipt, except as otherwise specifically provided herein, the Master
Servicer shall deposit or shall cause to be deposited into the applicable
subaccount of the Certificate Account the following payments and collections
remitted by Subservicers or received by it in respect of the Mortgage Loans in
the related Mortgage Pool subsequent to the Cut-off Date (other than in respect
of principal and interest due on such Mortgage Loans on or before the Cut-off
Date) and the following amounts required to be deposited hereunder:

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

         (ii)   all payments on account of interest on the Mortgage Loans in the
     related Mortgage Pool, net of the related Master Servicing Fee, any
     Prepayment Interest Excess and, for so long as First Horizon is the Master
     Servicer, any Retained Yield;

         (iii)  all Insurance Proceeds and Liquidation Proceeds in respect of
     the related Mortgage Loans in the related Mortgage Pool, other than
     proceeds to be applied to the restoration or repair of the Mortgaged
     Property or released to the Mortgagor in accordance with the Master
     Servicer's normal servicing procedures;

         (iv)   any amount required to be deposited by the Master Servicer in
     respect of the related Mortgage Pool pursuant to Section 3.5(c) in
     connection with any losses on Permitted Investments;

         (v)    any amounts required to be deposited by the Master Servicer in
     respect of the related Mortgage Pool pursuant to Section 3.9(b), 3.9(d),
     and in respect of net monthly rental income from any related REO Property
     pursuant to Section 3.11 hereof;

         (vi)   all Substitution Adjustment Amounts in respect of the related
     Mortgage Pool;

         (vii)  all Advances in respect of the related Mortgage Pool made by the
     Master Servicer pursuant to Section 4.1; and

         (viii) any other amounts required to be deposited hereunder in respect
     of the related Mortgage Pool.

     In addition, with respect to any Mortgage Loan that is subject to a buydown
agreement, on each Due Date for such Mortgage Loan, in addition to the monthly
payment remitted by the Mortgagor, the Master Servicer shall cause funds to be
deposited into the applicable subaccount of the Certificate Account in an amount
required to cause an amount of interest to be paid with respect to such Mortgage
Loan equal to the amount of interest that has accrued on such Mortgage Loan from
the preceding Due Date at the related Adjusted Mortgage Rate on such date.

                                      -51-

<PAGE>

         The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges, assumption fees or amounts attributable to reimbursements
of Advances, if collected, need not be remitted by the Master Servicer. In the
event that the Master Servicer shall remit any amount not required to be
remitted, it may at any time withdraw or direct the institution maintaining the
Certificate Account to withdraw such amount from the Certificate Account, any
provision herein to the contrary notwithstanding. Such withdrawal or direction
may be accomplished by delivering written notice thereof to the Trustee or such
other institution maintaining the Certificate Account which describes the
amounts deposited in error in the Certificate Account. The Master Servicer shall
maintain adequate records with respect to all withdrawals made pursuant to this
Section. All funds deposited in the Certificate Account shall be held in trust
for the Certificateholders until withdrawn in accordance with Section 3.8.

         (c) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Distribution Account shall
consist of two separate subaccounts, each of which shall relate to a particular
Mortgage Pool. The Trustee shall, promptly upon receipt, deposit in the
Distribution Account and retain therein the following:

             (i)   the aggregate amount remitted by the Master Servicer to the
         Trustee in respect of a Mortgage Pool pursuant to Section 3.8(a)(ix);

             (ii)  any amount deposited by the Master Servicer pursuant to this
         Section 3.5(c) 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 Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw such
amount from the applicable subaccount of the Distribution Account, any provision
herein to the contrary notwithstanding. Such direction may be accomplished by
delivering an Officer's Certificate 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 related
Certificateholders until disbursed in accordance with this Agreement or
withdrawn in accordance with Section 3.8. In no event shall the Trustee incur
liability for withdrawals from the Distribution Account at the direction of the
Master Servicer.

             (iv)  The institutions at which the Certificate Account and the
         Distribution Account are maintained shall invest funds as directed by
         the Master Servicer in Permitted Investments which in both cases shall
         mature not later than (i) in the case of the Certificate Account, the
         second Business Day next preceding the related Distribution Account
         Deposit Date (except that if such Permitted Investment is an obligation
         of the institution that maintains such account, then such Permitted
         Investment shall mature not later than the Business Day next preceding
         such Distribution Account Deposit Date) and (ii) in the case of the
         Distribution Account, the Business Day next preceding the Distribution
         Date (except that if such Permitted Investment is an obligation of the
         institution that maintains such fund or account, then such Permitted
         Investment shall mature not later than such Distribution Date) and, in
         each case, shall not be sold or disposed of prior to its maturity. All
         such Permitted

                                      -52-

<PAGE>

         Investments shall be made in the name of the Trustee,
         for the benefit of the Certificateholders. All income and gain net of
         any losses realized from any such investment of funds on deposit in the
         Certificate Account shall be for the benefit of the Master Servicer as
         servicing compensation and all income and gain net of any losses
         realized from any such investment of funds on deposit in the
         Distribution Account shall be for the benefit of the Trustee. The
         amount of any Realized Losses in the Certificate Account in respect of
         any such investments shall promptly be deposited by the Master Servicer
         in the Certificate Account and the amount of any Realized Losses in the
         Distribution Account in respect of any such investments shall promptly
         be deposited by the Trustee into the Distribution Account. All
         reinvestment income earned on amounts on deposit in the Distribution
         Account shall be for the benefit of the Trustee. The Trustee in its
         fiduciary capacity shall not be liable for the amount of any loss
         incurred in respect of any investment or lack of investment of funds
         held in the Certificate Account and made in accordance with this
         Section 3.5.
              (v) The Master Servicer shall give notice to the Trustee, the
         Seller, each Rating Agency and the Depositor of any proposed change of
         the location of the Certificate Account prior to any change thereof.
         The Trustee shall give notice to the Master Servicer, the Seller, each
         Rating Agency and the Depositor of any proposed change of the location
         of the Distribution Account prior to any change thereof.

         SECTION 3.6 Collection of Taxes, Assessments and Similar Items; Escrow
Accounts.

         (a) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain one
or more accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Master Servicer) for the
payment of taxes, assessments, hazard insurance premiums or comparable items for
the account of the Mortgagors. Nothing herein shall require the Master Servicer
to compel a Mortgagor to establish an Escrow Account in violation of applicable
law.

         (b) Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Master Servicer out of related collections for any payments made pursuant to
Sections 3.1 hereof (with respect to taxes and assessments and insurance
premiums) and 3.9 hereof (with respect to hazard insurance), to refund to any
Mortgagors any sums determined to be overages, to pay interest, if required by
law or the terms of the related Mortgage or Mortgage Note, to Mortgagors on
balances in the Escrow Account or to clear and terminate the Escrow Account at
the termination of this Agreement in accordance with Section 9.1 hereof. The
Escrow Accounts shall not be a part of the Trust Fund.

         (c) The Master Servicer shall advance any payments referred to in
Section 3.6(a) that are not timely paid by the Mortgagors on the date when the
tax, premium or other cost for which such payment is intended is due, but the
Master Servicer shall be required so to advance only to the extent that such
advances, in the good faith judgment of the Master Servicer, will be recoverable
by the Master Servicer out of Insurance Proceeds, Liquidation Proceeds or
otherwise.

         SECTION 3.7 Access to Certain Documentation and Information Regarding
the Mortgage Loans.

                                      -53-

<PAGE>

         The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage Loans
and all accounts, insurance information and other matters relating to this
Agreement, such access being afforded without charge, but only upon reasonable
request and during normal business hours at the office designated by the Master
Servicer.

         Upon reasonable advance notice in writing, the Master Servicer will
provide to each Certificateholder which is a savings and loan association, bank
or insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates; provided
that the Master Servicer shall be entitled to be reimbursed by each such
Certificateholder for actual expenses incurred by the Master Servicer in
providing such reports and access.

         SECTION 3.8 Permitted Withdrawals from the Certificate Account and
Distribution Account.

         (a) The Master Servicer may from time to time make withdrawals from the
applicable subaccount of the Certificate Account for the following purposes:

              (i)   to the extent not previously retained by the Master
         Servicer, to pay to First Horizon the Retained Yield and to pay to the
         Master Servicer the master servicing compensation to which it is
         entitled pursuant to Section 3.14, and earnings on or investment
         income with respect to funds in or credited to the Certificate Account
         as additional master servicing compensation;

              (ii)  to the extent not previously retained by the Master
         Servicer, to reimburse the Master Servicer for unreimbursed Advances
         made by it in respect of the related Mortgage Pool, such right of
         reimbursement pursuant to this subclause (ii) being limited to amounts
         received on the Mortgage Loan(s) in respect of which any such Advance
         was made;

              (iii) to reimburse the Master Servicer for any Nonrecoverable
         Advance previously made in respect of the related Mortgage Pool;

              (iv)  to reimburse the Master Servicer for Insured Expenses from
         the related Insurance Proceeds in respect of the related Mortgage Pool;

              (v)   to reimburse the Master Servicer for (a) unreimbursed
         Servicing Advances in respect of the related Mortgage Pool, the Master
         Servicer's right to reimbursement pursuant to this clause (a) with
         respect to any Mortgage Loan being limited to amounts received on such
         Mortgage Loan(s) which represent late recoveries of the payments for
         which such advances were made pursuant to Section 3.1 or Section 3.6
         and (b) for unpaid Master Servicing Fees as provided in Section 3.11
         hereof;

              (vi)  to pay to the Seller, with respect to each Mortgage Loan in
         respect of the related Mortgage Pool or property acquired in respect
         thereof that has been purchased

                                      -54-

<PAGE>

         pursuant to Section 2.2, 2.3 or 3.11, all amounts received thereon
         after the date of such purchase;

              (vii)  to reimburse the Seller, the Master Servicer or the
         Depositor for expenses incurred by any of them and reimbursable
         pursuant to Section 6.3 hereof;

              (viii) to withdraw any amount deposited in the Certificate Account
         and not required to be deposited therein;

              (ix)   on or prior to the Distribution Account Deposit Date, to
         withdraw an amount equal to the related Available Funds and the Trustee
         Fee for such Distribution Date and remit such amount to the Trustee for
         deposit in the Distribution Account; and

              (x)    to clear and terminate the Certificate Account upon
         termination of this Agreement pursuant to Section 9.1 hereof.
         The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis and on a Mortgage Pool by Mortgage Pool
basis, for the purpose of justifying any withdrawal from the Certificate Account
pursuant to such subclauses (i), (ii), (iv), (v) and (vi). Prior to making any
withdrawal from the Certificate Account pursuant to subclause (iii), the Master
Servicer shall deliver to the Trustee an Officer's Certificate of a Servicing
Officer indicating the amount of any previous Advance determined by the Master
Servicer to be a Nonrecoverable Advance and identifying the related Mortgage
Loans(s), and their respective portions of such Nonrecoverable Advance.

         The Master Servicer shall distribute the Retained Yield, if any, to
First Horizon on each Distribution Account Deposit Date during the term of this
Agreement.

         (b) The Trustee shall withdraw funds from the applicable subaccount of
the Distribution Account for distributions to the related Certificateholders in
the manner specified in this Agreement (and to withhold from the amounts so
withdrawn, the amount of any taxes that it is authorized to withhold pursuant to
the last paragraph of Section 8.11). In addition, the Trustee may prior to
making the distribution pursuant to Section 4.2 from time to time make
withdrawals from the Distribution Account for the following purposes:

              (i)    to pay to itself the Trustee Fee for the related
         Distribution Date;

              (ii)   to pay to itself earnings on or investment income with
         respect to funds in the Distribution Account;

              (iii)  to withdraw and return to the Master Servicer any amount
         deposited in the Distribution Account and not required to be deposited
         therein; and

              (iv)   to clear and terminate the Distribution Account upon
         termination of the Agreement pursuant to Section 9.1 hereof.

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<PAGE>

     SECTION 3.9   Maintenance of Hazard Insurance; Maintenance of Primary
Insurance Policies.

     (a) The Master Servicer shall cause to be maintained, for each Mortgage
Loan, hazard insurance with extended coverage in an amount that is at least
equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan or (ii) the greater of (y) the outstanding principal
balance of the Mortgage Loan and (z) an amount such that the proceeds of such
policy shall be sufficient to prevent the Mortgagor and/or the mortgagee from
becoming a co-insurer. Each such policy of standard hazard insurance shall
contain, or have an accompanying endorsement that contains, a standard mortgagee
clause. Any amounts collected by the Master Servicer under any such policies
(other than the amounts to be applied to the restoration or repair of the
related Mortgaged Property or amounts released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures) shall be deposited in
the applicable subaccount of the Certificate Account. Any cost incurred by the
Master Servicer in maintaining any such insurance shall not, for the purpose of
calculating monthly distributions to the Certificateholders or remittances to
the Trustee for their benefit, be added to the principal balance of the Mortgage
Loan, notwithstanding that the terms of the Mortgage Loan so permit. Such costs
shall be recoverable by the Master Servicer out of late payments by the related
Mortgagor or out of Liquidation Proceeds to the extent (1) permitted by Section
3.8 hereof. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property acquired
in respect of a Mortgage 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 is located at the time of
origination of the Mortgage Loan in a federally designated special flood hazard
area and such area is participating in the national flood insurance program, the
Master Servicer shall cause flood insurance to be maintained with respect to
such Mortgage Loan. Such flood insurance shall be in an amount equal to the
least of (i) the original principal balance of the related Mortgage Loan, (ii)
the replacement value of the improvements which are part of such Mortgaged
Property, and (iii) the maximum amount of such insurance available for the
related Mortgaged Property under the national flood insurance program.

     (b) In the event that the Master Servicer shall obtain and maintain a
blanket policy 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 sentence of this Section, it being understood and agreed that such
policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, the Master Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged Property a
policy complying with the first sentence of this Section, and there shall have
been a loss that would have been covered by such policy, deposit in the
applicable subaccount of the Certificate Account the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as Master Servicer of the Mortgage Loans, the
Master Servicer agrees to present, on behalf of itself, the Depositor, and the
Trustee for the benefit of the Certificateholders, claims under any such blanket
policy.

     (c) The Master Servicer shall not take any action which would result in
non-coverage under any applicable Primary Insurance Policy of any loss which,
but for the actions of the Master Servicer, would have been covered thereunder.
The Master Servicer shall not cancel or refuse to renew any such Primary
Insurance Policy that is in effect at the date of the initial issuance of the

                                      -56-

<PAGE>

Certificates and is required to be kept in force hereunder unless the
replacement Primary Insurance Policy for such canceled or non-renewed policy is
maintained with a Qualified Insurer.

         The Master Servicer shall not be required to maintain any Primary
Insurance Policy (i) with respect to any Mortgage Loan with a Loan-to-Value
Ratio less than or equal to 80% as of any date of determination or, based on a
new appraisal, the principal balance of such Mortgage Loan represents 80% or
less of the new appraised value or (ii) if maintaining such Primary Insurance
Policy is prohibited by applicable law.

         The Master Servicer agrees to effect the timely payment of the premiums
on each Primary Insurance Policy, and such costs not otherwise recoverable shall
be recoverable by the Master Servicer from the related liquidation proceeds.

         (d) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on behalf of itself, the
Trustee and Certificateholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action as shall
be necessary to permit recovery under any Primary Insurance Policies respecting
defaulted Mortgage Loans. Any amounts collected by the Master Servicer under any
Primary Insurance Policies shall be deposited in the applicable subaccount of
the Certificate Account.

         SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements.

         (a) Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Master Servicer
shall to the extent that it has knowledge of such conveyance, enforce any
due-on-sale clause contained in any Mortgage Note or Mortgage, to the extent
permitted under applicable law and governmental regulations, but only to the
extent that such enforcement will not adversely affect or jeopardize coverage
under any Required Insurance Policy. Notwithstanding the foregoing, the Master
Servicer is not required to exercise such rights with respect to a Mortgage Loan
if the Person to whom the related Mortgaged Property has been conveyed or is
proposed to be conveyed satisfies the terms and conditions contained in the
Mortgage Note and Mortgage related thereto and the consent of the mortgagee
under such Mortgage Note or Mortgage is not otherwise so required under such
Mortgage Note or Mortgage as a condition to such transfer. In the event that the
Master Servicer is prohibited by law from enforcing any such due-on-sale clause,
or if coverage under any Required Insurance Policy would be adversely affected,
or if nonenforcement is otherwise permitted hereunder, the Master Servicer is
authorized, subject to Section 3.10(b), to take or enter into an assumption and
modification agreement from or with the person to whom such property has been or
is about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, unless prohibited by applicable state law, the Mortgagor
remains liable thereon, provided that the Mortgage Loan shall continue to be
covered (if so covered before the Master Servicer enters such agreement) by the
applicable Required Insurance Policies. The Master Servicer, subject to Section
3.10(b), is also authorized with the prior approval of the insurers under any
Required Insurance Policies 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 Mortgagor and becomes liable under
the Mortgage Note. Notwithstanding the foregoing, the Master Servicer shall not
be deemed to be in default under this Section by reason of any transfer or
assumption which the Master Servicer reasonably believes it is restricted by law
from preventing, for any reason whatsoever.

                                      -57-

<PAGE>

         (b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.10(a) hereof, in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption agreement or modification agreement or supplement
to the Mortgage Note or Mortgage that requires the signature of the Trustee, or
if an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the Mortgage Loan, the Master Servicer shall prepare
and deliver or cause to be prepared and delivered to the Trustee for signature
and shall direct, in writing, the Trustee to execute the assumption agreement
with the Person to whom the Mortgaged Property is to be conveyed and such
modification agreement or supplement to the Mortgage Note or Mortgage or other
instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
may be changed. In addition, the substitute Mortgagor and the Mortgaged Property
must be acceptable to the Master Servicer in accordance with its underwriting
standards as then in effect. Together with each such substitution, assumption or
other agreement or instrument delivered to the Trustee for execution by it, the
Master Servicer shall deliver an Officer's Certificate signed by a Servicing
Officer stating that the requirements of this subsection have been met in
connection therewith. The Master Servicer shall notify the Trustee that any such
substitution or assumption agreement has been completed by forwarding to the
Trustee the original of such substitution or assumption agreement, which in the
case of the original shall be added to the related Mortgage File and shall, for
all purposes, be (2) considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. Any fee
collected by the Master Servicer for entering into an assumption or substitution
of liability agreement will be retained by the Master Servicer as additional
servicing compensation.

         SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of
Certain Mortgage Loans.

         The Master Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert 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. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
meet the requirements of the insurer under any Required Insurance Policy;
provided, however, that the Master Servicer shall not be required to expend its
own funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (i) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Mortgage Loan after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Certificate Account). The Master
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 liquidation proceeds with respect to the related
Mortgaged Property, as provided in the definition of Liquidation Proceeds. If
the Master Servicer has knowledge that a Mortgaged Property which the Master
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a 1 mile radius of any site listed in the
Expenditure Plan for the Hazardous Substance Clean Up Bond Act of

                                      -58-

<PAGE>

1984 or other site with environmental or hazardous waste risks known to the
Master Servicer, the Master Servicer will, prior to acquiring the Mortgaged
Property, consider such risks and only take action in accordance with its
established environmental review procedures.

         With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trust Fund for the benefit of the
Certificateholders, or its nominee, on behalf of the Certificateholders. The
Master Servicer shall ensure that the title to such REO Property references the
Pooling and Servicing Agreement and the Trust Fund's capacity thereunder.
Pursuant to its efforts to sell such REO Property, the Master Servicer shall
either itself or through an agent selected by the Master 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 Certificateholders, rent the
same, or any part thereof, as the Master Servicer deems to be in the best
interest of the Certificateholders for the period prior to the sale of such REO
Property. The Master Servicer shall prepare for and deliver to the Trustee a
statement with respect to each REO Property that has been rented showing the
aggregate rental income received and all expenses incurred in connection with
the management and maintenance of such REO Property at such times as is
necessary to enable the Trustee to comply with the reporting requirements of the
REMIC Provisions. The net monthly rental income, if any, from such REO Property
shall be deposited in the Certificate Account no later than the close of
business on each Determination Date. The Master Servicer shall perform the tax
reporting and withholding required by Sections 1445 and 6050J of the Code with
respect to foreclosures and abandonments, the tax reporting required by Section
6050H of the Code with respect to the receipt of mortgage interest from
individuals and any tax reporting required by Section 6050P of the Code with
respect to the cancellation of indebtedness by certain financial entities, by
preparing such tax and information returns as may be required, in the form
required, and delivering the same to the Trustee for filing.

         In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to the close of the third taxable year after its acquisition by the Trust
Fund unless the Trustee shall have been supplied with an Opinion of Counsel to
the effect that the holding by the Trust Fund of such Mortgaged Property
subsequent to such three-year period will not result in the imposition of taxes
on "prohibited transactions" of the REMIC hereunder as defined in Section 860F
of the Code or cause the REMIC created hereunder to fail to qualify as a REMIC
at any time that any Certificates are outstanding, in which case the Trust Fund
may continue to hold such Mortgaged Property (subject to any conditions
contained in such Opinion of Counsel). Notwithstanding any other provision of
this Agreement, no Mortgaged Property acquired by the Trust Fund shall be rented
(or allowed to continue to be rented) or otherwise used for the production of
income by or on behalf of the Trust Fund in such a manner or pursuant to any
terms that would (i) cause such Mortgaged Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
(ii) subject the REMIC hereunder to the imposition of any federal, state or
local income taxes on the income earned from such Mortgaged Property under
Section 860G(c) of the Code or otherwise, unless the Master Servicer has agreed
to indemnify and hold harmless the Trust Fund with respect to the imposition of
any such taxes.

         In the event of a default on a Mortgage Loan one or more of whose
obligor is not a United States Person, as that term is defined in Section
7701(a)(30) of the Code, in connection with any foreclosure or acquisition of a
deed in lieu of foreclosure (together, "foreclosure") in respect of such

                                      -59-

<PAGE>

Mortgage Loan, the Master Servicer will cause compliance with the provisions of
Treasury Regulation Section 1.1445-2(d)(3) (or any successor thereto) necessary
to assure that no withholding tax obligation arises with respect to the proceeds
of such foreclosure except to the extent, if any, that proceeds of such
foreclosure are required to be remitted to the obligors on such Mortgage Loan.

         The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any REO Properties,
net of reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed Master Servicing Fees, Advances and Servicing Advances, shall be
applied to the payment of principal of and interest on the related defaulted
Mortgage Loans (with interest accruing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the applicable subaccount of the
Certificate Account. To the extent the net income received during any calendar
month is in excess of the amount attributable to amortizing principal and
accrued interest at the related Mortgage Rate on the related Mortgage Loan for
such calendar month, such excess shall be considered to be a partial prepayment
of principal of the related Mortgage Loan.

         The proceeds from any liquidation of a Mortgage Loan, as well as any
income from an REO Property, will be applied in the following order of priority:
first, to reimburse the Master Servicer for any related unreimbursed Servicing
Advances and Master Servicing Fees; second, to reimburse the Master Servicer for
any unreimbursed Advances; third, to reimburse the applicable subaccount of the
Certificate Account for any Nonrecoverable Advances (or portions thereof) that
were previously withdrawn by the Master Servicer pursuant to Section 3.8(a)(iii)
that related to such Mortgage Loan; fourth, to accrued and unpaid interest (to
the extent no Advance has been made for such amount or any such Advance has been
reimbursed) on the Mortgage Loan or related REO Property, at the Adjusted Net
Mortgage Rate to the Due Date occurring in the month in which such amounts are
required to be distributed; and fifth, as a recovery of principal of the
Mortgage Loan. Excess Proceeds, if any, from the liquidation of a Liquidated
Mortgage Loan will be retained by the Master Servicer as additional servicing
compensation pursuant to Section 3.14.

         The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Trust Fund any Mortgage Loan which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
applicable subaccount of the Certificate Account and the Trustee, upon receipt
of a certificate from the Master Servicer in the form of Exhibit M hereto, shall
release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

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<PAGE>

         SECTION 3.12  Trustee to Cooperate; Release of Mortgage Files.

         Upon the payment in full of any Mortgage Loan, or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer will immediately notify
the Trustee by delivering, or causing to be delivered a "Request for Release"
substantially in the form of Exhibit M. Upon receipt of such request, the
Trustee shall or shall cause the Custodian to promptly release the related
Mortgage File to the Master Servicer, and the Trustee shall at the Master
Servicer's direction execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage in each case provided by the
Master Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the related
Mortgagor. From time to time and as shall be appropriate for the servicing or
foreclosure of any Mortgage Loan, including for such purpose, collection under
any policy of flood insurance, any fidelity bond or errors or omissions policy,
or for the purposes of effecting a partial release of any Mortgaged Property
from the lien of the Mortgage or the making of any corrections to the Mortgage
Note or the Mortgage or any of the other documents included in the Mortgage
File, the Trustee shall, upon delivery to the Trustee of a Request for Release
in the form of Exhibit L signed by a Servicing Officer, release the Mortgage
File to the Master Servicer. Subject to the further limitations set forth below,
the Master Servicer shall cause the Mortgage File or documents so released to be
returned to the Trustee or its Custodian when the need therefor by the Master
Servicer no longer exists, unless the Mortgage Loan is liquidated and the
proceeds thereof are deposited in the applicable subaccount of the Certificate
Account, in which case the Master Servicer shall deliver to the Trustee a
Request for Release in the form of Exhibit M, signed by a Servicing Officer.

         If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Master Servicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity.

         SECTION 3.13  Documents Records and Funds in Possession of Master
Servicer to be Held for the Trustee.

         Notwithstanding any other provisions of this Agreement, the Master
Servicer shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully to
the Trustee for any funds received by the Master Servicer or which otherwise are
collected by the Master Servicer as Liquidation 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 Master Servicer in respect of any Mortgage
Loans, whether from the collection of principal and interest payments or from
Liquidation Proceeds, including but not limited to, any funds on deposit in the
Certificate Account, shall be held by the Master 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

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<PAGE>

Master Servicer also agrees that it shall not create, incur or subject any
Mortgage File or any funds that are deposited in the Certificate Account,
Distribution Account or any Escrow 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 Master Servicer
shall be entitled to set off against and deduct from any such funds any amounts
that are properly due and payable to the Master Servicer under this Agreement.

         SECTION 3.14  Master Servicing Compensation.

         As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain or withdraw from the Certificate Account an amount equal
to the Master Servicing Fee for each Mortgage Loan, provided that the aggregate
Master Servicing Fee with respect to any Distribution Date shall be reduced (i)
by the amount of any Compensating Interest paid by the Master Servicer with
respect to such Distribution Date, and (ii) with respect to the first
Distribution Date, an amount equal to any amount to be deposited into the
Distribution Account by the Depositor pursuant to Section 2.1(a) and not so
deposited.

         Additional servicing compensation in the form of (i) Retained Yield,
Excess Proceeds, Prepayment Interest Excess and all income and gain net of any
losses realized from Permitted Investments and (ii) prepayment penalties,
assumption fees and late payment charges in each case under the circumstances
and in the manner set forth in the applicable Mortgage Note or Mortgage shall be
retained by the Master Servicer to the extent not required to be deposited in
the Certificate Account pursuant to Section 3.5 hereof; provided that in the
event the Master Servicer is terminated pursuant to Section 7.1, the Retained
Yield shall be payable to First Horizon Home Loan Corporation in its individual
capacity and shall not be payable to the Trustee or any successor to the Master
Servicer. The Master Servicer shall be required to pay all expenses incurred by
it in connection with its master servicing activities hereunder (including
payment of any premiums for hazard insurance and any Primary Insurance Policy
and maintenance of the other forms of insurance coverage required by this
Agreement) and shall not be entitled to reimbursement therefor except as
specifically provided in this Agreement.

