Document:

<PAGE>

                               FINANCING AGREEMENT
                               -------------------

                                Hilco Capital LP
                                   (as Lender)

                            Harvard Industries, Inc.,
                              Doehler-Jarvis, Inc.,
                       Harvard Transportation Corporation,
                        Doehler-Jarvis Greeneville, Inc.,
                       Pottstown Precision Casting, Inc.,
                    Harvard Industries Risk Management, Inc.,
                          Doehler-Jarvis Toledo, Inc.,
                            Harman Automotive, Inc.,
                            Hayes-Albion Corporation
                                       and
                          KWCI Liquidating Corporation
                                 (as Companies)

                                       and

                           Trim Trends Canada Limited
                                       and
                               177192 Canada Inc.
                                 (as Guarantors)

                            Dated: As of May 31, 2001

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                                TABLE OF CONTENTS

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SECTION 1.            Definitions.................................................................................1

         1.1      Certain Defined Terms...........................................................................1
         1.2      Construction of Certain Terms..................................................................21
         1.3      GAAP Terminology...............................................................................21
         1.4      No Presumption in Construction.................................................................22
         1.5      Independence of Provisions.....................................................................23
         1.6      Inactive Guarantor.............................................................................23

SECTION 2.            Conditions Precedent.......................................................................23

         2.1      Conditions relating to the Closing Date........................................................23

SECTION 3.            Term Loan..................................................................................30

         3.1      Term Loan......................................................................................30
         3.2      Borrowing Request and Procedure................................................................30
         3.3      Payment of Principal of Term Loan..............................................................30
         3.4      Payment of Term Loan Upon Termination..........................................................30
         3.5      Loan Account...................................................................................30
         3.6      Joint and Several Liability of Companies.......................................................32

SECTION 4.            Termination of the Commitment of the Lender................................................34

SECTION 5.            Prepayments of Term Loan...................................................................34

         5.1      Optional Prepayment of Term Loan...............................................................34
         5.2      Mandatory Application of Certain Proceeds......................................................34
         5.3      Mandatory Application of Insurance Proceeds and Sale of Asset Proceeds.........................35

SECTION 6.            Collateral for Obligations.................................................................37

         6.1      Security Interest..............................................................................37
         6.2      Related Collateral Matters and Financing Statements............................................37
         6.3      Certain Dealings, Rights and Matters Relating to Collateral....................................38
         6.4      Continuing Nature of Security Interest and Rights..............................................40
         6.5      Lender's Exercise of Rights and Remedies.......................................................40
         6.6      Security; Loan Account Charges.................................................................40
         6.7      Insurance on Collateral........................................................................40
         6.8      Taxes Relating to Collateral...................................................................42
         6.9      Mortgages......................................................................................42
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SECTION 7.            Representations; Warranties and Covenants..................................................42

         7.1      Representations and Warranties.................................................................42
         7.2      Covenants......................................................................................48
         7.3      Covenants Involving Accounts and Inventory.....................................................60
         7.4      Representations Regarding Accounts and Inventory...............................................61
         7.5      Matters Relating to Accounts...................................................................62
         7.6      Reports Involving Accounts and Related Matters.................................................63
         7.7      Indemnification................................................................................63

SECTION 8.            Interest, Fees and Expenses Involving Obligations..........................................64

         8.1      Term Loan......................................................................................64
         8.2      Other Expenses.................................................................................65
         8.3      Commitment Fee.................................................................................65
         8.4      Closing Fee....................................................................................65
         8.5      Anniversary Fee................................................................................65
         8.6      Facility Fee...................................................................................65
         8.7      Success Fee....................................................................................65
         8.8      Management Fee.................................................................................66
         8.9      Other Charges..................................................................................66
         8.10     Taxes..........................................................................................66
         8.11     Loan Account Charges...........................................................................67

SECTION 9.            Powers Involving Obligations...............................................................67

         9.1      Power of Attorney..............................................................................67
         9.2      Waivers........................................................................................68

SECTION 10.           Events of Default and Remedies.............................................................68

         10.1     Events of Default..............................................................................68
         10.2     Remedies Upon an Event of Default..............................................................71
         10.3     Additional Remedies Upon an Event of Default...................................................71
         10.4     Right of Set-Off...............................................................................73

SECTION 11.           Observation Rights.........................................................................73

SECTION 12.           Termination................................................................................74

SECTION 13.           Miscellaneous..............................................................................74

         13.1     Waivers........................................................................................74
         13.2     Entire Agreement...............................................................................74
         13.3     Usury..........................................................................................74
         13.4     Severability...................................................................................75
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         13.5     WAIVER OF JURY TRIAL...........................................................................75
         13.6     Notices........................................................................................75
         13.7     GOVERNING LAWS.................................................................................76
         13.8     Submission to Jurisdiction; Service of Process.................................................77
         13.9     Intentionally Omitted..........................................................................77
         13.10    Headings.......................................................................................77
         13.11    Replacement of Promissory Note.................................................................77
         13.12    Counterparts...................................................................................77
         13.13    Assignments....................................................................................77
         13.14    Participants...................................................................................78
         13.15    Currency.......................................................................................78
         13.16    Rate of Interest for Canadian Companies........................................................79
         13.17    Amendments; Waivers............................................................................79
         13.18    Confidentiality................................................................................79
         13.19    Contribution...................................................................................79
         13.20    Relationship...................................................................................80

SECTION 14.           Guaranty...................................................................................80

         14.1     Guaranty.......................................................................................80
         14.2     Guaranty Obligations Unconditional.............................................................81
         14.3     Waivers........................................................................................83
         14.4     Subrogation....................................................................................83
         14.5     Canadian Debenture.............................................................................84

EXHIBITS

         Exhibit A        -    Form of Promissory Note
         Exhibit B        -    Form of Notice of Borrowing
         Exhibit C        -    Form of Borrowing Base Certificate

SCHEDULES

         Schedule 1       -    Collateral Information
         Schedule 2       -    Litigation
         Schedule 3       -    Capital Stock
         Schedule 4       -    Certain Indebtedness and Permitted Encumbrances
         Schedule 5       -    Real Estate
         Schedule 6       -    Liabilities and Asset Dispositions
         Schedule 7       -    Defaults
         Schedule 8       -    Taxes
         Schedule 9       -    ERISA Matters
         Schedule 10      -    Environmental Matters
         Schedule 11           Intellectual Property Matters
         Schedule 12           Eligible Equipment
</TABLE>

                                     -iii-
<PAGE>

                               FINANCING AGREEMENT
                               -------------------

                  This Financing Agreement is made as of the 31st day of May,
2001 by and among HILCO CAPITAL LP, a Delaware limited partnership, with offices
located at One Northbrook Place, 5 Revere Drive, Suite 202, Northbrook, Illinois
60062 (herein "Lender"), HARVARD INDUSTRIES, INC., a Delaware corporation
(herein "Harvard"), DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD
TRANSPORTATION CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE,
INC., a Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware
corporation (herein "Pottstown"), HARVARD INDUSTRIES RISK MANAGEMENT, INC., a
Delaware corporation, DOEHLER-JARVIS TOLEDO, INC., a Delaware corporation,
HARMAN AUTOMOTIVE, INC., a Michigan corporation, HAYES-ALBION CORPORATION, a
Michigan corporation (herein "Hayes-Albion"), and KWCI LIQUIDATING CORPORATION,
a New Hampshire corporation (each individually a "Company" and collectively, the
"Companies") and TRIM TRENDS CANADA, LIMITED, a Canadian corporation (herein
"Trim Trends") and 177192 CANADA INC., an Ontario corporation (each individually
a "Guarantor" and collectively, the "Guarantors" and together with the
Companies, each an "Obligor" and collectively, the Obligors).

          SECTION 1. Definitions

                  1.1 Certain Defined Terms

                  The following terms shall have the meanings indicated below.

                  Access and Security Agreement shall mean the Access and
Security Agreement dated as of January 1, 2001, between Harvard, and Pottstown,
on the one hand, and General Motors Corporation, on the other hand, and each of
the three Access and Security Agreements dated as of the same date between
Harvard and Hayes-Albion, on the one hand, and General Motors Corporation, on
the other hand, relating to the Hayes-Albion facility in Jackson, Michigan, the
Trim-Trend facility in Bryan, Ohio, and the Trim-Trend facility in Spencerville,
Ohio.

                  Accounts shall mean all of an Obligor's now existing and
future: (a) accounts (as defined in the UCC), and any and all other receivables
(whether or not specifically listed on schedules furnished to the Lender),
including, without limitation, all accounts created by, or arising from, all of
each of such Obligor's sales, leases, rentals of goods or renditions of services
to its customers, including but not limited to, those accounts arising under any
of such Obligor's trade names or styles, or through any of such Obligor's
divisions; (b) any and all instruments, documents, chattel paper (including
electronic chattel paper) (all as defined in the UCC); (c) unpaid seller's or
lessor's rights (including rescission, replevin, reclamation, repossession and
stoppage in transit) relating to the foregoing or arising therefrom; (d) rights
to any goods represented by any of the foregoing, including rights to returned,
reclaimed or repossessed goods; (e) reserves and credit balances arising in
connection with or pursuant hereto; (f) guarantees, supporting obligations,
payment intangibles and letter of credit rights (all as defined in the UCC); (g)
insurance policies or rights relating to any of the foregoing; (h) general
intangibles pertaining to any and all of the foregoing (including all rights to
payment, including those arising in connection with bank and non-bank credit
cards), and including books and

<PAGE>

records and any electronic media and software thereto; (i) notes, deposits or
property of account debtors securing the obligations of any such account debtors
to such Obligor; and (j) cash and non-cash proceeds (as defined in the UCC) of
any and all of the foregoing.

                  Anniversary Date shall mean the date occurring one (1) year
from the Closing Date and the same date in every year thereafter.

                  Anniversary Fee shall have the meaning set forth in Paragraph
8.5 of Section 8 hereof.

                  Authorized Officer shall mean with respect to any Obligor, the
chairman of the board of directors, the chief executive officer or the president
of such Obligor or, with respect to financial matters, the chief financial
officer or comptroller of such Obligor, in each case, acting in that Person's
capacity as such (or any other officer of the relevant Obligor who is duly
authorized to take the relevant action or issue the relevant certification or
other document on behalf of such Obligor as contemplated herein or in another
relevant Loan Document).

                  Availability Reserves shall mean such reserves to the
Borrowing Base and/or the Senior Lien Borrowing Base as the Lender determines
from time to time in its reasonable discretion based upon the lending practices
of the Lender, which reserves may relate to the assets the value of which are
used to determine the Borrowing Base, the assets the value of which are used to
determine the Senior Lien Borrowing Base or any other assets or other matter or
circumstance deemed appropriate by the Lender in its reasonable discretion based
upon the lending practices of the Lender.

                  Bankruptcy Code shall mean each of the United States
Bankruptcy Code, 11 U.S.C. ss.ss. 101 et seq. and the Bankruptcy and Insolvency
Act (Canada).

                  Base Rate shall mean the rate of interest per annum announced
by LaSalle National Bank from time to time as its prime rate in effect at its
principal office in Chicago, Illinois. The prime rate is not intended to be the
lowest rate of interest charged by LaSalle National Bank to its borrowers. Each
change in the Base Rate shall be effective from and including the date such
change is publicly announced as being effective.

                  Blocked Account Agreements shall have the meaning set forth in
Paragraph 7.5(b) of Section 7 hereof.

                  Blocked Accounts shall have the meaning set forth in Paragraph
7.5(b) of Section 7 hereof.

                  Board of Directors shall have the meaning set forth in Section
11 hereof.

                  Borrowing Base shall mean, at any time, eighty two and
two-tenths percent (82.2%) of the orderly liquidation value of the Companies'
Eligible Equipment at such time, as such orderly liquidation value is determined
by an independent third party appraiser acceptable to the Lender.

                                     - 2 -
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                  Borrowing Base Certificate shall mean a certificate,
substantially in the form of Exhibit C hereto, signed by an Authorized Officer
of Harvard and setting forth the calculation of the Senior Lien Borrowing Base
on the date of such certificate, in compliance with Paragraph 7.2(g)(v) of
Section 7 hereof.

                  Borrowing Base Excess shall have the meaning set forth in
Paragraph 7.2(j)(xvi) of Section 7 hereof.

                  Business Day shall mean any day on which the Lender and the
principal office in Chicago, Illinois of LaSalle National Bank are open for
business.

                  Canadian Debenture shall have the meaning set forth in
Paragraph 14.5 of Section 14 hereof.

                  Canadian Deposit Account shall have the meaning set forth in
Paragraph 2.1(ff) of Section 2 hereof.

                  Capital Expenditures shall mean, for any period, the aggregate
expenditures of the Obligors during such period on account of, property, plant,
equipment or similar fixed assets that, in conformity with GAAP, are required to
be reflected in the balance sheets of the Obligors, including, without
limitation, each Capital Lease.

                  Capital Lease shall mean any lease of property (whether real,
personal or mixed) to the extent that, in conformity with GAAP, it is or should
be accounted for as a capital lease or a Capital Expenditure in the balance
sheets of the Obligors.

                  Cash Collateral Account shall have the meaning set forth in
Paragraph 2.1(gg) of Section 2 hereof.

                  Change in Control shall mean (a) the acquisition by any person
or group (within the meaning given to the term in the Exchange Act), other than
Contrarian Capital Management, of beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under the
Exchange Act) of more than fifty percent (50%) of the issued and outstanding
shares of the capital stock of Harvard having the right to vote for the election
of directors of Harvard under ordinary circumstances; (b) during any period of
twelve (12) consecutive calendar months, individuals who at the beginning of
such period constituted the board of directors of Harvard (together with any new
directors whose election by the board of directors of Harvard or nomination for
election by the stockholders of Harvard was approved by a vote of at least
two-thirds of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office; or (c) 100% of the
capital stock of any Obligor (other than Harvard) presently held (directly or
indirectly) by Harvard is transferred to any Person other than any Obligor.

                  Closing Date shall mean the date that this Financing Agreement
has been duly executed by the parties hereto and delivered to the Lender and
each condition set forth in Section 2.1 is satisfied in a manner satisfactory to
the Lender.

                                     - 3 -
<PAGE>

                  Closing Fee shall have the meaning set forth on Paragraph 8.4
of Section 8 hereof.

                  Code shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.

                  Collateral shall have the meaning set forth in Paragraph 6.1
of Section 6 hereof.

                  Collective Borrowers shall mean each and all of the Companies,
as specified in Paragraph 3.5(b) of Section 3 hereof.

                  Combined Borrowing Base Excess shall have the meaning set
forth in Paragraph 7.2(j)(xvii) of Section 7 hereof.

                  Commitment shall mean the Lender's commitment to make the Term
Loan on the Closing Date in accordance with this Financing Agreement.

                  Commitment Fee shall have the meaning set forth in Paragraph
8.3 of Section 8 hereof.

                  Commitment Letter shall mean the Commitment Letter, dated
April 17, 2001, issued by the Lender to, and accepted by, Harvard.

                  Consolidated Balance Sheet shall mean a consolidated or
compiled, as applicable, balance sheet for the Obligors and their consolidated
subsidiaries, eliminating all inter-company transactions and prepared in
accordance with GAAP.

                  Consolidating Balance Sheet shall mean (subject to Paragraph
1.3 of this Section 1) a Consolidated Balance Sheet plus individual balance
sheets for the Obligors and their consolidated subsidiaries, showing all
eliminations of inter-company transactions, including a balance sheet for each
of the Obligors exclusively, all prepared in accordance with GAAP.

                  Contaminant means any substance (including, without
limitation, any product) regulated, restricted or addressed by or under
Environmental Law, including, without limitation, any pollutant, contaminant,
hazardous substance, radioactive substance, toxic substance, hazardous waste,
medical waste, radioactive waste, or special waste, petroleum (including,
without limitation, crude-oil) or petroleum-derived substance or waste asbestos,
lead, polychlorinated biphenyls, or any hazardous or toxic constituent or
breakdown product thereof.

                  Contractual Obligations shall mean, as to any Person, any
provision of any security issued by such Person or any agreement, instrument or
other undertaking to which such Person is a party or by which it or any of its
property is bound.

                  Copyrights shall mean, as to any Obligor, such Obligor's
present and hereafter acquired copyrights, copyright registrations, recordings,
copyright applications, designs, styles, marks, prints and labels bearing any of
the foregoing, copyright licenses, and all cash and non-cash proceeds thereof.

                                     - 4 -
<PAGE>

                  Current Assets shall mean those assets of the Obligors which,
in accordance with GAAP, are classified as "current."

                  Current Liabilities shall mean those liabilities of the
Obligors which, in accordance with GAAP, are classified as "current," provided,
however, that, notwithstanding GAAP, the revolving loans under the Senior Lien
Financing Agreement and the current portion of Permitted Indebtedness shall be
considered "current liabilities."

                  Default shall mean any event specified in Paragraph 10.1 of
Section 10 hereof, whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition, event or act, has been
satisfied.

                  Default Rate of Interest shall mean a rate of interest per
annum equal to the sum of: (a) seven percent (7%) and (b) the greater of (x) the
applicable increment over the Base Rate (as set forth in Paragraph 8.1(a)(i) of
Section 8 hereof) plus the Base Rate and (y) fifteen percent (15%), which the
Lender shall be entitled to charge the Companies on all Obligations due to the
Lender, by the Companies, as further set forth in Paragraph 10.2 of Section 10
hereof.

                  Depository Account shall mean a collection account, subject to
the Senior Lien Administrative Agent's control.

                  Disposition shall mean any transaction, or series of related
transactions, pursuant to which any Obligor or any of its subsidiaries sells,
assigns, transfers or otherwise disposes of any property or assets (whether now
owned or hereafter acquired) to any other Person, in each case, whether or not
the consideration therefor consists of cash, securities or other assets owned by
the acquiring Person, excluding any sales of Inventory in the ordinary course of
business on ordinary business terms.

                  Doehler-Jarvis Plan shall mean the Doehler-Jarvis Pension Plan
for Wage-Basis Employees.

                  Documents of Title shall mean all of each of the Obligors'
present and future documents (as defined in the UCC), and any and all warehouse
receipts, bills of lading, shipping documents, chattel paper, instruments and
similar documents, all whether negotiable or not and all goods and Inventory
relating thereto and all cash and non-cash proceeds of the foregoing.

                  EBITDA shall mean, for any applicable period, consolidated net
income minus (to the extent included in determining net income) each of the
following: (A) income tax credits, (B) interest income, (C) gains from
extraordinary items, (D) aggregate non-cash net gains (but not any aggregate net
loss) arising from the sale, exchange or other disposition of capital assets,
(E) any other non-cash gains that would have been included in consolidated net
income under GAAP but for this provision, and (F) any other income that does not
arise in the ordinary course of business; plus (to the extent included in
determining net income) each of the following: (A) any provision for income
taxes, (B) interest expense, (C) the amount of any non-cash charges (including
amortization, depreciation and the non-cash portion of imputed interest on
employee post-retirement benefits other than pension benefits), (D) amortized
debt discount and (E) any aggregate non-cash net loss arising from the sale,
exchange or other disposition of capital assets. All items and classifications
relevant to the determination of EBITDA for a period shall

                                     - 5 -
<PAGE>

be determined in accordance with GAAP applied on a basis consistent with its
application in the audited financial statements of the Obligors for the 2000
Fiscal Year.

                  Eligible Equipment shall mean the Equipment listed on Schedule
12 hereto and located at the locations listed on Schedule 12 hereto which meets
all of the following specifications: (i) the Lender shall have received (A) the
most recent appraisal of such Equipment requested by the Lender pursuant to the
terms of this Financing Agreement, which appraisal shall be based upon the
orderly liquidation value of such Equipment and shall be in form and substance
and from an independent third party appraiser in each case acceptable to the
Lender in its sole discretion, (B) evidence satisfactory to the Lender that
there are no Liens on such Equipment other than Permitted Encumbrances, (C) a
written Phase I environmental site assessment ("ESA") report, in scope and
substance satisfactory to the Lender in its sole discretion, for each location
listed on Schedule 12, and a reliance letter in form and substance and from an
environmental firm satisfactory to the Lender in its sole discretion, relating
to each such ESA, and (D) evidence of property insurance and such other
information, agreements and documents with respect to such Equipment as the
Lender may reasonably request; (ii) the Lender shall be satisfied, in its
discretion, that the Lender has the right to dispose of such Equipment after an
Event of Default; and (iii) such Equipment is not furnishings, fixtures, parts,
and is not otherwise regarded by the Lender, in its discretion, as unsuitable
Collateral for the Obligations and is, and at all times shall continue to be,
acceptable to the Lender in all respects, in each case as Schedule 12 may from
time to time be amended by Harvard with the prior written consent of the Lender.

                  Environmental Laws shall mean all international, national,
state, provincial, regional, federal, municipal and local laws (including,
without limitation, principles of common law and decisional law), statutes,
treaties, codes, ordinances, rules, regulations, decrees, judgments, directives,
binding policies, permits, authorizations, consents, licenses, or orders
relating to or addressing the environment (including, without limitation,
natural resources) or the health or safety of humans or other living organisms.

                  Equipment shall mean, as to any Obligor, all of such Obligor's
present and hereafter acquired equipment (as defined in the UCC) including,
without limitation, all machinery, equipment, furnishings and fixtures, and all
additions, substitutions and replacements thereof, wherever located, together
with all attachments, components, parts, equipment and accessories installed
thereon or affixed thereto and all proceeds thereof of whatever sort.

                  ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time.

                  ERISA Affiliate shall mean any corporation or trade or
business which is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Code) as any Obligor or is under common
control (within the meaning of Section 414(c) of the Code) with any Obligor.

                  ERISA Event shall mean (a) with respect to a Plan subject to
Title IV of ERISA, a Reportable Event or an event described in Section 4068 of
ERISA, (b) the withdrawal of any

                                     - 6 -
<PAGE>

Company or ERISA Affiliate from a Multiple Employer Plan during a plan year in
which it was a "substantial employer", as such term is defined in Section
4001(a)(2) of ERISA, or the incurrence of liability by any Company or ERISA
Affiliate under Section 4064 of ERISA upon the termination of a Multiple
Employer Plan, (c) providing notice of intent to terminate a Plan pursuant to
Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA, (d) the institution of proceedings to terminate a
Plan by the PBGC under Section 4042 of ERISA, (e) a complete or partial
withdrawal by any Company or ERISA Affiliate from a Multiemployer Plan, (f) a
failure by any Company or ERISA Affiliate to make required contributions to a
Plan, (g) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any
Company or ERISA Affiliate, (h) an application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code with
respect to any Single Employer Plan, (i) the imposition of a Lien upon any
Company or ERISA Affiliate pursuant to Section 412 of the Code or Section 302 of
ERISA, (j) any event or condition that results in the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA, (k) any
Company or ERISA Affiliate engages in a Prohibited Transaction or otherwise
becomes liable with respect to a Prohibited Transaction or (l) any breach by
Harvard of the Agreement between Harvard and the PBGC, dated October 15, 1998,
and as hereafter amended, or any action by the PBGC to enforce the terms of such
agreement.

                  Event(s) of Default shall have the meaning set forth in
Paragraph 10.1 of Section 10 hereof.

                  Exchange Act shall mean the Securities Exchange Act of 1934,
as amended.

                  Excluded Property shall mean any contract, lease, license or
other agreement that contains a provision prohibiting the assignment or grant of
a security interest therein without the consent of another Person to the extent
(but only to the extent) that such consent has not been obtained and the
prohibition either exists on the date of this Financing Agreement or, after the
date of this Financing Agreement is included in such contract, lease, license or
other agreement with the prior written consent of the Lender (other than any of
the foregoing constituting an account or a general intangible for money due or
to become due to which Section 9-318(4) of the UCC applies). Notwithstanding
anything set forth herein to the contrary, the Lender will be deemed to have,
and at all times to have had, a security interest in the proceeds of such
Excluded Property.

                  Excluded Stock shall mean capital stock of the subsidiaries of
the Companies that are organized outside the United States representing
thirty-five percent (35%) of their capital stock on the Closing Date.

                  Existing Credit Agreements shall have the meaning set forth in
Paragraph 2.1(s) of Section 2 hereof.

                  Existing Lender shall have the meaning set forth in Paragraph
2.1(s) of Section 2 hereof.

                                     - 7 -
<PAGE>

                  Expense Deposit shall have the meaning set forth in Paragraph
2.1(cc) of Section 2 hereof.

                  Facility Fee shall have the meaning set forth in Paragraph 8.6
of Section 8 hereof.

                  Federal Reserve Board shall mean the Board of Governors of the
Federal Reserve System.

                  Fiscal Quarter shall mean, with respect to the Obligors, each
three (3) month period ending on or about December 31, March 31, June 30 or
September 30 of each Fiscal Year.

                  Fiscal Year shall mean each twelve (12) month period
commencing on October 1 of each year and ending on September 30 of the following
year.

                  Fixed Charge Coverage Ratio shall mean, for the relevant
period, the ratio determined by dividing EBITDA by the sum of (a) all interest
obligations paid or due, (b) the amount of principal repaid or scheduled to be
repaid on the Term Loan, the Senior Lien Obligations and all other Indebtedness
of the Obligors and their subsidiaries other than (i) the revolving loans and
reimbursement obligations in respect of letters of credit under the Senior Lien
Financing Documents and (ii) principal prepayments of the Term Loan made
pursuant to Section 3 hereof and the principal prepayments of the term loan
under the Senior Lien Financing Agreement made pursuant to Section 7 of the
Senior Lien Financing Agreement (as such Section is in effect on the date
hereof), (c) Capital Expenditures actually incurred which were not financed or
refinanced hereunder, (d) all mandatory dividends and other distributions of a
similar nature made in cash by the Obligors to anyone other than Harvard or the
other Obligors, and (e) all federal, state, provincial and local income tax
expenses due and payable.

                  Funded Debt shall mean, with respect to the Obligors, without
duplication, the aggregate of all Indebtedness of the Obligors (including
obligations in respect of interest that is capitalized or paid in kind) other
than any Indebtedness referred to in clause (b) of the definition of
"Indebtedness" or in clause (e) of that definition, to the extent that such
Indebtedness under clause (e) arises in respect of Indebtedness under clause (b)
or clause (e) of that definition. Without limiting the foregoing, Funded Debt
shall include the Obligations, the Guaranty Obligations and the obligations of
the Obligors under the Senior Lien Financing Documents.

                  GAAP shall mean generally accepted accounting principles in
the United States as in effect from time to time and for the period as to which
such accounting principles are to apply, provided that in the event any of the
Obligors modifies its accounting principles and procedures as applied as of the
Closing Date, such Obligor shall provide to the Lender such statements of
reconciliation as shall be in form and substance acceptable to the Lender.

                  GECC shall have the meaning set forth in Paragraph 2.1(s) of
Section 2 hereof.

                  General Intangibles shall mean, as to any Obligor, all of such
Obligor's present and hereafter acquired general intangibles (as defined in the
UCC), and shall include, without limitation, all present and future right, title
and interest in and to: (a) all Trademarks, tradenames, corporate names,
business names, logos and any other designs or sources of business identities,
(b) Patents, together with any improvements on said Patents, utility models,
industrial models,

                                     - 8 -
<PAGE>

and designs, (c) Copyrights, (d) trade secrets, (e) licenses, permits and
franchises, (f) all applications with respect to the foregoing, (g) all right,
title and interest in and to any and all extensions and renewals, (h) goodwill
with respect to any of the foregoing, (i) any other forms of similar
intellectual property, (j) all customer lists, distribution agreements, supply
agreements, blue prints, indemnification rights and Tax refunds, together with
all monies and claims for monies now or hereafter due and payable in connection
with any of the foregoing or otherwise, and all cash and non-cash proceeds
thereof, including, without limitation, the proceeds or royalties of any
licensing agreements between such Obligor and any licensee of any such Obligor's
General Intangibles other than Excluded Property.

                  GM Transition Supply Agreement shall mean the Transition
Supply Agreement, dated as of January 1, 2001, between Harvard and Pottstown, on
the one hand, and General Motors Corporation, on the other hand.

                  Governmental Authority shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

                  Guarantors shall mean each of the subsidiaries of Harvard
identified as a "Guarantor" in the preamble hereto and each other direct and
indirect subsidiary of Harvard that from time to time becomes a "Guarantor"
hereto pursuant to Paragraph 7.2(q) of Section 7 of this Financing Agreement.

                  Guaranty shall mean the guaranty made by each Guarantor
pursuant to Section 14 hereof.

                  Guaranty Obligations shall have the meaning set forth in
Paragraph 14.2(b) of Section 14 hereof.

                  Harvard Obligations shall have the meaning set forth in
Paragraph 14.1(a) of Section 14 hereof.

                  Hedging Agreement shall mean in relation to any Person (a) any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or other interest rate hedge or
arrangement to which that Person is a party and (b) any other agreement,
transaction or other arrangement for the transfer or assumption of risk and/or
exposure to fluctuations in currency exchange rates, credit risk or any other
variable that is not within that Person's control.

                  Inactive Guarantor shall mean 177192 Canada Inc.

                  Indebtedness shall mean, without duplication, in relation to
any Person, all liabilities, contingent or otherwise, which are any of the
following: (a) obligations in respect of borrowed money (including obligations
in respect of interest that is capitalized or paid in kind), (b) obligations in
respect of the deferred purchase price of property, services or assets, other
than Inventory, (c) all obligations in respect of Capital Leases, (d)
liabilities, contingent or other, arising under Hedging Agreements, (e) the
maximum available amount of all standby letters of credit or acceptances issued
or created for the account of such Person and (f) all other indebtedness

                                     - 9 -
<PAGE>

of another Person assumed or guaranteed by such Person, in respect of which such
Person is secondarily liable, or which are secured by a Lien on any property of
such Person, to the extent there is recourse to such Person in respect of such
liabilities, or to the extent of the fair market value of the property which is
subject to such Lien, if less. The Indebtedness of a Person shall include the
Indebtedness of any partnership or joint venture in which such Person is a
general partner or joint venturer, but only to the extent to which there is
recourse to such Person for the payment of such Indebtedness.

                  Insurance Proceeds shall mean proceeds or payments from an
insurance carrier with respect to any loss, casualty or damage to Collateral.

                  Intercompany Transfer shall mean any sale, lease, license,
assignment, transfer or other disposition of assets (including without
limitation any dividend or distribution) made by any Obligor or any subsidiary
of any Obligor to another Obligor.

                  Intercreditor Agreement shall mean an intercreditor agreement,
in form and substance satisfactory to the Lender, among the Lender, the Senior
Lien Lenders and the Senior Lien Administrative Agent, in its capacity as such.

                  Interest Expense shall mean the total interest obligations
(paid or accrued) of the Obligors, determined in accordance with GAAP applied on
a consistent basis with the latest audited financial statements of the Obligors.

                  Inventory shall mean, as to any Obligor, all of such Obligor's
present and hereafter acquired inventory (as defined in the UCC) and including,
without limitation, all merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with all
goods and materials used or usable in manufacturing, processing, packaging or
shipping same in all stages of production from raw materials through
work-in-process to finished goods.

                  Investment Property shall mean all present and hereafter
acquired investment property (as defined in the UCC), including, without
limitation, (a) all securities and capital stock or other interests in any other
Person whether certificated or uncertificated; all warrants, options and other
rights to acquire securities, capital stock or other interests in any other
Person; all securities entitlements; and all securities accounts, together with
all financial assets credited thereto; (b) all accessions and additions to,
substitutions for, and replacements, products and proceeds of any of the
foregoing, and, to the extent not otherwise included, all (c) payments under
insurance, or (d) any indemnity, warranty, guaranty or letter of credit, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing; and (e) any and all supporting obligations in respect of any of the
foregoing.

                  IP Security Agreement shall mean a security agreement, in form
and substance satisfactory to the Lender, pursuant to which each of Harvard,
Doehler-Jarvis, Inc., Hayes-Albion, Harman Automotive, Inc. and Harvard
Industries Risk Management, Inc. grants to the Lender, a security interest in
certain patents and other intellectual property rights and interests and related
Collateral to secure the Obligations.

                  Lender shall have the meaning set forth in the preamble
hereto.

                                     - 10 -
<PAGE>

                  Lien shall mean any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute, or
contract, whether such interest shall be recorded or perfected, and whether such
interest shall be contingent upon the occurrence of some future event or events
or the existence of some future circumstance or circumstances, including the
Lien or security interest arising from a mortgage, deed of trust, encumbrance,
pledge, hypothecation, assignment, deposit arrangement, security agreement,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting real property.

                  Loan Account shall mean the account on the Lender's books, in
the joint name of the Companies, in which the Companies will be charged with all
applicable Obligations under this Financing Agreement.

                  Loan Documents shall mean this Financing Agreement, the
Promissory Note, the Security Documents, the Stock Purchase Agreement, the
Intercreditor Agreement, the other closing documents and any other ancillary
loan and security agreements executed from time to time in connection with the
Obligations, the Guaranty Obligations or this Financing Agreement, all as may be
renewed, amended, extended, increased or supplemented from time to time.

                  Management Fee shall have the meaning set forth in Paragraph
8.8 of Section 8 hereof.

                  Material Adverse Change shall mean a material adverse change
in (i) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Obligors and their subsidiaries,
taken as a whole, since March 31, 2001, (ii) the ability of the Obligors to
perform their respective obligations under the Loan Documents or the Senior Lien
Financing Documents or (iii) the ability of the Lender to enforce the Loan
Documents.

                  Material Adverse Effect shall mean a material adverse effect
on (i) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Obligors and their subsidiaries,
taken as a whole, or, for the purposes of Paragraphs 7.1(o) and 7.2(l)(ii) of
Section 7, of any Obligor taken individually, in any case, since March 31, 2001,
(ii) the ability of the Obligors to perform their respective obligations under
the Loan Documents or the Senior Lien Financing Documents or (iii) the ability
of the Lender to enforce, or the validity or enforceability of, the Loan
Documents.

                  Maturity Date shall mean May 31, 2004.

                  Maximum Senior Lien Borrowing Base Debt means an amount equal
to the lesser of (i) $45,000,000 and (ii) the Senior Lien Borrowing Base.

                  Mortgage shall have the meaning set forth in Paragraph 2.1(t)
of Section 2 hereof.

                  Multiemployer Plan shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which any Company or ERISA Affiliate
is making or accruing an obligation to make contributions, or with respect to
which it has any liability.

                                     - 11 -
<PAGE>

                  Multiple Employer Plan shall mean a Single Employer Plan,
which (a) is maintained for employees of any Company or ERISA Affiliate and at
least one Person other than any of the Companies or ERISA Affiliates or (b) was
so maintained and in respect of which any Company or ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such Plan has been or
were to be terminated.

                  Net Cash Proceeds shall mean, (i) with respect to any
Disposition by any Obligor or any of its subsidiaries, the amount of cash
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on behalf
of such Obligor or such subsidiary, in connection therewith after deducting
therefrom only (A) the amount of any Indebtedness secured by any Lien permitted
by Section 7.2(j)(i) on any asset (other than Indebtedness assumed by the
purchaser of such asset) which is required to be, and is, repaid in connection
with such Disposition (other than Indebtedness under this Financing Agreement),
(B) reasonable expenses related thereto incurred by such Obligor or such
subsidiary in connection therewith, (C) transfer taxes paid to any taxing
authorities by such Obligor or such subsidiary in connection therewith, and (D)
net income taxes to be paid in connection with such Disposition (after taking
into account any tax credits or deductions and any tax sharing arrangements) and
(ii) with respect to the issuance or incurrence of any Indebtedness by any
Obligor or any of its subsidiaries, or the sale or issuance by any Obligor or
any of its subsidiaries of any shares of its capital stock, the aggregate amount
of cash received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on behalf
of such Obligor or such subsidiary in connection therewith, after deducting
therefrom only (A) reasonable brokerage commissions, underwriting fees and
discounts, legal fees and similar fees and commissions, (B) transfer taxes paid
by such Obligor or such subsidiary in connection therewith and (C) net income
taxes to be paid in connection therewith (after taking into account any tax
credits or deductions and any tax sharing arrangements).

                  Net Worth shall mean, at any date of determination, an amount
equal to (a) Total Assets minus (b) Total Liabilities, and shall be determined
(i) by amortizing intangible assets applying on a consistent basis the
principles and practices applied in the Obligors' audited financial statements
for the 2000 Fiscal Year, (ii) by excluding any extraordinary gains in any
period beginning after March 31, 2001, and (iii) otherwise in accordance with
GAAP, on a consistent basis with the latest audited financial statements of the
Obligors.

                  Notice of Borrowing shall have the meaning set forth in
Paragraph 3.2 of Section 3 hereof.

                  Obligations shall mean all loans, advances and extensions of
credit made or to be made hereunder or under any of the other Loan Documents by
the Lender to the Companies, or any one of them, or to others for the Companies'
account in respect of the Term Loan; any and all Indebtedness and obligations
which may at any time be owing by the Companies or any one of them to the Lender
howsoever arising, whether now in existence or incurred by the Companies or any
one of them from time to time hereafter; whether principal, interest (including,
without limitation, all interest that accrues after the commencement of any
case, proceeding or other action relating to bankruptcy, insolvency or
reorganization of any Obligor), fees, costs, expenses or otherwise; whether
secured by pledge, Lien upon or security interest in any of the

                                     - 12 -
<PAGE>

Collateral, or any assets or property of any Person; whether such Indebtedness
is absolute or contingent, joint or several, matured or unmatured, direct or
indirect and whether the Companies are liable to the Lender for such
Indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include Indebtedness owing to the Lender by the Companies or any one
of them under any Loan Document (including the obligations owing from time to
time by the Companies to the Lender under any other agreement or arrangement now
or hereafter entered into between the Companies and the Lender in connection
with any of the Loan Documents); Indebtedness or obligations incurred by, or
imposed on, the Lender as a result of environmental claims arising out of any of
the Companies' operations, premises or waste disposal practices or sites; the
Companies' liability to the Lender as maker or endorser of any promissory note
or other instrument for the payment of money; the Companies' liability to the
Lender under any instrument of guaranty or indemnity, or arising under any
guaranty, endorsement or undertaking which the Lender may make or issue to
others for the Companies' account, including any accommodation extended with
respect to the Lender's acceptance of drafts or the Lender's endorsement of
notes or other instruments for the Companies' account and benefit in connection
with other Obligations.

                  Obligor shall mean each of the Companies and each of the
Guarantors.

                  Observer shall have the meaning given to it in Section 11
hereof.

                  Operating Cash Flow shall mean EBITDA less Capital
Expenditures consistently applied.

                  Operating Leases shall mean all leases of property (whether
real, personal or mixed) other than Capital Leases.

                  Other Collateral shall mean, as to any Obligor, the Cash
Collateral Account and all of such Obligor's now owned and hereafter acquired
lockboxes, blocked accounts and any other deposit accounts maintained with any
bank or financial institutions into which the proceeds of Collateral are or may
be deposited; all cash and other monies and property in the possession or
control of the Lender; all books, records, ledger cards, disks and related data
processing software at any time evidencing or containing information relating to
any of the Collateral described herein or otherwise necessary or helpful in the
collection thereof or realization thereon; and all cash and non-cash proceeds of
the foregoing; and all contract rights, letters of credit, letter of credit
rights, claims and causes of action, all governmental approvals, licenses,
franchises and authorizations, to the maximum extent permitted by applicable
law, in each case other than Excluded Property.

                  Out-of-Pocket Expenses shall mean all of the Lender's present
and future reasonable expenses (including reasonable fees and expenses of
counsel) incurred relative to this Financing Agreement or any other Loan
Documents (including without limitation, all due diligence efforts and all
efforts in connection with monitoring and/or enforcing compliance with the terms
of this Financing Agreement or any other Loan Document) whether incurred
heretofore or hereafter; which expenses shall include, without limitation, the
cost of record searches, all costs and expenses incurred by the Lender in
opening bank accounts, depositing checks, receiving and transferring funds, and
wire transfer charges, any charges imposed on the Lender

                                     - 13 -
<PAGE>

due to returned items and "insufficient funds" of deposited checks and the
Lender's standard fees relating thereto, any amounts paid by, incurred by or
charged to, the Lender in connection with travel, lodging and similar expenses
of the Lender's personnel in connection with inspecting and monitoring the
Collateral for the Obligations and the Guaranty Obligations from time to time
hereunder, any applicable counsel fees and disbursements relating to
documenting, advising and enforcing the Obligations and the Guaranty Obligations
(which shall be understood to include, without limitation, subsequent to the
Closing Date, the Lender's standard fees and its standard allocated fees and
expenses of internal counsel relating to any and all modifications, waivers,
releases, amendments or additional collateral with respect to this Financing
Agreement, the Collateral and/or the Obligations and the Guaranty Obligations),
fees and Taxes relative to the filing of financing statements, all expenses,
costs and fees set forth in Paragraph 7.7 of Section 7 hereof, and title
insurance premiums, real estate survey costs, costs of preparing and recording
mortgages/deeds of trust against the Real Estate.

                  Patents shall mean, as to any Obligor, such Obligor's present
and hereafter acquired patents, patent applications, patent registrations, any
reissues or renewals thereof, any inventions and improvements claimed
thereunder, patent licenses, and all patent rights with respect thereto, and all
income, royalties, cash and non-cash proceeds thereof.

                  PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor
thereto.

                  Permitted Asset Transfer shall mean any sale, lease, license,
assignment, transfer or other disposition of assets of any of the Obligors that
is any of the following:

                           (i) an Intercompany Transfer;

                           (ii) a sale of Inventory in the ordinary course of
         business;

                           (iii) a license of intellectual property in the
         ordinary course of business;

                           (iv) a sale, exchange or other disposition of
         obsolete or worn-out Equipment in the ordinary course of business; or

                           (v) a sale, exchange or other disposition of assets
         the fair market value of which, when added to all other dispositions
         not otherwise permitted by clauses (i) through (iv) hereof or any other
         provision of this Financing Agreement, does not exceed $250,000 in any
         consecutive period of twelve (12) months;

provided, that (x) both before and immediately after giving effect to any such
sale, lease, license, assignment, transfer or other disposition, the Obligors
are in compliance with the covenants contained in Sections 7.2(j)(xv), (xvi) and
(xvii) and (y) the aggregate Net Cash Proceeds received by any Obligor from such
sales, exchange, license or other dispositions of assets, if identified in any
of clauses (ii) through (v) above, are paid upon consummation of the sale,
exchange, license or disposition thereof to the Senior Lien Administrative Agent
for application to repayment of the revolving loans under the Senior Lien
Financing Agreement or, if applicable, as otherwise required by Section 5 of
this Financing Agreement.

                                     - 14 -
<PAGE>

                  Permitted Encumbrances shall mean:

                           (a) Liens existing on the date hereof on specific
items of Equipment (other than Eligible Equipment) and other Liens expressly
permitted, or consented to in writing by the Lender, as identified in Schedule
4;

                           (b) Purchase Money Liens;

                           (c) Liens of local or state authorities for franchise
or other like Taxes, provided that the aggregate amount of all such Taxes
secured by such Liens shall not exceed $100,000.00 at any one time;

                           (d) statutory Liens of landlords and Liens of
carriers, warehousemen, bailees, mechanics, materialmen and other like Liens
imposed by law, except for Liens imposed by any Environmental Laws, created in
the ordinary course of business and for amounts not yet due (or which are being
contested in good faith, by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such Liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained by each of the Obligors, as applicable, in accordance with GAAP;

                           (e) deposits made (and the Liens thereon) in the
ordinary course of business of any of the Obligors (including, without
limitation, security deposits for leases, indemnity bonds, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment insurance
and other types of social security benefits or to secure the performance of
tenders, bids, contracts (other than for the repayment or guarantee of borrowed
money or purchase money obligations), statutory obligations and other similar
obligations arising as a result of progress payments under government contracts;

                           (f) easements (including, without limitation,
reciprocal easement agreements and utility agreements), encroachments, minor
defects or irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate, if applicable,
and which in the aggregate (A) do not materially interfere with the occupation,
use or enjoyment by any of the Obligors of its business or property so
encumbered and (B) do not materially and adversely affect the value of such Real
Estate in the reasonable business judgment of the Lender;

                           (g) Liens granted to the Lender by the Obligors or
any one of them to secure the Obligations and/or the Guaranty Obligations
arising under this Financing Agreement or the other Loan Documents;

                           (h) Liens granted to the Senior Lien Administrative
Agent by the Obligors or any one of them to secure the Senior Lien Obligations,
in the Senior Lien Financing Agreement or any other Senior Lien Financing
Document as approved by the Lender and in existence on the Closing Date (but no
further or different Lien, or change in any such Lien, for the benefit of the
Senior Lien Lenders, shall be a Permitted Encumbrance unless its creation or
existence has received the prior written consent of the Lender);

                                     - 15 -
<PAGE>

                           (i) Liens of judgment creditors, provided that the
aggregate amount secured by all such Liens shall not exceed $50,000.00 at any
one time (other than Liens bonded or insured to the reasonable satisfaction of
the Lender);

                           (j) Tax Liens for Taxes which are not yet due and
payable or which are being diligently contested in good faith by the Obligors by
appropriate proceedings, and which Liens are not (x) filed on any public
records, (y) other than with respect to Real Estate, senior to the Liens of the
Lender or the Senior Lien Administrative Agent for the benefit of the Senior
Lien Lenders; or (z) for Taxes due the United States or Canada or any state or
province thereof having similar priority statutes, as further set forth in
Paragraph 6.8 of Section 6 hereof;

                           (k) set-off rights arising in the ordinary course of
business; and

                           (l) Liens granted to General Motors Corporation in
the Access and Security Agreements as in effect on the Closing Date (but no
further or different Lien, or change in any such Lien, for the benefit of the
General Motors Corporation, shall be a Permitted Encumbrance unless its creation
or existence has received the prior written consent of the Lender).

                  Permitted Indebtedness shall mean: (a) current Indebtedness
maturing in less than one year and incurred in the ordinary course of business
for raw materials, supplies, equipment, services, Taxes or labor; (b) the
Indebtedness secured by Purchase Money Liens; (c) Indebtedness arising under
this Financing Agreement; (d) the Senior Lien Obligations, on the terms provided
for in the Senior Lien Financing Documents as approved by the Lender on the
Closing Date; (e) deferred Taxes and other expenses incurred in the ordinary
course of business; (f) other Indebtedness existing on the date of execution of
this Financing Agreement and listed in the most recent financial statements
delivered to the Lender or otherwise disclosed to the Lender in writing prior to
the Closing Date; (g) Indebtedness between or among the Obligors (provided that
any instruments evidencing such Indebtedness are Pledged Notes); and (h)
unsecured Indebtedness of the Guarantors in an aggregate principal amount not to
exceed $1,000,000.00 at any one time outstanding.

                  Permitted Liquidation shall mean, in relation to any Obligor,
its dissolution or liquidation at or after the transfer of all its remaining
assets in an Intercompany Transfer or otherwise as agreed upon in writing in
advance by the Lender.

                  Permitted Senior Lien Overadvance means the aggregate
principal amount of all Overadvances as such term is defined in the Senior Lien
Financing Agreement (as such agreement is in effect on the date hereof)
outstanding at any time under the Senior Lien Financing Agreement in an amount
not to exceed at any time the lesser of (a) $1,000,000 and (b) 5% of the Senior
Lien Borrowing Base at such time, provided that (A) the proceeds of such
Overadvances may only be used to fund the Companies' employee compensation,
employee benefit plans and employee expense reimbursements and, with the prior
consent of the Lender (which consent shall not be unreasonably withheld or
delayed), key vendor payments up to an aggregate amount not to exceed $500,000,
(B) Overadvances shall not be outstanding for more than 30 days, and (C)
Overadvances may only be made by the Senior Lien Lenders to the

                                     - 16 -
<PAGE>

Companies within the forty-five (45) consecutive day period commencing on the
date of the initial Overadvance.

                  Person shall mean an individual, corporation, limited
liability company, partnership, association, joint-stock company, trust,
unincorporated organization, joint venture or other enterprise or entity or
Governmental Authority.

                  Plan shall mean any Single Employer Plan or Multiemployer
Plan.

                  Pledge Agreement shall mean a Pledge Agreement, in form and
substance satisfactory to the Lender, dated as of the Closing Date, executed by
certain Obligors in favor of the Lender, which is to be delivered as provided in
Paragraph 2.1(m) of Section 2 hereof.

                  Pledged Notes shall mean all promissory notes now or hereafter
owned by any of the Obligors.

                  Pledged Stock shall mean any and all of the capital stock
(other than Excluded Stock) of all subsidiaries of the Companies and the
Guarantors now or hereafter held by any of the Companies or the Guarantors.

                  PPSA shall mean the Personal Property Security Act (Ontario)
as in effect from time to time.

                  Prohibited Transaction shall mean any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code for which there is no
applicable statutory, regulatory or administrative exemption (including a class
exemption or an individual exemption).

                  Promissory Note shall mean the promissory note, in the form of
Exhibit A hereto, delivered by the Companies to the Lender to evidence the Term
Loan pursuant to, and repayable in accordance with, the provisions of Section 3
hereof.

                  Purchase Money Liens shall mean Liens on any item of Equipment
(other than Eligible Equipment) (i) acquired after the date of this Financing
Agreement provided that (a) each such Lien shall attach only to the property to
be acquired, (b) a description of the Equipment so acquired is furnished to the
Lender, and (c) the Indebtedness incurred in connection with such acquisitions
shall not, in the aggregate, exceed in any Fiscal Year the maximum amount of
Capital Expenditures for such Fiscal Year permitted pursuant to Paragraph
7.2(i)(ii) of Section 7 of this Financing Agreement, unless consented to by the
Lender or (ii) identified on Schedule 4, in the case of Liens on any item of
Equipment existing on the date of this Financing Agreement.

                  Real Estate shall mean each of the Obligors' fee and/or
leasehold interests in real property, including any real property (other than
the Miami Street, St. Louis, Missouri property) which has been, or will be,
encumbered, mortgaged, pledged or assigned to the Lender or its designee.

                  Reorganization shall mean, with respect to any Multiemployer
Plan, the condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.

                                     - 17 -
<PAGE>

                  Reportable Event shall mean any of the events set forth in
Section 4043(c) of ERISA other than those events for which the notice
requirement has been waived under applicable regulations.

                  Requirements of Law shall mean, as to any Person, the
certificate of incorporation or by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.

                  Secured Transaction Laws shall mean the Uniform Commercial
Code as the same may be amended and in effect from time to time in the State of
New York, and the Personal Property Security Act (Ontario), the expression
Secured Transaction Laws meaning each and every of these personal security
statutes.

                  Securities Act shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.

                  Security Documents shall mean the Pledge Agreement and the IP
Security Agreement to be executed and delivered as provided in Paragraph 2(m) of
Section 2 hereof and the Mortgages to be executed and delivered as provided in
Paragraph 2(t) of Section 2 hereof.

                  Senior Lien Administrative Agent shall mean The CIT
Group/Business Credit, Inc., as administrative agent for the Senior Lien Lenders
and any successor administrative agent for the Senior Lenders under the Senior
Lien Financing Agreement.

                  Senior Lien Agents' Commitment Letter shall mean the
Commitment Letter, dated April 19, 2001, issued by the Senior Lien
Administrative Agent and the Senior Lien Syndication Agent to, and accepted by,
the Companies.

                  Senior Lien Availability shall mean "Availability" as such
term is defined in the Senior Lien Financing Agreement as such agreement is in
effect on the date hereof.

                  Senior Lien Availability Reserve shall mean "Availability
Reserve" as such term is defined in the Senior Lien Financing Agreement as such
agreement is in effect on the date hereof.

                  Senior Lien Borrowing Base shall mean the "Borrowing Base" as
such term is defined in the Senior Lien Financing Agreement as such agreement is
in effect on the date hereof.

                  Senior Lien Financing Agreement shall mean a financing
agreement substantially in the form of this Financing Agreement and, insofar as
it is different, in form and substance satisfactory to the Lender, among the
Senior Lien Lenders, the Senior Lien Administrative Agent, the Senior Lien
Syndication Agent, The CIT Group/Business Credit, Inc. and Salomon Smith Barney,
Inc., as arrangers, Citibank, N.A., as issuing bank in respect of letters of
credit, and the Obligors, and providing for loans (including a subfacility for
the issuance of letters of credit) in an amount up to $65,000,000.00 to be made
by the Senior Lien Lenders to the

                                     - 18 -
<PAGE>

Companies on the terms and subject to the conditions set forth therein and in
the Senior Lien Agents' Commitment Letter.

                  Senior Lien Financing Documents shall mean the Senior Lien
Financing Agreement, the promissory notes provided for therein, the Security
Documents (as defined in the Senior Lien Financing Agreement), the Intercreditor
Agreement, the other closing documents substantially in the respective forms
contemplated or required thereunder, and any other ancillary loan and security
agreements executed from time to time in connection with the Senior Lien
Obligations or the Senior Lien Financing Agreement.

                  Senior Lien Issuing Bank shall mean Citibank, N.A.

                  Senior Lien Lenders means, collectively, The CIT
Group/Business Credit, Inc., Citicorp USA, Inc. and each other party which
hereafter becomes a lender under the Senior Lien Financing Agreement.

                  Senior Lien Obligations shall mean all Indebtedness and other
obligations of the Obligors, or any one of them, which may at any time be owing
by the Obligors or any one of them to any of the Senior Lien Lenders, the Senior
Lien Issuing Bank, the Senior Lien Administrative Agent or the Senior Lien
Syndication Agent under or in respect of any of the Senior Lien Financing
Documents or the transactions or interests contemplated therein (including
reimbursement obligations in respect of letters of credit), whether such
Indebtedness is absolute or contingent, joint or several, matured or unmatured,
direct or indirect and whether the Obligors are liable to the Senior Lien
Lenders, the Senior Lien Administrative Agent or the Senior Lien Syndication
Agent for such Indebtedness and obligations as principal, surety, endorser,
guarantor or otherwise. Senior Lien Obligations shall also include Indebtedness
owing to the Senior Lien Lenders, the Senior Lien Administrative Agent and the
Senior Lien Syndication Agent by the Obligors or any one of them under any
Senior Lien Financing Document; Indebtedness or obligations incurred by, or
imposed on, the Senior Lien Lenders, the Senior Lien Administrative Agent or the
Senior Lien Syndication Agent as a result of environmental claims arising out of
any of the Obligors' operations, premises or waste disposal practices or sites
in accordance with Paragraph 9.3 of Section 9 of the Senior Lien Financing
Agreement and the Obligors' liability to the Senior Lien Lenders, the Senior
Lien Administrative Agent or the Senior Lien Syndication Agent as maker or
endorser of any promissory note or other instrument for the payment of money in
connection with other Senior Lien Obligations.

                  Senior Lien Syndication Agent shall mean Citicorp USA, Inc.,
as syndication agent for the Senior Lien Lenders and any successor syndication
agent for the Senior Lien Lenders under the Senior Lien Financing Agreement.

                  Single Employer Plan shall mean a "single-employer plan", as
defined in Section 4001(a)(15) of ERISA, which any Company or ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which any Company or ERISA Affiliate has any liability.

                                     - 19 -
<PAGE>

                  Stock Purchase Agreement shall mean a Securities Purchase
Agreement, in form and substance satisfactory to the Lender, dated as of the
Closing Date, between Harvard and Hilco Finance LLC.

                  Success Fee shall have the meaning set forth in Paragraph 8.7
of Section 8 hereof.

                  Surplus Cash shall mean, for any Fiscal Year, without
duplication, EBITDA plus, without duplication, each of the following: (a) any
income excluded in calculating EBITDA that does not arise in the ordinary course
of business, (b) any cash gains arising from the sale, exchange or other
disposition of assets other than any Permitted Asset Transfer, (c) cash interest
income, and (d) any cash tax refund, less, without duplication, each of the
following: (a) all cash interest for such Fiscal Year, (b) any cash loss from
the sale, exchange or other disposition of assets, (c) the aggregate scheduled
amounts of principal paid or payable on the Term Loan and the term loans under
the Senior Lien Financing Agreement, (d) the aggregate scheduled payments on
Capital Leases, (e) all Capital Expenditures actually made during such Fiscal
Year which are not financed, (f) all cash income Taxes for such Fiscal Year, (g)
cash payments due in respect of post-retirement employee benefit pension and
workers compensation obligations, and (h) mandatory prepayments made pursuant to
Section 5 hereof or Section 7 of the Senior Lien Financing Agreement (as such
agreement is in effect on the date hereof) in such Fiscal Year.

                  Taxes shall mean all federal, state, provincial, municipal and
other governmental taxes, levies, charges, claims and assessments which are or
may be due from any Obligor with respect to its business, operations, Collateral
or otherwise.

                  Term Loan shall mean the term loan in the principal amount of
$10,000,000.00 made by the Lender pursuant to, and repayable in accordance with,
the provisions of Section 3 hereof.

                  Tooling shall mean all tooling, fixtures, gauges, jigs,
patterns, casting patterns, dyes, cavities, moulds and documentation together
with any accessions, attachments, parts, accessories, substitutions,
replacements and appurtenances to any of the foregoing, but excluding machinery,
Equipment and Equipment spare parts.

                  Total Assets shall mean total assets of the Obligors
determined in accordance with GAAP on a basis consistent with the latest audited
financial statements of the Obligors.

                  Total Liabilities shall mean total liabilities of the Obligors
determined in accordance with GAAP on a basis consistent with the latest audited
financial statements of the Obligors.

                  Trade Accounts Receivable shall mean, with respect to any
Obligor, that portion of such Obligor's Accounts which arises from the sale of
Inventory or the rendition of services in the ordinary course of such Obligor's
business.

                  Trademarks shall mean, as to any Obligor, all of such
Obligor's present and hereafter acquired trademarks, trademark registrations,
trademark applications, tradenames, trade styles, service marks, prints and
labels (on which any of the foregoing may appear), reissues and renewals of the
foregoing, trademark licenses, internet domain names and URLs, and any

                                     - 20 -
<PAGE>

trademark rights pertaining to any of the foregoing, together with the goodwill
associated therewith, and all cash and non-cash proceeds thereof.

                  UCC shall mean the Uniform Commercial Code as the same may be
amended and in effect from time to time in the State of New York.

                  Unfunded Pension Liabilities shall mean, with respect to any
Single Employer Plan, any amount by which the present value of the aggregate
benefit liabilities under the Plan (whether or not vested), determined as of the
date of such Plan's most recent actuarial report on the basis of the actuarial
assumptions specified for funding purposes in such report, exceeds the aggregate
current value of the assets of such Plan allocable to such benefit liabilities
as specified in such report. For purposes of this definition of "Unfunded
Pension Liabilities," the term "benefit liabilities" has the meaning specified
in Section 4001 of ERISA and the terms "current value" and "present value" have
the meaning specified in Section 3 of ERISA.

                  United States shall mean the United States of  America.

                  U.S. dollar shall mean lawful currency of the United States.

                  Withdrawal Liability shall have the meaning set forth under
Part I of Subtitle E of Title IV of ERISA.

                  Working Capital shall mean Current Assets in excess of Current
Liabilities.

                  1.2 Construction of Certain Terms. (a) As used in this
Financing Agreement, (i) the words "hereof," "herein" and "hereunder" and words
of similar import refer to this Financing Agreement as a whole and not to any
particular provision of this Financing Agreement, and Paragraph, Section,
Schedule and Exhibit references are to this Financing Agreement unless otherwise
specified; (ii) the words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation," (iii) the word "or" shall not
be exclusive, (iv) the word "will" shall be construed to have the same meaning
and effect as the word "shall" and (v) the plural form of any term defined in
the singular in this Financing Agreement shall merely express the grammatical
plural of that defined term unless otherwise expressly provided herein.

                           (b) Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to that agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(ii) any reference herein to any Person shall be construed to include that
Person's successors and assigns (without prejudice to any restrictions on
transfer or other consequences of a transfer contemplated herein), and (iii) the
words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

                  1.3 GAAP Terminology. (a) As used herein, and in the other
Loan Documents, accounting terms relating to any Obligor or any of its
subsidiaries that are not defined in Paragraph 1.1 of Section 1 and accounting
terms that are partly defined in Paragraph

                                     - 21 -
<PAGE>

1.1 of Section 1, to the extent not defined, shall have the respective meanings
given to them under GAAP, except as otherwise provided in such Loan Documents.
All financial statements that any Obligor is required to deliver hereunder shall
be prepared in accordance with GAAP applied on a consistent basis, except as
otherwise expressly prescribed herein, subject to the following paragraph and
except that any financial statements which are not audited shall not be required
to have footnotes.

                           (b) If GAAP changes while any of the Obligations or
the Guaranty Obligations remains outstanding and, as a result, the financial
covenants set forth in subparagraphs (h) and (i) of Paragraph 7.2 of Section 7
would be calculated in a manner or with components different from those
applicable prior to the change, (i) the Obligors and the Lender will enter into
good faith negotiations to amend this Financing Agreement in such respects as
are necessary to conform those financial covenants as criteria for evaluating
the Obligors financial condition to substantially the same criteria as were
effective prior to the relevant change in GAAP and (ii) the Obligors shall be
deemed to be in compliance with those financial covenants during the period of
30 days beginning with the effective date of that change in GAAP if and to the
extent that the Obligors would have been in compliance therewith under GAAP if
the change had not occurred and compliance were tested applying GAAP as in
effect immediately before the change. At the end of that period of 30 days, if
an amendment of the kind described above has not been executed by all parties to
this Financing Agreement, GAAP as modified by the relevant change shall
automatically be taken into account in determining whether the Obligors are in
compliance with those financial covenants.

                           (c) Any reference in this Financing Agreement or the
other Loan Documents to "consolidating" balance sheets or other financial
statements or to "consolidating" borrowing base computations shall mean such
balance sheets, financial statements or borrowing base computations (in a format
submitted to and accepted by the Lender) showing consolidating entries only for
the major entities listed below, some of which consist of multiple entities (and
such other entities as may become successors or transferees of any of the
business owned or operated on the date of this Financing Agreement by any entity
listed below (if such business would be consolidated in accordance with GAAP)
and any other direct or indirect subsidiary of Harvard, if consolidating balance
sheets or other financial statements are hereafter prepared by any such other
subsidiary):

                           Hayes-Albion (excluding Trim Trends)
                           Trim Trends
                           Harvard Electronics
                           Pottstown
                           Harvard Corporate/Other

                  1.4 No Presumption in Construction. Neither this Financing
Agreement nor any other Loan Document nor any uncertainty or ambiguity herein or
therein shall be construed or resolved against the Lender under any rule of
construction or otherwise merely by virtue of being a party involved in its
drafting. On the contrary, this Financing Agreement and the other Loan Documents
have been reviewed by each of the parties and their counsel and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties.

                                     - 22 -
<PAGE>

                  1.5 Independence of Provisions. All agreements and covenants
herein and in the other Loan Documents shall be given independent effect so
that, if a particular action or condition is prohibited by the terms of any such
agreement or covenant, the fact that such action or condition would be permitted
within the limitations of another agreement or covenant shall not be construed
as allowing such action to be taken or condition to exist.

                  1.6 Inactive Guarantor. Notwithstanding anything else to the
contrary elsewhere in this Financing Agreement (including the definitions of the
term "Permitted Asset Transfer" and "Intercompany Transfer") none of the terms
of this Financing Agreement or any other Loan Documents shall be interpreted to
permit, or constitute the consent by the Lender to any transaction or action by
the Inactive Guarantor (other than those incidental to maintaining its existence
and compliance with the Loan Documents and the Senior Lien Financial Documents
or its liquidation or dissolution) or by any other Obligor with the Inactive
Guarantor.

         SECTION 2. Conditions Precedent

                  2.1 Conditions relating to the Closing Date.

                  The obligation of the Lender to make the Term Loan to be made
by it hereunder is subject to the satisfaction of, extension of or waiver in
writing of, on or prior to, the Closing Date, the following conditions
precedent:

                           (a) Lien Searches - The Lender shall have received
Tax, judgment and Secured Transaction Laws searches satisfactory to the Lender
for all locations presently occupied or used by each of the Obligors.

                           (b) Casualty Insurance - Each of the Obligors shall
have delivered to the Lender evidence satisfactory to the Lender that casualty
insurance policies listing the Lender as an additional insured, loss payee or
mortgagee, as the case may be, are in full force and effect, all as set forth in
Paragraph 7.2(d) of Section 7 hereof (and the certificates evidencing such
insurance shall be issued on form Acord 27).

                           (c) UCC Filings - Any financing statements required
to be filed in order to create in favor of the Lender, a perfected security
interest in the Collateral shall have been properly filed in each office in each
jurisdiction required in order to create in favor of the Lender a perfected Lien
on the Collateral, subject only to Permitted Encumbrances. The Lender shall have
received acknowledgment copies of all such filings (or, in lieu thereof, the
Lender shall have received other evidence satisfactory to the Lender that all
such filings have been made) and the Lender shall have received evidence that
all necessary filing fees and all Taxes or other expenses related to such
filings have been paid in full.

                           (d) Board Resolution - The Lender shall have received
a copy of the resolutions of the Board of Directors or shareholders of each of
the Obligors authorizing the execution, delivery and performance of each Loan
Document to which it is a party, certified by the Secretary or Assistant
Secretary of each of the Obligors as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of each of the Obligors as
to the incumbency and signature of the officers of each of the Obligors
executing such Loan Documents and any

                                     - 23 -
<PAGE>

certificate or other documents to be delivered by them pursuant hereto, together
with evidence of the incumbency of such Secretary or Assistant Secretary.

                           (e) Corporate Organization - The Lender shall have
received (i) a copy of the certificate or articles of incorporation of each of
the Obligors certified by the Secretary of State or equivalent authority of the
jurisdiction of their incorporation, (ii) a copy of the by-laws of each of the
Obligors certified by the respective Secretary or Assistant Secretary thereof,
all as amended through the date hereof, and (iii) evidence that each of the
Obligors is in good standing in the jurisdiction of its organization and duly
qualified to carry on business in each jurisdiction in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary.