         SECTION 3.15  Access to Certain Documentation.

         The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Subordinated
Certificates and the examiners and supervisory agents of the OTS, the FDIC and
such other authorities, access to the documentation regarding the Mortgage Loans
required by applicable regulations of the OTS and the FDIC. Such access shall be
afforded without charge, but only upon reasonable and prior written request and
during normal business hours at the offices designated by the Master Servicer.
Nothing in this Section shall limit the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as provided
in this Section as a result of such obligation shall not constitute a breach of
this Section.

                                      -62-

<PAGE>

         SECTION 3.16   Annual Statement as to Compliance.

         The Master Servicer shall deliver to the Depositor and the Trustee on
or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 2001 fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master Servicer
during the preceding calendar year and of the performance of the Master Servicer
under this Agreement has been made under such officer's supervision and (ii) to
the best of such officer's knowledge, based on such review, the Master Servicer
has fulfilled all 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 officer and the nature and status
thereof. The Trustee shall forward a copy of each such statement to each Rating
Agency.

         SECTION 3.17   Annual Independent Public Accountants' Servicing
Statement; Financial Statements.

         On or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 2002 fiscal year, the Master Servicer at its expense
shall cause a nationally or regionally recognized firm of independent public
accountants (who may also render other services to the Master Servicer, the
Seller or any affiliate thereof) which is a member of the American Institute of
Certified Public Accountants to furnish a statement to the Trustee and the
Depositor to the effect that-such firm has examined certain documents and
records relating to the servicing of the Mortgage Loans under this Agreement or
of mortgage loans under pooling and servicing agreements substantially similar
to this Agreement (such statement to have attached thereto a schedule setting
forth the pooling and servicing agreements covered thereby) and that, on the
basis of such examination, conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FNMA and FHLMC, such servicing has been conducted in
compliance with such pooling and servicing agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FNMA and FHLMC requires it to report. In rendering
such statement, such firm may rely, as to matters relating to direct servicing
of mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FNMA and FHLMC (rendered within one year of such statement) of independent
public accountants with respect to the related Subservicer. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon request
at the Master Servicer's expense, provided such statement is delivered by the
Master Servicer to the Trustee.

         SECTION 3.18   Errors and Omissions Insurance; Fidelity Bonds.

         The Master Servicer shall for so long as it acts as master servicer
under this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases

                                      -63-

<PAGE>

to be in effect, the Master Servicer shall obtain a comparable replacement
policy or bond from an insurer or issuer, meeting the requirements set forth
above as of the date of such replacement.

                                   ARTICLE IV
                                DISTRIBUTIONS AND
                         ADVANCES BY THE MASTER SERVICER

         SECTION 4.1    Advances.

         The Master Servicer shall determine on or before each Master Servicer
Advance Date whether it is required to make an Advance pursuant to the
definition thereof. If the Master Servicer determines it is required to make an
Advance, it shall, on or before the Master Servicer Advance Date, either (i)
deposit into the applicable subaccount of the Certificate Account an amount
equal to the Advance or (ii) make an appropriate entry in its records relating
to the applicable subaccount of the Certificate Account that any Amount Held for
Future Distribution has been used by the Master Servicer in discharge of its
obligation to make any such Advance. Any funds so applied shall be replaced by
the Master Servicer by deposit in the applicable subaccount of the Certificate
Account no later than the close of business on the next Master Servicer Advance
Date. The Master Servicer shall be entitled to be reimbursed from the applicable
subaccount of the Certificate Account for all Advances of its own funds made
pursuant to this Section as provided in Section 3.8. The obligation to make
Advances with respect to any Mortgage Loan shall continue if such Mortgage Loan
has been foreclosed or otherwise terminated and the related Mortgaged Property
has not been liquidated.

         The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer indicating
the amount of any proposed Advance determined by the Master Servicer to be a
Nonrecoverable Advance.

         SECTION 4.2    Priorities of Distribution.

         (a)      On each Distribution Date, the Trustee shall withdraw the
Available Funds for each Certificate Group from the applicable subaccount of the
Distribution Account and apply such funds to distributions on the Certificates
of the related Certificate Group in the following order and priority and, in
each case, to the extent of Available Funds remaining:

                  (i) to the Classes of Senior Certificates of the related
         Certificate Group, the Accrued Certificate Interest on each such Class
         for such Distribution Date, any shortfall in available amounts being
         allocated among such Classes in proportion to the amount of Accrued
         Certificate Interest otherwise distributable thereon;

                  (ii) to the Classes of Senior Certificates of the related
         Certificate Group, any Accrued Certificate Interest thereon remaining
         undistributed from previous Distribution Dates, to the extent of
         remaining Available Funds from the related Mortgage Pool, any shortfall
         in available amounts being allocated among such Classes in proportion
         to the amount of such Accrued Certificate Interest remaining
         undistributed for each such Class for such Distribution Date;

                                      -64-

<PAGE>
                  (iii) (1) to the Classes of Senior Certificates of the related
         Certificate Group, other than the Class II-A-PO Certificates, in
         reduction of the Class Certificate Balances thereof, to the extent of
         remaining Available Funds from the related Mortgage Pool, the related
         Senior Optimal Principal Amount for such Distribution Date, in the
         order of priority set forth below in Section 4.2(b), until the
         respective Class Certificate Balances thereof have been reduced to
         zero, and (2) concurrently with the Senior Certificates corresponding
         to Pool II, from the Available Funds for such Mortgage Pool, to the
         Class II-A-PO Certificates, the Class II-A-PO Principal Distribution
         Amount for such Distribution Date;

                  (iv) to the Class II-A-PO Certificates, to the extent of
         remaining Available Funds, the Class II-A-PO Deferred Amount for such
         Distribution Date, until the Class Certificate Balance thereof has been
         reduced to zero; provided that, (1) on any Distribution Date,
         distributions pursuant to this Section 4.2(a)(iv) shall not exceed the
         aggregate Subordinated Optimal Principal Amount for both Mortgage Pools
         on such Distribution Date, (2) such distributions shall not reduce the
         Class Certificate Balance of the Class II-A-PO Certificates, and (3) no
         distribution will be made in respect of the Class II-A-PO Deferred
         Amount after the Cross-over Date;

                  (v) to the Class B-1 Certificates, to the extent of remaining
         Available Funds for both Mortgage Pools, but subject to the prior
         payment of amounts described under Section 4.2(g), in the following
         order: (1) the Accrued Certificate Interest thereon for such
         Distribution Date, (2) any Accrued Certificate Interest thereon
         remaining undistributed from previous Distribution Dates and (3) such
         Class' Allocable Share for such Distribution Date;

                  (vi) to the Class B-2 Certificates, to the extent of remaining
         Available Funds for both Mortgage Pools, but subject to the prior
         payment of amounts described under Section 4.2(g), in the following
         order: (1) the Accrued Certificate Interest thereon for such
         Distribution Date, (2) any Accrued Certificate Interest thereon
         remaining undistributed from previous Distribution Dates and (3) such
         Class' Allocable Share for such Distribution Date;

                  (vii) to the Class B-3 Certificates, to the extent of
         remaining Available Funds for both Mortgage Pools, but subject to the
         prior payment of amounts described under Section 4.2(g), in the
         following order: (1) the Accrued Certificate Interest thereon for such
         Distribution Date, (2) any Accrued Certificate Interest thereon
         remaining undistributed from previous Distribution Dates and (3) such
         Class' Allocable Share for such Distribution Date;

                  (viii) to the Class B-4 Certificates, to the extent of
         remaining Available Funds for both Mortgage Pools, but subject to the
         prior payment of amounts described under Section 4.2(g) in the
         following order: (1) the Accrued Certificate Interest thereon for such
         Distribution Date, (2) any Accrued Certificate Interest thereon
         remaining undistributed from previous Distribution Dates and (3) such
         Class' Allocable Share for such Distribution Date;

                  (ix) to the Class B-5 Certificates, to the extent of remaining
         Available Funds for both Mortgage Pools, but subject to the prior
         payment of amounts described under Section 4.2(g) in the following
         order: (1) the Accrued Certificate Interest thereon for such
         Distribution Date, (2) any Accrued Certificate Interest thereon
         remaining undistributed from

                                      -65-

<PAGE>

         previous Distribution Dates and (3) such Class' Allocable Share for
         such Distribution Date; and

             (x) to the Class B-6 Certificates, to the extent of remaining
         Available Funds for both Mortgage Pools, but subject to the prior
         payment of amounts described under Section 4.2(g) in the following
         order: (1) the Accrued Certificate Interest thereon for such
         Distribution Date, (2) any Accrued Certificate Interest thereon
         remaining undistributed from previous Distribution Dates and (3) such
         Class' Allocable Share for such Distribution Date.

         (b) Amounts allocated to the Senior Certificates corresponding to Pool
I pursuant to the priority described above in Section 4.2(a)(iii) will be
distributed to the Class I-A-1, Class I-A-2 and Class I-A-3 Certificates, pro
rata, until their respective Class Certificate Balances have been reduced to
zero. Amounts allocated to the Senior Certificates corresponding to Pool II
pursuant to the priority described above in Section 4.2(a)(iii) will be
distributed in the following order of priority:

                  (i)   pro rata, to the Class II-A-RU and Class II-A-RL
         Certificates until the respective Class Certificate Balances thereof
         have each been reduced to zero, and

                  (ii)  concurrently, to the remaining Classes of Senior
         Certificates corresponding to Pool II (other than the Class II-A-PO
         Certificates), as follows:

                  (A)   59.9442424838% of the remaining Senior Optimal
                        Principal Amount for Pool II for such Distribution
                        Date in the following order of priority:

                        (I)      to the Class II-A-3 Certificates, an amount
                                 up to the Class II-A-3 Principal
                                 Distribution Amount for such date, until the
                                 Class Certificate Balance thereof has been
                                 reduced to zero;

                        (II)     sequentially, to the Class II-A-1 and Class
                                 II-A-2 Certificates, in that order, until
                                 the respective Class Certificate Balances
                                 thereof have each been reduced to zero; and

                        (III)    to the Class II-A-3 Certificates, until the
                                 Class Certificate Balance thereof has been
                                 reduced to zero; and

                  (B)   40.0557575162% of the remaining Senior Optical
                        Principal Amount for Pool II for such Distribution
                        Date in the following order of priority:

                           (I)   until the Class Certificate Balance of the
                                 Class II-A-15 Certificates has been reduced
                                 to zero (x) 33.3341942816% of the amount
                                 specified in clause (B), above, will be
                                 distributed to the Class II-A-4 Certificates
                                 until the Class Certificate Balance thereof
                                 has been reduced to its Planned Balance for
                                 such Distribution Date; and (y)
                                 66.6658057184% of the amount specified in
                                 such clause will be distributed to the Class
                                 II-A-15 Certificates until the Class
                                 Certificate Balance thereof has been reduced
                                 to its Planned Balance for such Distribution
                                 Date;

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<PAGE>

                           (II)     until the respective Class Certificate
                                    Balances of the Class II-A-4 and Class
                                    II-A-16 Certificates have been reduced to
                                    zero (x) 11.1111111111% of the amount
                                    specified in Section 4(b)(B), above, will be
                                    distributed to the Class II-A-4 Certificates
                                    until the Class Certificate Balance thereof
                                    has been reduced to its Planned Balance for
                                    such Distribution Date; and (y)
                                    88.888888889% of the amount specified in
                                    such clause will be distributed to the Class
                                    II-A-16 Certificate until the Class
                                    Certificate Balance thereof has been reduced
                                    to its Planned Balance for such Distribution
                                    Date;

                           (III)    pro rata, to the Class II-A-17 and Class
                                    II-A-18 Certificates, until the Class
                                    Certificate Balances thereof have been
                                    reduced to their Planned Balances for such
                                    Distribution Date;

                           (IV)     to the Class II-A-6 Certificates, until the
                                    Class Certificate Balance thereof has been
                                    reduced to its Planned Balance for such
                                    Distribution Date;

                           (V)      concurrently, (i) 66.6666666667% of the
                                    Senior Optimal Principal Amount for Pool II
                                    remaining after distribution of amounts
                                    specified in clause (B)(IV), above,
                                    sequentially to the Class II-A-7, Class
                                    II-A-8, and Class II-A-9 Certificates, in
                                    that order, until the respective Class
                                    Certificate Balances thereof have each been
                                    reduced to zero; and (ii) 33.3333333333% of
                                    such remaining amount, to the following
                                    classes in the following order of priority;

                                    (X)     sequentially, to the Class II-A-10,
                                            Class II-A-11 and Class II-A-12
                                            Certificates, in that order, until
                                            the respective Class Certificate
                                            Balances thereof have each been
                                            reduced to zero; and

                                    (Y)     pro rata, to the Class II-A-13 and
                                            Class II-A-14 Certificates, until
                                            the respective Class Certificate
                                            Balances thereof have each been
                                            reduced to zero;

                           (VI)     to the Class II-A-6 Certificates, without
                                    regard to their Planned Balances for such
                                    Distribution Date, until the Class
                                    Certificate Balance thereof has been reduced
                                    to zero; and

                           (VII)    to the Class II-A-4, Class II-A-15, Class
                                    II-A-16, Class II-A-17 and Class II-A-18
                                    Certificates, without regard to their
                                    Planned Balances for such Distribution Date,
                                    but otherwise in the same manner and
                                    priority specified in clauses (B)(I), (II)
                                    and (III) above, until the respective Class
                                    Certificate Balances thereof have each been
                                    reduced to zero.

                                      -67-

<PAGE>

         (c) On each Distribution Date, the Trustee shall distribute to the
Holders of the Class II-A-RU or Class II-A-RL Certificates any Available Funds
remaining in the related REMIC for such Distribution Date after application of
all amounts described in clauses (a) and (b) of this Section 4.2 on such
Distribution Date. Any distributions pursuant to this subsection (c) shall not
reduce the Class Certificate Balance of the Class II-A-RU and Class II-A-RL
Certificates.

         (d) If on any Distribution Date the Class Certificate Balances of the
Subordinated Certificates have each been reduced to zero, the amount
distributable for Pool II to the Senior Certificates of the related Certificate
Group (other than the Class II-A- PO Certificates) pursuant to Section
4.2(a)(iii) for such Distribution Date and each succeeding Distribution Date
shall be allocated among such Classes of Senior Certificates, pro rata, on the
basis of their respective Class Certificate Balances immediately prior to such
Distribution Date, regardless of the priorities and amounts set forth in Section
4.2.

         (e) If on any Distribution Date (i) the Class Certificate Balance of
any Class of Subordinated Certificates (other than the Class of Subordinated
Certificates with the highest priority of distribution) for which the related
Class Prepayment Distribution Trigger was satisfied on such Distribution Date is
reduced to zero and (ii) amounts distributable to such Class of Subordinated
Certificates pursuant to clauses (2), (3) and (5) of the applicable Subordinated
Optimal Principal Amount remain undistributed on such Distribution Date after
all amounts otherwise distributable on such date pursuant to clauses (v) through
(x) of Section 4.2(a) have been distributed, such amounts shall be distributed
on such Distribution Date to the remaining Classes of Subordinated Certificates
in order of priority, such that no such distribution shall be made to any Class
of Certificates while a prior such Class is outstanding.

         (f) In the event that in any calendar month the Master Servicer
recovers an amount (an "Unanticipated Recovery") in respect of principal of a
Mortgage Loan which had previously been allocated as a Realized Loss to any
Class of Certificates pursuant to Section 4.4, on the Distribution Date in the
next succeeding calendar month the Trustee, shall withdraw from the Distribution
Account and distribute to the Holders of each outstanding Class to which such
Realized Loss had previously been allocated its share (determined as described
in the succeeding paragraph) of such Unanticipated Recovery in an amount not to
exceed the amount of such Realized Loss previously allocated to such Class. When
the Class Certificate Balance of a Class of Certificates has been
reduced to zero, the Holders of such Class shall not be entitled to any
share of an Unanticipated Recovery, and such Unanticipated Recovery shall be
allocated among all outstanding Classes of Certificates entitled thereto in
accordance with the preceding sentence, subject to the remainder of this
subsection (f). In the event that (i) any Unanticipated Recovery remains
undistributed in accordance with the preceding sentence or (ii) the amount of an
Unanticipated Recovery exceeds the amount of the Realized Loss previously
allocated to any outstanding Classes with respect to the related Mortgage Loan,
on the applicable Distribution Date the Trustee shall distribute to the Holders
of all outstanding Classes of the related Certificates to which Realized Losses
had previously been allocated and not reimbursed their pro rata share
(determined as described below) of such excess in an amount not to exceed the
aggregate amount of any Realized Loss previously allocated to such Class with
respect to any other Mortgage Loan that has not been recovered in accordance
with this subsection (f). Any distributions made pursuant to this subsection (f)
shall not reduce the Class Certificate Balance of the related Certificate.

                                      -68-

<PAGE>

         For purposes of the preceding paragraph, the share of an Unanticipated
Recovery allocable to any Class of Certificates with respect to a Mortgage Loan
shall be (i) with respect to the Class II-A-PO Certificates, based on the
applicable PO Percentage of the principal portion of the Realized Loss
previously allocated thereto with respect to such Mortgage Loan (or all Mortgage
Loans for purposes of the next to last sentence of the preceding paragraph), and
(ii) with respect to any other Class of Certificates, based on its pro rata
share (in proportion to the Class Certificate Balances thereof with respect to
such Distribution Date) of the principal portion (or in the case of Pool II, the
applicable Non-PO Percentage thereof) of any such Realized Loss previously
allocated with respect to such Mortgage Loan (or Loans); provided however, that
(i) the share of an Unanticipated Recovery allocable to a Class II-A-PO
Certificate with respect to any Mortgage Loan (or Loans) shall be reduced by the
aggregate amount previously distributed to such Class on account of the
applicable Class PO Deferred Amount in respect of such Mortgage Loan (or Loans)
and (ii) the amount by which the distributions to the Class II-A-PO Certificates
have been so reduced shall be distributed to the Classes of Certificates
described in clause (ii) of the preceding paragraph in the same proportion as
described in such clause (ii). For purposes of the preceding sentence, any Class
PO Deferred Amount distributable to a Class II-A-PO Certificate on previous
Distribution Dates shall be deemed to have been allocated in respect of the
Mortgage Loans as to which the applicable PO Percentage of the principal portion
of Realized Losses has previously been allocated to such Class on a pro rata
basis (based on the amount of Realized Losses so allocated).

         (g) On any Distribution Date on which any Certificate Group constitutes
an Undercollateralized Group, all amounts otherwise distributable as principal
on the Subordinated Certificates, in reverse order of priority (other than
amounts necessary to pay Net Interest Shortfalls) (or, following the Cross-over
Date, such other amounts described in the immediately following sentence), will
be distributed as principal to the Senior Certificates of such
Undercollateralized Group in accordance with the priorities set forth in Section
4.2(a)(iii), until the total Class Certificate Balance of such Senior
Certificates equals the Pool Principal Balance of the related Mortgage Pool
(such distribution, an "Undercollateralization Distribution"). In the event that
the Senior Certificates of a Certificate Group constitute an Undercollateralized
Group on any Distribution Date following the Cross-over Date,
Undercollateralization Distributions will be made from the excess of the
Available Funds for the Mortgage Pool not related to an Undercollateralized
Group remaining after all required amounts for that distribution date have been
distributed to the Senior Certificates of such other Certificate Group. In
addition, the amount of any Net Interest Shortfalls with respect to any
Undercollateralized Group on any Distribution Date (including any Net Interest
Shortfalls for such Distribution Date) will be distributed to the Senior
Certificates of such Undercollateralized Group prior to the payment of any
Undercollateralization Distributions from amounts otherwise distributable as
principal on the Subordinated Certificates, in reverse order of priority (or,
following the Cross-over Date, as provided in the preceding sentence). If Senior
Certificates of each Certificate Group are Undercollateralized Groups, the
distributions described above will be made in proportion to the amount by which
the aggregate Class Certificate Balance of the Senior Certificates of each such
Certificate Group exceeds the Pool Principal Balance of the related Mortgage
Pool. All distributions described above will be made in accordance with the
priorities set forth in Section 4.2(a).

         SECTION 4.3      Method of Distribution.

         (a) Except for any Retail Certificates, all distributions with respect
to each Class of Certificates on each Distribution Date shall be made pro rata
among the outstanding Certificates of

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such Class, based on the Percentage Interest in such Class represented by each
Certificate. Payments to the Certificateholders on each Distribution Date will
be made by the Trustee to the Certificateholders of record on the related Record
Date by check or money order mailed to a Certificateholder at the address
appearing in the Certificate Register, or upon written request by such
Certificateholder to the Trustee made not later than the applicable Record Date,
by wire transfer to a U.S. depository institution acceptable to the Trustee, or
by such other means of payment as such Certificateholder and the Trustee shall
agree.

         (b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each financial
intermediary for which it acts as agent. Each such financial intermediary shall
be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the Depository Participants in
accordance with the provisions of the applicable Certificates. Neither the
Trustee nor the Master Servicer shall have any responsibility therefor except as
otherwise provided by applicable law.

         (c) The Trustee shall withhold or cause to be withheld such amounts as
it reasonably determines are required by the Code (giving full effect to any
exemptions from withholding and related certifications required to be furnished
by Certificateholders or Certificate Owners and any reductions to withholding by
virtue of any bilateral tax treaties and any applicable certification required
to be furnished by Certificateholders or Certificate Owners with respect
thereto) from distributions to be made to Non-U.S. Persons. If the Trustee
reasonably determines that a more accurate determination of the amount required
to be withheld for a distribution can be made within a reasonable period after
the scheduled date for such distribution, it may hold such distribution in trust
for a Holder of a Residual Certificate until such determination can be made. For
the purposes of this paragraph, a "Non-U.S. Person" is (i) an individual other
than a citizen or resident of the United States, (ii) a partnership, corporation
or entity treated as a partnership or corporation for U.S. federal income tax
purposes not formed under the laws of the United States, any state thereof or
the District of Columbia (unless, in the case of a partnership, Treasury
regulations provide otherwise), (iii) any estate, the income of which is not
subject to U.S. federal income taxation, regardless of source, and (iv) any
trust, other than a trust that 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 the authority to control all substantial decisions of the
trust.

         SECTION 4.4     Allocation of Losses.

         (a) On or prior to each Determination Date, the Master Servicer shall
determine the amount of any Realized Loss in respect of each Mortgage Loan that
occurred during the immediately preceding calendar month.

         (b) With respect to any Distribution Date, the principal portion of
each Realized Loss (other than any Excess Loss) with respect to a Mortgage Pool
shall be allocated as follows:

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<PAGE>

                  (i)  in the case of Pool II, the applicable PO Percentage of
         the principal portion of any such Realized Loss shall be allocated to
         the Class II-A-PO Certificates until the Class Certificate Balance
         thereof has been reduced to zero; and

                  (ii) the principal portion of any such Realized Loss (or in
         the case of Pool II, the Non-PO Percentage thereof) shall be allocated
         in the following order of priority:

                       first, to the Class B-6 Certificates until the Class
                  Certificate Balance thereof has been reduced to zero;

                       second, to the Class B-5 Certificates until the Class
                  Certificate Balance thereof has been reduced to zero;

                       third, to the Class B-4 Certificates until the Class
                  Certificate Balance thereof has been reduced to zero;

                       fourth, to the Class B-3 Certificates until the Class
                  Certificate Balance thereof has been reduced to zero;

                       fifth, to the Class B-2 Certificates until the Class
                  Certificate Balance thereof has been reduced to zero;

                       sixth, to the Class B-1 Certificates until the Class
                  Certificate Balance thereof has been reduced to zero;

                       seventh, to the Classes of Senior Certificates of the
                  related Certificate Group (other than the Class II-A-PO
                  Certificates), pro rata, in accordance with their Class
                  Certificate Balances; provided that the principal portion of
                  any Realized Loss allocated to the Class I-A-2 Certificates
                  shall instead be allocated to the Class I-A-3 Certificates
                  until the Class Certificate Balance thereof has been reduced
                  to zero, and the principal portion of any Realized Loss
                  allocated to the Class II-A-17 Certificates shall instead be
                  allocated to the Class II-A-18 Certificates until the Class
                  Certificate Balance thereof has been reduced to zero.

         (c)      With respect to any Distribution Date, the principal portion
of any Excess Loss with respect to a Mortgage Pool (other than Excess Bankruptcy
Losses attributable to Debt Service Reductions) shall be allocated as follows:
(i) in the case of Pool II, the PO Percentage of any such loss shall be
allocated to the Class II-A-PO Certificates, and (2) any such loss (or in the
case of Pool II, the applicable Non-PO Percentage thereof) shall be allocated
pro rata to each Class of Certificates of the related Certificate Group (other
than, in the case of Pool II, the Class II-A-PO Certificates) based on their
respective Class Certificate Balances (in the case of the Senior Certificates)
or Apportioned Principal Balances (in the case of the Subordinated
Certificates).

         (d)      Any Realized Losses allocated to a Class of Certificates
pursuant to Section 4.4(b) or (c) shall be allocated among the Certificates of
such Class in proportion to their respective Certificate Principal Balances. Any
allocation of Realized Losses pursuant to this paragraph (d) shall

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<PAGE>

be accomplished by reducing the Certificate Principal Balances of the related
Certificates on the related Distribution Date in accordance with Section 4.4(e).

         (e) Realized Losses allocated in accordance with this Section 4.4 shall
be allocated on the Distribution Date in the month following the month in which
such loss was incurred and, in the case of the principal portion thereof, after
giving effect to the distributions made on such Distribution Date. The aggregate
amount of Realized Losses to be allocated to the Class II-A-PO Certificates on
such Distribution Date will be taken into account in determining distributions
in respect of any Class PO Deferred Amount for such date.

         (f) On each Distribution Date, the Master Servicer shall determine the
Subordinated Certificate Writedown Amount, if any. Any such Subordinated
Certificate Writedown Amount shall effect, without duplication of any other
provision in this Section 4.4 that provides for a reduction in the Class
Certificate Balance of the Subordinated Certificates, a corresponding reduction
in the Class Certificate Balance of the Subordinated Certificates, which
reduction shall occur on such Distribution Date after giving effect to
distributions made on such Distribution Date.

         (g) Notwithstanding the foregoing, no such allocation of any Realized
Loss shall be made on a Distribution Date to a Class of Certificates to the
extent that such allocation would result in the reduction of the aggregate
Certificate Principal Balances of all the Senior Certificates of a related
Certificate Group as of such Distribution Date plus the Apportioned Principal
Balances of the Subordinated Certificates of such Certificate Group as of such
Distribution Date, after giving effect to all distributions and prior
allocations of Realized Losses on such date, to an amount less than the
aggregate Scheduled Principal Balance of the Mortgage Loans in the related
Mortgage Pool as of the first day of the month of such Distribution Date, less
any Deficient Valuations occurring on or prior to the Bankruptcy Coverage
Termination Date (such limitation, the "Loss Allocation Limitation").

         SECTION 4.5      Reserved.

         SECTION 4.6      Monthly Statements to Certificateholders.