                           (f) Officer's Certificate - The Lender shall have
received a certificate of each of the Obligors, executed by an Authorized
Officer in each case, satisfactory in form and substance to the Lender,
certifying that (i) the representations and warranties of such Obligor contained
herein and in the other Loan Documents to which such Obligor is a party are true
and correct in all material respects on and as of the Closing Date; (ii) such
Obligor is in compliance with all of the terms and provisions set forth herein
and in the other Loan Documents to which such Obligor is a party, and (iii) no
Default or Event of Default has occurred.

                           (g) Opinions - Counsel for the Obligors shall have
delivered to the Lender opinions satisfactory to the Lender addressing and
opining to such matters as the Lender shall reasonably request, including,
without limitation, that, subject to (i) the filing, priority and remedies
provisions of the Secured Transaction Laws and any applicable state or other
laws relating to the recording of the mortgage Liens on Real Estate created by
the Security Documents, (ii) the provisions of the Bankruptcy Code, insolvency
statutes or other like laws, (iii) the equity powers of a court of law and (iv)
such other matters as may be agreed upon with the Lender: (x) this Financing
Agreement and all other Loan Documents of each of the Obligors (A) are valid,
binding and enforceable according to their terms, (B) are duly authorized,
executed and delivered, and (C) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of any of the Obligors
or, to the best knowledge of such counsel, of any loan agreement, mortgage, deed
of trust, note, security or pledge agreement, indenture or other contract to
which the Obligors, or any one of them, are signatories or by which the relevant
Obligors, or any one of them, or their assets are bound; and (y) the perfection
of all security interests purported to be granted in this Financing Agreement or
under any other Loan Document.

                           (h) Absence of Default; No Material Adverse Change -
No Default or Event of Default shall have occurred and be continuing and no
Material Adverse Change shall have occurred.

                           (i) Legal Restraints/Litigation - As of the Closing
Date, there shall be no: (x) litigation, investigation or proceeding (judicial
or administrative) pending or threatened against the Obligors, or any one of
them, or their assets, by any agency, division or department of any county,
city, state, provincial or federal government arising out of this Financing
Agreement or any of the other Loan Documents; (y) injunction, writ or
restraining order restraining or prohibiting the financing arrangements
contemplated under this Financing

                                     - 24 -
<PAGE>

Agreement and the other Loan Documents; or (z) suit, action, investigation or
proceeding (judicial or administrative) pending against the Obligors, or any one
of them, or their assets, which, in the opinion of the Lender (i) could
reasonably be expected to result in a Material Adverse Change or, (ii) except as
set forth in Schedule 2 hereto, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.

                           (j) Intercreditor Agreement. The Senior Lien Lenders,
the Senior Lien Administrative Agent and the Senior Lien Syndication Agent shall
have executed and delivered the Intercreditor Agreement to the Lender, in form
and substance satisfactory to the Lender.

                           (k) Senior Lien Financing Documents The Senior Lien
Lenders and the Obligors shall have executed and delivered the Senior Lien
Financing Documents, which shall in all respects be satisfactory in form and
substance to the Lender, as delivered to the Lender, together with a certificate
of Harvard certifying that the copies of the Senior Lien Financing Documents
delivered to the Lender are true, correct and complete and represent the entire
agreement among the parties thereto relating to the Senior Lien Obligations and
Liens and other interests granted for the benefit of the Senior Lien Lenders in
relation to the Senior Lien Obligations.

                           (l) Financials; Projections - The Lender shall have
received and the Lender shall be satisfied with (i) a pro forma estimated
balance sheet of the Obligors at the Closing Date giving effect to the
termination of the Existing Credit Agreements and the transactions contemplated
hereby, (ii) interim unaudited consolidated and consolidating monthly and
quarterly financial statements of the Obligors through the fiscal month ending
no earlier than forty-five (45) days prior to the Closing Date and (iii) the
Obligors' business plan, which shall include a financial forecast, including,
without limitation, cash projections and projections of Senior Lien
Availability, in a form previously submitted to and accepted by the Lender and
in substance reasonably satisfactory to the Lender, on a monthly basis through
June 30, 2002 and on an annual basis thereafter through the year of the Maturity
Date.

                           (m) Security Documents - (i) Each of Harvard,
Doehler-Jarvis, Inc., Hayes-Albion and Trim Trends shall have executed and
delivered to the Lender, a Pledge Agreement granting a security interest to the
Lender as collateral for the Obligations (in the case of the Companies) and the
Guaranty Obligations (in the case of Trim Trends) in, (A) all of the Pledged
Notes held by the Obligors and (B) all of the Pledged Stock owned by the
Obligors and (ii) each of Harvard, Doehler-Jarvis, Inc., Hayes-Albion, Harman
Automotive, Inc. and Harvard Industries Risk Management, Inc. shall have
executed and delivered to the Lender, an IP Security Agreement.

                           (n) Stock Certificates and Notes. Each of the
Obligors which is a party to the Pledge Agreement shall have delivered to the
Senior Lien Administrative Agent the stock certificates evidencing the Pledged
Stock, together with duly executed stock powers (undated and in-blank) with
respect thereto, and all instruments evidencing the Pledged Notes, together with
duly executed instruments of assignment (undated and in-blank) with respect
thereto, all in form and substance satisfactory to the Lender. In addition, each
Obligor which holds any of the capital stock of any Guarantor shall deliver to
the Lender such documents

                                     - 25 -
<PAGE>

(including evidence of the adoption of such resolutions) as the Lender may
require to protect and preserve its rights and enable the Lender to enforce its
rights and remedies in respect of such Pledged Stock.

                           (o) Loan Documents; Additional Documents - (i) The
Lender shall have received an original of each Loan Document necessary to
consummate the lending arrangement contemplated between the Obligors and the
Lender, each of which Loan Documents shall be duly executed by the respective
parties thereto, in each case in form and substance satisfactory to the Lender,
and each such Loan Document shall be in full force and effect; and (ii) the
Lender shall have received such other certificates, opinions and other documents
as the Lender reasonably may require.

                           (p) Notice of Borrowing - Harvard, on behalf of the
Companies, shall have delivered to the Lender a Notice of Borrowing containing
all information necessary for the Lender to issue wire transfer instructions on
behalf of the Companies for the Term Loan to be made under this Financing
Agreement.

                           (q) Examination & Verification - The Lender shall
have completed, to its satisfaction, an examination and verification of the
Accounts, Inventory, financial statements, books and records of each of the
Obligors which examination shall indicate that, after giving effect to all
loans, advances and extensions of credit to be made at closing as contemplated
hereunder and under the Senior Lien Financing Documents, (i) the Companies shall
have an aggregate opening Senior Lien Availability of at least $20,000,000.00,
as evidenced by a Borrowing Base Certificate delivered by Harvard to the Lender
as of the Closing Date, and (ii) the sum of (A) the Senior Lien Borrowing Base
and (B) the Borrowing Base shall exceed the Term Loan made under this Financing
Agreement and the initial loans, advances and other extensions of credit made
under the Senior Lien Financing Agreement by at least $20,000,000. It is
understood that such requirement contemplates that all debts, obligations, taxes
and dividends are current, and that all payables are being handled in the normal
course of the Obligors' business and consistent with their past practice.

                           (r) Existing Accounts; Depository Accounts- Each of
the Obligors and each of their subsidiaries shall have used its best efforts to
cause each Existing Lender, or if applicable, its agent, to assign its rights
under the concentration accounts existing on the date of this Financing
Agreement to the Senior Lien Administrative Agent.

                           (s) Existing Credit Agreements - The Companies'
existing credit agreement with General Electric Capital Corporation ("GECC"), as
agent, and the existing credit agreement of Trim-Trends with Canadian Imperial
Bank of Commerce ("CIBC" and, together with GECC, the "Existing Lenders" and
each an "Existing Lender," and those agreements, the "Existing Credit
Agreements") shall be: (i) terminated; (ii) all loans and obligations of the
Obligors thereunder shall be paid and satisfied in full, including through
utilization of the proceeds of the initial loans to be made under this Financing
Agreement and the Senior Lien Financing Documents; and (iii) all Liens or
security interests in favor of the Existing Lenders (which, in the case of GECC,
shall include any Liens and security interests in favor of any agent acting on
its behalf) which are on the Collateral and otherwise in connection therewith
shall be terminated and/or released upon such payment, all to the satisfaction
of the Lender.

                                     - 26 -
<PAGE>

                           (t) Mortgages/Deeds of Trust - Each Obligor shall
have executed and delivered to the Lender, an agent of the Lender or to a title
insurance company acceptable to the Lender, such mortgages and/or deeds of trust
(including, without limitation, the Canadian Debenture on the Real Estate and
personal property in Canada), in form and substance satisfactory to the Lender
(each a "Mortgage"), as the Lender may reasonably require to obtain Liens on the
Real Estate owned by such Obligor on the Closing Date (which is identified in
Schedule 5), subject only to Permitted Encumbrances.

                           (u) Title Insurance Policies - The Lender shall have
received, in respect of each Mortgage referred to in the preceding paragraph (t)
other than the Canadian Debenture, a mortgagee's title policy or marked-up
unconditional binder for such insurance. Each such policy shall (i) be in an
amount satisfactory to the Lender and (ii) insure that the Mortgage insured
thereby creates a valid Lien on the property covered by such Mortgage for the
benefit of the Lender, free and clear of all defects and encumbrances except
Permitted Encumbrances and all other defects and encumbrances acceptable to the
Lender. Each such policy delivered to the Lender shall name the Lender as the
insured thereunder and contain such endorsements and effective coverage as the
Lender may reasonably request. The Lender shall also have received evidence that
all premiums in respect of such policies have been paid and that all charges for
mortgage recording Taxes, if any, shall have been paid.

                           (v) Surveys - The Lender and, where applicable, the
title insurance company issuing each policy referred to in the immediately
preceding paragraph (each, a "Title Insurance Company") shall have received (or
the Lender shall be satisfied with the arrangements and a committed schedule for
the subsequent receipt of) maps or plats of a perimeter or boundary of the site
of each of the properties covered by the Mortgages covered by such policy, dated
a date satisfactory to the Lender and the relevant Title Insurance Company and
prepared by an independent professional licensed land surveyor satisfactory to
the Lender and the relevant Title Insurance Company; and, there shall be
surveyed and shown on the maps or plats or surveys the following: (i) the
locations on such sites of all the buildings, structures and other improvements;
(ii) any encroachments on any adjoining property by the building, structures and
improvements on the sites; (iii) if the site is designated as being on a filed
map, a legend relating the survey to said map; and (iv) such other matters as
are covered by the surveys prepared in connection with the Existing Credit
Agreements and the related mortgages. Further, each survey shall be certified to
the Lender and the Title Insurance Company.

                           (w) Appraisals - The Lender shall have received
satisfactory appraisals on each of the Obligors' Equipment and Real Estate,
which appraisals: (i) shall be by an appraiser acceptable to the Lender, and
(ii) shall indicate (A) with respect to Equipment, an orderly liquidation value
of not less than $41,125,000.00, and (B) with respect to Real Estate, a fair
market value of not less than $22,500,000.00.

                           (x) Environmental Report - The Lender shall have
received environmental audit reports on (i) all of each of the Obligors'
leasehold and fee interests, and (ii) the Obligors' operations and waste
disposal practices. The reports must (x) be satisfactory to the Lender and (y)
not disclose or indicate any material liability (real or potential) stemming
from the Obligors' premises, their operations, their waste disposal practices or
waste disposal sites used by the Obligors.

                                     - 27 -
<PAGE>

                           (y) Schedules - The Obligors or their counsel shall
have provided the Lender with schedules of: (i) each Obligor's and its
subsidiaries' (A) Trademarks, (B) Patents, and (C) Copyrights, as applicable,
and all in such detail as to provide appropriate recording information with
respect thereto, (ii) any tradenames, (iii) monthly rental payments for any
leased premises or any other premises where any Collateral may be stored or
processed, (iv) all insurance policies of any nature maintained by any Obligor;
(v) all joint ventures or partnerships engaged in by any Obligor with any other
Person, and (vi) existing Indebtedness and Permitted Encumbrances, as well as
all other schedules required by this Financing Agreement or any of the other
Loan Documents, all of the foregoing in form and substance satisfactory to the
Lender.

                           (z) The Commitment Letter - Each of the Obligors
shall have fully complied, to the reasonable satisfaction of the Lender, with
all of the terms and conditions of the Commitment Letter.

                           (aa) Consents; Requirements of Law - All necessary
governmental and third party consents and approvals necessary in connection with
this Financing Agreement and the transactions contemplated hereby shall have
been obtained (without the imposition of any conditions that are not reasonably
acceptable to the Lender) and shall remain in effect, unless the failure to
obtain and keep in effect any such third-party consent and approval has been
disclosed to the Lender, and such failure could not reasonably be expected to
result in a Material Adverse Change; and all applicable governmental filings
shall have been made and all applicable waiting periods shall have expired
without in either case any action being taken by any competent authority; and no
law or regulation shall be applicable in the judgment of the Lender that
restrains, prevents or imposes materially adverse conditions upon this Financing
Agreement or the transactions contemplated hereby.

                           (bb) Fees; Expenses - All fees and expenses
(including, without limitation, reasonable fees and expenses of counsel)
required to be paid to the Lender on or before the Closing Date shall have been
paid.

                           (cc) Expense Deposit - The Lender shall have deducted
from the proceeds of the Term Loan an expense deposit in the amount of $50,000
(the "Expense Deposit"), which Expense Deposit shall be held by the Lender and
may be applied by the Lender to the fees and expenses incurred by the Lender in
connection with the exercise of any of its rights under this Financing
Agreement, including, without limitation, monitoring the Obligors' compliance
with the terms of this Financing Agreement and the other Loan Documents and any
appraisals, audits, collateral reviews and field examinations conducted by the
Lender during the term of this Financing Agreement. In no event shall prior
recourse to the Expense Deposit be a prerequisite to the Lender's right to
demand reimbursement for any such fees and expenses. The Expense Deposit will
not be segregated and may be commingled with other funds of the Lender and the
Obligors will not be entitled to receive any interest on the Expense Deposit.
The unused portion of the Expense Deposit shall be returned to the Companies
upon the earlier of the Maturity Date or the payment in full in cash of all of
the Obligations.

                           (dd) ERISA - The Lender shall be satisfied that, as
of the Closing Date, no event or condition constituting an ERISA Event has
occurred or exists with respect to any Plan that could result in a Material
Adverse Effect.

                                     - 28 -
<PAGE>

                           (ee) Access and Security; Agreements; Transition
Agreement - All matters relating to each Access and Security Agreement and the
GM Transition Supply Agreement shall be satisfactory to the Lender. Without
limiting the foregoing, the Lender shall have received a certification from the
chief executive officer of Harvard that the Obligors are not in violation of any
terms of the Access and Security Agreements or Transition Agreement and that, to
the best knowledge of the Obligors, General Motors Corporation has not asserted
any rights of set-off against amounts due to any of the Obligors by GM other
than in the ordinary course of business, as well as certified copies of
amendments to each such agreement satisfactory to the Lender, reflecting the
security interests provided under the Loan Documents to the Lender.

                           (ff) Canadian Collateral Account. - The Lender shall
be satisfied with all matters relating to arrangements for payment of Accounts
due from time to time to Trim Trends, and any other active Obligor organized in
Canada, directly to an account of Trim Trends established and maintained with
Canadian Imperial Bank of Commerce (the "Canadian Deposit Account"), with
acknowledgment by that depositary of the security interest granted herein by the
relevant Guarantor to the Lender (including waiver by that depositary of any
right of setoff that it might otherwise have in respect of that account).

                           (gg) Cash Collateral Account. - The Lender shall be
satisfied with all arrangements relating to the establishment of an account
subject to the lien created by the Senior Lien Financing Agreement and the
control of the Senior Lien Administrative Agent, with a depository institution
satisfactory to the Lender, established for amounts that the Companies may be
required to maintain as cash Collateral pursuant to the Senior Lien Financing
Agreement (the "Cash Collateral Account").

                           (hh) Stock Purchase Agreement. Harvard shall have
executed and delivered the Stock Purchase Agreement.

                           (ii) Inactive Guarantor Certificate. The Lender shall
have received a certificate of an Authorized Officer of Harvard, in form and
substance satisfactory to the Lender, certifying that the Inactive Guarantor (i)
is not currently actively engaged in business and (ii) currently has no assets
whatsoever (other than its corporate name, corporate charter and goodwill) and
the Lender shall be satisfied with the truth and accuracy of such
certifications.

                           (jj) Process Agent Acceptance. The Lender shall have
received evidence satisfactory to the Lender that the agent for service of
process appointed by each of the Obligors in Paragraph 13.8(d) of this Financing
Agreement, Section 9.9(d) of the Pledge Agreement and Section 5.06(d) of the IP
Security Agreement, has irrevocably accepted such appointment.

                  Upon the execution of this Financing Agreement and the making
of the Term Loan, all of the above Conditions Precedent shall have been deemed
satisfied or waived as set forth in the introductory paragraph of Paragraph 2.1
of this Section 2 or as the Obligors and the Lender shall otherwise agree in
writing.

                                     - 29 -
<PAGE>

         SECTION 3. Term Loan

                  3.1 Term Loan. On the Closing Date, each Company hereby agrees
to jointly and severally execute and deliver to the Lender the Promissory Note
to evidence the Term Loan to be extended by the Lender.

                  3.2 Borrowing Request and Procedure. The request for the Term
Loan by the Lender hereunder may be made by Harvard as agent for the Collective
Borrowers and the Lender is hereby authorized and directed to accept, honor and
rely on such instructions and requests, subject to the limitation and provisions
set forth in this Financing Agreement. Harvard shall give the Lender prior
written notice (substantially in the form of Exhibit B hereto (a "Notice of
Borrowing")) no later than 11:00 a.m. at least two (2) Business Days prior to
the date of the Term Loan. The Notice of Borrowing shall be executed by Harvard,
shall be irrevocable and shall specify or include the date of the Term Loan,
which must be a Business Day and shall be the Closing Date. On the date
specified in the Notice of Borrowing and upon receipt by the Lender of the
Promissory Note and the fulfillment by the Companies of the conditions set forth
in Section 2 hereof, the Lender will make available the requested Term Loan to
the Companies by causing an amount, in immediately available funds, to be
deposited into the account designated by Harvard in the Notice of Borrowing to
the Lender on the date and in the amount set forth in the Notice of Borrowing.

                  3.3 Payment of Principal of Term Loan. The principal amount of
the Term Loan shall be repaid to the Lender by the Companies, as their joint and
several obligation, on the Maturity Date.

                  3.4 Payment of Term Loan Upon Termination. In the event this
Financing Agreement is terminated by the Lender in accordance with the terms of
this Financing Agreement, the Term Loan shall become due and payable on the
effective date of such termination, notwithstanding any provision to the
contrary in the Promissory Note.

                  3.5 Loan Account. (a) Subject to the provisions of
subparagraph (b) below, the Lender shall maintain a Loan Account on its books in
which each of the Companies will be charged with the Term Loan, and with any
other Obligations, including any and all costs, expenses and reasonable
attorney's fees which the Lender may incur in connection with the exercise by or
for the Lender of any of the rights or powers herein or in any other Loan
Document conferred upon the Lender, or in the prosecution or defense of any
action or proceeding to enforce or protect any rights of the Lender in
connection with this Financing Agreement, the other Loan Documents or the
Collateral assigned hereunder or thereunder, or any Obligations. The Companies
will be credited with all amounts received by the Lender from the Companies or
from others for the Companies' account, and such amounts will be applied to
payment of the Obligations as set forth herein. In no event shall prior recourse
to any security granted to or by the Obligors be a prerequisite to the Lender's
right to demand payment of any Obligation. Further, it is understood that the
Lender shall have no obligation whatsoever to perform in any respect any of the
Obligors contracts or obligations relating to the Accounts.

                           (b) In order to utilize the collective borrowing
powers of the Companies (collectively, the "Collective Borrowers") in the most
efficient and economical

                                     - 30 -
<PAGE>

manner, and in order to facilitate the handling of the accounts of the
Collective Borrowers on the Lender's books, the Collective Borrowers have
requested, and the Lender has agreed to handle accounts of the Collective
Borrowers on the Lender's books on a combined basis, all in accordance with the
following provisions:

                                    (i) In lieu of maintaining separate accounts
on the Lender's books in the name of each of the Collective Borrowers, the
Lender shall maintain one account under the name: Harvard Industries et al.
(herein, the "Collective Account"). The Term Loan will be the joint and several
obligation of the Companies and charged to the Collective Account indicated
above, along with any charges and expenses under this Financing Agreement and
the other Loan Documents made in relation to any of the Obligations. The
Collective Account will be credited with all amounts received by the Lender from
any of the Collective Borrowers or from others for their account.

                                    (ii) Each month, the Lender will render to
the Collective Borrowers one extract of the combined Collective Account, which
shall be deemed to be an account stated as to each of the Collective Borrowers
and which will be deemed correct and accepted by all of the Collective
Borrowers, unless the Lender receives a written statement of exceptions from
them, through Harvard, within thirty (30) days after such extract has been
rendered by the Lender. It is expressly understood and agreed by each of the
Collective Borrowers that the Lender shall have no obligation to account
separately to any of the Collective Borrowers.

                                    (iii) It is expressly understood and agreed
by each of the Collective Borrowers that the Lender shall have no responsibility
to inquire into the correctness of the apportionment, allocation, or disposition
of (x) the Term Loan or (y) any of the expenses and charges of the Lender
relating thereto. The Term Loan is to be made for the Collective Account.

                                    (iv) The Collective Borrowers jointly and
severally and unconditionally guarantee to the Lender the prompt payment in full
of (A) the Term Loan, as well as (B) all other Obligations of the Collective
Borrowers to the Lender and hereby expressly confirm in all respects the
agreements and/or instruments executed by each of the Collective Borrowers in
the Lender's favor as more fully set forth therein.

                                    (v) Any collateral security now or hereafter
given to the Lender by any of the Collective Borrowers, shall secure the Term
Loan, and shall be deemed to be pledged to the Lender as security for any and
all Obligations of the Collective Borrowers and each of them to the Lender as
set forth under this Financing Agreement, the other Loan Documents, or any other
agreements between the Lender and any of the Collective Borrowers.

                                    (vi) The handling of the accounts of the
Collective Borrowers in a combined fashion, as more fully set forth herein, is
done solely as an accommodation to the Collective Borrowers and at their
request, and the Lender shall incur no liability to the Collective Borrowers as
a result hereof.

                                     - 31 -
<PAGE>

It is further expressly understood that the foregoing request was made because
the Collective Borrowers are engaged in an integrated operation that requires
financing on a basis permitting the availability of credit from time to time to
each of the Collective Borrowers as required for the continued successful
operation of each of the Collective Borrowers. Each of the Collective Borrowers
expects to derive benefit, directly or indirectly, from such availability since
the successful operation of each of the Collective Borrowers is dependent on the
continued successful performance of the functions of the integrated group. In
addition, the Companies have informed the Lender that:

                                             (A) Harvard, in order to increase
the efficiency and productivity of each of the other Collective Borrowers, has
centralized in itself a cash management system which entails, in part, central
disbursement and operating accounts in which it provides the working capital
needs of each of the other Collective Borrowers and manages and timely pays the
accounts payable of each of the other Collective Borrowers;

                                             (B) Harvard is further enhancing
the operating efficiencies of the other Collective Borrowers by purchasing, or
causing to be purchased, in its name for its account all materials, supplies,
inventory and services required by the other Collective Borrowers which will
result in reducing the operating costs of the other Collective Borrowers; and

                                             (C) Since all of the Collective
Borrowers are now engaged in an integrated operation that requires financing on
an integrated basis and since each Collective Borrower expects to benefit from
the continued successful performance of such integrated operations and in order
to best utilize the collective borrowing powers of each Collective Borrower in
the most effective and cost efficient manner and to avoid adverse effects on the
operating efficiencies of each Collective Borrower and the existing back-office
practices of the Collective Borrowers, each Collective Borrower has requested
that the Term Loan be disbursed solely upon the request of Harvard and to bank
accounts managed solely by Harvard and that Harvard will manage for the benefit
of each Collective Borrower the expenditure and usage of the Term Loan.

                  3.6 Joint and Several Liability of Companies. (a)
Notwithstanding anything in this Financing Agreement or any other Loan Document
to the contrary, each of the Companies hereby accepts joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Lender under this Financing
Agreement and the other Loan Documents, for the mutual benefit, directly and
indirectly, of each of the Companies and in consideration of the undertakings of
the other Companies to accept joint and several liability for the Term Loan and
the other Obligations hereunder. Each of the Companies, jointly and severally,
hereby irrevocably and unconditionally accepts, not merely as a surety but also
as a co-debtor, joint and several liability with the other Companies, with
respect to the payment and performance of all of the Obligations (including,
without limitation, any Obligations arising under this Paragraph 3.6), it being
the intention of the parties hereto that all of the Obligations shall be the
joint and several obligations of each of the Companies without preferences or
distinction among them. If and to the extent that any of the Companies shall
fail to make any payment with respect to any of the Obligations as and when

                                     - 32 -
<PAGE>

due or to perform any of the Obligations in accordance with the terms thereof,
then in each such event the other Companies will make such payment with respect
to, or perform, such Obligation.

                           (b) Subject to the terms and conditions hereof, the
Obligations of each of the Companies under the provisions of this Paragraph 3.6
constitute the absolute and unconditional, full recourse Obligations of each of
the Companies enforceable against each Company to the full extent of its
properties and assets, irrespective of all of the following:

                                    (i) any lack of validity or enforceability,
any irregularity, default or omission in any relevant documentation, including
any Loan Document, or of the Obligations, or any delay, failure or omission to
enforce or agreement not to enforce, or the stay or enjoining, by order of
court, by operation of law or otherwise, of the exercise of any right with
respect to the foregoing (including, in each case, without limitation, as a
result of the insolvency, bankruptcy or reorganization of the Lender or any
other Person);

                                    (ii) any change in the time, manner or place
of payment of, or in any other term in respect of, all or any of the Loan
Documents;

                                    (iii) any exchange or release of, or
non-perfection of any lien on or in, any Collateral, any release or amendment or
waiver of or consent to any departure from any guaranty or security, for all or
any of the Obligations or any release of any other Obligor from all or any part
of its obligations under this Financing Agreement or any of the terms of any
other Loan Document;

                                    (iv) any claim, set-off, counterclaim,
defense or other rights, including any as to marshalling of any security or
guaranties that any Obligor may have at any time and from time to time against
the Lender or any other Person, whether in connection with the transactions
contemplated in the Loan Documents or any other transaction; or

                                    (v) any other circumstances which might
otherwise constitute a defense based on suretyship or otherwise available to, or
a discharge of, any Company in respect of (A) the Obligations of any Company,
(B) the release of or waiver of any rights against any other Obligor and the
settlement, compromise or release of any Obligations of any of them or (C) the
failure by the Lender to attempt, or delay by it in attempting, to collect any
Obligations from any other Company or Guaranty Obligations from any Guarantor or
to realize upon any Collateral; and the Lender may deal with any of the Obligors
as it sees fit without prejudice or effect on this Financing Agreement or the
security for the Obligations;

and each Company hereby irrevocably waives all defenses that might otherwise
have based on any of the matters identified above in this Paragraph 3.6 or based
on any other circumstances other than the full, final and indefeasible payment
of all Obligations; provided that the foregoing provisions of this sentence
relating to any Company and any Obligation shall not be understood to constitute
a waiver of any defense based on the full and final release of all
responsibility of such Company for such Obligation given by the Lender.

                           (c) The provisions of this Paragraph 3.6 are made for
the benefit of the Lender and its successors and assigns, and may be enforced by
it or them from time to time against any or all of the Companies as often as
occasion therefor may arise and without

                                     - 33 -
<PAGE>

requirement on the part of the Lender or such successors or assigns first to
marshall any of its or their claims or to exercise any of its or their rights
against any other Company or to exhaust any remedies available to it or them
against any other Company or to resort to any other source or means of obtaining
payment of any of the Obligations hereunder or to elect any other remedy. The
provisions of this Paragraph 3.6 shall remain in effect until all of the
Obligations shall have been paid in full or otherwise fully satisfied.

                           (d) Each of the Companies hereby agrees that it will
not enforce any of its rights of contribution or subrogation against the other
Companies with respect to any liability incurred by it hereunder or under any of
the other Loan Documents, any payments made by it to the Lender with respect to
any of the Obligations or any Collateral until such time as all of the
Obligations have been paid in full in cash. Any claim which any Company may have
against the other Company with respect to any payments to the Lender hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation, as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the
laws of any jurisdiction relating to any Company, its debts or its assets,
whether voluntary or involuntary, all such Obligations shall be paid in full in
cash before any payment or distribution of any character, whether in cash,
securities or other property, shall be made to the other Companies therefor.

         SECTION 4. Termination of the Commitment of the Lender. The Commitment
of the Lender shall terminate upon the making of the Term Loan on the Closing
Date.

         SECTION 5. Prepayments of Term Loan

                  5.1 Optional Prepayment of Term Loan. The Companies may, upon
at least three (3) Business Days' notice, prepay, at their option, in whole or
in part, and without penalty or premium of any kind, the Term Loan, provided
that on each such prepayment, the Companies shall pay accrued interest on the
principal so prepaid to the date of such prepayment. Each such partial
prepayment shall be in an aggregate principal amount of $1,000,000.00 or an
integral multiple of $1,000,000.00 in excess thereof. The principal amount of
the Term Loan that has been prepaid may not be reborrowed.

                  5.2 Mandatory Application of Certain Proceeds. To the extent
that (x) there is any Surplus Cash for any Fiscal Year beginning after September
30, 2001 or (y) on any date on which any of the Obligors receives Net Cash
Proceeds from

                           (i) the incurrence or issuance by any of the Obligors
of any balance sheet debt other than Permitted Indebtedness, or

                           (ii) the sale or issuance of any equity securities
and capital contributions (other than in connection with (x) the capital stock
of Harvard issued pursuant to the Stock Purchase Agreement and any warrants
outstanding on the date of this Financing Agreement, (y) the exercise of
employee stock options or (z) securities issued or capital contributions made to
any Obligor), or

                                     - 34 -
<PAGE>

                           (iii) any payment due under (x) the GM Transition
Supply Agreement, (y) the Stock Purchase Agreement or (z) the letter agreement
with GECC with respect to, among other things, the release of all Liens and
security interests in favor of GECC, for itself or as agent, under any Existing
Credit Agreement,

the Companies shall (A) apply an amount equal to 100% of the payment referred to
in clause (iii) first, to prepay the outstanding revolving loans under the
Senior Lien Financing Agreement (without any corresponding decrease in the
Senior Lien Lenders' commitments thereunder), second, to prepay the principal
installments of the term loan B under the Senior Lien Financing Agreement, such
prepayment to be applied to such installments in the inverse order of maturity
until the Senior Lien Obligations in respect of such term loan B have been
repaid-in-full, and third, to prepay the principal installments of the term loan
A under the Senior Lien Financing Agreement, such prepayment to be applied to
such installments in the inverse order of maturity until the Senior Lien
Obligations in respect of such term loan A have been repaid-in-full, (B) apply
an amount equal to 100% of the other Net Cash Proceeds and Surplus Cash referred
to in this Paragraph 5.2 to prepay the aggregate principal amount of the term
loans and the revolving loans under the Senior Lien Financing Agreement and (C)
after the Senior Lien Obligations have been paid in full, apply the Net Cash
Proceeds referred to in clauses (A) and (B) above to prepay the aggregate
principal amount of the Term Loan. Each such prepayment under clause (B) above
shall be applied first to prepay the principal installments of the term loan B
under the Senior Lien Financing Agreement, such prepayment to be applied to such
installments in the inverse order of maturity until the Senior Lien Obligations
in respect of such term loan B have been repaid-in-full, second to prepay the
principal installments of the term loan A under the Senior Lien Financing
Agreement, such prepayment to be applied to such installments in the inverse
order of maturity until the Senior Lien Obligations in respect of such term loan
A have been repaid-in-full, and third to repay the revolving loans under the
Senior Lien Financing Agreement. The application of any such Surplus Cash shall
be applied as set forth above not later than one hundred (100) days after the
end of the Fiscal Year in which such Surplus Cash was generated. Notwithstanding
anything to the contrary contained herein, in the event that the Senior Lien
Administrative Agent or the Senior Lien Lenders shall waive any right to receive
any payments required to be made pursuant to Paragraph 7.3 of Section 7 of the
Senior Lien Financing Agreement as such agreement is in effect on the date
hereof, then all such payments shall be made to the Lender and applied (without
penalty or premium of any kind) to the aggregate principal amount of the Term
Loan in accordance with this Paragraph 5.2.

                  5.3 Mandatory Application of Insurance Proceeds and Sale of
Asset Proceeds. (a) On the date of receipt by any Obligor of:

                           (i) Insurance Proceeds, (other than Insurance
Proceeds that are reinvested in compliance with Paragraphs 6.7 of Section 6) or

                           (ii) Net Cash Proceeds from the sale, lease, transfer
or other disposition of any assets of any of the Obligors (other than a
Permitted Asset Transfer and Net Cash Proceeds that are reinvested in compliance
with Paragraphs 6.7(c) and (d) of Section 6),

the Companies shall prepay the aggregate principal amount of the term loans and
the revolving loans under the Senior Lien Financing Agreement in an amount equal
to 100% of the amount of

                                     - 35 -
<PAGE>

said Insurance Proceeds and/or Net Cash Proceeds, each such prepayment to be
applied (A) in the case of Net Cash Proceeds of Accounts and/or Inventory, to
repay the revolving loans under the Senior Lien Financing Agreement and (B) in
all other cases (x) if the Companies do not (or cannot) use Insurance Proceeds
for the repair, replacement or restoration of any Real Estate and/or Equipment,
first to prepay the principal installments of the term loan B under the Senior
Lien Financing Agreement, such prepayment to be applied to such installments in
the inverse order of maturity, until the obligations of the Obligors in respect
of such term loan B have been paid-in-full, second to prepay the principal
installments of the term loan A under the Senior Lien Financing Agreement, such
prepayment to be applied to such installments in the inverse order of maturity,
until the obligations of the Obligors under such term loan A have been
paid-in-full, and third to repay the revolving loans under the Senior Lien
Financing Agreement (without any corresponding decrease in the Senior Lien
Lenders' commitments thereunder) or (y) if the Companies do (and may) elect to
use Insurance Proceeds for the repair, replacement or restoration of Real Estate
and/or Equipment, to repay the revolving loans under the Senior Lien Financing
Agreement (without any corresponding decrease in the Lenders' commitments under
the Revolving Line of Credit), provided, however, that (x) with respect to any
Net Cash Proceeds from the sale of all or any substantial portion of the assets
(other than Accounts and Inventory) of Pottstown, such Net Cash Proceeds shall
be applied to repay the Senior Lien Obligations equally in respect of the
revolving loans and the installments of the term loan B under the Senior Lien
Financing Agreement with all such prepayments to be applied to such installments
in the inverse order of maturity and (y) with respect to Net Cash Proceeds from
the sale of Accounts and/or Inventory of Pottstown, such Net Cash Proceeds shall
be applied to repay the revolving loans under the Senior Lien Financing
Agreement, provided, however, that, notwithstanding anything to the contrary,
after the Senior Lien Obligations have been paid in full, the aggregate
principal amount of the Term Loan shall be prepaid (without penalty or premium
of any kind) in an amount equal to 100% of the amount of Insurance Proceeds
and/or Net Cash Proceeds received by any Obligor under clauses (i) and/or (ii)
above.

                  (b) Notwithstanding anything to the contrary in subparagraph
(a) of this Paragraph 5.3, so long as no Default or Event of Default is
continuing at the time any of the Obligors receives Net Cash Proceeds from the
sale of the Real Estate identified in Schedule 5 as the Salem Property or the
Snover Property, $300,000 of the Net Cash Proceeds of each such sale need not be
applied to any repayment or prepayment contemplated in subparagraph (a) of this
Paragraph 5.3 but shall be applied to prepay the revolving loans under the
Senior Lien Financing Agreement (without any corresponding decrease in the
Senior Lien Lenders' commitments thereunder).

                  (c) Notwithstanding anything to the contrary contained herein,
in the event that the Senior Lien Administrative Agent or the Senior Lien
Lenders shall waive any right to receive any payments required to be made
pursuant to Paragraph 7.4 of Section 7 of the Senior Lien Financing Agreement as
such agreement is in effect on the date hereof, then all such payments shall be
made to the Lender and applied to the aggregate principal amount of the Term
Loan in accordance with this Paragraph 5.3.

                                     - 36 -
<PAGE>

         SECTION 6. Collateral for Obligations

                  6.1 Security Interest. As security for the prompt payment in
full of all Obligations (in the case of each Company) or all Guaranty
Obligations (in the case of each Guarantor), each of the Obligors hereby pledges
and grants to the Lender a continuing general Lien upon, and security interest
in, all the assets of such Obligor, including, without limitation, in the case
of Harvard, all of its rights and interests in and under the Access and Security
Agreements and the GM Transition Supply Agreement, and in the case of all
Obligors, all of their:

                           (a)      Accounts;

                           (b)      Inventory;

                           (c)      General Intangibles;

                           (d)      Documents of Title;

                           (e)      Equipment;

                           (f)      Real Estate;

                           (g)      Investment Property other than the Excluded
                                    Stock;

                           (h)      Other Collateral; and

all cash and non-cash proceeds of any and all of the foregoing Collateral and,
to the extent not otherwise included, all payments under insurance (whether or
not the Lender is the loss payee thereof) and any indemnity, warranty or
guaranty payable by reason of loss or damage to or otherwise with respect to any
of the foregoing (all of the foregoing, collectively, the "Collateral").

                  6.2 Related Collateral Matters and Financing Statements. The
security interests granted hereunder shall extend and attach to:

                           (a) All Collateral which is owned by any of the
Obligors or in which the Obligors have any interest, whether held by the
Obligors or held by others for their account, and, if any Collateral is
Equipment, whether the Obligors' interest in such Equipment is as owner, finance
lessee or conditional vendee;

                           (b) All Equipment, whether the same constitutes
personal property or fixtures, including, but without limiting the generality of
the foregoing, all Tooling dies, jigs, tools, benches, molds, tables,
accretions, component parts thereof and additions thereto, as well as all
accessories, motors, engines and auxiliary parts used in connection with, or
attached to, the Equipment; and

                           (c) All Inventory and any portion thereof which may
be returned, rejected, reclaimed or repossessed by either the Lender or any of
the Obligors from the Obligors'

                                     - 37 -
<PAGE>

customers, as well as to all supplies, goods, incidentals, packaging materials,
labels and any other items which contribute to the finished goods or products
manufactured or processed by the Obligors, or to the sale, promotion or shipment
thereof.

                           (d) The Lender is hereby authorized by each of the
Obligors to file (including pursuant to the applicable terms of the Secured
Transaction Laws) from time to time any financing statements, registrations,
continuations or amendments covering the Collateral whether or not the Obligors'
signature(s) appears thereon. Each Obligor hereby consents to and ratifies any
and all execution and/or filing of financing statements and or registrations on
or prior to the Closing Date by the Lender with respect to the Collateral.

                  6.3 Certain Dealings, Rights and Matters Relating to
Collateral.

                           (a) Inventory. Each Obligor shall safeguard, protect
and hold all Inventory for the Lender's account and make no disposition thereof
except Permitted Asset Transfers. Each of the Obligors shall sell and ship
Inventory to its customers only in the ordinary course of such Obligor's
business, and then only on open account and on terms currently being extended by
such Obligor to its customers, provided that, absent the prior written consent
of the Lender, such Obligor shall not sell Inventory on a consignment basis nor
retain any Lien or security interest in any sold Inventory. Upon the sale,
exchange, or other disposition of Inventory, as herein provided, the security
interest in the Inventory provided for herein shall, without break in continuity
and without further formality or act, continue in, and attach to, all proceeds,
including any instruments for the payment of money, Trade Accounts Receivable,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sale, exchange or disposition. As to any such sale,
exchange or other disposition, the Lender shall have all of the rights of an
unpaid seller, including stoppage in transit, replevin, rescission and
reclamation. Each of the Companies shall immediately forward any and all
proceeds of any sale or other disposition of Inventory to the Depository
Account, and to hold any such proceeds (including any notes and instruments), in
trust for the Senior Lien Administrative Agent and the Lender pending delivery
to the Senior Lien Administrative Agent, provided that, after the payment in
full of the Senior Lien Obligations, all such proceeds of any sale or other
disposition of Inventory shall be forwarded to the Lender or as the Lender may
direct. Irrespective of the Lender's perfection status in any and all of the
General Intangibles, including, without limitation, any Patents, Trademarks,
Copyrights or licenses with respect thereto, each of the Obligors hereby
irrevocably grants to the Lender, subject to the terms of the Intercreditor
Agreement, a royalty free license to sell, or otherwise dispose of or transfer,
in accordance with Paragraph 10.3 of Section 10 hereof, and the applicable terms
hereof, any of the Inventory upon the occurrence of an Event of Default which
has not been waived in writing by the Lender.

                           (b) General Intangibles. Each of the Obligors shall
maintain its rights in, and the value of, its General Intangibles in the
ordinary course of its business, including, without limitation, by making timely
payment with respect to any applicable licensed rights, except for Permitted
Asset Transfers. Each of the Obligors shall deliver to the Lender, and/or shall
cause the appropriate party to deliver to the Lender, from time to time such
pledge or security agreements with respect to General Intangibles (now or
hereafter acquired) of such Obligor as the Lender shall (except as to Excluded
Property) require to obtain valid Liens thereon, subject only to Permitted
Encumbrances. In furtherance of the foregoing, each of the

                                     - 38 -
<PAGE>

Obligors shall provide timely notice to the Lender of any additional Patents,
Trademarks, tradenames, service marks, Copyrights, brand names, trade names,
logos and other trade designations acquired or applied for by such Obligor
subsequent to the Closing Date and each of the Obligors shall execute such
documentation as the Lender may reasonably require to obtain and perfect the
Lender's Lien thereon. Each of the Obligors hereby irrevocably grants to the
Lender a royalty-free, non-exclusive license in the General Intangibles,
including tradenames, Trademarks, Copyrights, Patents, licenses, and any other
proprietary and intellectual property rights and any and all right, title and
interest in any of the foregoing, for the sole purpose, upon the occurrence of
an Event of Default, of the right to: (i) advertise for sale and sell or
transfer any Inventory bearing any of the General Intangibles, and (ii) make,
assemble, prepare for sale or complete, or cause others to do so, any applicable
raw materials or Inventory bearing any of the General Intangibles, including use
of the Equipment and Real Estate for the purpose of completing the manufacture
of unfinished goods, raw materials or work-in-process comprising Inventory, and
apply the proceeds thereof to the Obligations (in the case of a Company) or the
Guaranty Obligations (in the case of a Guarantor) hereunder, all as further set
forth in this Financing Agreement and irrespective of the Lender's Lien and
perfection in any General Intangibles. Notwithstanding any of the foregoing, an
Obligor may, in the ordinary course of its business, abandon any of its rights,
title and interest in certain Trademarks, Copyrights, Patents, licenses or any
other proprietary or intellectual property rights (collectively, the "IP
Interest") if such IP Interest has ceased to be useful to such Obligor;
provided, that any abandonment of an Obligor's IP Interest which is (x)
identified in schedule A or schedule B to the IP Security Agreement or (y)
otherwise necessary for the operation of any material portion of such Obligor's
business shall be subject to the delivery by such Obligor to the Lender of a
certificate of an Authorized Officer of such Obligor (which certificate shall be
in form and substance satisfactory to the Lender) explaining the circumstances
causing the applicable IP Interest to cease to be useful; provided further that
no such abandonment shall be allowed with respect to any IP Interest described
in clause (x) or clause (y) of the preceeding proviso which is maintainable
merely by the payment of maintenance fees.

                           (c) Equipment. Each of the Obligors shall use the
Equipment owned by such Obligor only in the business of the Obligors and such
Equipment shall not be held for sale or lease, or removed from their premises,
or otherwise disposed of by any Obligors except for Permitted Asset Transfers.
Each of the Obligors shall, at such Obligor's own cost and expense, keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the Lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. Each of the Obligors shall safeguard, protect and hold
all Equipment in accordance with the terms hereof and subject to the Lender's
security interest. The proceeds of any Permitted Asset Transfers of Equipment
shall be held in trust by the Obligors for the Senior Lien Administrative Agent
and the Lender and shall be immediately delivered to the Senior Lien
Administrative Agent by deposit to the Depository Account designated by the
Senior Lien Administrative Agent (or, after the Senior Lien Obligations have
been paid in full, such proceeds shall be forwarded to the Lender or as the
Lender may direct), except that the Obligors may retain and use such proceeds to
purchase forthwith replacement Equipment which the Obligors determine in their
reasonable business judgment to have a collateral value at least equal to the
Equipment so disposed of or sold; provided, however, that the aforesaid right
shall automatically cease upon the occurrence of a Default or an Event of
Default which is not waived in writing by the Lender.

                                     - 39 -
<PAGE>

Upon the sale, exchange, or other disposition of the Equipment, as herein
provided, the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, Accounts,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sale, exchange or disposition. As to any such sale,
exchange or other disposition, the Lender shall have all of the rights of an
unpaid seller, including stoppage in transit, replevin, rescission and
reclamation.

                           (d) Pledged Stock and Pledged Notes. Each of the
Obligors hereby confirms that, if it is not a party to the Pledge Agreement on
the date of this Financing Agreement but thereafter obtains any Pledged Stock or
Pledged Notes, it shall promptly give notice to that effect to the Senior Lien
Administrative Agent and the Lender and become a party to the Pledge Agreement
through an amendment thereto, in form and substance satisfactory to the Lender,
and, pursuant to the Pledge Agreement, it shall deliver, or cause to be
delivered, all such Pledged Stock or Pledged Notes to the Senior Lien
Administrative Agent (or, after the Senior Lien Obligations have been paid in
full, to the Lender) in accordance with the applicable terms of the Pledge
Agreement and, prior to such delivery, shall hold any such stock in trust for
the Senior Lien Administrative Agent and the Lender.

                  6.4 Continuing Nature of Security Interest and Rights. The
rights and security interests granted to the Lender hereunder are to continue in
full force and effect until the final payment in full to the Lender of all
Obligations and the termination of this Financing Agreement.

                  6.5 Lender's Exercise of Rights and Remedies. Notwithstanding
the Lender's security interest in the Collateral and to the extent that the
Obligations or the Guaranty Obligations, as the case may be, are now or
hereafter secured by any assets or property other than the Collateral or by the
guarantee, endorsement, assets or property of any other Person, the Lender shall
have the right to determine which rights, Liens, security interests or remedies
the Lender shall at any time pursue, foreclose upon, relinquish, subordinate,
modify or take any other action with respect to, without in any way modifying or
affecting any of them, or any of the Lender's rights hereunder.

                  6.6 Security; Loan Account Charges. Any property or assets of
the Obligors, or any one of them, in the possession or control of the Lender may
be held by the Lender as security for any Obligations or any Guaranty
Obligations, as the case may be, and applied in whole or partial satisfaction of
such Obligors or such Guaranty Obligations when due. The Liens and security
interests granted herein, and any other Lien or security interest the Lender may
have in any other assets of the Obligors, shall secure payment and performance
of all now existing and future Obligations and Guaranty Obligations. The Lender
may in its discretion charge any or all of the Obligations to the Loan Account
when due.

                  6.7 Insurance on Collateral. (a) At the request of any
Obligor, or if any Obligor fails to maintain insurance in respect of any of the
Collateral as required by Paragraph 7.2(d) of Section 7, or fails to provide the
Lender with timely evidence, acceptable to the Lender, of its maintenance of
such insurance coverage, the Lender may purchase, at the Companies' expense (as
contemplated in subparagraph (d) of this Paragraph of 6.7), arrange for and
acquire insurance to protect the Lender's interests in the Collateral, but at
the Companies' expense and

                                     - 40 -
<PAGE>

without any responsibility on the Lender's part for: (i) obtaining the
insurance; (ii) the solvency of the insurance companies; (iii) the adequacy of
the coverage; or (iv) the collection of claims. Upon the occurrence of an Event
of Default which is not waived in writing by the Lender, the Lender shall,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to the Lender, have the sole right and at its option, in the name of the
Lender or the Obligors or any of them, to file claims under any insurance
policies, to receive, receipt and give acquittance for any payments that may be
payable thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies.

                           (b) In the event of any loss or damage by fire or
other casualty, Insurance Proceeds relating to the Obligors' or an Obligor's
Inventory shall be applied as provided by and in accordance with Paragraph 5.3
of Section 5. Upon the occurrence of a Default or Event of Default, such
Insurance Proceeds may be applied to the Obligations in such order as the Lender
may elect.

                           (c) In the event any part of the Obligors' or an
Obligor's Real Estate or Equipment is damaged by fire or other casualty and the
Insurance Proceeds for such damage or other casualty is less than or equal to
$100,000.00, the Lender shall promptly apply such proceeds in accordance with
Paragraph 5.3 of Section 5. Upon the occurrence of a Default or Event of
Default, such Insurance Proceeds may be applied to the Obligations in such order
as the Lender may elect.

                           (d) Absent the occurrence of an Event of Default
(which has not been waived in writing by the Lender), and provided that (x) the
Obligors have sufficient business interruption insurance to replace the lost
profits of any of the Obligors' facilities, and (y) the Insurance Proceeds are
in excess of $100,000.00, Harvard may request the consent of the Lender (by
delivering a written request to the Lender) to replace, repair or restore such
Real Estate or Equipment to substantially the equivalent condition prior to such
fire or other casualty as set forth herein. If Harvard is not permitted by the
Lender to, or cannot, elect to use the Insurance Proceeds as set forth above,
the Lender may, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to the Lender, apply the Insurance Proceeds to the payment
of the Obligations in such manner and in such order as the Lender may reasonably
elect.

                           (e) If Harvard receives the written consent of the
Lender and elects to use the Insurance Proceeds for the repair, replacement or
restoration of any Real Estate and/or Equipment, and there is then no Event of
Default, Harvard shall, prior to the commencement of any such material
restoration, repair or replacement, provide the Lender with a restoration plan
and a total budget certified by an independent third party experienced in
construction costing. If there are insufficient Insurance Proceeds to cover the
cost of restoration as so determined, the Companies shall be responsible for the
amount of any such insufficiency and shall demonstrate evidence of such prior to
the commencement of restoration. Completion of restoration shall be evidenced by
a final, unqualified certification of the design architect employed, if any; an
unconditional Certificate of Occupancy, if applicable; such other certification
as may be required by law; or if none of the above is applicable, a written good
faith determination of completion by Harvard.

                                     - 41 -
<PAGE>

                           (f) Any insurance acquired by the Lender as
contemplated in subparagraph (a) of this Paragraph 6.7 may, but need not,
protect the Obligor's respective interests in the Collateral, and therefore the
Obligors acknowledge that such insurance may not pay claims which the Obligors
may have with respect to the Collateral or pay any claim which may be made
against the Obligors in connection with the Collateral. In the event the Lender
purchases, obtains or acquires insurance covering all or any portion of the
Collateral, the Companies shall be responsible for all of the applicable costs
of such insurance, including premiums, interest (at the applicable rate of
interest set forth in Paragraph 8.1 of Section 8 hereof), fees and any other
charges with respect thereto, until the effective date of the cancellation or
the expiration of such insurance. The Lender may charge all of such premiums,
fees, costs, interest and other charges to the Loan Account. Each of the
Companies hereby acknowledges that the costs of the premiums of any insurance
acquired by the Lender may exceed the costs of insurance which the Companies may
be able to purchase on their own. In the event that the Lender purchases such
insurance, the Lender will notify Harvard of said purchase within thirty (30)
days of the date of such purchase. If, within thirty (30) days after the date of
such notice, Harvard provides the Lender with proof that the Obligors had the
insurance coverage required pursuant to Paragraph 7.2(d) of Section 7 (in form
and substance satisfactory to the Lender) as of the date on which the Lender
purchased insurance and the Obligors continued at all times to have such
insurance, then the Lender agrees to cancel the insurance purchased by the
Lender and credit the Loan Account with the amount of all costs, interest and
other charges associated with any insurance purchased by the Lender, including
with any amounts previously charged to the Loan Account.

                  6.8 Taxes Relating to Collateral. If, notwithstanding the
Obligors' covenants regarding the payment of Taxes, in Paragraph 7.2(e), any
Lien shall be filed or claimed (i) for Taxes due the United States or Canada or
any state or province of either such jurisdiction, or (ii) which in the Lender's
opinion might create a valid obligation having priority over the rights granted
to the Lender herein (exclusive of Real Estate), such Lien shall not be deemed
to be a Permitted Encumbrance hereunder and the Companies shall immediately pay
such Taxes and remove the Lien of record. If the Companies or any one of them
fails to do so promptly, then the Lender may, pay such Taxes on the Obligors'
behalf, and the amount thereof shall be an Obligation secured hereby and due on
demand.

                  6.9 Mortgages. (a) This Financing Agreement and the obligation
of the Obligors to perform all of their covenants and obligations hereunder are
further secured by mortgage(s), deed(s) of trust or assignment(s) on the Real
Estate.

                           (b) Each of the Obligors shall give to the Lender
from time to time such mortgage(s), deed(s) of trust or assignment(s) on the
Real Estate or real estate acquired by such Obligor after the date hereof as the
Lender shall require to obtain for the Lender a valid Lien thereon, subject only
to Permitted Encumbrances and to those exceptions of title as set forth in
future title insurance policies that are satisfactory to the Lender.

         SECTION 7. Representations; Warranties and Covenants

                  7.1 Representations and Warranties. Each of the Obligors
hereby makes the representations and warranties set forth in each of the
following subparagraphs of this Paragraph 7.1 to the Lender.

                                     - 42 -
<PAGE>

                           (a) Financial Condition. (i) The fair value of the
Obligors' Total Assets exceeds the book value of their Total Liabilities on a
consolidated basis; (ii) the Obligors are generally able to pay their debts as
they become due and payable; and (iii) the Obligors do not have unreasonably
small capital to carry on their business as it is currently conducted absent
extraordinary and unforeseen circumstances.

                           (b) Perfection and Related Matters. (i) Schedule 1
hereto correctly and completely sets forth such Obligor's (A) chief executive
office, (B) Collateral locations, (C) tradenames, and (D) all the other
information listed on said Schedule; and (ii) upon filing of financing
statements which name the Companies as debtors in the applicable filing clerks'
offices, this Financing Agreement creates a valid and perfected security
interest in the Collateral (other than Real Estate) securing the Obligations or
the Guaranty Obligations, as the case may be, to the extent that a security
interest may be perfected by the filing of a financing statement under the UCC
(in the case of the Companies) or the PPSA (in the case of the Guarantors) and
the security interests granted herein constitute in favor of the Lender, and
shall at all times constitute, perfected Liens in the assets of such Obligor
(subject only to Permitted Encumbrances) other than (1) Real Estate and (2) any
such Collateral for which possession or control is required under the UCC (in
the case of the Companies) or the PPSA (in the case of the Guarantors) for
perfection of a security interest, including any Pledged Stock or Pledged Notes
or proceeds thereof. The Pledge Agreement creates a valid security interest in
the Pledged Stock and Pledged Notes of such Obligor, which, upon delivery by
such Obligor of such Pledged Stock and Pledged Notes to the Senior Lien
Administrative Agent as required pursuant to the Senior Lien Financing
Agreement, will constitute a perfected security interest in favor of the Lender,
subject to the first priority Lien of the Senior Lien Administrative Agent (on
behalf of the Senior Lien Lenders and the Senior Lien Issuing Bank) pursuant to
the terms of the Intercreditor Agreement. Upon the recordation of the Mortgages,
the security interest granted in such Mortgage will create (and shall at all
times constitute) a valid and perfected lien in favor of the Lender, securing
the Obligations, in the case of a Company, or the Guaranty Obligations of Trim
Trends, in the case of Real Estate of Trim Trends, subject only to Permitted
Encumbrances.

                           (c) Collateral and Related Matters. (i) Except for
the Permitted Encumbrances, such Obligor is, or will be, at the time additional
Collateral is acquired by it, the absolute owner of the Collateral owned by such
Obligor with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or Liens in favor of
others (other than Permitted Encumbrances).

                                    (ii) The Equipment constituting Collateral
does not comprise a part of such Obligor's Inventory.

                                    (iii) Such Obligor possesses all General
Intangibles and rights thereto necessary to conduct its business as conducted as
of the Closing Date.

                           (d) Organization and Qualification. Such Obligor and
each of its subsidiaries is a corporation, duly incorporated and validly
existing in good standing under the laws of the jurisdiction of its
incorporation; each has the corporate power to own its property and to carry on
its business as now being conducted; and each is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned or leased by

                                     - 43 -
<PAGE>

it therein or in which the transaction of its business makes such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect or would not have a material adverse effect on its ability to
enforce collection of Accounts due from customers residing in such jurisdiction.

                           (e) Loan Documents. Such Obligor and each of its
subsidiaries has full corporate power and authority to execute and deliver, and
to incur and perform its obligations under, each of the Loan Documents to which
it is party, all of which have been duly authorized by all proper and necessary
corporate action. No consent or approval of stockholders is required as a
condition to the validity or performance of, or the exercise by the Lender of
any of its rights or remedies under any Loan Document. Such Obligor has duly
executed and delivered this Financing Agreement, and this Financing Agreement
constitutes, and upon such Obligor's execution and delivery of each other Loan
Document that it is required hereunder to execute and deliver, such other Loan
Document will constitute, the legal, valid and binding obligation of such
Obligor, enforceable against it in accordance with the terms of this Financing
Agreement or such other Loan Document, as the case may be, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.

                           (f) Governmental Action. All authorizations,
consents, approvals, registrations, notices, exceptions, licenses with or from
any Governmental Authority or other Person necessary for the execution, delivery
and performance by such Obligor or any of its subsidiaries, and the incurrence
and performance of each of its obligations under, each of the Loan Documents,
and the exercise by the Lender of its remedies under each of the Loan Documents
have been effected or obtained and are in full force and effect.

                           (g) Litigation. There are no proceedings or
investigations now pending or, to the knowledge of such Obligor, threatened
before any court or arbitrator or before or by any Governmental Authority which,
individually or in the aggregate, if determined adversely to the interests of
the Obligors or any of their subsidiaries, could reasonably be expected to have
a Material Adverse Effect.

                           (h) No Conflicts. There is no statute, regulation,
rule order or judgment, and no provision of any agreement or instrument binding
upon such Obligor or any of its subsidiaries, or affecting their properties, and
no provision of the certificate of incorporation or by-laws (or similar
constitutive instruments) of such Obligor or any of its subsidiaries, that would
prohibit, conflict with or in any way impair the execution or delivery of, or
the incurrence or performance of any obligations of the Obligors under, any Loan
Document, or result in or require the creation or imposition of any Lien on
property of the Obligors or any of their subsidiaries as a consequence of the
execution, delivery and performance of the Loan Documents, other than the Liens
in favor of the Lender or in favor of the Senior Lien Lenders expressly provided
for in this Financing Agreement and the other Loan Documents or in the Senior
Lien Financing Documents as approved by the Lender on the Closing Date.

                           (i) No Material Adverse Change. No Material Adverse
Change has occurred.

                                     - 44 -
<PAGE>

                           (j) Regulatory Status. Neither such Obligor nor any
of its subsidiaries is (i) an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or (ii) subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, each as amended, or any foreign, federal, state or local statute or
regulation limiting its ability to incur indebtedness for money borrowed as
contemplated hereby.

                           (k) Intellectual Property. Except as set forth on
Schedule 11, (i) such Obligor and each of its subsidiaries owns, or is licensed
to use, all Trademarks, Copyrights, technology, know-how and processes necessary
for the conduct of its business as currently conducted (the "Intellectual
Property") except for those the failure to own or license which could not have a
Material Adverse Effect, (ii) no claim has been asserted in writing (or is
otherwise known to such Obligor to exist) and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does such
Obligor know of any valid basis for any such claim, and (iii) the use of such
Intellectual Property by such Obligor and its subsidiaries does not infringe the
rights of any Person, except for such claims and infringements that, in the
aggregate do not have a Material Adverse Effect. The Obligors, however, make no
representations or warranties regarding the Intellectual Property identified in
the schedules of Intellectual Property entitled "Schedule Foreign Patents" and
"Schedule Foreign Trademarks" delivered pursuant to Paragraph 2.1(y) of Section
2 hereof.

                           (l) Requirements of Law and Contractual Obligations.
No Requirements of Law or Contractual Obligation of the Obligors or any of their
subsidiaries has a Material Adverse Effect.

                           (m) Capital Stock. Schedule 3 identifies (i) all
capital stock of each Obligor other than Harvard, the respective jurisdictions
in which they are organized and how and by whom such stock is owned and (ii) all
of the authorized capital stock of such Obligor, by class, and, as of the
Closing Date, the number of shares of each such class that are issued and
outstanding. All such issued shares of the capital stock of such Obligor which
constitute Pledged Stock have been validly issued and, as of the Closing Date,
are fully paid, non-assessable shares free of preemptive rights or other similar
rights suffered or permitted by such Obligor. Other than as described on
Schedule 3, (A) there are no subscriptions, options, warrants, rights to
subscribe for, or calls or commitments or similar rights relating to any shares
of such Obligor's capital stock, including any right of conversion or exchange
under any outstanding security or other instrument, (B) such Obligor is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any security convertible
into or exchangeable for any of its capital stock, and (C) there are no
agreements or arrangements under which such Obligor or any of its affiliates is
obligated to register the sale of any of their securities under the Securities
Act. Harvard may amend Schedule 3 from time to time to reflect any Permitted
Asset Transfer, merger or liquidation effected in accordance with the terms of
this Financing Agreement and the Senior Lien Financing Agreement (as such
agreement is in effect on the date hereof).

                           (n) Indebtedness. Schedule 4 identifies all
Indebtedness for borrowed money of such Obligor and all its subsidiaries which
is outstanding on the date of this Financing

                                     - 45 -
<PAGE>

Agreement as well as all other Indebtedness of such Obligor and its subsidiaries
which is secured by any Lien or other encumbrance on any of the property of any
of such Obligor or any of its Subsidiaries.

                           (o) Environmental Matters. Except as disclosed in
Schedule 10, such Obligor and each of its subsidiaries (i) is in compliance in
all material respects with all applicable Environmental Laws; (ii) has obtained
or has taken steps to obtain all necessary permits, consents, licenses, and
other approvals applicable under any Environmental Laws; (iii) is not subject to
any investigation, or any judicial or administrative proceeding, notice, order,
judgment, decree or settlement alleging or pertaining to any violation of
Environmental Laws that could result in a Material Adverse Effect; (iv) is not
subject to any claims or liabilities arising from any Environmental Laws that
could result in a Material Adverse Effect; and (v) does not have any Lien
attached based on any Environmental Laws that could result in a Material Adverse
Effect. Except for certain summary reports in respect of the environmental
database research results performed in 1998 (and referenced in the Financing
Transaction Checklist, dated September 30, 1999 in connection with the financing
set forth in the Existing Credit Agreement with GECC, as "Environmental Reports
(done in 1998)"), such Obligor has provided all environmental reports relating
to the Real Estate to the Lender or has disclosed the information in such
reports in Schedule 10.

                           (p) Federal Margin Regulations. None of the
transactions contemplated in this Financing Agreement will violate or result in
a violation of Section 7 of the Exchange Act, or any regulations issued pursuant
thereto, including, without limitation, Regulations T, U and X of the Federal
Reserve Board. If the Lender so requests, the Obligors will furnish to the
Lender a statement to the foregoing effect in conformity with the requirements
of an applicable form referred to in Regulation U.

                           (q) Financial Statements and Other Information. (i)
Except as set forth in Schedule 8 or reflected in financial statements delivered
to the Lender on or before the date of this Financing Agreement, (A) neither
such Obligor nor any of its subsidiaries has, on the date of this Financing
Agreement, any material obligation, contingent liability or liability for Taxes,
or any long-term lease or unusual forward or long-term exchange transaction, any
Hedging Agreement or other financial derivative which is not reflected in those
financial statements; and (B) there has been no sale, transfer or other
disposition by such Obligor or any of its subsidiaries of any material part of
its business or property (other than a Permitted Asset Transfer) and no purchase
or other acquisition of any business or property, including capital stock of any
other Person (other than another Obligor), that is material in relation to the
consolidated financial position of the Obligors at September 30, 2000, as
reflected in those financial statements, except, on a date after the date of
this Financing Agreement on which this representation is repeated or deemed
repeated or required to be true as if then made, for any other acquisition or
transfer made after the date of this Financing Agreement which at the time was
expressly permitted in or pursuant to this Financing Agreement and reported as
required herein to the Lender.

                                    (ii) The audited consolidated and unaudited
consolidating balance sheets of such Obligor and its subsidiaries as of
September 30, 2000, and the related consolidated and consolidating statements of
operations, changes in stockholder's equity and cash flows for the fiscal year
ended on that date, copies of which have been furnished to the

                                     - 46 -
<PAGE>

Lender, fairly present in all material respects the consolidated condition of
such Obligor and its consolidated subsidiaries as at such date, and the results
of their operations and their retained earnings and cash flows for the fiscal
year then ended. All such financial statements, including the related schedules
and notes thereto relating to those financial statements, have been prepared in
accordance with GAAP applied consistently throughout the periods involved,
except as disclosed therein.

                                    (iii) The operating forecast and cash flow
projections of such Obligor and its subsidiaries which have been furnished to
the Lender have been prepared in good faith under the direction of Authorized
Officers of such Obligor and the relevant subsidiaries. Those forecasts and
projections with respect to such Obligor and its subsidiaries were prepared and
presented in good faith based upon facts and assumptions that such Obligor
believes to have been reasonable in light of current and foreseeable conditions,
it being understood that projections are subject to significant uncertainties
and contingencies, many of which are beyond the control of such Obligor and its
subsidiaries and that no assurance can be given that the financial results set
forth in those forecasts and projections will actually be realized.

                                    (iv) All information, reports and other
papers and data (other than projections) with respect to such Obligor and its
subsidiaries furnished by such Obligor or Harvard, on behalf of such Obligor, to
the Lender in connection with the negotiation, preparation or execution of this
Financing Agreement or any of the other Loan Documents was, at the time
furnished, complete and correct in all material respects. The information,
reports and other papers and data (other than projections) with respect to such
Obligor and its subsidiaries, and the representations made by or on behalf of
such Obligor therein or in any other document delivered by or on behalf of such
Obligor under or in connection with any Loan Document after the date of this
Financing Agreement were, in each case, at the time furnished complete and
correct or, in the case of a representation, as at the time made, true and
correct, in all material respects.

                           (r) No Default. Except as set forth in Schedule 7, no
Default or Event of Default has occurred and is continuing and neither such
Obligor nor any of its subsidiaries is in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to its business.

                           (s) Taxes. Except as set forth in Schedule 8, such
Obligor and each of its subsidiaries has filed or caused to be filed all
federal, state, provincial and other material tax returns which are required to
be filed and has paid all Taxes shown to be due and payable on those returns or
on any assessments made against it or any of its property and all other Taxes,
fees or other charges imposed on it or any of its property by any Governmental
Authority (other than any Tax, fee or other charge the amount or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of such Obligor or subsidiary. No Tax Lien has been filed, and, to the
knowledge of such Obligor, no claim is being asserted, with respect to any such
Tax, fee or other charge. Neither such Obligor nor any of its subsidiaries has
waived or extended or has been requested to waive or extend the statute of
limitations relating to the payment of any Taxes.

                                     - 47 -
<PAGE>

                           (t) ERISA. Each Plan has been and is being maintained
and funded in accordance with its terms and in material compliance with all
provisions of ERISA and the Code applicable thereto. No Obligor nor any ERISA
Affiliate has incurred any liability (other than routine liability for premiums)
under Title IV of ERISA which could reasonably be expected to have a Material
Adverse Effect. No ERISA Event has occurred, nor has any other event occurred
that may result in an ERISA Event, which could reasonably be expected to have a
Material Adverse Effect. Each Single Employer Plan has been determined by the
Internal Revenue Service to qualify under Section 401 of the Code, and the
trusts created thereunder have been determined to be exempt from Tax under the
provisions of Section 501 of the Code, and to the best knowledge of the Obligors
nothing has occurred which would cause the loss of such qualification or
tax-exempt status. No Single Employer Plan subject to Title IV of ERISA has any
Unfunded Pension Liability as to which any Obligor, or ERISA Affiliate is or may
be liable and which could reasonably be expected to have a Material Adverse
Effect. No Plan maintained or sponsored by any Obligor or ERISA Affiliate
provides medical or other welfare benefits or extends coverage relating to such
benefits beyond the date of a participant's termination of employment with such
Obligor or ERISA Affiliate, except to the extent required by Section 4980B of
the Code or as otherwise set forth in Schedule 9 hereto. Each Obligor and ERISA
Affiliate has complied in all material respects with the notice and continuation
coverage requirements of Section 4980B of the Code. There are no pending or, to
the best knowledge of the Obligors, threatened claims, actions or lawsuits,
other than routine claims for benefits in the usual and ordinary course, with
respect to any Single Employer Plan for which any Obligor ERISA Affiliate may be
directly or indirectly liable, through indemnification obligations or otherwise,
which could reasonably be expected to have a Material Adverse Effect. Neither
any Obligor nor any ERISA Affiliate has transferred any Unfunded Pension
Liability to an entity other than an ERISA Affiliate or otherwise engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA. Each Plan
that is not subject to the laws of the United States (a "Foreign Plan") is being
maintained and funded in compliance with its terms and in compliance with any
and all provisions of the laws applicable thereto, and there are no unfunded
pension or benefit liabilities or claims or causes of action (other than routine
claims for benefits) with respect to such Foreign Plan which, in the aggregate
and together with the liabilities, claims or causes of action with respect to
any other Foreign Plans, could reasonably be expected to have a Material Adverse
Effect.

                  7.2 Covenants. Each of the Obligors shall perform and comply
with each of the covenants and agreements set forth in following subparagraphs
of this Paragraph 7.2 (it being understood that, where the relevant covenant
calls for compliance by the Obligors on a consolidated basis, each Obligor shall
take or refrain from taking such action as is necessary to cause compliance by
the Obligors on a consolidated basis).

                           (a) Books and Records Relating to Collateral; Change
in Location. Such Obligor shall, and shall cause each of its subsidiaries to,
maintain books and records pertaining to the Collateral in such detail, form and
scope as the Lender shall reasonably require, shall maintain such financial
books and records as shall be required to enable it to provide the financial
statements required by paragraph (g) of this Paragraph 7.2 and shall cause the
books and records of such Obligor to reflect the Lender's interest in the
Accounts, Inventory and other assets of such Obligor. Such Obligor shall permit
and cause each of its subsidiaries to permit the Lender or its agents at the
Obligors' cost and expense, upon reasonable notice to enter upon such

                                     - 48 -
<PAGE>

Obligor's premises at any time during normal business hours, and from time to
time in its reasonable business judgment, for the purpose of inspecting the
Collateral and any and all records pertaining thereto, and shall make all such
books and records available in such inspections, including any records handled
or maintained for such Obligor by any other company or entity. Such Obligor
shall afford the Lender thirty (30) days' prior written notice of any (i) change
in the location of any such Collateral, other than to locations, that as of the
Closing Date, are known to the Lender and at which the Lender has filed
financing statements and otherwise fully perfected its Liens thereon, (ii)
change in the location of its chief executive office/chief place of business
from its address specified for notices herein, or (iii) change of its name
(including the adoption of any new trade name), jurisdiction of incorporation,
identity or corporate structure. In addition, such Obligor shall not make any of
the changes described in this paragraph (a) of this Paragraph 7.2 until such
filings and other measures as may be required under applicable law to continue
uninterrupted the perfected Lien or security interest created hereunder shall
have been taken, and until the Lender shall have received such opinions of
counsel with respect thereto as it may have reasonably requested. Such Obligor
shall also advise the Lender promptly, in sufficient detail, of any material
adverse change relating to the type, quantity or quality of the Collateral or on
the security interests granted to the Lender herein or in any other Loan
Document.

                           (b) Information Regarding Collateral. Such Obligor
shall, and shall cause each of its subsidiaries to, execute and deliver to the
Lender, from time to time, solely for the Lender's convenience in maintaining a
record of the Collateral, such written statements, and schedules as the Lender
may reasonably require, designating, identifying or describing the Collateral.
Any failure, however, to promptly give the Lender such statements, or schedules
shall not affect, diminish, modify or otherwise limit the Lender's security
interests in the Collateral.

                           (c) Action Relating to Security Interest. Such
Obligor shall, and shall cause each of its subsidiaries to, comply with the
requirements of all state, provincial and federal laws in order to grant to the
Lender valid and perfected first security interests in the Collateral, subject
only to the Permitted Encumbrances. Such Obligor shall do whatever the Lender
may reasonably request, from time to time, by way of: (i) filing notices of
Liens, financing statements, registrations, amendments, renewals and
continuations thereof; (ii) cooperating with the Lender's agents and employees;
(iii) keeping Collateral records; (iv) transferring proceeds of Collateral to
the Lender's possession; (v) performing such further acts as the Lender may
reasonably require in order to effect the purposes of this Financing Agreement
and the Security Documents; and (vi) defend the Collateral against all claims
and demands of all Persons (other than the Lender and the holders of Permitted
Encumbrances) claiming an interest therein.

                           (d) Insurance. Such Obligor shall maintain insurance
on its Real Estate, Equipment and Inventory under such policies of insurance,
with such insurance companies, in such reasonable amounts and covering such
insurable risks as are at all times reasonably satisfactory to the Lender. All
policies covering the Real Estate, Equipment and Inventory of such Obligor
shall, subject to the rights of any holders of Permitted Encumbrances holding
claims senior to the Lender, be made payable to the Lender, in case of loss,
under a standard non-contributory "mortgagee", "lender" or "secured party"
clause and are to contain such other provisions as the Lender may require to
fully protect the Lender's interest in the Real Estate, Inventory and Equipment
and to any payments to be made under such policies. All

                                     - 49 -
<PAGE>

original policies or true copies thereof shall be delivered by such Obligor to
the Lender, premium prepaid, with the loss payable endorsement in the Lender's
favor, and shall provide for not less than thirty (30) days' prior written
notice to the Lender of the exercise of any right of cancellation.

                           (e) Taxes. Such Obligor shall pay, when due, all
Taxes, including sales taxes, assessments, claims and other charges lawfully
levied or assessed upon such Obligor or the Collateral unless such Taxes are
being diligently contested in good faith by the applicable Obligor by
appropriate proceedings and adequate reserves are established in accordance with
GAAP.

                           (f) Compliance with Requirements of Law. Such
Obligor: (i) shall comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official and other Requirements
of Law, which the failure to comply with would have a Material Adverse Effect,
provided that such Obligor may contest any acts, rules, regulations, orders and
directions of such bodies or officials in any reasonable manner which will not,
in the Lender's reasonable opinion, materially and adversely effect the Lender's
rights or priority in the Collateral; (ii) shall comply with all Environmental
Laws, applicable to the Collateral, the ownership and/or use of their real
property and operation of their business, which the failure to comply with would
have a material adverse effect on the Collateral, or any material part thereof,
or on the operation of the business of such Obligor or any other Obligor; and
(iii) shall not be deemed to have breached any provision of this Paragraph
7.2(f) if (x) the failure to comply with the requirements of this Paragraph
7.2(f) resulted from good faith error or innocent omission, (y) the Obligors
promptly commence and diligently pursue a cure of such breach, and (z) such
failure is cured within (30) days following such Obligor's receipt of notice of
such failure, or if such failure cannot in good faith be cured within thirty
(30) days, then such breach is cured within a reasonable time frame based upon
the extent and nature of the breach and the necessary remediation, and in
conformity with any applicable consent order, consensual agreement and
applicable law.

                           (g) Financial Information. The Obligors (or in the
case of clauses (i) and (ii), Harvard) shall furnish to the Lender, at the times
indicated, each of the following:

                           (i) within ninety (90) days after the end of each
Fiscal Year, an audited Consolidated Balance Sheet, with a Consolidating Balance
Sheet attached thereto, as at the close of such year, and consolidated and
consolidating statements of profit and loss, cash flow and reconciliation of
surplus of the Obligors and their subsidiaries for such year, audited by
independent public accountants selected by Harvard and satisfactory to the
Lender;

                           (ii) within forty-five (45) days after the end of
each of the first three Fiscal Quarters of each Fiscal Year, a Consolidated
Balance Sheet and Consolidating Balance Sheet as at the end of such period and
consolidated and consolidating statements of profit and loss, cash flow and
surplus of the Obligors and their subsidiaries, certified by an authorized
financial or accounting officer of Harvard;

                           (iii) within thirty (30) days after the end of each
month, a Consolidated Balance Sheet as at the end of such period and
consolidated and consolidating

                                     - 50 -
<PAGE>

statements of profit and loss, cash flow and surplus of the Obligors and their
subsidiaries for such period, certified by an authorized financial or accounting
officer of Harvard;

                                    (iv) within fifteen (15) days after the end
of each month, a statement setting forth each of the following for the Obligors:
(i) all Accounts (including and distinguishing Accounts that are not Eligible
Accounts Receivable (as defined in the Senior Lien Financing Agreement as such
agreement is in effect on the date hereof); (ii) accounts payable; (iii)
Inventory (including and distinguishing Inventory that is not Eligible Inventory
(as defined in the Senior Lien Financing Agreement as such agreement is in
effect on the date hereof); and (iv) any sales or dispositions of, or any other
changes with respect to the condition or operation of, the Eligible Equipment
from the prior month (or Schedule 12 in the case of the first month after the
Closing Date) together with a certification as to all such matters prepared by
an Authorized Officer of Harvard;

                                    (v) on the second Business Day of each week
and at such other times as the Lender shall request, a Borrowing Base
Certificate showing Eligible Accounts (as defined in the Senior Lien Financing
Agreement as such agreement is in effect on the date hereof) as of the close of
business on the last Business Day of the preceding week and Eligible Inventory
(as defined in the Senior Lien Financing Agreement as such agreement is in
effect on the date hereof) as of the close of business on the last Business Day
of the preceding month and as of such other times as the Lender in its
reasonable business judgment shall require; provided, however, that upon the
occurrence of any change in the information provided on the most recently
provided Borrowing Base Certificate which could have or could reasonably be
expected to have a Material Adverse Effect, Harvard shall promptly provide to
the Lender a new Borrowing Base Certificate reflecting such change;

                                    (vi) from time to time, such further
information regarding the business affairs and financial condition of the
Obligors and/or any subsidiaries thereof as the Lender may reasonably request,
including, without limitation (A) the accountant's management practice letter
and (B) not later than the 45th day of each Fiscal Year, annual cash flow
projections in form satisfactory to the Lender.

Each of the financial statements which the Obligors are required to submit as
provided above in clauses (i) and (ii) of this Paragraph 7.2(g) must be
accompanied by an officer's certificate, signed by the President, Vice
President, Controller, or Treasurer or other Authorized Officer, pursuant to
which any one such officer must certify that: (x) the financial statement(s)
present fairly, in all material respects, the relevant Obligors' financial
condition at the end of the particular accounting period, as well as such
Obligors' operating results during such accounting period, subject to year-end
audit adjustments; and (y) during the particular accounting period: (A) there
has been no Default or Event of Default under this Financing Agreement or
default or event of default under the Senior Lien Financing Agreement, provided,
however, that if any such officer has knowledge that any such Default, Event of
Default, default or event of default has occurred during such period, the
existence of and a detailed description of same shall be set forth in such
officer's certificate; (B) the Obligors have not received any notice of
cancellation with respect to their property insurance policies; (C) the Obligors
have not received any notice that could result in a material adverse effect on
the value of the Collateral taken as a whole; and

                                     - 51 -
<PAGE>

(D) the exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement.

                           (h) Affirmative Financial Covenants. The Obligors, on
a consolidated basis, shall:

                                    (i) maintain a Fixed Charge Coverage Ratio
of not less than that specified below at the end of each Fiscal Quarter
specified, which, for the Fiscal Quarters ending June 30, September 30 and
December 31, 2001, shall be determined on a cumulative basis for the periods of
three (3), six (6) and nine (9) months, respectively, so ending, and, for each
Fiscal Quarter thereafter shall be determined for the period of four consecutive
Fiscal Quarters ending with such Fiscal Quarter specified below:

                 Fiscal Quarter                                       Ratio
                 --------------                                       -----
                 (i)        Ending June 30, 2001                      0.80
                 (ii)       Ending September 30, 2001                 1.45
                 (iii)      Ending December 31, 2001                  1.00
                 (iv)       Ending March 31, 2002                     1.00
                 (v)        Ending June 30, 2002                      1.00
                 (vi)       Ending September 30, 2002                 0.85
                 (vii)      Ending December 31, 2002                  1.00
                 (viii)     Ending March 31, 2003                     1.00
                 (ix)       Ending June 30, 2003                      1.00
                 (x)        Ending September 30, 2003                 1.00
                 (xi)       Thereafter                                1.00

                                    (ii) maintain at the end of each Fiscal
Quarter specified below, a ratio of Adjusted Funded Debt (as defined below) to
cumulative EBITDA for the period of four consecutive Fiscal Quarters ending with
such Fiscal Quarter (calculated on an annualized basis for the first three
Fiscal Quarters indicated) of not greater than the ratio specified below. For
purposes of this financial covenant (A) in relation to each Fiscal Quarter,
"Adjusted Funded Debt" shall mean Funded Debt on the last day of such Fiscal
Quarter, reduced by the aggregate amount of cash received by the Obligors from
General Motors Corporation during the relevant period of five (5) Business Days
after the last day of such Fiscal Quarter, and (B) for the Fiscal Quarters
ending June 30, 2001, September 30, 2001 and December 31, 2001 the EBITDA for
such Fiscal Quarters shall be multiplied by four (4), two (2) and four thirds
(4/3), respectively, to obtain the cumulative EBITDA for such Fiscal Quarters.

                 Fiscal Quarter                                       Ratio
                 --------------                                       -----
                 (i)        Ending June 30, 2001                      3.80
                 (ii)       Ending September 30, 2001                 3.10
                 (iii)      Ending December 31, 2001                  3.45
                 (iv)       Ending March 31, 2002                     3.30
                 (v)        Ending June 30, 2002                      3.00
                 (vi)       Ending September 30, 2002                 3.00

                                     - 52 -
<PAGE>

                 Fiscal Quarter                                       Ratio
                 --------------                                       -----
                 (vii)      Ending December 31, 2002                  2.90
                 (viii)     Ending March 31, 2003                     2.90
                 (ix)       Ending June 30, 2003                      2.90
                 (x)        Ending September 30, 2003                 2.50
                 (xi)       Thereafter                                2.50

                                    (iii) maintain EBITDA of at least
$2,900,000.00 at the end of the Fiscal Quarter ending June 30, 2001, determined
on a cumulating basis for the period of three (3) months ending on that date.

                           (i) Negative Financial Covenants. Such Obligor shall
not, and shall not permit any of its subsidiaries to do any of the following:

                                    (i) incur expenses under or relating to any
Operating Lease (understood to mean any lease other than a Capital Lease) if, as
a result of such incurrence, the aggregate obligations with respect to Operating
Leases of the Obligors during any Fiscal Year would exceed $3,600,000;

                                    (ii) contract for, purchase, make
expenditures for, lease pursuant to a Capital Lease or otherwise incur
obligations with respect to Capital Expenditures (whether subject to a security
interest or otherwise) if, as a result, the aggregate of Capital Expenditures
for the Obligors during any period specified below would exceed the amount set
forth below for such period:

                                    (A)     $6,500,000.00 for the 2001 Fiscal
                                            Year; and
                                    (B)     $7,000,000.00 for each Fiscal Year
                                            thereafter;

provided that, if the aggregate amount of the Capital Expenditures made by the
Obligors in a Fiscal Year is less than the amount permitted above in this
provision, up to $750,000 of the difference shall automatically be added to the
amount specified above as the maximum permitted for the following Fiscal Year;
or

                                    (iii) for any Fiscal Quarter ended on or
after June 30, 2001, permit Net Worth to be less than the Net Worth for the
immediately preceding Fiscal Quarter by an amount in excess of the amount
specified below in relation to such Fiscal Quarter:

                 Fiscal Quarter                                       Amount
                 --------------                                       ------
                 (i)        Ending June 30, 2001                      $12,500,00
                 (ii)       Ending September 30, 2001                 $10,800,00
                 (iii)      Ending December 31, 2001                  $12,200,00
                 (iv)       Ending March 31, 2002                     $11,350,00
                 (v)        Ending June 30, 2002                      $11,000,00
                 (vi)       Ending September 30, 2002                 $12,100,00
                 (vii)      Ending December 31, 2002                  $11,600,00
                 (viii)     Ending March 31, 2003                     $10,700,00

                                     - 53 -
<PAGE>

                 Fiscal Quarter                                       Amount
                 --------------                                       ------
                 (ix)       Ending June 30, 2003                      $10,100,00
                 (x)        Ending September 30, 2003                 $11,000,00
                 (xi)       Ending after September 30, 2003           $11,000,00

                           (j) Other Negative Covenants. Such Obligor shall not,
and shall not permit its subsidiaries to, do any of the following, except as
otherwise expressly permitted in this Financing Agreement:

                                    (i) Mortgage, assign, pledge, transfer or
otherwise permit any Lien, charge, security interest, encumbrance or judgment
(whether as a result of a purchase money or title retention transaction, or
other security interest, or otherwise), to exist on any of the Collateral or any
other assets, whether now owned or hereafter acquired, of such Obligor or
subsidiary, except for the Liens granted herein and in the other Loan Documents
and for Permitted Encumbrances;

                                    (ii) Enter into, or permit any subsidiary to
enter into, any Hedging Agreement, or incur or create any Indebtedness other
than the Permitted Indebtedness;

                                    (iii) Except for Permitted Asset Transfers,
sell, lease, assign, transfer or otherwise dispose of any of its assets or any
beneficial interest therein or, in the case of any capital stock owned by an
Obligor, in any way relinquish control over any related voting power except
pursuant to the Security Documents and the Senior Lien Financing Documents (as
such documents are in effect on the date hereof);

                                    (iv) Except with respect to the transfer of
Pledged Stock of one Obligor to another and except for a Permitted Liquidation,
merge, amalgamate, consolidate or otherwise alter or modify their respective
corporate names, principal places of business, structure, or existence,
re-incorporate or re-organize, or enter into or engage in any operation or
activity materially different from that presently being conducted by such
Obligor (or such subsidiary), except that (A) an Obligor may change its
corporate name or address, or (B) a Company may merge or amalgamate with and
into any other Company or a Guarantor may merge or amalgamate with or into any
other Guarantor (other than the Inactive Guarantor) or Company (provided that a
Company is the survivor of such merger or amalgamation), provided that: (i) in
any such instance under clause (A) or (B) above, Harvard shall give the Lender
thirty (30) days' prior written notice thereof; and (ii) the relevant Obligors
shall execute and deliver, prior to or simultaneously with any such action, any
and all documents and agreements reasonably requested by the Lender to confirm
the continuation and preservation of all security interests and Liens granted to
the Lender hereunder or under any other Loan Document;

                                    (v) Assume, guarantee, endorse, or otherwise
become liable upon the obligations of any Person (other than any obligation of
another Obligor which such Obligor is permitted hereunder to incur), except by
the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business for any Obligations under the
Loan Documents and the Senior Lien Financing Documents or otherwise permitted
herein;

                                     - 54 -
<PAGE>

                                    (vi) Declare or pay any dividend or
distributions of any kind on, or purchase, acquire, redeem or retire, any
capital stock or equity interest, of any class whatsoever, whether now or
hereafter outstanding, except that the Obligors may declare and pay dividends or
distributions on their capital stock, (A) in the case of Obligors other than
Harvard, to Harvard or any other Obligor that, directly or indirectly, is a
wholly owned subsidiary of Harvard, and, (B) in the case of Harvard, in an
amount sufficient to enable Harvard to (i) redeem the capital stock owned by its
retired, deceased or terminated officers or shareholders which Harvard is
contractually obligated to redeem, provided that in no event shall the aggregate
amount of such dividends under this clause (i), exceed $100,000.00 in the
aggregate in any Fiscal Year, provided, further, that, such redemptions may be
made only if (x) no Default or Event of Default has occurred hereunder, (y)
after giving effect to such redemption, no Default and/or Event of Default has
occurred or would occur hereunder and (z) the Obligor making such redemption has
sufficient Working Capital to pay its debts as they come due; or (ii) pay income
or franchise Taxes of the Obligors due as a result of the filing of a
consolidated, combined or unitary tax return in which the operations of any of
the Obligors are included;

                                    (vii) Except with respect to advances or
loans to or investments in other Obligors and advances in respect of travel
expenses to directors, officers and employees in the ordinary course of
business, make any advance or loan to, or any investment in, any Person or
purchase or acquire all or substantially all of the stock or assets of any
Person, provided, however, with respect to loans to other Obligors, a promissory
note in form and substance satisfactory to the Lender shall, on the date such
loan is made, be delivered to the Senior Lien Administrative Agent (or, after
the Senior Lien Obligations are paid in full, the Lender); and provided,
further, that the aggregate outstanding principal amount of all advances made by
the Obligors to directors, officers and employees in respect of travel expenses
shall not at any time exceed $100,000;

                                    (viii) Pay any management, consulting or
other similar fees to any Person affiliated with any Obligor other than a
guarantee fee payable to the Guarantors for the Guaranty in Section 14 hereof or
Section 17 of the Senior Lien Financing Agreement or any other guaranty
permitted under this Financing Agreement;

                                    (ix) Intentionally omitted.

                                    (x) Permit any change in accounting
treatment or reporting practices of such Obligor, except as required by
applicable GAAP or as permitted by applicable GAAP existing on the Closing Date
and as otherwise permitted by this Financing Agreement;

                                    (xi) Prepay, redeem, purchase, defease,
exchange or repurchase any debt (other than the Term Loan and any loan under the
Senior Lien Financing Agreement) (as such agreement is in effect on the date
hereof) or amend or modify any of the terms of any such debt or other similar
agreements entered into by such Obligor or its subsidiaries;

                                    (xii) Except with respect to loans or
investments permitted under clause (vii) of this Paragraph 7.2(j), enter into
any transaction, including, without limitation, any purchase, sale, lease, loan
or exchange of property with any subsidiary or affiliate of any of the Obligors,
provided that, except as otherwise set forth in this Financing Agreement, the
Obligors

                                     - 55 -
<PAGE>

or any one of them may enter into sale and service transactions in the ordinary
course of their business and pursuant to the reasonable requirements of any such
Obligor, provided that any such transaction involving the price paid by an
Obligor in any such sale of Inventory is no greater than the prevailing market
price therefor or the price that could be obtained in a comparable arms' length
transaction with an unrelated third party, provided further that no Default or
Event of Default exists or will occur hereunder prior to and after giving effect
to any such transaction;

                                    (xiii) use the proceeds of the Term Loan to
purchase or carry margin stock (as defined in Regulation U of the Federal
Reserve Board) or to extend credit to others for the purpose of purchasing or
carrying any margin stock (as so defined) in violation of Regulation T, U or X
of the Federal Reserve Board; or permit the aggregate value of margin stock (as
so defined) at any time owned or held by such Obligor or any of its subsidiaries
to exceed an amount equal to 25% of the value of all consolidated assets subject
at such time to any "arrangement" (as such term is used in the definition of
"indirectly secured" in Section 221.2 of Regulation U of the Federal Reserve
Board);

                                    (xiv) amend, modify or waive, or request an
amendment, modification or waiver of any provision of the Senior Lien Financing
Agreement (including, without limitation, with respect to the due dates of or a
decrease in the amounts of any principal payments in respect of the term loans
or a waiver of any event of default thereunder as a result of the failure of the
Companies to make any payment of principal in respect of any term loan when due)
or any other Senior Lien Financing Document (except for any such amendment to
correct a manifest error);

                                    (xv) permit the outstanding principal amount
of all loans and letters of credit under the Senior Lien Financing Agreement to
exceed the sum of (A) Maximum Senior Lien Borrowing Base Debt and (B)
$20,000,000 as reduced from time to time by scheduled principal payments and
prepayments of the term loans as set forth in the Senior Lien Financing
Agreement (as such agreement is in effect on the date hereof);

                                    (xvi) permit (A) the outstanding principal
amount of the Term Loan (without giving effect to interest that is capitalized
or paid in kind) to exceed (B) the difference between (x) eighty-five percent
(85%) of the orderly liquidation value of the Companies' Eligible Equipment at
such time, as such orderly liquidation value is determined by an independent
third party appraiser acceptable to the Lender and (y) the sum of (1) the
outstanding principal amount of the term loans under the Senior Lien Financing
Agreement plus (2) the Availability Reserves (the amount by which the amount of
clause (A) above exceeds the amount of clause (B) above is hereafter referred to
as the "Borrowing Base Excess"), provided that, if any Borrowing Base Excess
exists, the Companies shall, immediately upon the occurrence of such Borrowing
Base Excess, take the following actions in the following order:

                                             (1) prepay the outstanding
                           principal amount of the term loans under the Senior
                           Lien Financing Agreement in the amount of the
                           Borrowing Base Excess; and

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<PAGE>

                                             (2) prepay the Term Loan in the
                           amount of the Borrowing Base Excess;

Each such prepayment under clause (1) above shall be applied first to prepay the
principal installments of the term loan B under the Senior Lien Financing
Agreement in the inverse order of maturities until the obligations of the
Companies in respect of such term loan B have been repaid-in-full and second to
prepay the principal installments of the term loan A under the Senior Lien
Financing Agreement in the inverse order of maturities until the obligations of
the Companies in respect of such term loan A have been repaid-in-full.

                                    (xvii) permit (A) the sum of (x) the
outstanding principal amount of the Term Loan (without giving effect to interest
that is capitalized or paid in kind), (y) the outstanding aggregate principal
amount of all loans under the Senior Lien Financing Agreement and (z) the
undrawn amount of all letters of credit issued under the Senior Lien Financing
Agreement to exceed (B) the difference between (x) the sum of (1) the Maximum
Senior Lien Borrowing Base Debt plus (2) the Borrowing Base and (y) the
Availability Reserves (the amount by which the amount of clause (A) above
exceeds the amount of clause (B) above is hereafter referred to as the "Combined
Borrowing Base Excess"), provided that, if any Combined Borrowing Base Excess
exists, the Companies shall, immediately upon the occurrence of such Combined
Borrowing Base Excess, take the following actions in the following order:

                                             (1) prepay the term loans
                           outstanding under the Senior Lien Financing Agreement
                           in the amount of such Combined Borrowing Base Excess;

                                             (2) prepay the revolving loans
                           outstanding under the Senior Lien Financing Agreement
                           in the amount of such Combined Borrowing Base Excess;

                                             (3) cash collateralize the undrawn
                           amount of the letters of credit outstanding under the
                           Senior Lien Financing Agreement in the amount of such
                           Combined Borrowing Base Excess; and

                                             (4) prepay the Term Loan in the
                           amount of such Combined Borrowing Base Excess;

Each such prepayment under clause (1) above shall be applied ratably first to
prepay the principal installments of the term loan B under the Senior Lien
Financing Agreement in the inverse order of maturities until the obligations of
the Companies in respect of such term loan B have been repaid-in-full and second
to prepay the principal installments of the term loan A under the Senior Lien
Financing Agreement in the inverse order of maturities until the obligations of
the Companies in respect of such term loan A have been repaid-in-full.

                                    (xviii) permit Senior Lien Availability less
Availability Reserves to be less than $5,000,000.00 at any time after the
Closing Date, it being understood that such requirement contemplates that all
debts, obligations, taxes and dividends shall be current, and that all payables
shall be handled in the normal course of the Obligors' business and consistent
with their past practice.

                                     - 57 -
<PAGE>

                           (k) Inventories, Appraisals, and Field Examinations.

                                    (i) The Obligors, at their own expense,
shall cause not less than one (1) physical inventory to be undertaken in each
twelve (12) month period during which this Financing Agreement is in effect
which shall be conducted by such inventory takers and following such methodology
as is consistent with the Obligors' past practices.

                                             (A) Harvard shall provide the
Lender with a copy of the preliminary results of each such inventory (as well as
of any other physical inventory undertaken by any Obligor) within ten (10) days
following the completion of such inventory.

                                             (B) Harvard shall provide the
Lender with a reconciliation of the results of each such inventory (as well as
of any other physical inventory undertaken by any Obligor) within thirty (30)
days following the completion of such inventory, and shall post such results to
the Obligors' stock ledger and, as applicable, to the Obligors' other financial
books and records.

                                             (C) Upon the occurrence and during
the continuance of a Default or an Event of Default, the Lender may, at the
expense of the Obligors, cause such additional inventories to be taken as the
Lender may determine in its discretion.

                                    (ii) The Lender shall obtain appraisals of
the Collateral from time to time (in all events, at the Obligors' expense),
conducted by such appraisers as are satisfactory to the Lender, including,
without limitation, desktop appraisals and full appraisals of the Collateral.
The Obligors agree to cooperate with and provide information relating to the
Collateral reasonably requested by each of the appraisers engaged by the Lender
to conduct the appraisals of the Collateral.

                                    (iii) The Lender shall conduct four (4)
commercial finance field examinations (in each event, at the Obligors' expense)
of the Obligors' books and records during each twelve (12) month period during
which this Financing Agreement is in effect, provided that upon the occurrence
and during the continuance of a Default or an Event of Default, the Lender may,
at the expense of the Obligors, undertake such additional field examinations as
the Lender may determine in its discretion.

                                    (iv) The Obligors, at their own expense,
shall arrange for a Phase I environmental assessment, by a consultant
satisfactory to the Lender, with respect to the properties and operations of the
Obligors, from time to time as requested by the Lender or shall permit the
Lender to arrange for such assessments, and copies of the results of such
assessments shall be delivered to the Lender upon request. The Obligors shall
cooperate with the conduct of the assessments and arrange for consultations
between the consultant and the Lender during the conduct of such assessments.

                           (l) Reports. Harvard shall advise the Lender in
writing of each of the following promptly upon learning of the relevant event,
circumstance or condition:

                                    (i) all expenditures (actual or anticipated)
in excess of $150,000.00 from the budgeted amount therefor in any Fiscal Year
for (x) environmental clean-

                                     - 58 -
<PAGE>

up, (y) environmental compliance or (z) environmental testing and the impact of
said expenses on such Obligor's Working Capital;

                                    (ii) (A) any notices such Obligor and each
of its subsidiaries receives from any local, state, provincial or federal
authority advising such Obligor or any of its subsidiaries of any environmental
liability (real or potential) arising from any of such Person's operations,
premises, waste disposal practices, or waste disposal sites used by any such
Person that could result in a Material Adverse Effect, together with copies of
all such notices if so required, and (B) any formal notice, violation, order or
service of any lawsuit which contains an allegation of a violation of an
Environmental Law or responsibility for any environmental remedial liabilities
that could result in a Material Adverse Effect, together with copies of all such
notices if so required.

                                    (iii) any material labor dispute to which
such Obligor or any of its subsidiaries may become a party and which involves
any group of employees, any strikes or walkouts relating to any of its
facilities and the expiration or termination of any labor contract to which such
Obligor or subsidiary is a party or by which such Obligor or subsidiary is
bound, if the dispute could reasonably be expected to materially disrupt the
operations of such Obligor or subsidiary;

                                    (iv) any Obligor or ERISA Affiliate knows or
has reason to know that any ERISA Event has occurred or exists, (y) any Single
Employer Plan (other than the Doehler-Jarvis Plan) subject to Title IV of ERISA
has any Unfunded Pension Liabilities or (z) the Doehler-Jarvis Plan has Unfunded
Pension Liabilities in excess of $10,000,000.00;

                                    (v) receipt by any Obligor or ERISA
Affiliate from the PBGC of any notice of the PBGC's intention to terminate any
Single Employer Plan or to have a trustee appointed to administer such Plan;

                                    (vi) any notice is given or required to be
given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure of any
Obligor or ERISA Affiliate to make timely payments to a Plan;

                                    (vii) receipt by any Obligor or ERISA
Affiliate, from a Multiemployer Plan sponsor, of any notice concerning (a) the
imposition of Withdrawal Liability by a Multiemployer Plan, (b) the
determination that a Multiemployer Plan is, or is expected to be, in
reorganization or insolvent within the meaning of Title IV of ERISA, (c) the
termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or
(d) the amount of liability incurred, or which may be incurred, by such Obligor
or ERISA Affiliate in connection with any event described in clause (a), (b) or
(c) above;

Each notice pursuant to this Paragraph 7.2(l) shall be accompanied by a
statement of an Authorized Officer setting forth details of the occurrence
referred to therein and stating what action the relevant Obligor or subsidiary
has taken or proposes to take with respect thereto. For the purposes of this
Paragraph 7.2(l), an Obligor shall be deemed to have knowledge when any officer
of such Obligor charged with responsibility for any matter that is the subject
of such notice requirement knows that such notice was required.

                                     - 59 -
<PAGE>

                           (m) RICO. Each Obligor shall comply, and cause each
of its subsidiaries to comply with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, compliance with the
Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970.

                           (n) Perform Obligations. Each Obligor shall perform,
and cause each of its subsidiaries to perform, its respective obligations under
the Loan Documents, and its material obligations under other material agreements
(it being understood that any obligation under any such other agreement will be
deemed material if its nonperformance could reasonably be expected to have a
Material Adverse Effect or result in a Material Adverse Change).

                           (o) Maintain Existence, Structure and Licenses.
Except for a Permitted Liquidation or as permitted by Paragraph 7.2(j)(iv) of
this Section 7, each Obligor shall preserve and maintain, and cause each of its
subsidiaries to preserve and maintain, its existence, legal structure, legal
name, rights (charter and statutory), and all permits, licenses, approvals,
privileges and franchises used or useful in the conduct of its business.

                           (p) Use of Proceeds. Each Company shall use, and
cause each of its subsidiaries to use the proceeds of the Term Loan and the
proceeds of the loans contemplated in the Senior Lien Financing Agreement for
the sole purposes of (i) repaying the Indebtedness incurred and paying the other
amounts owing under Existing Credit Agreements, (ii) paying transaction costs,
fees and expenses incurred hereunder and under the Senior Lien Financing
Agreement, (iii) providing Working Capital from time to time for the Companies
and their subsidiaries and (iv) other general corporate purposes.

                           (q) Additional Obligors. Each Obligor shall cause
each entity that becomes a subsidiary of such Obligor after the date of this
Financing Agreement, if such subsidiary is organized in the United States, to
become a joint and several obligor as a Company hereunder in respect of the
Obligations, or, if such subsidiary is organized outside the United States, to
become a joint and several obligor as a Guarantor in respect of the Guaranty
Obligations and, in each case, cause such subsidiary to secure its obligations
in the relevant capacity referred to above by executing and delivering to the
Lender, an amendment to this Financing Agreement and all other Loan Documents,
to the extent determined by Lender to be necessary or desirable to implement the
intent of this subparagraph. All such amendments shall be in form and substance
satisfactory to the Lender.

                           (r) Canadian Real Estate Title Insurance. Trim Trends
shall deliver, on or before June 5, 2001, the title insurance policy in respect
of the Canadian Debenture, which title insurance policy shall satisfy the
criteria set forth in Paragraph 2.1(u) of Section 2 hereof and shall otherwise
be in form and substance satisfactory to the Lender.

                  7.3 Covenants Involving Accounts and Inventory. (a) In
furtherance of the continuing assignment and security interest by each Obligor
in such Obligor's Accounts and Inventory in favor of the Lender as security for
the Obligations, in the case of the Companies, or as security for the Guaranty
Obligations, in the case of the Guarantors, each of the Obligors will, upon the
creation of Accounts and purchase or acquisition of Inventory, execute and
deliver to the Lender in such form and manner as the Lender may reasonably
require, solely for the

                                     - 60 -
<PAGE>

Lender's convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts and Inventory as the Lender may reasonably request,
including, without limitation, weekly schedules of Accounts and monthly
schedules of Inventory, all in form and substance satisfactory to the Lender,
and such other appropriate reports designating, identifying and describing the
Accounts and Inventory as the Lender may reasonably request, and provided
further that the Lender may request any such information more frequently, from
time to time, upon its reasonable prior request.

                           (b) In addition, upon the Lender's request, each of
the Obligors shall provide the Lender with copies of agreements with, or
purchase orders from, such Obligor's customers, and copies of invoices to
customers, proof of shipment or delivery, access to their computers, electronic
media and software programs associated therewith (including any electronic
records, contracts and signatures) and such other documentation and information
relating to said Accounts and other Collateral as the Lender may reasonably
require. Failure to provide the Lender with any of the foregoing shall in no way
affect, diminish, modify or otherwise limit the security interests granted
herein. Each of the Obligors hereby authorizes the Lender to regard the printed
name or rubber stamp signature of such Obligor on assignment schedules or
invoices as the equivalent of a manual signature by an Authorized Officer or
agent of such Obligor.

                           (c) Each of the Obligors agrees to maintain such
books and records regarding Accounts and Inventory as the Lender may reasonably
require and agrees that the books and records of such Obligor will reflect the
Lender's interest in the Accounts and Inventory of such Obligor. Each Obligor
shall make all of the books and records of such Obligor available to the Lender
at normal business hours, including any records handled or maintained for such
Obligor by any other company or entity.

                  7.4 Representations Regarding Accounts and Inventory. Each of
the Obligors hereby represents and warrants to the Lender that: each Trade
Account Receivable of such Obligor is based on an actual and bona fide sale and
delivery of Inventory or rendition of services to their respective customers,
and any other Account of such Obligor is bona fide, made by such Obligor in the
ordinary course of its business; the Inventory of such Obligor being sold, and
Trade Accounts Receivable created, are the exclusive property of such Obligor
and are not and shall not be subject to any Lien, consignment arrangement,
encumbrance, security interest or financing statement whatsoever, other than the
Permitted Encumbrances; the invoices evidencing such Trade Accounts Receivable
are in the name of such Obligor, and the customers of the relevant Obligor have
accepted the Inventory or services, owe and are obligated to pay the full
amounts stated in the invoices according to their terms, without dispute,
offset, defense, counterclaim or contra, except for disputes and other matters
arising in the ordinary course of business with respect to which such Obligor
has complied with the notification requirements of Paragraph 7.6 of this Section
7. Each Obligor confirms to the Lender that any and all Taxes or fees relating
to its business, its sales, or the Accounts or Inventory relating thereto, are
their sole responsibility and that same will be paid by such Obligor when due,
subject to Paragraph 7.2(e) of this Section 7, and that none of said Taxes or
fees represents a Lien on or claim against the Accounts. Each of the Obligors
hereby further represents and warrants to the Lender that such Obligor shall not
acquire any Inventory on a consignment basis, nor co-mingle its Inventory with
any inventory of any of its customers or any other Person (other than Inventory
of another

                                     - 61 -
<PAGE>

Obligor which constitutes Collateral), including pursuant to any bill and hold
sale or otherwise, and that such Obligor's Inventory is marketable to its
customers in the ordinary course of business of such Obligor, except as such
Obligor may otherwise report in writing to the Lender pursuant to Paragraph 7.6
of this Section 7 from time to time.

                  7.5 Matters Relating to Accounts. (a)(i) Until the Lender has
advised the Obligors to the contrary after the occurrence of an Event of
Default, the Obligors, at their own expense, will enforce, collect and receive
all amounts owing on their respective Accounts in the ordinary course of their
business and any proceeds they so receive shall be subject to the terms hereof,
and held on behalf of and in trust for the Lender and the Senior Lien
Administrative Agent on behalf of the Senior Lien Lenders and the Senior Lien
Issuing Bank. Such privilege shall terminate at the election of the Lender, upon
the occurrence of an Event of Default, and until such Event of Default is waived
in writing by the Lender or cured to the Lender's satisfaction.

                                    (ii) Each Obligor shall ensure that any
checks, cash, credit card sales and receipts, notes or other instruments or
property received by such Obligor with respect to any Collateral, including
Accounts, shall be held by such Obligor in trust for the Lender and the Senior
Lien Administrative Agent, on behalf of the Senior Lien Lenders, separate from
such Obligor's own property and funds, and promptly turned over to the Senior
Lien Administrative Agent with proper assignments or endorsements by deposit to
the Depository Account (or, after the Senior Lien Obligations have been paid in
full, to the Lender or as the Lender may direct), subject to subparagraph (c) of
this Paragraph 7.5, where Trim Trends is concerned.

                                    (iii) The Companies shall provide the Lender
with prior written notice of any and all deposit accounts opened or to be opened
subsequent to the Closing Date.

                           (b) Establishment of Blocked Accounts. (i) The
Obligors shall establish and maintain, in their name and at their expense, the
deposit accounts, including the Canadian Deposit Account, with such banks as are
acceptable to the Senior Lien Administrative Agent and the Lender (the "Blocked
Accounts") into which each of the Obligors shall promptly cause to be deposited:
(i) all proceeds of Collateral received by any of the Obligors, including all
amounts payable to the Obligors from credit card issuers and credit card
processors, and (ii) all amounts on deposit in deposit accounts used by the
Obligors at each of their locations, all as further provided in Paragraph 7.5(a)
above.

                                    (ii) The Obligors shall cause each of the
banks at which any of the Blocked Accounts is established to enter into an
agreement, in form and substance satisfactory to the Senior Lien Administrative
Agent and the Lender (the "Blocked Account Agreements"), which Blocked Account
Agreements shall (x) be assignable by the Senior Lien Administrative Agent to
the Lender upon payment in full of all Senior Lien Obligations and (y) provide
that the depository bank has no Lien upon, or right of set off against, the
Blocked Accounts and (z) otherwise comply with the terms of this Financing
Agreement and the Senior Lien Financing Agreement (as such agreement is in
effect on the date hereof). The Obligors shall deposit into the Blocked Accounts
all checks, cash, credit card sales and receipts, notes or other instruments or
property received by them in accordance with the Senior Lien Financing Agreement
(as such agreement is in effect on the date hereof).

                                     - 62 -
<PAGE>

                  7.6 Reports Involving Accounts and Related Matters. The
Obligors shall notify the Lender: (a) of any matters affecting the value,
enforceability or collectibility of any Account and of all customer disputes,
offsets, defenses, counterclaims, returns, rejections and all reclaimed or
repossessed merchandise or goods, and of any adverse effect in the value of
their Inventory, in their weekly and monthly collateral reports (as applicable)
provided to the Lender hereunder, in such detail and format as the Lender may
reasonably require from time to time and (b) promptly of any such matters which
are material, as a whole, to the Accounts and/or the Inventory. The Obligors
agree to issue credit memoranda promptly (with duplicates to the Lender upon
request after the occurrence of an Event of Default) upon accepting returns or
granting allowances. Upon the occurrence of an Event of Default (which is not
waived in writing by the Lender or cured to the satisfaction of the Lender) and
on notice from the Lender, the Obligors agree to ensure that all returned,
reclaimed or repossessed merchandise or goods shall be set aside by the
Obligors, marked with the Senior Lien Administrative Agent's and the Lender's
names (as secured parties) and held by the Obligors for the account of the
Lender and the Senior Lien Administrative Agent.

                  7.7 Indemnification. (a) Each of the Companies hereby, jointly
and severally, agrees to indemnify and hold harmless the Lender and each of its
affiliates and each of its officers, directors, employees, attorneys and agents
(each an "Indemnified Party") from and against any and all claims, damages,
losses, liabilities, obligations, any payments made or required to be made by
the Lender pursuant to any indemnity provided by the Lender and reasonable
expenses (including, without limitation, reasonable fees and disbursements of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party (including, without limitation, in connection with or by reason of (a)
this Financing Agreement, (b) the other Loan Documents or any of the
transactions contemplated thereby, (c) the Loan Account or any deposit account
and/or the agreements executed in connection therewith; and (d) any violation or
alleged violation of any Environmental Law by any Obligor or any of its
subsidiaries; or any claim or expense which results from any Obligor's or any of
its subsidiaries' operations, or from the release or threatened release at, to,
or from any Real Estate of any Contaminants, or remedial action (as defined
under the Comprehensive, Environmental Response, Compensation and Liability Act,
42 U.S.C.A ss. 9601 et seq., or any equivalent state, local or foreign law) or
corrective action (as this term is used in Section 3004(u), 3004(v), and 3008(h)
of the Resource Conservation and Recovery Act or any equivalent state, local or
foreign law), and (e) any other matter relating to or arising in connection with
this Financing Agreement or any of the other Loan Documents or any part of the
Collateral, which such Indemnified Party may sustain or incur, all whether
through the alleged or actual negligence of such Person or otherwise, except and
to the extent that the same results solely and directly from the gross
negligence or willful misconduct of such Indemnified Party, as finally
determined in a non-appealable judgment by a court of competent jurisdiction.
The Companies hereby agree that this indemnity shall survive termination of this
Financing Agreement, as well as payments of the Obligations and the Guaranty
Obligations which may be due hereunder. The Lender may, in its sole business
judgment, establish such Availability Reserves with respect to the indemnities
provided for in this Paragraph 7.7 as it may deem advisable under the
circumstances. In the case of an investigation, litigation or other proceeding
to which the indemnity in this paragraph applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by any of the Obligors, any of their respective directors, securityholders or
creditors, an Indemnified Party or any other Person, or an Indemnified Party is
otherwise a party

                                     - 63 -
<PAGE>

thereto and whether or not the transactions contemplated by the Loan Documents
are consummated. The Obligors further agree that no Indemnified Party shall have
any liability (whether direct or indirect, in contract, tort or otherwise) to
any of the Obligors or any of their respective securityholders or creditors for
or in connection with the transactions contemplated by the Loan Documents,
except for direct damages (as opposed to special, indirect, consequential or
punitive damages (including, without limitation, any loss of profits, business
or anticipated savings) that are determined in a final non-appealable judgment
by a court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct.

                           (b) Each of the Companies hereby indemnifies the
Lender and holds the Lender harmless from any and all costs, expenses, claims,
liabilities, Out-of-Pocket Expenses or otherwise, incurred or imposed on the
Lender by reason of the exercise of any of its rights, remedies and interests
hereunder, including, without limitation, from any sale or transfer of
Collateral, preserving, maintaining or securing the Collateral, defending its
interests in Collateral (including pursuant to any claims brought by the
Companies, any of the Companies as debtor-in-possession, the Senior Lien Lenders
or any other secured or unsecured creditors of any of the Companies or
Guarantors, any trustee or receiver in bankruptcy, or otherwise) or dealing with
any of the Collateral as provided in the Loan Documents or the Intercreditor
Agreement (or any claim brought against the Lender by the Senior Lien Lenders in
respect of any of the foregoing), and the Companies hereby agree to so indemnify
and hold the Lender harmless, absent the Lender's gross negligence or willful
misconduct as finally determined in a non-appealable judgment by a court of
competent jurisdiction. The foregoing indemnification shall survive termination
of this Financing Agreement until such time as all Obligations (including the
foregoing) have been fully, finally and indefeasibly paid in full. In
furtherance thereof the Lender may establish such reserves for Obligations
hereunder (including any contingent Obligations) as it may deem advisable in its
reasonable business judgment.

         SECTION 8. Interest, Fees and Expenses Involving Obligations

                  8.1 Term Loan. (a) Interest on the principal amount of the
Term Loan shall be payable monthly as of the end of each month on the unpaid
balance or on payment in full prior to maturity and shall accrue at a rate per
annum for each day in the relevant month equal to the sum of (i) the greater of
(A) the sum of the Base Rate for such day plus seven percent (7%) per annum and
(B) fifteen percent (15%) per annum and (ii) four percent (4%) per annum;
provided, however, that interest on the principal amount of the Term Loan at a
per annum rate equal to four percent (4%) shall, in the absence of a continuing
Event of Default or an election by Harvard on behalf of the Companies to pay
such interest in cash as provided above, be paid by capitalizing such interest
and adding such capitalized amount to the then outstanding principal amount of
the Term Loan. Any such interest to be capitalized shall be capitalized on each
Anniversary Date and added to the then outstanding principal amount of the Term
Loan and thereafter shall bear interest as provided hereunder as if it had
originally been part of the outstanding principal of the Term Loan. The Lender
shall be entitled to charge the Loan Account at the rate provided for herein
when due until all Obligations have been paid in full.

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                           (b) Upon and after the occurrence of an Event of
Default and the giving of any required notice by the Lender in accordance with
the provisions of Paragraph 10.2 of Section 10 hereof, all Obligations shall
bear interest at the Default Rate of Interest.

                           (c) All interest and fees under this Financing
Agreement shall be calculated based on a 360 day year.

                           (d) All payments and prepayments of principal made
pursuant to this Financing Agreement shall be accompanied by accrued interest on
the principal amount being payed or prepaid to the date of payment or
prepayment, and if such payment or prepayment would reduce the outstanding
principal amount of the Term Loan to zero, such payment or prepayment shall be
accompanied by the payment of all fees accrued to such date pursuant to this
Financing Agreement.

                  8.2 Other Expenses. Each of the Companies shall reimburse or
pay the Lender for (a) all Out-of-Pocket Expenses, (b) an audit fee in the
amount of $750.00 per person per day or such higher amount as at the time is
being charged by the Lender or the agent or agents used by it for the purpose,
for each person who, for or at the request of the Lender, is engaged in
appraising, valuing, inspecting or monitoring the Collateral from time to time
hereunder, and (c) reasonable fees and costs incurred in connection with the
enforcement and protection of the rights of the Lender under this Financing
Agreement or any other Loan Document, including the protection of the rights of
the Lender in any bankruptcy, reorganization, liquidation or insolvency
proceeding, whether or not litigation is commenced.

                  8.3 Commitment Fee. On the Closing Date, the Companies shall
pay to the Lender, to the extent not previously paid in accordance with the
Commitment Letter, a non-refundable commitment fee (the "Commitment Fee") in the
amount of $300,000.00, which Commitment Fee shall be deemed fully earned when
paid.

                  8.4 Closing Fee. On the Closing Date, the Companies shall pay
to the Lender a non-refundable closing fee (the "Closing Fee") in the amount of
$100,000.00, which Closing Fee shall be deemed fully earned when paid.

                  8.5 Anniversary Fee. On each Anniversary Date (including the
Maturity Date), the Companies shall pay to the Lender a non-refundable
anniversary fee (the "Anniversary Fee") in the amount of $250,000.00, and each
Anniversary Fee shall be deemed fully earned on the Closing Date, provided that
to the extent not already paid, each Anniversary Fee shall be paid on the date
on which all Obligations are paid in full.

                  8.6 Facility Fee. On each of the second Anniversary Date and
the Maturity Date, the Companies shall pay to the Lender a non-refundable
facility fee (the "Facility Fee") in the amount of $500,000.00, and each
Facility Fee shall be deemed fully earned on the Closing Date, provided that to
the extent not already paid, each Facility Fee shall be paid on the date on
which all Obligations are paid in full.

                  8.7 Success Fee. Upon the earliest to occur of (i) the
payment-in-full of all Obligations, (ii) the Maturity Date or (iii) the sale of
all or substantially all of the assets of Hayes Albion or Trim Trends, the
Companies shall pay to the Lender a non-refundable success fee (the

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"Success Fee") in the amount of $975,000.00, which Success Fee shall be deemed
fully earned on the Closing Date.

                  8.8 Management Fee. On the Closing Date, and monthly in
advance thereafter on the first day of each calendar month, the Companies shall
pay to the Lender a non-refundable management fee (the "Management Fee") in the
amount of $5,000, which Management Fee shall be deemed fully earned when paid.

                  8.9 Other Charges. The Companies shall pay the Lender's
standard charges and fees for the professionals used by the Lender for reviewing
the books and records of the Companies and for appraising, valuing, examining,
verifying, testing, protecting, safeguarding, preserving or disposing of all or
any part of the Collateral (which fees shall be in addition to any other fees
and Out-of-Pocket Expenses payable by the Companies to the Lender).

                  8.10 Taxes. (a) Each payment by each Obligor under this
Financing Agreement or any other Loan Document shall be made without withholding
on account of any present or future Tax, levy, impost, duty, charge, assessment
or fee of any nature that is imposed by any Governmental Authority or taxing
authority unless withholding is required by applicable law. If applicable law
requires any such withholding by any Obligor, such Obligor shall give notice to
that effect to the Lender, make the necessary withholding and make timely
payment of the amount withheld to the appropriate Governmental Authority. All
amounts so withheld shall be paid before penalties attach thereto or interest
accrues thereon. If any such penalties or interest nonetheless become due, the
Companies shall make prompt payment thereof to the appropriate Governmental
Authority. If the Lender pays any amount in respect of any such Tax, levy,
impost, duty, charge, assessment or fee that is not a net income or net receipts
tax or a franchise tax imposed in lieu of such net income or receipt taxes (each
such non-excluded tax, an "Indemnifiable Tax") which is imposed on any payment
due from any Obligor hereunder or penalties or interest thereon, the Companies
shall reimburse the Lender in U.S. Dollars for that payment on demand. If any
Obligor pays any such Indemnifiable Taxes or penalties or interest thereon, it
shall deliver official tax receipts evidencing the payment or certified copies
thereof to the Lender not later than the thirtieth (30th) day after payment.

                           (b) If the Lender is or becomes entitled to a reduced
withholding rate or a complete exemption from withholding with respect to
Indemnifiable Taxes on payments to it by an Obligor under this Financing
Agreement or any of the other Loan Documents, within [30] days after receipt of
a request from such Obligor, the Lender shall, as promptly as practicable, and
provided that it is not burdensome for it to do so, complete and deliver from
time to time to such Obligor such form as such Obligor is required to obtain
from the Lender in order to give effect to the reduced rate or exemption.

                           (c) If any Indemnifiable Taxes are withheld from a
payment due to the Lender in accordance with this Paragraph 8.10, the Companies
shall promptly pay to the Lender, such additional amount as is necessary to
ensure that the net amount actually received by the Lender free and clear of
those Indemnifiable Taxes is equal to the amount that the Lender would have
received had those Indemnifiable Taxes not been withheld, except that no such
additional amount shall be payable to the extent that the relevant Indemnifiable
Taxes would not have been imposed but for failure by the Lender to comply with
the provisions of Paragraph 8.10(b) hereof. The

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obligation of the Companies to pay these additional amounts shall constitute
Obligations and shall survive the termination of the Lender's Commitment,
repayment of the principal of the Term Loan and payment of all other
Obligations.

                           (d) The Companies shall pay any registration or
transfer taxes, stamp duties or similar levies, and any penalties or interest
that may be due with respect thereto, that may be imposed by any jurisdiction in
connection with this Financing Agreement or the other Loan Documents. If the
Lender pays any amount in respect of any such Taxes, duties, levies, penalties
or interest, the Companies shall reimburse the Lender for that payment on
demand.

                  8.11 Loan Account Charges. Each of the Companies hereby
authorizes the Lender to charge the Loan Account with the amount of all
Obligations due hereunder as such payments become due. The Companies hereby
confirm and agree that they shall promptly pay the Obligations to the Lender
upon its request therefor. Each of the Companies confirms that (i) its liability
for any and all of the fee obligations (including without limitation, those set
forth in Paragraphs 8.3 through 8.9 above) and Out-of-Pocket Expenses, set forth
in this Financing Agreement and in any of the other Loan Documents is joint and
several, (ii) the Companies, as between themselves, shall determine how to
pro-rate any such payments due hereunder, and (iii) for ease of administration,
the Lender may charge the Loan Account with the amount of any such fee payments
and any such charges which the Lender may so make to the Loan Account as herein
provided will be made as an accommodation to the Companies and solely at the
Lender's discretion.

         SECTION 9. Powers Involving Obligations

                  9.1 Power of Attorney. Each Obligor hereby appoints the
Lender, or any person or agent the Lender may designate, as its
attorney-in-fact, at the Obligors' cost and expense, to exercise all of the
following powers, which being coupled with an interest, shall be irrevocable
until all Obligations and Guaranty Obligations have been fully, finally and
indefeasibly paid in full:

                           (a) To receive, take, endorse, sign, assign and
deliver, all in the name of the Lender or the Obligors or any one of them, any
and all checks, notes, drafts, and other documents or instruments relating to
the Collateral;

                           (b) To receive, open and dispose of all mail
addressed to the Obligors or any one of them and to notify postal authorities to
change the address for delivery thereof to such address as the Lender may
designate;

                           (c) To request from customers indebted on Accounts at
any time, in the name of the Lender information concerning the amounts owing on
the Accounts;

                           (d) To request from customers indebted on Accounts at
any time, in the name of the Obligors or any one of them, in the name of
certified public accountant designated by the Lender or in the name of the
Lender's designee, information concerning the amounts owing on the Accounts;

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                           (e) To transmit to customers indebted on Accounts
notice of the Lender's interest therein and to notify customers indebted on
Accounts to make payment directly to the Lender for the Obligors' account;

                           (f) To take or bring, in the name of the Lender or
the Obligors or any one of them, all steps, actions, suits or proceedings deemed
by the Lender necessary or desirable to enforce or effect collection of the
Accounts; and

                           (g) To take and refrain from taking any and all
actions contemplated for it in the Intercreditor Agreement or any Security
Document.

Notwithstanding anything hereinabove contained to the contrary, the powers set
forth in clauses (b), (c), (e) and (f) of this Paragraph 9.1 may only be
exercised after the occurrence of an Event of Default or a Default of a kind
referred to in subparagraph (c) or (g) of Paragraph 10.1 of Section 10 hereof,
and until such time as such Default is remedied or, in the case of any Event of
Default, until such time as it is waived in writing by the Lender, subject to
the following. If, in connection with any such Event of Default, the Lender has
(as provided in Paragraph 10.2) declared all Obligations to be immediately due
and payable (or it has, as contemplated in Section 10 hereof, become so payable
without need for any such declaration), the Lender shall not be limited in the
further exercise of the powers set forth in this Paragraph 9.1, regardless of
any subsequent remedy of any such Event of Default, until all the Obligations
and Guaranty Obligations have been fully, finally and indefeasibly paid.

                  9.2 Waivers. Each Obligor acknowledges that the Obligations or
the Guaranty Obligations, as the case may be, and its joint and several
responsibility for them are those of a principal obligor, and not merely a
surety, and to the fullest extent permitted by applicable law, each Obligor
hereby expressly and irrevocably waives and agrees not to assert against the
Lender:

                                    (i) any right of setoff or counterclaim
which any Obligor may have, against the Obligations or the Guaranty Obligations,
as the case may be;

                                    (ii) any defense that might otherwise be
available to it as a guarantor or surety (other than final payment in full of
the Obligations), and any right to any notice that it might otherwise have, in
connection with any and all of the following: (A) the release of or waiver of
any rights against any other Obligor and the settlement, compromise or release
of any of the Obligations or the Guaranty Obligations, as the case may be; and
(B) failure by the Lender to attempt, or delay by it in attempting, to collect
any of the Obligations or the Guaranty Obligations, as the case may be from any
other Obligor or to realize upon any Collateral.

         SECTION 10. Events of Default and Remedies

                  10.1 Events of Default. Notwithstanding anything hereinabove
to the contrary, the Lender in its sole discretion may, take such actions as are
contemplated in Paragraph 10.2, immediately upon the occurrence of any of the
following (each an "Event of Default"):

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                           (a) cessation of the business of any Obligor or the
calling of a meeting of the creditors of any Obligor, in each case, for purposes
of compromising the debts and obligations of such Obligor;

                           (b) the failure of any Obligor to generally meet its
debts as they mature or its admission of its inability to do so;

                           (c) (i) the liquidation of any Obligor (other than in
a Permitted Liquidation); (ii) the commencement by any Obligor of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal, provincial or state law; (iii) the commencement
against any Obligor of any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding under any federal, provincial or state law by
creditors of such Obligor, which proceeding shall not have been controverted
within forty-five (45) days or shall not have been dismissed and vacated within
sixty (60) days of commencement, or any of the actions sought in any such
proceeding shall occur or any Obligor shall take action to authorize or effect
any of the actions in any such proceeding; or (iv) the commencement (x) by any
of the subsidiaries of any Obligor which itself is not a party hereto, of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceeding under any applicable state or provincial law, or (y) against any
subsidiary of any Obligor, of any involuntary bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceeding under applicable
law, which proceeding shall not have been controverted within forty-five (45)
days and shall not have been dismissed or vacated within sixty (60) days of
commencement, or any of the actions sought in any such proceeding shall occur or
any of the subsidiaries of any Obligor shall take action to authorize or effect
any of the actions in any such proceeding;

                           (d) any warranty or representation of any Obligor set
forth in any of the Loan Documents shall prove to have been incorrect in any
material respect when made or, if applicable, deemed made or repeated
thereunder;

                           (e) any Obligor fails to perform or be in compliance
with any of its covenants or other agreements contained herein, other than those
referred to in subparagraph (f) or subparagraph (g) below, or in any other Loan
Document or other written agreement between such Obligor and the Lender,
provided that such failure of performance or noncompliance by such Obligor of
any of the covenants referred in this subparagraph (e) shall not be deemed to be
an Event of Default unless and until it shall remain unremedied to the Lender's
satisfaction for a period of ten (10) days from the date the failure of
performance or noncompliance occurs;

                           (f) (i) any Obligor fails to perform or be in
compliance with any of its covenants or other agreements set forth in any of the
following provisions: Paragraphs 5.2 and 5.3 of Section 5 hereof, Paragraph 6.3
(other than the second sentence of subparagraph (c) thereof) of Section 6
hereof, subparagraphs (a), (d), (e), (f), (g) (except for clauses (i), (ii) and
(iii) thereof), (h), (i), (j), (k), (l), (m). (p) and (q) of Paragraph 7.2 or
paragraph (a) (other than the second sentence of subclause (i) and the second,
third and fourth sentences of subclause (iv) thereof) of Paragraph 7.5 of
Section 7 hereof; or (ii) this Financing Agreement or any of the Security
Documents fails or ceases for any reason to create a perfected mortgage or
security

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interest in and Lien on any of the Collateral, except as expressly permitted by
this Financing Agreement or any Security Document;

                           (g) failure by any of the Companies to make a
prepayment as and when required in Paragraph 5.2 or Paragraph 5.3 of Section 5
hereof or failure of the Obligors or any one of them to pay any of the
Obligations or the Guaranty Obligations, as the case may be, on the due date
thereof;

                           (h) an event or condition constituting an ERISA Event
or Unfunded Pension Liabilities shall occur or exist with respect to any Plan,
which event or condition could reasonably be expected to have a Material Adverse
Effect;

                           (i) except as expressly permitted in any Loan
Document or in the Intercreditor Agreement, the Obligors or any one of them
shall amend or otherwise modify any of the Senior Lien Obligations or Senior
Lien Financing Documents;

                           (j) the occurrence or existence of any event or
circumstance the effect of which is to cause, or to permit the holder or holders
or beneficiary or beneficiaries of (x) the Senior Lien Obligations or (y) any
other Indebtedness of the Obligors or any one of them (other than the
Obligations and the Guaranty Obligations) having an aggregate principal amount
in excess of $250,000 (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice or the
lapse of time, or both, such Senior Lien Obligations or other Indebtedness to
become due prior to its stated maturity or which constitutes a failure to pay
when due (whether at maturity, by acceleration or otherwise) such an aggregate
amount of such Indebtedness;

                           (k) (i) any of Roger G. Pollazzi, James B. Gray,
Theodore W. Vogtman or J. Vincent Toscano ceases for any reason whatsoever
(other than as a result of death) to be actively engaged in the management of
the Companies or (ii) a Change in Control occurs;

                           (l) General Motors Corporation gives notice that it
proposes to take, or General Motors Corporation takes, any action to exercise
the Rights of Access contemplated in section 3 of any Access and Security
Agreement or any similar right in any similar agreement involving any of the
properties of any of the Obligors;

                           (m) one or more judgments or decrees shall be entered
against one or more of the Obligors (or any subsidiary of any of them that is
not a party to this Financing Agreement) involving in the aggregate a liability
(to the extent not covered by third-party insurance as to which the insurer has
acknowledged coverage) of $50,000 or more and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
thirty (30) days from the entry thereof; or

                           (n) The Inactive Guarantor shall, at any time after
the date of this Financing Agreement, engage in any business or receive any
assets or be involved in any transaction whatsoever other than those incidental
to maintaining its existence and compliance with the Loan Documents and the
Senior Lien Financing Documents (as such documents are in effect on the date
hereof) or its own orderly liquidation and dissolution.