         (a) Not later than each Distribution Date, the Trustee shall prepare
and cause to be forwarded by first class mail to each Certificateholder, the
Master Servicer, the Depositor and each Rating Agency a statement setting forth
with respect to the related distribution and may post such statement on its
website located at www.mbsreporting.com:

             (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, the amount of any
         Compensating Interest included in such distribution and any remaining
         Net Interest Shortfalls after giving effect to such distribution;

             (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;

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<PAGE>

              (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 Principal Balance for each Mortgage Pool for the
         following Distribution Date;

              (vi)   the Senior Percentage and Subordinated Percentage for each
         Certificate Group for the following Distribution Date;

              (vii)  the amount of the Master Servicing Fees paid to or retained
         by the Master Servicer with respect to such Distribution Date;

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

              (ix)   the amount of Advances for each Mortgage Pool included in
         the distribution on such Distribution Date and the aggregate amount of
         Advances for each Mortgage Pool outstanding as of the close of
         business on such Distribution Date;

              (x)    the number and aggregate principal amounts of Mortgage
         Loans (A) delinquent (exclusive of Mortgage Loans in foreclosure) (1)
         1 to 30 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or more
         days and (B) in foreclosure and delinquent (1) 1 to 30 days (2) 31 to
         60 days (3) 61 to 90 days and (4) 91 or more days, as of the close of
         business on the last day of the calendar month preceding such
         Distribution Date;

              (xi)   with respect to any Mortgage Loan in a Mortgage Pool 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;

              (xii)  the total number and principal balance of any REO
         Properties (and market value, if available) in each Mortgage Pool as
         of the close of business on the Determination Date preceding such
         Distribution Date;

              (xiii) the Senior Prepayment Percentage for each Certificate Group
         for the following Distribution Date;

              (xiv)  the aggregate amount of Realized Losses incurred in respect
         of each Mortgage Pool during the preceding calendar month;

              (xv)   the cumulative amount of Realized Losses applied in
         reduction of the principal balance of each class of Certificates since
         the Closing Date;

              (xvi)  the Special Hazard Loss Coverage Amount, the Fraud Loss
         Coverage Amount and the Bankruptcy Loss Coverage Amount, in each case
         as of the related Determination Date; and

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<PAGE>

         (xvii) with respect to the second Distribution Date, the number and
     aggregate balance of any Delay Delivery Mortgage Loans in each Mortgage
     Pool not delivered within thirty days after the Closing Date.

     (b) The Trustee's responsibility for disbursing the above information to
the Certificateholders is limited to the availability, timeliness and accuracy
of the information provided by the Master Servicer.

     (c) On or before the fifth Business Day following the end of each
Prepayment Period (but in no event later than the third Business Day prior to
the related Distribution Date), the Master Servicer shall deliver to the Trustee
(which delivery may be by electronic data transmission) a report in
substantially the form set forth as Schedule IV hereto.

     (d) 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
4.6 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.

     SECTION 4.7  Determination of Pass-Through Rates for LIBOR Certificates.

     (a) On each Interest Determination Date so long as any LIBOR Certificates
are outstanding, the Trustee will determine LIBOR on the basis of the British
Bankers' Association ("BBA") "Interest Settlement Rate" for one-month deposits
in U.S. dollars as found on Telerate page 3750 as of 11:00 a.m. London time on
each LIBOR Determination Date. Interest Settlement Rates currently are based on
rates quoted by sixteen BBA designated banks as being, in the view of such
banks, the offered rate at which deposits are being quoted to prime banks in the
London interbank market. Such Interest Settlement Rates are calculated by
eliminating the four highest rates and the four lowest rates, averaging the
eight remaining rates, carrying the result (expressed as a percentage) out to
six decimal places, and rounding to five decimal places. "Telerate Page 3750"
means the display page currently so designated on the Bridge Telerate Service
(formerly the Dow Jones Markets) (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices.)

     (b) If LIBOR cannot be determined as provided in paragraph (A) of this
Section 4.07, the Trustee shall either (i) request each Reference Bank to inform
the Trustee of the quotation offered by its principal London office for making
one-month United States dollar deposits in leading banks in the London interbank
market, as of 11:00 a.m. (London time) on such Interest Determination Date or
(ii) in lieu of making any such request, rely on such Reference Bank quotations
that appear at such time on the Reuters Screen LIBO Page (as defined in the
International Swap Dealers Association Inc. Code of Standard Wording,
Assumptions and Provisions for Swaps, 1986 Edition), to the extent available.
LIBOR for the next Interest Accrual Period will be established by the Trustee on
each interest Determination Date as follows:

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<PAGE>

          (i)   If on any interest Determination Date two or more Reference
     Banks provide such offered quotations, LIBOR for the next Interest Accrual
     Period shall be the arithmetic mean of such offered quotations (rounding
     such arithmetic mean upwards if necessary to the nearest whole multiple of
     1/32%).

          (ii)  If on any Interest Determination Date only one or none of the
     Reference Banks provides such offered quotations, LIBOR for the next
     Interest Accrual Period shall be whichever is the higher of (i) LIBOR as
     determined on the previous Interest Determination Date or (ii) the Reserve
     Interest Rate. The "Reserve Interest Rate" shall be the rate per annum
     which the Trustee determines to be either (i) the arithmetic mean (rounded
     upwards if necessary to the nearest whole multiple of 1/32%) of the
     one-month United States dollar lending rates that New York City banks
     selected by the Trustee are quoting, on the relevant Interest Determination
     Date, to the principal London offices of at least two of the Reference
     Banks to which such quotations are, in the opinion of the Trustee, being so
     made, or (ii) in the event that the Trustee can determine no such
     arithmetic mean, the lowest one-month United States dollar lending rate
     which New York City banks selected by the Trustee are quoting on such
     Interest Determination Date to leading European banks.

          (iii) If on any interest Determination Date the trustee is required
     but is unable to determine the Reserve Interest Rate in the manner provided
     in paragraph (b) above, LIBOR shall be LIBOR as determined on the preceding
     Interest Determination Date.

     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 Interest Determination Date. The Master Servicer
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 Master Servicer should terminate its appointment as Reference Bank,
the Trustee 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.

     (c)  The Pass-Through Rate for each Class of LIBOR Certificates for each
Interest Accrual Period shall be determined by the Trustee on each Interest
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.

     In determining LIBOR, any Pass-Through Rate for the LIBOR Certificates, any
Interest Settlement Rate, or any Reserve Interest Rate, the Trustee may
conclusively rely and shall be protected in relying upon the offered quotations
(whether written, oral or on the Dow Jones Markets) from the BBA designated
banks, the Reference Banks or the New York City banks as to LIBOR, the Interest
Settlement Rate or the Reserve Interest Rate, as appropriate, in effect from
time to time. The Trustee shall not have any liability or responsibility to any
Person for (i) the Trustee's selection of New York City banks for purposes of
determining any Reserve Interest Rate or (ii) its inability,

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<PAGE>

following a good-faith reasonable effort, to obtain such quotations from, the
BBA designated banks, the Reference Banks or the New York City banks or to
determine such arithmetic mean, all as provided for in this Section 4.07.

     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 4.8 Principal Distributions on the Retail Certificates.

     (a)  Except as provided in subsections (d) and (f) below, on each
Distribution Date on which distributions in reduction of the Certificate
Principal Balance of the Retail Certificates are made, such distributions will
be made in the following order of priority:

     (i)  first, in respect of any Principal Distribution Request by the
          personal representative of a Deceased Holder of the Retail
          Certificates, a surviving tenant by the entirety, a surviving joint
          tenant, a surviving tenant in common or such other Person empowered to
          act on behalf of such Deceased Holder upon his or her death, in an
          amount up to but not exceeding $100,000 per request; and

     (ii) second, in respect of any Principal Distribution Request by a Living
          Holder of the Retail Certificates, in an amount up to but not
          exceeding $10,000 per request.

     Thereafter, distributions in respect of the Retail Certificates submitted
on behalf of each Deceased Holder will be made as provided in clause (i) above
up to a second $100,000 per request and distributions in respect of the Retail
Certificates submitted on behalf of each Living Holder will be made as provided
in clause (ii) above up to a second $10,000 per request. This sequence of
priorities will be repeated until all such requests have been honored to the
extent of amounts available for distribution in reduction of the Certificate
Principal Balance of the Retail Certificates.

     Principal Distribution Requests presented on behalf of Deceased Holders in
accordance with the provisions of clause (i) above will be accepted in the order
of their receipt by the Depository. Principal Distribution Requests presented in
accordance with the provisions of clause (ii) above will be accepted in the
order of their receipt by the Depository after all requests presented in
accordance with clause (i) have been honored. All Principal Distribution
Requests with respect to any Distribution Date shall be made in accordance with
Section 4.8(c) below and must be received by the Depository no later than the
close of business on the related Record Date. Principal Distribution Requests
that are received by the Depository after the related Record Date and requests,
in either case, for distributions timely received but not accepted with respect
to any Distribution Date, will be treated as Principal Distribution Requests on
the next succeeding Distribution Date, and each succeeding Distribution Date
thereafter, until each such request is accepted or is withdrawn as provided in
Section 4.8(c). Requests on behalf of Deceased Holders that are not so withdrawn
shall retain their order of priority, all in accordance with the procedures of
the Depository and the Trustee. Upon the transfer of beneficial ownership of any
Retail Certificate, any Principal Distribution Request previously submitted with
respect to such Certificate will be deemed to have been withdrawn only upon the
receipt by the Trustee of notification of such withdrawal using a form required
by the Depository.

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<PAGE>

     Principal Distribution Requests for the Retail Certificates will be
applied, in the aggregate, in an amount equal to the portion of the Available
Funds distributable to the Retail Certificates pursuant to Section 4.2, plus any
amounts available for distribution from the Rounding Account for the Retail
Certificates pursuant to paragraph (e), provided that the aggregate distribution
                                        --------
in reduction of the Certificate Principal Balance of the Retail Certificates on
any Distribution Date shall be made in an integral multiple of $1,000, subject
to Section 4.8(f).

     (b) A "Deceased Holder" is a beneficial owner of a Retail Certificate who
was living at the time such interest was acquired and whose authorized personal
representative, surviving tenant by the entirety, surviving joint tenant or
surviving tenant in common or other Person empowered to act on behalf of such
beneficial owner upon his or her death, causes to be furnished to the Trustee a
certified copy of the death certificate of such Deceased Holder, evidence of
such person's status as an authorized representative of the Deceased Holder,
such as surviving tenant (whether by the entirety, joint tenancy or tenancy in
common), which evidence shall be satisfactory to the Trustee, and any additional
evidence of death required by and satisfactory to the Trustee and any tax
waivers requested by the Trustee. Retail Certificates beneficially owned by
tenants by the entirety, joint tenants or tenants in common will be considered
to be beneficially owned by a single owner. The death of a tenant by the
entirety, joint tenant or tenant in common will be deemed to be the death of the
beneficial owner, and any Retail Certificates so beneficially owned will be
eligible for priority with respect to distributions in reduction of the
Certificate Principal Balance of such Certificates, subject to the limitations
contained in this Section 4.8. Retail Certificates beneficially owned by a trust
will be considered to be beneficially owned by each beneficiary of the trust to
the extent of such beneficiary's beneficial interest therein, but in no event
will a trust's beneficiaries collectively be deemed to be beneficial owners of a
number of individual Retail Certificates greater than the number of individual
Retail Certificates of which such trust is the beneficial owner. The death of a
beneficiary of a trust will be deemed to be the death of a beneficial owner of
the Retail Certificates beneficially owned by the trust to the extent of such
beneficiary's beneficial interest in such trust. The death of an individual who
was a tenant by the entirety, joint tenant or tenant in common in a tenancy that
is the beneficiary of a trust will be deemed to be the death of the beneficiary
of the trust. The death of a person who, immediately prior to his or her death,
was entitled to substantially all of the beneficial ownership interest in a
Retail Certificate will be deemed to be the death of the beneficial owner of
such Certificate regardless of the registration of ownership of such
Certificate, if such beneficial ownership interest can be established to the
satisfaction of the Trustee. The Trustee's decision regarding whether a Deceased
Holder's beneficial interest is substantial for purposes of the preceding
sentence shall be conclusive and binding. Such beneficial interest will be
deemed to exist in typical cases of street name or nominee ownership, ownership
by a trustee, ownership under the applicable Uniform Gifts to Minors Act or
Uniform Transfers to Minors Act, as the case may be, and community property or
other joint ownership arrangements between a husband and wife. Beneficial
interests shall include the power to sell, transfer or otherwise dispose of a
Retail Certificate, and the right to receive the proceeds therefrom, as well as
interest and distributions in reduction of the Certificate Principal Balance of
such Certificates payable with respect thereto. The Trustee shall not be under
any duty to determine independently the occurrence of the death of any
beneficial owner. The Trustee may rely entirely upon documentation delivered to
it in establishing the eligibility of any beneficial owner to receive the
priority accorded Deceased Holders in Section 4.8(a). Expenses incurred by the
Trustee in an effort to determine the beneficial ownership interest with respect
to any Principal Distribution Request presented on behalf of a Deceased Holder,
including, without limitation, attorneys fees, shall be paid by the Person
presenting such Principal Distribution Request.

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<PAGE>

     (c) Requests for distributions in reduction of the Certificate Principal
Balance of the Retail Certificates must be made by delivering a Principal
Distribution Request therefor to the Depository Participant or Indirect
Participant that maintains the account evidencing the beneficial owner's
interest in such Certificate. Such Depository Participant or Indirect
Participant should in turn make the request of the Depository (or, in the case
of an Indirect Participant, such Indirect Participant should notify the related
Depository Participant of such request, which Depository Participant should make
the request of the Depository) on a form required by the Depository and provided
to the Depository Participant. In the case of a request on behalf of a Deceased
Holder, a certified copy of the death certificate and any additional appropriate
evidence of death and any tax waivers must be forwarded to the Trustee under
separate cover. Any such requests of Deceased Holders that are incomplete may
not be honored by the Trustee and, if not honored, will lose their priority and
must be resubmitted in proper form. Upon receipt of such Principal Distribution
Request, the Depository will date and time stamp such request and forward such
request to the Trustee. Such requests will be honored on any Distribution Date
only to the extent that they are received by the Depository on or before the
Record Date for such Distribution Date. The Depository may establish such
procedures as it deems fair and equitable to establish the order of receipt of
requests for such distributions received by it on the same day. Principal
Distribution Requests delivered to the Depository after the Record Date for a
particular Distribution Date and requests received in a timely manner but not
accepted with respect to a particular Distribution Date will be treated as
Principal Distribution Requests for the next succeeding Distribution Date and
each succeeding Distribution Date thereafter until each request is accepted or
is withdrawn as provided below. In the case of Principal Distribution Requests
on behalf of Living Holders, the Depository will establish a new order of
priority for each Distribution Date. This order will apply both to previously
unsatisfied Principal Distribution Requests and to newly submitted requests. A
Principal Distribution Request submitted on behalf of a Living Holder who later
dies will become entitled to the priority of a newly submitted request on behalf
of a Deceased Holder upon satisfaction of the requirements set forth above for
requests of a Deceased Holder. Such priority will be effective for each
subsequent Distribution Date if the Trustee has received a certified copy of the
death certificate for such Deceased Holder and any additional appropriate
evidence of death and any requested tax waivers by the last business day of the
preceding calendar month. Each Principal Distribution Request submitted by a
beneficial owner of a Retail Certificate will be held by the Depository until
such request has been accepted or has been withdrawn in writing as provided
herein. None of the Trustee, the Master Servicer, the Seller or the Depositor
shall be liable for any delay in delivery of Principal Distribution Requests or
Withdrawals (as defined below) of such requests by the Depository, a Depository
Participant or any Indirect Participant.

     In the event that any Principal Distribution Requests are rejected by the
Trustee for failure to comply with the requirements of this Section 4.8, the
Trustee shall return such requests to the appropriate Depository Participant
with a copy to the Depository with an explanation as to the reason for such
rejection.

     The Trustee shall maintain a list of those Depository Participants
representing the Certificate Owners of Retail Certificates that have submitted
Principal Distribution Requests, together with the order of receipt and the
amounts of such requests. The Trustee shall notify the Depository and the
appropriate Depository Participants as to which requests should be honored on
each Distribution Date. Requests shall be honored by the Depository in
accordance with the procedures, and subject to the priorities and limitations,
described in this Section 4.8. The exact procedures to be followed by the
Trustee and the Depository for purposes of determining such priorities and
limitations shall

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<PAGE>

be those established from time to time by the Trustee or the Depository, as the
case may be. The decisions of the Trustee and the Depository concerning such
matters shall be final and binding on all affected Persons.

     Any beneficial owner of a Retail Certificate that has made a Principal
Distribution Request may withdraw its request by so notifying in writing the
Depository Participant or Indirect Participant that maintains such beneficial
owner's account (each such withdrawal, a "Withdrawal"). The Depository
Participant should forward the Withdrawal to the Depository on a form required
by the Depository. In the event that such account is maintained by an Indirect
Participant, such Indirect Participant should notify the related Depository
Participant which in turn should forward the Withdrawal of such request, on a
form required by the Depository, to the Depository. If such Withdrawal has not
been received by the Depository and forwarded to the Trustee on or before the
Record Date for the next Distribution Date, the previously made Principal
Distribution Request will be irrevocable with respect to the making of
distributions in reduction of the Certificate Principal Balance of such
Certificate on such Distribution Date.

     (d) To the extent, if any, that amounts available for distribution in
reduction of the Certificate Principal Balance of the Retail Certificates on a
Distribution Date pursuant to Section 4.2 exceed the dollar amount of Principal
Distribution Requests that have been received in respect of the Retail
Certificates by the related Record Date, as provided in Section 4.8(c) above,
distributions in reduction of the Certificate Principal Balance of the Retail
Certificates will be made by mandatory distributions on a Random Lot basis, in
integral multiples equal to $1,000, in reduction thereof without regard to
whether the related Certificate Owners have submitted Principal Distribution
Requests. The Trustee shall notify the Depository of the aggregate amount of the
mandatory distribution by Random Lot in reduction of the Certificate Principal
Balance of the Retail Certificates to be made on the next Distribution Date. The
Depository shall then allocate such aggregate amount among its Depository
Participants on a Random Lot basis. Each Depository Participant and, in turn,
each Indirect Participant, will then select, in accordance with its own
procedures, Retail Certificates from among those held in its accounts to receive
mandatory distributions in reduction of the Certificate Principal Balance of the
Retail Certificates, such that the total amount so selected is equal to the
aggregate amount of such mandatory distributions allocated to such Depository
Participant by the Depository and to such Indirect Participant by its related
Depository Participant, as the case may be. Depository Participants and Indirect
Participants that hold Retail Certificates selected for mandatory distributions
in reduction of the Certificate Principal Balance thereof should provide notice
of such mandatory distributions to the affected Certificate Owners.

     (e) No later than the Closing Date, the Trustee will establish and maintain
with itself for the Retail Certificates a segregated trust account that is an
Eligible Account, which shall be titled "Rounding Account, The Bank of New York,
as Trustee for the registered Holders of First Horizon Mortgage Pass-Through
Certificates, Series 2002-2, Class II-A-14." On the Closing Date, the
Underwriter shall deposit with the Trustee, and the Trustee shall deposit into
the Rounding Account, cash in an amount equal to $999.99. Amounts held in the
Rounding Account shall not be invested in any investment which produces income.
The Rounding Account will be included in the Lower REMIC.

     On each Distribution Date on which a distribution is to be made in
reduction of the Certificate Principal Balance of the Retail Certificates
pursuant to Section 4.2, funds on deposit in the Rounding

                                      -79-

<PAGE>

Account shall be, to the extent needed, withdrawn by the Trustee and applied to
round upward to an integral multiple of $1,000 the aggregate distribution in
reduction of the Certificate Principal Balance to be made thereon. Rounding of
such distribution on the Retail Certificates shall be accomplished, on the first
such Distribution Date, by withdrawing from the Rounding Account the amount of
funds, if any, needed to round the amount otherwise available for such
distribution in reduction of the Certificate Principal Balance of the Retail
Certificates upward to the next integral multiple of $1,000. On each succeeding
Distribution Date on which distributions in reduction of the Certificate
Principal Balance of the Retail Certificates are to be made pursuant to Section
4.2, the aggregate amount of such distributions allocable to the Retail
Certificates shall be applied first to repay any funds withdrawn from the
Rounding Account and not previously repaid, and then the remainder of such
allocable amount, if any, shall be similarly rounded upward to the next integral
multiple of $1,000 and applied as distributions in reduction of the Certificate
Principal Balance of the Retail Certificates; this process shall continue on
succeeding principal Distribution Dates prior to the earlier to occur of the
Cross-Over Date and the next Distribution Date after the Distribution Date on
which the principal portion of any Realized Loss is allocated to the Retail
Certificates until the Certificate Principal Balance thereof has been reduced to
zero. On the earliest of (1) the Cross-Over Date, (2) the next Distribution Date
after the Distribution Date on which the principal portion of any Realized Loss
is allocated to the Retail Certificates and (3) the first Distribution Date
after the Certificate Principal Balance of the Retail Certificates has been
reduced to zero, any remaining amounts in the Rounding Account shall be
distributed to the Holders of the Class II-A-RL Certificates.

     (f)  Notwithstanding any provisions herein to the contrary, on each
Distribution Date coinciding with or after the earlier to occur of the
Cross-Over Date and the next Distribution Date after the Distribution Date on
which the principal portion of any Realized Loss is allocated to the Retail
Certificates, all distributions in reduction of the Certificate Principal
Balance of the Retail Certificates will be made among the Holders and
Certificate Owners of the Retail Certificates, pro rata, based on their
Certificate Principal Balances, and will not be made in integral multiples of
$1,000 or pursuant to requested distributions or mandatory distributions by
Random Lot.

     (g)  In the event that Definitive Certificates representing the Retail
Certificates are issued pursuant to Section 5.2(e) (other than Section
5.2(e)(z)), all requests for distributions or withdrawals of such requests
relating to the Retail Certificates must be submitted to the Trustee, and the
Trustee shall perform the functions described in Section 4.8(a) through (d)
using its own procedures, which procedures shall, to the extent practicable, be
consistent with the procedures described in Section 4.8(a) through (d). In the
event that Definitive Certificates representing the Retail Certificates are
issued pursuant to Section 5.2(e)(z), all distributions of principal shall be
made pro rata in accordance with Section 4.8(f).

                                    ARTICLE V
                                THE CERTIFICATES

     SECTION 5.1 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

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<PAGE>

in excess of the applicable minimum denomination) and aggregate denominations
per Class set forth in the Preliminary Statement.

     Subject to Section 9.2 hereof 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 (i) such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date and (ii) such Holder shall hold (A) 100% of the Class Certificate Balance
of any Class of Certificates or (B) Certificates of any Class with aggregate
principal Denominations of not less than $1,000,000 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 when 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 countersignature and delivery of 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 countersigned by the Trustee by manual signature, and such
countersignature 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 countersignature. On the
Closing Date, the Trustee shall countersign 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 5.2 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 5.6 hereof, 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 satisfactory to the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing.

                                      -81-

<PAGE>

     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. In the event that a
transfer 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 and such
Certificateholder's prospective transferee shall each certify to the Trustee in
writing the facts surrounding the transfer in substantially the forms set forth
in Exhibit I (the "Transferor Certificate") and (i) deliver a letter in
substantially the form of either Exhibit J (the "Investment Letter") or Exhibit
K (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 pursuant to an exemption from the Securities Act. 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 Master 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 and the Depositor, the Seller and the Master
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.

     No transfer of an ERISA-Restricted Certificate shall be made unless the
Trustee shall have received either (i) a representation from the transferee of
such Certificate acceptable to and in form and substance satisfactory to the
Trustee (in the event such Certificate is a Private Certificate, such
requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit J or Exhibit K),
to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan or arrangement subject to
Section 4975 of the Code, nor a person acting on behalf of any such plan or
arrangement, nor using the assets of any such plan or arrangement to effect such
transfer, (ii) in the case of a Private Certificate or a Residual Certificate,
if the purchaser is an insurance company, a representation that the purchaser is
an insurance company which is purchasing such Certificates 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 that
the purchase and holding of such Certificates are covered under PTCE 95-60 or
(iii) in the case of any such ERISA-Restricted Certificate presented for
registration in the name of an employee benefit plan subject to ERISA, or a plan
or arrangement subject to Section 4975 of the Code (or comparable provisions of
any subsequent enactments), or a trustee of any such plan or any other person
acting on behalf of any

                                      -82-

<PAGE>

such plan or arrangement, or using such plan's or arrangement's assets, an
Opinion of Counsel satisfactory to the Trustee, which Opinion of Counsel shall
not be an expense of either the Trustee or the Trust Fund, addressed to the
Trustee to the effect that the purchase or holding of such ERISA-Restricted
Certificate will not result in the assets of the Trust Fund being deemed to be
"plan assets" and subject to the prohibited transaction provisions of ERISA and
the Code and will not subject the Trustee to any obligation in addition to those
expressly undertaken in this Agreement or to any liability. Notwithstanding
anything else to the contrary herein, any purported transfer of an
ERISA-Restricted Certificate to or on behalf of an employee benefit plan subject
to ERISA or to the Code without the delivery to the Trustee of an Opinion of
Counsel satisfactory to the Trustee as described above 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 5.2(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.

          (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 is not a Permitted
     Transferee.

          (iv)  Any attempted or purported Transfer of any Ownership Interest in
     a Residual Certificate in violation of the provisions of this Section
     5.2(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
     5.2(c), then the

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<PAGE>

     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 5.2(b) and this Section 5.2(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 either the Rule 144A Letter
     or the Investment Letter. The Trustee shall be entitled but not obligated
     to recover from any Holder of a Residual Certificate that was in fact not a
     Permitted Transferee at the time it became a Holder or, at such subsequent
     time as it became other than a 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.

          (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 not a Permitted Transferee.

     The restrictions on Transfers of a Residual Certificate set forth in this
Section 5.2(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 Seller or the Master
Servicer, to the effect that the elimination of such restrictions will not cause
the REMIC created 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 not a Permitted Transferee and (b)
to provide for a means to compel the Transfer of a Residual Certificate which is
held by a Person that is not a 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 5.2 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

                                      -84-

<PAGE>

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 advises the
Trustee in writing that it elects to terminate the book-entry system through the
Depository or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Class 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 Master 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 relying on, such instructions.
The Master Servicer 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.

     SECTION 5.3 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 Master Servicer and the
Trustee such security or indemnity as may be required by them to save 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, countersign 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 5.3, 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

                                      -85-

<PAGE>

Section 5.3 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 5.4 Persons Deemed Owners.

     The Master Servicer, the Trustee and any agent of the Master Servicer 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 Master Servicer the Trustee nor any agent of the Master Servicer or the
Trustee shall be affected by any notice to the contrary.

     SECTION 5.5 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 Master
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 Master 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 5.6 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 its Corporate Trust Office for such purposes. The Trustee will give
prompt written notice to the Certificateholders of any change in such location
of any such office or agency.

                                   ARTICLE VI
                      THE DEPOSITOR AND THE MASTER SERVICER

     SECTION 6.1 Respective Liabilities of the Depositor and the Master
Servicer.

     The Depositor and the Master 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 6.2 Merger or Consolidation of the Depositor or the Master
Servicer.

     The Depositor and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation 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

                                      -86-

<PAGE>

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 Master Servicer may be
merged or consolidated, or any Person resulting from any merger or consolidation
to which the Depositor or the Master Servicer shall be a party, or any person
succeeding to the business of the Depositor or the Master Servicer, shall be the
successor of the Depositor or the Master 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 Master Servicer shall be qualified to sell mortgage loans to, and to service
mortgage loans on behalf of, FNMA or FHLMC.

         SECTION 6.3 Limitation on Liability of the Depositor, the Seller, the
Master Servicer and Others.

         None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer 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 Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Seller, the Master Servicer
or any such Person against any breach of representations or warranties made by
it herein or protect the Depositor, the Seller, the Master Servicer or any such
Person from any liability which would otherwise be imposed by reasons of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
the Seller, the Master Servicer and any director, officer, employee or agent of
the Depositor, the Seller or the Master Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Seller, the Master
Servicer and any director, officer, employee or agent of the Depositor, the
Seller or the Master Servicer 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,
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. None of the Depositor, the Seller or the
Master Servicer shall 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 any of the Depositor, the Seller or the Master Servicer may in its
discretion undertake any such action 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, the Seller and the Master Servicer shall be entitled to be reimbursed
therefor out of the applicable subaccount of the Certificate Account.