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                  10.2 Remedies Upon an Event of Default. Upon the occurrence of
an Event of Default, the Lender in its sole discretion may:

                                    (i) declare that all Obligations are
immediately due and payable; provided, however, that upon the occurrence of an
Event of Default listed in Paragraph 10.1(c) of this Section 10, all Obligations
shall become due and payable, without any action, declaration, notice or demand
by the Lender; and

                                    (ii) charge the Companies the Default Rate
of Interest on all then outstanding or thereafter incurred Obligations in lieu
of the interest at any lower rate provided for in Section 8 of this Financing
Agreement, provided that, with respect to this clause "(ii)" the Lender has
given the Companies written notice of the Event of Default, provided, further,
however, that no notice is required if the Event of Default is an event or
circumstance listed in any of subparagraphs (a) through (c) of Paragraph 10.1 of
this Section 10.

The exercise of any of these options or alternatives is not exclusive of any
other option or alternative or right or remedy, which may be exercised at any
time by the Lender.

                  10.3 Additional Remedies Upon an Event of Default. Immediately
upon the occurrence of any Event of Default, the Lender may, to the extent
permitted by law and subject to the terms of the Intercreditor Agreement:

                           (a) remove from any premises where same may be
located any and all books and records, computers, electronic media and software
programs associated with any Collateral (including any electronic records,
contracts and signatures pertaining thereto), documents, instruments, files and
records, and any receptacles or cabinets containing same, relating to the
Accounts, or the Lender may use, at the Obligors' expense, such of the Obligors'
personnel, supplies or space at the Obligors' places of business or otherwise,
as may be necessary to properly administer and control the Accounts or the
handling of collections and realizations thereon or on any other Collateral, and
the Obligors hereby irrevocably grant the Lender right of access to their
premises therefor;

                           (b) bring suit, in the name of the Obligors (or any
of them) or the Lender, and generally shall have all other rights respecting
said Accounts, including, without limitation, the right to: extend the time of
payment, settle, compromise, release in whole or in part any amounts owing on
any Accounts and issue credits in the name of the Obligors (or any of them) or
the Lender;

                           (c) sell, assign and deliver the Collateral and any
returned, reclaimed or repossessed Inventory, with or without advertisement, at
public or private sale, for cash, on credit or otherwise, at the Lender's sole
option and discretion, and the Lender may bid or become a purchaser at any such
sale, free from any right of redemption, which right is hereby expressly waived
by the Obligors (or any of them);

                           (d) foreclose the security interests in the
Collateral created herein or by any of the other Loan Documents to secure the
Obligations by any available judicial procedure, or to take possession of any or
all of the Collateral, including any Inventory, Equipment and/or Other
Collateral without judicial process, and to enter any premises where any

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Inventory and Equipment and/or Other Collateral may be located for the purpose
of taking possession of or removing the same;

                           (e) exercise all rights and remedies provided in any
Mortgage or other Security Document; and

                           (f) exercise any other rights and remedies provided
in law, in equity, by contract or otherwise.

                  The Lender shall have the right, without notice or
advertisement, to sell, lease, or otherwise dispose of all or any part of the
Collateral, whether in its then condition or after further preparation or
processing, in the name of any Obligor or the Lender, or in the name of such
other party as the Lender may designate, either at public or private sale or at
any broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such other terms and conditions as the
Lender in its sole discretion may deem advisable, and the Lender shall have the
right to purchase at any such sale. If any Inventory and Equipment shall require
rebuilding, repairing, maintenance or preparation, the Lender shall have the
right, at its option, to do such of the aforesaid as is necessary, for the
purpose of putting the Inventory and Equipment in such saleable form as the
Lender shall deem appropriate and any such costs shall be deemed an Obligation
hereunder. The Obligors agree, at the request of the Lender, to assemble the
Inventory and Equipment and to make it available to the Lender at premises of
the Obligors or elsewhere and to make available to the Lender the premises and
facilities of the Obligors for the purpose of the Lender's taking possession of,
removing or putting the Inventory and Equipment in saleable form. If notice of
intended disposition of any Collateral is required by law, it is agreed that ten
(10) days' notice shall constitute reasonable notification and full compliance
with the law. The net cash proceeds resulting from the Lender's exercise of any
of the foregoing rights (after deducting all charges, costs and expenses,
including reasonable attorneys' fees) shall be applied by the Lender to the
payment of the Obligations, whether due or to become due, in such order as the
Lender may elect or as may be required by the Intercreditor Agreement, and the
Obligors shall remain liable to the Lender for any deficiencies remaining. The
Lender shall remit to the Obligors or their successors or assigns, any surplus
resulting therefrom, subject to the terms of the Intercreditor Agreement
relating to remittance thereof to or to the order of the Senior Lien Lenders,
except as may otherwise be required by order of a court of competent
jurisdiction. The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative. Any applicable mortgage(s),
deed(s) of trust or assignment(s) issued to the Lender on the Real Estate shall
govern the rights and remedies of the Lender thereto. Notwithstanding anything
to the contrary elsewhere in this Financing Agreement, if the Obligations are
declared or automatically become immediately due and payable pursuant to
Paragraph 10.2 of this Financing Agreement, in connection with an Event of
Default, the rights and remedies of the Lender provided for herein, including,
without limitation, the Lender's rights to exercise the powers granted to it in
the power of attorney included in this Financing Agreement, shall continue and
shall not cease to be effective until the full, final and indefeasible payment
of all the Obligations, regardless of whether such Event of Default is
subsequently remedied.

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                  10.4 Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of any Obligor against any and all of the
Obligations (in the case of a Company) or against any and all of the Guaranty
Obligations (in the case of a Guarantor) now or hereafter existing under the
Loan Documents, irrespective of whether or not the Lender shall have made any
demand under any Loan Document and although such Obligations or Guaranty
Obligations (as the case may be) may be unmatured. The Lender agrees promptly to
notify the Obligors after any such set-off and application made by the Lender;
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Lender under this Paragraph 10.4
are in addition to other rights and remedies which the Lender may have upon the
occurrence and during the continuance of any Event of Default.

         SECTION 11. Observation Rights

                  Prior to the Maturity Date (and thereafter to the extent that
the Lender shall not be entitled to designate directors pursuant to a written
agreement between Harvard and the Lender), the Lender shall have the right
(effective upon the Closing Date) to designate by written notice to Harvard one
employee or agent of the Lender, who will receive reasonable notice of, and be
entitled to attend, all meetings of the Board of Directors of Harvard (the
"Board of Directors") as a nonvoting observer (the "Observer"). Harvard or the
applicable members of the Board of Directors will give the Observer oral or
written notice of each meeting of the Board of Directors (whether annual or
special) at the same time and in the same manner as oral or written notice is
given to the applicable members of the Board of Directors (which notice may be
waived by the Observer). Notwithstanding the foregoing, if the Observer attends
(or, in the case of a telephonic meeting, listens by telephone to) any such
meeting of the Board of Directors, then the Observer shall be deemed to have had
proper notice of such meeting. Notwithstanding anything contained herein to the
contrary, the failure of the Observer to be given notice of a meeting of the
Board of Directors pursuant to the immediately preceding two sentences or to
attend such meeting shall not in any way affect the authority of the Board of
Directors to have or to adopt resolutions at such meeting or the legitimacy of
any actions taken by the Board of Directors at such meeting. Subject to the
foregoing, Harvard will permit the Observer to attend (or, in the case of a
telephonic meeting, to listen by telephone to) each meeting of the Board of
Directors as a non-voting observer. Harvard shall provide the Observer all
written materials and other information (including copies of meeting minutes)
given to the members of the Board of Directors in connection with any such
meeting at the same time as such information is delivered to the members of the
Board of Directors and, if the Observer does not attend (or, in the case of a
telephonic meeting, does not listen by telephone to) a meeting of the Board of
Directors, Harvard shall, promptly following such meeting of the Board of
Directors, provide the written minutes or an oral summary of the meeting from
the Secretary of Harvard to the Observer. Prior to attending or listening to any
meeting of the Board of Directors or obtaining any documents or summaries of
such meetings, the Observer shall agree in writing to be bound by the same
duties of confidentiality, good faith and loyalty as if such Observer were a
director of Harvard. If Harvard wishes to take any action by written consent of
the Board of Directors in lieu of a meeting, then Harvard shall circulate such
written consent to the Observer at the same time it

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circulates such instrument for signature by the directors, and shall give prompt
written notice of any action taken pursuant thereto to the Observer.

         SECTION 12. Termination

                  The Companies or any one of them may terminate this Financing
Agreement at any time with such advance notice as is required and otherwise as
contemplated in the provisions of this Financing Agreement providing for the
prepayment in full of all Obligations. Notice of termination, as aforesaid, by
Harvard shall be deemed to be notice by the Companies for purposes hereof. All
Obligations shall become due and payable as of any termination under this
provision or under Section 10 hereof. All of the Lender's rights, Liens and
security interests shall continue after any termination until all Obligations
have been paid and satisfied in full. Upon satisfaction of the Lender as to all
of the foregoing, the Lender, at the expense of the Companies, shall execute and
deliver such releases, termination statements or other documents and take such
actions as Harvard may reasonably request, to confirm the release of the
security interest and liens created in the Collateral by this Financing
Agreement and the other Loan Documents and to confirm the termination of this
Financing Agreement.

         SECTION 13. Miscellaneous

                  13.1 Waivers. Each Obligor hereby waives diligence, notice of
intent to accelerate, notice of acceleration, demand, presentment and protest
and any notices thereof as well as notice of nonpayment except as otherwise
expressly provided in this Financing Agreement. No delay or omission of the
Lender or any Obligor to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy precludes any
other or further exercise thereof, or precludes any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to, or waiver of, any
right or remedy on any future occasion. No waiver of any right or remedy
provided for herein shall be effective as a waiver unless it is in writing and
signed by the Lender.

                  13.2 Entire Agreement. This Financing Agreement and the Loan
Documents executed and delivered in connection therewith constitute the entire
agreement between the Obligors and the Lender relating to the subject matter
hereof and thereof; supersede any agreements relating to such subject matter
existing on the date of this Financing Agreement other than the Commitment
Letter; may be changed only by a writing signed by the Obligors and the Lender;
and shall bind the Obligors and the Lender and their respective successors and
assigns, and shall benefit the Obligors and the Lender and their respective
successors and assigns.

                  13.3 Usury. In no event shall an Obligor, upon demand by the
Lender for payment of any Indebtedness relating to any Obligation or Guaranty
Obligation by acceleration of the maturity thereof, or otherwise, be obligated
to pay interest and fees in excess of the amount permitted by applicable law.
Regardless of any provision herein or in any agreement made in connection
herewith, the Lender shall never be entitled to receive, charge or apply, as
interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If the Lender ever
receives, collects or applies any

                                     - 74 -
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such excess, it shall be deemed a partial repayment of principal owed to it
hereunder and treated as such; and if principal is paid in full, any remaining
excess shall be refunded to the Obligors. This paragraph shall control every
other provision hereof, the Loan Documents and of any other agreement made in
connection herewith. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof, provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Financing Agreement and the Loan Documents shall be governed by such
new law insofar as it relates to the permissible rate of interest as of its
effective date.

                  13.4 Severability. If any provision hereof or of any other
agreement made in connection herewith is held to be illegal or unenforceable,
such provision shall be fully severable, and the remaining provisions of the
applicable agreement shall remain in full force and effect and shall not be
affected by such provision's severance. Furthermore, in lieu of any such
provision, there shall be added automatically as a part of the applicable
agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.

                  13.5 WAIVER OF JURY TRIAL. NONE OF THE OBLIGORS OR THE LENDER
AND NO SUCCESSOR, ASSIGN OR PERSONAL REPRESENTATIVE OF ANY OF THEM SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION
PROCEDURE INVOLVING ANY OF THE OBLIGORS OR THE LENDER (OR ANY OFFICER, DIRECTOR,
EMPLOYEE OR AGENT OF ANY OF THEM) BASED UPON OR ARISING OUT OF THIS FINANCING
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ANY COLLATERAL FOR THE PAYMENT OF
ANY OF THE OBLIGATIONS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG SUCH
PERSONS OR ENTITIES, OR ANY OF THEM. NONE OF THE OBLIGORS OR THE LENDER WILL
SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH 13.5 OF THIS SECTION 13 HAVE BEEN FULLY DISCUSSED
BY THE COMPANIES AND THE LENDER, AND THE PROVISIONS HEREOF SHALL BE SUBJECT TO
NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER
PARTY THAT THE PROVISIONS OF THIS PARAGRAPH 13.5 OF THIS SECTION 13 WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES.

                  13.6 Notices. Except as otherwise herein provided, any notice
or other communication required hereunder or relating to this Financing
Agreement or any other Loan Document shall except as otherwise expressly
provided herein or in such other Loan Document be in writing and may be given by
personal delivery, including by any commercial courier or overnight delivery
service, or by United States registered or certified mail, return receipt
requested, with all postage and fees fully prepaid. Notices shall be effective
upon receipt by the party being given notice, as indicated by the return receipt
if mailed; except that if a party has relocated without providing the other
party with its new address for service of notices, or if a party refuses
delivery of a notice upon its tender, the notice shall be effective upon the
attempt to serve the notice at the last address given for service of notices
upon that party. In addition to (but not in lieu of) the foregoing, notice may
be served by facsimile transmission, in which case service shall be deemed
effective only upon receipt by the party serving the notice of telephonic

                                     - 75 -
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or return facsimile transmission confirmation that the party to whom the notice
is directed has received a complete and legible copy of the notice (provided
that, any electronic communications from any of the Obligors with respect to any
request, transmission, document, electronic signature, electronic mail or
facsimile transmission shall be deemed binding on the Obligors for purposes of
this Financing Agreement, provided further that any such transmission shall not
relieve the Obligors from any other obligation hereunder to communicate further
in writing). Notices shall be addressed to the party to be notified as follows
or to such other address as that party may designate for itself by notice to the
sender:

         if to the Lender, at:

                  Hilco Capital LP
                  One Northbrook Place
                  5 Revere Drive, Suite 202
                  Northbrook, Illinois  60062
                  Attention:  Portfolio Administrator
                  Fax No.:  847-559-9330

         with a courtesy copy of any material notice to the Lender's counsel at:

                  Schulte Roth & Zabel LLP
                  900 Third Avenue
                  New York, New York  10022
                  Attention:  Frederic L. Ragucci, Esq.
                  Fax No.:  212-593-5955

         if to any of the Obligors at:

                  Harvard Industries, Inc.
                  3 Werner Way
                  Lebanon, New Jersey  08833
                  Attn: Mr.  Roger Pollazzi
                  Fax No.:  908-437-8134

         with a courtesy copy of any material notice to the Companies' counsel
         at:

                  Chadbourne & Parke LLP
                  30 Rockefeller Plaza
                  New York, New York  10112
                  Attn:  Joseph Smolinsky, Esq.
                  Fax No.  212-541-5369

(provided, however, that the failure of the Lender to provide the Obligors'
counsel with a copy of such notice shall not invalidate any notice given to the
Obligors and shall not give the Obligors any rights, claims or defenses due to
the failure of the Lender to provide such additional notice).

                  13.7 GOVERNING LAWS. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS FINANCING AGREEMENT AND THE OTHER LOAN

                                     - 76 -
<PAGE>

DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN
DOCUMENT INCLUDES AN EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER
JURISDICTION AND EXCEPT AS OTHERWISE REQUIRED BY THE UNIFORM COMMERCIAL CODE.

                  13.8 Submission to Jurisdiction; Service of Process. Each of
the Obligors hereby irrevocably: (a) Submits for itself and its property in any
legal action or proceeding relating to this Financing Agreement and the other
Loan Documents to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York in the county of New York or of the United
States District Court for the Southern District of New York, and the appellate
courts from any thereof;

                           (b) consents that any such action or proceeding may
be brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

                           (c) agrees that nothing contained herein shall affect
the right to effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction;

                           (d) appoints CT Corporation, Inc., at 111 Eighth
Avenue, 13th Floor, New York, New York 10011, as its agent to receive service of
process or other summons in connection with any such action or proceeding and
waives personal service of process and consents to service of process by
certified or registered mail, return receipt requested, addressed to such
Obligor at its address for notices hereunder.

                  13.9 Intentionally Omitted

                  13.10 Headings. The headings of this Financing Agreement are
solely for the purpose of identification and shall not be construed as a part of
the paragraphs or sections they head.

                  13.11 Replacement of Promissory Note. Upon receipt of an
affidavit of an officer of the Lender as to the loss, theft, destruction or
mutilation of the Promissory Note or any other Loan Document, and, in the case
of any such loss, theft, destruction or mutilation, upon cancellation of the
Promissory Note or other Loan Document, the Companies will issue, in lieu
thereof, a replacement Promissory Note or other Loan Document in the same
principal amount thereof and otherwise of like tenor.

                  13.12 Counterparts. This Financing Agreement may be signed in
any number of counterparts with the same effect as if the signatures hereto were
upon the same instrument.

                  13.13 Assignments. (a) The Obligors may not assign or transfer
any of their rights under this Financing Agreement, the Promissory Note or the
other Loan Documents without the prior written consent of the Lender, and any
such assignment or transfer without the

                                     - 77 -
<PAGE>

Lender's prior written consent shall be null and void. The Lender shall have the
right at any time to (i) assign or transfer to any Person all or a portion of
its rights and obligations under this Financing Agreement and the other Loan
Documents (including, without limitation, the Term Loan) and (ii) pledge the
Term Loan and all of its rights under this Financing Agreement, the Promissory
Note and the other Loan Documents to its lenders in support of borrowings made
by the Lender from such lenders, in each case without the consent of the
Obligors.

                           (b) The Obligors shall, if necessary, execute any
documents reasonably required to effectuate an assignment or transfer by the
Lender contemplated by subparagraph (a) above, including, without limitation,
amendments to this Financing Agreement, the Promissory Note or any other Loan
Document, as the Lender shall reasonably deem necessary to effect the foregoing.
In addition, at the request of the Lender and any such assignee or transferee,
the Companies shall issue a new Promissory Note to such assignee or transferee
and, if the Lender has retained any of its rights and obligations hereunder
following such assignment or transfer, to the Lender, which new Promissory
Note(s) shall be issued in replacement of, but not in discharge of, the
liability evidenced by the Promissory Note held by the Lender prior to such
assignment and shall reflect the amount of the respective amounts of the Term
Loan of the Lender and the assignee or transferee after giving effect to such
assignment or transfer.

                  13.14 Participants. (a) The Obligors acknowledge that the
Lender may at any time sell, assign or participate to an Affiliate of the Lender
or to any other Person its rights and obligations under this Financing Agreement
and the other Loan Documents (including, without limitation, its Term Loan). The
Obligors further acknowledge that in doing so, the Lender may grant to such
participants certain rights which would require the participant's consent to
certain waivers, amendments and other actions with respect to the provisions of
this Financing Agreement.

                           (b) The Obligors authorize the Lender to disclose to
any participant or purchasing lender (each, a "Transferee") and any prospective
Transferee any and all financial information in the Lender's possession
concerning the Obligors and their affiliates which has been delivered to the
Lender by or on behalf of the Obligors pursuant to this Financing Agreement or
any other Loan Document or which has been delivered to the Lender by or on
behalf of the Obligors in connection with the Lender's credit evaluation of the
Obligors and their affiliates prior to entering into this Financing Agreement,
provided that such Transferee agrees to hold such information in confidence in
the ordinary course of its business.

                  13.15 Currency. All Obligations and Guaranty Obligations shall
be payable in lawful currency of the United States ("U.S. Dollars"). The
foregoing reference to U.S. Dollars is of the essence. The Obligations and
Guaranty Obligations shall, notwithstanding any payment in any other currency
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in U.S. Dollars that the Lender may, in accordance with normal
banking procedures, purchase with the sum paid in that other currency (after
deducting any premium and costs of exchange) on the Business Day immediately
following the day on which the Lender receives that payment. If the amount in
U.S. Dollars that may be so purchased for any reason falls short of the amount
originally due, the Obligors shall pay to the Lender such additional amount, in
U.S. Dollars, as is necessary to compensate for the shortfall. Any Obligation or

                                     - 78 -
<PAGE>

Guaranty Obligations not discharged by that payment shall, to the fullest extent
permitted by applicable law, be due as a separate and independent Obligation or
Guaranty Obligation and, until discharged as provided herein, shall continue in
full force and effect.

                  13.16 Rate of Interest for Canadian Companies. For purposes of
disclosure pursuant to the Interest Act (Canada), the yearly rate of interest to
which any rate of interest payable under this Financing Agreement which is to be
calculated on any basis other than a full calendar year is equivalent may be
determined by multiplying such rate by a fraction, the numerator of which is the
number of days in the calendar year in which the period for which the interest
at such rate is payable ends and the denominator of which is the number of days
comprising such other basis.

                  13.17 Amendments; Waivers. No amendment or waiver of any
provision of this Financing Agreement or any other Loan Document nor consent to
any departure by any Obligor therefrom shall in any event be effective unless
the same shall be in writing and signed by the Lender and, in the case of any
amendment, by the Companies or, if a party to the relevant Loan Documents, the
Guarantors, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

                  13.18 Confidentiality. The Lender agrees to maintain the
confidentiality of any non-public information provided by the Obligors to it, in
the ordinary course of its business, provided that the foregoing confidentiality
provision shall terminate one (1) year after the payment in full of the Term
Loan, and provided further that the Lender may disclose such information (a)
after such information shall have become public other than through a violation
of this Paragraph 13.18 of this Section 13, (b) to the extent required by
statute, rule, regulation or judicial process, (c) to counsel for the Lender,
(d) to bank examiners or any other regulatory authority having jurisdiction over
the Lender, or to auditors or accountants, (e) to the Senior Lien Lenders; (f)
in connection with any litigation to which the Lender is a party, or in
connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, (g) to a subsidiary or affiliate of the Lender or (h) to
any assignee or participant (or prospective assignee or participant) so long as
such assignee or participant agrees to be bound by the provisions hereof.

                  13.19 Contribution. (a) Notwithstanding anything to the
contrary in Paragraph 3.6 of Section 3 or Paragraph 14.4 of Section 14, if any
Obligor makes any payment in respect of any of the Obligations or Guaranty
Obligations, other than Obligations in respect of the Term Loan to the extent
the proceeds thereof were received by or for such Obligor, through any Company
or otherwise (an "Obligor Payment") and, taking into account all other Obligor
Payments then previously made or concurrently being made by any of the other
Obligors, the amount of such Obligor Payment exceeds the amount such Obligor
would otherwise have paid if each Obligor had paid the aggregate Obligations
satisfied by such Obligor Payment in the same proportion as such Obligor's
Allocable Amount (as defined below), determined immediately prior to such
Obligor Payment, bore to the aggregate Allocable Amounts of all the Obligors as
determined immediately prior to the making of such Obligor Payment, then,
following full, final and indefeasible payment of the Obligations and the
Guaranty Obligations, such Obligor shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each

                                     - 79 -
<PAGE>

other Obligor for the amount of the excess, pro rata, based upon their
respective Allocable Amounts of the Obligors in effect immediately prior to such
Obligor Payment.

                           (b) As of any date of determination, the "Allocable
Amount" of each Obligor shall be equal to the maximum amount of the claim that
could then be recovered from such Obligor under this Paragraph without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.

                           (c) This Paragraph 13.19 is intended only to define
certain relative rights of the Obligors vis-a-vis each other, and nothing set
forth in this Paragraph 13.19 is intended to or shall impair the obligations of
the Obligors to pay any amounts as and when the same shall become due and
payable in accordance with the terms of this Financing Agreement, as their joint
and several obligations in respect of the Obligations, in the case of the
Companies, as their joint and several obligations in respect of the Harvard
Obligations, in the case of the Guarantors, and as their own Guaranty
Obligations, in the case of the Guarantors (to the extent those Guaranty
Obligations exceed the Harvard Obligations). Nothing in this Paragraph 13.19
shall limit the liability of any Company to pay the Term Loan and accrued
interest and expenses with respect thereto, for which such Company shall be
primarily liable.

                           (d) The parties hereto acknowledge that the rights of
contribution and indemnification provided for in this Paragraph 13.19 shall
constitute assets of the Obligor to which such contribution and indemnification
is owing.

                           (e) The rights of the indemnifying Obligors against
other Obligors under this Paragraph 13.18 shall only be exercisable upon the
full, final and indefeasible payment of the Obligations and the Guaranty
Obligations.

                  13.20 Relationship. The Obligors acknowledge that the
relationship between and among the Lender, on the one hand, and the Senior Lien
Lenders, on the other hand, pursuant to the Intercreditor Agreement shall not be
construed as giving rise to or constituting a joint venture, and the Lender and
the Obligors agree that the Lender is not a partner or joint venturer with the
Obligors or with any entity comprising the Obligors, in any manner whatsoever.

         SECTION 14. Guaranty

                  14.1 Guaranty.

                           (a) Each Guarantor, as primary obligor and not merely
as surety, hereby irrevocably, absolutely and unconditionally guarantees to the
Lender the prompt and full payment in cash as and when due (whether at stated
maturity or by required or optional prepayment, acceleration, demand or
otherwise), of all existing and future Obligations payable by Harvard hereunder
and under the other Loan Documents, including but not limited to the Obligations
payable by Harvard in respect of the principal of and interest (including,
without limitation, all interest that accrues after the commencement of any
case, proceeding or other action relating to bankruptcy, insolvency or
reorganization of Harvard) on the Term Loan, and the fees, expenses and other
amounts payable under this Financing Agreement or any other Loan

                                     - 80 -
<PAGE>

Document and specifically including all amounts payable by Harvard arising from
its joint and several obligations as a co-obligor in respect of the Obligations,
whether its obligations in respect of such amounts are in the nature of a
guaranty or otherwise (all such amounts payable by Harvard in respect of the
Obligations, the "Harvard Obligations"). The guaranty set forth in this Section
14 is hereinafter referred to as the "Guaranty."

                           (b) If any Harvard Obligation is not paid as and when
due by Harvard, each Guarantor shall pay such Harvard Obligation on demand,
together with interest thereon, which shall accrue from and including the date
such Harvard Obligation fell due, to but excluding the date such Harvard
Obligation is paid in full, at the highest rate of interest then applicable to
any of the Harvard Obligations at the time overdue and unpaid. This interest
shall be calculated on the basis of a year of 360 days for the actual number of
days elapsed in the relevant period. The statement of account issued by the
Lender to Harvard shall, absent manifest error, be conclusive as to the amount
and status of Harvard Obligations.

                           (c) Each Guarantor shall, on demand, pay to the
Lender any and all expenses (including reasonable fees and expenses of counsel)
which may be paid or incurred by the Lender in collecting any or all of the
Harvard Obligations and/or enforcing the rights of the Lender against such
Guarantor under the Guaranty, and the Guaranty specifically includes all such
expenses, as well as all obligations of such Guarantor (in respect of Taxes and
otherwise) provided for in this Financing Agreement or any other Loan Document
(together with the Harvard Obligations, such obligations, in relation to each
Guarantor, its "Guaranty Obligations").

                  14.2 Guaranty Obligations Unconditional.

                           (a) Each Guarantor shall perform its obligations
under this Guaranty in respect of the Harvard Obligations so that they are paid
strictly in accordance with the terms of the Loan Documents.

                           (b) Without limiting the foregoing, this Guaranty is
a guaranty of payment by each Guarantor, and not merely a guaranty of
collection, and shall not be affected in any way by the absence of, or
conditioned or contingent upon, any action to obtain payment of any of Harvard
Obligations (by way of setoff or otherwise) from Harvard or any other Person who
now or hereafter may be responsible for all or any part of the Harvard
Obligations, including any other Guarantor or any Company, or from any
Collateral or other property and each Guarantor specifically waives any argument
or defense that the Lender seek or exhaust any recourse of any nature,
including, without limitation, any right to realize as to security held, against
any other Person before making demands under this Guaranty. In addition, this
Guaranty shall be absolute and unconditional irrespective of:

                                    (i) any change in, or in the interpretation
or application of, the law in any jurisdiction which affects or purports to
affect any of the terms giving rise to any of the Harvard Obligations or the
rights of the Lender with respect thereto;

                                    (ii) any lack of validity or enforceability,
any irregularity, default or omission in any relevant documentation, including,
without limitation, any Loan Document, or of any of the Harvard Obligations, or
any delay, failure or omission to enforce or agreement not to

                                     - 81 -
<PAGE>

enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise of any right with respect to the foregoing
(including, in each case, without limitation, as a result of the insolvency,
bankruptcy or reorganization of Harvard, any other Obligor or any other Person);

                                    (iii) any change in the time, manner or
place of payment of, or in any other term in respect of, all or any of the Loan
Documents;

                                    (iv) any exchange or release of, or
non-perfection of any Lien on or in, any Collateral, any release or amendment or
waiver of or consent to any departure from any other guaranty or security, for
all or any of the Harvard Obligations or any release of any Obligor from all or
any part of its obligations under this Guaranty, any other part of this
Financing Agreement or any of the terms of any other Loan Document;

                                    (v) any claim, set-off, counterclaim,
defense or other rights, including, without limitation, any as to marshalling of
any security or other guaranties, that any Guarantor may have at any time and
from time to time against the Lender or any other Person, whether in connection
with the transactions contemplated in the Loan Documents or any other
transaction;

                                    (vi) any other circumstances which might
otherwise constitute a defense based on suretyship or otherwise available to, or
a discharge of, any other Obligor in respect of (A) the Harvard Obligations or
the Guaranty Obligations, (B) the release of or waiver of any rights against any
other Obligor and the settlement, compromise or release of any other Obligor, or
(C) the failure by the Lender to attempt, or delay by the Lender in attempting,
to collect any Guaranty Obligations from any other Guarantor or any Obligations
from any Company or to realize upon any Collateral; and the Lender may deal with
any of the Obligors as it sees fit without prejudice to or effect on the
Guaranty or the security for the Guaranty Obligations; or

                                    (vii) the merger, consolidation or
amalgamation of Harvard with or into any other Person or the loss by Harvard or
any other Obligor of its separate legal identity, or its ceasing to exist;

and each Guarantor hereby irrevocably waives all defenses that it might
otherwise have based on any of the matters identified above in this Paragraph
14.2(b) or based on any other circumstances other than, in each case, the full,
final and indefeasible payment of all Harvard Obligations and all Guaranty
Obligations of such Guarantor.

                           (c) This Guaranty is a continuing guaranty and shall
remain in full force and effect in relation to each Guarantor until the payment
in full and indefeasible satisfaction of (i) all the Harvard Obligations and
(ii) all of such Guarantor's Guaranty Obligations. This Guaranty shall continue
to be effective or shall be reinstated, as the case may require, if at any time
any payment, or any part thereof, of any of the Harvard Obligations is rescinded
or must otherwise be returned by the Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Obligor or otherwise, all as
though such payment had not been made. This Guaranty shall not be affected by
any change in status, of any kind, of any Obligor or of the Lender.

                                     - 82 -
<PAGE>

                           (d) Each Guarantor confirms that there has been no
agreement, promise, representation or stipulation by any Person which in any way
affects the Guaranties hereunder.

                           (e) Without the necessity of any reservation of
rights against any Obligor and without notice to or further assent by any
Obligor, any demand for payment of any of the Harvard Obligations made by the
Lender to any Guarantor may be rescinded by the Lender and any of the Harvard
Obligations continued after such rescission.

                  14.3 Waivers. To the extent permitted by applicable law (and
without limiting the waivers of defenses of the Guarantors in Paragraph 9.2 of
Section 9), each Guarantor hereby waives:

                           (a) promptness and diligence;

                           (b) notice of or proof of reliance by the Lender upon
this Guaranty or acceptance of this Guaranty;

                           (c) notice of the incurrence of any Harvard
Obligation or of any Guaranty Obligation of any Guarantor, or of the renewal,
extension or accrual of any Harvard Obligation or Guaranty Obligation;

                           (d) notice of any actions taken by the Lender, any
Obligor or any other party to any Loan Document;

                           (e) all other notices, demands and protests, and all
other formalities of every kind in connection with the enforcement of the
Harvard Obligations or the Guaranty Obligations of any Guarantor, the omission
of or delay in which, but for the provisions of this Paragraph 14.3, might
constitute grounds for relieving Harvard of any of its Harvard Obligations or
any Guarantor of any of its Guaranty Obligations;

                           (f) any requirement that the Lender protect, secure,
perfect or insure any Lien on any Collateral or other property subject thereto
or exhaust any right or take any action against any Obligor or any other Person
or any Collateral; and

                           (g) each other circumstance, other than the payment
of the Harvard Obligations in full, that might otherwise result in a discharge
or exoneration of, or constitute a defense to, such Guarantor's obligations
under this Guaranty.

                  14.4 Subrogation. Each Guarantor hereby waives and releases
any rights which it may acquire by way of subrogation under or in respect of
this Guaranty, whether acquired by any payment made hereunder, by any setoff or
application of funds of Harvard or any Guarantor by the Lender or otherwise.
Each Guarantor further hereby agrees that, if any of the Harvard Obligations is
paid (by way of setoff or otherwise) by such Guarantor, any claim or right that
such Guarantor may, as a result, have against any other Obligor, for
contribution or otherwise, shall be subordinate to the rights and claims of the
Lender in respect of all Harvard Obligations and the Guaranty Obligations of
each Guarantor, without limitation, as to any increases in the Harvard
Obligations or the Guaranty Obligations arising hereunder or thereunder, and
shall not

                                     - 83 -
<PAGE>

be payable until all the Harvard Obligations and the Guaranty Obligations of
each Guarantor have been fully, finally and indefeasibly paid in full in cash
and, in the event of any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceeding under the laws of any jurisdiction
relating to any Guarantor, its debts or its assets, whether voluntary or
involuntary, all such Harvard Obligations and Guaranty Obligations shall be
fully, finally and indefeasibly paid in cash before any payment or distribution
of any character, whether in cash, securities or other property, shall be made
by any Guarantor to any other Obligor therefor. If, notwithstanding the
foregoing, any Guarantor receives, in respect of any payment made by it under
this Guaranty, any amount from Harvard or any Guarantor, such Guarantor shall
promptly pay such amount received by it to the Lender for application to the
Harvard Obligations or the Guaranty Obligations in such order as the Lender
shall elect and, until such payment is paid to the Lender, such amount shall be
held by such Guarantor for the benefit of the Lender.

                  14.5 Canadian Debenture. If there is an inconsistency between
the terms of this Financing Agreement and the terms of the Security Document
entered into by Trim Trends on the Closing Date in the form of a debenture (the
"Canadian Debenture"), the provisions hereof shall prevail to the extent of the
inconsistency, but the foregoing shall not apply to limit or restrict in any way
the rights and remedies of the Lender under the terms of the Canadian Debenture
after the security thereby constituted shall have become enforceable. For
greater certainty:

                           (a) Notwithstanding that the rate of interest
stipulated in the Canadian Debenture may exceed the rate of interest stipulated
in this Financing Agreement in respect of the Harvard Obligations and the
Guaranty Obligations, the rate or rates of interest applicable to the
Obligations shall be as stipulated herein;

                           (b) Notwithstanding that the Canadian Debenture may
contain a promise by Trim Trends to pay to the Lender a principal amount which
may be in excess of the Harvard Obligations, Trim Trends shall only be liable to
pay to the Lender, the amount of the Harvard Obligations and Trim Trends'
Guaranty Obligations (which shall, however, include such expenses and
indemnities as are provided for in the Canadian Debenture in connection with the
protection, preservation and enforcement of the interest created therein and
rights and remedies thereunder of the Lender (and such stamp, documentation,
recordation, value added and other taxes and duties related to the foregoing)).

                                     - 84 -
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Financing Agreement to be effective, executed, accepted and delivered by their
proper and duly authorized officers as of the date set forth above.

                                             LENDER
                                             ------

                                             HILCO CAPITAL LP

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

                                             COMPANIES
                                             ---------

                                             HARVARD INDUSTRIES, INC.

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

                                             DOEHLER-JARVIS, INC.

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

                                             HARVARD TRANSPORTATION
                                              CORPORATION

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

                                             DOEHLER-JARVIS GREENEVILLE, INC.

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

                                     - 85 -
<PAGE>

                                             POTTSTOWN PRECISION CASTING, INC.

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

                                             HARVARD INDUSTRIES RISK
                                              MANAGEMENT, INC.

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

                                             DOEHLER-JARVIS TOLEDO, INC.

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

                                             HARMAN AUTOMOTIVE, INC.

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

                                             HAYES-ALBION CORPORATION

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

                                             KWCI LIQUIDATING CORPORATION

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

                                     - 86 -
<PAGE>

                                             GUARANTORS
                                             ----------

                                             TRIM TRENDS CANADA LIMITED

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

                                             177192 CANADA INC.

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

                                     - 87 -
<PAGE>

                                    EXHIBIT A

                                 PROMISSORY NOTE

$10,000,000.00                                             Dated: May 31, 2001
                                                           New York, New York

FOR VALUE RECEIVED, the undersigned, HARVARD INDUSTRIES, INC., a Delaware
corporation, DOEHLER-JARVIS, INC., a Delaware corporation, HARVARD
TRANSPORTATION CORPORATION, a Michigan corporation, DOEHLER-JARVIS GREENEVILLE,
INC., a Delaware corporation, POTTSTOWN PRECISION CASTING, INC., a Delaware
corporation, HARVARD INDUSTRIES RISK MANAGEMENT, INC., a Delaware corporation,
DOEHLER-JARVIS TOLEDO, INC., a Delaware corporation, HARMAN AUTOMOTIVE, INC., a
Michigan corporation, HAYES-ALBION CORPORATION, a Michigan corporation, and KWCI
LIQUIDATING CORPORATION, a New Hampshire corporation (each individually a
"Company" and collectively, the "Companies"), HEREBY JOINTLY AND SEVERALLY
PROMISE TO PAY to the order of HILCO CAPITAL LP (herein the "Lender") at its
office located at One Northbrook Place, 5 Revere Drive, Suite 202, Northbrook,
Illinois 60062, in lawful money of the United States of America and in
immediately available funds, the principal amount of TEN MILLION DOLLARS
($10,000,000.00), or if less, the aggregate unpaid principal amount of the Term
Loan (as defined in the Financing Agreement hereinafter referred to) made by the
Lender to the Companies, payable in such installments and at such times as are
specified in the Financing Agreement.

Each Company further agrees to pay interest at said office, in like money, on
the unpaid principal amount owing hereunder from time to time from the date
hereof on the date and at the rate specified in Section 8 of the Financing
Agreement, of even date herewith between the Companies and the Lender (the
"Financing Agreement"). Capitalized terms used herein and defined in the
Financing Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein.

THE PRINCIPAL AMOUNT OF THIS PROMISSORY NOTE MAY BE INCREASED IN ACCORDANCE WITH
SECTION 8 OF THE FINANCING AGREEMENT. SUCH INCREASED PRINCIPAL AMOUNT SHALL BE
DUE AND PAYABLE AND SHALL BEAR INTEREST AS PROVIDED IN SUCH SECTION 8.

If any payment on this Promissory Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day, and with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.

This Promissory Note is the Promissory Note referred to in the Financing
Agreement, evidences the joint and several obligations of the Companies in
respect of Term Loan thereunder, and is subject to, and entitled to, all
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.

                                      A-1
<PAGE>

Upon the occurrence of any Event of Default specified in the Financing Agreement
or upon termination of the Financing Agreement in accordance with the terms
thereof, all amounts then remaining unpaid on this Promissory Note may become,
or be declared to be, at the sole election of the Lender, immediately due and
payable as provided in the Financing Agreement.

The Companies acknowledge that the Lender shall have the right at any time to
(i) assign or transfer to any Person all or a portion of its rights and
obligations under this Promissory Note pursuant to Paragraph 13.13 of Section 13
of the Financing Agreement and (ii) pledge this Promissory Note to its lenders
in support of borrowings made by the Lender from such lenders.

For purposes of disclosure pursuant to the Interest Act (Canada), the yearly
rate of interest to which any rate of interest payable under this Promissory
Note which is to be calculated on any basis other than a full calendar year is
equivalent may be determined by multiplying such rate by a fraction, the
numerator of which is the number of days in the calendar year in which the
period for which the interest at such rate is payable ends and the denominator
of which is the number of days comprising such other basis.

                                      A-2
<PAGE>

This Promissory Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice of
law.

                                             HARVARD INDUSTRIES, INC.

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

                                             DOEHLER-JARVIS, INC.

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

                                             HARVARD TRANSPORTATION
                                              CORPORATION

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

                                             DOEHLER-JARVIS GREENEVILLE, INC.

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

                                             POTTSTOWN PRECISION CASTING, INC.

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

                                      A-3
<PAGE>

                                             HARVARD INDUSTRIES RISK
                                              MANAGEMENT, INC.

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

                                             DOEHLER-JARVIS TOLEDO, INC.

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

                                             HARMAN AUTOMOTIVE, INC.

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

                                             HAYES-ALBION CORPORATION

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

                                             KWCI LIQUIDATING CORPORATION

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

                                      A-4IMPAC SECURED ASSETS CORP.,
                                    Company,

                            IMPAC FUNDING CORPORATION
                                Master Servicer,

                                       and

                    BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT

                             Dated as of May 1, 2001

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

                       Mortgage Pass-Through Certificates

                                  Series 2001-4

<PAGE>

                                TABLE OF CONTENTS
                                -----------------
                                                                          Page

ARTICLE I

          DEFINITIONS........................................................5
          1.01.  Defined Terms...............................................5
          Accrual Period.....................................................5
          Advance  ..........................................................5
          Aggregate Stated Principal Balance.................................5
          Agreement..........................................................5
          Allocated Realized Loss Amount.....................................5
          Anniversary........................................................5
          Assignment.........................................................5
          Available Distribution Amount......................................5
          Balloon Loan.......................................................6
          Balloon Payment....................................................6
          Bankruptcy Code....................................................6
          Basic Principal Distribution Amount................................6
          Book-Entry Certificate.............................................6
          Business Day.......................................................6
          Buydown Funds......................................................6
          Buydown Mortgage Loan..............................................6
          Cash Liquidation...................................................7
          Certificate........................................................7
          Certificate Account................................................7
          Certificate Account Deposit Date...................................7
          Certificateholder" or "Holder......................................7
          Certificate Owner..................................................7
          Certificate Principal Balance......................................7
          Certificate Register...............................................8
          Class    ..........................................................8
          Class A Certificate................................................8
          Class A-I Certificate..............................................8
          Class A-I-1 Certificate............................................8
          Class A-I-2 Certificate............................................8
          Class A-I-3 Component..............................................8
          Class A-I-4 Certificate............................................8
          Class A-I-5 Certificate............................................8
          Class A-II Certificate.............................................8
          Class A-II-1 Certificate...........................................8
          Class A-II-2 Component.............................................9
          Class A-II-3 Certificate...........................................9
          Class A-IO Rate....................................................9
          Class A-IO Certificate.............................................9

                                                           i

<PAGE>

          Class A-3 Certificate..............................................9
          Class A-3 Components...............................................9
          Class A Principal Distribution Amount..............................9
          Class B Certificate...............................................10
          Class B Principal Distribution Amount.............................10
          Class C Certificate...............................................10
          Class M-1 Certificate.............................................10
          Class M-1 Principal Distribution Amount...........................11
          Class M-2 Certificate.............................................11
          Class M-2 Principal Distribution Amount...........................11
          Class P Certificate...............................................11
          Class R Certificate...............................................12
          Class R-1 Interest................................................12
          Class R-2 Interest................................................12
          Class R-3 Interest................................................12
          Closing Date......................................................12
          Code     .........................................................12
          Collateral Value..................................................12
          Commission........................................................12
          Company  .........................................................12
          Compensating Interest.............................................12
          Component Principal Balance.......................................12
          Corporate Trust Office............................................12
          Corresponding Certificate or Component............................12
          Current Specified Overcollateralization Percentage................13
          Curtailment.......................................................13
          Custodial Account.................................................13
          Cut-off Date......................................................13
          Defaulted Mortgage Loan...........................................14
          Deficient Valuation...............................................14
          Definitive Certificate............................................14
          Deleted Mortgage Loan.............................................14
          Depository........................................................14
          Depository Participant............................................14
          Determination Date................................................14
          Disqualified Organization.........................................14
          Distribution Date.................................................15
          Due Date .........................................................15
          Due Period........................................................15
          Eligible Account..................................................15
          Event of Default..................................................15
          Excess Overcollateralized Amount..................................15
          Excess Proceeds...................................................15
          Extra Principal Distribution Amount...............................16
          Fannie Mae........................................................16
          FDIC     .........................................................16

                                       ii

<PAGE>

          Fitch    .........................................................16
          Freddie Mac.......................................................16
          Funding Date......................................................16
          GMAC     .........................................................16
          Group 1 Loan......................................................16
          Group 2 Loan......................................................16
          Group 1 Marker Rate...............................................16
          Group 1 Net WAC Rate..............................................17
          Group 2 Marker Rate...............................................17
          Group 2 Net WAC Rate..............................................18
          Initial Certificate Principal Balance.............................18
          Initial Component Principal Balance...............................18
          Initial Notional Amount...........................................18
          Insurance Policy..................................................18
          Insurance Proceeds................................................18
          Interest Remittance Amount........................................18
          Late Collections..................................................18
          Liquidated Mortgage Loan..........................................19
          Liquidation Proceeds..............................................19
          Loan-to-Value Ratio...............................................19
          Lost Note Affidavit...............................................19
          Majority Class C Certificateholder................................19
          Master Servicer...................................................19
          Master Servicer Prepayment Charge Payment Amount..................19
          Servicing Fees....................................................19
          Servicing Fee Rate................................................19
          Maximum Uncertificated Accrued Interest Deferral Amount...........20
          Mezzanine Certificate.............................................21
          Mezzanine Net WAC Rate............................................21
          Monthly Interest Distributable Amount.............................21
          Monthly Payment...................................................21
          Moody's  .........................................................22
          Mortgage .........................................................22
          Mortgage File.....................................................22
          Mortgage Loan.....................................................22
          Mortgage Loan Purchase Agreement..................................22
          Mortgage Loan Schedule............................................22
          Mortgage Note.....................................................23
          Mortgage Rate.....................................................24
          Mortgaged Property................................................24
          Mortgagor.........................................................24
          Net Liquidation Proceeds..........................................24
          Net Monthly Excess Cashflow.......................................24
          Net Mortgage Rate.................................................24
          Net Prepayment Interest Shortfall.................................24
          Net WAC Rate......................................................24

                                                          iii

<PAGE>

          Nonrecoverable Advance............................................25
          Non-United States Person..........................................25
          Notional Amount...................................................25
          Officers' Certificate.............................................25
          Opinion of Counsel................................................25
          Optional Termination Date.........................................25
          OTS      .........................................................25
          Outstanding Mortgage Loan.........................................25
          Overcollateralization Deficiency Amount...........................26
          Overcollateralization Release Amount..............................26
          Overcollateralization Target Amount...............................26
          Overcollateralized Amount.........................................26
          Ownership Interest................................................26
          Pass-Through Rate.................................................26
          Percentage Interest...............................................29
          Permitted Investment..............................................29
          Permitted Transferee..............................................31
          Person   .........................................................31
          Prepayment Assumption.............................................31
          Prepayment Charge.................................................31
          Prepayment Interest Shortfall.....................................31
          Prepayment Period.................................................31
          Primary Hazard Insurance Policy...................................31
          Primary Insurance Policy..........................................31
          Principal Distribution Amount.....................................31
          Principal Prepayment..............................................31
          Principal Prepayment in Full......................................32
          Principal Remittance Amount.......................................32
          Prospectus Supplement.............................................32
          Purchase Price....................................................32
          Qualified Insurer.................................................32
          Qualified Substitute Mortgage Loan................................32
          Radian   .........................................................33
          Radian Insured Loans..............................................33
          Radian Lender-Paid PMI Policy.....................................33
          Radian PMI Policy Rate............................................33
          Rating Agency.....................................................33
          Realized Loss.....................................................33
          Record Date.......................................................34
          Regular Certificate...............................................34
          Relief Act........................................................34
          Relief Act Interest Shortfall.....................................34
          REMIC    .........................................................34
          REMIC 1  .........................................................34
          REMIC 1 Regular Interest LT1A.....................................34
          REMIC 1 Regular Interest LT1B.....................................35

                                       iv

<PAGE>

          REMIC 1 Regular Interest LT1C.....................................35
          REMIC 1 Regular Interest LT1D.....................................35
          REMIC 1 Regular Interest LT1P.....................................35
          REMIC 1 Regular Interests.........................................35
          REMIC 2  .........................................................35
          REMIC 2 Group 1 Interest Loss Allocation Amount...................36
          REMIC 2 Group 2 Interest Loss Allocation Amount...................36
          REMIC 2 Group 1 Overcollateralized Amount.........................36
          REMIC 2 Group 2 Overcollateralized Amount.........................36
          REMIC 2 Group 1 Principal Loss Allocation Amount..................36
          REMIC 2 Group 2 Principal Loss Allocation Amount..................37
          REMIC 2 Overcollateralization Target Amount.......................37
          REMIC 2 Regular Interest LT2A-IO..................................37
          REMIC 2 Regular Interest LT2-1AA..................................37
          REMIC 2 Regular Interest LT2-AI1..................................37
          REMIC 2 Regular Interest LT2-AI2..................................37
          REMIC 2 Regular Interest LT2-AI3..................................38
          REMIC 2 Regular Interest LT2-AI4..................................38
          REMIC 2 Regular Interest LT2-AI5..................................38
          REMIC 2 Regular Interest LT2-1M1..................................38
          REMIC 2 Regular Interest LT2-1M2..................................38
          REMIC 2 Regular Interest LT2-1B...................................38
          REMIC 2 Regular Interest LT2-1ZZ..................................38
          REMIC 2 Regular Interest LT2-2AA..................................39
          REMIC 2 Regular Interest LT2-AII1.................................39
          REMIC 2 Regular Interest LT2-AII2.................................39
          REMIC 2 Regular Interest LT2-AII3.................................39
          REMIC 2 Regular Interest LT2-2M1..................................39
          REMIC 2 Regular Interest LT2-2M2..................................39
          REMIC 2 Regular Interest LT2-2B...................................40
          REMIC 2 Regular Interest LT2-2ZZ..................................40
          REMIC 2 Regular Interest LT2P.....................................40
          REMIC 2 Regular Interests.........................................40
          REMIC 3  .........................................................40
          REMIC Provisions..................................................40
          REMIC Regular Interest............................................41
          Remittance Report.................................................41
          REO Acquisition...................................................41
          REO Disposition...................................................41
          REO Imputed Interest..............................................41
          REO Proceeds......................................................41
          REO Property......................................................41
          Request for Release...............................................41
          Residual Interest.................................................41
          Responsible Officer...............................................41
          Seller   .........................................................42

                                        v

<PAGE>

          Servicing Account.................................................42
          Servicing Advances................................................42
          Servicing Guide...................................................42
          Servicing Officer.................................................42
          Single Certificate................................................42
          Special Deposit...................................................42
          Standard & Poor's.................................................42
          Startup Day.......................................................42
          Stated Principal Balance..........................................42
          Stepdown Date.....................................................43
          Sub-Servicer......................................................43
          Sub-Servicer Remittance Date......................................43
          Sub-Servicing Account.............................................43
          Sub-Servicing Agreement...........................................43
          Sub-Servicing Fees................................................43
          Sub-Servicing Fee Rate............................................43
          Substitution Adjustment...........................................43
          Tax Returns.......................................................43
          Transfer .........................................................44
          Transferor........................................................44
          Trigger Event.....................................................44
          Trust Fund........................................................44
          Trustee  .........................................................44
          Trustee's Fee.....................................................45
          Trustee Fee Rate..................................................45
          Uncertificated Accrued Interest...................................45
          Uncertificated Notional Amount....................................45
          Uncertificated Principal Balance..................................45
          Uncertificated Pass-Through Rate..................................45
          Uncertificated REMIC 1 Pass-Through Rate..........................45
          Uncertificated REMIC 2 Pass-Through Rate..........................46
          Uninsured Cause...................................................46
          United States Person..............................................46
          Unpaid Interest Shortfall Amount..................................47
          Voting Rights.....................................................47
          Weighted Average Net Mortgage Rate................................47
          Wendover .........................................................47
          1.02     Allocation of Certain Interest Shortfalls................47

ARTICLE II

          CONVEYANCE OF MORTGAGE LOANS;
          ORIGINAL ISSUANCE OF CERTIFICATES.................................50
          2.01.    Conveyance of Mortgage Loans.............................50
          2.02.    Acceptance of the Trust Fund by the Trustee..............53

                                       vi

<PAGE>

          2.03.    Representations, Warranties and Covenants of the Master
                   Servicer and the Company.................................54
          2.04.    Representations and Warranties of the Seller.............56
          2.05.    Issuance of Certificates; Conveyance of  REMIC
                   Regular Interests and Acceptance of REMIC 2 by the
                   Trustee..................................................58

ARTICLE III

          ADMINISTRATION AND SERVICING
          OF THE TRUST FUND.................................................60
          3.01.    Master Servicer to Act as Master Servicer................60
          3.02.    Sub-Servicing Agreements Between Master Servicer and
                   Sub-Servicers............................................61
          3.03.    Successor Sub-Servicers..................................63
          3.04.    Liability of the Master Servicer.........................63
          3.05.    No Contractual Relationship Between Sub-Servicers
                   and Trustee or Certificateholders........................63
          3.06.    Assumption or Termination of Sub-Servicing
                   Agreements by Trustee....................................64
          3.07.    Collection of Certain Mortgage Loan Payments.............64
          3.08.    Sub-Servicing Accounts...................................65
          3.09.    Collection of Taxes, Assessments and Similar Items;
                   Servicing Accounts.......................................66
          3.10.    Custodial Account........................................66
          3.11.    Permitted Withdrawals From the Custodial Account.........67
          3.12.    Permitted Investments....................................68
          3.13.    Maintenance of Primary Hazard Insurance. ................69
          3.14.    Enforcement of Due-on-Sale Clauses; Assumption
                   Agreements...............................................71
          3.15.    Realization Upon Defaulted Mortgage Loans................72
          3.16.    Trustee to Cooperate; Release of Mortgage Files..........73
          3.17.    Servicing Compensation...................................74
          3.18.    Maintenance of Certain Servicing Policies................75
          3.19.    Annual Statement as to Compliance........................76
          3.20.    Annual Independent Public Accountants' Servicing
                   Statement................................................76
          3.21.    Access to Certain Documentation..........................77
          3.22.    Title, Conservation and Disposition of REO Property......77
          3.23.    Additional Obligations of the Master Servicer............79
          3.24     .........................................................79
          Additional Obligations of the Company.............................79
          3.25.    Periodic Filings with the Securities and Exchange
                   Commission; Additional Information.......................80
          3.26.    Administration of Buydown Funds..........................80

ARTICLE IV

          PAYMENTS TO CERTIFICATEHOLDERS....................................82
          4.01.    Distributions............................................82
          4.02.    Statements to Certificateholders.........................87
          4.03.    Remittance Reports; Advances by the Master Servicer......90

                                       vii

<PAGE>

          4.04.    Distributions on the REMIC Regular Interests.............91
          4.05.    Allocation of Realized Losses............................94
          4.06.    Information Reports to Be Filed by the Master Servicer...96
          4.07.    Compliance with Withholding Requirements.................96

ARTICLE V

          THE CERTIFICATES..................................................97
          5.01.    The Certificates.........................................97
          5.02.    Registration of Transfer and Exchange of Certificates....99
          5.03.    Mutilated, Destroyed, Lost or Stolen Certificates.......103
          5.04.    Persons Deemed Owners...................................103
          5.05.    Rule 144A Information...................................104

ARTICLE VI

          THE COMPANY AND THE MASTER SERVICER..............................105
          6.01.    Liability of the Company and the Master Servicer........105
          6.02.    Merger, Consolidation or Conversion of the Company
                   or the Master Servicer..................................105
          6.03.    Limitation on Liability of the Company, the Master
                   Servicer and Others.....................................105
          6.04.    Limitation on Resignation of the Master Servicer........106
          6.05.    Sale and Assignment of Master Servicing.................106

ARTICLE VII

          DEFAULT..........................................................108
          7.01.    Events of Default.......................................108
          7.02.    Trustee to Act; Appointment of Successor................110
          7.03.    Notification to Certificateholders......................110
          7.04.    Waiver of Events of Default.............................111
          7.05.    List of Certificateholders..............................111

ARTICLE VIII

          CONCERNING THE TRUSTEE...........................................112
          8.01.    Duties of Trustee.......................................112
          8.02.    Certain Matters Affecting the Trustee...................113
          8.03.    Trustee Not Liable for Certificates or Mortgage Loans...114
          8.04.    Trustee May Own Certificates............................115
          8.05.    Trustee's Fees..........................................115
          8.06.    Eligibility Requirements for Trustee....................115
          8.07.    Resignation and Removal of the Trustee..................116
          8.08.    Successor Trustee.......................................117
          8.09.    Merger or Consolidation of Trustee......................117
          8.10.    Appointment of Co-Trustee or Separate Trustee...........117

                                      viii

<PAGE>

ARTICLE IX

          TERMINATION......................................................119
          9.01.    Termination Upon Repurchase or Liquidation of All
                   Mortgage Loans or upon Purchase of Certificates.........119
          9.02.    Termination of REMIC 2 and REMIC 3......................121
          9.03.    Additional Termination Requirements.....................121

ARTICLE X

          REMIC PROVISIONS.................................................122
          10.01.   REMIC Administration....................................122
          10.02.   Prohibited Transactions and Activities..................124
          10.03.   Master Servicer and Trustee Indemnification.............125

ARTICLE XI

          MISCELLANEOUS PROVISIONS.........................................126
          11.01.   Amendment...............................................126
          11.02.   Recordation of Agreement; Counterparts..................127
          11.03.   Limitation on Rights of Certificateholders..............127
          11.04.   Governing Law...........................................128
          11.05.   Notices.................................................128
          11.06.   Severability of Provisions..............................129
          11.07.   Successors and Assigns..................................129
          11.08.   Article and Section Headings............................129
          11.09.   Notice to Rating Agencies...............................129

          Signatures
          Acknowledgments

          Exhibit A         Form of Class A Certificate
          Exhibit B-1       Form of Class M and Class B Certificate
          Exhibit B-2       Form of Class P Certificate
          Exhibit B-3       Form of Class C Certificate
          Exhibit B-4       Form of Class R Certificate
          Exhibit C         Form of Trustee Initial Certification
          Exhibit D         Form of Trustee Final Certification
          Exhibit E         Form of Remittance Report
          Exhibit F-1       Request for Release
          Exhibit F-2       Request for Release for Mortgage Loans Paid in Full
          Exhibit G-1       Form of Investor Representation Letter
          Exhibit G-2       Form of Transferor Representation Letter
          Exhibit G-3       Form of Rule 144A Investment Representation
          Exhibit G-4       Transferor Certificate for Transfers of Residual
                            Certificates

                                       ix

<PAGE>

          Exhibit G-5       Transfer Affidavit and Agreement for Transfers of
                            Residual Certificates
          Exhibit G-6       Form of Investor Representation Letter for Insurance
                            Companies
          Exhibit H         Mortgage Loan Schedule
          Exhibit I         Seller Representations and Warranties
          Exhibit J         Form of Notice Under Section 3.24
          Exhibit K         Impac Funding Corporation Servicing Guide

                                        x

<PAGE>

                   This Pooling and Servicing Agreement, dated and effective as
of May 1, 2001, among Impac Secured Assets Corp., as company (the "Company"),
Impac Funding Corporation, as master servicer (the "Master Servicer"), and
Bankers Trust Company of California, N.A., as trustee (the "Trustee").

                             PRELIMINARY STATEMENT:

                   The Company intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created hereunder. The Certificates will consist of fourteen
classes of certificates, designated as (i) the Class A-I-1, Class A-I-2, Class
A-I-4, Class A-I-5, Class A-II-1, Class A-II-3, Class A-3 and Class A-IO
Certificates, (ii) the Class M-1 Certificates, (iii) the Class M-2 Certificates,
(iv) the Class B Certificates, (v) the Class P Certificates, (vi) the Class C
Certificates and (vii) the Class R Certificates.

                                     REMIC 1

          As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement as a real estate mortgage investment
conduit (a "REMIC") for federal income tax purposes, and such segregated pool of
assets will be designated as "REMIC 1." The Class R-1 Interest will represent
the sole class of "residual interests" in REMIC 1 for purposes of the REMIC
Provisions (as defined herein) under federal income tax law. The following table
irrevocably sets forth the designation, the Uncertificated REMIC 1 Pass-Through
Rate, the initial Uncertificated Principal Balance, and solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC 1 Regular Interests. None of the REMIC 1
Regular Interests will be certificated.
<TABLE>
<CAPTION>

    Designation            Uncertificated REMIC 1           Initial Uncertificated              Assumed Final
---------------
                              Pass-Through Rate                Principal Balance              Maturity Date (1)
-------------------  ---------------------------------- ------------------------------        -----------------
<S>                        <C>                            <C>                                     <C>
       LT1A                     Variable(2)                   $180,252,804.60                        June 2031
       LT1B                     Variable(2)                     $1,218,878.66                        June 2031
       LT1C                     Variable (2)                      $601,856.74                        June 2031
       LT1D                     Variable(2)                    $20,230,000.00                        June 2031
       LT1P                     Variable(2)                           $100.00                        June 2031
</TABLE>
-------------------
(1)  Solely  for  purposes  of  Section   1.860G-1(a)(4)(iii)  of  the  Treasury
     regulations,  the  Distribution  Date in the month of the maturity date for
     the Mortgage Loan with the latest  maturity date has been designated as the
     "latest possible maturity date" for each REMIC 1 Regular Interest.

(2)  Calculated in accordance  with the  definition of  "Uncertificated  REMIC 1
     Pass-Through Rate" herein.

<PAGE>

                                     REMIC 2

        As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the REMIC 1 Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC 2". The Class R-2 Interest will represent the sole class of
"residual interests" in REMIC 2 for purposes of the REMIC Provisions.

        The following table irrevocably sets forth the designation, the
Uncertificated REMIC 2 Pass- Through Rate, the initial Uncertificated Principal
Balance, and solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC 2
Regular Interests. None of the REMIC 2 Regular Interests will be certificated.

<TABLE>
<CAPTION>
                    Uncertificated REMIC 2     Initial Uncertificated           Assumed Final
   Designation         Pass-Through Rate          Principal Balance           Maturity Date (1)
---------------- ---------------------------- ------------------------        -----------------
<S>                     <C>                      <C>                          <C>
    LT2-1AA              Variable(2)                 $132,722,052.68              June 2031
    LT2-AI1              Variable(2)                     $297,000.00              June 2031
    LT2-AI2              Variable(2)                     $181,000.00              June 2031
    LT2-AI3              Variable(2)                     $182,000.00              June 2031
    LT2-AI4              Variable(2)                     $307,000.00              June 2031
    LT2-AI5              Variable(2)                     $306,050.00              June 2031
    LT2-1M1              Variable(2)                      $38,858.78              June 2031
    LT2-1M2              Variable(2)                      $27,084.35              June 2031
     LT2-1B              Variable(2)                      $20,309.91              June 2031
    LT2-1ZZ              Variable(2)                   $1,354,310.27              June 2031
    LT2-2AA              Variable(2)                  $65,535,416.52              June 2031
    LT2-AII1             Variable(2)                     $168,600.00              June 2031
    LT2-AII2             Variable(2)                     $216,800.00              June 2031
    LT2-AII3             Variable(2)                     $243,200.00              June 2031
    LT2-2M1              Variable(2)                      $16,721.22              June 2031
    LT2-2M2              Variable(2)                      $13,375.65              June 2031
     LT2-2B              Variable(2)                      $10,030.09              June 2031
    LT2-2ZZ              Variable(2)                     $668,730.53              June 2031
    LT2A-IO              Variable(2)                       N/A(3)                 June 2031
      LT2P               Variable(2)                         $100.00              June 2031
</TABLE>
-------------------

(1)  Solely  for  purposes  of  Section   1.860G-1(a)(4)(iii)  of  the  Treasury
     regulations, the Distribution Date in the month following the maturity date
     for the Mortgage Loan with the latest  maturity date has been designated as
     the "latest possible maturity date" for each REMIC 2 Regular Interest.

(2)  Calculated in accordance  with the  definition of  "Uncertificated  REMIC 2
     Pass-Through Rate" herein.