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<PAGE>

         SECTION 6.4 Limitation on Resignation of Master Servicer.

         The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) upon appointment of a successor servicer and
receipt by the Trustee of a letter from each Rating Agency that such a
resignation and appointment will not result in a downgrading of the rating of
any of the Certificates, or (b) upon determination that its duties hereunder are
no longer permissible under applicable law. Any such determination under clause
(b) permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a successor master servicer shall
have assumed the Master Servicer's responsibilities, duties, liabilities and
obligations hereunder.

                                   ARTICLE VII
                                     DEFAULT

         SECTION 7.1 Events of Default.

         "Event of Default," wherever used herein, means any one of the
         following events:

             (i)    any failure by the Master Servicer to -deposit in the
         applicable subaccount of the Certificate Account or remit to the
         Trustee any payment required to be made under the terms of this
         Agreement, which failure shall continue unremedied for five days after
         the date upon which written notice of such failure shall have been
         given to the Master Servicer by the Trustee or the Depositor or to the
         Master Servicer and the Trustee by the Holders of Certificates having
         not less than 25% of the Voting Rights evidenced by the Certificates;
         or

             (ii)   any failure by the Master Servicer to observe or perform in
         any material respect any other of the covenants or agreements on the
         part of the Master Servicer contained in this Agreement, which failure
         materially affects the rights of Certificateholders, which failure
         continues unremedied for a period of 60 days after the date on which
         written notice of such failure shall have been given to the Master
         Servicer by the Trustee or the Depositor, or to the Master Servicer and
         the Trustee by the Holders of Certificates evidencing not less than 25%
         of the Voting Rights evidenced by the Certificates; provided, however,
         that the 60-day cure period shall not apply to the initial delivery of
         the Mortgage File for Delay Delivery Mortgage Loans nor the failure to
         substitute or repurchase in lieu thereof; or

             (iii)  a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises for the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings, or for
         the winding-up or liquidation of its affairs, shall have been entered
         against the Master Servicer and such decree or order shall have
         remained in force undischarged or unstayed for a period of 60
         consecutive days; or

             (iv)   the Master Servicer shall consent to the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings of or
         relating to the Master Servicer or all or substantially all of the
         property of the Master Servicer; or

                                      -88-

<PAGE>

             (v) the Master Servicer shall admit in writing its inability to pay
         its debts generally as they become due, file a petition to take
         advantage of, or commence a voluntary case under, any applicable
         insolvency or reorganization statute, make an assignment for the
         benefit of its creditors, or voluntarily suspend payment of its
         obligations.

         If an Event of Default described in clauses (i) to (v) of this Section
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, or at the direction of
the Holders of Certificates evidencing not less than 66 2/3% of the Voting
Rights evidenced by the Certificates, the Trustee shall by notice in writing to
the Master Servicer (with a copy to each Rating Agency), terminate all of the
rights and obligations of the Master Servicer under this Agreement and in and to
the Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder. On and after the receipt by the Master Servicer of
such written notice, all authority and power of the Master Servicer hereunder,
whether with respect to the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee. The Trustee, in its capacity as successor to the Master
Servicer, shall thereupon make any Advance which the Master Servicer failed to
make subject to Section 4.1 hereof. The Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Master Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement 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 Master Servicer to pay amounts owed pursuant
to Article VIII. The Master Servicer agrees to cooperate with the Trustee in
effecting the termination of the Master 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 Certificate Account, or
thereafter be received with respect to the Mortgage Loans. All expenses incurred
in the transferring of the servicing duties from the Master Servicer to a
Successor Servicer shall be paid by the Master Servicer, and if not paid by the
Master Servicer, shall be paid from amounts on deposit in the Certificate
Account.

         Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a Scheduled Payment on a Mortgage Loan which was due prior to
the notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3.8(a)(i)
through (viii),and any other amounts payable to such Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder.

         SECTION 7.2 Trustee to Act; Appointment of Successor.

         On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.1 hereof, the Trustee shall, subject to and to
the extent provided in Section 3.4, be the successor to the Master Servicer in
its capacity as master 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 Master Servicer by the
terms and provisions hereof and applicable law including the obligation to make
Advances pursuant to Section 4.1. As compensation therefor, the Trustee shall be
entitled to all funds relating to the Mortgage Loans that the Master Servicer
would have been entitled to charge to the Certificate Account or Distribution
Account if the Master Servicer

                                      -89-

<PAGE>

had continued to act hereunder. Notwithstanding the foregoing, if the Trustee
has become the successor to the Master Servicer in accordance with Section 7.1
hereof, the Trustee may, if it shall be unwilling to so act, or shall, if it is
prohibited by applicable law from making Advances pursuant to Section 4.1 hereof
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 Master
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer hereunder. Any successor to the
Master Servicer shall be an institution which is a FNMA and FHLMC approved
seller/servicer in good standing, which has a net worth of at least $10,000,000,
and which is willing to service the Mortgage Loans and executes and delivers to
the Depositor and the Trustee an agreement accepting such delegation and
assignment, which contains an assumption by such Person of the rights, powers,
duties, responsibilities, obligations and liabilities of the Master Servicer
(other than liabilities of the Master Servicer under Section 6.3 hereof incurred
prior to termination of the Master Servicer under Section 7.1), with like effect
as if originally named as a party to this Agreement; and provided further 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 Master Servicer hereunder, the Trustee, unless the Trustee is
prohibited by law from so acting, shall, subject to Section 3.4 hereof, act in
such capacity as provided above. 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
Master Servicing Fee permitted the Master Servicer hereunder. 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 master 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 Master Servicer to deliver or provide, or any delay in
delivering or providing, any cash, information, documents or records to it.

         Any successor to the Master Servicer as master servicer shall give
notice to the Mortgagors of such change of servicer and shall, during the term
of its service as master servicer maintain in force the policy or policies that
the Master Servicer is required to maintain pursuant to Section 6.5.

         SECTION 7.3 Notification to Certificateholders.

         (1)     Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders and to each Rating Agency.

         (2)     Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.

                                      -90-

<PAGE>

                                  ARTICLE VIII
                             CONCERNING THE TRUSTEE

         SECTION 8.1 Duties of Trustee.

         The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge 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 of which a Responsible Officer of the Trustee has
actual knowledge 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; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other instrument. If any such
instrument is found not to conform in any material respect to the requirements
of this Agreement, the Trustee shall notify the Certificateholders of such
instrument in the event that the Trustee, after so requesting, does not receive
a satisfactorily corrected 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; provided, however, that:

             (i)   unless an Event of Default of which a Responsible Officer of
         the Trustee has actual knowledge shall have occurred and be continuing,
         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 such duties and obligations as are
         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;

             (ii)  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 shall be finally proven that the Trustee was
         negligent in ascertaining the pertinent facts;

             (iii) 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 Holders of Certificates evidencing not
         less than 25% of the Voting Rights of Certificates relating to the

                                      -91-

<PAGE>

         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;

             (iv)  the Trustee shall not be required to expend or risk its own
         funds or otherwise incur financial liability in the performance of any
         of its duties hereunder or the exercise of any of its rights or powers
         if there is reasonable ground for believing that the repayment of such
         funds or adequate indemnity against such risk or liability is not
         assured to it, and none of the provisions contained in this Agreement
         shall in any event require the Trustee to perform, or be responsible
         for the manner of performance of, any of the obligations of the Master
         Servicer under this Agreement except during such time, if any, as the
         Trustee shall be the successor to, and be vested with the rights,
         duties, powers and privileges of, the Master Servicer; and

             (v)   without limiting the generality of this Section 8.1, the
         Trustee shall have no duty (A) to see to any recording, filing, or
         depositing of this Agreement or any agreement referred to herein or any
         financing statement or continuation statement evidencing a security
         interest, or to see to the maintenance of any such recording or filing
         or deposit or to any rerecording, refiling or redepositing of any
         thereof, (B) to see to any insurance, (C) to see to the payment or
         discharge of any tax, assessment, or other governmental charge or any
         lien or encumbrance of any kind owing with respect to, assessed or
         levied against, any part of the Trust Fund other than from funds
         available in the Distribution Account (D) to confirm or verify the
         contents of any reports or certificates of the Servicer delivered to
         the Trustee pursuant to this Agreement believed by the Trustee to be
         genuine and to have been signed or presented by the proper party or
         parties.

         SECTION 8.2 Certain Matters Affecting the Trustee.

         Except as otherwise provided in Section 8.1:

             (i)   the Trustee may request and rely upon and shall be protected
         in acting or refraining from acting upon any resolution, Officers'
         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;

             (ii)  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;

             (iii) 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;

             (iv)  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,

                                      -92-

<PAGE>

         request, consent, order, approval, bond or other paper or document,
         unless requested in writing so to do by Holders of Certificates
         evidencing not less than 25% of the Voting Rights allocated to each
         Class of Certificates; provided, however, that if the payment within a
         reasonable time to the Trustee of the costs, expenses or liabilities
         likely to be incurred by it in the making of such investigation is, in
         the opinion of the Trustee, not assured to the Trustee by the security
         afforded to it by the terms of this Agreement, the Trustee may require
         indemnity satisfactory to the Trustee against such cost, expense or
         liability as a condition to taking any such action. The reasonable
         expense of every such examination shall be paid by the Master Servicer
         or, if paid by the Trustee, shall be repaid by the Master Servicer upon
         demand from the Servicer's own funds.

                  (v)      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 such agent,
         accountant or attorney appointed by the Trustee with due care;

                  (vi)     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;

                  (vii)    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);

                  (viii)   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 in the absence of such notice,
         the Trustee may conclusively assume that there is no Event of Default;

                  (ix)     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 the provisions of this Agreement,
         unless such Certificateholders shall have offered to the Trustee
         reasonable security or indemnity satisfactory to the Trustee against
         the costs, expenses and liabilities which may be incurred therein or
         thereby;

                  (x)      the right of the Trustee to perform any discretionary
         act enumerated in this Agreement shall not be construed as a duty, and
         the Trustee shall not be answerable for other than its negligence or
         willful misconduct in the performance of such act; and

                  (xi)     the Trustee shall not be required to give any bond or
         surety in respect of the execution of the Trust Fund created hereby or
         the powers granted hereunder.

                                      -93-

<PAGE>

         SECTION 8.3 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 or the Seller, as the case may be, 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 counter-signature of the Certificates. The
Trustee shall not be accountable for the use or application by the Depositor or
the Master Servicer of any funds paid to the Depositor or the Master Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from the Certificate
Account by the Depositor or the Master Servicer.

         SECTION 8.4 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 8.5 Trustee's Fees and Expenses.

         The Trustee, as compensation for its activities prior to making the
distributions pursuant to Section 4.2 hereunder, shall be entitled to withdraw
from the Distribution Account on each Distribution Date an amount equal to the
Trustee Fee for such Distribution Date. The Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Master Servicer and
held harmless against any loss, liability or expense (including reasonable
attorney's fees) (i) incurred in connection with any claim or legal action
relating to (a) this Agreement, (b) the Certificates or (c) in connection with
the performance of any of the Trustee's duties hereunder, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of any of the Trustee's duties hereunder or
incurred by reason of any action of the Trustee taken at the direction of the
Certificateholders and (ii) resulting from any error in any tax or information
return prepared by the Master Servicer. Such indemnity shall survive the
termination of this Agreement or the resignation or removal of the Trustee
hereunder. Without limiting the foregoing, the Master Servicer covenants and
agrees, except as otherwise agreed upon in writing by the Depositor and the
Trustee, and except for any such expense, disbursement or advance as may arise
from the Trustee's negligence, bad faith or willful misconduct, to pay or
reimburse the Trustee, for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement with respect to: (A) the reasonable compensation and the expenses and
disbursements of its counsel not associated with the closing of the issuance of
the Certificates, (B) the reasonable compensation, expenses and disbursements of
any accountant, engineer or appraiser that is not regularly employed by the
Trustee, to the extent that the Trustee must engage such persons to perform acts
or services hereunder and (C) printing and engraving expenses in connection with
preparing any Definitive Certificates. Except as otherwise provided herein, the
Trustee shall not be entitled to payment or reimbursement for any routine
ongoing expenses incurred by the Trustee in the ordinary course of its duties as
Trustee, Registrar, Tax Matters Person or Paying Agent hereunder or for any
other expenses.

                                      -94-

<PAGE>

         SECTION 8.6 Eligibility Requirements for 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 either 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). 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 8.6 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 the
provisions of this Section 8.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.7 hereof. The entity serving
as Trustee may have normal banking and trust relationships with the Depositor
and its affiliates or the Master Servicer and its affiliates; provided, however,
that such entity cannot be an affiliate of the Master Servicer other than the
Trustee in its role as successor to the Master Servicer.

         SECTION 8.7 Resignation and Removal of 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 and the
Master Servicer and each Rating Agency not less than 60 days before the date
specified in such notice when, subject to Section 8.8, such resignation is to
take effect, and acceptance by a successor trustee in accordance with Section
8.8 meeting the qualifications set forth in Section 8.6. 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 the provisions of Section 8.6 hereof 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 Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.

         The Holders of Certificates entitled to at least 51% 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 duly authorized, one complete set of which instruments
shall be delivered by the successor Trustee to the Master Servicer, one complete
set to

                                      -95-

<PAGE>

the Trustee so removed and one complete set to the successor so appointed.
Notice of any removal of the Trustee shall be given to each Rating Agency by the
Successor Trustee.

         Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.7 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.8 hereof.

         SECTION 8.8 Successor Trustee.

         Any successor trustee appointed as provided in Section 8.7 hereof shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Master 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 Master 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 8.8 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.6 hereof and its appointment shall
not adversely affect the then current rating of the Certificates.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.8, 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 8.9 Merger or Consolidation of 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
the provisions of Section 8.6 hereof 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 Master 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 to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund

                                      -96-

<PAGE>

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 Master Servicer and the Trustee may consider necessary or
desirable. If the Master 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 8.6 and no notice to Certificateholders of the appointment
of any co-trustee or separate trustee shall be required under Section 8.8.

         Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

                  (i)      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 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 Master 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;

                  (ii)     No trustee hereunder shall be held personally liable
         by reason 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;

                  (iii)    The Trustee may at any time accept the resignation of
         or remove any separate trustee or co-trustee; and

                  (iv)     The Master Servicer, and not the Trustee, shall be
         liable for the payment of reasonable compensation, reimbursement and
         indemnification to any such separate trustee or co-trustee.

         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 to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.

         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

                                      -97-

<PAGE>

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.

         It is intended that the assets with respect to which each REMIC
election is to be made, as set forth in the preliminary statement shall
constitute, and that the conduct of matters relating to such assets shall be
such as to qualify such assets as, a "real estate mortgage investment conduit"
as defined in and in accordance with the REMIC Provisions. In furtherance of
such intention, the Trustee covenants and agrees that it shall act as agent (and
the Trustee is hereby appointed to act as agent) on behalf of any such REMIC and
that in such capacity it shall: (a) prepare and file, or cause to be prepared
and filed, 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 or cause to be prepared and filed 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 such REMIC,
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 or cause to be furnished 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 or cause to be furnished to the
Internal Revenue Service, on Forms 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 or cause to be made elections that such assets 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, or cause to be prepared and
forwarded, 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 without limitation, the calculation of any original issue discount
using the prepayment assumption; (e) provide information necessary for the
computation of tax imposed on the transfer of a Residual Certificate to a Person
that is not a 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); (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; (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 such REMIC prior to 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) ensure that federal, state or local income tax or information
returns shall 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 any such REMIC,

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including but not limited to the income, expenses, assets and liabilities
thereof 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 any such REMIC 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
any such REMIC, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any tax item of any such
REMIC, and otherwise act on behalf of any such REMIC in relation to any tax
matter or controversy involving it.

         In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within ten (10) 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, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby 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.

         In the event that any tax is imposed on "prohibited transactions" of
any REMIC as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of any REMIC as defined in Section 860G(c) of the Code, on
any contribution to any REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, if not paid as otherwise provided for
herein, such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement which breach was caused by its negligence or willful misconduct,
(ii) the Master Servicer, in the case of any such minimum tax, or if such tax
arises out of or results from a breach by the Master Servicer or Seller of any
of their obligations under this Agreement, (iii) the Seller, if any such tax
arises out of or results from the Seller's obligation to repurchase a Mortgage
Loan pursuant to Section 2.2 or 2.3 or (iv) in all other cases, or in the event
that the Trustee, the Master Servicer or the Seller fails to honor its
obligations under the preceding clauses (i), (ii) or (iii), any such tax will be
paid with amounts otherwise to be distributed to the Certificateholders, as
provided in Section 3.8(b).

         SECTION 8.12 Periodic Filings.

         Pursuant to written instructions from the Depositor, the Trustee shall
prepare, execute and file all periodic reports required under the Securities
Exchange Act of 1934 in conformity with the terms of the "no-action" relief
granted by the SEC to issuers of asset-backed securities such as the
Certificates. In connection with the preparation and filing of such periodic
reports, the Depositor and the Master Servicer shall timely provide to the
Trustee all material information available to them which is required to be
included in such reports and not known to them to be in the possession of the
Trustee and such other information as the Trustee reasonably may request from
either of them and otherwise reasonably shall cooperate with the Trustee. 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

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Trustee's inability or failure to obtain any information not resulting from its
own negligence or willful misconduct.

                                   ARTICLE IX
                                   TERMINATION

         SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage
Loans.

         Subject to Section 9.3, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
Trust Fund at the price equal to the sum of (i) 100% of the Stated Principal
Balance of each Mortgage Loan (other than a Mortgage Loan that has been
foreclosed and subject to clause (ii)) plus one month's accrued interest thereon
at the applicable Adjusted Mortgage Rate and (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 Master
Servicer at the expense of the Master Servicer and (y) the Stated Principal
Balance of each Mortgage Loan related to any REO Property, in each case plus
accrued and unpaid interest thereon at the applicable Adjusted Mortgage Rate 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 earlier of (i) 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, and (ii) the Latest Possible Maturity Date.
The right to purchase all Mortgage Loans and REO Properties pursuant to clause
(a) above shall be conditioned upon the Pool Principal Balance for both Mortgage
Pools, at the time of any such repurchase, aggregating less than ten percent of
the aggregate Cut-off Date Principal Balance of the Mortgage Loans.

         SECTION 9.2 Final Distribution on the Certificates.

         If on any Determination Date, the Master 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 Certificate Account, the Master Servicer shall
direct the Trustee promptly to send a final distribution notice to each
Certificateholder. If the Master Servicer elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.1, at least 20 days prior to the date notice
is to be mailed to the affected Certificateholders, the Master Servicer shall
notify the Depositor and the Trustee of the date the Master Servicer intends to
terminate the Trust Fund and of the applicable repurchase price of the Mortgage
Loans and REO Properties.

         Notice of any termination of the Trust Fund, 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 earlier than the 10th
day and no later than the 15th day of the month next preceding the month of such
final distribution. Any such notice 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

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<PAGE>

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 Master Servicer will give such notice to each
Rating Agency at the time such notice is given to Certificateholders.

         In the event such notice is given, the Master Servicer shall cause all
funds in the Certificate Account to be remitted to the Trustee for deposit in
the applicable subaccounts of 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 Master Servicer the Mortgage 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, in the order
set forth in Section 4.2 hereof, on the final Distribution Date, in the case of
the Certificateholders, in proportion to their respective Percentage Interests,
with respect to Certificateholders of the same Class, an amount equal to (i) as
to each Class of Regular Certificates, the Class Certificate Balance thereof
plus accrued interest thereon (or on their Notional Principal Amount, if
applicable) in the case of an interest bearing Certificate, 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 Holders of each of the
Class II-A-RU and Class II-A-RL Certificates shall be entitled to all unclaimed
funds and other assets of the Trust Fund, held for distribution to such
Certificateholders, which remain subject hereto.

         SECTION 9.3 Additional Termination Requirements.

         (a)      In the event the Master Servicer exercises its purchase option
as provided in Section 9.1, the Trust Fund and each REMIC created hereunder
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 Master Servicer, to the effect that the failure to comply with the
requirements of this Section 9.3 will not (i) result in the imposition of taxes
on "prohibited transactions" on the REMIC as defined in Section 860F of the
Code, or (ii) cause any REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding:

                  (1) Within 90 days prior to the final Distribution Date set
         forth in the notice given by the Master Servicer under Section 9.2, the
         Master Servicer shall prepare and the Trustee, at the expense of the
         "tax matters person," shall adopt a plan of complete liquidation within

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<PAGE>

         the meaning of Section 860F(a)(4) of the Code for each REMIC created
         hereunder which, as evidenced by an Opinion of Counsel addressed to the
         Trustee (which opinion shall not be an expense of the Trustee or the
         Tax Matters Person), meets the requirements of a qualified liquidation;
         and

                  (2)   Within 90 days after the time of adoption of such plans
         of complete liquidation, the Trustee shall sell all of the assets of
         the Trust Fund to the Master Servicer for cash in accordance with
         Section 9.1.

         (2)      The Trustee as agent for any REMIC established hereunder
hereby agrees to adopt and sign such a plan of complete liquidation upon the
written request of the Master Servicer, and the receipt of the Opinion of
Counsel referred to in Section 9.3(a)(1) and to take such other action in
connection therewith as may be reasonably requested by the Master Servicer.

         (3)      By their acceptance of the Certificates, the Holders thereof
hereby authorize the Master Servicer to prepare and the Trustee to adopt and
sign plans of complete liquidation.

                                    ARTICLE X
                                   [RESERVED]

                                   ARTICLE XI
                            MISCELLANEOUS PROVISIONS

         SECTION 11.1 Amendment.

         This Agreement may be amended from time to time by the Depositor, the
Master Servicer and the Trustee 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, the Seller or the Master 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 delivered to the Trustee (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;
provided, however, that the amendment 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. The Trustee, the
Depositor and the Master Servicer also may at any time and from time to time
amend this Agreement 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 REMIC as a REMIC under the
Code, (ii) avoid or minimize the risk of the imposition of any tax on the 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,

                                     -102-

<PAGE>

provided that the Trustee have 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 by the Depositor,
the Master Servicer and the Trustee with the consent of the Holders of a
Majority in Interest of each Class of Certificates 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 66%, 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 the REMIC or the Certificateholders or cause the REMIC
to fail to qualify as a REMIC at any time that any Certificates are outstanding.

         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 each
Certificateholder and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section 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 11.1.

         SECTION 11.2 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 properties

                                     -103-

<PAGE>

subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Master
Servicer at its expense, but only upon direction a majority of the
Certificateholders 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 (by
facsimile or otherwise) 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 11.3 Governing Law.

         THIS AGREEMENT (OTHER THAN SECTION 2.1 HEREOF) 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 2.1
OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HERETO AND THE CERTIFICATEHOLDER UNDER SUCH SECTION BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.

         SECTION 11.4 Intention of Parties.

         (a) It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans by the Seller to the Depositor be, and be construed as,
absolute sales thereof. It is, further, not the intention of the parties that
such conveyances be deemed a pledge thereof by the Seller to the Depositor.
However, in the event that, notwithstanding the intent of the parties, the
Mortgage Loans are held to be the property of the Seller, or if for any other
reason this Agreement is held or deemed to create a security interest in 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 conveyance of the Mortgage Loans provided for in this Agreement shall
be deemed to be an assignment and a grant by the Seller to the Depositor, for
the benefit of the Certificateholders, of a security interest in all of the
Mortgage Loans, whether now owned or hereafter acquired.

         The Seller, for the benefit of the Certificateholders, 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
Mortgage Loans, 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 Seller shall arrange for
filing any Uniform Commercial Code continuation statements in connection with
any security interest granted or assigned to the Depositor for the benefit of
the Certificateholders.

         (b) It is the express intent of the parties hereto that the conveyance
of the Trust Fund by the Depositor to the Trustee be, and be construed as,
absolute sales thereof to the Trustee. It is,

                                     -104-

<PAGE>

further, not the intention of the parties that such conveyances be deemed a
pledge thereof by the Depositor to the Trustee. However, in the event that,
notwithstanding the intent of the parties, such assets are held to be the
property of the Depositor, or if for any other reason this Agreement is held or
deemed to create a security interest in 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 conveyance 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 that constitute the Trust Fund, whether now owned
or hereafter acquired.

         The Depositor, for the benefit of the Certificateholders, 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 11.5 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 Master Servicer or the
                  Trustee and the appointment of any successor;
         4.       The repurchase or substitution of Mortgage Loans pursuant to
                  Section 2.3; and
         5.       The final payment to Certificateholders.
         6.       Any rating action involving the long-term credit rating of the
                  Master Servicer, which notice shall be made by first-class
                  mail within two Business Days after the Trustee gains actual
                  knowledge thereof.

         In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:

         1.       Each report to Certificateholders described in Section 4.6;
         2.       Each annual statement as to compliance described in Section
                  3.16;
         3.       Each annual independent public accountants' servicing report
                  described in Section 3.17; and
         4.       Any notice of a purchase of a Mortgage Loan pursuant to
                  Section 2.2, 2.3 or 3.11.

         (b)      All directions, demands, authorizations, consents, waivers,
communications and notices hereunder shall be in writing and shall be deemed to
have been duly given when delivered to by first class mail, facsimile or courier
(a) in the case of the Depositor, First Horizon Asset Securities Inc., 4000
Horizon Way, Irving, Texas 75063, Attention: Wade Walker; (b) in the case of the
Master Servicer, First Horizon Home Loan Corporation, 4000 Horizon Way, Irving,
Texas 75063, Attention: Wade Walker or such other address as may be hereafter
furnished to the Depositor and the Trustee by the Master Servicer in writing;
(c) in the case of the Trustee, The Bank of New York, 5 Penn

                                     -105-

<PAGE>

Plaza, 16/th/ Floor, New York, New York 10001, Attention: Diane Pickett, or such
other address as the Trustee may hereafter furnish to the Depositor or Master
Servicer; and (d) in the case of the Rating Agencies, the address specified
therefor in the definition corresponding to the name of such Rating Agency.
Notices to Certificateholders shall be deemed given when mailed, first class
postage prepaid, to their respective addresses appearing in the Certificate
Register.

         SECTION 11.6 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 11.7 Assignment.

         Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.

         SECTION 11.8 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
Rights evidenced by the Certificates 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

                                     -106-

<PAGE>

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 11.8, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

         SECTION 11.9 Inspection and Audit Rights.

         The Master Servicer agrees that, on reasonable prior notice, it will
permit and will cause each Subservicer to permit any representative of the
Depositor or the Trustee during the Master Servicer's normal business hours, to
examine all the books of account, records, reports and other papers of the
Master 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 Depositor or the Trustee 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 Master
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 out-of-pocket expense incident to the
exercise by the Depositor or the Trustee of any right under this Section 11.9
shall be borne by the party requesting such inspection; all other such expenses
shall be borne by the Master Servicer or the related Subservicer.

         SECTION 11.10 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 11.11 Limitations on Actions; No Proceedings.

         (a) Other than pursuant to this Agreement, or in connection with or
incidental to the provisions or purposes of this Agreement, the trust created
hereunder shall not (i) issue debt or otherwise borrow money, (ii) merge or
consolidate with any other entity reorganize, liquidate or transfer all or
substantially all of its assets to any other entity, or (iii) otherwise engage
in any activity or exercise any power not provided for in this Agreement.
         (b) Notwithstanding any prior termination of this Agreement, the
Trustee, the Master Servicer and the Depositor shall not, prior to the date
which is one year and one day after the termination of this Agreement,
acquiesce, petition or otherwise invoke or cause any Person to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Depositor or the Trust Fund under any federal or
state bankruptcy, insolvency or other similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Depositor or the Trust Fund or any substantial part of their respective
property, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust Fund.