(3)  REMIC 2 Regular Interest LT2A-IO will not have an Uncertificated  Principal
     Balance,  but will accrue  interest on its  Uncertificated  Notional Amount
     outstanding  from  time  to  time  which  shall  equal  the  Uncertificated
     Principal Balance of REMIC 1 Regular Interest LT1D.

                                        2

<PAGE>

                                     REMIC 3

        As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the REMIC 2 Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC 3". The Class R-3 Interest will represent the sole class of
"residual interests" in REMIC 3 for purposes of the REMIC Provisions.

        The following table irrevocably sets forth the Class designation,
Pass-Through Rate and Initial Certificate Principal Balance for each Class of
Certificates that represents one or more of the "regular interests" in REMIC 3
created hereunder:

<TABLE>
<CAPTION>

                                    Initial
                             Certificate Principal         Pass-Through            Assumed Final
    Class Designation               Balance                    Rate               Maturity Date(1)
    -----------------               -------                    ----               ----------------
<S>                          <C>                         <C>                    <C>
Class A-I-1                    $29,700,000.00              Variable(2)              April 2016
Class A-I-2                    $18,100,000.00              Variable(2)             October 2019
Class A-I-4                    $30,700,000.00              Variable(2)             August 2027
Class A-I-5                    $30,605,000.00              Variable(2)              June 2031
Class A-II-1                   $16,860,000.00              Variable(2)               May 2016
Class A-II-3                   $24,320,000.00              Variable(2)              June 2031
Class A-3                      $39,880,000.00              Variable(2)              April 2024
Class A-IO                          N/A (4)                Variable(2)            November 2003
Class M-1                      $ 5,058,000.00              Variable(2)              June 2031
Class M-2                      $ 4,046,000.00              Variable(2)              June 2031
Class B                        $ 3,034,000.00              Variable(2)              June 2031
Class C                         $540.00(3)                 Variable(2)              June 2031
Class P                         $100.00                      N/A(5)                 June 2031
</TABLE>
-------------------

(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date in the month following the maturity date
     for the Mortgage Loan with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates that
     represents one or more of the "regular interests" in REMIC 3.

     (2)  Calculated in accordance with the definition of "Pass-Through Rate"
          herein.

(3)  The Class C Certificates will accrue interest at their variable
     Pass-Through Rate on the Notional Amount of the Class C Certificates
     outstanding from time to time which shall equal the aggregate of the
     Uncertificated Principal Balances of the REMIC 2 Regular Interests. The
     Class C Certificates will not accrue interest on their Certificate
     Principal Balance.

(4)  The Class A-IO Certificates do not have a Certificate Principal Balance and
     are not entitled to distributions of principal. The Class A-IO Certificates
     accrue interest on a Notional Amount calculated in accordance with the
     definition of "Notional Amount" herein.

(5)  The Class P Certificates do not accrue interest.

                                        3

<PAGE>

        Using the Structuring Assumptions (as defined in the Prospectus
Supplement), assuming prepayments at 0% of the Prepayment Assumption, no losses
or delinquencies on the Mortgage Loans, a Required Overcollateralization Amount
of $0, and no Excess Cash Flow, the final scheduled Distribution Date on each
Class of Certificates would be as follows: (i) for the Class A-I-1 Certificates,
the Distribution Date in April 2016; (ii) for the Class A-I-2 Certificates, the
Distribution Date in October 2019; (iii) for the Class A-I-4 Certificates, the
Distribution Date in August 2027; (iv) for the Class A-II-1 Certificates, the
Distribution Date in May 2016; (v) for the Class A-3 Certificates, the
Distribution Date in April 2024; (vi) for the Class A-IO Certificates, the
Distribution Date in November 2003; and (vii) for the Class A-I-5, Class A-II-3,
Class M, Class B and Class C Certificates, the Distribution Date in June 2031.

        Due to Realized Losses, principal prepayments (including Principal
Prepayments, liquidations of defaulted Mortgage Loans, repurchases of Mortgage
Loans) and other differences between the Structuring Assumptions and the actual
behavior that the Mortgage Loans will exhibit during the period that they are
held in the Trust Fund, the final scheduled Distribution Date on each Class of
Certificates may be substantially earlier or later than the dates indicated in
the preceding paragraph. The failure of any Class of Certificates to be retired
on or before the applicable date indicated in the preceding paragraph shall not
constitute an Event of Default or a breach by any party hereto, nor shall any
Certificateholder (or the Trustee on behalf of any Certificateholder) be
entitled to any remedy for such failure. The termination of the Trust Fund and
the final distribution on any Class of the Certificates shall only occur in
accordance with the provisions of Section 4.01 and Article IX of this Agreement.

                                        4

<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

               SECTION 1.01.  Defined Terms.

               Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations in respect of interest on
the Class A Certificates (including the Class A-3 Components), the Mezzanine
Certificates, the Class C Certificates, the REMIC 1 Regular Interests and the
REMIC 2 Regular Interests shall be made on the basis a 360-day year consisting
of twelve 30-day months. The Class P Certificates and the Class R Certificates
do not accrue interest.

               "Accrual Period": With respect to each Class of Regular
Certificates (other than the Class P Certificates), including, with respect to
the Class A-3 Certificates, the Class A-3 Components, and each Distribution
Date, the calendar month prior to the month of such Distribution Date.

               "Advance": As to any Mortgage Loan, any advance made by the
Master Servicer on any Distribution Date pursuant to Section 4.03.

               "Aggregate Stated Principal Balance": As of any date of
determination, the aggregate Stated Principal Balance of the Mortgage Loans.

               "Agreement": This Pooling and Servicing Agreement and all
amendments hereof.

               "Allocated Realized Loss Amount": With respect to any
Distribution Date and any Class of Mezzanine Certificates, the sum of (i) any
Realized Losses allocated to such Class of Certificates on any Distribution Date
and (ii) the amount of any Allocated Realized Loss Amount for such Class of
Certificates remaining unpaid from the previous Distribution Date.

               "Anniversary": Each anniversary of May 1, 2001.

               "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.

               "Available Distribution Amount": With respect to any Distribution
Date, an amount equal to (a) the sum of (i) the balance on deposit in the
Custodial Account as of the close of business on the related Determination Date,
(ii) the aggregate amount of any Advances made and all amounts required to be
paid by the Master Servicer pursuant to Sections 3.13 and 3.23 by deposits into
the Certificate Account on the immediately preceding Certificate Account Deposit
Date, (iii) the aggregate amount of Mortgage Loan purchases made pursuant to
Section 9.01 and (iv) the aggregate

                                        5

<PAGE>

amount required to be deposited by the Master Servicer pursuant to Section
4.01(h), reduced by (b) the sum, as of the close of business on the related
Determination Date, of (i) Monthly Payments collected but due during a Due
Period subsequent to the Due Period ending on the first day of the month of the
related Distribution Date, (ii) all interest or other income earned on deposits
in the Custodial Account or the Certificate Account, (iii) any other amounts
reimbursable or payable to the Trustee, Master Servicer or any Sub-Servicer
pursuant to Section 3.11, (iv) the Master Servicing Fees, the Sub-Servicing Fees
and the fees of the Trustee payable on such Distribution Date, (v) any amounts
in respect of the premium payable to Radian under the Radian Lender-Paid PMI
Policy, (vi) Insurance Proceeds, Liquidation Proceeds, Principal Prepayments,
REO Proceeds and the proceeds of Mortgage Loan purchases made pursuant to
Section 2.02, 2.04, 3.14 or 3.22, in each case received or made after the first
day of the month of such Distribution Date and (vii) amounts on deposit in the
Custodial Account representing any Prepayment Charges or Master Servicer
Prepayment Charge Payment Amounts.

               "Balloon Loan": Each of the Mortgage Loans identified in the
Mortgage Loan Schedule as having an original term to maturity that is shorter
than the related amortization term.

               "Balloon Payment": With respect to any Balloon Loan, the related
Monthly Payment payable on the stated maturity date of such Balloon Loan.

               "Bankruptcy Code":  The Bankruptcy Code of 1978, as amended.

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

               "Book-Entry Certificate": Any Certificate registered in the name
of the Depository or its nominee.

               "Business Day": Any day other than a Saturday, Sunday or a day on
which banking institutions in California or New York (and such other state or
states in which the Custodial Account or the Certificate Account are at the time
located) or in the city in which the Corporate Trust Office of the Trustee is
located are authorized or obligated by law or executive order to close.

               "Buydown Funds": Any amount contributed by the seller of a
Mortgaged Property, the Company or other source in order to enable the Mortgagor
to reduce the payments required to be made from the Mortgagor's funds in the
early years of a Mortgage Loan. Buydown Funds are not part of the Trust Fund
prior to deposit into the Custodial or Certificate Account.

               "Buydown Mortgage Loan": Any Mortgage Loan as to which a
specified amount of interest is paid out of related Buydown Funds in accordance
with a related buydown agreement.

                                        6

<PAGE>

               "Cash Liquidation": As to any defaulted Mortgage Loan other than
a Mortgage Loan as to which an REO Acquisition occurred, a determination by the
Master Servicer that it has received all Insurance Proceeds, Liquidation
Proceeds and other payments or cash recoveries which the Master Servicer
reasonably and in good faith expects to be finally recoverable with respect to
such Mortgage Loan.

               "Certificate":  Any Regular Certificate or Class R Certificate.

               "Certificate Account": The trust account or accounts created and
maintained pursuant to Section 4.01, which shall be entitled "Bankers Trust
Company of California, N.A., in trust for registered holders of Impac Secured
Assets Corp., Mortgage Pass-Through Certificates, Series 2001-4, and which
account or accounts must each be an Eligible Account.

               "Certificate Account Deposit Date": With respect to any
Distribution Date, the third Business Day immediately preceding such
Distribution Date.

               "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that only a
Permitted Transferee shall be a holder of a Residual Certificate for any
purposes hereof and, solely for the purposes of giving any consent pursuant to
this Agreement, any Certificate registered in the name of the Company or the
Master Servicer or any affiliate thereof shall be deemed not to be outstanding
and the Voting Rights to which such Certificate is entitled shall not be taken
into account in determining whether the requisite percentage of Voting Rights
necessary to effect any such consent has been obtained, except as otherwise
provided in Section 11.01. The Trustee shall be entitled to rely upon a
certification of the Company or the Master Servicer in determining if any
Certificates are registered in the name of the respective affiliate. All
references herein to "Holders" or "Certificateholders" shall reflect the rights
of Certificate Owners as they may indirectly exercise such rights through the
Depository and participating members thereof, except as otherwise specified
herein; provided, however, that the Trustee shall be required to recognize as a
"Holder" or "Certificateholder" only the Person in whose name a Certificate is
registered in the Certificate Register.

               "Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate, as reflected on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent, if any, and otherwise on the books of a Depository
Participant, if any, and otherwise on the books of the Depository.

               "Certificate Principal Balance": With respect to any Class of
Regular Certificates (other than the Class A-3, Class A-IO and Class C
Certificates) immediately prior to any Distribution Date, the Initial
Certificate Principal Balance thereof reduced by the sum of all amounts actually
distributed in respect of principal of such Class and, in the case of a
Mezzanine Certificate, Realized Losses allocated thereto on all prior
Distribution Dates. With respect to the Class A-3 Certificates, the sum of the
Component Principal Balances of the Class A-3 Components. With respect to the
Class C Certificates as of any date of determination, an amount equal to the
excess, if any, of (A) the

                                        7

<PAGE>

then aggregate Uncertificated Principal Balances of the REMIC 2 Regular
Interests over (B) the then aggregate Certificate Principal Balances of the
Class A Certificates, the Mezzanine Certificates and the Class P Certificates
then outstanding. The Class A-IO Certificates will not have a Certificate
Principal Balance.

               "Certificate Register": The register maintained pursuant to
Section 5.02.

               "Class": Collectively, all of the Certificates bearing the same
designation.

               "Class A Certificate": Any one of the Class A-I-1, Class A-I-2,
Class A-I-4, Class A-I-5, Class A-II-1, Class A-II-3, Class A-3 and Class A-IO
Certificates.

               "Class A-I Certificate": Any one of the Class A-I-1, Class A-I-2,
Class A-I-4 or Class A-I-5 Certificates or the Class A-I-3 Component.

               "Class A-I-1 Certificate": Any one of the Class A-I-1
Certificates as designated on the face thereof substantially in the form annexed
hereto as Exhibit A, executed by the Trustee and authenticated and delivered by
the Trustee, representing the right to distributions as set forth herein and
therein and evidencing a Regular Interest in REMIC 3.

               "Class A-I-2 Certificate": Any one of the Class A-I-2
Certificates as designated on the face thereof substantially in the form annexed
hereto as Exhibit A, executed by the Trustee and authenticated and delivered by
the Trustee, representing the right to distributions as set forth herein and
therein and evidencing a Regular Interest in REMIC 3.

               "Class A-I-3 Component": The Class A-I-3 Component, representing
the right to distributions as set forth herein and therein and evidencing a
Regular Interest in REMIC 3.

               "Class A-I-4 Certificate": Any one of the Class A-I-4
Certificates as designated on the face thereof substantially in the form annexed
hereto as Exhibit A, executed by the Trustee and authenticated and delivered by
the Trustee, representing the right to distributions as set forth herein and
therein and evidencing a Regular Interest in REMIC 3.

               "Class A-I-5 Certificate": Any one of the Class A-I-5
Certificates as designated on the face thereof substantially in the form annexed
hereto as Exhibit A, executed by the Trustee and authenticated and delivered by
the Trustee, representing the right to distributions as set forth herein and
therein and evidencing a Regular Interest in REMIC 3.

               "Class A-II Certificate": Any one of the Class A-II-1 or Class
A-II-3 Certificates or the Class A-II-2 Component.

               "Class A-II-1 Certificate": Any one of the Class A-II-1
Certificates as designated on the face thereof substantially in the form annexed
hereto as Exhibit A, executed by the Trustee and

                                        8

<PAGE>

authenticated and delivered by the Trustee, representing the right to
distributions as set forth herein and therein and evidencing a Regular Interest
in REMIC 3.

               "Class A-II-2 Component": The Class A-II-2 Component,
representing the right to distributions as set forth herein and therein and
evidencing a Regular Interest in REMIC 3.

               "Class A-II-3 Certificate": Any one of the Class A-II-3
Certificates as designated on the face thereof substantially in the form annexed
hereto as Exhibit A, executed by the Trustee and authenticated and delivered by
the Trustee, representing the right to distributions as set forth herein and
therein and evidencing a Regular Interest in REMIC 3.

               "Class A-IO Rate": With respect to the Class A-IO Certificates
and (a) any of the first through the twelfth Distribution Dates, a per annum
rate equal to the excess of (i) the Weighted Average Net Mortgage Rate over (ii)
the excess (but not less than zero) of (x) the Weighted Average Net Mortgage
Rate over (y) 8.00% per annum, (b) any of the thirteenth through the eighteenth
Distribution Dates, a per annum rate equal to the excess of (i) the Weighted
Average Net Mortgage Rate over (ii) the excess (but not less than zero) of (x)
the Weighted Average Net Mortgage Rate over (y) 7.00% per annum, (c) any of the
nineteenth through the twenty-fourth Distribution Dates, a per annum rate equal
to the excess of (i) the Weighted Average Net Mortgage Rate over (ii) the excess
(but not less than zero) of (x) the Weighted Average Net Mortgage Rate over (y)
5.00% per annum, (d) any of the twenty-fifth through the thirtieth Distribution
Dates, a per annum rate equal to the excess of (i) the Weighted Average Net
Mortgage Rate over (ii) the excess (but not less than zero) of (x) the Weighted
Average Net Mortgage Rate over (y) 4.00% per annum and (e) any Distribution Date
after the thirtieth Distribution Date, 0.00% per annum.

               "Class A-IO Certificate": Any one of the Class A-IO Certificates
as designated on the face thereof substantially in the form annexed hereto as
Exhibit A, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein and therein
and evidencing a Regular Interest in REMIC 3.

               "Class A-3 Certificate": Any one of the Class A-3 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein and therein
and evidencing an interest in the Class A-3 Components.

               "Class A-3 Components": The Class A-I-3 Component and the Class
A-II-2 Component.

               "Class A Principal Distribution Amount": For any applicable
Distribution Date, an amount equal to the excess (if any) of (x) the Certificate
Principal Balance of the Class A Certificates immediately prior to such
Distribution Date over (y) the difference between (a) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received

                                        9

<PAGE>

or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) and (b) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period, and after reduction for
Realized Losses incurred during the related Prepayment Period) multiplied by the
sum of (A) approximately 12.00% and (B) the Current Specified
Overcollateralization Percentage.

               "Class B Certificate": Any one of the Class B Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit B-1, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein and therein
and evidencing a Regular Interest in REMIC 3.

               "Class B Principal Distribution Amount": For any applicable
Distribution Date, an amount equal to the excess (if any) of (x) the Certificate
Principal Balance of the Class B Certificates immediately prior to such
Distribution Date over (y) the difference between (a) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) and (b) the sum of (1) the Certificate Principal Balance of the Class A
Certificates (after taking into account the payment of the Class A Principal
Distribution Amount on such Distribution Date), (2) the Certificate Principal
Balance of the Class M-1 Certificates (after taking into account the payment of
the Class M-1 Principal Distribution Amount on such Distribution Date), (3) the
Certificate Principal Balance of the Class M-2 Certificates (after taking into
account the payment of the Class M-2 Principal Distribution Amount on such
Distribution Date), and (4) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) multiplied by the Current
Specified Overcollateralization Percentage.

               "Class C Certificate": Any one of the Class C Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit B-3, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein and therein
and evidencing a Regular Interest in REMIC 3.

               "Class M-1 Certificate": Any one of the Class M-1 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit B-1, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein and therein
and evidencing a Regular Interest in REMIC 3.

                                       10

<PAGE>

               "Class M-1 Principal Distribution Amount": For any applicable
Distribution Date, an amount equal to the excess (if any) of (x) the Certificate
Principal Balance of the Class M-1 Certificates immediately prior to such
Distribution Date over (y) the difference between (a) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) and (b) the sum of (1) the Certificate Principal Balance of the Class A
Certificates (after taking into account the payment of the Class A Principal
Distribution Amount on such Distribution Date) and (2) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) multiplied by the sum of (A) approximately 7.00% and (B) the Current
Specified Overcollateralization Percentage.

               "Class M-2 Certificate": Any one of the Class M-2 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit B-1, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein and therein
and evidencing a Regular Interest in REMIC 3.

               "Class M-2 Principal Distribution Amount": For any applicable
Distribution Date, an amount equal to the excess (if any) of (x) the Certificate
Principal Balance of the Class M-2 Certificates immediately prior to such
Distribution Date over (y) the difference between (a) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period), and (b) the sum of (1) the Certificate Principal Balance of the Class A
Certificates (after taking into account the payment of the Class A Principal
Distribution Amount on such Distribution Date), (2) the Certificate Principal
Balance of the Class M-1 Certificates (after taking into account the payment of
the Class M-1 Principal Distribution Amount on such Distribution Date), and (3)
the aggregate Stated Principal Balance of the Mortgage Loans as of the last day
of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) multiplied by the sum of (A) approximately 3.00% and (B) the
Current Specified Overcollateralization Percentage.

               "Class P Certificate": Any one of the Class P Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit B-2, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein and therein
and evidencing a Regular Interest in REMIC 3.

                                       11

<PAGE>

               "Class R Certificate": Any one of the Class R Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit B-4, executed by the Trustee and authenticated and delivered by the
Trustee, evidencing the ownership of the Class R-1 Interest, Class R-2 Interest
and the Class R-3 Interest.

               "Class R-1 Interest": The uncertificated Residual Interest in
REMIC 1.

               "Class R-2 Interest": The uncertificated Residual Interest in
REMIC 2.

               "Class R-3 Interest": The uncertificated Residual Interest in
REMIC 3.

               "Closing Date":  May 30, 2001.

               "Code":  The Internal Revenue Code of 1986.

               "Collateral Value": The appraised value of a Mortgaged Property
based upon the lesser of (i) the appraisal (as reviewed and approved by the
Seller) made at the time of the origination of the related Mortgage Loan, or
(ii) the sales price of such Mortgaged Property at such time of origination.
With respect to a Mortgage Loan the proceeds of which were used to refinance an
existing mortgage loan, the appraised value of the Mortgaged Property based upon
the appraisal (as reviewed and approved by the Seller) obtained at the time of
refinancing.

               "Commission":  The Securities and Exchange Commission.

               "Company": Impac Secured Assets Corp., or its successor in
interest.

               "Compensating Interest": With respect to any Distribution Date,
an amount equal to Prepayment Interest Shortfalls resulting from Principal
Prepayments during the related Prepayment Period, but not more than the sum of
the Master Servicing Fees and the Sub-Servicing Fees for the immediately
preceding Due Period.

               "Component Principal Balance": With respect to any of the Class
A-3 Components, immediately prior to any Distribution Date, the Initial
Component Principal Balance thereof reduced by the sum of all amounts actually
distributed in respect of principal of such Class.

               "Corporate Trust Office": The principal corporate trust office of
the Trustee at which at any particular time its corporate trust business related
to this Agreement shall be administered, which office at the date of the
execution of this Agreement is located at 1761 East St. Andrew Place, Santa Ana,
California 92705, Attention: Corporate Trust, Impac Secured Assets Corp. Series
2001-4 IM01S4.

               "Corresponding Certificate or Component": With respect to:

                                       12

<PAGE>

                       (i) REMIC 2 Regular Interest LT2-AI1, the Class A-I-1
                       Certificates,

                       (ii) REMIC 2 Regular Interest LT2-AI2, the Class A-I-2
                       Certificates,

                       (iii) REMIC 2 Regular Interest LT2-AI3, the Class A-I-3
                       Component,

                       (iv) REMIC 2 Regular Interest LT2-AI4, the Class A-I-4
                       Certificates,

                       (v) REMIC 2 Regular Interest LT2-AI5, the Class A-I-5
                       Certificates,

                       (vi) REMIC 2 Regular Interest LT2-AII1, the Class A-II-1
                       Certificates,

                       (vii) REMIC 2 Regular Interest LT2-AII2, the Class A-II-2
                       Component,

                       (viii) REMIC 2 Regular Interest LT2-AII3, the Class
                       A-II-3 Certificates,

                       (ix) REMIC 2 Regular Interest LT2-1M1 and REMIC 2 Regular
                       Interest LT2- 2M1, the Class M-1 Certificates,

                       (x) REMIC 2 Regular Interest LT2-1M2 and REMIC 2 Regular
                       Interest LT2- 2M2, the Class M-2 Certificates,

                       (xi) REMIC 2 Regular Interest LT2-1B and REMIC 2 Regular
                       Interest LT2- 2B, the Class B Certificates, and

                       (xii) REMIC 2 Regular Interest LT2P, the Class P
                       Certificates.

               "Current Specified Overcollateralization Percentage": For any
Distribution Date, a percentage equal to (a) the Overcollateralization Target
Amount divided by (b) the aggregate Stated Principal Balance of the Mortgage
Loans as of the last day of the related Due Period (after giving effect to
scheduled payments of principal due during the related Due Period, to the extent
received or advanced, and unscheduled collections of principal received during
the related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period).

               "Curtailment": Any Principal Prepayment made by a Mortgagor which
is not a Principal Prepayment in Full.

               "Custodial Account": The custodial account or accounts created
and maintained pursuant to Section 3.10 in the name of a depository institution,
as custodian for the holders of the Certificates. Any such account or accounts
shall be an Eligible Account.

               "Cut-off Date":  May 1, 2001.

                                       13

<PAGE>

               "Defaulted Mortgage Loan" means any Mortgage Loan as to which the
Mortgagor has failed to make unexcused three or more consecutive scheduled
Monthly Payments.

               "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 Monthly Payment that constitutes a permanent forgiveness of principal,
which valuation or reduction results from a proceeding under the Bankruptcy
Code.

               "Definitive Certificate": Any definitive, fully registered
Certificate.

               "Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced with a Qualified Substitute Mortgage Loan.

               "Depository" The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository for purposes
of registering those Certificates that are to be Book-Entry Certificates is Cede
& Co. The Depository shall at all times be a "clearing corporation" as defined
in Section 8-102(5) of the Uniform Commercial Code of the State of New York and
a "clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended.

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

               "Determination Date": The 15th day (or if such 15th day is not a
Business Day, the Business Day immediately preceding such 15th day) of the month
of the related Distribution Date.

               "Disqualified Organization": Any organization defined as a
"disqualified organization" under Section 860E(e)(5) of the Code, which includes
any of the following: (i) the United States, any State or political subdivision
thereof, any possession of the United States, or any agency or instrumentality
of any of the foregoing (other than an instrumentality which is a corporation if
all of its activities are subject to tax and, except for the Freddie Mac, a
majority of its board of directors is not selected by such governmental unit),
(ii) a foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, (iii) any organization (other than
certain farmers' cooperatives described in Section 521 of the Code) which is
exempt from the tax imposed by Chapter 1 of the Code (including the tax imposed
by Section 511 of the Code on unrelated business taxable income), (iv) rural
electric and telephone cooperatives described in Section 1381(a)(2)(C) of the
Code and (v) any other Person so designated by the Trustee based upon an Opinion
of Counsel that the holding of an Ownership Interest in a Class R Certificate by
such Person may cause any of REMIC 1, REMIC 2 or REMIC 3 or any Person having an
Ownership Interest in any Class of Certificates (other than such Person) to
incur a liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the Transfer of an

                                       14

<PAGE>

Ownership Interest in a Class R Certificate to such Person. The terms "United
States", "State" and "international organization" shall have the meanings set
forth in Section 7701 of the Code or successor provisions.

               "Distribution Date": The 25th day of any month, or if such 25th
day is not a Business Day, the Business Day immediately following such 25th day,
commencing in June 2001.

               "Due Date": The first day of the month of the related
Distribution Date.

               "Due Period": With respect to any Distribution Date, the period
commencing on the second day of the month preceding the month of such
Distribution Date (or, with respect to the first Due Period, the day following
the Cut-off Date) and ending on the related Due Date.

               "Eligible Account": Any of (i) a segregated account maintained
with a federal or state chartered depository institution (A) the short-term
obligations of which are rated A-1+ or better by Standard & Poor's and P-1 by
Moody's (and F-1 by Fitch if rated by Fitch) at the time of any deposit therein
or (B) insured by the FDIC (to the limits established by such Corporation), the
uninsured deposits in which account are otherwise secured such that, as
evidenced by an Opinion of Counsel (obtained by the Person requesting that the
account be held pursuant to this clause (ii)) delivered to the Trustee prior to
the establishment of such account, the Certificateholders will have a claim with
respect to the funds in such account and a perfected first priority security
interest against any collateral (which shall be limited to Permitted
Investments, each of which shall mature not later than the Business Day
immediately preceding the Distribution Date next following the date of
investment in such collateral or the Distribution Date if such Permitted
Investment is an obligation of the institution that maintains the Certificate
Account or Custodial Account) securing such funds that is superior to claims of
any other depositors or general creditors of the depository institution with
which such account is maintained, (ii) a segregated trust account or accounts
maintained with a federal or state chartered depository institution or trust
company with trust powers acting in its fiduciary capacity or (iii) a segregated
account or accounts of a depository institution acceptable to the Rating
Agencies (as evidenced in writing by the Rating Agencies that use of any such
account as the Custodial Account or the Certificate Account will not have an
adverse effect on the then- current ratings assigned to the Classes of the
Certificates then rated by the Rating Agencies). Eligible Accounts may bear
interest.

               "Event of Default": One or more of the events described in
Section 7.01.

               "Excess Overcollateralized Amount": With respect to the Class A
Certificates (other than the Class A-IO Certificates) and the Mezzanine
Certificates and any Distribution Date, the excess, if any, of (i) the
Overcollateralized Amount for such Distribution Date, assuming that 100% of the
Principal Remittance Amount is applied as a principal payment on such
Distribution Date over (ii) the Overcollateralization Target Amount for such
Distribution Date.

               "Excess Proceeds":  As defined in Section 3.22.

                                       15

<PAGE>

               "Extra Principal Distribution Amount": With respect to any
Distribution Date, the lesser of (x) the Net Monthly Excess Cashflow for such
Distribution Date and (y) the Overcollateralization Deficiency Amount for such
Distribution Date.

               "Fannie Mae": Federal National Mortgage Association or any
successor.

               "FDIC":  Federal Deposit Insurance Corporation or any successor.

               "Fitch":  Fitch, Inc., or its successor in interest.

               "Freddie Mac": Federal Home Loan Mortgage Corporation or any
successor.

               "Funding Date": With respect to each Mortgage Loan, the date on
which funds were advanced by or on behalf of the Seller and interest began to
accrue thereunder.

               "GMAC": GMAC Mortgage Corporation.

               "Group 1 Loan": Any Mortgage Loan identified as a Group 1 Loan on
the Mortgage Loan Schedule.

               "Group 2 Loan": Any Mortgage Loan identified as a Group 2 Loan on
the Mortgage Loan Schedule.

               "Group 1 Marker Rate": With respect to the Class C Certificates
and any Distribution Date, a per annum rate equal to two (2) times the weighted
average of the Uncertificated REMIC 2 Pass-Through Rates for REMIC 2 Regular
Interest LT2-AI1, REMIC 2 Regular Interest LT2-AI2, REMIC 2 Regular Interest
LT2-AI3, REMIC 2 Regular Interest LT2-AI4, REMIC 2 Regular Interest LT2-AI5,
REMIC 2 Regular Interest LT2-1MI, REMIC 2 Regular Interest LT2-1M2, REMIC 2
Regular Interest LT2-1B and REMIC 2 Regular Interest LT2-1ZZ, with the rate on
REMIC 2 Regular Interest LT2-AI1 subject to a cap equal to the lesser of (x)
5.15% per annum and (y) the Group 1 Net WAC Rate for the purpose of this
calculation; with the rate on REMIC 2 Regular Interest LT2-AI2 subject to a cap
equal to the lesser of (x) 5.53% per annum and (y) the Group 1 Net WAC Rate for
the purpose of this calculation; with the rate on REMIC 2 Regular Interest
LT2-AI3 subject to a cap equal to the lesser of (x) 6.38% per annum and (y) the
Group 1 Net WAC Rate for the purpose of this calculation; with the rate on REMIC
2 Regular Interest LT2-AI4 subject to a cap equal to the lesser of (x) 6.65% per
annum and (y) the Group 1 Net WAC Rate for the purpose of this calculation; with
the rate on REMIC 2 Regular Interest LT2-AI5 subject to a cap equal to (A) in
the case of any Distribution Date up to and including the Optional Termination
Date, the lesser of (x) 7.36% per annum and (y) the Group 1 Net WAC Rate and (B)
in the case of any Distribution Date after the Optional Termination Date, the
lesser of (x) 7.86% per annum and (y) the Group 1 Net WAC Rate for the purpose
of this calculation; with the rate on REMIC 2 Regular Interest LT2-1M1 subject
to a cap equal to (A) in the case of any Distribution Date up to and including
the Optional Termination Date, the lesser of (x) 7.250% per annum and (y) the
Mezzanine Net WAC Rate and

                                       16

<PAGE>

(B) in the case of any Distribution Date after the Optional Termination Date,
the lesser of (x) 7.750% per annum and (y) the Mezzanine Net WAC Rate for the
purpose of this calculation; with the rate on REMIC 2 Regular Interest LT2-1M2
subject to a cap equal to (A) in the case of any Distribution Date up to and
including the Optional Termination Date, the lesser of (x) 7.250% per annum and
(y) the Mezzanine Net WAC Rate and (B) in the case of any Distribution Date
after the Optional Termination Date, the lesser of (x) 7.750% per annum and (y)
the Mezzanine Net WAC Rate for the purpose of this calculation; with the rate on
REMIC 2 Regular Interest LT2-1B subject to a cap equal to (A) in the case of any
Distribution Date up to and including the Optional Termination Date, the lesser
of (x) 7.250% per annum and (y) the Mezzanine Net WAC Rate and (B) in the case
of any Distribution Date after the Optional Termination Date, the lesser of (x)
7.750% per annum and (y) the Mezzanine Net WAC Rate for the purpose of this
calculation; and with the rate on REMIC 2 Regular Interest LT2-1ZZ subject to a
cap of zero for the purpose of this calculation.

        "Group 1 Net WAC Rate": With respect to each Distribution Date through
and including the Distribution Date in November 2003, the Net WAC Rate and for
each Distribution Date thereafter, the weighted average of the Net Mortgage
Rates of the Group 1 Mortgage Loans, weighted on the basis of the Stated
Principal Balances thereof as of the close of business on the first day of the
calendar month preceding the month in which such Distribution Date occurs.

        "Group 2 Marker Rate": With respect to the Class C Certificates and any
Distribution Date, a per annum rate equal to two (2) times the weighted average
of the Uncertificated REMIC 2 Pass-Through Rates for REMIC 2 Regular Interest
LT2-AII1, REMIC 2 Regular Interest LT2-AII2, REMIC 2 Regular Interest LT2-AII3,
REMIC 2 Regular Interest LT2-2MI, REMIC 2 Regular Interest LT2-2M2, REMIC 2
Regular Interest LT2-2B and REMIC 2 Regular Interest LT2-2ZZ; with the rate on
REMIC 2 Regular Interest LT2-AII1 subject to a cap equal to the lesser of (x)
5.38% per annum and (y) the Group 2 Net WAC Rate for the purpose of this
calculation; with the rate on REMIC 2 Regular Interest LT2-AII2 subject to a cap
equal to the lesser of (x) 6.38% per annum and (y) the Group 2 Net WAC Rate for
the purpose of this calculation; with the rate on REMIC 2 Regular Interest
LT2-AII3 subject to a cap equal to (A) in the case of any Distribution Date up
to and including the Optional Termination Date, the lesser of (x) 7.250% per
annum and (y) the Group 2 Net WAC Rate and (B) in the case of any Distribution
Date after the Optional Termination Date, the lesser of (x) 7.750% per annum and
(y) the Group 2 Net WAC Rate for the purpose of this calculation; with the rate
on REMIC 2 Regular Interest LT2-2MI subject to a cap equal to (A) in the case of
any Distribution Date up to and including the Optional Termination Date, the
lesser of (x) 7.250% per annum and (y) the Mezzanine Net WAC Rate and (B) in the
case of any Distribution Date after the Optional Termination Date, the lesser of
(x) 7.750% per annum and (y) the Mezzanine Net WAC Rate for the purpose of this
calculation; with the rate on REMIC 2 Regular Interest LT2-2M2 subject to a cap
equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 7.250% per annum and (y) the
Mezzanine Net WAC Rate and (B) in the case of any Distribution Date after the
Optional Termination Date, the lesser of (x) 7.750% per annum and (y) the
Mezzanine Net WAC Rate for the purpose of this calculation; with the rate on
REMIC 2 Regular Interest LT2-2B subject to a cap equal to (A) in the case of any
Distribution Date up to and including the Optional Termination Date, the lesser
of (x) 7.250% per

                                       17

<PAGE>

annum and (y) the Mezzanine Net WAC Rate and (B) in the case of any Distribution
Date after the Optional Termination Date, the lesser of (x) 7.750% per annum and
(y) the Mezzanine Net WAC Rate for the purpose of this calculation; and with the
rate on REMIC 2 Regular Interest LT2-2ZZ subject to a cap of zero for the
purpose of this calculation.

               "Group 2 Net WAC Rate": With respect to each Distribution Date
through and including the Distribution Date in November 2003, the Net WAC Rate
and for each Distribution Date thereafter, the weighted average of the Net
Mortgage Rates of the Group 2 Mortgage Loans, weighted on the basis of the
Stated Principal Balances thereof as of the close of business on the first day
of the calendar month preceding the month in which such Distribution Date
occurs.

               "Initial Certificate Principal Balance": With respect to each
Class of Regular Certificates (other than the Class A-IO Certificates), the
Initial Certificate Principal Balance of such Class of Certificates as set forth
in the Preliminary Statement hereto, or with respect to any single Certificate,
the Initial Certificate Principal Balance as stated on the face thereof.

               "Initial Component Principal Balance": With respect to the Class
A-I-3 Component, $18,200,000, and with respect to the Class A-II-2 Component,
$21,680,000.

               "Initial Notional Amount": With respect to the Class A-IO
Certificates, $20,230,000.00 or with respect to any single Certificate, the
Initial Notional Amount as stated on the face thereof. With respect to the Class
C Certificate, the aggregate of the initial Uncertificated Principal Balance of
the REMIC 2 Regular Interests, or with respect to any single Certificate, the
Initial Notional Amount as stated on the face thereof.

               "Insurance Policy": With respect to any Mortgage Loan, any
insurance policy (including a Radian Lender-Paid PMI Policy) which is required
to be maintained from time to time under this Agreement in respect of such
Mortgage Loan.

               "Insurance Proceeds": Proceeds paid in respect of the Mortgage
Loans pursuant to any Primary Hazard Insurance Policy, any Primary Insurance
Policy, any title insurance policy or any other insurance policy covering a
Mortgage Loan, to the extent such proceeds are not applied to the restoration of
the related Mortgaged Property or released to the Mortgagor in accordance with
the procedures that the Master Servicer would follow in servicing mortgage loans
held for its own account.

               "Interest Remittance Amount": With respect to any Distribution
Date, that portion of the Available Distribution Amount for such Distribution
Date allocable to interest received or advanced on the Mortgage Loans.

               "Late Collections": With respect to any Mortgage Loan, all
amounts received during any Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds,

                                       18

<PAGE>

Liquidation Proceeds or otherwise, which represent late payments or collections
of Monthly Payments due but delinquent for a previous Due Period and not
previously recovered.

               "Liquidated Mortgage Loan": As to any Distribution Date, any
Mortgage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified herein, as of the end of the
related Prepayment Period, that all Liquidation Proceeds which it expects to
recover with respect to the liquidation of the Mortgage Loan or disposition of
the related REO Property have been recovered.

               "Liquidation Proceeds": Amounts (other than Insurance Proceeds)
received by the Master Servicer in connection with the taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
in connection with the liquidation of a defaulted Mortgage Loan through
trustee's sale, foreclosure sale or otherwise, other than amounts received in
respect of any REO Property.

               "Loan-to-Value Ratio": As of any date, the fraction, expressed as
a percentage, the numerator of which is the current principal balance of the
related Mortgage Loan at the date of determination and the denominator of which
is the Collateral Value of the related Mortgaged Property.

               "Lost Note Affidavit": With respect to any Mortgage Note, an
original lost note affidavit from the Seller stating that the original Mortgage
Note was lost, misplaced or destroyed, together with a copy of the related
Mortgage Note.

               "Majority Class C Certificateholder": As defined in Section 9.01.

               "Master Servicer": Impac Funding Corporation, or any successor
master servicer appointed as herein provided.

               "Master Servicer Prepayment Charge Payment Amount": The amounts
payable by the Master Servicer in respect of any waived Prepayment Charges
pursuant to Section 2.03, and any amount paid to the Trust Fund by any Person to
remedy any breach of any representation, warranty of covenant made with respect
to the Prepayment Charges to the extent the Trust Fund, as assignee, is the
beneficiary of such representation, warranty or covenant.

               "Master Servicing Fees": As to each Mortgage Loan, an amount,
payable out of any payment of interest on the Mortgage Loan, equal to interest
at the Master Servicing Fee Rate on the Stated Principal Balance of such
Mortgage Loan for the calendar month preceding the month in which the payment is
due (alternatively, in the event such payment of interest accompanies a
Principal Prepayment in Full made by the Mortgagor, interest for the number of
days covered by such payment of interest).

               "Master Servicing Fee Rate": With respect to each Mortgage Loan,
the per annum rate of 0.03%.

                                       19

<PAGE>

               "Maximum Uncertificated Accrued Interest Deferral Amount": With
respect to any Distribution Date, the excess of (a) the sum of (I) accrued
interest at the Uncertificated REMIC 2 Pass-Through Rate applicable to REMIC 2
Regular Interest LT2-1ZZ for such Distribution Date on a balance equal to the
excess of (i) the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-1ZZ and (ii) the REMIC 2 Group 1 Overcollateralized Amount for such
Distribution Date and (II) accrued interest at the Uncertificated REMIC 2
Pass-Through Rate applicable to REMIC 2 Regular Interest LT2-2ZZ for such
Distribution Date on a balance equal to the excess of (i) the Uncertificated
Principal Balance of REMIC 2 Regular Interest LT2-2ZZ and (ii) the REMIC 2 Group
2 Overcollateralized Amount for such Distribution Date, over (b) Uncertificated
Accrued Interest on REMIC 2 Regular Interest LT2-AI1, with the rate on REMIC 2
Regular Interest LT2-AI1 subject to a cap equal to the lesser of (x) 5.15% per
annum and (y) the Group 1 Net WAC Rate; Uncertificated Accrued Interest on REMIC
2 Regular Interest LT2-AI2, with the rate on REMIC 2 Regular Interest LT2-AI2
subject to a cap equal to the lesser of (x) 5.53% per annum and (y) the Group 1
Net WAC Rate; Uncertificated Accrued Interest on REMIC 2 Regular Interest
LT2-AI3, with the rate on REMIC 2 Regular Interest LT2-AI3 subject to a cap
equal to the lesser of (x) 6.38% per annum and (y) the Group 1 Net WAC Rate;
Uncertificated Accrued Interest on REMIC 2 Regular Interest LT2-AI4, with the
rate on REMIC 2 Regular Interest LT2-AI4 subject to a cap equal to the lesser of
(x) 6.65% per annum and (y) the Group 1 Net WAC Rate; Uncertificated Accrued
Interest on REMIC 2 Regular Interest LT2-AI5, with the rate on REMIC 2 Regular
Interest LT2-AI5 subject to a cap equal to (A) in the case of any Distribution
Date up to and including the Optional Termination Date, the lesser of (x) 7.36%
per annum and (y) the Group 1 Net WAC Rate and (B) in the case of any
Distribution Date after the Optional Termination Date, the lesser of (x) 7.86%
per annum and (y) the Group 1 Net WAC Rate; Uncertificated Accrued Interest on
REMIC 2 Regular Interest LT2-1M1 with the rate on REMIC 2 Regular Interest
LT2-1M1 subject to a cap equal to (A) in the case of any Distribution Date up to
and including the Optional Termination Date, the lesser of (x) 7.250% per annum
and (y) the Mezzanine Net WAC Rate and (B) in the case of any Distribution Date
after the Optional Termination Date, the lesser of (x) 7.750% per annum and (y)
the Mezzanine Net WAC Rate for the purpose of this calculation, Uncertificated
Accrued Interest on REMIC 2 Regular Interest LT2-1M2, with the rate on REMIC 2
Regular Interest LT2-1M2 subject to a cap equal to (A) in the case of any
Distribution Date up to and including the Optional Termination Date, the lesser
of (x) 7.250% per annum and (y) the Mezzanine Net WAC Rate and (B) in the case
of any Distribution Date after the Optional Termination Date, the lesser of (x)
7.750% per annum and (y) the Mezzanine Net WAC Rate for the purpose of this
calculation, Uncertificated Accrued Interest on REMIC 2 Regular Interest LT2-1B,
with the rate on REMIC 2 Regular Interest LT2-1B subject to a cap equal to (A)
in the case of any Distribution Date up to and including the Optional
Termination Date, the lesser of (x) 7.250% per annum and (y) the Mezzanine Net
WAC Rate and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 7.750% per annum and (y) the Mezzanine Net
WAC Rate for the purpose of this calculation, Uncertificated Accrued Interest on
REMIC 2 Regular Interest LT2-OAII1, with the rate on REMIC 2 Regular Interest
LT2-OAII1 subject to a cap equal to the lesser of (x) 5.38% per annum and (y)
the Group 2 Net WAC Rate; Uncertificated Accrued Interest on REMIC 2 Regular
Interest LT2-AII2, with the rate on REMIC 2 Regular Interest LT2-AII2 subject to
a cap equal to the lesser of (x) 6.38% per annum and (y) the Group 2 Net WAC
Rate; Uncertificated Accrued Interest on REMIC 2 Regular Interest LT2-AII3, with
the rate on REMIC 2 Regular Interest LT2-AII3 subject to a cap

                                       20

<PAGE>

equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 7.250% per annum and (y) the Group
2 Net WAC Rate and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 7.750% per annum and (y) the Group 2 Net WAC
Rate for the purpose of this calculation, Uncertificated Accrued Interest on
REMIC 2 Regular Interest LT2-2M1, with the rate on REMIC 2 Regular Interest
LT2-2M1 subject to a cap equal to (A) in the case of any Distribution Date up to
and including the Optional Termination Date, the lesser of (x) 7.250% per annum
and (y) the Mezzanine Net WAC Rate and (B) in the case of any Distribution Date
after the Optional Termination Date, the lesser of (x) 7.750% per annum and (y)
the Mezzanine Net WAC Rate for the purpose of this calculation, Uncertificated
Accrued Interest on REMIC 2 Regular Interest LT2-2M2, with the rate on REMIC 2
Regular Interest LT2-2M2 subject to a cap equal to (A) in the case of any
Distribution Date up to and including the Optional Termination Date, the lesser
of (x) 7.250% per annum and (y) the Mezzanine Net WAC Rate and (B) in the case
of any Distribution Date after the Optional Termination Date, the lesser of (x)
7.750% per annum and (y) the Mezzanine Net WAC Rate for the purpose of this
calculation, and Uncertificated Accrued Interest on REMIC 2 Regular Interest
LT2-2B, with the rate on REMIC 2 Regular Interest LT2-2B subject to a cap equal
to (A) in the case of any Distribution Date up to and including the Optional
Termination Date, the lesser of (x) 7.250% per annum and (y) the Mezzanine Net
WAC Rate and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 7.750% per annum and (y) the Mezzanine Net
WAC Rate for the purpose of this calculation.

               "Mezzanine Certificate": Any Class M-1 Certificate, Class M-2
Certificate or Class B Certificate.

               "Mezzanine Net WAC Rate": (A) For the June 2001 Distribution Date
through the November 2003 Distribution Date, a per annum rate equal to the Net
WAC Rate and (B) for each Distribution Date thereafter, the lesser of (1) the
weighted average of the Net Mortgage Rates of the Group 1 Loans as of the first
day of the month preceding the month in which such Distribution Date occurs and
(2) the weighted average of the Net Mortgage Rates of the Group 2 Loans as of
the first day of the month preceding the month in which such Distribution Date
occurs.

               "Monthly Interest Distributable Amount": With respect to the
Class A Certificates, Mezzanine Certificates and Class C Certificates,
including, in the case of the Class A-3 Certificates, the Class A-3 Components,
and any Distribution Date, the amount of interest accrued during the related
Accrual Period at the related Pass-Through Rate on the Certificate Principal
Balance (or Notional Amount in the case of the Class A-IO Certificates and Class
C Certificates, or Component Principal Balance in the case of the Class A-3
Components) of such Class or Class A-3 Component immediately prior to such
Distribution Date, in each case, reduced by any Net Prepayment Interest
Shortfalls and Relief Act Interest Shortfalls (allocated to such Certificate or
Class A-3 Component as set forth in Section 1.02).

               "Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by a Mortgagor from time to time under the related Mortgage Note as
originally executed (after adjustment, if any, for Deficient

                                       21

<PAGE>

Valuations occurring prior to such Due Date, and after any adjustment by reason
of any bankruptcy or similar proceeding or any moratorium or similar waiver or
grace period).

               "Moody's": Moody's Investors Service, Inc., or its successor in
interest.

               "Mortgage": The mortgage, deed of trust or any other instrument
securing the Mortgage Loan.

               "Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement; provided, that
whenever the term "Mortgage File" is used to refer to documents actually
received by the Trustee, such term shall not be deemed to include such
additional documents required to be added unless they are actually so added.

               "Mortgage Loan": Each of the mortgage loans, transferred and
assigned to the Trustee pursuant to Section 2.01 or Section 2.04 and from time
to time held in the Trust Fund (including any Qualified Substitute Mortgage
Loans), the Mortgage Loans so transferred, assigned and held being identified in
the Mortgage Loan Schedule. As used herein, the term "Mortgage Loan" includes
the related Mortgage Note and Mortgage.

               "Mortgage Loan Purchase Agreement": The Mortgage Loan Purchase
Agreement dated as of May 1, 2001, among Impac Funding Corporation, as seller,
Impac Mortgage Holdings, Inc., as guarantor, and the Company as purchaser, and
all amendments thereof and supplements thereto.

               "Mortgage Loan Schedule": As of any date of determination, the
schedule of Mortgage Loans included in the Trust Fund. The initial schedule of
Mortgage Loans with accompanying information transferred on the Closing Date to
the Trustee as part of the Trust Fund for the Certificates, attached hereto as
Exhibit H (as amended from time to time to reflect the addition of Qualified
Substitute Mortgage Loans) (and, for purposes of the Trustee pursuant to Section
2.02, in computer-readable form as delivered to the Trustee), which list shall
set forth the following information with respect to each Mortgage Loan:
<TABLE>
<CAPTION>

<S>      <C>          <C>
             (i)       the loan number and name of the Mortgagor;

            (ii)       the street address, city, state and zip code of the Mortgaged Property;

           (iii)       (A) the original term to maturity and (B) if such Mortgage Loan is a Balloon
                       Loan, the amortization term thereof;

            (iv)       the original principal balance and the original Mortgage Rate;

             (v)       the first payment date;

                                       22

<PAGE>

            (vi)       whether the Mortgage Loan is a Balloon Mortgage Loan or a Mortgage Loan
                       the terms of which do not provide for a Balloon Payment;

           (vii)       the type of Mortgaged Property;

          (viii)       the Monthly Payment in effect as of the Cut-off Date;

            (ix)       the principal balance as of the Cut-off Date;

             (x)       the Mortgage Rate as of the Cut-off Date;

            (xi)       the occupancy status;

           (xii)       the purpose of the Mortgage Loan;

          (xiii)       the Collateral Value of the Mortgaged Property;

           (xiv)       the original term to maturity;

            (xv)       the paid-through date of the Mortgage Loan;

           (xvi)       the Master Servicing Fee Rate;

            (xvii)     the Sub-Servicing Fee Rate;

         (xviii)       the Net Mortgage Rate for such Mortgage Loan;

           (xix)       whether such Mortgage Loan is a Radian Insured Loan and, if so, the related
                       Radian PMI Policy Rate;

            (xx)       whether the Mortgage Loan is covered by a private mortgage insurance policy
                       or an original certificate of private mortgage insurance;

           (xxi)       the documentation type;

          (xxii)       the type and term of the related Prepayment Charge, if any; and

         (xxiii)       whether the Mortgage Loan is a Group 1 Loan or a Group 2 Loan.
</TABLE>

               The Mortgage Loan Schedule may be in the form of more than one
schedule, collectively setting forth all of the information required.

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

                                       23

<PAGE>

               "Mortgage Rate": With respect to any Mortgage Loan, the annual
rate at which interest accrues on such Mortgage Loan, as adjusted from time to
time in accordance with the provisions of the Mortgage Note.

               "Mortgaged Property": The underlying property securing a Mortgage
Loan.

               "Mortgagor":  The obligor or obligors on a Mortgage Note.

               "Net Liquidation Proceeds": With respect to any Liquidated
Mortgage Loan or any other disposition of related Mortgaged Property (including
REO Property) the related Liquidation Proceeds net of Advances, Servicing
Advances, Master Servicing Fees, Sub-Servicing Fees and any other accrued and
unpaid servicing fees received and retained in connection with the liquidation
of such Mortgage Loan or Mortgaged Property.

               "Net Monthly Excess Cashflow": With respect to each Distribution
Date, the sum of (a) any Overcollateralization Release Amount for such
Distribution Date and (b) the excess of (x) Available Distribution Amount for
such Distribution Date over (y) the sum for such Distribution Date of (A) the
Monthly Interest Distributable Amounts for the Class A Certificates and the
Mezzanine Certificates, (B) the Unpaid Interest Shortfall Amounts for the Class
A Certificates and (C) the Principal Remittance Amount.

               "Net Mortgage Rate": With respect to each Mortgage Loan Due Date,
a per annum rate of interest equal to the then-applicable Mortgage Rate on such
Mortgage Loan less the sum of the Master Servicing Fee Rate, the Sub-Servicing
Fee Rate, the Trustee Fee Rate, and with respect to the Radian Insured Loans,
the Radian PMI Policy Rate.

               "Net Prepayment Interest Shortfall": With respect to any
Distribution Date, the excess, if any, of any Prepayment Interest Shortfalls for
such date over the related Compensating Interest.

               "Net WAC Rate": With respect to each class of the Class A
Certificates (other than the Class A-IO Certificates), each Class of the
Mezzanine Certificates and the REMIC 2 Regular Interests (other than REMIC 2
Regular Interest LT2A-IO) and any Distribution Date, a per annum rate (but not
less than zero) equal to the weighted average of (x) the Uncertificated REMIC 1
Pass- Through Rate with respect to REMIC 1 Regular Interest LT1A, REMIC 1
Regular Interest LT1B, REMIC 1 Regular Interest LT1C and REMIC 1 Regular
Interest LT1P for such Distribution Date and (y) the excess, if any, of (i) the
Uncertificated REMIC 1 Pass-Through Rate with respect to REMIC 1 Regular
Interest LT1D for such Distribution Date over (ii) (A) in the case of the
Distribution Dates beginning in June 2001 and ending in November 2003, the
applicable Class A-IO Rate, and (B) in the case of any Distribution Date
thereafter, 0.00% per annum, weighted, in the case of clause (x), on the basis
of the aggregate Uncertificated Principal Balance of REMIC 1 Regular Interest
LT1A, REMIC 1 Regular Interest LT1B, REMIC 1 Regular Interest LT1C and REMIC 1
Regular Interest LT1P, and in the case of clause (y), on the basis of the
Uncertificated Principal Balance of REMIC 1 Regular Interest LT1D, respectively.

                                       24

<PAGE>

               "Nonrecoverable Advance": Any Advance or Servicing Advance
previously made or proposed to be made in respect of a Mortgage Loan which, in
the good faith judgment of the Master Servicer, will not or, in the case of a
proposed Advance or Servicing Advance, would not be ultimately recoverable from
related Late Collections, Insurance Proceeds, Liquidation Proceeds or REO
Proceeds. The determination by the Master Servicer that it has made a
Nonrecoverable Advance or that any proposed Advance or Servicing Advance would
constitute a Nonrecoverable Advance, shall be evidenced by a certificate of a
Servicing Officer delivered to the Company and the Trustee.

               "Non-United States Person": Any Person other than a United States
Person.

               "Notional Amount": With respect to the Class A-IO Certificates,
immediately prior to any Distribution Date, an amount equal to the
Uncertificated Principal Balance of REMIC 1 Regular Interest LT1D. With respect
to the Class C Certificates, immediately prior to any Distribution Date, the
aggregate of the Uncertificated Principal Balances of the REMIC 2 Regular
Interests.

               "Officers' Certificate": A certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or a vice president and
by the Treasurer, the Secretary, or one of the assistant treasurers or assistant
secretaries of the Company, the Seller, the Master Servicer or of any
Sub-Servicer and delivered to the Company and Trustee.

               "Opinion of Counsel": A written opinion of counsel, who may be
counsel for the Company, the Seller, or the Master Servicer, reasonably
acceptable to the Trustee; except that any opinion of counsel relating to (a)
the qualification of any account required to be maintained pursuant to this
Agreement as an Eligible Account, (b) the qualification of REMIC 1, REMIC 2 or
REMIC 3 as REMICs, (c) compliance with the REMIC Provisions or (d) resignation
of the Master Servicer pursuant to Section 6.04 must be an opinion of counsel
who (i) is in fact independent of the Company and the Master Servicer, (ii) does
not have any direct financial interest or any material indirect financial
interest in the Company or the Master Servicer or in an affiliate of either and
(iii) is not connected with the Company or the Master Servicer as an officer,
employee, director or person performing similar functions.

               "Optional Termination Date": The first Distribution Date on which
the Majority Class C Certificateholders may opt to terminate the Trust Fund
pursuant to Section 9.01.

               "OTS":  Office of Thrift Supervision or any successor.

               "Outstanding Mortgage Loan": As to any Due Date, a Mortgage Loan
(including an REO Property) which was not the subject of a Principal Prepayment
in Full, Cash Liquidation or REO Disposition and which was not purchased prior
to such Due Date pursuant to Sections 2.02, 2.04 or 3.14.

                                       25

<PAGE>

               "Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the amount, if any, by which the Overcollateralization Target
Amount exceeds the Overcollateralized Amount on such Distribution Date (after
giving effect to distributions in respect of the Basic Principal Distribution
Amount on such Distribution Date).

               "Overcollateralization Release Amount": With respect to any
Distribution Date, the lesser of (x) the Principal Remittance Amount for such
Distribution Date and (y) the Excess Overcollateralized Amount.

               "Overcollateralization Target Amount": With respect to any
Distribution Date, $1,011,518.20.

               "Overcollateralized Amount": With respect to any Distribution
Date, the amount, if any, by which (i) the aggregate Stated Principal Balance of
the Mortgage Loans (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period and after reduction for Realized Losses incurred during the related
Prepayment Period) exceeds (ii) the aggregate Certificate Principal Balance of
the Class A Certificates (other than the Class A-IO Certificates), the Mezzanine
Certificates and the Class P Certificates as of such Distribution Date after
giving effect to distributions to be made on such Distribution Date.

               "Ownership Interest": As to any Certificate, any ownership or
security 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, as owner or as pledgee.

               "Pass-Through Rate": With respect to any Distribution Date and

               (i) the Class A-I-1 Certificates, the lesser of (x) 5.15% per
annum and (y) the Group 1 Net WAC Rate;

         (ii)  the Class A-I-2 Certificates, the lesser of (x) 5.53% per annum
               and (y) the Group 1 Net WAC Rate;

        (iii)  the Class A-I-3 Component, the lesser of (x) 6.38% per annum and
               (y) the Group 1 Net WAC Rate;

         (iv)  the Class A-I-4 Certificates, the lesser of (x) 6.65% per annum
               and (y) the Group 1 Net WAC Rate;

        (v)    the Class A-I-5 Certificates, (A) in the case of any Distribution
               Date up to and including the Optional Termination Date, the
               lesser of (x) 7.36% per annum and (y) the Group 1 Net WAC Rate
               and (B) in the case of any Distribution Date after the Optional
               Termination Date, the lesser of (x) 7.86% per annum and (y) the
               Group 1 Net WAC Rate;

                                       26

<PAGE>

         (vi)  the Class A-II-1 Certificates, the lesser of (x) 5.38% per annum
               and (y) the Group 2 Net WAC Rate;

        (vii)  the Class A-II-2 Component, the lesser of (x) 6.38% per annum
               and (y) the Group 2 Net WAC Rate;

        (viii) the Class A-II-3 Certificates, (A) in the case of any
               Distribution Date up to and including the Optional Termination
               Date, the lesser of (x) 7.250% per annum and (y) the Group 2 Net
               WAC Rate and (B) in the case of any Distribution Date after the
               Optional Termination Date, the lesser of (x) 7.750% per annum and
               (y) the Group 2 Net WAC Rate;

         (ix)  the Class A-IO Certificates, 100% of the interest on REMIC 2
               Regular Interest LT2A-IO;

        (x)    the Class M-1 Certificates, (A) in the case of any Distribution
               Date up to and including the Optional Termination Date, the
               lesser of (x) 7.250% per annum and (y) the Mezzanine Net WAC Rate
               and (B) in the case of any Distribution Date after the Optional
               Termination Date, the lesser of (x) 7.750% per annum and (y) the
               Mezzanine Net WAC Rate;

        (xi)   the Class M-2 Certificates, (A) in the case of any Distribution
               Date up to and including the Optional Termination Date, the
               lesser of (x) 7.250% per annum and (y) the Mezzanine Net WAC Rate
               and (B) in the case of any Distribution Date after the Optional
               Termination Date, the lesser of (x) 7.750% per annum and (y) the
               Mezzanine Net WAC Rate;

        (xii)  the Class B Certificates, (A) in the case of any Distribution
               Date up to and including the Optional Termination Date, the
               lesser of (x) 7.250% per annum and (y) the Mezzanine Net WAC Rate
               and (B) in the case of any Distribution Date after the Optional
               Termination Date, the lesser of (x) 7.750% per annum and (y) the
               Mezzanine Net WAC Rate; and

        (vii)  the Class C Certificates, a per annum rate equal to the
               percentage equivalent of a fraction, the numerator of which is
               (x) the sum of the amounts calculated pursuant to clauses (A)
               through (S) below, and the denominator of which is (y) the
               aggregate of the Uncertificated Principal Balances of the REMIC 2
               Regular Interests. For purposes of calculating the Pass-Through
               Rate for the Class C Certificates, the numerator is equal to the
               sum of the following components:

               (A) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-1AA minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-1AA;

                                       27

<PAGE>

               (B) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AI1 minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AI1;

               (C) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AI2 minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AI2;

               (D) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AI3 minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AI3;

               (E) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AI4 minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AI4;

               (F) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AI5 minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AI5;

               (G) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-1M1 minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-1M1;

               (H) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-1M2 minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-1M2;

               (I) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-1B minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-1B;

               (J) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-1ZZ minus the Group 1 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-1ZZ;

               (K) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-2AA minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-2AA;

               (L) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AII1 minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AII1;

                                       28

<PAGE>

               (M) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AII2 minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AII2;

               (N) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-AII3 minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-AII3;

               (O) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-2M1 minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-2M1;

               (P) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-2M2 minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-2M2;

               (Q) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-2B minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-2B;

               (R) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-2ZZ minus the Group 2 Marker Rate, applied to an amount
equal to the Uncertificated Principal Balance of REMIC 2 Regular Interest
LT2-2ZZ; and

               (S) 100% of the interest on REMIC 2 Regular Interest LT2P.

               The Class P Certificates will not accrue interest and therefore
will not have a Pass- Through Rate.

               "Percentage Interest": With respect to any Regular Certificate,
the undivided percentage ownership interest in the related Class evidenced by
such Certificate, which percentage ownership interest shall be equal to the
Initial Certificate Principal Balance thereof or Initial Notional Amount, as
applicable, thereof divided by the aggregate Initial Certificate Principal
Balance or Initial Notional Amount, as applicable, of all of the Certificates of
the same Class. With respect to any Class R Certificate, the interest in
distributions to be made with respect to such Class evidenced thereby, expressed
as a percentage, as stated on the face of each such Certificate.

               "Permitted Investment": One or more of the following:

               (i) obligations of or guaranteed as to principal and interest by
        the United States or any agency or instrumentality thereof when such
        obligations are backed by the full faith and credit of the United
        States;

                                       29

<PAGE>

               (ii) repurchase agreements on obligations specified in clause (i)
        maturing not more than one month from the date of acquisition thereof,
        provided that the unsecured obligations of the party agreeing to
        repurchase such obligations are at the time rated by each Rating Agency
        in its highest short-term rating available;

               (iii) federal funds, certificates of deposit, demand deposits,
        time deposits and bankers' acceptances (which shall each have an
        original maturity of not more than 90 days and, in the case of bankers'
        acceptances, shall in no event have an original maturity of more than
        365 days or a remaining maturity of more than 30 days) denominated in
        United States dollars of any U.S. depository institution or trust
        company incorporated under the laws of the United States or any state
        thereof or of any domestic branch of a foreign depository institution or
        trust company; provided that the debt obligations of such depository
        institution or trust company (or, if the only Rating Agency is Standard
        & Poor's, in the case of the principal depository institution in a
        depository institution holding company, debt obligations of the
        depository institution holding company) at the date of acquisition
        thereof have been rated by each Rating Agency in its highest short-term
        rating available; and provided further that, if the only Rating Agency
        is Standard & Poor's and if the depository or trust company is a
        principal subsidiary of a bank holding company and the debt obligations
        of such subsidiary are not separately rated, the applicable rating shall
        be that of the bank holding company; and, provided further that, if the
        original maturity of such short-term obligations of a domestic branch of
        a foreign depository institution or trust company shall exceed 30 days,
        the short-term rating of such institution shall be A-1+ in the case of
        Standard & Poor's if Standard & Poor's is the Rating Agency;

               (iv) commercial paper (having original maturities of not more
        than 365 days) of any corporation incorporated under the laws of the
        United States or any state thereof which on the date of acquisition has
        been rated by Moody's and Standard & Poor's (and by Fitch if rated by
        Fitch) in their highest short-term ratings available; provided that such
        commercial paper shall have a remaining maturity of not more than 30
        days;

               (v) a money market fund or a qualified investment fund rated by
        Moody's and Fitch in their respective highest long-term ratings
        available and rated AAAm or AAAm-G by Standard & Poor's, including any
        such funds for which Bankers Trust Company of California, N.A. or any
        affiliate thereof serves as an investment advisor, manager,
        administrator, shareholder, servicing agent, and/or custodian or
        sub-custodian; and

               (vi) other obligations or debt securities that are acceptable to
        each Rating Agency as a Permitted Investment hereunder and will not
        reduce the rating assigned to any Class of Certificates by such Rating
        Agency below the lower of the then-current rating or the rating assigned
        to such Certificates as of the Closing Date by such Rating Agency, as
        evidenced in writing;

provided, however, that no instrument shall be a Permitted Investment if it
represents, either (1) the right to receive only interest payments with respect
to the underlying debt instrument or (2) the right

                                       30

<PAGE>

to receive both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provide a yield to maturity greater than 120% of the yield to
maturity at par of such underlying obligations.

               "Permitted Transferee": Any transferee of a Residual Certificate
other than a Disqualified Organization, a Non-United States Person or an
"electing large partnership" (as defined in Section 775 of the Code).

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

               "Prepayment Assumption": As defined in the Prospectus Supplement.

               "Prepayment Charge": With respect to any Mortgage Loan, the
charges or premiums, if any, due in connection with a full or partial prepayment
of such Mortgage Loan in accordance with the terms thereof (other than any
Master Servicer Prepayment Charge Payment Amount).