                                   * * * * * *

                                     -107-

<PAGE>

         IN WITNESS WHEREOF, the Depositor, the Trustee, the Seller and the
Master 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.

                                 FIRST HORIZON ASSET SECURITIES INC.,
                                   as Depositor

                                 By:____________________________________________
                                    Wade Walker
                                    Senior Vice President - Asset Securitization

                                 THE BANK OF NEW YORK,
                                   not in its individual capacity, but solely as
                                   Trustee

                                 By:___________________________________________
                                    Diane Pickett
                                    Vice President

                                 FIRST HORIZON HOME LOAN CORPORATION,
                                   as Seller and Master Servicer

                                 By:____________________________________________
                                    Wade Walker
                                    Senior Vice President - Asset Securitization

FHASI 2002-2
Pooling Servicing Agreement - Signature Page<PAGE>

Kemper Investors Life Insurance Company
A Stock Life Insurance Company
1600 McConnor Parkway                                                   ZURICH
Schaumburg, Illinois 60196-6801                                          LIFE

GROUP FLEXIBLE PREMIUM MODIFIED GUARANTEED, FIXED AND VARIABLE DEFERRED ANNUITY
MASTER POLICY

This Master Policy takes effect on the date agreed upon by Us and the Master
Policyholder.

The provisions and conditions on the following pages of this policy are as fully
part of the Master Policy as if they are recorded above the signatures below.
All provisions and conditions of this policy are subject to the laws of the
jurisdiction in which the policy is delivered.

Signed for Kemper Investors Life Insurance Company at its home office, in
Schaumburg, Illinois.

/s/____________________________     /s/____________________________________
Secretary                           President

Policy Form No. L-8823                                   Group Policy No. K1005

<PAGE>

                               TABLE OF CONTENTS                            Page

MASTER POLICY SCHEDULE                                 Follows Table of Contents

DEFINITIONS                                                                  1-3

GENERAL PROVISIONS                                                           3-4
   The Entire Contract                                                       3
   Modification of Contract                                                  3
   Certificates                                                              3
   Incontestability                                                          3
   Change of Annuity Date                                                    3
   Assignment                                                                3
   Due Proof of Death                                                        3
   Reserves, Certificate Values and Death Benefits                           3
   Non-Participating                                                         3
   Reports                                                                   3
   Premium Taxes                                                             4
   Creditors                                                                 4

OWNER, BENEFICIARY AND ANNUITANT PROVISIONS                                  4-5
   Owner                                                                     4
   Change of Ownership                                                       4
   Beneficiary Designation and Change of Beneficiary                         4
   Death of Beneficiary                                                      4
   Annuitant                                                                 5

PURCHASE PAYMENT PROVISIONS                                                  5
   Purchase Payment Limitations                                              5
   Place of Payment                                                          5

FIXED ACCOUNT PROVISIONS                                                     5
   Fixed Account Certificate Value                                           5

GUARANTEE PERIOD PROVISIONS                                                  6
   Guarantee Period                                                          6
   Guarantee Period Value                                                    6
   Market Value Adjustment                                                   6

VARIABLE ACCOUNT PROVISIONS                                                  6-7
   Separate Account                                                          6
   Liabilities of the Separate Account                                       6
   Subaccounts                                                               6
   Fund                                                                      7
   Rights Reserved by the Company                                            7
   Accumulation Unit Value                                                   7
   Investment Experience Factor                                              7

TRANSFER AND WITHDRAWAL PROVISIONS                                           8-9
   Transfers During the Accumulation Period                                  8
   Withdrawals During the Accumulation Period                                8
   Withdrawal Charges                                                        8
   Transfers and Withdrawal Procedures                                       9
   Deferment of Withdrawal or Transfer                                       9

L-8823

<PAGE>

                               TABLE OF CONTENTS                            Page

DEATH BENEFIT PROVISIONS                                                   9-10
   Amount Payable Upon Death                                               9
   Payment of Death Benefits During the Accumulation Period                10
   Spousal Continuation                                                    10

ANNUITY PERIOD PROVISIONS                                                  10-16
   Annuity Options                                                         10
   Option 1 Fixed Installment Annuity                                      10
   Option 2 Life Annuity                                                   10
   Option 3 Life Annuity with Installments Guaranteed                      10
   Option 4 Joint and Survivor Annuity                                     11
   Option 5 Joint and Survivor Annuity with Installments Guaranteed        11
   Other Options                                                           11
   Commutability                                                           11
   Election of Annuity Option                                              11
   Electing a Fixed or Variable Annuity Option                             11-12
   Fixed Annuity                                                           12
   Variable Annuity                                                        12
   Annuity Unit Value                                                      12-13
   Basis of Annuity Options                                                13
   Withdrawal Charge Upon Annuitization                                    13
   Transfers Between Subaccounts                                           13
   Conversions from a Fixed Account Payment                                13-14
   Conversions to a Fixed Annuity Payment                                  14
   Payment of Death Benefits During the Annuity Period                     15
   Disbursement Upon Death of Annuitant: Under Options 1, 3 or 5           15-16
   Supplementary Agreement                                                 16
   Date of First Payment                                                   16
   Evidence of Age, Sex and Survival                                       16
   Misstatement of Age or Sex                                              16

ANNUITY OPTION TABLE                                          Follows Page 16

ENDORSEMENTS, if any                              Follow Annuity Option Table

L-8823

<PAGE>

                             Master Policy Schedule

Group Contract number                                 K1005

Owner                                                 XYZ Trust

Type of Contract                                      [Nonqualified]

Minimum Initial Purchase Payment                      [Non-Qualified $10,000]
                                                      [Qualified $2,000]

Minimum Subsequent Purchase Payment:                  [$500 for nonqualified
                                                      certificates, $50 for all
                                                      other certificate types]
                                                      [$100 if using Systematic
                                                      Accumulation Plan]

Maximum Total Purchase Payments:                      [$1,000,000]

Minimum Initial Account Allocation:                   [$500 for each subaccount,
                                                      fixed account or each
                                                      GPA.]

Minimum Subsequent Account Allocation:                [$50 for each subaccount
                                                      or fixed account. $500
                                                      for each GPA.]

Minimum Certificate Value after a Partial Withdrawal: [$5,000]

8823

<PAGE>

                             Master Policy Schedule

Class 1 Accumulation Options:

      Fixed Accumulation Option
      -------------------------
      Fixed Account

      Market Value Adiustment options:
      --------------------------------
      1 Year Guarantee Period Account      6 Year Guarantee Period Account
      2 Year Guarantee Period Account      7 Year Guarantee Period Account
      3 Year Guarantee Period Account      8 Year Guarantee Period Account
      4 Year Guarantee Period Account      9 Year Guarantee Period Account
      5 Year Guarantee Period Account      10 Year Guarantee Period Account

      Variable Subaccount options available on Issue Date:
      ----------------------------------------------------

      Scudder Money Market I
      Scudder Money Market II

8823

<PAGE>

                             Master Policy Schedule

Class 2 Accumulation Options:

      Fixed Accumulation Option
      -------------------------
      None

      Market Value Adjustment options:
      --------------------------------
      None

      Variable Subaccount options available on Issue Date:
      ----------------------------------------------------

      Alger American Balanced
      Alger American Leveraged All Cap
      CS Emerging Markets
      CS Global Post-Venture Capital
      Dreyfus Socially Responsible Fund
      Dreyfus VIF Midcap Stock
      Scudder 21st Century Growth
      Scudder Capital Growth
      Scudder Global Discovery
      Scudder Growth and Income
      Scudder Health Sciences
      Scudder International
      Scudder Aggressive Growth
      Scudder Blue Chip
      Scudder Contrarian Value
      Scudder Global Blue Chip
      Scudder Government Securities
      Scudder Growth
      Scudder High Yield
      Scudder International Select Equity
      Scudder Investment Grade Bond
      Scudder Small Cap Growth
      Scudder Small Cap Value
      Scudder Technology Growth
      Scudder Total Return
      SVS Dreman Financial Services
      SVS Dreman High Return Equity
      SVS Dynamic Growth (Invesco)
      SVS Focus Value+Growth
      SVS Focused Large Cap Growth
      SVS Growth And Income
      SVS Growth Opportunities
      SVS Index 500
      SVS Mid-Cap Growth
      SVS Strategic Equity
      SVS Venture Value
      SVS Dreman Small Cap Value
      SVS MFS Strategic Value

8823

<PAGE>

                             Master Policy Schedule

Fixed Account

      A fixed account will be available for purchase payments and transfers of
      existing values. For premiums and transfers allocated to the fixed
      account, the initial interest rate is guaranteed through the end of the
      calendar month in which the purchase payment or transfer was made and for
      12 additional calendar months thereafter. Subsequent fixed account
      interest rates are guaranteed for 12 calendar months.

      The interest rate will never be less than the minimum guaranteed interest
      rate.

      Minimum guaranteed interest rate:                                3.00%

Charges

Mortality and Expense Risk charge:                [1.55%]

Administration charge:                            [0.15%]

The above annual charges will be assessed as a daily percentage on the Separate
Account Certificate Value.

[Optinal Enhanced Death Benefit rider charge:]    Option 1 [0.20%]
                                                  Option 2 [0.35%]

The Optional Enhanced Death Benefit rider charge applies to the Class 2
accumulation options. This charge does not apply to the Class 1 accumulation
options.

Records Maintenance Charge:                       [$30] per contract year

      We will assess an annual records maintenance charge on each Certificate
      Anniversary and upon total withdrawal. However, if the Certificate Value
      is greater than or equal to [$50,000] on a Certificate Anniversary or date
      of total withdrawal, we will not assess the records maintenance charge on
      that Certificate Anniversary or date of total withdrawal. We will not
      assess this charge after the Annuity Date.

8823

<PAGE>

                             Master Policy Schedule

Market Value Adjustment Formula

       The Market Value Adjustment is determined by the application of the
       following formula:

       Market Value Adjustment = Guarantee Period Value x
       [[(1+l) / (1+j)]/T/365/ -1]

       Where,

       I is the guaranteed interest rate being credited to the Guarantee Period
       Value subject to the Market Value Adjustment.

       J is the current interest rate declared by the Company as of the
       effective date of the application of the Market Value Adjustment, for
       current allocation to a Guarantee Period, the length of which is equal to
       the balance of the Guarantee Period for the Guarantee Period Value
       subject to the Market Value Adjustment, rounded to the next lower number
       of complete years.

       T is the number of days remaining in the Guarantee Period.

8823

<PAGE>

DEFINITIONS

ACCUMULATED GUARANTEE PERIOD VALUE - The sum of the Guarantee Period Values.

ACCUMULATION PERIOD - The period between the Issue Date and the Annuity Date.

ACCUMULATION UNIT - An accounting unit of measure used to calculate the value of
each Subaccount. Each Subaccount will have an Accumulation Unit for each
combination of charges.

ADMINISTRATION CHARGE - A charge deducted in the calculation of the Accumulation
Unit value and the Annuity Unit value for a portion of Our administrative costs.

AGE - The attained age.

ANNIVERSARY VALUE - The Certificate Value calculated on each Certificate
Anniversary during the Accumulation Period.

ANNUITANT - The person during whose lifetime the Annuity is to be paid. Joint
Annuitants may be named under Non-qualified Certificates and any reference to
Annuitant shall include joint Annuitants.

ANNUITY - A series of payments paid in accordance with the Certificate which
begin on the Annuity Date.

ANNUITY DATE - The date on which the Certificate matures and Annuity payments
begin. The original Annuity Date is stated in the Certificate Schedule.

ANNUITY PERIOD - The period that starts on the Annuity Date.

ANNUITY UNIT - An accounting unit of measure used to calculate the amount of
Variable Annuity payments after the first Annuity payment.

CERTIFICATE - An individual Certificate which We issue to the Owner as evidence
of the rights and benefits under this Master Policy.

CERTIFICATE ANNIVERSARY - An anniversary of the Issue Date.

CERTIFICATE VALUE - The sum of the Fixed Account Certificate Value plus the
Separate Account Certificate Value plus the Accumulated Guarantee Period Value.

CERTIFICATE YEAR - A one year period starting on the Issue Date and successive
Certificate Anniversaries.

DEBT - The principal of any outstanding loan plus any accrued interest. Loans
are available under certain Qualified Plans.

FIXED ACCOUNT - The General Account of KILICO to which the Owner may allocate
all or a portion of Purchase Payments or Certificate Value.

FIXED ACCOUNT CERTIFICATE VALUE - The value of amounts allocated under the
Certificate to the Fixed Account.

FIXED ANNUITY - An Annuity payment plan that does not vary as to dollar amount
with investment experience.

FREE WITHDRAWAL ALLOWANCE - Amount of Purchase Pavments subject to a withdrawal
charge that may be withdrawn each Certificate Year without incurring a
withdrawal charge as described in the Certificate Schedule.

FUND - An investment company or separate series thereof, in which the
Subaccounts of the Separate Account invest.

GENERAL ACCOUNT - Our assets other than those allocated to the Separate Account,
the non-unitized separate account or any other separate account.

L-8823                                                                    Page 1

<PAGE>

DEFINITIONS (continued)

GUARANTEE PERIOD - A period of time during which an amount is to be credited
with a guaranteed interest rate, subject to a Market Value Adjustment prior to
the end of the Guarantee Period. The Guarantee Periods initially offered are
stated in the Certificate Schedule.

GUARANTEE PERIOD VALUE - The (1) Purchase Payments allocated or amounts
transferred to a Guarantee Period; plus (2) interest credited; minus (3)
withdrawals, previously assessed withdrawal charges and transfers; adjusted for
(4) any applicable Market Value Adjustment previously made.

ISSUE DATE - The Issue Date stated in the Certificate Schedule.

MARKET ADJUSTED VALUE - A Guarantee Period Value adjusted by the Market Value
Adjustment formula prior to the end of a Guarantee Period.

MARKET VALUE ADJUSTMENT - An adjustment of Guarantee Period Values in accordance
with the Market Value Adjustment formula prior to the end of the Guarantee
Period. The adjustment reflects the change in the value of the Guarantee Period
Value due to changes in interest rates since the date the Guarantee Period
commenced. The Market Value Adjustment formula is stated in the Certificate
Schedule.

MORTALITY AND EXPENSE RISK CHARGE - A charge deducted in the calculation of the
Accumulation Unit value and the Annuity Unit value. It is for Our assumption of
mortality risks and expense guarantees. This charge is shown in the Certificate
Schedule.

NONQUALIFIED - The Certificate issued other than as a Qualified Plan.

PAYEE - A recipient of periodic payments under the Certificate.

PURCHASE PAYMENTS - The dollar amount We receive in U.S. currency to buy the
benefits the Certificate provides.

QUALIFIED PLAN - A Certificate issued under a retirement plan which qualifies
for favorable income tax treatment under Section 401, 403, 408, 408A, or 457 of
the Internal Revenue Code as amended.

If the Certificate is issued under a Qualified Plan additional provisions may
apply. The rider or amendment to the Certificate used to qualify it under the
applicable section of the Internal Revenue Code will indicate the extent of
change in the provisions.

RECORDS MAINTENANCE CHARGE - A charge assessed against the Owner's Certificate
as specified in the Certificate Schedule.

SEPARATE ACCOUNT - A unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 known as the KILICO
Variable Annuity Separate Account.

SEPARATE ACCOUNT CERTIFICATE VALUE - The sum of the Subaccount Values of the
Certificate on a Valuation Date.

SUBACCOUNTS - The subdivisions of the Separate Account, the assets of which
consist solely of shares of the corresponding Fund portfolio.

SUBACCOUNT VALUE - The value of the Owner's interest in each Subaccount.

VALUATION DATE - Each business day that applicable law requires that We value
the assets of the Separate Account. Currently this is each day that the New York
Stock Exchange is open for trading.

VALUATION PERIOD - The period that starts at the close of a Valuation Date and
ends at the close of the next succeeding Valuation Date.

L-8823                                                                    Page 2

<PAGE>

DEFINITIONS (continued)

VARIABLE ANNUITY - An Annuity payment plan which varies as to dollar amount
because of Subaccount investment experience.

WE, OUR, US - Kemper Investors Life Insurance Company, Schaumburg, Illinois.

OWNER - The party(s) named as Owner unless later changed as provided in the
Certificate. Under a Nonqualified Certificate when more than one person is named
as Owner, the term Owner means joint Owners. The Owner may be changed during the
lifetime of the Owner and prior to the Annuity Date. The Owner, prior to
distribution of any death benefit, has the exclusive right to exercise every
option and right conferred by the Certificate.

GENERAL PROVISIONS

The Entire Contract

The Master Policy, Master Policy Application, any written application attached
to the Certificate, and any endorsements and riders constitute the entire
contract between the parties.

Modification of Contract

Only Our president, secretary and assistant secretaries have the power to
approve a change or waive any provisions of the Master Policy or the
Certificate. Any such modifications must be in writing. No agent or person other
than the officers named has the authority to change or waive the provisions of
the Master Policy or the Certificate.

Upon notice to the Owner, the Certificate may be modified by Us as is necessary
to comply with any law or regulation issued by a governmental agency to which We
or the Separate Account is subject or as is necessary to assure continued
qualification of the Certificate under the Internal Revenue Code or other laws
relating to retirement plans or annuities or as otherwise may be in the Owner's
best interest of the Master Policyholder and Owners. In the event of a
modification, We may make appropriate endorsement to the Certificate and We will
obtain all required regulatory approvals.

Certificates

We will issue an individual Certificate to each Owner as evidence of his or her
rights and benefits under the Master Policy.

Incontestability

We cannot contest the Certificate after it has been in force for two years from
the Issue Date.

Change of Annuity Date

The Owner may write to Us prior to the death of an Owner and the first Annuity
payment date and request a change of the Annuity Date. The new Annuity Date must
not be earlier than the minimum Annuity Date or beyond the maximum Annuity Date
stated in the Certificate Schedule.

Assignment

No assignment under the Certificate is binding unless We receive it in writing.
We assume no responsibility for the validity or sufficiency of any assignment.
The rights of the Owner, Annuitant and beneficiarv are subject to the assignment
after it has been recorded by Us. Any claim is subject to proof of interest of
the assignee.

Due Proof of Death

We must receive written proof of death of the Owner when a death benefit is
payable. The proof may be a certified death certificate, or any other proof
satisfactory to Us.

Reserves, Certificate Values and Death Benefits

All reserves are equal to or greater than those required by statute. Any
available Certificate Value and death benefit are not less than the minimum
benefits required by the statutes of the state in which the Certificate is
delivered.

Non-Participating

The Certificate does not pay dividends. It will not share in Our surplus or
earnings.

Reports

At least once each Certificate Year We will send the Owner a statement showing
Purchase Payments received, interest credited, investment experience, and
charges made since the last report, as well as any other information required
by statute.

L-8823                                                                    Page 3

<PAGE>
GENERAL PROVISIONS (continued)

Premium Taxes

We will make a deduction for state premium taxes in certain situations. On any
Certificate subject to premium tax, as provided under applicable law, the tax
will be deducted from: a. the Purchase Payments when We receive them; b. the
Certificate Value upon total withdrawal; or c. from the total Certificate Value
applied to any Annuity option at the time Annuity payments start. In no event
will an amount be deducted for premium taxes before the Company has incurred a
tax liability under applicable state law.

Creditors

The proceeds of the Certificate and any payment under an Annuity option will be
exempt from the claims of creditors and from legal process to the extent
permitted by law.

OWNER, BENEFICIARY AND ANNUITANT PROVISIONS

Owner

Before the Annuity Date and prior to the death of the Owner, the Owner may
exercise every option and right conferred by the Certificate including the right
of assignment. The joint Owners must agree to the exercise of any option or
right if more than one Owner is named.

Change of Ownership

The Owner may change the Owner by written request before the Annuity Date and
prior to the death of the Owner. The Owner must furnish information sufficient
to clearly identify the new Owner to Us. The change is subject to any existing
assignment of the Certificate. After We receive the change, it will take effect
on the date the written notice is signed. However, any action taken by Us before
the change is recorded by Us remains in effect. Any change is subject to the
payment of any proceeds. We may require the Owner to return the Certificate to
Us for endorsement of a change.

Beneficiary Designation and
Change of Beneficiary

The beneficiary initially designated is shown in the Certificate Schedule. In
the case of joint owners, the surviving joint Owner is automatically the primary
beneficiary of any death benefit resulting from the death of a joint Owner. The
owner may change the beneficiary if the Owner sends Us written notice in a form
acceptable to Us. Changes are subject to the following conditions:

1.   Prior to the Annuity Date the change must be filed while the Owner is
     alive;

2.   After the Annuity Date the change must be filed while the Owner and the
     Annuitant(s) are alive;

3.   The Certificate must be in force at the time the Owner files a change;

4.   Such change must not be prohibited by the terms of an existing assignment,
     beneficiary designation or other restriction;

5.   After We receive the change, it will take effect on the date the written
     notice was signed. However, any action taken by Us before the change form
     is recorded by Us will remain in effect;

6.   The request for change must provide information sufficient to identify the
     new beneficiary; and

7.   In the case of joint Owners, the designation of a beneficiary other than
     the surviving joint Owner(s) will be deemed to be a contingent
     beneficiary(s).

We may require the Owner to return the Certificate to Us for endorsement of a
change.

Death of Beneficiary

The interest of a beneficiary who dies before the distribution of the death
benefit will pass to the other beneficiaries, if any, share and share alike,
unless otherwise provided in the beneficiary designation. If no beneficiary
survives or is named, the distribution will be made to the Owner's estate when
the Owner dies.

L-8823                                                                    Page 4

<PAGE>

Annuitant

The initial Annuitant is shown in the Certificate Schedule. Prior to the Annuity
Date, an Annuitant may be replaced or added unless the Owner is a non-natural
person. At all times there must be at least one Annuitant. If the Annuitant
dies, the youngest Owner will become the new Annuitant unless a new Annuitant is
otherwise named. Upon the death of an Annuitant prior to the Annuity Date, a
death benefit is not paid unless the Owner is a non-natural person.

PURCHASE PAYMENT PROVISIONS

Purchase Payment
Limitations

The Minimum Initial Purchase Payment, subsequent Purchase Payment, and maximum
total Purchase Payment limits are shown in the Certificate Schedule.

The minimum initial allocation or transfer to a Guarantee Period, Fixed Account,
or to a Subaccount is shown in the Certificate Schedule.

We reserve the right to waive or modify these limits and to aggregate multiple
Certificates with the same Owner and/or Annuitants in applying these limits. We
also reserve the right to not accept any Purchase Payment.

Place of Payment

All Purchase Payments under the Certificate must be paid to Us at Our home
office or such other location as We may select. We will notify the Owner and any
other interested parties in writing of such other locations. Purchase Payments
received by an agent will not be considered received by Us.

FIXED ACCOUNT PROVISIONS

Fixed Account
Certificate Value

The Fixed Account Certificate Value includes:

1.   The Owner's Purchase Payments allocated to the Fixed Account; plus

2.   amounts transferred to the Fixed Account; plus

3.   interest credited; minus

4.   withdrawals, previously assessed withdrawal charges and transfers from the
     Fixed Account, minus

5.   any applicable portion of the Records Maintenance Charge.

The initial Fixed Account interest rate credited to the initial Purchase Payment
is shown in the Certificate Schedule and is in effect through the period also
shown in the Certificate Schedule. We will declare the Fixed Account interest
rate applicable to the initial Purchase Payment for each subsequent interest
rate period at the beginning of each subsequent interest rate period shown in
the Certificate Schedule.

We will declare the Fixed Account interest rate with respect to each subsequent
Purchase Payment or transfer received. Any such Purchase Payment or transfer We
receive will be credited that rate through the end of the interest rate period
shown in the Certificate Schedule. We will declare the Fixed Account interest
rate applicable to each subsequent Purchase Payment or transfer for each
subsequent interest rate period at the beginning of each subsequent interest
rate period.

We reserve the right to declare the Fixed Account current interest rate(s) based
upon the Issue Date, the date We receive a Purchase Payment or the date of
account transfer.

We calculate the interest credited to the Fixed Account by compounding daily, at
daily interest rates, rates that would produce at the end of 12 months a result
identical to the one produced by applying an annual interest rate.

The minimum guaranteed Fixed Account interest rate is shown in the Certificate
Schedule.

L-8823                                                                    Page 5

<PAGE>

GUARANTEE PERIOD PROVISIONS

Guarantee Period

We hold all amounts allocated to a Guarantee Period in a non-unitized separate
account. The non-unitized separate account may also hold amounts from other
contracts and certificates we issue. The assets of this separate account equal
to the reserves and other liabilities of this separate account will not be
charged with liabilities arising out of any other business we may conduct. The
initial Guarantee Periods available under the Certificate are shown in the
Certificate Schedule.

Guarantee Period Value

On any Valuation Date, the Guarantee Period Value includes:

1.   The Owner's Purchase Payments allocated to the Guarantee Period; plus

2.   amounts transferred to the Guarantee Period; plus

3.   interest credited; minus

4.   withdrawals, previously assessed withdrawal charges and transfers from the
     Guarantee Period; minus

5.   any applicable portion of the Records Maintenance Charge; adjusted for

6.   any applicable Market Value Adjustment previously made.

The Guarantee Period(s) initially elected and the interest rate(s) initially
credited are shown in the Certificate Schedule. The initial interest rate
credited to subsequent Purchase Payments or transfers will be declared at the
time the payment is received. At the end of a Guarantee Period, We will declare
a guaranteed interest rate applicable for the next subsequent Guarantee Period.

We calculate the interest credited to the Guarantee Period Value by compounding
daily, at daily interest rates, rates which would produce at the end of 12
months a result identical to the one produced by applying an annual interest
rate.

Market Value Adjustment

The Market Value Adjustment formula is stated in the Certificate Schedule. This
formula is applicable for both an upward and downward adjustment to a Guarantee
Period Value when, prior to the end of a Guarantee Period, such value is:

1.   taken as a total or partial withdrawal;

2.   applied to purchase an Annuity option; or

3.   transferred to another Guarantee Period, the Fixed Account, or a
     Subaccount.

However, a Market Value Adjustment will not be applied to any Guarantee Period
Value transaction effected within 30 days after the end of the applicable
Guarantee Period.

VARIABLE ACCOUNT PROVISIONS

Separate Account

The variable benefits under the Certificate are provided through the KILICO
Variable Annuity Separate Account. The Separate Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. It is a separate investment account maintained
by Us into which a portion of Our assets has been aflocated for the Certificate
and may be allocated for certain other contracts and certificates we issue.

Liabilities of the
Separate Account

The assets equal to the reserves and other liabilities of the Separate Account
will not be charged with liabilities arising out of any other business We may
conduct. We will value the assets of the Separate Account on each Valuation Date

Subaccounts

The Separate Account consists of multiple Subaccounts. We may from time to time,
combine or remove Subaccounts in the Separate Account and establish additional
Subaccounts of the Separate Account. In such event, We may permit the Owner to
select other Subaccounts under the Certificate. However, the right to select any
other Subaccount is limited by the terms and conditions We may impose on such
transactions.

L-8823                                                                    Page 6

<PAGE>

VARIABLE ACCOUNT PROVISIONS (continued)

Fund                      Each Subaccount of the Separate Account will buy
                          shares of a Fund or a separate series of a Fund. Each
                          Fund is registered under the Investment Company Act
                          of 1940 as an open-end diversified management
                          investment company. Each series of a Fund represents
                          a separate investment portfolio which corresponds to
                          one of the Subaccounts of the Separate Account.

                          If We establish additional Subaccounts, each new
                          Subaccount will invest in a new series of a Fund or
                          in shares of another investment company. We may also
                          substitute other investment companies.