               "Prepayment Interest Shortfall": As to any Distribution Date and
any Mortgage Loan (other than a Mortgage Loan relating to an REO Property) that
was the subject of (a) a Principal Prepayment in Full during the related
Prepayment Period, an amount equal to the excess of one month's interest at the
Net Mortgage Rate on the Stated Principal Balance of such Mortgage Loan over the
amount of interest (adjusted to the Net Mortgage Rate) paid by the Mortgagor for
such Prepayment Period to, but not including, the date of such Principal
Prepayment in Full or (b) a Curtailment during the prior calendar month, an
amount equal to one month's interest at the Net Mortgage Rate on the amount of
such Curtailment.

               "Prepayment Period": As to any Distribution Date, Determination
Date or Sub- Servicer Remittance Date, the calendar month preceding the month in
which such Distribution Date, Determination Date or Sub-Servicer Remittance Date
occurs.

               "Primary Hazard Insurance Policy": Each primary hazard insurance
policy required to be maintained pursuant to Section 3.13.

               "Primary Insurance Policy": Any primary policy of mortgage
guaranty insurance including the Radian Lender-Paid PMI Policy, or any
replacement policy therefor.

               "Principal Distribution Amount": With respect to any Distribution
Date, an amount equal to the sum of the Basic Principal Distribution Amount plus
the Extra Principal Distribution Amount.

               "Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not

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accompanied by an amount of interest representing scheduled interest due on any
date or dates in any month or months subsequent to the month of prepayment.

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

               "Principal Remittance Amount": With respect to any Distribution
Date, the sum of (i) each scheduled payment of principal collected or advanced
on the Mortgage Loans by the Master Servicer that were due during the related
Due Period, (ii) the principal portion of all partial and full Principal
Prepayments of the Mortgage Loans applied by the Master Servicer during the
related Prepayment Period, (iii) the principal portion of all related Net
Liquidation Proceeds, REO Proceeds and Insurance Proceeds received during the
related Prepayment Period, (iv) the principal portion of proceeds of Mortgage
Loan purchases made pursuant to Section 2.02, 2.04, 3.14 or 3.22, in each case
received or made during the related Prepayment Period, (v) the principal portion
of any related Substitution Adjustments deposited in the Custodial Account
during the related Prepayment Period and (vi) on the Distribution Date on which
the Trust Fund is to be terminated pursuant to Section 9.01, the principal
portion of the termination price received from the Majority Class C
Certificateholders in connection with a termination of the Trust Fund to occur
on such Distribution Date.

               "Prospectus Supplement": That certain Prospectus Supplement dated
May 25, 2001 relating to the public offering of the Class A Certificates and the
Mezzanine Certificates.

               "Purchase Price": With respect to any Mortgage Loan (or REO
Property) required to be purchased pursuant to Section 2.02, 2.04 or 3.14, an
amount equal to the sum of (i) 100% of the Stated Principal Balance thereof,
(ii) unpaid accrued interest (or REO Imputed Interest) at the applicable Net
Mortgage Rate on the Stated Principal Balance thereof outstanding during each
Due Period that such interest was not paid or advanced, from the date through
which interest was last paid by the Mortgagor or advanced and distributed to
Certificateholders together with unpaid Master Servicing Fees, Sub-Servicing
Fees, Trustee's Fees and, if such Mortgage Loan is a Radian Insured Loan, fees
due Radian at the Radian PMI Policy Rate, from the date through which interest
was last paid by the Mortgagor, in each case to the first day of the month in
which such Purchase Price is to be distributed, plus (iii) the aggregate of all
Advances and Servicing Advances made in respect thereof that were not previously
reimbursed.

               "Qualified Insurer": Any insurance company duly qualified as such
under the laws of the state or states in which the related Mortgaged Property or
Mortgaged Properties is or are located, duly authorized and licensed in such
state or states to transact the type of insurance business in which it is
engaged and approved as an insurer by the Master Servicer, so long as the claims
paying ability of which is acceptable to the Rating Agencies for pass-through
certificates having the same rating as the Certificates rated by the Rating
Agencies as of the Closing Date.

               "Qualified Substitute Mortgage Loan": A Mortgage Loan substituted
by the Company for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed

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<PAGE>

in an Officers' Certificate of the Seller delivered to the Trustee, (i) have an
outstanding principal balance, after deduction of the principal portion of the
monthly payment due in the month of substitution (or in the case of a
substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an
aggregate outstanding principal balance, after such deduction), not in excess of
the Stated Principal Balance of the Deleted Mortgage Loan (the amount of any
shortfall to be paid to the Master Servicer for deposit in the Custodial Account
in the month of substitution); (ii) have a Mortgage Rate and a Net Mortgage Rate
no lower than and not more than 1% per annum higher than the Mortgage Rate and
Net Mortgage Rate, respectively, of the Deleted Mortgage Loan as of the date of
substitution; (iii) have a Loan-to-Value Ratio at the time of substitution no
higher than that of the Deleted Mortgage Loan at the time of substitution; (iv)
have a remaining term to stated maturity not greater than (and not more than one
year less than) that of the Deleted Mortgage Loan; (v) comply with each
representation and warranty set forth in Section 2.04 hereof; and, (vi) comply
with each representation and warranty set forth in the Mortgage Loan Purchase
Agreement.

               "Radian": Radian Guaranty, Inc. (f/k/a Commonwealth Mortgage
Assurance Company), or its successors or assigns.

               "Radian Insured Loans": The Mortgage Loans included in the Trust
Fund covered by a Radian Lender-Paid PMI Policy, as indicated on the Mortgage
Loan Schedule.

               "Radian Lender-Paid PMI Policy": A Primary Insurance Policy
issued by Radian in accordance with a May 1, 2000 letter between the Seller and
Radian.

               "Radian PMI Policy Rate": With respect to any Radian Insured
Loan, the rate per annum at which the related premium on the Radian Lender-Paid
PMI Policy accrues.

               "Rating Agency": Standard & Poor's, Fitch or Moody's and each of
their successors. If such agencies and their successors are no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating agency, or other comparable Person, designated by the Company, notice of
which designation shall be given to the Trustee and Master Servicer. References
herein to the two highest long term debt rating of a Rating Agency shall mean
"AA" or better in the case of Standard & Poor's, "AA" or better in the case of
Fitch and "Aa2" or better in the case of Moody's and references herein to the
highest short-term debt rating of a Rating Agency shall mean "A-1+" in the case
of Standard & Poor's, F-1 in the case of Fitch and "P-1" in the case of Moody's,
and in the case of any other Rating Agency such references shall mean such
rating categories without regard to any plus or minus.

               "Realized Loss": With respect to each Mortgage Loan or REO
Property as to which a Cash Liquidation or REO Disposition has occurred, an
amount (not less than zero) equal to (i) the Stated Principal Balance of the
Mortgage Loan as of the date of Cash Liquidation or REO Disposition, plus (ii)
interest (and REO Imputed Interest, if any) at the Net Mortgage Rate from the
Due Date as to which interest was last paid or advanced to Certificateholders up
to the date of the Cash Liquidation or REO Disposition on the Stated Principal
Balance of such Mortgage Loan outstanding during each Due Period that such
interest was not paid or advanced, minus (iii) the

                                       33

<PAGE>

proceeds, if any, received during the month in which such Cash Liquidation or
REO Disposition occurred, to the extent applied as recoveries of interest at the
Net Mortgage Rate and to principal of the Mortgage Loan, net of the portion
thereof reimbursable to the Master Servicer or any Sub- Servicer with respect to
related Advances or Servicing Advances not previously reimbursed. With respect
to each Mortgage Loan which has become the subject of a Deficient Valuation, 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.

               "Record Date": With respect to each Class of Certificates and
each Distribution Date, the last Business Day of the month immediately preceding
the month of the related Distribution Date.

               "Regular Certificate": Any of the Certificates other than a
Residual Certificate.

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

               "Relief Act Interest Shortfall": With respect to any Distribution
Date, for any Mortgage Loan with respect to which there has been a reduction in
the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Relief Act, the amount by which (i)
interest collectible on such Mortgage Loan during such Due Period is less than
(ii) one month's interest on the Principal Balance of such Mortgage Loan at the
Loan Rate for such Mortgage Loan before giving effect to the application of the
Relief Act.

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

               "REMIC 1": The segregated pool of assets, with respect to which a
REMIC election is to be made, conveyed in trust to the Trustee, for the benefit
of the Holders of the REMIC 1 Regular Interests and the Holders of the Class R
Certificates (as holders of the Class R-1 Interest), consisting of: (i) each
Mortgage Loan (exclusive of payments of principal and interest due on or before
the Cut-off Date, if any, received by the Master Servicer which shall not
constitute an asset of the Trust Fund) as from time to time are subject to this
Agreement and all payments under and proceeds of such Mortgage Loans (exclusive
of any prepayment fees and late payment charges received on the Mortgage Loans),
together with all documents included in the related Mortgage File, subject to
Section 2.01; (ii) such funds or assets as from time to time are deposited in
the Custodial Account or the Certificate Account and belonging to the Trust
Fund; (iii) any REO Property; (iv) the Primary Hazard Insurance Policies, if
any, the Primary Insurance Policies, if any, and all other Insurance Policies
with respect to the Mortgage Loans; (v) [reserved]; and (vi) the Company's
interest in respect of the representations and warranties made by the Seller in
the Mortgage Loan Purchase Agreement as assigned to the Trustee pursuant to
Section 2.04 hereof.

               "REMIC 1 Regular Interest LT1A": One of the separate
non-certificated beneficial ownership interests in REMIC 1 issued hereunder and
designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1A shall
accrue interest at the related Uncertificated REMIC 1 Pass-

                                       34

<PAGE>

Through Rate in effect from time to time, and shall be entitled to distributions
of principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

               "REMIC 1 Regular Interest LT1B": One of the separate
non-certificated beneficial ownership interests in REMIC 1 issued hereunder and
designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1B shall
accrue interest at the related Uncertificated REMIC 1 Pass- Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 1 Regular Interest LT1C": One of the separate
non-certificated beneficial ownership interests in REMIC 1 issued hereunder and
designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1C shall
accrue interest at the related Uncertificated REMIC 1 Pass- Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 1 Regular Interest LT1D": One of the separate
non-certificated beneficial ownership interests in REMIC 1 issued hereunder and
designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1D shall
accrue interest at the related Uncertificated REMIC 1 Pass- Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 1 Regular Interest LT1P": One of the separate
non-certificated beneficial ownership interests in REMIC 1 issued hereunder and
designated as a Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1P shall
accrue interest at the related Uncertificated REMIC 1 Pass- Through Rate in
effect from time to time, and shall be entitled to any Prepayment Charges
relating to the Mortgage Loans collected by the Master Servicer and to a
distribution of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Principal Balance as set
forth in the Preliminary Statement hereto.

               "REMIC 1 Regular Interests": REMIC 1 Regular Interest LT1A, REMIC
1 Regular Interest LT1B, REMIC 1 Regular Interest LT1C, REMIC 1 Regular Interest
LT1D and REMIC 1 Regular Interest LT1P.

               "REMIC 2": The segregated pool of assets consisting of all of the
REMIC 1 Regular Interests conveyed in trust to the Trustee, for the benefit of
REMIC 3, as holder of the REMIC 2 Regular Interests, and the Class R
Certificateholders, as holders of the Class R-2 Interest, pursuant to Article II
hereunder, and all amounts deposited therein, with respect to which a separate
REMIC election is to be made.

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<PAGE>

               "REMIC 2 Group 1 Interest Loss Allocation Amount": With respect
to any Distribution Date, an amount equal to (a) the product of (i) the
aggregate Principal Balance of the Group 1 Loans and related REO Properties then
outstanding and (ii) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-1AA minus the Group 1 Marker Rate, divided by (b) 12.

               "REMIC 2 Group 2 Interest Loss Allocation Amount": With respect
to any Distribution Date, an amount equal to (a) the product of (i) the
aggregate Principal Balance of the Group 2 Loans and related REO Properties then
outstanding and (ii) the Uncertificated REMIC 2 Pass-Through Rate for REMIC 2
Regular Interest LT2-2AA minus the Group 2 Marker Rate, divided by (b) 12.

               "REMIC 2 Group 1 Overcollateralized Amount": With respect to any
date of determination, (i) 1% of the aggregate Uncertificated Principal Balances
of REMIC 2 Regular Interest LT2-1AA, REMIC 2 Regular Interest LT2-AI1, REMIC 2
Regular Interest LT2-AI2, REMIC 2 Regular Interest LT2-AI3, REMIC 2 Regular
Interest LT2-AI4, REMIC 2 Regular Interest LT2- AI5, REMIC 2 Regular Interest
LT2-1M1, REMIC 2 Regular Interest LT2-1M2, REMIC 2 Regular Interest LT2-1B and
REMIC 2 Regular Interest LT2-1ZZ, minus (ii) the aggregate of the Uncertificated
Principal Balances of REMIC 2 Regular Interest LT2-AI1, REMIC 2 Regular Interest
LT2-AI2, REMIC 2 Regular Interest LT2-AI3, REMIC 2 Regular Interest LT2-AI4,
REMIC 2 Regular Interest LT2-AI5, REMIC 2 Regular Interest LT2-1M1, REMIC 2
Regular Interest LT2-1M2 and REMIC 2 Regular Interest LT2-1B, in each case as of
such date of determination.

               "REMIC 2 Group 2 Overcollateralized Amount": With respect to any
date of determination, (i) 1% of the aggregate Uncertificated Principal Balances
of REMIC 2 Regular Interest LT2-2AA, REMIC 2 Regular Interest LT2-AII1, REMIC 2
Regular Interest LT2-AII2, REMIC 2 Regular Interest LT2-AII3, REMIC 2 Regular
Interest LT2-2M1, REMIC 2 Regular Interest LT2-2M2, REMIC 2 Regular Interest
LT2-2B and REMIC 2 Regular Interest LT2-2ZZ, minus (ii) the aggregate of the
Uncertificated Principal Balances of REMIC 2 Regular Interest LT2-AII1, REMIC 2
Regular Interest LT2-AII2, REMIC 2 Regular Interest LT2-AII3, REMIC 2 Regular
Interest LT2-2M1, REMIC 2 Regular Interest LT2-2M2 and REMIC 2 Regular Interest
LT2-2B, in each case as of such date of determination.

               "REMIC 2 Group 1 Principal Loss Allocation Amount": With respect
to any Distribution Date and the Group 1 Loans, an amount equal to (a) the
product of (i) the aggregate Principal Balance of the Group 1 Loans and related
REO Properties then outstanding and (ii) 1 minus a fraction, the numerator of
which is two times the aggregate of the Uncertificated Principal Balances of
REMIC 2 Regular Interest LT2-AI1, REMIC 2 Regular Interest LT2-AI2, REMIC 2
Regular Interest LT2-AI3, REMIC 2 Regular Interest LT2-AI4, REMIC 2 Regular
Interest LT2-AI5, REMIC 2 Regular Interest LT2-1M1, REMIC 2 Regular Interest
LT2-1M2 and REMIC 2 Regular Interest LT2-1B, and the denominator of which is the
aggregate of the Uncertificated Principal Balances of REMIC 2 Regular Interest
LT2-AI1, REMIC 2 Regular Interest LT2-AI2, REMIC 2 Regular Interest LT2-AI3,
REMIC 2 Regular Interest LT2-AI4, REMIC 2 Regular Interest LT2-AI5, REMIC 2

                                       36

<PAGE>

Regular Interest LT2-1M1, REMIC 2 Regular Interest LT2-1M2, REMIC 2 Regular
Interest LT2-1B and REMIC 2 Regular Interest LT2-1ZZ.

               "REMIC 2 Group 2 Principal Loss Allocation Amount": With respect
to any Distribution Date and the Group 2 Loans, an amount equal to (a) the
product of (i) the aggregate Principal Balance of the Group 2 Loans and related
REO Properties then outstanding and (ii) 1 minus a fraction, the numerator of
which is two times the aggregate of the Uncertificated Principal Balances of
REMIC 2 Regular Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2, REMIC 2
Regular Interest LT2-AII3, REMIC 2 Regular Interest LT2-2M1, REMIC 2 Regular
Interest LT2-2M2 and REMIC 2 Regular Interest LT2-2B, and the denominator of
which is the aggregate of the Uncertificated Principal Balances of REMIC 2
Regular Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2, REMIC 2 Regular
Interest LT2-AII3, REMIC 2 Regular Interest LT2-2M1, REMIC 2 Regular Interest
LT2-2M2 and REMIC 2 Regular Interest LT2-2B.

               "REMIC 2 Overcollateralization Target Amount": 1% of the
Overcollateralization Target Amount.

               "REMIC 2 Regular Interest LT2A-IO": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2A-IO
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate on
its Uncertificated Notional Amount outstanding from time to time.

               "REMIC 2 Regular Interest LT2-1AA": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-1AA
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-AI1": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AI1
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-AI2": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AI2
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

                                       37

<PAGE>

               "REMIC 2 Regular Interest LT2-AI3": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AI3
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-AI4": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AI4
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-AI5": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AI5
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-1M1": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-1M1
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-1M2": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-1M2
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-1B": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-1B
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-1ZZ": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest"

                                       38

<PAGE>

in REMIC 2. REMIC 2 Regular Interest LT2-1ZZ shall accrue interest at the
related Uncertificated REMIC 2 Pass-Through Rate in effect from time to time,
and shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Principal Balance as set forth in the Preliminary Statement hereto.

               "REMIC 2 Regular Interest LT2-2AA": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-2AA
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-AII1": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AII1
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-AII2": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AII2
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-AII3": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-AII3
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-2M1": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-2M1
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-2M2": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-2M2
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of

                                       39

<PAGE>

principal, subject to the terms and conditions hereof, in an aggregate amount
equal to its initial Uncertificated Principal Balance as set forth in the
Preliminary Statement hereto.

               "REMIC 2 Regular Interest LT2-2B": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-2B
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2-2ZZ": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2-2ZZ
shall accrue interest at the related Uncertificated REMIC 2 Pass-Through Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Principal Balance as set forth in the Preliminary
Statement hereto.

               "REMIC 2 Regular Interest LT2P": One of the separate
non-certificated beneficial ownership interests in REMIC 2 issued hereunder and
designated as a "regular interest" in REMIC 2. REMIC 2 Regular Interest LT2P
shall accrue interest at the related Uncertificated REMIC 2 Pass- Through Rate
in effect from time to time, and shall be entitled to any amounts distributed to
REMIC 1 Regular Interest LT1P.

               "REMIC 2 Regular Interests": REMIC 2 Regular Interest LT21AA,
REMIC 2 Regular Interest LT2A-IO, REMIC 2 Regular Interest LT2-AI1, REMIC 2
Regular Interest LT2-AI2, REMIC 2 Regular Interest LT2-AI3, REMIC 2 Regular
Interest LT2-AI4, REMIC 2 Regular Interest LT2-AI5, REMIC 2 Regular Interest
LT2-1M1, REMIC 2 Regular Interest LT2-1M2, REMIC 2 Regular Interest LT2-1B,
REMIC 2 Regular Interest LT2-1ZZ, REMIC 2 Regular Interest LT2-2AA, REMIC 2
Regular Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2, REMIC 2 Regular
Interest LT2-AII3, REMIC 2 Regular Interest LT2-2M1, REMIC 2 Regular Interest
LT2-2M2, REMIC 2 Regular Interest LT2-2B, REMIC 2 Regular Interest LT2-2ZZ and
REMIC 2 Regular Interest LT2P.

               "REMIC 3": The segregated pool of assets consisting of all of the
REMIC 2 Regular Interests conveyed in trust to the Trustee, for the benefit of
the Holders of the Regular Certificates and the Holders of the Class R
Certificates (as holders of the Class R-3 Interest), including, with respect to
the Class A-3 Certificates, the Class A-3 Components, pursuant to Article II
hereunder, and all amounts deposited therein, with respect to which a separate
REMIC election is to be made.

               "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 proposed, temporary and final regulations and published rulings,
notices and announcements promulgated thereunder, as the foregoing may be in
effect from time to time.

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<PAGE>

               "REMIC Regular Interest": A REMIC 1 Regular Interest or REMIC 2
Regular Interest.

               "Remittance Report": A report prepared by the Master Servicer
providing the information set forth in Exhibit E attached hereto.

               "REO Acquisition": The acquisition by the Master Servicer on
behalf of the Trustee for the benefit of the Certificateholders of any REO
Property pursuant to Section 3.15.

               "REO Disposition": The receipt by the Master Servicer of
Insurance Proceeds, Liquidation Proceeds and other payments and recoveries
(including proceeds of a final sale) which the Master Servicer expects to be
finally recoverable from the sale or other disposition of the REO Property.

               "REO Imputed Interest": As to any REO Property, for any period,
an amount equivalent to interest (at the Mortgage Rate that would have been
applicable to the related Mortgage Loan had it been outstanding) on the unpaid
principal balance of the Mortgage Loan as of the date of acquisition thereof (as
such balance is reduced pursuant to Section 3.15 by any income from the REO
Property treated as a recovery of principal).

               "REO Proceeds": Proceeds, net of directly related expenses,
received in respect of any REO Property (including, without limitation, proceeds
from the rental of the related Mortgaged Property and of any REO Disposition),
which proceeds are required to be deposited into the Custodial Account as and
when received.

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

               "Request for Release": A release signed by a Servicing Officer,
in the form of Exhibits F-1 or F-2 attached hereto.

               "Residual Interest": The sole class of "residual interests" in a
REMIC within the meaning of Section 860G(a)(2) of the Code.

               "Responsible Officer": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters, any
vice president, any assistant vice president, the Secretary, any assistant
secretary, the Treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.

                                       41

<PAGE>

               "Seller": Impac Funding Corporation, or its successor in
interest.

               "Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.

               "Servicing Advances": All customary, reasonable and necessary
"out of pocket" costs and expenses incurred in connection with a default,
delinquency or other unanticipated event in the performance by the Master
Servicer or any Sub-Servicer of its servicing obligations, including, but not
limited to, the cost of (i) the preservation, restoration and protection of a
Mortgaged Property, (ii) any enforcement or judicial proceedings, including
foreclosures, (iii) the management and liquidation of any REO Property,
including reasonable fees paid to any independent contractor in connection
therewith, and (iv) compliance with the obligations under the fourth paragraph
of Section 3.01, Section 3.09 and Section 3.13 (other than any deductible
described in the last paragraph thereof).

               "Servicing Guide": The Impac Funding Corporation Servicing Guide
attached hereto as Exhibit K.

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

               "Single Certificate": A Regular Certificate of any Class (other
than a Class P Certificate) evidencing an Initial Certificate Principal Balance
or Initial Notional Amount, as applicable, of $1,000, or, in the case of a Class
P Certificate, a Certificate of such Class evidencing an Initial Certificate
Principal Balance of $100.

               "Special Deposit":  As defined in Section 2.01(a).

               "Standard & Poor's": Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc., or its successor in interest.

               "Startup Day": The day designated as such pursuant to Article X
hereof.

               "Stated Principal Balance": With respect to any Mortgage Loan or
related REO Property at any given time, (i) the principal balance of the
Mortgage Loan outstanding as of the Cut- off Date, after application of
principal payments due on or before such date, whether or not received, minus
(ii) the sum of (a) the principal portion of the Monthly Payments due with
respect to such Mortgage Loan or REO Property during each Due Period ending
prior to the most recent Distribution Date which were received or with respect
to which an Advance was made, and (b) all Principal Prepayments with respect to
such Mortgage Loan or REO Property, and all Insurance Proceeds, Liquidation
Proceeds and REO Proceeds to the extent applied by the Master Servicer as
recoveries of principal in accordance with Section 3.15 with respect to such
Mortgage Loan or REO Property,

                                       42

<PAGE>

which were distributed pursuant to Section 4.01 on any previous Distribution
Date, and (c) any Realized Loss with respect thereto allocated pursuant to
Section 4.05 for any previous Distribution Date.

               "Stepdown Date": The earlier to occur of (i) the Distribution
Date on which the aggregate Certificate Principal Balance of the Class A
Certificates has been reduced to zero and (ii) the later to occur of (x) the
Distribution Date occurring in June 2004 and (y) the first Distribution Date for
which the aggregate Certificate Principal Balance of the Mezzanine Certificates
divided by the aggregate Stated Principal Balance of the Mortgage Loans as of
the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) is greater than or equal to 12.00%.

               "Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.

               "Sub-Servicer Remittance Date": The 18th day of each month, or if
such day is not a Business Day, the immediately preceding Business Day.

               "Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the Master Servicer.

               "Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer and any successor Sub-Servicer relating to
servicing and administration of certain Mortgage Loans as provided in Section
3.02.

               "Sub-Servicing Fees": As to each Mortgage Loan, an amount,
payable out of any payment of interest on the Mortgage Loan, equal to interest
at the Sub-Servicing Fee Rate on the Stated Principal Balance of such Mortgage
Loan for the calendar month preceding the month in which the payment is due
(alternatively, in the event such payment of interest accompanies a Principal
Prepayment in Full made by the Mortgagor, interest for the number of days
covered by such payment of interest).

               "Sub-Servicing Fee Rate": With respect to each Mortgage Loan, the
per annum rate of 0.25%.

               "Substitution Adjustment":  As defined in Section 2.04 hereof.

               "Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of REMIC 1, REMIC 2 and REMIC 3 due

                                       43

<PAGE>

to their classification as REMICs under the REMIC Provisions, together with any
and all other information, reports or returns that may be required to be
furnished to the Certificateholders or filed with the Internal Revenue Service
or any other governmental taxing authority under any applicable provisions of
federal, state or local tax laws.

               "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.

               "Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.

               "Trigger Event": A Trigger Event is in effect with respect to any
Distribution Date if

          (i)  the aggregate Stated Principal Balance of Mortgage Loans that are
               60 or more days delinquent as of the close of business on the
               last day of the preceding calendar month exceeds 2.25% (in the
               case of the 36th Distribution Date through the 60th Distribution
               Date) or 3.25% (in the case of any Distribution Date thereafter)
               of the aggregate Stated Principal Balance of the Mortgage Loans
               as of such Distribution Date (prior to giving effect to scheduled
               payments of principal due during the related Due Period, to the
               extent received or advanced, and unscheduled collections of
               principal received during the related Prepayment Period); or

          (ii) in the case of any Distribution Date after the 36th Distribution
               Date, the cumulative amount of Realized Losses incurred on the
               Mortgage Loans from the Cut-off Date through the end of the
               calendar month immediately preceding such Distribution Date
               exceeds 10.00% of the sum of (x) the aggregate Certificate
               Principal Balance of the Mezzanine Certificates (or, if the
               Certificate Principal Balances of the Class A Certificates have
               been reduced to zero, the aggregate Certificate Principal Balance
               of the Mezzanine Certificates other than the Class of Mezzanine
               Certificates with the highest payment priority) after giving
               effect to distributions that would be made on such Distribution
               Date if no Trigger Event were in effect and (y) the
               Overcollateralized Amount.

For purposes of the foregoing calculation, a mortgage loan is considered "60
days" delinquent if a payment due on the first day of a month has not been
received by the second day of the second following month.

               "Trust Fund": REMIC 1, REMIC 2 and REMIC 3.

               "Trustee": Bankers Trust Company of California, N.A., or its
successor in interest, or any successor trustee appointed as herein provided.

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<PAGE>

               "Trustee's Fee": As to each Mortgage Loan and Distribution Date,
an amount equal to interest at the Trustee Fee Rate on the Stated Principal
Balance of such Mortgage Loan as of the Due Date in the month immediately
preceding the month in which such Distribution Date occurs.

               "Trustee Fee Rate": 0.005% per annum.

               "Uncertificated Accrued Interest": With respect to each REMIC
Regular Interest on each Distribution Date, an amount equal to one month's
interest at the related Uncertificated Pass- Through Rate on the Uncertificated
Principal Balance or Uncertificated Notional Amount, as applicable, of such
REMIC Regular Interest. In each case, Uncertificated Accrued Interest will be
reduced by any Net Prepayment Interest Shortfalls and Relief Act Interest
Shortfalls (allocated to such REMIC Regular Interests as set forth in Section
1.02).

               "Uncertificated Notional Amount": With respect to each of REMIC 2
Regular Interest LT2A-IO and any date of determination, the Uncertificated
Principal Balance of REMIC 1 Regular Interest LT1D for such Distribution Date.

               "Uncertificated Principal Balance": With respect to each REMIC 1
Regular Interest and REMIC 2 Regular Interest (other than REMIC 2 Regular
Interest LT2A-IO), the principal amount of such REMIC Regular Interest
outstanding as of any date of determination. As of the Closing Date, the
Uncertificated Principal Balance of each REMIC 1 Regular Interest, REMIC 2
Regular Interest (other than REMIC 2 Regular Interest LT2A-IO) shall equal the
amount set forth in the Preliminary Statement hereto as its initial
Uncertificated Principal Balance. On each Distribution Date, the Uncertificated
Principal Balance of each REMIC Regular Interest shall be reduced by all
distributions of principal made on such REMIC Regular Interest on such
Distribution Date pursuant to Section 4.04 and, if and to the extent necessary
and appropriate, shall be further reduced on such Distribution Date by Realized
Losses as provided in Section 4.05. The Uncertificated Principal Balance of each
of REMIC 2 Regular Interest LT2-1ZZ and REMIC 2 Regular Interest LT2-2ZZ shall
each be increased by interest deferrals as provided in Section 4.04. The
Uncertificated Principal Balance of each REMIC Regular Interest shall never be
less than zero. REMIC 2 Regular Interest LT2A-IO will not have an Uncertificated
Principal Balance.

               "Uncertificated Pass-Through Rate": The Uncertificated REMIC 1
Pass-Through Rate or the Uncertificated REMIC 2 Pass-Through Rate.

               "Uncertificated REMIC 1 Pass-Through Rate": With respect to any
Distribution Date and REMIC 1 Regular Interest LT1A, REMIC 1 Regular Interest
LT1D and REMIC 1 Regular Interest LT1P, a per annum rate equal to the average of
the Net Mortgage Rates of the Mortgage Loans, weighted on the basis of the
Stated Principal Balances thereof as of the close of business on the last day of
the calendar month preceding the month in which such Distribution Date occurs.
With respect to any Distribution Date and REMIC 1 Regular Interest LT1B, a per
annum rate equal to the average of the Net Mortgage Rates of the Group 1
Mortgage Loans, weighted on the basis of the Stated Principal Balances thereof
as of the close of business on the last day of the calendar month preceding the
month in which such Distribution Date occurs. With respect to any Distribution
Date

                                       45

<PAGE>

and REMIC 1 Regular Interest LT1C, a per annum rate equal to the average of the
Net Mortgage Rates of the Group 2 Mortgage Loans, weighted on the basis of the
Stated Principal Balances thereof as of the close of business on the last day of
the calendar month preceding the month in which such Distribution Date occurs.

               "Uncertificated REMIC 2 Pass-Through Rate":

               (a) With respect to REMIC 2 Regular Interest LT2-1AA, REMIC 2
Regular Interest LT2-AI1, REMIC 2 Regular Interest LT2-AI2, REMIC 2 Regular
Interest LT2-AI3, REMIC 2 Regular Interest LT2-AI4, REMIC 2 Regular Interest
LT2-AI5, REMIC 2 Regular Interest LT2-1M1, REMIC 2 Regular Interest LT2-1M2,
REMIC 2 Regular Interest LT2-1B, REMIC 2 Regular Interest LT2-1ZZ, REMIC 2
Regular Interest LT2-2AA, REMIC 2 Regular Interest LT2-AII1, REMIC 2 Regular
Interest LT2-AII2, REMIC 2 Regular Interest LT2-AII3, REMIC 2 Regular Interest
LT2-2M1, REMIC 2 Regular Interest LT2-2M2, REMIC 2 Regular Interest LT2-2B,
REMIC 2 Regular Interest LT2-2ZZ and REMIC 2 Regular Interest LT2P and any
Distribution Date prior to and including the Distribution Date in November 2003,
a per annum rate equal to the Net WAC Rate. With respect to REMIC 2 Regular
Interest LT2-1AA, REMIC 2 Regular Interest LT2-AI1, REMIC 2 Regular Interest
LT2-AI2, REMIC 2 Regular Interest LT2-AI3, REMIC 2 Regular Interest LT2-AI4,
REMIC 2 Regular Interest LT2-AI5, REMIC 2 Regular Interest LT2-1M1, REMIC 2
Regular Interest LT2-1M2, REMIC 2 Regular Interest LT2-1B, REMIC 2 Regular
Interest LT2-1ZZ, and REMIC 2 Regular Interest LT2P and any Distribution Date
after the Distribution Date in November 2003, a per annum rate equal to the
Uncertificated REMIC 1 Pass-Through Rate of the Uncertificated REMIC 1 Regular
Interest LT1B. With respect to REMIC 2 Regular Interest LT2-2AA, REMIC 2 Regular
Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2, REMIC 2 Regular Interest
LT2-AII3, REMIC 2 Regular Interest LT2-M1, REMIC 2 Regular Interest LT2-2M2,
REMIC 2 Regular Interest LT2-2B and REMIC 2 Regular Interest LT2-2ZZ and any
Distribution Date after the Distribution Date in November 2003, a per annum rate
equal to the Uncertificated REMIC 1 Pass-Through Rate of the Uncertificated
REMIC 1 Regular Interest LT1C.

               (b) With respect to REMIC 2 Regular Interest LT2A-IO and the
first 30 Distribution Dates, the Class A-IO Rate, and 0.00% per annum
thereafter.

               "Uninsured Cause": Any cause of damage to property subject to a
Mortgage such that the complete restoration of such property is not fully
reimbursable by the hazard insurance policies or flood insurance policies
required to be maintained pursuant to Section 3.13.

               "United States Person": A citizen or resident of the United
States, a corporation or a partnership (including an entity treated as a
corporation or partnership for United States federal income tax purposes)
created or organized in, or under the laws of, the United States or any State
thereof or the District of Columbia (except, in the case of a partnership, to
the extent provided in regulations) provided that, for purposes solely of the
restrictions on the transfer of Class R Certificates, no partnership or other
entity treated as a partnership for United States federal income tax purposes
shall be treated as a United States Person unless all persons that own an
interest in such partnership either directly or through any entity that is not a
corporation for United States federal

                                       46

<PAGE>

income tax purposes are required by the applicable operative agreement to be
United States Persons or an estate whose income is subject to United States
federal income tax regardless of its source, or 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 such United States Persons have the authority to
control all substantial decisions of the trust. To the extent prescribed in
regulations by the Secretary of the Treasury, which have not yet been issued, a
trust which was in existence on August 20, 1996 (other than a trust treated as
owned by the grantor under subpart E of part I of subchapter J of chapter 1 of
the Code), and which was treated as a United States person on August 20, 1996
may elect to continue to be treated as a United States person notwithstanding
the previous sentence.

               "Unpaid Interest Shortfall Amount": With respect to the Class A
Certificates and Mezzanine Certificates and (i) the first Distribution Date,
zero, and (ii) any Distribution Date after the first Distribution Date, the
amount, if any, by which (a) the sum of (1) the Monthly Interest Distributable
Amount for such Class for the immediately preceding Distribution Date and (2)
the outstanding Unpaid Interest Shortfall Amount, if any, for such Class for
such preceding Distribution Date exceeds (b) the aggregate amount distributed on
such Class in respect of interest pursuant to clause (a) of this definition on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid on the Certificates of such Class on such preceding Distribution
Date, to the extent permitted by law, at the Pass-Through Rate for such Class
for the related Accrual Period.

               "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. At all times during the term
of this Agreement, (i) 97% of all Voting Rights will be allocated among the
Holders of the Class A Certificates (other than the Class A-IO Certificates),
the Mezzanine Certificates and the Class C Certificates in proportion to the
then outstanding Certificate Principal Balances of their respective
Certificates, (ii) 1% of all Voting Rights will be allocated to the Holders of
the Class A-IO Certificates, (iii) 1% of all Voting Rights will be allocated to
the Holders of the Class P Certificates and (iv) 1% of all Voting Rights will be
allocated to the Holders of the Class R Certificates. The Voting Rights
allocated to any Class of Certificates shall be allocated among all Holders of
the Certificates of such Class in proportion to the outstanding Percentage
Interests in such Class represented thereby.

               "Weighted Average Net Mortgage Rate": The weighted average of the
Net Mortgage Rates of the Mortgage Loans, weighted on the basis of the Stated
Principal Balances thereof as of the close of business on the first day of the
calendar month preceding the month in which such Distribution Date occurs.

               "Wendover": Wendover Funding, Inc.

        SECTION 1.02          Allocation of Certain Interest Shortfalls.

               For purposes of calculating the amount of the Monthly Interest
Distributable Amount for the Class A Certificates, the Mezzanine Certificates
and the Class C Certificates, including, with respect to the Class A-3
Certificates, the Class A-3 Components, for any Distribution Date, (1) the
aggregate amount of any Net Prepayment Interest Shortfalls and any Relief Act
Interest Shortfalls

                                       47

<PAGE>

incurred in respect of the Mortgage Loans for any Distribution Date shall be
allocated first, among the Class C Certificates on a pro rata basis based on,
and to the extent of, one month's interest at the then applicable Pass-Through
Rate on the Notional Amount of each such Certificate and, thereafter, among the
Class A Certificates and the Mezzanine Certificates, including, with respect to
the Class A-3 Certificates, the Class A-3 Components, on a pro rata basis based
on, and to the extent of, one month's interest at the then applicable respective
Pass-Through Rate on the respective Notional Amount, Certificate Principal
Balance or Component Principal Balance of each such Certificate or Class A-3
Component and (2) the aggregate amount of any Realized Losses incurred for any
Distribution Date shall be allocated among the Class C Certificates on a pro
rata basis based on, and to the extent of, one month's interest at the then
applicable Pass-Through Rate on the Notional Amount of each such Certificate.

        For purposes of calculating the amount of Uncertificated Accrued
Interest for the Uncertificated REMIC 1 Regular Interests for any Distribution
Date, the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first: with respect to any Group 1 Loan, to
REMIC 1 Regular Interest LT1A and REMIC 1 Regular Interest LT1B, 99% and 1%,
respectively, and with respect to any Group 2 Loan, to REMIC 1 Regular Interest
LT1A and REMIC 1 Regular Interest LT1C, 99% and 1%, respectively, and then to
REMIC 1 Regular Interest LT1D, in each case to the extent of one month's
interest at the then applicable respective Uncertificated REMIC 1 Pass- Through
Rate on the respective Uncertificated Principal Balance of each such
Uncertificated REMIC 1 Regular Interest.

        For purposes of calculating the amount of Uncertificated Accrued
Interest for the Uncertificated REMIC 2 Regular Interests for any Distribution
Date, the aggregate amount of any Net Prepayment Interest Shortfalls and any
Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated (i) with respect to the Group 1 Loans,
first, to Uncertificated Accrued Interest payable to REMIC 2 Regular Interest
LT2-1AA and REMIC 2 Regular Interest LT2-1ZZ up to an aggregate amount equal to
the REMIC 2 Group 1 Interest Loss Allocation Amount, 98% and 2%, respectively,
and thereafter among REMIC 2 Regular Interest LT2A-IO, REMIC 2 Regular Interest
LT2-1AA, REMIC 2 Regular Interest LT2-AI1, REMIC 2 Regular Interest LT2-AI2,
REMIC 2 Regular Interest LT2-AI3, REMIC 2 Regular Interest LT2-AI4, REMIC 2
Regular Interest LT2-AI5, REMIC 2 Regular Interest LT2-1M1, REMIC 2 Regular
Interest LT2-1M2, REMIC 2 Regular Interest LT2-1B and REMIC 2 Regular Interest
LT2-1ZZ, PRO RATA based on, and to the extent of, one month's interest at the
then applicable respective Uncertificated REMIC 2 Pass-Through Rate on the
respective Uncertificated Principal Balance of each such Uncertificated REMIC 2
Regular Interest, and (ii) with respect to the Group 2 Loans, first, to
Uncertificated Accrued Interest payable to REMIC 2 Regular Interest LT2-2AA and
REMIC 2 Regular Interest LT2-2ZZ up to an aggregate amount equal to the REMIC 2
Group 2 Interest Loss Allocation Amount, 98% and 2%, respectively, and
thereafter among REMIC 2 Regular Interest LT2A-IO, REMIC 2 Regular Interest
LT2-2AA, REMIC 2 Regular Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2,
REMIC 2 Regular Interest LT2-AII3, REMIC 2 Regular Interest LT2-2M1, REMIC 2
Regular Interest LT2-2M2, REMIC 2 Regular Interest LT2-2B and REMIC 2 Regular
Interest LT2-2ZZ, PRO RATA based on, and to the extent of, one month's interest
at the then

                                       48

<PAGE>

applicable respective Uncertificated REMIC 2 Pass-Through Rate on the respective
Uncertificated Principal Balance of each such Uncertificated REMIC 2 Regular
Interest.

                                       49

<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

               SECTION 2.01.          Conveyance of Mortgage Loans.

               The Company, as of the Closing Date, and concurrently with the
execution and delivery hereof, does hereby assign, transfer, sell, set over and
otherwise convey to the Trustee without recourse all the right, title and
interest of the Company in and to the Mortgage Loans identified on the Mortgage
Loan Schedule (exclusive of any prepayment fees and late payment charges
received thereon) and all other assets included or to be included in the Trust
Fund for the benefit of the Certificateholders. Such assignment includes all
principal and interest received by the Master Servicer on or with respect to the
Mortgage Loans (other than payment of principal and interest due on or before
the Cut-off Date).

               The Master Servicer hereby acknowledges the receipt by it of cash
in an amount equal to $455,530.20 (the "Special Deposit"), representing interest
at the Mortgage Rate, for the calendar month of May 2001, for those Mortgage
Loans which do not have Monthly Payments due on June 1, 2001. The Master
Servicer shall hold such amount in the Custodial Account and shall include such
amount in the Available Distribution Amount for the Distribution Date in June
2001.

               In connection with such transfer and assignment, the Company has
caused the Seller to deliver to, and deposit with the Trustee, as described in
the Mortgage Loan Purchase Agreement the following documents or instruments:

             (i) the original Mortgage Note endorsed without recourse, "Bankers
        Trust Company of California, N.A., as trustee under the Pooling and
        Servicing Agreement relating to Impac Secured Assets Corp., Mortgage
        Pass-Through Certificates, Series 2001-4" with all intervening
        endorsements showing an unbroken chain of endorsements from the
        originator to the Person endorsing it to the Trustee or, with respect to
        any Mortgage Loan as to which the original Mortgage Note has been
        permanently lost or destroyed and has not been replaced, a Lost Note
        Affidavit;

            (ii) the original recorded Mortgage or, if the original Mortgage has
        not been returned from the public recording office, a copy of the
        Mortgage certified by the Seller or the public recording office in which
        such Mortgage has been recorded to be a true and complete copy of the
        original Mortgage submitted for recording;

           (iii) a duly executed original Assignment of the Mortgage, without
        recourse, in recordable form to "Bankers Trust Company of California,
        N.A., as trustee," or to "Bankers Trust Company of California, N.A.,
        as trustee for holders of Impac Secured Assets Corp., Mortgage
        Pass-Through Certificates, Series 2001-4";

                                       50

<PAGE>

            (iv) the original recorded Assignment or Assignments of the Mortgage
        showing an unbroken chain of assignment from the originator thereof to
        the Person assigning it to the Trustee or, if any such Assignment has
        not been returned from the applicable public recording office, a copy of
        such Assignment certified by the Seller to be a true and complete copy
        of the original Assignment submitted to the title insurance company for
        recording;

             (v) the original title insurance policy, or, if such policy has not
        been issued, any one of an original or a copy of the preliminary title
        report, title binder or title commitment on the Mortgaged Property with
        the original policy of the insurance to be delivered promptly following
        the receipt thereof;

            (vi) a copy of the related hazard insurance policy; and

           (vii) a true and correct copy of any assumption, modification,
        consolidation or substitution agreement.

               The Seller is obligated as described in the Mortgage Loan
Purchase Agreement to deliver to the Trustee: (a) either the original recorded
Mortgage, or in the event such original cannot be delivered by the Seller, a
copy of such Mortgage certified as true and complete by the appropriate
recording office, in those instances where a copy thereof certified by the
Seller was delivered to the Trustee pursuant to clause (ii) above; and (b)
either the original Assignment or Assignments of the Mortgage, with evidence of
recording thereon, showing an unbroken chain of assignment from the originator
to the Seller, or in the event such original cannot be delivered by the Seller,
a copy of such Assignment or Assignments certified as true and complete by the
appropriate recording office, in those instances where copies thereof certified
by the Seller were delivered to the Trustee pursuant to clause (iv) above.
However, pursuant to the Mortgage Loan Purchase Agreement, the Seller need not
cause to be recorded any assignment in any jurisdiction under the laws of which,
as evidenced by an Opinion of Counsel delivered by the Seller to the Trustee and
the Rating Agencies, the recordation of such assignment is not necessary to
protect the Trustee's interest in the related Mortgage Loan; provided, however,
notwithstanding the delivery of any Opinion of Counsel, each assignment shall be
submitted for recording by the Seller in the manner described above, at no
expense to the Trust or the Trustee, upon the earliest to occur of: (i)
direction by the Holders of Certificates evidencing at least 25% of the Voting
Rights, (ii) the occurrence of a Event of Default, (iii) the occurrence of a
bankruptcy, insolvency or foreclosure relating to the Seller, (iv) the
occurrence of a servicing transfer as described in Section 7.02 hereof and (v)
if the Seller is not the Master Servicer and with respect to any one assignment,
the occurrence of a bankruptcy, insolvency or foreclosure relating to the
Mortgagor under the related Mortgage.

               Notwithstanding anything to the contrary contained in this
Section 2.01, in those instances where the public recording office retains the
original Mortgage after it has been recorded, the Seller shall be deemed to have
satisfied its obligations hereunder upon delivery to the Trustee of a copy of
such Mortgage certified by the public recording office to be a true and complete
copy of the recorded original thereof.

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<PAGE>

               If any Assignment is lost or returned unrecorded to the Trustee
because of any defect therein, the Seller is required, as described in the
Mortgage Loan Purchase Agreement, to prepare a substitute Assignment or cure
such defect, as the case may be, and the Seller shall cause such Assignment to
be recorded in accordance with this section.

               The Seller is required as described in the Mortgage Loan Purchase
Agreement to exercise its best reasonable efforts to deliver or cause to be
delivered to the Trustee within 120 days of the Closing Date the original or a
photocopy of the title insurance policy with respect to each Mortgage Loan
assigned to the Trustee pursuant to this Section 2.01.

               All original documents relating to the Mortgage Loans which are
not delivered to the Trustee are and shall be held by the Master Servicer in
trust for the benefit of the Trustee on behalf of the Certificateholders.

               Except as may otherwise expressly be provided herein, none of the
Company, the Master Servicer or the Trustee shall (and the Master Servicer shall
ensure that no Sub-Servicer shall) assign, sell, dispose of or transfer any
interest in the Trust Fund or any portion thereof, or cause the Trust Fund or
any portion thereof to be subject to any lien, claim, mortgage, security
interest, pledge or other encumbrance.

               It is intended that the conveyance of the Mortgage Loans by the
Company to the Trustee as provided in this Section be, and be construed as, a
sale of the Mortgage Loans and the REMIC 1 Regular Interests as provided for in
this Section 2.01 by the Company to the Trustee for the benefit of the
Certificateholders. It is, further, not intended that such conveyance be deemed
a pledge of the Mortgage Loans and the REMIC 1 Regular Interests by the Company
to the Trustee to secure a debt or other obligation of the Company. However, in
the event that the Mortgage Loans and the REMIC 1 Regular Interests are held to
be property of the Company, or if for any reason this Agreement is held or
deemed to create a security interest in the Mortgage Loans and the REMIC 1
Regular Interests, then it is intended that, (a) this Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of the
New York Uniform Commercial Code and the Uniform Commercial Code of any other
applicable jurisdiction; (b) the conveyance provided for in this Section shall
be deemed to be (1) a grant by the Company to the Trustee of a security interest
in all of the Company's right (including the power to convey title thereto),
title and interest, whether now owned or hereafter acquired, in and to (A) the
Mortgage Loans, including the Mortgage Notes, the Mortgages, any related
Insurance Policies and all other documents in the related Mortgage Files, (B)
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof, (C) the REMIC 1 Regular Interests and (D) all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, instruments,
securities or other property, including without limitation all amounts from time
to time held or invested in the Certificate Account or the Custodial Account,
whether in the form of cash, instruments, securities or other property and (2)
an assignment by the Company to the Trustee of any security interest in any and
all of the Seller's right (including the power to convey title thereto), title
and interest, whether now owned or hereafter acquired, in and to the property
described in the foregoing clauses (1)(A) through (D); (c) the possession by the
Trustee or any other agent of the Trustee of Mortgage Notes and such other items
of property as

                                       52

<PAGE>

constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" or possession by a purchaser or a
person designated by such secured party, for purposes of perfecting the security
interest pursuant to the New York Uniform Commercial Code and the Uniform
Commercial Code of any other applicable jurisdiction (including, without
limitation, Sections 9-115, 9-305, 8-102, 8-301, 8-501 and 8-503 thereof); and
(d) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Trustee for the purpose
of perfecting such security interest under applicable law. The Company and the
Trustee 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 and the REMIC 1 Regular Interests, 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.

               SECTION 2.02.  Acceptance of the Trust Fund by the Trustee.

               The Trustee acknowledges receipt (subject to any exceptions noted
in the Initial Certification described below), of the documents referred to in
Section 2.01 above and all other assets included in the definition of "Trust
Fund" and declares that it holds and will hold such documents and the other
documents delivered to it constituting the Mortgage Files, and that it holds or
will hold such other assets included in the definition of "Trust Fund" (to the
extent delivered or assigned to the Trustee), in trust for the exclusive use and
benefit of all present and future Certificateholders.

               The Trustee agrees, for the benefit of the Certificateholders, to
review or cause to be reviewed on its behalf, each Mortgage File on or before
the Closing Date to ascertain that all documents required to be delivered to it
are in its possession, and the Trustee agrees to execute and deliver, or cause
to be executed and delivered, to the Company and the Master Servicer on the
Closing Date, an Initial Certification in the form annexed hereto as Exhibit C
to the effect that, as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it pursuant to
this Agreement with respect to such Mortgage Loan are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
relate to such Mortgage Loan and (iii) based on its examination and only as to
the foregoing documents, the information set forth in items (i), (ii), (iii)(A)
and (iv) of the definition of the "Mortgage Loan Schedule" accurately reflects
information set forth in the Mortgage File. Neither the Trustee nor the Master
Servicer shall be under any duty to determine whether any Mortgage File should
include any of the documents specified in clause (vi) or (vii) of Section 2.01.
Neither the Trustee nor the Master Servicer 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, or they are in recordable form or that they are other than what they
purport to be on their face.

                                       53

<PAGE>

               Within 90 days of the Closing Date the Trustee shall deliver to
the Company and the Master Servicer a Final Certification in the form annexed
hereto as Exhibit D evidencing the completeness of the Mortgage Files, with any
applicable exceptions noted thereon.

               If in the process of reviewing the Mortgage Files and preparing
the certifications referred to above the Trustee finds any document or documents
constituting a part of a Mortgage File to be missing or defective in any
material respect, the Trustee shall promptly notify the Seller, the Master
Servicer and the Company. The Trustee shall promptly notify the Seller of such
defect and request that the Seller cure any such defect within 60 days from the
date on which the Seller was notified of such defect, and if the Seller does not
cure such defect in all material respects during such period, request on behalf
of the Certificateholders that the Seller purchase such Mortgage Loan from the
Trust Fund at the Purchase Price within 90 days after the date on which the
Seller was notified of such defect; provided that if such defect would cause the
Mortgage Loan to be other than a "qualified mortgage" as defined in Section
860G(a)(3) of the Code, any such cure or repurchase must occur within 90 days
from the date such breach was discovered. It is understood and agreed that the
obligation of the Seller to cure a material defect in, or purchase any Mortgage
Loan as to which a material defect in a constituent document exists shall
constitute the sole remedy respecting such defect available to
Certificateholders or the Trustee on behalf of Certificateholders. The Purchase
Price for the purchased Mortgage Loan shall be deposited or caused to be
deposited upon receipt by the Master Servicer in the Custodial Account and, upon
receipt by the Trustee of written notification of such deposit signed by a
Servicing Officer, the Trustee shall release or cause to be released to the
Seller the related Mortgage File and shall execute and deliver such instruments
of transfer or assignment, in each case without recourse, as the Seller shall
require as necessary to vest in the Seller ownership of any Mortgage Loan
released pursuant hereto and at such time the Trustee shall have no further
responsibility with respect to the related Mortgage File.

               SECTION 2.03.  Representations, Warranties and Covenants of the
                              Master Servicer and the Company.

               (a) The Master Servicer hereby represents and warrants to and
covenants with the Company and the Trustee for the benefit of Certificateholders
that:

                    (i) The Master Servicer is, and throughout the term hereof
        shall remain, a corporation duly organized, validly existing and in good
        standing under the laws of the state of its incorporation (except as
        otherwise permitted pursuant to Section 6.02), the Master Servicer is,
        and shall remain, in compliance with the laws of each state in which any
        Mortgaged Property is located to the extent necessary to perform its
        obligations under this Agreement, and the Master Servicer is, and shall
        remain, approved to sell mortgage loans to and service mortgage loans
        for Fannie Mae and Freddie Mac;

                   (ii) The execution and delivery of this Agreement by the
        Master Servicer, and the performance and compliance with the terms of
        this Agreement by the Master Servicer, will not violate the Master
        Servicer's articles of incorporation or bylaws or constitute a default
        (or an event which, with notice or lapse of time, or both, would
        constitute

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<PAGE>

        a default) under, or result in the breach of, any material agreement
        or other instrument to which it is a party or which is applicable to
        it or any of its assets;

                  (iii) The Master Servicer has the full power and authority to
        enter into and consummate all transactions contemplated by this
        Agreement, has duly authorized the execution, delivery and performance
        of this Agreement, and has duly executed and delivered this Agreement;

                   (iv) This Agreement, assuming due authorization, execution
        and delivery by the Company and the Trustee, constitutes a valid, legal
        and binding obligation of the Master Servicer, enforceable against the
        Master Servicer in accordance with the terms hereof, subject to (A)
        applicable bankruptcy, insolvency, reorganization, moratorium and other
        laws affecting the enforcement of creditors' rights generally, and (B)
        general principles of equity, regardless of whether such enforcement is
        considered in a proceeding in equity or at law;

                    (v) The Master Servicer is not in violation of, and its
        execution and delivery of this Agreement and its performance and
        compliance with the terms of this Agreement will not constitute a
        violation of, any law, any order or decree of any court or arbiter, or
        any order, regulation or demand of any federal, state or local
        governmental or regulatory authority, which violation is likely to
        affect materially and adversely either the ability of the Master
        Servicer to perform its obligations under this Agreement or the
        financial condition of the Master Servicer;

                   (vi) No litigation is pending (other than litigation with
        respect to which pleadings or documents have been filed with a court,
        but not served on the Master Servicer) or, the best of the Master
        Servicer's knowledge, threatened against the Master Servicer which would
        prohibit its entering into this Agreement or performing its obligations
        under this Agreement or is likely to affect materially and adversely
        either the ability of the Master Servicer to perform its obligations
        under this Agreement or the financial condition of the Master Servicer;

                  (vii) The Master Servicer will comply in all material respects
        in the performance of this Agreement with all reasonable rules and
        requirements of each insurer under each Insurance Policy;

                 (viii) The execution of this Agreement and the performance of
        the Master Servicer's obligations hereunder do not require any license,
        consent or approval of any state or federal court, agency, regulatory
        authority or other governmental body having jurisdiction over the Master
        Servicer, other than such as have been obtained;

                   (ix) No information, certificate of an officer, statement
        furnished in writing or report delivered to the Company, any affiliate
        of the Company or the Trustee by the Master Servicer in its capacity as
        Master Servicer, and not in its capacity as a Seller

                                       55

<PAGE>

        hereunder, will, to the knowledge of the Master Servicer, contain any
        untrue statement of a material fact; and

                    (x) The Master Servicer will not waive any Prepayment Charge
        unless it is waived in accordance with the standard set forth in Section
        3.01.

               It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.03(a) shall survive the execution and
delivery of this Agreement, and shall inure to the benefit of the Company, the
Trustee and the Certificateholders. Upon discovery by the Company, the Trustee
or the Master Servicer of a breach of any of the foregoing representations,
warranties and covenants that materially and adversely affects the interests of
the Company or the Trustee, the party discovering such breach shall give prompt
written notice to the other parties. Notwithstanding the foregoing, within 90
days of the earlier of discovery by the Master Servicer or receipt of notice by
the Master Servicer of the breach of the covenant of the Master Servicer set
forth in Section 2.03(x) above which materially and adversely affects the
interests of the Holders of the Class P Certificates in any Prepayment Charge,
the Master Servicer shall remedy such breach as follows: the Master Servicer
shall pay the amount of such waived Prepayment Charge, for the benefit of the
holders of the Class P Certificates, by depositing such amount into the
Custodial Account (net of any amount actually collected by the Master Servicer
in respect of such Prepayment Charge and remitted by the Master Servicer, for
the benefit of the Holders of the Class P Certificates, in respect of such
Prepayment Charge, into the Custodial Account). The foregoing shall not,
however, limit any remedies available to the Certificateholders, the Company or
the Trustee on behalf of the Certificateholders, pursuant to the Mortgage Loan
Purchase Agreement respecting a breach of any of the representations, warranties
and covenants contained in the Mortgage Loan Purchase Agreement.

               (b) The Company hereby represents and warrants to the Master
Servicer and the Trustee for the benefit of Certificateholders that as of the
Closing Date, the representations and warranties of the Seller with respect to
the Mortgage Loans and the remedies therefor that are contained in the Mortgage
Loan Purchase Agreement are as set forth in Exhibit I hereto.

               It is understood and agreed that the representations and
warranties set forth in this Section 2.03(b) shall survive delivery of the
respective Mortgage Files to the Trustee.

               Upon discovery by either the Company, the Master Servicer or the
Trustee of a breach of any representation or warranty set forth in this Section
2.03 which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the party discovering such breach shall
give prompt written notice to the other parties.

               SECTION 2.04.   Representations and Warranties of the Seller.

               The Company hereby assigns to the Trustee for the benefit of
Certificateholders all of its rights (but none of its obligations) in, to and
under the Mortgage Loan Purchase Agreement. Insofar as the Mortgage Loan
Purchase Agreement relates to such representations and warranties and

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<PAGE>

any remedies provided thereunder for any breach of such representations and
warranties, such right, title and interest may be enforced by the Trustee on
behalf of the Certificateholders. Upon the discovery by the Company, the Master
Servicer or the Trustee of a breach of any of the representations and warranties
made in the Mortgage Loan Purchase Agreement in respect of any Mortgage Loan
which materially and adversely affects the interests of the Certificateholders
in such Mortgage Loan, the party discovering such breach shall give prompt
written notice to the other parties. The Trustee shall promptly notify the
Seller of such breach and request that the Seller shall, within 90 days from the
date that the Seller was notified or otherwise obtained knowledge of such
breach, either (i) cure such breach in all material respects or (ii) purchase
such Mortgage Loan from the Trust Fund at the Purchase Price and in the manner
set forth in Section 2.02; provided that if such breach would cause the Mortgage
Loan to be other than a "qualified mortgage" as defined in Section 860G(a)(3) of
the Code, any such cure or repurchase must occur within 90 days from the date
such breach was discovered. However, in the case of a breach under the Mortgage
Loan Purchase Agreement, subject to the approval of the Company, the Seller
shall have the option to substitute a Qualified Substitute Mortgage Loan or
Loans for such Mortgage Loan if such substitution occurs within two years
following the Closing Date, except that if the breach would cause the Mortgage
Loan to be other than a "qualified mortgage" as defined in Section 860G(a)(3) of
the Code, any such substitution must occur within 90 days from the date the
breach was discovered if such 90 day period expires before two years following
the Closing Date. In the event that the Seller elects to substitute a Qualified
Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this
Section 2.04, the Trustee shall enforce the obligation of the Seller under the
Mortgage Loan Purchase Agreement to deliver to the Trustee and the Master
Servicer, as appropriate, with respect to such Qualified Substitute Mortgage
Loan or Loans, the original Mortgage Note, the Mortgage, an Assignment of the
Mortgage in recordable form, and such other documents and agreements as are
required by Section 2.01, with the Mortgage Note endorsed as required by Section
2.01. No substitution will be made in any calendar month after the Determination
Date for such month. Monthly Payments due with respect to Qualified Substitute
Mortgage Loans in the month of substitution, to the extent received by the
Master Servicer or any Sub-Servicer, shall not be part of the Trust Fund and
will be retained by the Master Servicer and remitted by the Master Servicer to
the Seller on the next succeeding Distribution Date. For the month of
substitution, distributions to Certificateholders will include the Monthly
Payment due on a 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 Company shall amend or cause to be amended the Mortgage Loan
Schedule for the benefit of the Certificateholders to reflect the removal of
such Deleted Mortgage Loan and the substitution of the Qualified Substitute
Mortgage Loan or Loans and the Company shall deliver the amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, the Qualified Substitute
Mortgage Loan or Loans shall be subject to the terms of this Agreement in all
respects, the Seller shall be deemed to have made the representations and
warranties with respect to the Qualified Substitute Mortgage Loan contained in
the Mortgage Loan Purchase Agreement as of the date of substitution, and the
Company shall be deemed to have made with respect to any Qualified Substitute
Mortgage Loan or Loans, as of the date of substitution, the representations and
warranties set forth in Exhibit I hereof (other than representations (xiv),
(xvi), (xxix) and (xxxiii) through (xli)).

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<PAGE>

               In connection with the substitution of one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Master
Servicer will determine the amount (the Substitution Adjustment"), if any, by
which the aggregate principal balance of all such Qualified Substitute Mortgage
Loans as of the date of substitution is less than the aggregate Stated Principal
Balance of all such Deleted Mortgage Loans (in each case after application of
the principal portion of the Monthly Payments due in the month of substitution
that are to be distributed to Certificateholders in the month of substitution).
The Trustee shall enforce the obligation of the Seller under the Mortgage Loan
Purchase Agreement to provide the Master Servicer on the day of substitution for
immediate deposit into the Custodial Account the amount of such shortfall,
without any reimbursement therefor. In accordance with the Mortgage Loan
Purchase Agreement, the Seller shall give notice in writing to the Trustee of
such event, which notice shall be accompanied by an Officers' Certificate as to
the calculation of such shortfall and by an Opinion of Counsel to the effect
that such substitution will not cause (a) any federal tax to be imposed on REMIC
1, REMIC 2 or REMIC 3, including without limitation, any federal tax imposed on
"prohibited transactions" under Section 860F(a)(1) of the Code or on
"contributions after the startup date" under Section 860G(d)(1) of the Code or
(b) any portion of REMIC 1, REMIC 2 or REMIC 3 to fail to qualify as a REMIC at
any time that any Certificate is outstanding. The costs of any substitution as
described above, including any related assignments, opinions or other
documentation in connection therewith shall be borne by the Seller.

               Except as expressly set forth herein neither the Trustee nor the
Master Servicer is under any obligation to discover any breach of the
above-mentioned representations and warranties. It is understood and agreed that
the obligation of the Seller to cure such breach, purchase or to substitute for
such Mortgage Loan as to which such a breach has occurred and is continuing
shall constitute the sole remedy respecting such breach available to
Certificateholders or the Trustee on behalf of Certificateholders.

          SECTION 2.05. Issuance of Certificates; Conveyance of REMIC Regular
                        Interests and Acceptance of REMIC 2 by the Trustee.

        (a) The Trustee acknowledges the assignment to it of the Mortgage Loans
and the delivery to it of the Mortgage Files, subject to the provisions of
Sections 2.01 and 2.02, together with the assignment to it of all other assets
included in the Trust Fund, receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the written request of the Company executed by an officer
of the Company, has executed, authenticated and delivered to or upon the order
of the Company, the Certificates in authorized denominations. The interests
evidenced by the Certificates, constitute the entire beneficial ownership
interest in the Trust Fund.

        (b) The Company, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Company in and
to the REMIC 1 Regular Interests for the benefit of the Holders of the REMIC 2
Regular Interests and Holders of the Class R Certificates (as holders of the
Class R-1 Interest). The Trustee acknowledges receipt of the REMIC 1 Regular
Interests (which are

                                       58

<PAGE>

uncertificated) and declares that it holds and will hold the same in trust for
the exclusive use and benefit of the Holders of the REMIC 2 Regular Interests
and Holders of the Class R Certificates (as holders of the Class R-1 Interest).
The interests evidenced by the Class R-2 Interest, together with the Regular
Certificates, constitute the entire beneficial ownership interest in REMIC 2.

        (c) The Company, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Company in and
to the REMIC 2 Regular Interests for the benefit of the holders of the
Certificates. The Trustee acknowledges receipt of the REMIC 2 Regular Interests
(which are uncertificated) and declares that it holds and will hold the same in
trust for the exclusive use and benefit of the holders of the Certificates. The
interests evidenced by the Class R-3 Interest, together with the Regular
Certificates, constitute the entire beneficial ownership interest in REMIC 3.

        (d) In exchange for the REMIC 2 Regular Interests and, concurrently with
the assignment to the Trustee thereof, pursuant to the written request of the
Company executed by an officer of the Company, the Trustee has executed,
authenticated and delivered to or upon the order of the Company, the Regular
Certificates in authorized denominations evidencing (together with the Class R-3
Interest) the entire beneficial ownership interest in REMIC 3.