Rights Reserved by        We reserve the right, subject to compliance with the
the Company               current law or as it may be changed in the future:

                          1.  To operate the Separate Account in any form
                              permitted under the Investment Company Act of
                              1940 or in any other form permitted by law;

                          2.  To take any action necessary to comply with or
                              obtain and continue any exemptions from the
                              Investment Company Act of 1940 or to comply with
                              any other applicable law;

                          3.  To transfer any assets in any Subaccount to
                              another Subaccount or to one or more Separate
                              Accounts, or the General Account or to add,
                              combine or remove Subaccounts in the Separate
                              Account;

                          4.  To delete the shares of any of the portfolios of
                              a Fund or any other open-end investment company
                              and to substitute, for the Fund shares held in
                              any Subaccount, the shares of another portfolio
                              of a Fund or the shares of another investment
                              company or any other investment permitted by law;
                              and

                          5.  To change the way We assess charges, but not to
                              increase the aggregate amount above that currently
                              charged to the Separate Account and the Funds in
                              connection with this Certificate.

                          When required by law, We will obtain the Owner's
                          approval of such changes and the approval of any
                          regulatory authority.

Accumulation Unit Value   Each Subaccount has an Accumulation Unit value for
                          each combination of charges. When Purchase Payments
                          or other amounts are allocated to a Subaccount, a
                          number of units are purchased based on the relevant
                          Accumulation Unit value of the Subaccount at the end
                          of the Valuation Period during which the allocation is
                          made. When amounts are transferred out of or deducted
                          from a Subaccount, units are redeemed in a similar
                          manner. The value of a Subaccount on any Valuation
                          Date is the number of units held in the Subaccount
                          times the relevant Accumulation Unit value on that
                          Valuation Date.

                          An Accumulation Unit value for each subsequent
                          Valuation Period is the relevant investment experience
                          factor for that period multiplied by the Accumulation
                          Unit value for the period immediately preceding. The
                          Accumulation Unit values for each Valuation Period are
                          applied to each day in a Valuation Period. The number
                          of Accumulation Units will not change as a result of
                          investment experience; however, adding, deleting or
                          modifying a rider for the Certificate will result in
                          a change in the number of Accumulation Units.

Investment Experience     Each Subaccount has an investment experience factor
Factor                    for each combination of charges. The investment
                          experience factor of a Subaccount for a combination of
                          charges for a Valuation Period is determined by
                          dividing 1. by 2. and subtracting 3. from the result,
                          where:

                          1.  is the net result of:
                                a.  the net asset value per share of the
                                    investment held in the Subaccount
                                    determined at the end of the current
                                    Valuation Period; plus

                                b.  the per share amount of any dividend or
                                    capital gain distributions made by the
                                    investments held in the Subaccount, if the
                                    "ex-dividend" date occurs during the current
                                    Valuation Period; plus or minus

                                c.  a credit or charge for any taxes reserved
                                    for the current Valuation Period which We
                                    determine resulted from the investment
                                    operations of the Subaccount;

                          2.  is the net asset value per share of the investment
                              held in the Subaccount, determined at the end of
                              the last Valuation Period;

                          3.  is the factor representing the sum of the Separate
                              Account charges currently applicable for the
                              number of days in the Valuation Period.

L-8823                                                                   Page 7

<PAGE>

TRANSFER AND WITHDRAWAL PROVISIONS

Transfers During the      Transfers may be made among the Subaccounts, Guarantee
Accumulation Period       Periods and the Fixed Account subject to the following
                          conditions:

                          1.  The minimum amount which maybe transferred is the
                              Minimum Subsequent Account Allocation stated in
                              the Certificate Schedule or, if smaller, the
                              remaining value in the Fixed Account or a
                              Subaccount or Guarantee Period.

                          2.  No partial transfer will be made if the remaining
                              value of the Fixed Account, Subaccount, or
                              Guarantee Period will be less than the Minimum
                              Initial Account Allocation stated in the
                              Certificate Schedule.

                          3.  No transfer may be made within seven calendar
                              days of the date on which the first Annuity
                              payment is due.

                          4.  We reserve the right to impose a 15 calendar day
                              waiting period between transfers for any transfer
                              in excess of 12 in a Certificate Year.

                          5.  We reserve the right to assess a $10.00 charge
                              for each transfer in excess of 12 in a Certificate
                              Year.

                          6.  Any transfer from a Guarantee Period is subject to
                              a Market Value Adjustment unless the transfer is
                              effected within thirty days after the end of the
                              applicable Guarantee Period.

                          Any transfer request must clearly specify:

                          1.  the amount which is to be transferred; and

                          2.  the names of the accounts which are affected.

                          For the Fixed Account and Guarantee Period accounts,
                          We will transfer Purchase Payments and all related
                          accumulation received in a given Certificate Year, in
                          the chronological order We receive them.

                          We reserve the right at any time and without notice to
                          any party, to terminate, suspend, or modify these
                          transfer rights.

Withdrawals During the    During the Accumulation Period, the Owner may withdraw
Accumulation Period       all or part of the Certificate Value reduced by any
                          withdrawal charge, Debt and applicable premium taxes,
                          and adjusted by any applicable Market Value
                          Adjustment.

                          Withdrawals are subject to all of the following
                          conditions:

                          1.  The Owner must return the Certificate to Us if the
                              Owner elects a total withdrawal.

                          2.  Each withdrawal must be at least $500 or the value
                              that remains in the Fixed Account, Subaccount or
                              Guarantee Period if smaller.

                          3.  The Minimum Subsequent Account Allocation stated
                              in the Certificate Schedule must remain in the
                              account after the Owner makes a withdrawal unless
                              the account is eliminated by such withdrawal.

                          4.  We must receive a written request that indicates
                              the amount of the withdrawal from the Fixed
                              Account and each Subaccount and Guarantee Period.

                          5.  Withdrawals will reduce each investment option on
                              a proportional basis unless the Owner directs Us
                              otherwise.

                          6.  Withdrawals will first reduce the Owner's Purchase
                              Payments in the chronological order in which they
                              were received and then reduce any earnings.

                          7.  If a partial withdrawal would reduce the
                              Certificate Value to less than the Minimum
                              Certificate Value after a Partial Withdrawal
                              stated in the Certificate Schedule, the partial
                              withdrawal will be processed as a total
                              withdrawal.

L-8823                                                                    Page 8

<PAGE>

TRANSFER AND WITHDRAWAL PROVISIONS (continued)

Withdrawal Charges

Withdrawal charges are shown in the Certificate Schedule. For purposes of
calculating Withdrawal Charges, We will assume that amounts are withdrawn in the
following order:

1.   Purchase Payments no longer subject to a Withdrawal Charge,

2.   Free Withdrawal Allowance,

3.   Purchase Payments in chronological order in which they were received,

4.   Earnings.

Transfer and Withdrawal Procedures

We will withdraw or transfer from the Fixed Account or Guarantee Periods as of
the Valuation Date that follows the date We receive the Owner's written or
telephone transfer request. To process a withdrawal, the request must contain
all required information.

We will redeem the necessary number of Accumulation Units to achieve the dollar
amount when the withdrawal or transfer is made from a Subaccount. We will reduce
the number of Accumulation Units credited in each Subaccount by the number of
Accumulation Units redeemed. The reduction in the number of Accumulation Units
is determined based on the Accumulation Unit value at the end of the Valuation
Period when We receive the request, provided the request contains all required
information. We will pay the withdrawal amount within seven calendar days after
the date We receive the request, except as provided below.

Deferment of Withdrawal or Transfer

If the withdrawal or transfer is to be made from a Subaccount, We may suspend
the right of withdrawal or transfer or delay payment more than seven
calendar days:

1.   during any period when the New York Stock Exchange is closed other than
     customary weekend and holiday closings;

2.   when trading in the markets normally utilized is restricted, or an
     emergency exists as determined by the Securities and Exchange Commission,
     so that disposal of investments or determination of the Accumulation Unit
     value is not practical; or

3.   for such other periods as the Securities and Exchange Commission by order
     may permit for protection of Owners.

We may defer the payment of a withdrawal or transfer from the Fixed Account or
Guarantee Periods, for the period permitted by law. This can never be more than
six months after the Owner sends Us a written request. During the period of
deferral, We will continue to credit interest, at the then current interest
rate(s), to the Fixed Account Certificate Value and/or each Guarantee Period
Value.

DEATH BENEFIT PROVISIONS

Amount Payable Upon Death

When a death benefit is payable We will pay the greater of 1. or 2. below, less
Debt.

1.   the Certificate Value, excluding any negative but including any positive
     market value adjustment.

2.   the total amounts of purchase payments, less previous Purchase Payments
     withdrawn and withdrawal charges.

We compute the Certificate Value at the end of the Valuation Period following
our receipt of due proof of death and the return of the Certificate. We compute
2. above as of the Owner's date of death.

Payment of Death Benefits During the Accumulation Period

A death benefit will be paid to the beneficiary upon the death of the Owner, or
a joint Owner, during the Accumulation Period. If the Owner is a non-natural
person, a death benefit will be paid to the beneficiary upon the death of an
Annuitant prior to the Annuity Date.

We will pay the death benefit to the beneficiary after We receive due proof of
death. We will then have no further obligation under the Certificate.

L-8823                                                                   Page 9

<PAGE>

DEATH BENEFIT PROVISIONS (continued)

The entire interest in the Certificate must be distributed within five years
from the date of death unless it is applied under an Annuity Option or the
spouse continues the Certificate as described below.

The beneficiary may elect to have the death benefit distributed as stated in
Annuity Period Provisions Option 1 provided the beneficiary's life expectancy is
not less than 10 years; or Options 2 or 3 as described in the Annuity Period
Provisions of the Certificate, based on the life expectancy of the beneficiary
as prescribed by federal regulations unless the Owner has restricted the right
to make such an election. The beneficiary must make this choice within sixty
days of the time We receive due proof of death, and distributions must commence
within one year of the date of death.

If the beneficiary is a non-natural person, the beneficiary must elect that the
entire death benefit be distributed within five years of the date of death.

Spousal Continuation

If the Certificate was issued as a Nonqualified Plan or an Individual Retirement
Annuity ("IRA") and the Owner's spouse is the primary beneficiary when the Owner
dies, the Owner's surviving spouse may elect to be the successor Owner of the
Certificate. This is known as a Spousal Continuation. In such a case, no death
benefit will be payable upon the Owner's death.

Upon the Owner's death, theOwner's surviving spouse may continue the Certi-
ficate thereby waiving claim to the death benefit otherwise payable. Electing
to continue the Certificate underthe Spousal Continuation provision of the
Certificate will affect how thecharges and benefits under the Certificate and
applicable endorsements are calculated or determined.

If a Spousal Continuation is elected, the Certificate Value will be adjusted to
equal the amount otherwise payable as a death benefit under the Certificate
subject to the following:

A.   The Certificate Value will be adjusted to equal the amount of the death
     benefit. If the death benefit otherwise payable exceeds the Certificate
     Value one day prior to the date of continuance, such excess will be
     credited to the money market Subaccount listed in the Certificate Schedule.
     This amount may subsequently be transferred from the money market
     Subaccount to other options under the Certificate.

B.   Upon the death of the Owner's surviving spouse before the Annuity Date, the
     amount of the death benefit payable will be determined as if: (1) the
     Certificate was issued on the date of continuance; (2) the Certificate
     Value applied on the date of continuance resulted from our receipt of an
     initial Purchase Payment,

C.   Withdrawal charges will not apply to withdrawals made from the Certificate
     Value credited on the date of continuance. Withdrawal Charges will apply to
     Purchase Payments made after the date of continuance.

D.   The Certificate may not be continued under a subsequent Spousal
     Continuation.

We may make certain riders available to the surviving spouse at the time of
continuance.

ANNUITY PERIOD PROVISIONS

Annuity Options

The Owner may annuitize the Certificate under one of the following Annuity
options:

Option I
Fixed Installment Annuity

We will make monthly payments for 10 years.

Option 2
Life Annuity

We will make monthly payments while the Annuitant is alive.

0ption 3
Life Annuity with
Installments Guaranteed

We will make monthly payments for a 10 year certain period and thereafter while
the Annuitant is alive.

L-8823                                                                  Page 10

<PAGE>

ANNUITY PERIOD PROVISIONS (continued)

Option 4 Joint and Survivor Annuity

We will pay the full monthly income while both Annuitant(s) are alive. Upon the
death of either Annuitant, We will continue to pay a percentage of the original
monthly payment. The percentage payable must be selected at the time the Annuity
option is chosen. The'percentages available are 50%, 66 2/3%, 75% and 100%.

Option 5 Joint and Survivor Annuity with Installments Guaranteed

We will make monthly payments for a 10 year certain period and thereafter while
the Annuitants are alive.

Other Options

We may make other Annuity options available.

Commutability

For annuitizations under the Fixed and Variable Annuity options with a 10 year
certain period, the Owner may elect a commutable Annuity option. The Owner must
make this election prior to the Annuity Date. Under the commutable Annuity
option, partial lump sum payments are available during the certain period.

Lump sum payments are available once each year following the Annuity Date and
may not be elected until 13 months after annuitization has started.

The Owner may elect to receive a partial lump sum payment of the present value
of the remaining payments in the period certain subject to the restrictions
described below. If a partial lump sum payment is elected, the remaining
payments in the period certain will be reduced based on the ratio of the amount
of the partial withdrawal to the amount of the present value of the remaining
installments in the period certain prior to the withdrawal. If the Annuitant is
living after the period certain is over, payments will resume without regard to
any lump sum payments made during the certain period.

Each time that a partial lump sum payment is made, We will determine the
percentage that the payment represents of the present value of the remaining
installments in the period certain. The sum of these percentages over the life
of the Certificate cannot exceed 75% for Nonqualified Certificates, or 100% for
Certificates issued under a Qualified Plan.

In determining the amount of the lump sum payment that is available, the present
value of the remaining installments in the certain period will be calculated
based on the applicable interest rate.

For a Fixed Annuity option the applicable interest rate is the greater of:

(a) the ten year treasury constant maturity plus 3%, and
(b) the rate used to determine the initial payment plus 2%.

For a Variable Annuity option the applicable interest rate is the assumed
investment rate plus 2%.

The amount of each payment for purposes of determining the present value of any
variable installments will be the payment next scheduled after the request for
commutation is received.

The terms for the commutability of an Annuity option under any Certificate rider
are specified in the rider.

Election of Annuity Option

We must receive an election of an Annuity option in writing. The Owner may make
an election on or before the Annuity Date provided the Annuitant is
alive.

A subsequent change of beneficiary, or an assignment of the Certificate will
revoke an election unless the assignment provides otherwise.

L-8823                                                                  Page 11

<PAGE>

ANNUITY PERIOD PROVISIONS (continued)

Upon election of an Annuity option, We agree to pay the Owner on the payment due
dates as stated in the specifications page of the supplementary agreement. The
Owner may direct Us, in writing, to make payments to another person. An option
cannot be changed after the first Annuity payment is made. If the total
Certificate Value is applied under one of the Annuity options, the Certificate
must be surrendered to Us.

If an Annuity option is not elected by the Annuity Date, an Annuity will be paid
under Option 3 if there is one Annuitant on the Annuity Date and Option 5 if
there are joint Annuitants on the Annuity Date.

Electing a Fixed or Variable Annuity Option

The Owner may elect a Fixed Annuity, a Variable Annuity or a combination of
both. The portion of the Certificate Value the Owner elects to be paid as a
Fixed Annuity, if any, will be transferred to Our GeneralAccount. We must
receive the Owner's Fixed and Variable allocation election inwriting at least
seven days prior to the Annuity Date. If We do not receivenotification from the
Owner, all the Certificate Value will be paid to the Owneras a Fixed Annuity.

If the Owner's allocation includes a Variable Annuity payment, payments will
reflect the investment performance of the Subaccounts in accordance with the
allocation on the Annuity Date. Allocations will not be changed thereafter,
except as provided in the Transfers Between Subaccounts section.

Payments for all options are derived from the applicable tables. Current Annuity
rates will be used if they produce greater payments than those quoted in the
Certificate. The age in the tables is the Age of the Annuitant on the last
birthday before the first payment is due.

The option selected must result in a payment that is at least equal to Our
minimum payment, according to Our rules, at the time the Annuity option is
chosen. If at any time the payment is less than the minimum payment, We have the
right to increase the period between payments to quarterly, semi-annual or
annual so that the payment is at least equal to the minimum payment or to make
payment in one lump sum.

Fixed Annuity

The portion of the Certificate Value the Owner elected to have paid to the Owner
as a Fixed Annuity less any withdrawal charge, charges for other benefits, and
Records Maintenance Charge will be used to determine the Fixed Annuity monthly
payment in accordance with the Annuity option selected. Any Accumulated
Guarantee Period Values will be adjusted for any applicable Market Value
Adjustment as well.

Variable Annuity

The portion of the Certificate Value the Owner elects to have paid to the Owner
as a Variable Annuity is first reduced by any withdrawal charge, charges for
other benefits, and Records Maintenance Charge. The value that remains is used
to determine the first monthly Annuity payment. The first monthly Annuity
payment is based on the guaranteed Annuity option shown in the Annuity Option
Table.

The dollar amount of subsequent payments may increase or decrease depending on
the investment experience of each Subaccount to which Certificate Value is
allocated. The Owner may not have more than three Subaccounts at one time. The
number of Annuity Units per payment will remain fixed for each Subaccount unless
a transfer is made. If a transfer is made, the number of Annuity Units per
payment will change. Some Annuity options provide for a reduction in the income
level upon the death of an Annuitant, which will reduce the number of Annuity
units.

L-8823                                                                  Page 12

<PAGE>

ANNUITY PERIOD PROVISIONS (continued)

The number of Annuity Units for each Subaccount is calculated by dividing a. by
b. where:

a.   is the amount of the monthly payment that can be attributed to that
     Subaccount; and

b.   is the Annuity Unit value for that Subaccount at the end of the Valuation
     Period.

The Valuation Period includes the date on which the payment is made.

Monthly Annuity payments, after the first payment, are calculated by summing up,
for each Subaccount, the product of a. multiplied by b. where:

a.   is the number of Annuity Units per payment in each Subaccount; and

b.   is the Annuity Unit value for that Subaccount at the end of the Valuation
     Period.

Annuity Unit Value

The Valuation Period includes the date on which the payment is made. The value
of an Annuity Unit for each Subaccount at the end of any Valuation Period is
determined by the result of a. multiplied by b. by c. where:

a.   is the Annuity Unit value for the immediately preceding Valuation Period;
     and

b.   is the net investment experience factor for the Valuation Period for which
     the Annuity Unit value is being calculated; and

c.   is the interest factor of .99993235 per calendar day of such subsequent
     Valuation Period to offset the effect of the assumed rate of [2.50%] per
     year used in the Annuity Option Table. A different interest rate factor
     will be used if an assumed rate other than [2.50%] is used in the Annuity
     Option Table.

Basis of Annuity Options

The guaranteed monthly payments are based on an interest rate of [2.50%] per
year and, where mortality is involved, the ["Annuity 2000 Table" developed by
the Society of Actuaries projected using Scale G to the year 2015.] We may also
make available Variable Annuity payment options based on assumed investment
rates other than [2.50%], but not greater than 5.00%.

Withdrawal Charge Upon Annuitization

Upon annuitization, a withdrawal charge will be applied as shown in the
Certificate Schedule after application of any applicable Market Value
Adjustment. The withdrawal charge is waived when the Owner elects an Annuity
option which provides either an income benefit period of ten years or more
or a benefit under which payment is contingent on the life of the Annuitant(s).

Transfers Between Subaccounts

During the Annuity Period, the Owner may make transfers between Subaccounts
subject to the following:

1.   The Owner must send Us written notice in a form satisfactory to Us.

2.   Transfers between Subaccounts are prohibited during the first year of the
     Annuity Period; subsequent transfers are limited to one per year.

3.   The Owner may not have more than three Subaccounts at any time.

4.   At least $5,000 of Annuity Unit value must be transferred from a
     Subaccount, unless the transfer will eliminate the Owner's interest
     in the Subaccount.

5.   At least $5,000 of Annuity Unit value must remain in the Subaccount after
     a transfer, unless the transfer will eliminate the Owner's interest
     in the Subaccount.

L-8823                                                                   Page 13

<PAGE>

ANNUITY PERIOD PROVISIONS (continued)

6.   If We receive notice of a transfer between Subaccounts more than seven (7)
     days before an Annuity payment date, the transfer is effective during the
     Valuation Period after the date We receive the notice.

7.   If We receive notice of a transfer between Subaccounts less than seven (7)
     days before an Annuity Payment date, the transfer is effective during the
     Valuation Period after the Annuity Payment date.

We reserve the right at any time and without notice to any party to terminate,
suspend or modify these transfer privileges.

When a transfer is made between Subaccounts, the number of Annuity Units per
payment attributable to a Subaccount to which the transfer is made is equal to
a. multiplied by b. divided by c., where:

a.   is the number of Annuity Units per payment in the Subaccount from which the
     transfer is being made;

b.   is the Annuity Unit value for the Subaccount from which the transfer is
     being made; and

c.   is the Annuity Unit value for the Subaccount to which the transfer is being
     made.

Conversion from a Fixed Annuity Payment

During the Annuity Period, the Owner may convert Fixed Annuity payments
to Variable Payment Annuity payments subject to the following:

1.   The Owner must send Us written notice in a form satisfactory to Us.

2.   At least $30,000 of annuity reserve value must be transferred from Our
     General Account, unless the transfer will eliminate the annuity reserve
     value.

3.   At least $30.000 of annuity reserve value must remain in Our General
     Account after a transfer, unless the transfer will eliminate the annuity
     reserve value.

4.   Conversions from a Fixed Annuity payment are available only on an
     anniversary of the Annuity Date.

5.   We must receive notice at least thirty (30) days prior to the anniversary.

We reserve the right at any time and without notice to any party to terminate,
suspend or modify these conversion privileges.

When a conversion is made from a Fixed Annuity payment to a Variable Annuity
payment, the number of Annuity Units per payment attributable to a Subaccount to
which the conversion is made is equal to a. divided by b. divided by c., where:

a.   is the annuity reserve being transferred from Our General Account;

b.   is the Annuity Unit value for the Subaccount to which the transfer is
     being made; and

c.   is the present value of $1.00 per payment period using the attained Age(s)
     of the Annuitant(s) and any remaining payment that may be due at the time
     of the transfer.

The annuity reserve value equals the present value of the remaining Fixed
Annuity payments using the same interest and mortality basis used to calculate
the Fixed Annuity payments.

Money converted to a Variable Annuity payment will be applied under the same
Annuity option as originally selected.

L-8823                                                                   Page 14

<PAGE>

ANNUITY PERIOD PROVISIONS (continued)

Conversion to a Fixed Annuity Payment

During the Annuity Period, the Owner may convert Variable Annuity payments to
Fixed Annuity payments subject to the following:

1.   The Owner must send Us written notice in a form satisfactory to Us.

2.   At least $30,000 of Annuity Unit value must be transferred to Our General
     Account from the Subaccounts.

3.   At least $5,000 of Annuity Unit value must remain in a Subaccount after a
     transfer, unless the transfer will eliminate the Owner's interest in the
     Subaccount.

4.   Conversions to a Fixed Annuity payment are available only on an anniversary
     of the Annuity Date.

5.   We must receive notice at least thirty (30) days prior to the anniversary.

We reserve the right at any time and without notice to any party to terminate,
suspend or modify these conversion privileges.

When a conversion is made from a Variable Annuity payment to a Fixed Annuity
payment, the number of Annuity Units per payment attributable to a Subaccount
from which the conversion is made is the product of a. multiplied by b.
multiplied by c., where:

a.   is the number of Annuity Units representing the Owner's interest in such
     Subaccount per Annuity payment;

b.   is the Annuity Unit value for such Subaccount; and

c.   is the present value of $1.00 per payment period using the attained Age(s)
     of the Annuitant(s) and any remaining payment that may be due at the time
     of the transfer.

Money converted to a Fixed Annuity payment will be applied under the same
Annuity option as originally selected.

Payment of Death Benefits During the Annuity Period

If an Annuitant dies after the Annuity Date, the death benefit, if any, will
depend on the Annuity option in effect.

If an Owner, who is not also an Annuitant, dies after the Annuity Date, the
following provisions apply:

1.   If the Owner was the sole Owner, the remaining Annuity payments will be
     payable to the beneficiary in accordance with the Annuity option in effect.
     The beneficiary will become the Owner.

2.   If the Certificate has joint Owners, the Annuity payments will be payable
     to the surviving joint Owner in accordance with the terms of the Annuity
     option in effect. Upon the death of the surviving joint Owner, the
     beneficiary becomes the Owner.

Disbursement Upon Death of Annuitant: Under Options 1, 3 or 5

When the Annuitant or surviving joint Annuitant dies, We will automatically
continue any unpaid installments for the remainder of the certain period under
Option 1, Option 3 or Option 5 to the Payee. However, if the Owner elects within
60 days of Our receipt of due proof of death, We will pay a commuted value of
the remaining payments of the certain period. In determining the commuted value,
the present value of the remaining payments in the certain period will be
calculated based on the applicable interest rate.

L-8823                                                                   Page 15

<PAGE>

ANNUITY PERIOD PROVISIONS (continued)

For a Fixed Annuity option the applicable interest rate is the greater of:

(a)  the ten year treasury constant maturity plus 3%, and

(b)  the rate used to determine the initial payment plus 2%.

For a Variable Annuity option the applicable interest rate is the assumed
investment rate plus 2%.

The amount of each payment for purposes of determining the present value of any
variable installments will be determined by applying the Annuity Unit value next
determined following Our receipt of due proof of death.

Supplementary Agreement

A supplementary agreement will be issued to reflect payments that will be made
under an Annuity option.

Date of First Payment

Interest, under an Annuity option, will start to accrue on the effective date of
the supplementary agreement. The supplementary agreement will provide details on
the payments to be made.

Evidence of Age, Sex and Survival

We may require satisfactory evidence of the Age, sex and the continued survival
of any person on whose life the income is based.

Misstatement of Age or Sex

If the Age or sex of the Annuitant has been misstated, the amount payable under
the Certificate will be such as the Purchase Payments sent to Us would
have purchased at the correct Age or sex. Interest not to exceed 6% compounded
each year will be charged to any overpayment or credited to any underpayment
against future payments We may make under the Certificate.

L-8823                                                                   Page 16

<PAGE>

                              ANNUITY OPTION TABLE

           AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF VALUE APPLIED

Option One - Fixed Installment Annuity

Number
of years         Monthly
selected         Payment

   10             9.39
<table>
<caption>
Options Two and Three - Life Annuity With Installments Guaranteed

Age of      Monthly Payments Guaranteed     Age of   Monthly Payments Guaranteed
Male                                        Female
Payee                                       Payee
<S>           <C>         <C>               <C>            <C>
              None        120                              None        120

55            4.00       3.96               55             3.71        3.70
56            4.08       4.04               56             3.78        3.76
57            4.17       4.12               57             3.86        3.83
58            4.26       4.21               58             3.93        3.91
59            4.36       4.30               59             4.02        3.99
60            4.46       4.40               60             4.10        4.07
61            4.57       4.50               61             4.20        4.16
62            4.69       4.60               62             4.29        4.25
63            4.81       4.71               63             4.40        4.35
64            4.95       4.83               64             4.51        4.45
65            5.09       4.95               65             4.63        4.56
66            5.24       5.08               66             4.75        4.68
67            5.41       5.22               67             4.89        4.80
68            5.58       5.36               68             5.03        4.93
69            5.76       5.50               69             5.19        5.06
70            5.96       5.65               70             5.36        5.21
71            6.17       5.81               71             5.54        5.36
72            6.39       5.97               72             5.73        5.52
73            6.62       6.13               73             5.94        5.69
74            6.88       6.30               74             6.17        5.86
75            7.14       6.47               75             6.41        6.04
76            7.43       6.65               76             6.68        6.23
77            7.73       6.83               77             6.96        6.42
78            8.06       7.01               78             7.26        6.62
79            8.41       7.18               79             7.59        6.82
80            8.79       7.36               80             7.95        7.02
81            9.19       7.54               81             8.34        7.23
82            9.62       7.71               82             8.76        7.43
83           10.08       7.88               83             9.21        7.62
84           10.57       8.04               84             9.71        7.81
85           11.10       8.20               85            10.24        8.00

</table>
Option Four - Joint and 100% Survivor Annuity

<TABLE>
<caption>
Age of                                         Age of Female Payee
Male
Payee       55               60              65               70              75               80              85
<S>         <C>              <C>             <C>              <C>             <C>              <C>             <C>
55        3.38             3.53            3.67             3.77            3.86             3.91            3.95
60        3.48             3.68            3.88             4.06            4.20             4.30            4.37
65        3.56             3.81            4.08             4.35            4.59             4.77            4.91
70        3.62             3.92            4.26             4.63            4.99             5.32            5-57
75        3.65             3.99            4.39             4.87            5.39             5.90            6.34
80        3.68             4.03            4.49             5.05            5.73             6.46            7.18
85        3.69             4.06            4.55             5.18            5.99             6.96            8.01
</TABLE>

Option Five - Joint and 100% Survivor Annuity with Installments Guaranteed for
10 years

<TABLE>
<caption>
Age of                                     Age of Female Payee
Male
Payee      55               60              65               70              75               80              85
<S>         <C>              <C>              <C>             <C>             <C>              <C>             <C>
55        3.38             3.53            3.66             3.77            3.85             3.91            3.94
60        3.48             3.68            3.88             4.05            4.19             4.29            4.35
65        3.56             3.81            4.08             4.34            4.57             4.74            4.86
70        3.61             3.91            4.25             4.61            4.96             5.26            5.46
75        3.65             3.98            4.38             4.84            5.33             5.78            6.13
80        3.67             4.03            4.47             5.01            5.63             6.26            6.78
85        3.69             4.05            4.52             5.12            5.84             6.63            7.34
</TABLE>

Rates for ages not shown here will be provided upon request.

L-8823                                                                  Page 17

<PAGE>

UNISEX RIDER PROVISION

The following provision replaces the respective provisions found in individual
sections for Certificates issued as part of an employer sponsored retirement
plan or in those states that require unisex rates.

All reference throughout or Certificate to the sex of a person used in the
calculation of benefits are deleted.

The tables for Annuity Options 2, 3, 4 and 5 are replaced by the following:

Options Two and Three - Life Annuity With Installments Guaranteed

<TABLE>
<caption>
Age of           Monthly Payments Guaranteed
Payee
       None         120                          None                120
<S>     <C>        <C>                           <C>     <C>          <C>
55     3.86        3.83                          71      5.85        5.59
56     3.93        3.90                          72      6.06        5.75
57     4.01        3.98                          73      6.28        5.91
58     4.10        4.06                          74      6.52        6.08
59     4.19        4.15                          75      6.77        6.26
60     4.28        4.23                          76      7.05        6.44
61     4.38        4.33                          77      7.34        6.63
62     4.49        4.43                          78      7.66        6.82
63     4.61        4.53                          79      8.00        7.01
64     4.73        4.64                          80      8.36        7.20
65     4.86        4.76                          81      8.76        7.39
66     5.00        4.88                          82      9.18        7.57
67     5.15        5.01                          83      9.64        7.76
68     5.31        5.14                          84     10.13        7.93
69     5.48        5.29                          85     10.66        8.10
70     5.66        5.43
</TABLE>

 Option Four - Joint and 100% Survivor Annuity

<TABLE>
<caption>
 Age of                           Age of Secondary Payee
 Primary
 Payee     55         60         65         70         75          80         85
<S>        <C>        <C>        <C>        <C>        <C>         <C>       <C>
 55      3.39       3.52       3.62       3.70       3.76        3.80       3.82
 60      3.52       3.70       3.86       4.00       4.10        4.17       4.22
 65      3.62       3.86       4.10       4.32       4.50        4.64       4.73
 70      3.70       4.00       4.32       4.65       4.95        5.20       5.38
 75      3.76       4.10       4.50       4.95       5.41        5.83       6.17
 80      3.80       4.17       4.64       5.20       5.83        6.48       7.08
 85      3.82       4.22       4.73       5.38       6.17        7.08       8.03
</TABLE>

Option Five - Joint and 100% Survivor Annuity with Installments
Guaranteed for 10 years

<TABLE>
<caption>
Age of                            Age of Secondary Payee
Primary
Payee      55         60         65         70         75          80         85
<S>        <C>        <C>        <C>        <C>        <C>         <C>       <C>
55       3.39       3.52       3.62       3.70       3.76        3.79       3.81
60       3.52       3.70       3.86       3.99       4.06        4.16       4.20
65       3.62       3.86       4.09       4.31       4.49        4.61       4.69
70       3.70       3.99       4.31       4.63       4.92        5.15       5.30
75       3.76       4.09       4.49       4.92       5.35        5.72       6.00
80       3.79       4.16       4.61       5.15       5.72        6.27       6.72
85       3.81       4.20       4.69       5.30       6.00        6.72       7.34
</TABLE>

L-8823                                                                   Page 18

<PAGE>
DISABILITY PROVISION

The following provision is added to the Owner's Certificate:

If the Owner is disabled, withdrawal charges will not be assessed when a total
or partial withdrawal is requested in excess of the free partial withdrawal
amount. The request must be in a form satisfactory to us.

Disability must begin after the effective date of the Certificate and prior to
age 65.

Withdrawal charges will not be waived when disability is due to: 1) substance
abuse; or 2) mental or personality disorders without a demonstrable organic
disease. A degenerative brain disease such as Alzheimer's Disease is considered
an organic disease.

For purposes of this provision:

"Disability" is defined as the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which: 1) can be expected to result in death; or 2) has lasted, or can be
expected to last, for a continuous period of not less than 12 months.

"Disabled" is defined as having the conditions of the disability definition.

NURSING CARE PROVISION

The following provision is added to the Owner's Certificate:

Withdrawal charges will not be assessed when a total or partial withdrawal in
excess of the free partial withdrawal amount is requested in a form satisfactory
to us;

(1)  after the Owner has been confined in a Hospital or Skilled Health Care
     Facility for at least forty-five consecutive days and the Owner remains
     confined in the Hospital or Skilled Health Care Facility when the request
     is made; or

(2)  within forty-five days following the Owner's discharge from a Hospital or
     Skilled Health Care Facility after a confinement of at least forty-five
     consecutive days.

Confinement must begin after the effective date of the Certificate.

Withdrawal charges will not be waived when confinement is due to: 1) substance
abuse; or 2) mental or personality disorders without a demonstrable organic
disease. A degenerative brain disease such as Alzheimer's Disease is considered
an organic disease.

For purposes of this provision:

"Hospital" means a place which is licensed by the State as a Hospital and is
operating within the scope of its license.

"Skilled Health Care Facility" means a place which:

(a) is licensed by the State;

(b) provides skilled nursing care under the supervision of a physician;

(c) has twenty-four hour a day nursing services by or under the supervision of a
    registered nurse (RN); and

(d) keeps a daily medical record of each patient.

L-8823                                                                   Page 19

<PAGE>

457 DEFERRED COMPENSATION PROVISION

When a Certificate is issued as an Annuity which is Qualified under IRC Section
457. (IRC means the Internal Revenue Code of 1986, as amended from time to
time), the following shall apply regardless of any provisions to the contrary in
this Master Policy:

SECTION 1. Ownership

The Annuitant is the participant in a 457 plan. The owner is the employer that
maintains the plan. Prior to the distribution of the Annuitant's interest, all
property and rights will remain those of the employer, except if the next
section applies.

SECTION 2. Exclusive Benefit

This section applies if the Certificate is held by: a State; or a political
subdivision of a State. In that case, in accordance with 457(g), all assets and
income under the Certificate are held for the exclusive benefit of: the
Annuitant(s); and the beneficiary(s) of the Annuitant(s).

QUALIFIED PLAN PROVISION

When a Certificate is issued as a Tax Sheltered Annuity, the following provision
shall apply regardless of any provisions to the contrary in this Master Policy.

The Owner's Certificate is amended as follows:

The applicable sections of this provision apply and take precedence over
contrary provisions if the Certificate is issued as a Code Section 403(b) Tax
Sheltered Annuity ("Tax Sheltered Annuity").

SECTION 1: Provisions Applicable to a Tax Sheltered Annuity

A. The Owner of the coverage provided is the Annuitant.

B. The rights of the Annuitant under the Certificate are nonforfeitable.

C. The Certificate is not transferable and cannot be: sold; assigned;
discounted; or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other than
us.

D. The amount that may be contributed to the Certificate will be governed by the
provisions of Sections 403(b), 415, and 402(g) of the Code.

E. In the case of benefits that accrued under the Certificate after December 31,
1986, distribution must be: a. made in accordance with the minimum distribution
requirements of Section 403(b)(10) of the Code; and b. the regulations
thereunder.

F. Distributions attributable to salary reduction contributions received or
earnings credited after December 31, 1988 may be paid only when: a. the employee
attains age 59 1/2; b. separates from service; or c. dies or is disabled.
Notwithstanding the foregoing, contributions, but not earnings thereon, may be
distributed in the case of hardship within the meaning of Code Section 403 (b)
(11)(B).

G. If the Annuitant receives an eligible rollover distribution and elects to
have the distribution paid directly to an eligible retirement plan (as defined
in Section 402(c) of the Code) and specifies the eligible retirement plan to
which the distribution is to be paid, then the distribution will be paid to that
eligible retirement plan in a direct rollover.

H. We will not be responsible for the timing, purpose or propriety of any
distribution. We will not incur any liability or responsibility of any Tax
imposed on account of any such distribution. We are not obligated to make any
distribution absent a specific written direction in accordance with the
provisions of the Certificate.

SECTION 2: Provisions Applicable to ERISA Plans

At any time prior to the annuity date, an ERISA loan may be requested. One-half
of the Certificate will be assigned as security for such a loan. The maximum
ERISA loan amount available is the lesser of: a. $50,000 (reduced by the excess
of the highest outstanding loan balance of all loans during the prior 12 month
period ending on the day before the loan is made over any loan amount
outstanding on the date the loan is made); or b. fifty percent of the
Certificate Value less Debt. The minimum ERISA loan amount available is $1,000.
We may defer the granting of an ERISA loan for six months from the date of our
receipt of a written loan request.

L-8823                                                                   Page 20

<PAGE>

QUALIFIED PLAN PROVISION (continued)

SECTION 3: Provisions Applicable to all Loans

A.   Definitions:

Certificate Value is the sum of the Fixed Account Certificate Value, the Loan
Value, the Separate Account Certificate Value, and the Guarantee Period Value.

Debt is the principal of any outstanding loan plus loan interest due or accrued.

Loan Value is the outstanding loan amount plus interest credited.

B.   When a loan is taken, an amount equal to the loan will be transferred from
     the Fixed Account Certificate Value, the Separate Account Certificate
     Value, and the Guarantee Period Value to the loan account. Unless the Owner
     tells us otherwise, the loan will proportionately reduce the amount
     allocated to the Fixed Account, the Separate Account, and the Guarantee
     Periods.

C.   The amount of Debt will reduce the amount payable upon death or surrender
     or the amount that may be applied under an annuity option.

D.   While a loan is outstanding, the Loan Value will be credited with interest
     at a rate equal to the rate charged on Debt less a deduction not to exceed
     2.5%.

E.   A loan may be repaid in full or in part at any time prior to the Annuity
     Date.

F.   Should the Debt equal or exceed the Certificate Value, the Certificate will
     terminate thirty-one days after we mail a notice of termination to the
     Owner's last known address. The Debt will be treated as a withdrawal.
     Notice of termination may be sent upon occurrence of an event outlined in
     Section 1(F).

G.   The Owner must sign a loan agreement in the form prescribed by us to be
     eligible for a loan. The interest rate and any service fees charged on a
     loan will be as stated in the loan agreement. The loan will also be subject
     to the terms of the agreement to the extent not inconsistent with this
     provision.

H.   All Debt must be repaid prior to the transfer of any amounts to another
     contract.

I.   Failure to make timely repayment of Debt will result in a taxable
     distribution and possible tax penalties.

ERISA LOAN PROVISION

When a Certificate is issued as a Qualified Annuity, the following provision
shall apply regardless of any provisions to the contrary in this Master Policy.

The Owner's Certificate is amended as follows:

The applicable sections of this provision apply and take precedence over
contrary provisions if the Certificate is issued under a plan described in
Section 401(a) or 403(b) of the Code if subject to the requirements of the
Employee Retirement Income Security Act of 1974 ("ERISA Plans").

Loans

At any time prior to the Annuity Date, an ERISA loan may be requested. Fixed
Account Value equal to an Annuitant's loan will be assigned as security for the
loan at the time it is made. Any additional Fixed Account Value required as
security beyond existing value will be obtained by transfer from the Separate
Account, if any. The maximum ERISA loan amount available is the largest loan
amount which, when added to the outstanding balance of all other qualified plan
loans, does not exceed the lesser of $50,000 (reduced by the excess of the
highest outstanding loan balance on all qualified plan loans during the 12 month
period ending on the day before the loan is made over any loan amount
outstanding on the date the loan is made) or fifty percent of an Annuitant's
Certificate Value. The minimum ERISA loan amount available is $1,000. We may
defer the granting of an ERISA loan for six months from the date of our receipt
of a written loan request.

L-8823                                                                   Page 21

<PAGE>

ERISA LOAN PROVISION (continued)

Loan Interest              The ERISA loan interest rate is declared each month.
                           It is based upon the Moody's Corporate Bond Yield
                           Average - Monthly Average Corporates (rounded to the
                           nearest .25%) for the calendar month ending two
                           months before the date on which the loan is taken
                           (the "ERISA Rate"). If the Average is no longer
                           published, the rate used in its place will be that
                           set by law or by regulation of the insurance
                           supervisory official of the state in which the
                           Contract is issued.

                           The loan interest rate is an annual rate. It is
                           compounded daily, and is based on the declared
                           interest rate at the time the loan is established.

                           We will notify the annuitant of the initial ERISA
                           loan interest rate declared and of any change in the
                           rate. We will send the annuitant notice of a change
                           in the rate 30 days prior to the loan anniversary.

Loan Repayment             A loan may be repaid in full or in part at any time
                           prior to the annuity date. After a loan has been
                           made, repayment of the loan will be due on February
                           1, May 1, August 1 and November 1 of each year.

                           Repayment of debt will be applied first to reduce
                           that portion of the debt that is attributed to loan
                           interest and then to that portion of debt that is
                           attributed to loan principal.

                           If a loan is in default, no additional loans are
                           permitted until the initial loan is paid in full.

                           All loans must be repaid prior to any transfer of an
                           Annuitant's Account Value to another insurer.

                           Failure to make timely repayment of the loan will
                           result in a taxable distribution and possible tax
                           penalties.

Interest Applied to        While a loan exists, that portion of an Annuitant's
Loan Value Assigned        Contract Value remaining in the Fixed Account to
as Security                secure the debt will earn interest at the daily
                           equivalent of the annual loan interest rate reduced
                           by not more than 2.50%.

Loan Agreement             An Annuitant must sign a loan agreement in the form
                           prescribed by us to be eligible for a loan. The loan
                           will also be subject to the terms of such agreement
                           to the extent not inconsistent with the terms of this
                           Provision. The loan must be approved by the
                           Annuitant's plan administrator. The annuitant's
                           spouse, if any, must consent to any loan over $5,000.

INDIVIDUAL RETIREMENT ANNUITY PROVISION

                           When a Certificate is Issued as an Individual
                           Retirement Annuity ("IRA") under Section 408(b) of
                           the Internal Revenue Code ("Code"), the following
                           provisions will apply regardless of any provision to
                           the contrary in this Master Policy.

                           The Owner's Certificate is amended as follows:

SECTION 1.                 The Annuitant will be the Owner of the IRA. This IRA
Ownership-Exclusive        is established for the exclusive benefit of the Owner
Benefit - Transferability  and the Owner's beneficiary(s). The Owner's interest
Non-forfeiture -           in this IRA cannot be: transferred, forfeited,
Non-Assignable             assigned; discounted; borrowed against; or pledged
                           as security for any purpose.

L-8823                                                                   Page 22

<PAGE>

INDIVIDUAL RETIREMENT ANNUITY PROVISION (continued)

SECTION 2.                 We will only accept cash contributions. Except in the
Premium Payments           case of a rollover contribution allowed by Sections
Limitations                402(c), 403(a)(4), 403(b)(8) or 408(d)(3), of the
                           Code or a contribution to a Simplified Employee
                           Pension Program ("SEP") described in Section 408(k),
                           we will not accept contributions of more than a
                           $2,000 for any tax year. Pursuant to Code Section 219
                           (c) (1), in the case of a spousal IRA, payments to
                           all IRAs for any tax year cannot be more than
                           $4,000. No more than $2,000 of this amount can be
                           credited to the IRA of either spouse. If the
                           Certificate is an Immediate Annuity Certificate, no
                           further contributions will be allowed.

                           Any refund of premiums will be applied, before the
                           close of the calendar year that follows the year of
                           the refund, toward; a. the payment of future
                           contributions; or b. the purchase of increased
                           benefits. This does not apply to premiums that can be
                           attributed to excess contributions.

SECTION 3.
Time and Matter of         Notwithstanding any provision herein to the contrary,
Distribution               distribution of the Owner's interest under this
                           Section and Section 4 will be made in accordance with
                           the minimum distribution rules of Section 401(a)(9),
                           and 408(b)(3) of the Code and the regulations
                           thereunder. This includes the incidental death
                           benefit provisions of Section 1.401(a)(9)-2 of the
                           proposed regulations. All of these are herein
                           incorporated by reference.

                           Distribution of the Owner's interest must start by
                           the first day of April after the calendar year in
                           which the Owner attains age 70 1/2. The election of
                           one of the pay out options must be made at least 60
                           days prior to the date it is to begin. For each
                           succeeding year, distribution must be made on or
                           before December 31. The pay out option elected must
                           result in distribution of equal or substantially
                           equal payments which conform with one of the
                           following: a. over the Owner's life; b. over the
                           Owner's life and the life of the Owner's designated
                           beneficiary; c. over a specified period that may not
                           be longer than the Owner's life expectancy; or d.
                           over a specified period that may not be longer than
                           the joint life and last survivor expectancy of the
                           Owner and the Owner's designated beneficiary. A
                           single sum payment may also be elected.

                           If payments under a chosen option are guaranteed,
                           the period of guarantee may not exceed the Owner's
                           expected life, or the expected lives of the joint and
                           last survivor of the Owner and the secondary
                           Annuitant. This limit also applies to Option 1 under
                           the Certificate.

SECTION 4.                 a. Immediate Annuity Contracts
Distribution
Upon Death                 If the Certificate is an Immediate Annuity
                           Certificate and the Owner dies, distribution will
                           continue to be made, if due as provided in the
                           Certificate.

                           b. Other Annuity Certificates

                           If the Certificate is not an Immediate Annuity
                           Certificate, the rules that follow will apply.

                           If the Owner dies after distribution has begun, the
                           unpaid portion of the Owner's interest that remains
                           will continue to be paid under the pay out option
                           in effect.

                           If the Owner dies before a pay out option has begun,
                           the entire interest that remains must be distributed
                           in accordance with one of the provisions that follow:

                           1. The Owner's entire interest will be paid to the
                           beneficiary(s) by December 31 of the year containing
                           the fifth anniversary of the Owner's death.

L-8823                                                                   Page 23

<PAGE>

INDIVIDUAL RETIREMENT ANNUITY PROVISION (continued)

                           2. the Owner's interest is payable to a
                           beneficiary(s) who is not the Owner's surviving
                           spouse, and the Owner has not elected b. 1. of this
                           section, then the entire interest will be distributed
                           under Option 3 of the Certificate starting no later
                           than December 31, of the year that follows the year
                           of the Owner's death. The period of guarantee will be
                           the lesser of: a. ten years; or b. the expected life
                           of the beneficiary(s).

                           3. If the beneficiary is the surviving spouse, the
                           spouse may receive pay out under Option 2 or 3 of the
                           Certificate or b. 1. of this section; or the spouse
                           may treat the Certificate as his or own IRA. This
                           election will be deemed to have been made if such
                           surviving spouse: makes a regular IRA contribution
                           to the Certificate; makes a rollover contribution to
                           or from the Certificate; or fails to elect any other
                           option provided. Payments under Option 2 or 3 must
                           start prior to December 31st of the year in which
                           the Owner would have attained age 70 1/2. The
                           surviving spouse must elect this option within 300
                           days after the Owner's death. If not, we will pay out
                           the method of b. 2 of this section.

                           4. The entire interest will be paid in a lump sum to
                           the Owner's estate if: a. the Owner has not
                           designated a beneficiary(s) prior to the Owner's
                           death; or b. the beneficiary(s) does not survive the
                           Owner.

SECTION 5.                 We will send the Owner an annual report on the IRA.
Reports

SECTION 6.                 We will send the Owner a copy of any amendment needed
Amendments                 to maintain the Certificate on a tax-qualified basis
                           in a timely manner. It will be deemed accepted by the
                           Owner unless the Owner returns it to us within ten
                           days of the time the Owner receives it.

SECTION 7.                 The term Immediate Annuity Certificate means an
Other Items                Annuity Certificate which at issue provides that a
                           pay out of benefits is scheduled to start within
                           eleven months of it's effective date. Unless
                           otherwise provided, the Owner must make an election
                           at least 60 days before a pay out is to start. The
                           election is made by sending Us a request in writing.
                           An election takes effect only if we receive it while
                           the Owner is alive.

                           An individual may satisfy the minimum distribution
                           requirements under Sections 408(a)(6) and 408(b)(3)
                           of the Code by receiving a distribution from one IRA
                           that is equal to the amount required to satisfy the
                           minimum distribution requirements for two or more
                           IRAs. For this purpose, the Owner of two or more
                           IRAs may use the "alternative method" described in
                           Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum
                           distribution requirements.

                           Life expectancy and joint and last survivor
                           expectancy are computed by use of the return
                           multiples contained in Table V and VI of Section
                           1.72-9 of the Income Regulations. Life Expectations
                           will be calculated using the Owner's or the Owner's
                           beneficiary(s) attained age at the time distribution
                           is required to begin.

SIMPLE INDIVIDUAL RETIREMENT ANNUITY PROVISION

                           When a Certificate is issued as an Individual
                           Retirement Annuity ("IRA") under a SIMPLE IRA plan,
                           the following provisions will apply regardless of any
                           provision to the contrary in this Master Policy.

                           The Owner's Certificate is amended as follows:

L-8823                                                                   Page 24

<PAGE>

SIMPLE INDIVIDUAL RETIREMENT ANNUITY PROVISION (continued)

Section 1.                     The Annuitant will be the Owner of the IRA. The
Ownership - Exclusive          IRA is established for the exclusive benefit of
Benefit - Transferability      the Owner and the Owner's beneficiaries. The
Non-Forfeiture                 Owner's interest in this IRA cannot be:
Non-Assignable                 transferred; forfeited; assigned; discounted;
                               borrowed against; or pledged as security for any
                               purpose.

Section 2.                     We will accept only cash contributions made on
Premium Payments -             behalf of the Owner pursuant to the terms of a
Limitations                    SIMPLE IRA Plan described in section 408(p) of
                               the Internal Revenue Code. A rollover
                               contribution or a transfer of assets from another
                               SIMPLE IRA of the owner will also be accepted.
                               No other contributions will be accepted.

                               Any refund of premiums will be applied, before
                               the close of the calendar year that follows the
                               year of the refund, toward; a. the payment of
                               future contributions; or b. the purchase of
                               increased benefits. This does not apply to
                               premiums that can be attributed to excess
                               contributions.

                               If contributions made on behalf of the Owner
                               pursuant to a SIMPLE IRA Plan maintained by the
                               Owner's employer are received directly by Us from
                               the employer, We will provide the employer with
                               the summary description required by section
                               408(I)(2) of the Internal Revenue Code.

Section 3.                     Prior to the expiration of the 2-year period
Time and Manner of             beginning on the date the Owner first
Distribution                   participated in any SIMPLE IRA Plan maintained by
                               the Owner's employer, any rollover or transfer by
                               the Owner of funds from this SIMPLE IRA must be
                               made to another SIMPLE IRA of the Owner. Any
                               distribution of funds to the Owner during this
                               2-year period may be subject to a 25-percent
                               additional tax if the Owner does not roll over
                               the amount distributed into a SIMPLE IRA. After
                               the expiration of this 2-year period, the Owner
                               may roll over or transfer funds to any IRA of the
                               Owner that is qualified under section 408(a) or
                               (b) of the Internal Revenue Code.

                               If this SIMPLE IRA is maintained by a designated
                               financial institution (within the meaning of
                               section 408(p)(7) of the Internal Revenue Code)
                               under the terms of a SIMPLE IRA Plan of the
                               Owner's employer, the Owner must be permitted to
                               transfer the Owner's balance without cost or
                               penalty (within the meaning of section 408(p)(7))
                               to another IRA.

                               Notwithstanding any provision herein to the
                               contrary, distribution of the Owner's interest
                               under this Section and Section 4 will be made in
                               accordance with the minimum distribution rules of
                               Sections 401(a)(9), 408(a)(6) and 408(b)(3) of
                               the Code and the regulations thereunder. This
                               includes the incidental death benefit provisions
                               of Section 1.401(a)(9)-2 of the proposed
                               regulations. All of these are herein incorporated
                               by reference.

                               Distribution of the Owner's interest must start
                               by the first day of April after the calendar year
                               in which the Owner attains age 70 1/2. The
                               election of one of the pay out options must be
                               made at least 60 days prior to the date it is to
                               begin. For each succeeding year, distribution
                               must be made on or before December 31. The pay
                               out option elected must result in distribution
                               of equal or substantially equal payments which
                               conform with one of the following: a. over the
                               Owner's life; b. over the Owner's life and the
                               life of the Owner's designated beneficiary; c.
                               over a specified period that may not be longer
                               than the Owner's life expectancy; or d. over a
                               specified period that may not be longer than the
                               joint life and last survivor expectancy of the
                               Owner and the Owner's beneficiary. A single sum
                               payment may also be elected.

                               If payments under a chosen option are guaranteed,
                               the period of guarantee may not exceed your
                               expected life, or the expected lives of the joint
                               and last survivor of the Owner and the secondary
                               Annuitant. This limit also applies to Option 1
                               under the Certificate.

Section 4.                     a. Immediate Annuity Contracts
Distribution
Upon Death                     If the Certificate is an Immediate Annuity
                               Certificate and the Owner dies, distribution will
                               continue to be made, if due, as provided in the
                               Certificate.

                               b. Other Annuity Certificate

                               If the Certificate is not an Immediate Annuity
                               Certificate, the rules that follow will apply.

L-8823                                                                   Page 25

<PAGE>

SIMPLE INDIVIDUAL RETIREMENT ANNUITY PROVISION (continued)

                          2. The Owner's interest is payable to a
                          beneficiary(s) who is not the Owner's surviving
                          spouse, and the Owner has not elected b. 1. of this
                          section, then the entire interest will be distributed
                          under Option 3 of the Certificate starting no later
                          than December 31, of the year that follows the year
                          of the Owner's death. The period of guarantee will be
                          the lesser of: a. ten years; or b. the expected life
                          of the beneficiary(s).