        (e) Concurrently with (i) the assignment and delivery to the Trustee of
REMIC 1 (including the Residual Interest therein represented by the Class R-1
Interest) and the acceptance by the Trustee thereof, (ii) the assignment and
delivery to the Trustee of REMIC 2 (including the Residual Interest therein
represented by the Class R-2 Interest), and (iii) the assignment and delivery to
the Trustee of REMIC 3 (including the Residual Interest therein represented by
the Class R-3 Interest), and the acceptance by the Trustee thereof, the Trustee,
pursuant to the written request of the Company executed by an officer of the
Company, has executed, authenticated and delivered to or upon the order of the
Company, the Class R Certificates in authorized denominations evidencing the
Class R-1 Interest, the Class R-2 Interest and the Class R-3 Interest.

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<PAGE>

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF THE TRUST FUND

               SECTION 3.01.          Master Servicer to Act as Master Servicer.

               The Master Servicer shall supervise, or take such actions as are
necessary to ensure, the servicing and administration of the Mortgage Loans and
any REO Property in accordance with this Agreement and its normal servicing
practices, which generally shall conform to the standards (i) of the Servicing
Guide, if Impac Funding Corporation is Master Servicer, or (ii) if Impac Funding
Corporation is not the Master Servicer, of an institution prudently servicing
mortgage loans for its own account and shall have full authority to do anything
it reasonably deems appropriate or desirable in connection with such servicing
and administration. To the extent consistent with the foregoing, the Master
Servicer shall waive (or permit a Sub-Servicer to waive) a Prepayment Charge
only under the following circumstances: (i) such waiver is standard and
customary in servicing similar Mortgage Loans and (ii) such waiver would, in the
reasonable judgement of the Master Servicer, maximize recovery of total proceeds
taking into account the value of such Prepayment Charge and the related Mortgage
Loan and, if such waiver is made in connection with a refinancing of the related
Mortgage Loan, such refinancing is related to a default or a reasonably
foreseeable default.

               The Master Servicer may perform its responsibilities relating to
servicing through other agents or independent contractors, but shall not thereby
be released from any of its responsibilities as hereinafter set forth. The
authority of the Master Servicer, in its capacity as master servicer, and any
Sub-Servicer acting on its behalf, shall include, without limitation, the power
to (i) consult with and advise any Sub-Servicer regarding administration of a
related Mortgage Loan, (ii) approve any recommendation by a Sub-Servicer to
foreclose on a related Mortgage Loan, (iii) supervise the filing and collection
of insurance claims and take or cause to be taken such actions on behalf of the
insured Person thereunder as shall be reasonably necessary to prevent the denial
of coverage thereunder, and (iv) effectuate foreclosure or other conversion of
the ownership of the Mortgaged Property securing a related Mortgage Loan,
including the employment of attorneys, the institution of legal proceedings, the
collection of deficiency judgments, the acceptance of compromise proposals, the
filing of claims under any Insurance Policy and any other matter pertaining to a
delinquent Mortgage Loan. The authority of the Master Servicer shall include, in
addition, the power on behalf of the Certificateholders, the Trustee or any of
them to (i) execute and deliver customary consents or waivers and other
instruments and documents, (ii) consent to transfer of any related Mortgaged
Property and assumptions of the related Mortgage Notes and Security Instruments
(in the manner provided in this Agreement) and (iii) collect any Insurance
Proceeds and Liquidation Proceeds. Without limiting the generality of the
foregoing, the Master Servicer and any Sub-Servicer acting on its behalf may,
and is hereby authorized, and empowered by the Trustee to, execute and deliver,
on behalf of itself, the Certificateholders or the Trustee or any of them, any
instruments of satisfaction, cancellation, partial or full release, discharge
and all other comparable instruments, with respect to the related Mortgage
Loans, the Insurance Policies and the accounts

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<PAGE>

related thereto, and the Mortgaged Properties. The Master Servicer may exercise
this power in its own name or in the name of a Sub-Servicer.

               Subject to Section 3.16, the Trustee shall execute, at the
written request of the Master Servicer, and furnish to the Master Servicer and
any Sub-Servicer such documents provided to it by the Master Servicer or any
Sub-Servicer as are necessary or appropriate to enable the Master Servicer or
any Sub-Servicer to carry out their servicing and administrative duties
hereunder, and the Trustee hereby grants to the Master Servicer a power of
attorney to carry out such duties. The Trustee shall not be liable for the
actions of the Master Servicer or any Sub-Servicers under such powers of
attorney.

               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 3.09, and further as
provided in Section 3.11; provided that the Master Servicer shall not be
obligated to make such advance if, in its good faith judgment, the Master
Servicer determines that such advance to be a Nonrecoverable Advance.

               Notwithstanding anything in this Agreement to the contrary, the
Master Servicer shall not (unless the Mortgagor is in default with respect to
the Mortgage Loan or such default is, in the judgment of the Master Servicer,
reasonably foreseeable) make or permit any modification, waiver or amendment of
any term of any Mortgage Loan that would both (i) effect an exchange or
reissuance of such Mortgage Loan under Section 1001 of the Code (or Treasury
regulations promulgated thereunder) and (ii) cause any of REMIC 1, REMIC 2 or
REMIC 3 to fail to qualify as a REMIC under the Code or the imposition of any
tax on "prohibited transactions" or "contributions" after the startup date under
the REMIC Provisions.

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

               SECTION 3.02.  Sub-Servicing Agreements Between Master Servicer
                              and Sub-Servicers.

               (a) The Master Servicer may enter into Sub-Servicing Agreements
with Sub- Servicers for the servicing and administration of the Mortgage Loans
and for the performance of any and all other activities of the Master Servicer
hereunder; provided, however, that such agreements would not result in a
withdrawal or a downgrading by Standard & Poor's of its rating on any Class of
Certificates. Each Sub-Servicer shall be either (i) an institution the accounts
of which are insured by the FDIC or (ii) another entity that engages in the
business of originating or servicing mortgage loans comparable to the Mortgage
Loans, and in either case shall be authorized to transact business in the state
or states in which the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder

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and under the Sub-Servicing Agreement, and in either case shall be a Freddie Mac
or Fannie Mae approved mortgage servicer. Any Sub-Servicing Agreement entered
into by the Master Servicer shall include the provision that such Agreement may
be immediately terminated (x) with cause and without any termination fee by any
Master Servicer hereunder or (y) without cause in which case the Master Servicer
shall be responsible for any termination fee or penalty resulting therefrom. In
addition, each Sub-Servicing Agreement shall provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. With the consent of
the Trustee, the Master Servicer and the Sub-Servicers may enter into
Sub-Servicing Agreements and make amendments to the Sub- Servicing Agreements or
enter into different forms of Sub-Servicing Agreements providing for, among
other things, the delegation by the Master Servicer to a Sub-Servicer of
additional duties regarding the administration of the Mortgage Loans; provided,
however, that any such amendments or different forms shall be consistent with
and not violate the provisions of this Agreement, and that no such amendment or
different form shall be made or entered into which could be reasonably expected
to be materially adverse to the interests of the Certificateholders, without the
consent of the Holders of Certificates entitled to at least 51% of the Voting
Rights. The parties hereto acknowledge that the initial Sub-Servicer shall be
Wendover.

        The Master Servicer has entered into a Sub-Servicing Agreement with
Wendover for the servicing and administration of the Mortgage Loans and may
enter into additional Sub-Servicing Agreements with Sub-Servicers acceptable to
the Trustee for the servicing and administration of certain of the Mortgage
Loans.

               (b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee and the Certificateholders, shall
enforce the obligations of each Sub-Servicer under the related Sub-Servicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Sub-Servicing Agreements and the pursuit
of other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Master Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense, but
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement only to the extent, if any, that such recovery exceeds all
amounts due in respect of the related Mortgage Loan or (ii) from a specific
recovery of costs, expenses or attorneys' fees against the party against whom
such enforcement is directed.

               (c) The Master Servicer represents that it has entered into a
contract regarding the sale of sub-servicing rights with respect to the Mortgage
Loans with GMAC and shall transfer the subservicing of such Mortgage Loans from
Wendover to GMAC on or about August 1, 2001. The Trustee hereby consents to such
transfer.

               (d) The Master Servicer represents that it will cause any
Sub-Servicer to accurately and fully report its borrower credit files to all
three credit repositories in a timely manner.

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               SECTION 3.03.          Successor Sub-Servicers.

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

               SECTION 3.04.          Liability of the Master Servicer.

               Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a Sub-Servicer or reference to actions taken through a
Sub-Servicer or otherwise, the Master Servicer shall under all circumstances
remain obligated and primarily liable to the Trustee and Certificateholders for
the servicing and administering of the Mortgage Loans and any REO Property in
accordance with the provisions of Article III without diminution of such
obligation or liability by virtue of such Sub- Servicing Agreements or
arrangements or by virtue of indemnification from the Sub-Servicer 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. For purposes of this
Agreement, the Master Servicer shall be deemed to have received payments on
Mortgage Loans when the Sub-Servicer has received such payments. The Master
Servicer shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Master Servicer by such Sub-Servicer and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification.

               SECTION 3.05.   No Contractual Relationship Between Sub-Servicers
                               and Trustee or Certificateholders.

               Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such and not as an originator shall be deemed to be between
the Sub-Servicer and the Master Servicer alone, and the Trustee and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Sub-Servicer
except as set forth in Section 3.06. The Master Servicer (or Sub-Servicer) shall
be liable for the payment of any franchise taxes which may be assessed by the
California Franchise Tax Board in connection with the activities of the Trust
under this Agreement.

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               SECTION 3.06.    Assumption or Termination of Sub-Servicing
                                Agreements by Trustee.

               (a) If the Trustee or its designee shall assume the master
servicing obligations of the Master Servicer in accordance with Section 7.02
below, the Trustee, to the extent necessary to permit the Trustee to carry out
the provisions of Section 7.02 with respect to the Mortgage Loans, shall succeed
to all of the rights and obligations of the Master Servicer under each of the
Sub- Servicing Agreements. In such event, the Trustee or its designee as the
successor master servicer shall be deemed to have assumed all of the Master
Servicer's rights and obligations therein and to have replaced the Master
Servicer as a party to such Sub-Servicing Agreements to the same extent as if
such Sub-Servicing Agreements had been assigned to the Trustee or its designee
as a successor master servicer, except that the Trustee or its designee as a
successor master servicer shall not be deemed to have assumed any obligations or
liabilities of the Master Servicer arising prior to such assumption (other than
the obligation to make any Advances hereunder) and the Master Servicer shall not
thereby be relieved of any liability or obligations under such Sub-Servicing
Agreements arising prior to such assumption. Nothing in the foregoing shall be
deemed to entitle the Trustee or its designee as a successor master servicer at
any time to receive any portion of the servicing compensation provided under
Section 3.17 except for such portion as the Master Servicer would be entitled to
receive.

               (b) In the event that the Trustee or its designee as successor
master servicer for the Trustee assumes the servicing obligations of the Master
Servicer under Section 7.02, upon the reasonable request of the Trustee or such
designee as successor master servicer the Master Servicer shall at its own
expense deliver to the Trustee, or at its written request to such designee,
photocopies of all documents, files and records, electronic or otherwise,
relating to the Sub-Servicing Agreements and the related Mortgage Loans or REO
Property then being serviced and an accounting of amounts collected and held by
it, if any, and will otherwise cooperate and use its reasonable efforts to
effect the orderly and efficient transfer of the Sub-Servicing Agreements, or
responsibilities hereunder to the Trustee, or at its written request to such
designee as successor master servicer.

               SECTION 3.07.    Collection of Certain Mortgage Loan Payments.

               (a) The Master Servicer will coordinate and monitor remittances
by Sub-Servicers to the Master Servicer with respect to the Mortgage Loans in
accordance with this Agreement.

               (b) The Master Servicer shall make its reasonable efforts to
collect or cause to be collected all payments required under the terms and
provisions of the Mortgage Loans and shall follow, and use its reasonable
efforts to cause Sub-Servicers to follow, collection procedures comparable to
the collection procedures of prudent mortgage lenders servicing mortgage loans
for their own account to the extent such procedures shall be consistent with
this Agreement. Consistent with the foregoing, the Master Servicer may in its
discretion (i) waive or permit to be waived any late payment charge, prepayment
charge, assumption fee, or any penalty interest in connection with the
prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be
suspended or reduced regular monthly payments for a period of up to six months,
or arrange or permit an arrangement with

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a Mortgagor for a scheduled liquidation of delinquencies. In the event the
Master Servicer shall consent to the deferment of the due dates for payments due
on a Mortgage Note, the Master Servicer shall nonetheless make an Advance or
shall cause the related Sub-Servicer to make an advance to the same extent as if
such installment were due, owing and delinquent and had not been deferred
through liquidation of the Mortgaged Property; provided, however, that the
obligation of the Master Servicer or related Sub-Servicer to make an Advance
shall apply only to the extent that the Master Servicer believes, in good faith,
that such advances are not Nonrecoverable Advances.

               (c) On each Determination Date, with respect to each Mortgage
Loan for which during the related Prepayment Period the Master Servicer has
determined that all amounts which it expects to recover from or on account of
each such Mortgage Loan have been recovered and that no further Liquidation
Proceeds will be received in connection therewith, the Master Servicer shall
provide to the Trustee a certificate of a Servicing Officer that such Mortgage
Loan became a Liquidated Mortgage Loan in a Cash Liquidation or REO Disposition.

               The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any related Insurance Policy, follow such collection
procedures as it would follow with respect to mortgage loans comparable to the
Mortgage Loans and held for its own account. 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, Primary Hazard Insurance
Policy or otherwise or against any public or governmental authority with respect
to a taking or condemnation) if it reasonably believes that it is prohibited by
applicable law from enforcing the provision of the Mortgage or other instrument
pursuant to which such payment is required. The Master Servicer shall be
responsible for preparing and distributing all information statements relating
to payments on the Mortgage Loans, in accordance with all applicable federal and
state tax laws and regulations.

               SECTION 3.08.    Sub-Servicing Accounts.

               In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub- Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
otherwise be acceptable to the Master Servicer. All amounts held in a
Sub-Servicing Account shall be held in trust for the Trustee for the benefit of
the Certificateholders. Any investment of funds held in such an account shall be
in Permitted Investments maturing not later than the Business Day immediately
preceding the next Sub-Servicer Remittance Date. The Sub- Servicer will be
required to deposit into the Sub-Servicing Account no later than the first
Business Day after receipt all proceeds of Mortgage Loans received by the
Sub-Servicer, less its servicing compensation and any unreimbursed expenses and
advances, to the extent permitted by the Sub- Servicing Agreement. On each
Sub-Servicer Remittance Date the Sub-Servicer will be required to remit to the
Master Servicer for deposit in the Custodial Account all funds held in the
Sub-Servicing Account with respect to any Mortgage Loan as of the Sub-Servicer
Remittance Date, after deducting from such remittance an amount equal to the
servicing compensation (including interest on Permitted

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Investments) and unreimbursed expenses and advances to which it is then entitled
pursuant to the related Sub-Servicing Agreement, to the extent not previously
paid to or retained by it. In addition, on each Sub-Servicer Remittance Date the
Sub-Servicer will be required to remit to the Master Servicer any amounts
required to be advanced pursuant to the related Sub-Servicing Agreement. The
Sub-Servicer will also be required to remit to the Master Servicer, within five
Business Days of receipt, the proceeds of any Principal Prepayment made by the
Mortgagor, and, on each Sub-Servicer Remittance Date, the amount of any
Insurance Proceeds or Liquidation Proceeds received during the related
Prepayment Period.

               SECTION 3.09. Collection of Taxes, Assessments and Similar Items;
                             Servicing Accounts.

               The Master Servicer and the Sub-Servicers shall establish and
maintain one or more accounts (the "Servicing Accounts"), and shall deposit and
retain therein all collections from the Mortgagors (or related advances from
Sub-Servicers) for the payment of taxes, assessments, Primary Hazard Insurance
Policy premiums, and comparable items for the account of the Mortgagors, to the
extent that the Master Servicer customarily escrows for such amounts.
Withdrawals of amounts so collected from a Servicing Account may be made only to
(i) effect payment of taxes, assessments, Primary Hazard Insurance Policy
premiums and comparable items; (ii) reimburse the Master Servicer (or a
Sub-Servicer to the extent provided in the related Sub-Servicing Agreement) out
of related collections for any payments made pursuant to Sections 3.01 (with
respect to taxes and assessments), and 3.13 (with respect to Primary Hazard
Insurance Policies); (iii) refund to Mortgagors any sums as may be determined to
be overages; or (iv) clear and terminate the Servicing Account at the
termination of this Agreement pursuant to Section 9.01. As part of its servicing
duties, the Master Servicer or Sub-Servicers shall, if and to the extent
required by law, pay to the Mortgagors interest on funds in Servicing Accounts
from its or their own funds, without any reimbursement therefor.

               SECTION 3.10.          Custodial Account.

               (a) The Master Servicer shall establish and maintain one or more
accounts (collectively, the "Custodial Account") in which the Master Servicer
shall deposit or cause to be deposited on a daily basis, or as and when received
from the Sub-Servicers, the following payments and collections received or made
by or on behalf of it subsequent to the Cut-off Date, or received by it prior to
the Cut-off Date but allocable to a period subsequent thereto (other than in
respect of principal and interest on the Mortgage Loans due on or before the
Cut-off Date):

             (i) all payments (including advances by a Sub-Servicer) on account
        of principal, including Principal Prepayments, on the Mortgage Loans and
        all Prepayment Charges collected on the Mortgage Loans (and any Master
        Servicer Prepayment Charge Payment Amounts paid by, or collected on
        behalf of the Trust Fund by, the Master Servicer or any Sub-Servicer);

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            (ii) all payments (including advances by a Sub-Servicer) on account
        of interest on the Mortgage Loans, including Buydown Funds, if any, net
        of any portion thereof retained by the Master Servicer as Master
        Servicing Fees or any Sub-Servicer as Sub-Servicing Fees;

           (iii) all Insurance Proceeds, other than proceeds that represent
        reimbursement of costs and expenses incurred by the Master Servicer or
        any Sub-Servicer in connection with presenting claims under the related
        Insurance Policies, Liquidation Proceeds and REO Proceeds;

            (iv) all proceeds of any Mortgage Loan or REO Property repurchased
        or purchased in accordance with Sections 2.02, 2.04, 3.14 or 9.01; and
        all amounts required to be deposited in connection with the substitution
        of a Qualified Substitute Mortgage Loan pursuant to Section 2.04; and

             (v) any amounts required to be deposited pursuant to Section 3.12,
        3.13, 3.15 or 3.22.

               The foregoing requirements for deposit in the Custodial Account
shall be exclusive. In the event the Master Servicer shall deposit in the
Custodial Account any amount not required to be deposited therein, it may
withdraw such amount from the Custodial Account, any provision herein to the
contrary notwithstanding. The Custodial Account shall be maintained as a
segregated account, separate and apart from trust funds created for mortgage
pass-through certificates of other series, and the other accounts of the Master
Servicer.

               (b) Funds in the Custodial Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. The
Master Servicer shall give notice to the Trustee and the Company of the location
of the Custodial Account after any change thereof.

               SECTION 3.11.  Permitted Withdrawals From the Custodial Account.

               The Master Servicer may, from time to time as provided herein,
make withdrawals from the Custodial Account of amounts on deposit therein
pursuant to Section 3.10 that are attributable to the Mortgage Loans for the
following purposes:

                     (i) to make deposits into the Certificate Account in the
        amounts and in the manner provided for in Section 4.01;

                    (ii) to pay to itself, the Company, the Seller or any other
        appropriate person, as the case may be, with respect to each Mortgage
        Loan that has previously been purchased or repurchased pursuant to
        Sections 2.02, 2.04, 3.14 or 9.01 all amounts received thereon and not
        yet distributed as of the date of purchase or repurchase;

                     (iii) to reimburse itself or any Sub-Servicer for Advances
        not previously reimbursed, the Master Servicer's or any Sub-Servicer's
        right to reimbursement pursuant to

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        this clause (iii) being limited to amounts received which represent Late
        Collections (net of the related Master Servicing Fees and Sub-Servicing
        Fees) of Monthly Payments on Mortgage Loans with respect to which such
        Advances were made and as further provided in Section 3.15;

                    (iv) to reimburse or pay itself, the Trustee or the Company
        for expenses incurred by or reimbursable to the Master Servicer, the
        Trustee or the Company pursuant to Sections 3.22, 6.03, 8.05 or
        10.01(g), except as otherwise provided in such Sections hereof;

                     (v) to reimburse itself or any Sub-Servicer for costs and
        expenses incurred by or reimbursable to it relating to the prosecution
        of any claims pursuant to Section 3.13 that are in excess of the amounts
        so recovered;

                    (vi) to reimburse itself or any Sub-Servicer for unpaid
        Master Servicing Fees, Sub-Servicing Fees and unreimbursed Servicing
        Advances, the Master Servicer's or any Sub-Servicer's right to
        reimbursement pursuant to this clause (vi) with respect to any Mortgage
        Loan being limited to late recoveries of the payments for which such
        advances were made pursuant to Section 3.01 or Section 3.09 and any
        other related Late Collections;

                   (vii) to pay itself as servicing compensation (in addition to
        the Master Servicing Fee and Sub-Servicing Fee), on or after each
        Distribution Date, any interest or investment income earned on funds
        deposited in the Custodial Account for the period ending on such
        Distribution Date;

                  (viii) to reimburse itself or any Sub-Servicer for any Advance
        or Servicing Advance previously made, after a Realized Loss has been
        allocated with respect to the related Mortgage Loan if the Advance or
        Servicing Advance was not reimbursed pursuant to clauses (iii) and (vi);

                     (ix) to pay Radian the premium under the Radian Lender-Paid
        PMI Policy; and

                     (x) to clear and terminate the Custodial Account at the
        termination of this Agreement pursuant to Section 9.01.

               The Master Servicer shall keep and maintain separate accounting
records on a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying
any withdrawal from the Custodial Account pursuant to such subclauses (ii)
through (x).

               SECTION 3.12.          Permitted Investments.

               Any institution maintaining the Custodial Account shall at the
direction of the Master Servicer invest the funds in such account in Permitted
Investments, each of which shall mature not later than (i) the Business Day
immediately preceding the date on which such funds are required to

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be withdrawn from such account pursuant to this Agreement, if a Person other
than the Trustee is the obligor thereon, and (ii) no later than the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Trustee is the obligor thereon and shall not be sold or
disposed of prior to its maturity. All income and gain realized from any such
investment as well as any interest earned on deposits in the Custodial Account
shall be for the benefit of the Master Servicer. The Master Servicer shall
deposit in the Custodial Account an amount equal to the amount of any loss
incurred in respect of any such investment immediately upon realization of such
loss without right of reimbursement.

               SECTION 3.13.          Maintenance of Primary Hazard Insurance.

               (a) The Master Servicer shall cause to be maintained for each
Mortgage Loan primary hazard insurance by a Qualified Insurer or other insurer
satisfactory to the Rating Agencies with extended coverage on the related
Mortgaged Property in an amount equal to the lesser of (i) 100% of the
replacement value of the improvements, as determined by the insurance company,
on such Mortgaged Property or (ii) the unpaid principal balance of the Mortgage
Loan. The Master Servicer shall also cause to be maintained on property acquired
upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, fire
insurance with extended coverage in an amount equal to the replacement value of
the improvements thereon. Any costs incurred in maintaining any insurance
described in this Section 3.13 (other than any deductible described in the last
paragraph hereof) shall be recoverable as a Servicing Advance. The Master
Servicer shall not be obligated to advance any amounts pursuant to this Section
3.13 if, in its good faith judgment, the Master Servicer determines that such
advance would be a Nonrecoverable Advance. Pursuant to Section 3.10, any amounts
collected by the Master Servicer under any such policies (other than amounts to
be applied to the restoration or repair of the related Mortgaged Property or
property thus acquired or amounts released to the Mortgagor in accordance with
the Master Servicer's normal servicing procedures) shall be deposited in the
Custodial Account, subject to withdrawal pursuant to Section 3.11. Any cost
incurred by the Master Servicer in maintaining any such insurance shall not, for
the purpose of calculating monthly distributions to Certificateholders, be added
to the amount owing under the Mortgage Loan, notwithstanding that the terms of
the Mortgage Loan so permit. 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 Loan other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance.

               The Master Servicer shall, or shall cause the related
Sub-Servicer to, exercise its best reasonable efforts to maintain and keep in
full force and effect each Primary Insurance Policy by a Qualified Insurer, or
other insurer satisfactory to the Rating Agencies, with respect to each first
lien Mortgage Loan as to which as of the Cut-Off Date such a Primary Insurance
Policy was in effect (or, in the case of a Qualified Substitute Mortgage Loan,
the date of substitution) and the original principal amount of the related
Mortgage Note exceeded 80% of the Collateral Value in an amount at least equal
to the excess of such original principal amount over 75% of such Collateral
Value until the principal amount of any such first lien Mortgage Loan is reduced
below 80% of the Collateral Value or, based upon a new appraisal, the principal
amount of such first lien Mortgage Loan

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represents less than 80% of the new appraised value. The Master Servicer shall,
or shall cause the related Sub-Servicer to, effect the timely payment of the
premium on each Primary Insurance Policy. The Master Servicer and the related
Sub-Servicer shall have the power to substitute for any Primary Insurance Policy
another substantially equivalent policy issued by another Qualified Insurer,
provided, that, such substitution shall be subject to the condition that it will
not cause the ratings on the Certificates to be downgraded or withdrawn, as
evidenced in writing from each Rating Agency.

         The Master Servicer shall cooperate with Radian and shall use its best
efforts to furnish all reasonable aid, evidence and information in the
possession of the Master Servicer or to which the Master Servicer has access
with respect to any Radian Insured Loan.

        In the event of a default by Radian under the Radian Lender-Paid PMI
Policy (a "Replacement Event"), the Master Servicer shall use its best efforts
to obtain a substitute lender-paid primary mortgage insurance policy (a
"Substitute PMI Policy"); PROVIDED, HOWEVER, that the Master Servicer shall not
be obligated, and shall have no liability for failing, to obtain a Substitute
PMI Policy unless such Substitute PMI Policy can be obtained on the following
terms and conditions: (i) the Certificates shall be rated no lower than the
rating assigned by each Rating Agency to the Certificates immediately prior to
such Replacement Event, as evidenced by a letter from each Rating Agency
addressed to the Company, the Master Servicer and the Trustee, (ii) the timing
and mechanism for drawing on such new Substitute PMI Policy shall be reasonably
acceptable to the Master Servicer and the Trustee and (iii) the premiums under
the proposed Substitute PMI Policy shall not exceed such premiums under the
existing Radian Lender-Paid PMI Policy.

        With respect to the Radian PMI Insured Loans covered by a Radian
Lender-Paid PMI Policy, the Master Servicer will confirm with Radian, and Radian
will certify to the Trustee, on or before May 15, 2001, that the Mortgage Loans
indicated on the Mortgage Loan Schedule as being covered by Radian Lender-Paid
PMI Policy are so covered.

        No earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired with respect to a security
instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional insurance. When, at
the time of origination of the Mortgage Loan or at any subsequent time, the
Mortgaged Property is located in a federally designated special flood hazard
area, the Master Servicer shall cause with respect to the Mortgage Loans and
each REO Property flood insurance (to the extent available and in accordance
with mortgage servicing industry practice) to be maintained. Such flood
insurance shall cover the Mortgaged Property, including all items taken into
account in arriving at the Collateral Value on which the Mortgage Loan was
based, and shall be in an amount equal to the lesser of (i) the Stated Principal
Balance of the related Mortgage Loan and (ii) the minimum amount required under
the terms of coverage to compensate for any damage or loss on a replacement cost
basis, but not more than the maximum amount of such insurance available for the
related Mortgaged Property under either the regular or emergency programs of the
National Flood Insurance Program (assuming that the area in which such Mortgaged
Property is located is participating in such program). Unless applicable state
law requires a higher deductible, the deductible on such flood insurance may not
exceed $1,000 or 1% of the applicable amount of coverage, whichever is less.

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               In the event that the Master Servicer shall obtain and maintain a
blanket fire insurance policy with extended coverage insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first two sentences of this
Section 3.13, it being understood and agreed that such policy may contain a
deductible clause, in which case the Master Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property a policy
complying with the first two sentences of this Section 3.13 and there shall have
been a loss which would have been covered by such policy, deposit in the
Certificate Account from its own funds the amount not otherwise payable under
the blanket policy because of such deductible clause. Any such deposit by the
Master Servicer shall be made on the Certificate Account Deposit Date next
preceding the Distribution Date which occurs in the month following the month in
which payments under any such policy would have been deposited in the Custodial
Account. Any such deposit shall not be deemed Servicing Advances and the Master
Servicer shall not be entitled to reimbursement therefor. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Master
Servicer agrees to present, on behalf of itself, the Trustee and
Certificateholders, claims under any such blanket policy.

               SECTION 3.14.   Enforcement of Due-on-Sale Clauses; Assumption
                               Agreements.

               The Master Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance by any Mortgagor of the Mortgaged Property
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note or the
Mortgage), exercise or cause to be exercised its rights to accelerate the
maturity of such Mortgage Loan under any "due-on-sale" clause applicable
thereto; provided, however, that the Master Servicer shall not exercise any such
rights if it reasonably believes that it is prohibited by law from doing so. The
Master Servicer or the related Sub-Servicer may repurchase a Mortgage Loan at
the Purchase Price deposited into the Custodial Account when the Master Servicer
requires acceleration of the Mortgage Loan, but only if the Master Servicer is
satisfied, as evidenced by an Officer's Certificate delivered to the Trustee,
that either (i) such Mortgage Loan is in default or default is reasonably
foreseeable or (ii) if such Mortgage Loan is not in default or default is not
reasonably foreseeable, such repurchase will have no adverse tax consequences
for the Trust Fund or any Certificateholder. If the Master Servicer is unable to
enforce such "due-on-sale" clause (as provided in the second preceding sentence)
or if no "due-on-sale" clause is applicable, the Master Servicer or the
Sub-Servicer is authorized to enter into an assumption and modification
agreement with the Person to whom such property has been conveyed or is proposed
to be conveyed, pursuant to which such Person becomes liable under the Mortgage
Note and, to the extent permitted by applicable state law, the Mortgagor remains
liable thereon; provided, however, that the Master Servicer shall not enter into
any assumption and modification agreement if the coverage provided under the
Primary Insurance Policy, if any, would be impaired by doing so. The Master
Servicer shall notify the Trustee, whenever possible, before the completion of
such assumption agreement, and shall forward to the Trustee the original copy of
such assumption agreement, which copy shall be added by the Trustee to the
related Mortgage File and which shall, for all purposes, be considered a part of
such Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such assumption agreement,
the interest rate on the related

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Mortgage Loan shall not be changed and no other material alterations in the
Mortgage Loan shall be made unless such material alteration would not cause any
of REMIC 1, REMIC 2 or REMIC 3 to fail to qualify as a REMIC for federal income
tax purposes, as evidenced by an Opinion of Counsel. The Master Servicer is also
authorized to enter into a substitution of liability agreement with such Person,
pursuant to which the original Mortgagor is released from liability and such
Person is substituted as the Mortgagor and becomes liable under the Mortgage
Note. Any fee collected by or on behalf of the Master Servicer for entering into
an assumption or substitution of liability agreement will be retained by or on
behalf of the Master Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the Mortgage Rate, the amount of the Monthly
Payment and any other term affecting the amount or timing of payment on the
Mortgage Loan) may be changed. The Master Servicer shall not enter into any
substitution or assumption if such substitution or assumption shall (i) both
constitute a "significant modification" effecting an exchange or reissuance of
such Mortgage Loan under the Code (or Treasury regulations promulgated
thereunder) and cause any of REMIC 1, REMIC 2 or REMIC 3 to fail to qualify as a
REMIC under the REMIC Provisions or (ii) cause the imposition of any tax on
"prohibited transactions" or "contributions" after the Startup Day under the
REMIC Provisions. The Master Servicer shall notify the Trustee that any such
substitution or assumption agreement has been completed by forwarding to the
Trustee the original copy of such substitution or assumption agreement, which
copy shall be added to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. A portion equal to up to
2% of the Collateral Value of the related Mortgage Loan, of any fee or
additional interest collected by the related Sub- Servicer for consenting in any
such conveyance or entering into any such assumption agreement may be retained
by the related Sub-Servicer as additional servicing compensation.

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

               SECTION 3.15.          Realization Upon Defaulted Mortgage Loans.

               The Master Servicer shall exercise reasonable efforts, consistent
with the procedures that the Master Servicer would use in servicing loans for
its own account, to foreclose upon or otherwise comparably convert (which may
include an REO Acquisition) the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.07, and which are not released from the Trust Fund
pursuant to any other provision hereof. The Master Servicer shall use reasonable
efforts to realize proceeds from such defaulted Mortgage Loans in such manner
(including short sales) as will maximize the receipt of principal and interest
by Certificateholders, taking into account, among other things, the timing of
foreclosure proceedings.

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The foregoing is subject to the provisions that, in any case in which Mortgaged
Property shall have suffered damage from an Uninsured Cause, the Master Servicer
shall not be required to expend its own funds toward the restoration of such
property unless it shall determine in its sole discretion (i) that such
restoration will increase the net proceeds of liquidation of the related
Mortgage Loan to Certificateholders after reimbursement to itself for such
expenses, and (ii) that such expenses will be recoverable by the Master Servicer
through Insurance Proceeds or Liquidation Proceeds from the related Mortgaged
Property, as contemplated in Section 3.11. 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 related property, as contemplated in Section 3.11.

               The proceeds of any Cash Liquidation or REO Disposition, as well
as any recovery resulting from a partial collection of Insurance Proceeds or
Liquidation Proceeds or any income from an REO Property, will be deposited into
the Custodial Account and applied in the following order of priority: first, to
reimburse the Master Servicer or any Sub-Servicer for any related unreimbursed
Servicing Advances, pursuant to Section 3.11(vi) or 3.22; second, to accrued and
unpaid interest on the Mortgage Loan or REO Imputed Interest, at the Mortgage
Rate, to the date of the Cash Liquidation or REO Disposition, or to the Due Date
prior to the Distribution Date on which such amounts are to be distributed if
not in connection with a Cash Liquidation or REO Disposition; and third, as a
recovery of principal of the Mortgage Loan. If the amount of the recovery so
allocated to interest is less than a full recovery thereof, that amount will be
allocated as follows: first, to unpaid Master Servicing Fees and Sub-Servicing
Fees; and second, to interest at the Net Mortgage Rate. The portion of the
recovery so allocated to unpaid Master Servicing Fees and Sub-Servicing Fees
shall be reimbursed to the Master Servicer or any Sub-Servicer pursuant to
Section 3.11(vi). The portions of the recovery so allocated to interest at the
Net Mortgage Rate and to principal of the Mortgage Loan shall be applied as
follows: first, to reimburse the Master Servicer or any Sub- Servicer for any
related unreimbursed Advances in accordance with Section 3.11(iii) or 3.22,
second, payment to Radian in accordance with Sections 3.11(ix) and third, for
payment to the Trustee and distribution to the Certificateholders in accordance
with the provisions of Section 4.01, subject to Section 3.22 with respect to
certain recoveries from an REO Disposition constituting Excess Proceeds.

               SECTION 3.16.    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 shall be escrowed in
a manner customary for such purposes, the Master Servicer will immediately
notify the Trustee by a certification (which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the Custodial
Account pursuant to Section 3.10 have been or will be so deposited) of a
Servicing Officer and shall request delivery to it of the Mortgage File in the
form of the Request for Release attached hereto as Exhibit F-2. Upon receipt of
such certification and request, the Trustee shall promptly release the related
Mortgage File to the Master Servicer. Subject to the receipt by the Master
Servicer of the proceeds of such payment in full and the payment of all related
fees and expenses, the Master Servicer shall arrange for the release to the

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Mortgagor of the original canceled Mortgage Note. All other documents in the
Mortgage File shall be retained by the Master Servicer to the extent required by
applicable law. The Master Servicer shall provide for preparation of the
appropriate instrument of satisfaction covering any Mortgage Loan which pays in
full and the Trustee shall cooperate in the execution and return of such
instrument to provide for its delivery or recording as may be required. No
expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Custodial Account or the Certificate
Account.

               From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loan, the Trustee shall, upon
request of the Master Servicer and delivery to the Trustee of a Request for
Release in the form attached hereto as Exhibit F-1, release the related Mortgage
File to the Master Servicer and the Trustee shall execute such documents as the
Master Servicer shall prepare and request as being necessary to the prosecution
of any such proceedings. Such Request for Release shall obligate the Master
Servicer to return each document previously requested from the Mortgage File to
the Trustee when the need therefor by the Master Servicer no longer exists; and
in any event within 21 days of the Master Servicer's receipt thereof, unless the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Custodial Account or the Mortgage File
or such document has been delivered to an attorney, or to a public trustee or
other public official as required by law, for purposes of initiating or pursuing
legal action or other proceedings for the foreclosure of the Mortgaged Property
either judicially or non- judicially, and the Master Servicer has delivered to
the Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a Request for
Release stating that such Mortgage Loan was liquidated and that all amounts
received or to be received in connection with such liquidation which are
required to be deposited into the Custodial Account have been or will be so
deposited, or that such Mortgage Loan has become an REO Property, a copy of the
Request for Release shall be released by the Trustee to the Master Servicer.

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

               SECTION 3.17.          Servicing Compensation.

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               As compensation for its activities hereunder, the Master Servicer
shall be entitled to withhold and retain, from deposits to the Custodial Account
of amounts representing payments or recoveries of interest, the Master Servicing
Fees with respect to each Mortgage Loan (less any portion of such amounts
retained by any Sub-Servicer). In addition, the Master Servicer shall be
entitled to recover unpaid Master Servicing Fees out of related Late Collections
to the extent permitted in Section 3.11.

               Each Sub-Servicing Agreement shall permit the related
Sub-Servicer to retain the Sub-Servicing Fees from collections on the related
Mortgage Loans, or shall provide that the Sub- Servicer be paid directly by the
Master Servicer from collections on the related Mortgage Loans. To the extent
the Master Servicer directly services a Mortgage Loan, the Master Servicer shall
be entitled to retain the Sub-Servicing Fees for that Mortgage Loan.

               The Master Servicer also shall be entitled pursuant to Section
3.11 to receive from the Custodial Account as additional servicing compensation
interest or other income earned on deposits therein, subject to Section 3.23, as
well as any assumption fees, late payment charges and reconveyance fees. The
Master Servicer shall not be entitled to retain any Prepayment Charges. The
Master Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including payment of the
premiums for any blanket policy insuring against hazard losses pursuant to
Section 3.13 and servicing compensation of the Sub-Servicer to the extent not
retained by it), and shall not be entitled to reimbursement therefor except as
specifically provided in Section 3.11. The Master Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Master Servicer's responsibilities and obligations under this Agreement.

               SECTION 3.18.          Maintenance of Certain Servicing Policies.

        The Master Servicer shall obtain and maintain at its own expense and
shall cause each Sub- Servicer to obtain and maintain for the duration of this
Agreement a blanket fidelity bond and an errors and omissions insurance policy
covering the Master Servicer's and such Sub-Servicer's officers, employees and
other persons acting on its behalf in connection with its activities under this
Agreement. The amount of coverage shall be at least equal to the coverage
maintained by the Master Servicer or Sub-Servicer in order to be acceptable to
Fannie Mae or Freddie Mac to service loans for it or otherwise in an amount as
is commercially available at a cost that is generally not regarded as excessive
by industry standards. The Master Servicer shall promptly notify the Trustee in
writing of any material change in the terms of such bond or policy. The Master
Servicer shall provide annually to the Trustee a certificate of insurance that
such bond and policy are in effect. If any such bond or policy ceases to be in
effect, the Master Servicer shall, to the extent possible, give the Trustee ten
days' notice prior to any such cessation and shall use its reasonable best
efforts to obtain a comparable replacement bond or policy, as the case may be.

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               SECTION 3.19.          Annual Statement as to Compliance.

               Within 120 days after December 31 of each year, commencing
December 2001, the Master Servicer at its own expense shall deliver to the
Trustee, with a copy to the Rating Agencies, a certificate signed by a Servicing
Officer stating, as to the signers thereof, that (i) a review of the activities
of the Master Servicer during the preceding calendar year and of performance
under this Agreement has been made under such officers' supervision, (ii) to the
best of such officers' knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Agreement for 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 including
the steps being taken by the Master Servicer to remedy such default; (iii) a
review of the activities of each Sub-Servicer during the Sub-Servicer's most
recently ended fiscal year on or prior to such December 31 and its performance
under its Sub-Servicing Agreement has been made under such officer's
supervision; and (iv) to the best of the Servicing Officer's knowledge, based on
his review and the certification of an officer of the Sub-Servicer (unless the
Servicing Officer has reason to believe that reliance on such certification is
not justified), either each Sub-Servicer has performed and fulfilled its duties,
responsibilities and obligations under this Agreement and its Sub-Servicing
Agreement in all material respects throughout the year, or, if there has been a
default in performance or fulfillment of any such duties, responsibilities or
obligations, specifying the nature and status of each such default known to the
Servicing Officer. Copies of such statements shall be provided by the Master
Servicer to the Certificateholders upon request or by the Trustee at the expense
of the Master Servicer should the Master Servicer fail to provide such copies.

               SECTION 3.20.  Annual Independent Public Accountants' Servicing
                              Statement.

               (a) Within 120 days after December 31 of each year, commencing
December 2001, the Master Servicer, at its expense, shall cause a firm of
independent public accountants who are members of the American Institute of
Certified Public Accountants to furnish a statement to the Master Servicer,
which will be provided to the Trustee and the Rating Agencies, to the effect
that, in connection with the firm's examination of the Master Servicer's
financial statements as of the end of such calendar year, nothing came to their
attention that indicated that the Master Servicer was not in compliance with the
provisions of this Agreement except for (i) such exceptions as such firm
believes to be immaterial and (ii) such other exceptions as are set forth in
such statement.

               (b) Within 120 days after December 31 of each year, commencing
December 2001, the Master Servicer, at its expense, shall or shall cause each
Sub-Servicer to cause a nationally recognized firm of independent certified
public accountants to furnish to the Master Servicer or such Sub-Servicer a
report stating that (i) it has obtained a letter of representation regarding
certain matters from the management of the Master Servicer or such Sub-Servicer
which includes an assertion that the Master Servicer or such Sub-Servicer has
complied with certain minimum mortgage loan servicing standards (to the extent
applicable to commercial and multifamily mortgage loans) identified in the
Uniform Single Attestation Program for Mortgage Bankers established by the
Mortgage Bankers Association of America with respect to the servicing of first
and second lien

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conventional single family mortgage loans during the most recently completed
calendar year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. Immediately upon receipt of such report, the Master Servicer shall
or shall cause each Sub-Servicer to furnish a copy of such report to the Trustee
and the Rating Agencies.

               SECTION 3.21.          Access to Certain Documentation.

               The Master Servicer shall provide, and shall cause any
Sub-Servicer to provide, to the Trustee, access to the documentation in their
possession regarding the related Mortgage Loans and REO Properties and to the
Certificateholders, the FDIC, and the supervisory agents and examiners of the
FDIC (to which the Trustee shall also provide) access to the documentation
regarding the related Mortgage Loans required by applicable regulations, such
access being afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Master Servicer or the Sub-Servicers
that are designated by these entities; provided, however, that, unless otherwise
required by law, the Trustee, the Master Servicer or the Sub-Servicer shall not
be required to provide access to such documentation if the provision thereof
would violate the legal right to privacy of any Mortgagor; provided, further,
however, that the Trustee shall coordinate its requests for such access so as
not to impose an unreasonable burden on, or cause an unreasonable interruption
of, the business of the Master Servicer or any Sub-Servicer. The Master
Servicer, the Sub-Servicers and the Trustee shall allow representatives of the
above entities to photocopy any of the documentation and shall provide equipment
for that purpose at a charge that covers their own actual out-of-pocket costs.

               SECTION 3.22.  Title, Conservation and Disposition of REO
                              Property.

               This Section shall apply only to REO Properties acquired for the
account of REMIC 1 and shall not apply to any REO Property relating to a
Mortgage Loan which was purchased or repurchased from REMIC 1 pursuant to
Sections 2.02, 2.04 or 3.14. In the event that title to any such REO Property is
acquired, the deed or certificate of sale shall be issued to the Trustee, or to
its nominee, on behalf of the Certificateholders. The Master Servicer, on behalf
of REMIC 1, shall either sell any REO Property before the close of the third
taxable year following the taxable year in which REMIC 1 acquires ownership of
such REO Property for purposes of Section 860G(a)(8) of the Code or, at the
expense of REMIC 1, request, more than 60 days before the day on which the
three-year grace period would otherwise expire an extension of the three-year
grace period, unless the Master Servicer has delivered to the Trustee an Opinion
of Counsel (which shall not be at the expense of the Trustee), addressed to the
Trustee and the Master Servicer, to the effect that the holding by REMIC 1 of
such REO Property subsequent to the close of the third taxable year following
the taxable year in which REMIC 1 acquires ownership of such REO Property will
not result in the imposition on REMIC 1 of taxes on "prohibited transactions"
thereof, as defined in Section 860F of the Code, or cause any of REMIC 1, REMIC
2 or REMIC 3 to fail to qualify as a REMIC under the REMIC Provisions or
comparable provisions of the laws of the State of California at any time that
any Certificates are outstanding. The Master Servicer shall manage, conserve,

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protect and operate each REO Property for the Certificateholders solely for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) or result in the receipt by any of REMIC 1, REMIC 2 or REMIC
3 of any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code or any "net income from foreclosure property" which is
subject to taxation under the REMIC Provisions. 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.

               Any REO Disposition shall be for cash only (unless changes in the
REMIC Provisions made subsequent to the Startup Day allow a sale for other
consideration).

               The Master Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets. The Master Servicer shall deposit,
or cause to be deposited, on a daily basis in the Custodial Account all revenues
received with respect to the REO Properties, net of any directly related
expenses incurred or withdraw therefrom funds necessary for the proper
operation, management and maintenance of the REO Property.

               If as of the date of acquisition of title to any REO Property
there remain outstanding unreimbursed Servicing Advances with respect to such
REO Property or any outstanding Advances allocated thereto the Master Servicer,
upon an REO Disposition, shall be entitled to reimbursement for any related
unreimbursed Servicing Advances and any unreimbursed related Advances as well as
any unpaid Master Servicing Fees and Sub-Servicing Fees from proceeds received
in connection with the REO Disposition, as further provided in Section 3.15. The
Master Servicer shall not be obligated to advance any amounts with respect to an
REO Property if, in its good faith judgment, the Master Servicer determines that
such advance would constitute a Nonrecoverable Advance.

               The REO Disposition shall be carried out by the Master Servicer
at such price and upon such terms and conditions as the Master Servicer shall
determine.

               The Master Servicer shall deposit the proceeds from the REO
Disposition, net of any payment to the Master Servicer as provided above, in the
Custodial Account upon receipt thereof for distribution in accordance with
Section 4.01; provided, that any such net proceeds received by the Master
Servicer which are in excess of the applicable Stated Principal Balance plus all
unpaid REO Imputed Interest thereon through the last day of the month in which
the REO Disposition occurred ("Excess Proceeds") shall be retained by the Master
Servicer as additional servicing compensation.

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               With respect to any Mortgage Loan as to which the Master Servicer
has received notice of, or has actual knowledge of, the presence of any toxic or
hazardous substance on the Mortgaged Property, the Master Servicer shall not, on
behalf of the Trustee, either (i) obtain title to the related Mortgaged Property
as a result of or in lieu of foreclosure or otherwise, or (ii) otherwise acquire
possession of, the related Mortgaged Property, unless the Master Servicer has,
at least 30 days prior to taking such action, obtained and delivered to the
Trustee an environmental audit report prepared by a Person who regularly
conducts environmental audits using customary industry standards. The Master
Servicer shall take such action as it deems to be in the best economic interest
of the Trust Fund (other than proceeding against the Mortgaged Property) and is
hereby authorized at such time as it deems appropriate to release such Mortgaged
Property from the lien of the related Mortgage.

               The cost of the environmental audit report contemplated by this
Section 3.22 shall be advanced by the Master Servicer as an expense of the Trust
Fund, and the Master Servicer shall be reimbursed therefor from the Custodial
Account as provided in Section 3.11, any such right of reimbursement being prior
to the rights of the Certificateholders to receive any amount in the Custodial
Account.

               If the Master Servicer determines, as described above, that it is
in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property in compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund. The cost of any such compliance,
containment, clean-up or remediation shall be advanced by the Master Servicer as
an expense of the Trust Fund, and the Master Servicer shall be entitled to be
reimbursed therefor from the Custodial Account as provided in Section 3.11, any
such right of reimbursement being prior to the rights of the Certificateholders
to receive any amount in the Custodial Account.

               SECTION 3.23.  Additional Obligations of the Master Servicer.

               On each Certificate Account Deposit Date, the Master Servicer
shall deliver to the Trustee for deposit in the Certificate Account from its own
funds and without any right of reimbursement therefor, a total amount equal to
the amount of Compensating Interest for the related Distribution Date.

               SECTION 3.24   Additional Obligations of the Company.

               The Company agrees that on or prior to the tenth day after the
Closing Date, the Company shall provide the Trustee with a written notification,
substantially in the form of Exhibit J attached hereto, relating to each Class
of Certificates, setting forth (i) in the case of each Class of such
Certificates, (a) if less than 10% of the aggregate Certificate Principal
Balance or Notional Amount of such Class of Certificates has been sold as of
such date, the value calculated pursuant to clause (b)(iii) of Exhibit J hereto,
or, (b) if 10% or more of such Class of Certificates has been sold

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as of such date but no single price is paid for at least 10% of the aggregate
Certificate Principal Balance or Notional Amount of such Class of Certificates,
then the weighted average price at which the Certificates of such Class were
sold and the aggregate percentage of Certificates of such Class sold, (c) the
first single price at which at least 10% of the aggregate Certificate Principal
Balance or Notional Amount of such Class of Certificates was sold, or (d) if any
Certificates of each Class of Certificates are retained by the Company or an
affiliate corporation, or are delivered to the Seller, the fair market value of
such Certificates as of the Closing Date, (ii) the Prepayment Assumption used in
pricing the Certificates, and (iii) such other information as to matters of fact
as the Trustee may reasonably request to enable it to comply with its reporting
requirements with respect to each Class of such Certificates to the extent such
information can in the good faith judgment of the Company be determined by it.

               SECTION 3.25. Periodic Filings with the Securities and Exchange
                             Commission; Additional Information.

               The Trustee shall prepare or cause to be prepared for filing with
the Commission any and all reports, statements and information respecting the
Trust Fund and/or the Certificates required to be filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended, and shall solicit
any and all proxies of the Certificateholders whenever such proxies are required
to be solicited, pursuant to the Securities Exchange Act of 1934, as amended.
The Company shall promptly file, and exercise its reasonable best efforts to
obtain a favorable response to, no-action requests with, or other appropriate
exemptive relief from, the Commission seeking the usual and customary exemption
from such reporting requirements granted to issuers of securities similar to the
Certificates. Fees and expenses incurred by the Trustee in connection with this
Section shall not be reimbursable from the Trust Fund.

               The Master Servicer and the Company each agree to promptly
furnish to the Trustee, from time to time upon request, such further
information, reports and financial statements within their respective control
related to this Agreement and the Mortgage Loans as the Trustee reasonably deems
appropriate to prepare and file all necessary reports with the Commission.

               SECTION 3.26.          Administration of Buydown Funds.

               (a) With respect to any Buydown Mortgage Loan, the Sub-Servicer
has deposited Buydown Funds in an account that satisfies the requirements for a
Sub-Servicing Account (the "Buydown Account"). The Master Servicer shall cause
the Sub-Servicing Agreement to require that upon receipt from the Mortgagor of
the amount due on a Due Date for each Buydown Mortgage Loan, the Sub-Servicer
will withdraw from the Buydown Account the predetermined amount that, when added
to the amount due on such date from the Mortgagor, equals the full Monthly
Payment and transmit that amount in accordance with the terms of the
Sub-Servicing Agreement to the Master Servicer together with the related payment
made by the Mortgagor or advanced by the Sub-Servicer.

               (b) If the Mortgagor on a Buydown Mortgage Loan prepays such loan
in its entirety during the period (the "Buydown Period") when Buydown Funds are
required to be applied

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to such Buydown Mortgage Loan, the Sub-Servicer shall be required to withdraw
from the Buydown Account and remit any Buydown Funds remaining in the Buydown
Account in accordance with the related buydown agreement. The amount of Buydown
Funds which may be remitted in accordance with the related buydown agreement may
reduce the amount required to be paid by the Mortgagor to fully prepay the
related Mortgage Loan. If the Mortgagor on a Buydown Mortgage Loan defaults on
such Mortgage Loan during the Buydown Period and the property securing such
Buydown Mortgage Loan is sold in the liquidation thereof (either by the Master
Servicer or the insurer under any related Primary Insurance Policy), the
Sub-Servicer shall be required to withdraw from the Buydown Account the Buydown
Funds for such Buydown Mortgage Loan still held in the Buydown Account and remit
the same to the Master Servicer in accordance with the terms of the
Sub-Servicing Agreement for deposit in the Custodial Account or, if instructed
by the Master Servicer, pay to the insurer under any related Primary Insurance
Policy if the Mortgaged Property is transferred to such insurer and such insurer
pays all of the loss incurred in respect of such default. Any amount so remitted
pursuant to the preceding sentence will be deemed to reduce the amount owed on
the Mortgage Loan.

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                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

               SECTION 4.01.          Distributions.

               (a) The Trustee shall establish and maintain a Certificate
Account, in which the Master Servicer shall cause to be deposited on behalf of
the Trustee on or before 5:00 P.M. New York time on each Certificate Account
Deposit Date by wire transfer of immediately available funds an amount equal to
the sum of (i) any Advance for the immediately succeeding Distribution Date,
(ii) any amount required to be deposited in the Certificate Account pursuant to
Sections 3.11, 3.13, 3.22 or 3.23, (iii) all other amounts constituting the
Available Distribution Amount for the immediately succeeding Distribution Date
and (iv) any amounts on deposit in the Custodial Account representing Prepayment
Charges collected by the Master Servicer (and any Master Servicer Prepayment
Charge Payment Amounts paid by, or collected on behalf of the Trust Fund by, the
Master Servicer or any Sub-Servicer), other than any such Prepayment Charges or
Master Servicer Prepayment Charge Payment Amounts relating to Principal
Prepayments that occurred after the end of the related Prepayment Period.

               On each Distribution Date, prior to making any other
distributions referred to in Section 4.01, the Trustee shall withdraw from the
Certificate Account and pay itself the Trustee's Fee for such Distribution Date.

               On each Distribution Date the Trustee shall distribute to each
Certificateholder of record as of the next preceding Record Date (other than as
provided in Section 9.01 respecting the final distribution) either in
immediately available funds (by wire transfer or otherwise) to the account of
such Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has so notified the Trustee at least 5
Business Days prior to the related Record Date, or otherwise by check mailed to
such Certificateholder at the address of such Holder appearing in the
Certificate Register, such Certificateholder's share (based on the aggregate of
the Percentage Interests represented by Certificates of the applicable Class
held by such Holder) of the amounts required to be distributed to such Holder
pursuant to this Section 4.01.

               On each Distribution Date, the Trustee shall withdraw from the
Certificate Account that portion of Available Distribution Amount for such
Distribution Date consisting of the Interest Remittance Amount for such
Distribution Date, and make the following disbursements and transfers in the
order of priority described below, in each case to the extent of the Interest
Remittance Amount remaining for such Distribution Date:

                (i) to the Holders of the Class A-IO Certificates, the
        related Monthly Interest Distributable Amount for each such Class for
        such Distribution Date;

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               (ii) to the Holders of the Class A-IO Certificates, the related
        Unpaid Interest Shortfall Amount, if any, for each such Class for such
        Distribution Date;

               (iii) (a) from the remaining Interest Remittance Amount in
        respect of the Group I Loans, to the Class A-I-1, Class A-I-2, Class
        A-I-4 and Class A-I-5 Certificates, and the Class A-I-3 Component of the
        Class A-3 Certificates, pro rata, the related Monthly Interest
        Distributable Amount for such Class or Class A-3 Component for such
        Distribution Date, and (b) from the remaining Interest Remittance Amount
        in respect of the Group II Loans, to the Class A-II-1 Certificates and
        Class A-II-3 Certificates, and the Class A-3 Certificates in respect of
        the Class A-II-2 Component, pro rata, the related Monthly Interest
        Distributable Amount for such Class or Class A-3 Component for such
        Distribution Date;

               (iv) (a) from the remaining Interest Remittance Amount in respect
        of the Group I Loans, to the Class A-I-1, Class A-I-2, Class A-I-4 and
        Class A-I-5 Certificates, and the Class A-3 Certificates in respect of
        the Class A-I-3 Component, pro rata, the related Unpaid Interest
        Shortfall for such Class or Class A-3 Component for such Distribution
        Date, and (b) from the remaining Interest Remittance Amount in respect
        of the Group II Loans, to the Class A-II-1 Certificates and Class A-II-3
        Certificates, and the Class A-3 Certificates in respect of the Class
        A-II-2 Component, pro rata, the related Unpaid Interest Shortfall for
        such Class or Class A-3 Component for such Distribution Date;

               (v) (a) from the remaining Interest Remittance Amount in respect
        of the Group I Loans, to the Class A-II-1 Certificates and Class A-II-3
        Certificates, and the Class A-3 Certificates in respect of the Class
        A-II-2 Component, pro rata, any remaining Unpaid Interest Shortfall for
        such Class or Class A-3 Component for such Distribution Date, and (b)
        from the remaining Interest Remittance Amount in respect of the Group II
        Loans, to the Class A-I-1, Class A-I-2, Class A-I-4 and Class A-I-5
        Certificates, and the Class A-3 Certificates in respect of the Class
        A-II-2 Component, pro rata, any remaining Unpaid Interest Shortfall for
        such Class or Class A-3 Component for such Distribution Date;

               (vi) to the Holders of the Class M-1 Certificates, the Monthly
        Interest Distributable Amount for such Class for such Distribution Date;

               (vii) to the Holders of the Class M-2 Certificates, the Monthly
        Interest Distributable Amount for such Class for such Distribution Date;
        and

               (viii) to the Holders of the Class B Certificates, the Monthly
        Interest Distributable Amount for such Class for such Distribution Date.

               (b) On each Distribution Date (x) prior to the Stepdown Date or
(y) on which a Trigger Event is in effect, the Trustee shall withdraw from the
Certificate Account an amount equal to the Principal Distribution Amount and
distribute to the Certificateholders the following amounts, in the following
order of priority, in each case to the extent of the Principal Distribution
Amount remaining for such Distribution Date:

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               (i) first, (a) to the Class A-I-1 Certificates, the Class A-I-2
        Certificates, the Class A-3 Certificates in respect of the Class A-I-3
        Component, the Class A-I-4 Certificates and the Class A-I-5
        Certificates, sequentially, in that order, the Principal Distribution
        Amount for such Distribution Date from the Group I Loans and (b) to the
        holders of the Class A-II-1 Certificates, the Class A-3 Certificates in
        respect of the Class A-II-2 Component, and the Class A-II-3
        Certificates, sequentially, in that order, the Principal Distribution
        Amount for such Distribution Date from the Group II Loans, in each case
        until the Certificate Principal Balances or Component Principal Balances
        thereof are reduced to zero; provided that if on any Distribution Date,
        the Class A-I Certificates or Class A-II Certificates are no longer
        outstanding, the Principal Distribution Amount will be allocated to the
        Class A-II Certificates and Class A-I Certificates, respectively, in the
        order described above;

               (ii) second, to the holders of the Class M-1 Certificates, until
        the Certificate Principal Balance thereof has been reduced to zero;

               (iii) third, to the holders of the Class M-2 Certificates, until
        the Certificate Principal Balance thereof has been reduced to zero; and

               (iv) fourth, to the holders of the Class B Certificates, until
        the Certificate Principal Balance thereof has been reduced to zero.

               (c) On each Distribution Date (x) on or after the Stepdown Date
and (y) on which a Trigger Event is not in effect, the Trustee shall withdraw
from the Certificate Account an amount equal to the Principal Distribution
Amount and distribute to the Certificateholders the following amounts, in the
following order of priority, in each case to the extent of the Principal
Distribution Amount remaining for such Distribution Date:

               (i) first, from the Class A Principal Distribution Amount, (a) to
        the Class A-I-1 Certificates, the Class A-I-2 Certificates, the Class
        A-3 Certificates in respect of the Class A-I-3 Component, the Class
        A-I-4 Certificates and the Class A-I-5 Certificates, sequentially, in
        that order, the pro rata portion of the Class A Principal Distribution
        Amount, based on the Principal Remittance Amount for such Distribution
        Date from the Group I Loans, and (b) to the holders of the Class A-II-1
        Certificates, the Class A-3 Certificates in respect of the Class A-II-2
        Component, and the Class A-II-3 Certificates, sequentially, in that
        order, the pro rata portion of the Class A Principal Distribution
        Amount, based on the Principal Remittance Amount for such Distribution
        Date from the Group II Loans, in each case until the Certificate
        Principal Balances or Component Principal Balances thereof, as
        applicable, are reduced to zero; provided that if on any Distribution
        Date, the Class A-I Certificates or Class A-II Certificates are no
        longer outstanding, the Class A Principal Distribution Amount will be
        allocated to the Class A-II Certificates and Class A-I Certificates,
        respectively, in the order described above;

               (ii) second, to the holders of the Class M-1 Certificates, the
        Class M-1 Principal Distribution Amount until the Certificate Principal
        Balance thereof has been reduced to zero;

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               (iii) third, to the holders of the Class M-2 Certificates, the
        Class M-2 Principal Distribution Amount until the Certificate Principal
        Balance thereof has been reduced to zero; and

               (iv) fourth, to the holders of the Class B Certificates, the
        Class B Principal Distribution Amount until the Certificate Principal
        Balance thereof has been reduced to zero.

               (d) On each Distribution Date, the Net Monthly Excess Cashflow
shall be distributed in the following order of priority, in each case to the
extent of the Net Monthly Excess Cashflow remaining for such Distribution Date:

               (i) to the Holders of the Class or Classes of Certificates then
        entitled to receive distributions in respect of principal, in an amount
        equal to any Extra Principal Distribution Amount, payable to such
        Holders as part of the Principal Distribution Amount as described under
        Section 4.01(b) or Section 4.01(c) above, as applicable;

               (ii) to the Holders of the Class M-1 Certificates, in an amount
        equal to the Unpaid Interest Shortfall Amount allocable to such
        Certificates;

               (iii) to the Holders of the Class M-1 Certificates, in an amount
        equal to the Allocated Realized Loss Amount allocable to such
        Certificates;

               (iv) to the Holders of the Class M-2 Certificates, in an amount
        equal to the Unpaid Interest Shortfall Amount allocable to such
        Certificates;

               (v) to the Holders of the Class M-2 Certificates, in an
        amount equal to the Allocated Realized Loss Amount allocable to such
        Certificates;

               (vi) to the Holders of the Class B Certificates, in an amount
        equal to the Unpaid Interest Shortfall Amount allocable to such
        Certificates;

               (vii) to the Holders of the Class B Certificates, in an amount
        equal to the Allocated Realized Loss Amount allocable to such
        Certificates;

               (viii) to the Holders of the Class C Certificates, interest equal
        to the Monthly Interest Distributable Amount for such Class and
        principal equal to any remaining Overcollateralization Release Amount
        for such Distribution Date;

               (ix) if such Distribution Date follows the Prepayment Period
        during which occurs the latest date on which a Prepayment Charge may be
        required to be paid in respect of any Mortgage Loans, to the Holders of
        the Class P Certificates, in reduction of the Certificate Principal
        Balance thereof, until the Certificate Principal Balance thereof is
        reduced to zero; and

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               (x) any remaining amounts to the Holders of the Class R
        Certificates (in respect of the appropriate Residual Interest).

               (e) On each Distribution Date, all amounts representing
Prepayment Charges in respect of the Mortgage Loans received during the related
Prepayment Period and any Master Servicer Prepayment Charge Amounts paid by the
Master Servicer during the related Prepayment Period will be withdrawn from the
Certificate Account and distributed by the Trustee to the Holders of the Class P
Certificates and shall not be available for distribution to the Holders of any
other Class of Certificates. The payment of the foregoing amounts to the Holders
of the Class P Certificates shall not reduce the Certificate Principal Balances
thereof.

               (f) Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting 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 indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the Company
or the Master Servicer shall have any responsibility therefor except as
otherwise provided by this Agreement or applicable law.

               (g) The Trustee, upon the written direction of the Master
Servicer shall invest or cause the institution maintaining the Certificate
Account to invest the funds in the Certificate Account in Permitted Investments
designated in the name of the Trustee for the benefit of the Certificateholders,
which shall mature not later than the Business Day next preceding the
Distribution Date next following the date of such investment and shall not be
sold or disposed of prior to maturity. All income and gain realized from any
such investment prior to the Business Day next preceding the Distribution Date
shall be for the benefit of the Master Servicer. The amount of any losses
incurred in respect of any such investments shall be deposited in the
Certificate Account by the Master Servicer out of its own funds immediately as
realized without any right of reimbursement.

               (h) Except as otherwise provided in Section 9.01, if the Master
Servicer anticipates that a final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Master Servicer
shall, no later than the Determination Date in the month of such final
distribution, notify the Trustee and the Trustee shall, no later than two (2)
Business Days after such Determination Date, mail on such date to each Holder of
such Class of Certificates a notice to the effect that: (i) the Trustee
anticipates that the final distribution with respect to such Class of
Certificates will be made on such Distribution Date but only upon presentation
and surrender of such Certificates at the office of the Trustee or as otherwise
specified therein, and (ii) no interest shall accrue on such Certificates from
and after the end of the prior calendar month.