                          3. If the beneficiary is the surviving spouse, the
                          spouse may receive pay out under Option 2 or 3 of the
                          Certificate or b. 1. of this section; or the spouse
                          may treat the Certificate as his or own IRA. This
                          election will be deemed to have been made if such
                          surviving spouse: makes a regular IRA contribution to
                          the Certificate; makes a rollover contribution to or
                          from the Certificate; or fails to elect any other
                          option provided. Payments under Option 2 or 3 must
                          start prior to December 31st of the year in which
                          the Owner would have attained age 70 1/2. The
                          surviving spouse must elect this option within 300
                          days after the Owner's death. If not, we will pay out
                          the method of b. 2 of this section.

                          4. The entire interest will be paid in a lump sum to
                          the Owner's estate if: a. the Owner has not designated
                          a beneficiary(s) prior to the Owner's death; or b. the
                          beneficiary(s) does not survive the Owner.

SECTION 5.                We will send the Owner an annual report on the IRA.
Reports

SECTION 6.                We will send the Owner a copy of any amendment needed
Amendments                to maintain the Certificate on a tax-qualified basis
                          in a timely manner. It will be deemed accepted by the
                          Owner unless the Owner returns it to us within ten
                          days of the time the Owner receives it.

SECTION 7.                The term Immediate Annuity Certificate means an
Other Items               Annuity Certificate which at issue provides that a pay
                          out of benefits is scheduled to start within eleven
                          months of it's effective date. Unless otherwise
                          provided, the Owner must make an election at least 60
                          days before a pay out is to start. The election is
                          made by sending Us a request in writing. An election
                          takes effect only if we receive it while the Owner is
                          alive.

                          An individual may satisfy the minimum distribution
                          requirements under Sections 408(a)(6) and 408(b)(3) of
                          the Code by receiving a distribution from one IRA
                          that is equal to the amount required to satisfy the
                          minimum distribution requirements for two or more
                          IRAs. For this purpose, the Owner of two or more
                          IRAs may use the "alternative method" described in
                          Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum
                          distribution requirements.

                          Life expectancy and joint and last survivor expectancy
                          are computed by use of the return multiples contained
                          in Table V and VI of Section 1.72-9 of the Income
                          Regulations. Life Expectations will be calculated
                          using the Owner's or the Owner's beneficiary(s)
                          attained age at the time distribution is required to
                          begin.

L-8823                                                                   Page 26

<PAGE>

ROTH INDIVIDUAL RETIREMENT ANNUITY ("ROTH IRA") PROVISION

                           The following provision applies in lieu of any
                           provisions to the contrary in this Master Policy if
                           an Annuitant establishes a Roth Individual Retirement
                           Annuity ("Roth IRA") under Section 408A of the
                           Internal Revenue Code of 1986, as amended ("Code").
                           The Certificate is amended to restrict the Owner's
                           rights and any beneficiary(s) rights, and to limit
                           the contributions as follows:

                           1.   The Owner may not transfer Ownership of the
                                Certificate, sell the Certificate, or assign or
                                pledge the Certificate as collateral for a loan
                                or as security for the performance of an
                                obligation or for any other purpose, to any
                                person other than to Us or the Owner's former
                                spouse under a divorce decree or a written
                                instrument incident to that divorce.

                           2.   The Owner is established for the exclusive
                                benefit of the Owner and the Owner's
                                beneficiary(s).

                           3.   The Owner's interest in the Certificate is
                                nonforfeitable.

                           4.   Dividends, if applicable, will not be paid in
                                cash but will be applied as contributions to the
                                Certificate.

                           5.   At least once each calendar Year, we shall
                                furnish the Owner a report concerning the status
                                of the Certificate.

                           6.   The Certificate will accept contributions only
                                as follows:

                                A.   Contributions to the Certificate must be
                                     paid in cash and, except in the case of a
                                     trustee-to-trustee transfer from another
                                     Roth IRA, or in the case of a qualified
                                     rollover contribution, may not exceed the
                                     excess of the Owner's contribution limit
                                     for the taxable year over the aggregate
                                     contributions made during the taxable year
                                     to all other Roth IRA's and IRA's held by
                                     the Owner. Contributions may be made
                                     without respect to the Owner's age.

                                     The contribution limit for the taxable year
                                     is either: (1) the lesser of $2,000 or 100%
                                     of the Owner's compensation for the taxable
                                     year; or (2) where the Owner files a joint
                                     return and receives less compensation for
                                     the taxable year than the Owner's spouse,
                                     the lesser of $2,000 or 100% of the Owner's
                                     compensation and the Owner's spouse's
                                     compensation for the taxable year less the
                                     Owner's spouse's contribution to a Roth IRA
                                     or IRA (if any) for the same taxable year.

                                     When the Owner's adjusted gross income
                                     (AGI) exceeds the applicable dollar limit
                                     (ADL; see description below), the annual
                                     contribution limit is reduced by the
                                     following amount:

                    Annual
                    Contribution
                    Limit         X The Owner's AGI - ADL Limit
                                  -----------------------------
                                  $15,000 ($10,000 if the Owner is married)

                                     For purposes of this Section: AGI does not
                                     include any amount included in gross
                                     income as a result of a rollover of an IRA
                                     to a Roth IRA; and AGI is reduced by any
                                     deduction under Section 219 of the Code.

                                     The ADL is $150,000 for the Owner filing a
                                     joint return; or $95,000 for the Owner
                                     filing a single return; or $-0 for the
                                     Owner as married filing a separate return.

                                B.   A qualified rollover contribution described
                                     in Section 408A(e) can be made only from:
                                     (1) another Roth IRA; or (2) another IRA,
                                     which is not a Roth IRA, and can be made
                                     from an IRA other than Roth IRA only if the
                                     Owner's AGI for the taxable year does not
                                     exceed $100,000.

L-8823                                                                   Page 27

<PAGE>

ROTH INDIVIDUAL RETIREMENT ANNUITY ("ROTH IRA") PROVISION (continued)

                           C.   For purposes of this Section, compensation
                                means: wages, salaries, professional fees, or
                                other amounts derived from or received for
                                personal service actually rendered (including
                                but not limited to commissions paid to
                                salespersons, compensation for services on the
                                basis of a percentage of profits, commissions
                                on insurance premiums, tips, and bonuses); and
                                includes earned income, as defined in Section
                                401(c)(2) (reduced by the deduction the
                                self-employed individual takes for contributions
                                made to a self-employed retirement plan). For
                                purposes of this definition, Section 401(c)(2)
                                shall be applied as if the term or business for
                                purposes of Section 1402 included service in
                                subsection (c)(6). Compensation does not include
                                amounts derived from or received as earnings or
                                profits from property (including, but not
                                limited to interest and dividends) or amounts
                                not includible in gross income. Compensation
                                also does not include any amount received as a
                                pension or Annuity or as deferred compensation.
                                The term "compensation" shall include any amount
                                includible in the Owner's gross income under
                                Section 71 with respect to a divorce or
                                separation instrument described in subparagraph
                                (A) of section 71(b)(2).

                        7.    The Owner's entire interest will be distributed in
                              accordance with one of the following provisions,
                              as elected:

                              A. (1) The Owner's entire interest will be paid
                                     by December 31 following the fifth
                                     anniversary of the Owner's death.

                                 (2) If any portion of the Owner's interest is
                                     payable to a designated beneficiary(s) and
                                     such beneficiary(s) has not elected 7.A(l)
                                     above, then the entire interest which is
                                     payable to the beneficiary(s) will be
                                     distributed in substantially equal
                                     installments over a period not exceeding
                                     the life or life expectancy of the
                                     designated beneficiary, commencing by
                                     December 31 following the first anniversary
                                     of the Owner's death. The designated
                                     beneficiary may elect at any time to
                                     receive greater payments if otherwise
                                     permitted under the terms of the
                                     Certificate.

                                 (3) In applying the requirements of 7.A(2)
                                     above to any portion of the Owner's
                                     interest which is payable to the Owner's
                                     surviving spouse, the date on which
                                     payments must commence is the later of: (a)
                                     December 31 following the date the Owner
                                     would have attained age 70 1/2; or (b)
                                     December 31 following the first anniversary
                                     the Owner's death.

                                 (4) If the Owner's designated beneficiary(s) is
                                     the surviving spouse, the spouse may treat
                                     the Certificate as their own Roth IRA. This
                                     election will be deemed to have been made:
                                     if the surviving spouse makes a rollover or
                                     other contribution into this Certificate;
                                     or if the surviving spouse has failed to
                                     satisfy one or more requirements described
                                     in 7.A(l) of 7.A(2) above. If the surviving
                                     spouse dies before distributions are
                                     required to begin under this section, the
                                     surviving spouse will be treated as having
                                     elected to make the Roth IRA his or her own
                                     Roth IRA.

                              B. For purposes of this Section, life expectancy
                                 will be computed by use of the return
                                 multiples specified in Tables V or VI of
                                 Section 1.72-9 of the Income Tax Regulations
                                 based on the attained age of such
                                 beneficiary(s) during the calendar year in
                                 which distributions are required to commence
                                 pursuant to this Section. Payments for any
                                 subsequent calendar year will be based on the
                                 life expectancy reduced by one for each
                                 calendar year which has elapsed since
                                 the calendar year life expectancy was first
                                 calculated. The Owner's designated
                                 beneficiary(s) who is the surviving spouse may
                                 elect, prior to the time that payments have
                                 begun to him or her, to redetermine fife
                                 expectancy each year based on the
                                 beneficiary(s) attained age in each such year.

                        8. The Certificate shall be amended from time to time,
                           if required, to reflect any changes in the Code,
                           related regulations, or other federal tax
                           requirements.

L-8823                                                                   Page 28

<PAGE>

OPTIONAL ENHANCED DEATH BENEFIT PROVISION

                              If the Owner has elected Optional Enhanced Death
                              Benefit Option #1, the following provision is
                              added to the Owner's Certificate. A separate
                              charge will be made for this benefit; it will be
                              shown on the Certificate Schedule.

                              The Amount Payable Upon Death provision of the
                              Certificate is deleted in its entirety and
                              replaced with the following:

Class 1 Accumulation Options  Certain Accumulation Options may be considered
                              Class 1 Accumulation Options. The list of Class 1
                              Accumulation Options, if any, is shown on the
                              Certificate Schedule. Class 1 Accumulation
                              Options may be subject to limitations or rules
                              when calculating the death benefit described
                              below.

                              We may reduce the benefit charge for the portion
                              of Certificate Value allocated to Class 1
                              Accumulation Options. We may add or remove
                              Accumulation Options to the Class 1 Accumulation
                              Options. We will give You 30 days notice of any
                              changes. Such changes will apply to transfers and
                              subsequent Purchase Payments allocated to the
                              Class 1 Accumulation Options after the date of any
                              change.

                              The death benefit payable under this benefit is
                              equal to the greatest of the following less debt:

                                (1)  the Certificate Value, excluding any
                                     negative Market Value Adjustment but
                                     including any positive Market Value
                                     Adjustment, and

                                (2)  the total amount of Purchase Payments, less
                                     previous Purchase Payments withdrawn and
                                     withdrawal charges, and

                                (3)  the Step-up Death Benefit.

                              We compute the Certificate Value at the end of the
                              Valuation Period following our receipt of due
                              proof of death and the return of the Certificate.
                              We compute the other amounts above as of the date
                              of death.

Step-Up Death Benefit         The Step-up Death Benefit for the Certificate is
                              equal to the sum of (i + ii):

                                 i) the greater of:

                                    a)   Certificate Value allocated to the
                                         Class 1 Accumulation Options, or

                                    b)   Adjusted Purchase Payment Death
                                         Benefit for Class 1 Accumulation
                                         Options, and

                                ii) Guaranteed Step-up Death Benefit for Class 2
                                    Accumulation Options.

                              The Adjusted Purchase Payment Death Benefit for
                              Class 1 Accumulation Options on the Issue Date is
                              equal to the initial Purchase Payment allocated to
                              the Class 1 Accumulation Options. On a subsequent
                              Valuation Date, the Adjusted Purchase Payment
                              Death Benefit for Class 1 Accumulation Options is
                              adjusted by adding to the prior value:

                                (1)  any subsequent Purchase Payments allocated
                                     to the Class 1 Accumulation Options, and

                                (2)  any adjustments for transfers to the Class
                                     1 Accumulation Options.

                              and subtracting:

                                (3)  any adjustments for transfers from the
                                     Class 1 Accumulation Options, and

                                (4)  the amount of any pro rata adjustment for
                                     withdrawals from the Class 1 Accumulation
                                     Options.

                              The Guaranteed Step-up Death Benefit for Class 2
                              Accumulation Options on the Issue Date is equal to
                              the initial Purchase Payment allocated to the
                              Class 2 Accumulation Options. On each subsequent
                              Certificate Anniversary, prior to the oldest Owner
                              attaining age [81], the Guaranteed Step-up Death
                              Benefit for Class 2 Accumulation Options equals
                              the greater of (1) and (2) below. On all other
                              Valuation Dates the Guaranteed Step-up Death
                              Benefit for Class 2 Accumulation Options is equal
                              to (2) below.

L-8823                                                                   Page 29

<PAGE>

OPTIONAL ENHANCED DEATH BENEFIT PROVISION (continued)

                             (1)  Certificate Value allocated to the Class 2
                                  Accumulation Options, or

                             (2)  The Guaranteed Step-up Death Benefit for Class
                                  2 Accumulation Options on the prior
                                  Certificate Anniversary plus:

                                a)  any Purchase Payments allocated to the
                                    Class 2 Accumulation Options since the prior
                                    Certificate Anniversary, and

                                b)  any adjustments for transfers from the Class
                                    1 Accumulation Options made since the prior
                                    Certificate Anniversary, and

                                less:

                                c)  any adjustments for transfers to the Class 1
                                    Accumulation Options made since the prior
                                    Certificate Anniversary, and

                                d)  the amount of any pro rata adjustment for
                                    withdrawals from the Class 2 Accumulation
                                    Options since the prior Certificate
                                    Anniversary.

Adjustments for Transfers  Transfers from Class 1 Accumulation Options to Class
and Withdrawals            2 Accumulation Options will reduce the Adjusted
                           Purchase Payment Death Benefit for Class 1
                           Accumulation Options on a pro rata basis. The
                           resulting increase in the Guaranteed Step-up
                           Death Benefit for the Class 2 Accumulation Options is
                           equal to the lesser of:

                             (1)  the reduction in Adjusted Purchase Payment
                                  Death Benefit for Class 1 Accumulation
                                  Options, and

                             (2)  net Certificate Value transferred.

                          Transfers from Class 2 Accumulation Options to Class 1
                          Accumulation Options will reduce the Guaranteed
                          Step-up Death Benefit for the Class 2 Accumulation
                          Options on a pro rata basis. The resulting increase in
                          the Adjusted Purchase Payment Death Benefit for Class
                          1 Accumulation Options is equal to reduction in the
                          Guaranteed Step-up Death Benefit for the Class 2
                          Accumulation Options.

                          Pro rata adjustment - The pro rata adjustment applies
                          to transfers and partial withdrawals from the Class 1
                          Accumulation Options and Class 2 Accumulation Options.

                             The pro rata adjustment for transfers and
                             withdrawals from Class 1 Accumulation Options is
                             equal to (1) divided by (2), with the result
                             multiplied by (3), where:

                                (1)  is the withdrawal and withdrawal charge or
                                     transfer amount,

                                (2)  is the Certificate Value allocated to the
                                     Class 1 Accumulation Options immediately
                                     prior to the withdrawal or transfer,

                                (3)  is the value of the applicable death
                                     benefit immediately prior to the withdrawal
                                     or transfer.

                             The pro rata adjustment for transfers and
                             withdrawals from Class 2 Accumulation Options is
                             equal to (1) divided by (2), with the result
                             multiplied by (3), where:

                                (1)  is the withdrawal and withdrawal charge or
                                     transfer amount,

                                (2)  is the Certificate Value allocated to the
                                     Class 2 Accumulation Options immediately
                                     prior to the withdrawal or transfer,

                                (3)  is the value of the applicable death
                                     benefit immediately prior to the
                                     withdrawal or transfer.

Spousal Continuation      This Rider will terminate as of the date of
                          death. If this Rider is subsequently elected
                          pursuant to a spousal continuation the Date of
                          Continuance listed on the Certificate
                          Schedule will become the Issue Date for purposes
                          of calculating the death benefit under this
                          rider.

L-8823                                                                   Page 30

<PAGE>

OPTIONAL ENHANCED DEATH BENEFIT PROVISION

                              If the Owner has elected Earnings Enhanced Death
                              Benefit Option #2, the following provision is
                              added to the Owner's Certificate. A separate
                              charge will be made for this benefit; it will be
                              shown on the Certificate Schedule.

                              The Amount Payable Upon Death provision of the
                              Certificate is deleted in its entirety and
                              replaced with the following:

Class 1 Accumulation Options  Certain Accumulation Options may be considered
                              Class 1 Accumulation Options. The list of Class 1
                              Accumulation Options, if any, is shown on the
                              Certificate Schedule. Class 1 Accumulation
                              Options may be subject to limitations or rules
                              when calculating the death benefit described
                              below.

                              We may reduce the benefit charge for the portion
                              of Certificate Value allocated to Class 1
                              Accumulation Options. We may add or remove
                              Accumulation Options to the Class 1 Accumulation
                              Options. We will give You 30 days notice of any
                              changes. Such changes will apply to transfers and
                              subsequent Purchase Payments allocated to the
                              Class 1 Accumulation Options after the date of any
                              change.

                              The death benefit payable under this benefit is
                              equal to the greatest of the following less debt:

                                  (1)  the Certificate Value, excluding any
                                       negative Market Value Adjustment but
                                       including any positive Market Value
                                       Adjustment, and

                                  (2)  the total amount of Purchase Payments,
                                       less previous Purchase Payments withdrawn
                                       and withdrawal charges, and

                                  (3)  the Step-up Death Benefit.

                              We compute the Certificate Value at the end of the
                              Valuation Period following our receipt of due
                              proof of death and the return of the Certificate.
                              We compute the other amounts above as of the date
                              of death.

Step-Up Death Benefit         The Step-up Death Benefit for the Certificate is
                              equal to the sum of (i + ii):

                                  i) the greater of.

                                     a) Certificate Value allocated to the Class
                                        1 Accumulation Options, or

                                     b) Adjusted Purchase Payment Death Benefit
                                        for Class 1 Accumulation Options, and

                                 ii) Guaranteed Step-up Death Benefit for Class
                                     2 Accumulation Options.

                             The Adjusted Purchase Payment Death Benefit for
                             Class 1 Accumulation Options on the Issue Date is
                             equal to the initial Purchase Payment allocated to
                             the Class 1 Accumulation Options. On a subsequent
                             Valuation Date, the Adjusted Purchase Payment Death
                             Benefit for Class 1 Accumulation Options is
                             adjusted by adding to the prior value:

                                 (1) any subsequent Purchase Payments allocated
                                     to the Class 1 Accumulation Options, and

                                 (2) any adjustments for transfers to the Class
                                     1 Accumulation Options.

                             and subtracting:

                                 (3) any adjustments for transfers from the
                                     Class 1 Accumulation Options, and

                                 (4) the amount of any pro rata adjustment for
                                     withdrawals from the Class 1 Accumulation
                                     Options.

                             The Guaranteed Step-up Death Benefit for Class 2
                             Accumulation Options on the Issue Date is equal to
                             the initial Purchase Payment allocated to the
                             Class 2 Accumulation Options. On each subsequent
                             Certificate Anniversary, prior to the oldest Owner
                             attaining age [81] the Guaranteed Step-up Death
                             Benefit for Class 2 Accumulation Options equals
                             the greater of (1) and (2) below. On all other
                             Valuation Dates the Guaranteed Step-up Death
                             Benefit for Class 2 Accumulation Options is equal
                             to (2) below.

L-8823                                                                   Page 31

<PAGE>

OPTIONAL ENHANCED DEATH BENEFIT PROVISION (continued)

                           (1) Certificate Value allocated to the Class 2
                               Accumulation Options, or

                           (2) the Guaranteed Step-up Death Benefit for Class 2
                               Accumulation Options on the prior Certificate
                               Anniversary plus:

                               a) any Purchase Payments allocated to the Class 2
                                  Accumulation Options since the prior
                                  Certificate Anniversary, and

                               b) any adjustments for transfers from the Class 1
                                  Accumulation Options made since the prior
                                  Certificate Anniversary

                          less:

                             c) any adjustments for transfers to the Class 1
                                Accumulation Options made since the prior
                                Certificate Anniversary, and

                             d) the amount of any pro rata adjustment for
                                withdrawals from the Class 2 Accumulation
                                Options since the prior Certificate Anniversary.

Adjustments for Transfer  Transfers from Class 1 Accumulation Options to Class 2
and Withdrawals           Accumulation Options will reduce the Adjusted
                          Purchase Payment Death Benefit for Class 1
                          Accumulation Options on a pro rata basis. The
                          resulting increase in the Guaranteed Step-up Death
                          Benefit for the Class 2 Accumulation Options is equal
                          to the lesser of:

                           (1) the reduction in Adjusted Purchase Payment Death
                               Benefit for Class 1 Accumulation Options, and

                           (2) net Certificate Value transferred.

                          Transfers from Class 2 Accumulation Options to Class 1
                          Accumulation Options will reduce the Guaranteed
                          Step-up Death Benefit for the Class 2 Accumulation
                          Options on a pro rata basis. The resulting increase
                          in the Adjusted Purchase Payment Death Benefit for
                          Class 1 Accumulation Options is equal to reduction in
                          the Guaranteed Step-up Death Benefit for the Class 2
                          Accumulation Options.

                          Pro rata adjustment - The pro rata adjustment applies
                          to transfers and partial withdrawals from the Class 1
                          Accumulation Options and Class 2 Accumulation Options.

                              The pro rata adjustment for transfers and
                              withdrawals from Class 1 Accumulation Options is
                              equal to (1) divided by (2), with the result
                              multiplied by (3), where:

                           (1) is the withdrawal and withdrawal charge or
                               transfer amount,

                           (2) is the Certificate Value allocated to the Class
                               1 Accumulation Options immediately prior to the
                               withdrawal or transfer,

                           (3) is the value of the applicable death benefit
                               immediately prior to the withdrawal or transfer.

                             The pro rata adjustment for transfers and
                             withdrawals from Class 2 Accumulation Options is
                             equal to (1) divided by (2), with the result
                             multiplied by (3), where:

                           (1) is the withdrawal and withdrawal charge or
                               transfer amount,

                           (2) is the Certificate Value allocated to the Class
                               2 Accumulation Options immediately prior to the
                               withdrawal or transfer,

                           (3) is the value of the applicable death benefit
                               immediately prior to the withdrawal or transfer.

L-8823                                                                   Page 32

<PAGE>

OPTIONAL ENHANCED DEATH BENEFIT PROVISION (continued)

Roll-up Death Benefit  The Roll-up Death Benefit for the Certificate is equal to
                       the sum of (i+ii):

                             i) the greater of:

                                 a) Certificate Value allocated to the Class 1
                                    Accumulation Options or

                                 b) Adjusted Accumulated Death Benefit Class 1
                                    Accumulation Options.

                            ii) Guaranteed Roll-up Death Benefit for Class 2
                                Accumulation Options.

                       The Adjusted Accumulated Death Benefit for Class 1
                       Accumulation Options on the Issue Date is equal to the
                       initial Purchase Payment allocated to the Class 1
                       Accumulation Options. On each subsequent Valuation Date,
                       the Adjusted Accumulated Death Benefit for Class 1
                       Accumulation Options is adjusted by adding to the prior
                       value:

                         (1) interest on the Adjusted Accumulated Death Benefit
                             for Class 2 Accumulation Options, and

                         (2) any subsequent Purchase Payment allocated to the
                             Class 1 Accumulation Options, and

                         (3) any adjustments for transfers to the Class 1
                             Accumulation Options.

                         and subtracting:

                         (4) any adjustments for transfers from the Class 1
                             Accumulation Options, and

                         (5) the amount of any pro rata adjustment for
                             withdrawals from the Class 1 Accumulation Options.

                       The Guaranteed Roll-up Death Benefit for Class 2
                       Accumulation Options on the Issue Date is equal to the
                       initial Purchase Payment allocated to the Class 2
                       Accumulation Options. On each subsequent Valuation Date,
                       the Guaranteed Roll-up Death Benefit for Class 2
                       Accumulation Options is adjusted by adding to the prior
                       value:

                         (1) interest on the Guaranteed Roll-up Death Benefit
                             for Class 2 Accumulation Options, and

                         (2) any subsequent Purchase Payments allocated to the
                             Class 2 Accumulation Options, and

                         (3) any adjustments for transfers from the Class 1
                             Accumulation Options,

                       and subtracting:

                         (4) any adjustments for transfers to the Class 1
                             Accumulation Options, and

                         (5) the amount of any pro rata adjustment for
                             withdrawals from the Class 2 Accumulation Options.

                       The Guaranteed Roll-up Death Benefit Interest Rate is
                       shown in the Contract Schedule. The Guaranteed Roll-up
                       Death Benefit Interest Rate is 0%.

                           (a) following the oldest Owner's 80th birthday, or

                           (b) when the Roll-up Death benefit is equal to two
                               (2) times the value of remaining purchase
                               payments.

L-8823                                                                   Page 33

<PAGE>

OPTIONAL ENHANCED DEATH BENEFIT PROVISION (continued)

Adjustments for Transfers  Transfers from Class 1 Accumulation Options to Class
and Withdrawals            2 Accumulation Options will reduce the Adjusted
                           Accumulated Death Benefit for Class 1 Accumulation
                           Options on a pro rata basis. The resulting increase
                           in the Guaranteed Roll-up Death Benefit for the Class
                           2 Accumulation Options is equal to the lesser of:

                                  (1) the reduction in Adjusted Accumulated
                                      Death Benefit for Class 1 Accumulation
                                      Options, and

                                  (2) net Certificate Value transferred.

                           Transfers from Class 2 Accumulation Options to Class
                           1 Accumulation Options will reduce the Guaranteed
                           Roll-up Death Benefit for the Class 2 Accumulation
                           Options on a pro rata basis. The resulting increase
                           in the Adjusted Accumulated Death Benefit for Class
                           1 Accumulation Options is equal to reduction in the
                           Guaranteed Roll-up Death Benefit for the Class 2
                           Accumulation Options.

                           Pro rata adjustment - The pro rata adjustment applies
                           to transfers and partial withdrawals from the Class
                           1 Accumulation Options and Class 2 Accumulation
                           Options.

                              The pro rata adjustment for transfers and
                              withdrawals from Class 1 Accumulation Options is
                              equal to (1) divided by (2), with the result
                              multiplied by (3), where:

                                  (1) is the withdrawal and withdrawal charge or
                                      transfer amount,

                                  (2) is the Certificate Value allocated to the
                                      Class 1 Accumulation Options immediately
                                      prior to the withdrawal or transfer,

                                  (3) is the value of the applicable death
                                      benefit immediately prior to the
                                      withdrawal or transfer.

                           The pro rata adjustment for transfers and withdrawals
                           from Class 2 Accumulation Options is equal to (1)
                           divided by (2), with the result multiplied by (3),
                           where:

                                  (1) is the withdrawal and withdrawal charge
                                      or transfer amount,

                                  (2) is the Certificate Value allocated to the
                                      Class 2 Accumulation Options immediately
                                      prior to the withdrawal or transfer,

                                  (3) is the value of the applicable death
                                      benefit immediately prior to the
                                      withdrawal or transfer.

Spousal Continuation       This provision will terminate as of the date of
                           death. If this Rider is subsequently elected pursuant
                           to a spousal continuation the Date of Continuance
                           listed on the Certificate Schedule will become the
                           Issue Date for purposes of calculating the Death
                           Benefit under this provision.

L-8823                                                                   Page 34

<PAGE>

Form No. L-8823                                           Group Policv No. K1005

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