               Any funds not distributed to any Holder or Holders of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates

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shall, on such date, be set aside and held in trust and credited to the account
of the appropriate non- tendering Holder or Holders. If any Certificates as to
which notice has been given pursuant to this Section 4.01(h) shall not have been
surrendered for cancellation within six months after the time specified in such
notice, the Trustee shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within six months after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trustee shall take reasonable steps as directed by the
Company, or appoint an agent to take reasonable steps, to contact the remaining
non-tendering Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the Trust Fund.
If within nine months after the second notice any such Certificates shall not
have been surrendered for cancellation, the Class R Certificateholders shall be
entitled to all unclaimed funds and other assets which remain subject hereto. No
interest shall accrue or be payable to any Certificateholder on any amount held
in trust as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.01(h).

               SECTION 4.02.          Statements to Certificateholders.

               (a) On each Distribution Date, based, as applicable, on
information provided to it by the Master Servicer, the Trustee shall prepare and
make available on the Trustee's website,
http://www-apps.gis.deutsche-bank.com/invr (or deliver at the recipient's
option), to each Holder of the Regular Certificates, the Master Servicer and the
Rating Agencies, a statement as to the distributions made on such Distribution
Date:

               (i) (A) the amount of the distribution made on such Distribution
        Date to the Holders of each Class of Regular Certificates (other than
        the Class A-IO Certificates), including, with respect to the Class A-3
        Certificates, the Class A-3 Components, separately identified, allocable
        to principal and (B) the amount of the distribution made on such
        Distribution Date to the Holders of the Class P Certificates allocable
        to Prepayment Charges and Master Servicer Prepayment Charge Payment
        Amounts;

               (ii) the amount of the distribution made on such Distribution
        Date to the Holders of each Class of Regular Certificates (other than
        the Class P Certificates), including, with respect to the Class A-3
        Certificates, the Class A-3 Components, allocable to interest,
        separately identified;

               (iii) the Pass-Through Rate on each Class of Regular Certificates
        (other than the Class P Certificates), including, with respect to the
        Class A-3 Certificates, the Class A-3 Components, for such Distribution
        Date;

               (iv) the aggregate amount of Advances for such Distribution Date;

               (v) the number and aggregate Stated Principal Balance of the
        Mortgage Loans as of the end of the related Due Period;

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               (vi) the Overcollateralized Amount, the Excess Overcollateralized
        Amount, the Overcollateralization Release Amount, the
        Overcollateralization Deficiency Amount and the Overcollateralization
        Target Amount for such Distribution Date;

               (vii) the aggregate Certificate Principal Balance, Component
        Principal Balance or Notional Amount, as applicable, of each Class of
        Regular Certificates, including, with respect to the Class A-3
        Certificates, the Class A-3 Components, after giving effect to the
        amounts distributed on such Distribution Date (in the case of each Class
        of the Mezzanine Certificates, separately identifying any reduction
        thereof due to the allocation of Realized Losses thereto);

               (viii) the number and aggregate Stated Principal Balance of
        Mortgage Loans (a) delinquent 31 to 60 days, (b) delinquent 61 to 90
        days, (c) delinquent 91 days or more, in each case as of the end of the
        calendar month prior to such Distribution Date;

               (ix) the number, aggregate principal balance and book value of
        any REO Properties as of the close of business on the last day of the
        calendar month preceding the month in which such Distribution Date
        occurs;

               (x) the weighted average remaining term to maturity, weighted
        average Mortgage Rate and weighted average Net Mortgage Rate of the
        Mortgage Loans as of the close of business on the first day of the
        calendar month in which such Distribution Date occurs;

               (xi) the aggregate amount of Principal Prepayments made during
        the related Prepayment Period;

               (xii) the aggregate amount of Realized Losses incurred during the
        related Prepayment Period and the cumulative amount of Realized Losses;

               (xiii) the aggregate amount of extraordinary Trust Fund expenses
        withdrawn from the Custodial Account or the Certificate Account for such
        Distribution Date;

               (xiv) the aggregate amount of any Prepayment Interest Shortfalls
        for such Distribution Date, to the extent not covered by payments by the
        Master Servicer pursuant to Section 3.23, and the aggregate amount of
        Relief Act Interest Shortfalls for such Distribution Date;

               (xv) the Monthly Interest Distributable Amount in respect of each
        Class of the Class A Certificates and Mezzanine Certificates, including,
        with respect to the Class A-3 Certificates, the Class A-3 Components,
        for such Distribution Date and the Unpaid Interest Shortfall Amount, if
        any, with respect to each Class of the Class A Certificates, including,
        with respect to the Class A-3 Certificates, the Class A-3 Components,
        and Mezzanine Certificates for such Distribution Date;

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               (xvi) (A) the Overcollateralization Target Amount, (B) the
        Overcollateralized Amount and (C) the amount, if any, by which the
        Overcollateralization Target Amount exceeds the Overcollateralized
        Amount, in each case after giving effect to the distribution made on the
        Regular Certificates on such Distribution Date;

               (xvii)  when the Stepdown Date or a Trigger Event has occurred;

               (xviii) the aggregate amount of servicing compensation received
        by the Master Servicer with respect to the related Due Period and such
        other customary information as the Trustee deems necessary or desirable,
        or which a Certificateholder reasonably requests, to enable
        Certificateholders to prepare their tax returns; and

               (xix) the Available Distribution Amount for such Distribution
        Date.

               In the case of information furnished pursuant to subclauses (i)
and (ii) above, the amounts shall also be expressed as a dollar amount per
Single Certificate.

               On each Distribution Date the Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") CUSIP level factors for each Class of
Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg.

               Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare and forward, to each Person who at any time
during the calendar year was a Holder of a Certificate, a statement containing
the information set forth in subclauses (i) and (ii) above, 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 and regulations
thereunder as from time to time are in force.

               On each Distribution Date the Trustee shall prepare and make
available on the Trustee's website, http://www-apps.gis.deutsche-bank.com/invr
(or deliver at the recipient's option), to each Holder of a Class R Certificate
a copy of the reports forwarded to the other Certificateholders on such
Distribution Date.

               Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare and forward, to each Person who at any time
during the calendar year was a Holder of a Class R Certificate a statement
containing the information provided pursuant to the previous paragraph
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 are in force.

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               SECTION 4.03. Remittance Reports; Advances by the Master
                             Servicer.

               (a) On the Business Day following each Determination Date, the
Master Servicer shall deliver to the Trustee a report, prepared as of the close
of business on the Determination Date (the "Remittance Report"), in the form of
an electromagnetic tape or disk. The Remittance Report and any written
information supplemental thereto shall include such information with respect to
the Mortgage Loans that is required by the Trustee for purposes of making the
calculations and preparing the statement described in Sections 4.01 and 4.02, as
set forth in written specifications or guidelines issued by the Trustee from
time to time. The Trustee shall have no obligation to recompute, recalculate or
verify any information provided to it by the Master Servicer.

               (b) The Master Servicer shall determine the aggregate amount of
Advances required to be made for the related Distribution Date, which shall be
in an aggregate amount equal to the sum of (1) the aggregate amount of Monthly
Payments (with each interest portion thereof adjusted to the Mortgage Rate less
the sum of the Master Servicing Fee Rate, the Sub-Servicing Fee Rate and any
applicable Radian PMI Policy Rate), other than Balloon Payments, less the amount
of any related Debt Service Reductions or reductions in the amount of interest
collectable from the Mortgagor pursuant to the Relief Act, on the Outstanding
Mortgage Loans as of the related Due Date, which Monthly Payments were
delinquent as of the close of business as of the related Determination Date plus
(2) with respect to each Balloon Loan delinquent in respect of its Balloon
Payment as of the close of business on the related Determination Date, an amount
equal to the assumed Monthly Payment (net of the related Master Servicing Fees
and Sub-Servicing Fees) that would have been due on the related Due Date based
on the original principal amortization scheduled for such Balloon Loan until
such Balloon Loan is finally liquidated; provided that no Advance shall be made
if it would be a Nonrecoverable Advance. On or before 4:00 P.M. New York time on
each Certificate Account Deposit Date, the Master Servicer shall either (i)
deposit in the Certificate Account from its own funds, or funds received
therefor from the Sub-Servicers, an amount equal to the Advances to be made by
the Master Servicer in respect of the related Distribution Date, (ii) withdraw
from amounts on deposit in the Custodial Account and deposit in the Certificate
Account all or a portion of the amounts held for future distribution in
discharge of any such Advance, or (iii) make advances in the form of any
combination of (i) and (ii) aggregating the amount of such Advance. Any portion
of the amounts held for future distribution so used shall be replaced by the
Master Servicer by deposit in the Certificate Account on or before 1:00 P.M. New
York time on any future Certificate Account Deposit Date to the extent that
funds attributable to the Mortgage Loans that are available in the Custodial
Account for deposit in the Certificate Account on such Certificate Account
Deposit Date shall be less than payments to Certificateholders required to be
made on the following Distribution Date. The amount of any reimbursement
pursuant to Section 3.11 in respect of outstanding Advances on any Distribution
Date shall be allocated to specific Monthly Payments due but delinquent for
previous Due Periods, which allocation shall be made, to the extent practicable,
to Monthly Payments which have been delinquent for the longest period of time.
Such allocations shall be conclusive for purposes of reimbursement to the Master
Servicer from recoveries on related Mortgage Loans pursuant to Section 3.11. The
determination by the Master Servicer that it has made a Nonrecoverable Advance
or that any proposed Advance, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by a certificate of a Servicing Officer delivered to
the

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Seller and the Trustee with the Remittance Report. The Trustee shall deposit all
funds it receives pursuant to this Section 4.03 into the Certificate Account.

               (c) In the event that the Master Servicer determines as of any
Certificate Account Deposit Date that it will be unable to deposit in the
Certificate Account an amount equal to the Advance required to be made for the
immediately succeeding Distribution Date in the amount determined by the Master
Servicer pursuant to paragraph (b) above, it shall give notice to the Trustee of
its inability to Advance (such notice may be given by telecopy), not later than
4:00 P.M., New York time, on such date, specifying the portion of such amount
that it will be unable to deposit. Not later than 4:00 P.M., New York time, on
the earlier of (x) two Business Days following such Certificate Account Deposit
Date or (y) the Business Day preceding the related Distribution Date, unless by
such time the Master Servicer shall have directly or indirectly deposited in the
Certificate Account the entire amount of the Advances required to be made for
the related Distribution Date, pursuant to Section 7.01, the Trustee shall (a)
terminate all of the rights and obligations of the Master Servicer under this
Agreement in accordance with Section 7.01 and (b) assume the rights and
obligations of the Master Servicer hereunder, including the obligation to
deposit in the Certificate Account an amount equal to the Advance for the
immediately succeeding Distribution Date.

               SECTION 4.04.    Distributions on the REMIC Regular Interests.

               On each Distribution Date, the Trustee shall cause the Available
Distribution Amount, in the following order of priority, to be distributed by
REMIC 1 to REMIC 2 on account of the REMIC 1 Regular Interests or withdrawn from
the Certificate Account and distributed to the Holders of the Class R
Certificates (in respect of the Class R-1 Interest), as the case may be:

               (1) first, to the Holders of REMIC 1 Regular Interest LT1D, in an
        amount equal to (A) the Uncertificated Accrued Interest for such
        Distribution Date, plus (B) any amounts in respect thereof remaining
        unpaid from previous Distribution Dates and second, to Holders of REMIC
        1 Regular Interest LT1A, REMIC 1 Regular Interest LT1B, REMIC 1 Regular
        Interest LT1C and REMIC 1 Regular Interest LT1P in an amount equal to
        (A) the Uncertificated Accrued Interest for such Distribution Date, plus
        (B) any amounts in respect thereof remaining unpaid from previous
        Distribution Dates; and

               (2) second, to the Holders of REMIC 1 Regular Interests, in an
        amount equal to the remainder of the Available Distribution Amount for
        such Distribution Date after the distributions made pursuant to clause
        (1) above, allocated in the following order of priority:

                              (A) to the Holders of REMIC 1 Regular Interest
               LT1P, on the Distribution Date immediately following the
               expiration of the latest Prepayment Charge as identified on the
               Prepayment Charge Schedule or any Distribution Date thereafter
               until $100 has been distributed pursuant to this clause (A);

                              (B) with respect to the Group 1 Loans, to the
               Holders of REMIC 1 Regular Interest LT1A and REMIC 1 Regular
               Interest LT1B, 99% and 1%,

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               respectively, until the Uncertificated Principal Balance of those
               REMIC 1 Regular Interests are reduced to zero;

                              (C) with respect to the Group 2 Loans, to the
               Holders of REMIC Regular Interest LT1A and REMIC 1 Regular
               Interest LT1C, 99% and 1%, respectively, until the Uncertificated
               Principal Balance of those REMIC 1 Regular Interests are reduced
               to zero;

                              (D) to the Holders of REMIC 1 Regular Interest
               LT1D, until the Uncertificated Principal Balance of REMIC 1
               Regular Interest LT1D is reduced to zero; and

                              (E) any remaining amount to the Holders of the
               Class R Certificates (in respect of the Class R-1 Interest).

               On each Distribution Date, all amounts representing Prepayment
Charges in respect of the Mortgage Loans received during the related Prepayment
Period and any Master Servicer Prepayment Charge Payment Amounts paid by the
Master Servicer during the related Prepayment Period will be distributed by
REMIC 1 to the Holders of REMIC 1 Regular Interest LT1P. The payment of the
foregoing amounts to the Holders of REMIC 1 Regular Interest LT1P shall not
reduce the Uncertificated Principal Balance thereof.

               On each Distribution Date, the Trustee shall cause in the
following order of priority, the following amounts to be distributed by REMIC 2
to REMIC 3 on account of the REMIC 2 Regular Interests or withdrawn from the
Distribution Account and distributed to the holders of the Class R Certificates
(in respect of the Class R-2 Interest), as the case may be:

               (i) first, to the extent of Available Funds, to the Holders of
        REMIC 2 Regular Interest A-IO, in an amount equal to (A) the
        Uncertificated Accrued Interest for such Distribution Date, plus (B) any
        amounts in respect thereof remaining unpaid from previous Distribution
        Dates and then to Holders of REMIC 2 Regular Interest LT2-1AA, REMIC 2
        Regular Interest LT2-AI1, REMIC 2 Regular Interest LT2-AI2, REMIC 2
        Regular Interest LT2-AI3, REMIC 2 Regular Interest LT2-AI4, REMIC 2
        Regular Interest LT2-AI5, REMIC 2 Regular Interest LT2-1M1, REMIC 2
        Regular Interest LT2-1M2, REMIC 2 Regular Interest LT2-1B, REMIC 2
        Regular Interest LT2-1ZZ, REMIC 2 Regular Interest LT2-2AA, REMIC 2
        Regular Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2, REMIC 2
        Regular Interest LT2-AII3, REMIC 2 Regular Interest LT2-2M1, REMIC 2
        Regular Interest LT2-2M2, REMIC 2 Regular Interest LT2-2B, REMIC 2
        Regular Interest LT2-2ZZ and REMIC 2 Regular Interest LT2P, PRO RATA, in
        an amount equal to (A) the Uncertificated Accrued Interest for such
        Distribution Date, plus (B) any amounts in respect thereof remaining
        unpaid from previous Distribution Dates. Amounts payable as
        Uncertificated Accrued Interest in respect of REMIC 2 Regular Interest
        LT2-1ZZ and REMIC 2 Regular Interest LT2-2ZZ shall be reduced when the
        sum of REMIC 2 Group 1 Overcollateralized Amount and REMIC 2 Group 2
        Overcollateralized Amount is less than the REMIC 2

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        Overcollateralization Target Amount, by the lesser of (x) the amount of
        such difference and (y) the Maximum Uncertificated Accrued Interest
        Deferral Amount, and such amount will be payable to the Holders of REMIC
        2 Regular Interest LT2-AI1, REMIC 2 Regular Interest LT2-AI2, REMIC 2
        Regular Interest LT2-AI3, REMIC 2 Regular Interest LT2-AI4, REMIC 2
        Regular Interest LT2-AI5, REMIC 2 Regular Interest LT2-1M1, REMIC 2
        Regular Interest LT2-1M2, REMIC 2 Regular Interest LT2-1B, REMIC 2
        Regular Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2, REMIC 2
        Regular Interest LT2-AII3, REMIC 2 Regular Interest LT2-2M1, REMIC 2
        Regular Interest LT2-2M2 and REMIC 2 Regular Interest LT2-2B in the same
        proportion as the Overcollateralization Increase Amount is allocated to
        the Corresponding Certificates or Components;

               (ii) second, to the Holders of REMIC 2 Regular Interests, in an
        amount equal to the remainder of the Available Funds for such
        Distribution Date after the distributions made pursuant to clause (i)
        above, allocated as follows:

                       (a) with respect to the Group 1 Loans, to the Holders of
               REMIC 2 Regular Interest LT2-1AA, 98.00% of such remainder, until
               the Uncertificated Principal Balance of such Uncertificated REMIC
               2 Regular Interest is reduced to zero, and with respect to the
               Group 2 Loans, to the Holders of REMIC 2 Regular Interest
               LT2-2AA, 98.00% of such remainder, until the Uncertificated
               Principal Balance of such Uncertificated REMIC 2 Regular Interest
               is reduced to zero;

                       (b) with respect to the Group 1 Loans, to the Holders of
               REMIC 2 Regular Interest LT2-AI1, REMIC 2 Regular Interest
               LT2-AI2, REMIC 2 Regular Interest LT2-AI3, REMIC 2 Regular
               Interest LT2-AI4, REMIC 2 Regular Interest LT2-AI5, REMIC 2
               Regular Interest LT2-1M1, REMIC 2 Regular Interest LT2-1M2 and
               REMIC 2 Regular Interest LT2-1B, 1.00% of such remainder, in the
               same proportion as principal payments are allocated to the
               Corresponding Certificates, until the Uncertificated Principal
               Balances of such REMIC 2 Regular Interests are reduced to zero;
               and with respect to the Group 2 Loans, to the Holders of REMIC 2
               Regular Interest LT2-AII1, REMIC 2 Regular Interest LT2-AII2,
               REMIC 2 Regular Interest LT2-AII3, REMIC 2 Regular Interest
               LT2-2M1, REMIC 2 Regular Interest LT2-2M2 and REMIC 2 Regular
               Interest LT2-2B, 1.00% of such remainder, in the same proportion
               as principal payments are allocated to the Corresponding
               Certificates, until the Uncertificated Principal Balances of such
               REMIC 2 Regular Interests are reduced to zero;

                       (c) with respect to the Group 1 Loans, to the Holders of
               REMIC 2 Regular Interest LT2-1ZZ, 1.00% of such remainder, until
               the Uncertificated Principal Balance of such REMIC 2 Regular
               Interest is reduced to zero, and with respect to the Group 2
               Loans, to the Holders of REMIC 2 Regular Interest LT2-2ZZ, 1.00%
               of such remainder, until the Uncertificated Principal Balance of
               such REMIC 2 Regular Interest is reduced to zero;

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                       (d) to the Holders of REMIC 2 Regular Interest LT2P, on
               the Distribution Date immediately following the expiration of the
               latest Prepayment Charge as identified on the Prepayment Charge
               Schedule or any Distribution Date thereafter until $100 has been
               distributed pursuant to this clause; then

                       (e) any remaining amount to the Holders of the Class R
               Certificates (in respect of the Class R-2 Interest); and

               (iii) third, to REMIC 2 Regular Interest LT2P, 100% of the amount
        paid in respect of Prepayment Charges and Master Servicer Prepayment
        Charge Payment Amounts on REMIC 1 Regular Interest LT1P;

provided, however, that with respect to the Group 1 Loans, 98.00% and 2.00% of
any principal payments that are attributable to an Overcollateralization Release
Amount shall be allocated to Holders of REMIC 2 Regular Interest LT2-1AA and
REMIC 2 Regular Interest LT2-1ZZ, respectively, to the extent the principal
balance of the Group 1 Loans exceeds the sum of the Uncertificated Principal
Balances of REMIC 2 Regular Interest LT2-1AA, REMIC 2 Regular Interest LT2-AI1,
REMIC 2 Regular Interest LT2-AI2, REMIC 2 Regular Interest LT2-AI3, REMIC 2
Regular Interest LT2-AI4, REMIC 2 Regular Interest LT2-AI5, REMIC 2 Regular
Interest LT2-1M1, REMIC 2 Regular Interest LT2-1M2, REMIC 2 Regular Interest
LT2-1B and REMIC 2 Regular Interest LT2-1ZZ immediately following payments
pursuant to (c) above but prior to any payments pursuant to this proviso, and
with respect to the Group 2 Loans, 98.00% and 2.00% of any principal payments
that are attributable to an Overcollateralization Release Amount shall be
allocated to Holders of REMIC 2 Regular Interest LT2-2AA and REMIC 2 Regular
Interest LT2-2ZZ, respectively, to the extent the principal balance of the Group
2 Loans exceeds the sum of the Uncertificated Principal Balances of REMIC 2
Regular Interest LT2-2AA, REMIC 2 Regular Interest LT2-AII1, REMIC 2 Regular
Interest LT2-AII2, REMIC 2 Regular Interest LT2-AII3, REMIC 2 Regular Interest
LT2-2M1, REMIC 2 Regular Interest LT2-2M2, REMIC 2 Regular Interest LT2-2B and
REMIC 2 Regular Interest LT2-2ZZ immediately following payments pursuant to (c)
above but prior to any payments pursuant to this proviso.

               SECTION 4.05.          Allocation of Realized Losses.

               (a) All Realized Losses on the Mortgage Loans shall be allocated
by the Trustee on each Distribution Date as follows: first, to Net Monthly
Excess Cashflow; second, to the Class C Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; third, to the Class B
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; fourth, to the Class M-2 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; and fifth, to the Class M-1
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero. All Realized Losses to be allocated to the Certificate Principal
Balances of all Classes on any Distribution Date shall be so allocated after the
actual distributions to be made on such date as provided above. All references
above to the Certificate Principal Balance of any Class of Certificates shall be
to the Certificate Principal Balance of such Class immediately prior to the
relevant Distribution Date, before reduction thereof by any Realized Losses, in
each case to be

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allocated to such Class of Certificates, on such Distribution Date.

        Any allocation of Realized Losses to a Mezzanine Certificate on any
Distribution Date shall be made by reducing the Certificate Principal Balance
thereof by the amount so allocated. Any allocation of Realized Losses to a Class
C Certificate shall be made by reducing the amount otherwise payable in respect
thereof pursuant to Section 4.01(d)(viii). No allocations of any Realized Losses
shall be made to the Certificate Principal Balances of the Class A Certificates
or the Class P Certificates.

               (b) All Realized Losses on the Mortgage Loans shall be allocated
by the Trustee on each Distribution Date as follows: with respect to Realized
Losses on the Group 1 Loans, to REMIC 1 Regular Interest LT1A and REMIC 1
Regular Interest LT1B, 99% and 1%, respectively, and with respect to Realized
Losses on the Group 2 Loans, to REMIC 1 Regular Interest LT1A and REMIC 1
Regular Interest LT1C, 99% and 1%, respectively, until the Uncertificated
Principal Balance has been reduced to zero and then to REMIC 1 Regular Interest
LT1D until the Uncertificated Principal Balance has been reduced to zero.

               (c) All Realized Losses on the REMIC 1 Regular Interest LT1A,
REMIC 1 Regular Interest LT1B, REMIC 1 Regular Interest LT1C and REMIC 1 Regular
Interest LT1D shall be deemed to have been allocated in the specified
percentages, as follows: with respect to Realized Losses on the Group 1 Loans,
first, to Uncertificated Accrued Interest payable to the REMIC 2 Regular
Interest LT2-1AA and REMIC 2 Regular Interest LT2-1ZZ up to an aggregate amount
equal to the REMIC 2 Group 1 Interest Loss Allocation Amount, 98% and 2%,
respectively; second, to the Uncertificated Principal Balances of REMIC 2
Regular Interest LT2-1AA and REMIC 2 Regular Interest LT2-1ZZ up to an aggregate
amount equal to the REMIC 2 Group 1 Principal Loss Allocation Amount, 98% and
2%, respectively; third, to the Uncertificated Principal Balances of REMIC 2
Regular Interest LT2-1AA, REMIC 2 Regular Interest LT2-1B and REMIC 2 Regular
Interest LT2-1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated
Principal Balance of REMIC 2 Regular Interest LT2-1B has been reduced to zero;
fourth, to the Uncertificated Principal Balances of REMIC 2 Regular Interest
LT2-1AA, REMIC 2 Regular Interest LT2-1M2 and REMIC 2 Regular Interest LT2-1ZZ,
98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of
REMIC 2 Regular Interest LT2-1M2 has been reduced to zero; and fifth, to the
Uncertificated Principal Balances of REMIC 2 Regular Interest LT2-1AA, REMIC 2
Regular Interest LT2-1M1 and REMIC 2 Regular Interest LT2-1ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC 2 Regular
Interest LT2-1M1 has been reduced to zero, and with respect to Realized Losses
on the Group 2 Loans, first, to Uncertificated Accrued Interest payable to the
REMIC 2 Regular Interest LT2-2AA and REMIC 2 Regular Interest LT2-2ZZ up to an
aggregate amount equal to the REMIC 2 Group 2 Interest Loss Allocation Amount,
98% and 2%, respectively; second, to the Uncertificated Principal Balances of
REMIC 2 Regular Interest LT2-2AA and REMIC 2 Regular Interest LT2-2ZZ up to an
aggregate amount equal to the REMIC 2 Group 2 Principal Loss Allocation Amount,
98% and 2%, respectively; third, to the Uncertificated Principal Balances of
REMIC 2 Regular Interest LT2-2AA, REMIC 2 Regular Interest LT2-2B and REMIC 2
Regular Interest LT2-2ZZ, 98%, 1% and 1%, respectively, until the Uncertificated
Principal Balance of REMIC 2 Regular Interest LT2-2B has been reduced to zero;
fourth, to the

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Uncertificated Principal Balances of REMIC 2 Regular Interest LT2-2AA, REMIC 2
Regular Interest LT2-2M2 and REMIC 2 Regular Interest LT2-2ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC 2 Regular
Interest LT2-2M2 has been reduced to zero; and fifth, to the Uncertificated
Principal Balances of REMIC 2 Regular Interest LT2-2AA, REMIC 2 Regular Interest
LT2-2M1 and REMIC 2 Regular Interest LT2-2ZZ, 98%, 1% and 1%, respectively,
until the Uncertificated Principal Balance of REMIC 2 Regular Interest LT2-2M1
has been reduced to zero.

               SECTION 4.06. Information Reports to Be Filed by the Master
                             Servicer.

               The Master Servicer or the Sub-Servicers shall file information
reports with respect to the receipt of mortgage interest received in a trade or
business, foreclosures and abandonments of any Mortgaged Property and the
information returns relating to cancellation of indebtedness income with respect
to any Mortgaged Property required by Sections 6050H, 6050J and 6050P of the
Code, respectively, and deliver to the Trustee an Officers' Certificate stating
that such reports have been filed. Such reports shall be in form and substance
sufficient to meet the reporting requirements imposed by such Sections 6050H,
6050J and 6050P of the Code.

               SECTION 4.07.  Compliance with Withholding Requirements.

               Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount on the
Mortgage Loans, that the Trustee reasonably believes are applicable under the
Code. The consent of Certificateholders shall not be required for such
withholding. In the event the Trustee withholds any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Trustee shall, together with
its monthly report to such Certificateholders pursuant to Section 4.02 hereof,
indicate such amount withheld.

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                                    ARTICLE V

                                THE CERTIFICATES

               SECTION 5.01.          The Certificates.

               (a) The Certificates will be substantially in the respective
forms annexed hereto as Exhibits A, B-1, B-2, B-3 and B-4. The Certificates will
be issuable in registered form only. The Certificates (other than the Class P
Certificates, the Class C Certificates and the Class R Certificates) will be
issued in minimum denominations of $25,000 Initial Certificate Principal Balance
or Initial Notional Amount, as applicable, and integral multiples of $1 in
excess thereof. The Class C Certificates will be issued in minimum denominations
of $10,000 Initial Notional Amount and integral multiples of $1 in excess
thereof. The Class P Certificates and the Class R Certificates will each be
issuable in minimum denominations of any Percentage Interest representing 20.00%
and multiples of 0.01% in excess thereof.

               Upon original issue, the Certificates shall, upon the written
request of the Company executed by an officer of the Company, be executed and
delivered by the Trustee, authenticated by the Trustee and delivered to or upon
the order of the Company upon receipt by the Trustee of the documents specified
in Section 2.01. The Certificates shall be executed by manual or facsimile
signature on behalf of the Trustee in its capacity as trustee hereunder by a
Responsible Officer. Certificates bearing the manual or facsimile signatures of
individuals who were at the time they signed the proper officers of the Trustee
shall bind the Trustee, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Certificates or did not hold such offices at the date of such Certificates.
No Certificate shall be entitled to any benefit under this Agreement, or be
valid for any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates issued on the Closing
Date shall be dated the Closing Date and any Certificates delivered thereafter
shall be dated the date of their authentication.

               (b) The Class A Certificates and the Mezzanine Certificates shall
initially be issued as one or more Certificates registered in the name of the
Depository or its nominee and, except as provided below, registration of such
Certificates may not be transferred by the Trustee except to another Depository
that agrees to hold such Certificates for the respective Certificate Owners with
Ownership Interests therein. The Certificate Owners shall hold their respective
Ownership Interests in and to each of such Book-Entry Certificates through the
book-entry facilities of the Depository and, except as provided below, shall not
be entitled to Definitive Certificates in respect of such Ownership Interests.
All transfers by Certificate Owners of their respective Ownership Interests in
the 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 transfer the Ownership
Interests only in the Book-Entry

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Certificates of Certificate Owners it represents or of brokerage firms for which
it acts as agent in accordance with the Depository's normal procedures. The
Trustee shall not be required to monitor, determine or inquire as to compliance
with the transfer restrictions with respect to the Book-Entry Certificates, and
the Trustee shall have no liability for transfers of Ownership Interests in the
Book Entry Certificates made through the book-entry facilities of the Depositary
or between or among Depositary Participants or Certificate Owners, made in
violation of the applicable restrictions.

               The Trustee, the Master Servicer and the Company may for all
purposes (including the making of payments due on the respective Classes of
Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the respective Classes
of Book-Entry Certificates for the purposes of exercising the rights of
Certificateholders hereunder. The rights of Certificate Owners with respect to
the respective Classes of Book-Entry Certificates shall be limited to those
established by law and agreements between such Certificate Owners and the
Depository Participants and brokerage firms representing such Certificate
Owners. Multiple requests and directions from, and votes of, the Depository as
Holder of any Class of Book- Entry Certificates with respect to any particular
matter shall not be deemed inconsistent if they are made with respect to
different Certificate Owners. The Trustee may establish a reasonable record date
in connection with solicitations of consents from or voting by
Certificateholders and shall give notice to the Depository of such record date.

               If (i)(A) the Company advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository and (B) the Company is unable to locate a
qualified successor or (ii) the Company at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the
Depository, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Trustee of the Book-Entry Certificates by the Depository,
accompanied by registration instructions from the Depository for registration of
transfer, the Trustee shall, at the expense of the Company, issue the Definitive
Certificates. Neither the Company, the Master Servicer nor the Trustee shall be
liable for any actions taken by the Depository or its nominee, including,
without limitation, any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates the Trustee and the Master Servicer
shall recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.

               (c) Each Certificate is intended to be a "security" governed by
Article 8 of the Uniform Commercial Code as in effect in the State of New York
and any other applicable jurisdiction, to the extent that any of such laws may
be applicable.

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               SECTION 5.02. Registration of Transfer and Exchange of
                             Certificates.

               (a) The Trustee shall maintain a Certificate Register in which,
subject 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.

               (b) Except as provided in Section 5.02(c), no transfer, sale,
pledge or other disposition of a Class P Certificate, Class C Certificate or a
Class R Certificate shall be made unless such transfer, sale, pledge or other
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Act"), and any applicable state securities laws or is
made in accordance with said Act and laws. In the event that a transfer of a
Class P Certificate, Class C Certificate or Class R Certificate is to be made
under this Section 5.02(b), (i) the Trustee shall require an Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee that such
transfer shall be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which Opinion of Counsel shall not be an expense
of the Trustee, the Company or the Master Servicer, provided that such Opinion
of Counsel will not be required in connection with the initial transfer of any
such Certificate by the Company or any affiliate thereof, to a non-affiliate of
the Company and (ii) the Trustee shall require the transferee to execute a
representation letter, substantially in the form of Exhibit G-1 hereto, and the
Trustee shall require the transferor to execute a representation letter,
substantially in the form of Exhibit G-2 hereto, each acceptable to and in form
and substance satisfactory to the Trustee certifying to the Company and the
Trustee the facts surrounding such transfer, which representation letters shall
not be an expense of the Trustee, the Company or the Master Servicer; provided
however that such representation letters will not be required in connection with
any transfer of any such Certificate by the Company to an affiliate of the
Company and the Trustee shall be entitled to conclusively rely upon a
representation (which, upon the request of the Trustee, shall be a written
representation) from the Company of the status of such transferee as an
affiliate of the Company. Any such Certificateholder desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Company 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 applicable federal and state
laws.

               (c) Notwithstanding the requirements of Section 5.02(b),
transfers of Class P Certificates, Class C Certificates and Class R Certificates
may be made in accordance with this Section 5.02(c) if the prospective
transferee of a Certificate provides the Trustee and the Company with an
investment letter substantially in the form of Exhibit G-3 attached hereto,
which investment letter shall not be an expense of the Trustee, the Company or
the Master Servicer, and which investment letter states that, among other
things, such transferee is a "qualified institutional buyer" as defined under
Rule 144A. Such transfers shall be deemed to have complied with the requirements
of Section 5.02(b) hereof; provided, however, that no Transfer of any of the
Class P Certificates, Class C Certificates or Class R Certificates may be made
pursuant to this Section 5.02(c) by the Company. Any such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Company and the Master Servicer against any liability that may
result

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if the transfer is not so exempt or is not made in accordance with such
applicable federal and state laws.

               The Trustee shall require an Opinion of Counsel from a
prospective transferee prior to the transfer of any Class P Certificate, Class C
Certificate or Class R Certificate to any employee benefit plan or other
retirement arrangement, including individual retirement accounts and Keogh
plans, that is subject to Section 406 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or Section 4975 of the Code (any of the
foregoing, a "Plan"), to a trustee or other Person acting on behalf of any Plan,
or to any other person who is using "plan assets" of any Plan to effect such
acquisition (including any insurance company using funds in its general or
separate accounts that may constitute "plan assets"). Such Opinion of Counsel
must establish to the satisfaction of the Company, the Trustee and the Master
Servicer that such transfer is permissible under applicable law, will not
constitute or result in a non-exempt prohibited transaction under ERISA or
Section 4975 of the Code, and will not subject the Trustee, the Master Servicer
or the Company to any obligation in addition to those undertaken in this
Agreement. Neither the Company, the Master Servicer nor the Trustee will be
required to obtain such Opinion of Counsel on behalf of any prospective
transferee.

               (d)     [Reserved].

               (e) (i) Each Person who has or who acquires any Ownership
Interest in a Class R Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Class R Certificate are expressly subject
to the following provisions:

               (A) Each Person holding or acquiring any Ownership Interest in a
        Class R Certificate shall be a Permitted Transferee and shall promptly
        notify the Trustee of any change or impending change in its status as a
        Permitted Transferee.

               (B) In connection with any proposed Transfer of any Ownership
        Interest in a Class R Certificate, the Trustee shall require delivery to
        it, and shall not register the Transfer of any Class R Certificate until
        its receipt of (I) an affidavit and agreement (a "Transfer Affidavit and
        Agreement" in the form attached hereto as Exhibit G-5) from the proposed
        Transferee, in form and substance satisfactory to the Trustee
        representing and warranting, among other things, that it is a Permitted
        Transferee, that it is not acquiring its Ownership Interest in the Class
        R Certificate that is the subject of the proposed Transfer as a nominee,
        trustee or agent for any Person who is not a Permitted Transferee, that
        for so long as it retains its Ownership Interest in a Class R
        Certificate, it will endeavor to remain a Permitted Transferee, and that
        it has reviewed the provisions of this Section 5.02 and agrees to be
        bound by them, and (II) a certificate, in the form attached hereto as
        Exhibit G-4, from the Holder wishing to transfer

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        the Class R Certificate, in form and substance satisfactory to the
        Trustee representing and warranting, among other things, that no purpose
        of the proposed Transfer is to impede the assessment or collection of
        tax.

               (C) Notwithstanding the delivery of a Transfer Affidavit and
        Agreement by a proposed Transferee under clause (B) above, if a
        Responsible Officer of the Trustee assigned to this transaction has
        actual knowledge that the proposed Transferee is not a Permitted
        Transferee, no Transfer of an Ownership Interest in a Class R
        Certificate to such proposed Transferee shall be effected.

               (D) Each Person holding or acquiring any Ownership Interest in a
        Class R Certificate shall agree (x) to require a Transfer Affidavit and
        Agreement from any other Person to whom such Person attempts to transfer
        its Ownership Interest in a Class R Certificate and (y) not to transfer
        its Ownership Interest unless it provides a certificate to the Trustee
        in the form attached hereto as Exhibit G-4.

               (E) Each Person holding or acquiring an Ownership Interest in a
        Class R Certificate, by purchasing an Ownership Interest in such
        Certificate, agrees to give the Trustee written notice that it is a
        "pass-through interest holder" within the meaning of Temporary Treasury
        Regulations Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
        Ownership Interest in a Class R Certificate, if it is "a pass-through
        interest holder", or is holding an Ownership Interest in a Class R
        Certificate on behalf of a "pass-through interest holder."

               (ii) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and Agreement
in the form attached hereto as Exhibit G-5, a certificate of the Holder
requesting such transfer in the form attached hereto as Exhibit G-4 and all of
such other documents as shall have been reasonably required by the Trustee as a
condition to such registration. Transfers of the Class R Certificates other than
to Permitted Transferees are prohibited.

               (iii) (A) If any Person other than a Permitted Transferee shall
become a Holder of a Class R Certificate, then the last preceding Permitted
Transferee shall be restored, to the extent permitted by law, to all rights and
obligations as Holder thereof retroactive to the date of registration of such
Transfer of such Class R Certificate. If a Non-United States Person shall become
a Holder of a Class R Certificate, then the last preceding Permitted Transferee
shall be restored, to the extent permitted by law, to all rights and obligations
as Holder thereof retroactive to the date of registration of such Transfer of
such Class R Certificate. If a transfer of a Class R Certificate is disregarded
pursuant to the provisions of Treasury Regulations Section 1.860E-1 or Section
1.860G-3, then the last preceding Permitted Transferee shall be restored, to the
extent permitted by law, to all rights and obligations as Holder thereof
retroactive to the date of registration of such transfer of such Class R
Certificate. The prior Holder shall be entitled to recover from any purported
Holder of a Class R Certificate that was in fact not a Permitted Transferee
under this Section 5.05(b) at the time it became a Holder all payments made on
such Class R Certificate. Each Holder of a Class R Certificate, by acceptance
thereof, shall be deemed for all purposes to have consented to the

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provisions of this clause (b) and to any amendment of this Agreement deemed
necessary (whether as a result of new legislation or otherwise) by counsel of
the Company to ensure that the Class R Certificates are not transferred to any
Person who is not a Permitted Transferee and that any transfer of such Class R
Certificates will not cause the imposition of a tax upon the Trust or cause any
such REMIC to fail to qualify as a REMIC. The Trustee shall be under no
liability to any Person for any registration of Transfer of a Class R
Certificate that is in fact not permitted by this Section 5.02 or for making any
payments due on such Certificate to the holder thereof or for taking any other
action with respect to such holder under the provisions of this Agreement.

                       (B)  If any purported Transferee shall become a Holder of
a Class R Certificate in violation of the restrictions in this Section 5.02 and
to the extent that the retroactive restoration of the rights of the Holder of
such Class R Certificate as described in clause (iii)(A) above shall be invalid,
illegal or unenforceable, then the Trustee shall have the right, without notice
to the holder or any prior holder of such Class R Certificate, to sell such
Class R Certificate to a purchaser selected by the Trustee on such terms as the
Trustee may choose. Such purported Transferee shall promptly endorse and deliver
each Class R Certificate in accordance with the instructions of the Trustee.
Such purchaser may be the Trustee itself. The proceeds of such sale, net of the
commissions (which may include commissions payable to the Trustee), expenses and
taxes due, if any, will be remitted by the Trustee to such purported Transferee.
The terms and conditions of any sale under this clause (iii)(B) shall be
determined in the sole discretion of the Trustee, and the Trustee shall not be
liable to any Person having an Ownership Interest in a Class R Certificate as a
result of its exercise of such discretion.

               (iv) The Trustee shall make available to the Internal Revenue
Service and those Persons specified by the REMIC Provisions, all information
necessary to compute any tax imposed (A) as a result of the transfer of an
ownership interest in a Class R Certificate to any Person who is a Disqualified
Organization, including the information regarding "excess inclusions" of such
Class R Certificates required to be provided to the Internal Revenue Service and
certain Persons as described in Treasury Regulations Sections 1.860D-1(b)(5) and
1.860E-2(a)(5), and (B) as a result of any regulated investment company, real
estate investment trust, common trust fund, partnership, trust, estate or
organization described in Section 1381 of the Code that holds an Ownership
Interest in a Class R Certificate having as among its record holders at any time
any Person who is a Disqualified Organization. The Trustee may charge and shall
be entitled to reasonable compensation for providing such information as may be
required from those Persons which may have had a tax imposed upon them as
specified in clauses (A) and (B) of this paragraph for providing such
information.

               (f) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate at the office of the Trustee
maintained for such purpose, the Trustee shall execute and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of the same Class of a like aggregate
Percentage Interest. Every Certificate surrendered for transfer shall be
accompanied by notification of the account of the designated transferee or
transferees for the purpose of receiving distributions pursuant to Section 4.01
by wire transfer, if any such transferee desires and is eligible for
distribution by wire transfer.

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               (g) At the option of the Certificateholders, Certificates may be
exchanged for other Certificates of authorized denominations of the same Class
of a like aggregate Percentage Interest, upon surrender of the Certificates to
be exchanged at the office 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 transfer or exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in the form satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing. In
addition, with respect to each Class R Certificate, the Holder thereof may
exchange, in the manner described above, such Class R Certificate for three
separate Certificates, each representing such Holder's respective Percentage
Interest in the Class R-1 Interest, the Class R-2 Interest and the Class R-3
Interest, respectively, in each case that was evidenced by the Class R
Certificate being exchanged.

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

               (i) All Certificates surrendered for transfer and exchange shall
be canceled and retained by the Trustee in accordance with the Trustee's
standard procedures.

               SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.

               If (i) any mutilated Certificate is surrendered to the Trustee
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Certificate, and (ii) there is delivered to the Trustee such
security or indemnity as may be required by it to save it harmless, then, in the
absence of notice to the Trustee that such Certificate has been acquired by a
bona fide purchaser, the Trustee shall execute, authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of the same Class and Percentage Interest. Upon
the issuance of any new Certificate under this Section, the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee) connected therewith. Any replacement
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust Fund, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.

               SECTION 5.04.          Persons Deemed Owners.

               The Company, the Master Servicer, the Trustee and any agent of
any of them may treat the person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 4.01 and for all other purposes whatsoever, and neither the
Company, the Master Servicer, the Trustee nor any agent of any of them shall be
affected by notice to the contrary.

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               SECTION 5.05.          Rule 144A Information.

               For so long as any Class P Certificates, Class C Certificates and
Class R Certificates are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) of the Securities Act, (1) the Company will provide or
cause to be provided to any holder of such Certificates and any prospective
purchaser thereof designated by such a holder, upon the request of such holder
or prospective purchaser, the information required to be provided to such holder
or prospective purchaser by Rule 144A(d)(4) under the Securities Act; and (2)
the Company shall update such information from time to time in order to prevent
such information from becoming false and misleading and will take such other
actions as are necessary to ensure that the safe harbor exemption from the
registration requirements of the Securities Act under Rule 144A is and will be
available for resales of such Certificates conducted in accordance with Rule
144A. The Master Servicer shall cooperate with the Company and furnish the
Company such information in the Master Servicer's possession as the Company may
reasonably request.

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                                   ARTICLE VI

                       THE COMPANY AND THE MASTER SERVICER

               SECTION 6.01. Liability of the Company and the Master Servicer.

               The Company and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Company and the Master Servicer herein. Only the
Master Servicer, any successor Master Servicer or the Trustee acting as Master
Servicer shall be liable with respect to the servicing of the Mortgage Loans and
the REO Property for actions taken by any such Person in contravention of the
Master Servicer's duties hereunder.

               SECTION 6.02. Merger, Consolidation or Conversion of the Company
                             or the Master Servicer.

               The Company and the Master Servicer each will keep in full effect
its existence, rights and franchises as a corporation under the laws of the
state of its incorporation, and each will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its respective duties under this Agreement.

               Any Person into which the Company or the Master Servicer may be
merged, consolidated or converted, or any corporation resulting from any merger
or consolidation to which the Company or the Master Servicer shall be a party,
or any Person succeeding to the business of the Company or the Master Servicer,
shall be the successor of the Company 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 service
mortgage loans for Fannie Mae or Freddie Mac.

               SECTION 6.03. Limitation on Liability of the Company, the Master
                             Servicer and Others.

               Neither the Company, the Master Servicer nor any of the
directors, officers, employees or agents of the Company or the Master Servicer
shall be under any liability to the Trust Fund or 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 Company or the Master Servicer (but this
provision shall protect the above described persons) against any breach of
warranties or representations made herein, or against any specific liability
imposed on the Master Servicer pursuant to Section 3.01 or any other Section
hereof; and provided further that this provision shall not protect the Company,
the Master Servicer or any such person, against any liability which would
otherwise be imposed by reason of willful

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misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Company,
the Master Servicer and any director, officer, employee or agent of the Company
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 Company, the Master Servicer and any director, officer,
employee or agent of the Company or the Master Servicer shall be indemnified and
held harmless by the Trust Fund against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the
Certificates (including reasonable legal fees and disbursements of counsel),
other than (a) any loss, liability or expense related to Master Servicer's
servicing obligations with respect to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) or related to the Master Servicer's
obligations under Section 3.01, or (b) 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. Neither the Company nor the Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its respective duties under this Agreement and which
in its opinion may involve it in any expense or liability; provided, however,
that the Company or the Master Servicer may in its sole discretion undertake any
such action which it may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto and the interests of
the Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom (except any action or
liability related to the Master Servicer's obligations under Section 3.01) shall
be expenses, costs and liabilities of the Trust Fund, and the Company and the
Master Servicer shall be entitled to be reimbursed therefor from the Certificate
Account as provided in Section 3.11, any such right of reimbursement being prior
to the rights of Certificateholders to receive any amount in the Certificate
Account.

               SECTION 6.04. Limitation on Resignation of the 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
reasonably acceptable to the Trustee upon receipt by the Trustee of a letter
from each Rating Agency (obtained by the Master Servicer and at its expense)
that such a resignation and appointment will not, in and of itself, result in a
downgrading of the Certificates or (b) upon determination that its duties
hereunder are no longer permissible under applicable law. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel (at the expense of the resigning Master Servicer) to such
effect delivered to the Trustee. No such resignation shall become effective
until the Trustee or a successor servicer shall have assumed the Master
Servicer's responsibilities, duties, liabilities and obligations hereunder.

               SECTION 6.05. Sale and Assignment of Master Servicing.

               The Master Servicer may sell and assign its rights and delegate
its duties and obligations in their entirety as Master Servicer under this
Agreement; provided, however, that: (i) the purchaser or transferee accepting
such assignment and delegation (a) shall be a Person which

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shall be qualified to service mortgage loans for Fannie Mae or Freddie Mac; (b)
shall, in the case of successor master servicers only, have a net worth of not
less than $10,000,000 (unless otherwise approved by each Rating Agency pursuant
to clause (ii) below); (c) shall be reasonably satisfactory to the Trustee (as
evidenced in a writing signed by the Trustee) as having a comparable servicing
ability to that of the Master Servicer on the Closing Date; (d) shall execute
and deliver to the Trustee an agreement, in form and substance reasonably
satisfactory to the Trustee, which contains an assumption by such Person of the
due and punctual performance and observance of each covenant and condition to be
performed or observed by it as master servicer under this Agreement and any
custodial agreement, from and after the effective date of such agreement; (ii)
each Rating Agency shall be given prior written notice of the identity of the
proposed successor to the Master Servicer and each Rating Agency's rating of the
Certificates in effect immediately prior to such assignment, sale and delegation
will not be downgraded or withdrawn as a result of such assignment, sale and
delegation, as evidenced by a letter to such effect obtained by the Master
Servicer at its expense and delivered to the Trustee; and (iii) the Master
Servicer assigning and selling the master servicing shall deliver to the Trustee
an Officer's Certificate and an Opinion of Counsel (at the expense of the Master
Servicer), each stating that all conditions precedent to such action under this
Agreement have been completed and such action is permitted by and complies with
the terms of this Agreement. No such assignment or delegation shall affect any
liability of the Master Servicer arising prior to the effective date thereof.

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                                   ARTICLE VII

                                     DEFAULT

               SECTION 7.01.          Events of Default.

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

             (i) any failure by the Master Servicer to deposit into the
        Certificate Account on each Certificate Account Deposit Date the amounts
        required to be deposited therein (other than an Advance) under the terms
        of this Agreement which continues unremedied for two (2) Business Days
        after such amount was required to be remitted; or

            (ii) any failure on the part of the Master Servicer duly to observe
        or perform in any material respect any other of the covenants or
        agreements on the part of the Master Servicer contained in the
        Certificates or in this Agreement (including any breach of the Master
        Servicer's representations and warranties pursuant to Section 2.03(a)
        which materially and adversely affects the interests of the
        Certificateholders) which continues unremedied for a period of 60 days
        after the date on which written notice of such failure, requiring the
        same to be remedied, shall have been given to the Master Servicer by the
        Trustee, or to the Master Servicer and the Trustee by the Holders of
        Certificates entitled to at least 25% of the Voting Rights; or

           (iii) a decree or order of a court or agency or supervisory authority
        having jurisdiction in an involuntary case under any present or future
        federal or state bankruptcy, insolvency or similar law or the
        appointment of a conservator or receiver or liquidator in any
        insolvency, readjustment of debt, marshaling 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
        conservator or receiver or liquidator in any insolvency, readjustment of
        debt, marshaling of assets and liabilities or similar proceedings of or
        relating to the Master Servicer or of or relating to all or
        substantially all of its property; or

             (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 otherwise voluntarily commence a case or proceeding
        under any applicable bankruptcy, insolvency, reorganization or other
        similar statute, make an assignment for the benefit of its creditors, or
        voluntarily suspend payment of its obligations; or

            (vi) the Master Servicer shall fail to deposit in the Certificate
        Account on any Certificate Account Deposit Date an amount equal to any
        required Advance which continues

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        unremedied for the earlier of (a) a period of two (2) Business Days or
        (b) the Business Day immediately preceding the Distribution Date.

If an Event of Default described in clauses (i) - (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 or the Holders of Certificates
entitled to at least 51% of the Voting Rights, by notice in writing to the
Master Servicer (and to the Trustee if given by such Holders of Certificates),
with a copy to the Rating Agencies, may terminate all of the rights and
obligations (but not the liabilities) of the Master Servicer under this
Agreement and in and to the Trust Fund, other than its rights as a
Certificateholder hereunder; provided, however, that the successor to the Master
Servicer appointed pursuant to Section 7.02 shall have accepted the duties of
Master Servicer effective upon the resignation or termination of the Master
Servicer. If an Event of Default described in clause (vi) hereof shall occur,
the Trustee shall, by notice to the Master Servicer, and the Company, terminate
all of the rights and obligations of the Master Servicer under this Agreement
and in and to the Trust Fund, other than its rights as a Certificateholder
hereunder; provided, however, that if the Trustee determines (in its sole
discretion) that the failure by the Master Servicer to make any required Advance
was due to circumstances beyond its control, and the required Advance was
otherwise made, the Trustee shall not terminate the Master Servicer. On or after
the receipt by the Master Servicer of such notice, all authority and power of
the Master Servicer under this Agreement, whether with respect to the
Certificates (other than as a holder thereof) or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this
Section, and, without limitation, 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 at the
expense of the Master Servicer. The Master Servicer agrees to cooperate with
(and pay any related costs and expenses of) the Trustee in effecting the
termination of the Master Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Trustee or the successor
Master Servicer for administration by it of (i) the property and amounts which
are then or should be part of the Trust Fund or which thereafter become part of
the Trust Fund; (ii) originals or copies of all documents of the Master Servicer
reasonably requested by the Trustee to enable it to assume the Master Servicer's
duties thereunder; (iii) the rights and obligations of the Master Servicer under
the Sub-Servicing Agreements with respect to the Mortgage Loans; and (iv) all
cash amounts which shall at the time be deposited by the Master Servicer or
should have been deposited to the Custodial or the Certificate Account or
thereafter be received with respect to the Mortgage Loans. The Trustee shall not
be deemed to have breached any obligation hereunder as a result of a failure to
make or delay in making any distribution as and when required hereunder caused
by the failure of the Master Servicer to remit any amounts received by it or to
deliver any documents held by it with respect to the Mortgage Loans. For
purposes of this Section 7.01, the Trustee shall not be deemed to have knowledge
of an Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless notice of any event which is in fact such an Event
of Default is received by the Trustee as provided in Section 11.05 and such
notice references the Certificates, the Trust Fund or this Agreement.

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               SECTION 7.02.          Trustee to Act; Appointment of Successor.

               Within 90 days of the time the Master Servicer receives a notice
of termination pursuant to Section 7.01(i) - (v), the Trustee or its appointed
agent shall be the successor in all respects 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 thereafter to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer including the obligation to make Advances which have been or will be
required to be made (except for the responsibilities, duties and liabilities
contained in Section 2.03 and its obligations to deposit amounts in respect of
losses pursuant to Section 3.12 and 4.01(h)) by the terms and provisions hereof;
and provided further, that any failure to perform such duties or
responsibilities caused by the Master Servicer's failure to provide information
required by Section 4.03 shall not be considered a default by the Trustee
hereunder. As compensation therefor, the Trustee shall be entitled to all funds
relating to the Mortgage Loans which the Master Servicer would have been
entitled to charge to the Custodial Account and the Certificate Account if the
Master Servicer had continued to act hereunder. If the Trustee has become the
successor to the Master Servicer in accordance with Section 6.04 or Section
7.02, then notwithstanding the above, if the Trustee shall be unwilling to so
act, or shall be unable to so act, the Trustee may appoint, or petition a court
of competent jurisdiction or appoint, any established housing and home finance
institution, which is also a Fannie Mae- or Freddie Mac- approved mortgage
servicing institution, having a net worth of not less than $10,000,000 as the
successor to the Master Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Master Servicer hereunder.
Pending appointment of a successor to the Master Servicer hereunder, the Trustee
shall act in such capacity as herein above provided. In connection with such
appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Master Servicer hereunder. Each of the Seller, the
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. In no event
shall the successor Master Servicer be liable for the acts or omissions of the
predecessor Master Servicer.

               Any successor, including the Trustee, to the Master Servicer
shall maintain in force during its term as master servicer hereunder policies
and fidelity bonds to the same extent as the Master Servicer is so required
pursuant to Section 3.18.

               Notwithstanding anything else herein to the contrary, in no event
shall the Trustee be liable for any Servicing Fee or for any differential in the
amount of the Servicing Fee paid hereunder and the amount necessary to induce
any successor Master Servicer or Servicer, as applicable, to act as successor
Master Servicer or Servicer, as applicable, under this Agreement and the
transactions set forth or provided for herein.

               SECTION 7.03.          Notification to Certificateholders.

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

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

               SECTION 7.04.          Waiver of Events of Default.

               The Holders representing at least 51% of the Voting Rights of
Certificates affected by a default or Event of Default hereunder, may waive such
default or Event of Default (other than an Event of Default set forth in Section
7.01(vi)); PROVIDED, HOWEVER, that (a) a default or Event of Default under
clause (i) of Section 7.01 may be waived only by all of the Holders of
Certificates affected by such default or Event of Default and (b) no waiver
pursuant to this Section 7.04 shall affect the Holders of Certificates in the
manner set forth in the second paragraph of Section 11.01 or materially
adversely affect any non-consenting Certificateholder. Upon any such waiver of a
default or Event of Default by the Holders representing the requisite percentage
of Voting Rights of Certificates affected by such default or Event of Default,
such default or Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose hereunder. No such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon except to the extent expressly so waived. The Master Servicer
shall give notice of any such waiver to the Rating Agencies.

               SECTION 7.05.          List of Certificateholders.

               Upon written request of three or more Certificateholders of
record, for purposes of communicating with other Certificateholders with respect
to their rights under this Agreement, the Trustee will afford such
Certificateholders access during business hours to the most recent list of
Certificateholders held by the Trustee.

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                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

               SECTION 8.01.          Duties of Trustee.

               The Trustee, prior to the occurrence of an Event of Default and
after the curing or waiver of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If an Event of Default occurs, is continuing and has
not been waived, 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 man would exercise or use under the circumstances in the
conduct of his own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.

               The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them in accordance with the
requirements of this Agreement. If any such instrument is found not to conform
to the requirements of this Agreement in a material manner, the Trustee shall
take such action as it deems appropriate to have the instrument corrected, and
if the instrument is not corrected to the Trustee's satisfaction, the Trustee
will provide notice thereof to the Certificateholders. Notwithstanding the
foregoing, the Trustee shall not be responsible for the accuracy or content of
any resolution, certificate, statement, opinion, report, document, order or
other instrument furnished by the Master Servicer hereunder or any Opinion of
Counsel required hereunder.

               The Trustee shall prepare and file or cause to be filed on behalf
of the Trust Fund any tax return that is required with respect to REMIC 1, REMIC
2 and REMIC 3 pursuant to applicable federal, state or local tax laws.

               The Trustee covenants and agrees that it shall perform its
obligations hereunder in a manner so as to maintain the status of REMIC 1, REMIC
2 and REMIC 3 under the REMIC Provisions and to prevent the imposition of any
federal, state or local income, prohibited transaction, contribution or other
tax on any of REMIC 1, REMIC 2 or REMIC 3 to the extent that maintaining such
status and avoiding such taxes are within the control of the Trustee and are
reasonably within the scope of its duties under this Agreement.

               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) Prior to the occurrence of an Event of Default, and
               after the curing or waiver of all such Events of Default which
               may have occurred, 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

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               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, in the absence of bad faith on
               the part of the Trustee, 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;

                    (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 proved
               that the Trustee was negligent in ascertaining the pertinent
               facts; and

                   (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 the Holders of Certificates
               entitled to at least 25% of the Voting Rights relating to the
               time, method and place of conducting any proceeding for any
               remedy available to the Trustee, or exercising any trust or power
               conferred upon the Trustee, under this Agreement.

               SECTION 8.02.          Certain Matters Affecting the Trustee.

                       Except as otherwise provided in Section 8.01:

             (a) The Trustee may conclusively rely upon and shall be fully
        protected in acting or refraining from acting in reliance 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 reasonably
        believed by it to be genuine and to have been signed or presented by the
        proper party or parties;

             (b) The Trustee may consult with counsel 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 therewith;

             (c) The Trustee shall be under no obligation to exercise any of the
        trusts or powers vested in it by this Agreement, other than its
        obligation to give notice pursuant to 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 security or indemnity satisfactory to
        it against the costs, expenses and liabilities which may be incurred
        therein or thereby; nothing contained herein shall, however, relieve the
        Trustee of the obligation, upon the occurrence of an Event of Default of
        which a Responsible Office of the Trustee's corporate trust department
        has actual knowledge (which has not been waived or cured), to exercise
        such of the rights and powers vested in it by this Agreement, and to use
        the same degree of care and skill in their exercise as a prudent man
        would exercise or use under the circumstances in the conduct of his own
        affairs;

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             (d) 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;

             (e) Prior to the occurrence of an Event of Default hereunder and
        after the curing or waiver of all Events of Default which may have
        occurred, the Trustee shall not be bound to make any investigation into
        the facts or matters stated in any resolution, certificate, statement,
        instrument, opinion, report, notice, request, consent, order, approval,
        bond or other paper or document, unless requested in writing to do so by
        the Holders of Certificates entitled to at least 25% of the Voting
        Rights; 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, reasonably assured to the Trustee by the security afforded
        to it by the terms of this Agreement reasonable expense of every such
        examination shall be paid by the Certificateholders requesting the
        investigation;

             (f) The Trustee may execute any of the trusts or powers hereunder
        or perform any duties hereunder either directly or by or through agents,
        nominees, custodians or attorneys appointed with due care, and shall not
        be responsible for any willful misconduct or negligence on the part of
        any agent, attorney, custodian or nominee so appointed;

             (g) The Trustee shall not be required to give any bond or surety
        with respect to the execution of the trust created hereby or the powers
        granted hereunder; and

             (h) Whenever in the administration of the provisions of this
        Agreement the Trustee shall deem it necessary or desirable that a matter
        be proved or established prior to taking or suffering any action to be
        taken hereunder, such matter (unless other evidence in respect thereof
        be herein specifically prescribed) may, in the absence of gross
        negligence or bad faith on the part of the Trustee, be deemed to be
        conclusively proved and established by a certificate signed and
        delivered to the Trustee and such certificate, in the absence of gross
        negligence or bad faith on the part of the Trustee, shall be full
        warrant to the Trustee for any action taken, suffered or omitted by it
        under the provisions of this Agreement upon the faith thereof.

               SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
                             Loans.

               The recitals contained herein and in the Certificates (other than
the signature of the Trustee, the authentication of the Trustee on the
Certificates, the acknowledgments of the Trustee contained in Article II) shall
be taken as the statements of the Company and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement or of the
Certificates (other than the signature and authentication of the Trustee on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Company of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the

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Company or the Master Servicer in respect of the Mortgage Loans or deposited in
or withdrawn from the Custodial Account by the Master Servicer.

               SECTION 8.04.          Trustee May Own Certificates.

               The Trustee in its individual or any other capacity (other than
as Trustee hereunder) may become the owner or pledgee of Certificates with the
same rights it would have if it were not Trustee and may otherwise deal with the
parties hereto.

               SECTION 8.05.          Trustee's Fees.

               On each Distribution Date, the Trustee shall be entitled to
withdraw from the Certificate Account as compensation hereunder the Trustee's
Fees. Such compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) shall be paid for
all services rendered by it (except as otherwise reimbursed by the Seller
pursuant to a separate fee letter between the Seller and the Trustee) in the
execution of the trusts hereby created and in the exercise and performance of
any of the powers and duties hereunder or of the Trustee. Except as otherwise
provided in this Agreement, the Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified and held harmless by the Trust Fund
against any claim, loss, liability, fee or expense incurred in connection with
any Event of Default, any breach of this Agreement or any claim or legal action
(including any pending or threatened claim or legal action) relating to the
acceptance or administration of its trusts hereunder or the Trustee's
performance under the Certificates, other than any claim, loss, liability or
expense (i) sustained in connection with this Agreement related to the willful
misfeasance, bad faith or negligence of the Master Servicer in the performance
of its duties hereunder or (ii) incurred in connection with a breach
constituting willful misfeasance, bad faith or negligence of the Trustee in the
performance of its duties hereunder or by reason of reckless disregard of its
obligations and duties hereunder.

               The Master Servicer shall indemnify the Trustee and any director,
officer, employee or agent of the Trustee against any such claim or legal action
(including any pending or threatened claim or legal action), loss, liability,
fee or expense that may be sustained in connection with this Agreement related
to the willful misfeasance, bad faith, or negligence in the performance of the
Master Servicer's duties hereunder.

               The provisions of this Section 8.05 shall survive the resignation
or removal of the Trustee or the termination of this Agreement.

               SECTION 8.06.          Eligibility Requirements for Trustee.

               The Trustee hereunder shall at all times be a corporation or a
national banking association organized and doing business under the laws of any
state or the United States of America or the District of Columbia, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority. In addition, the Trustee shall at all times be
acceptable to the Rating

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Agency rating the Certificates. If such corporation 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 the combined capital and surplus of such corporation 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, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.07.
The corporation or national banking association serving as Trustee may have
normal banking and trust relationships with the Seller and their affiliates or
the Master Servicer and its affiliates; provided, however, that such corporation
cannot be an affiliate of the Master Servicer other than the Trustee in its role
as successor to the Master Servicer.

               SECTION 8.07.          Resignation and Removal of the Trustee.

               The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Master Servicer;
with a copy to the Rating Agencies; provided, that such resignation shall not be
effective until a successor trustee is appointed and accepts appointment in
accordance with the following provisions; provided, however, that the resigning
Trustee shall not resign and be discharged from the trusts hereby created until
such time as the Rating Agency rating the Certificates approves the successor
trustee. Upon receiving such notice of resignation, the Master Servicer shall
promptly appoint a successor trustee who meets the eligibility requirements of
Section 8.06 by written instrument, in triplicate, one copy of which instrument
shall be delivered to each of the resigning Trustee and to the successor
trustee. If no successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of 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 8.06 and shall fail to resign after
written request therefor by the Master Servicer, or if at any time the Trustee
shall become incapable of acting, or shall be adjudged 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, the
Master Servicer may remove the Trustee and appoint a successor trustee who meets
the eligibility requirements of Section 8.06 by written instrument, in
triplicate, which instrument shall be delivered to the Trustee so removed and 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 to the Master Servicer, one complete set to the
Trustee so removed and one complete set to the successor so appointed. A copy of
such instrument shall be delivered to the Certificateholders and the Company by
the Master Servicer.

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               Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.

               SECTION 8.08.          Successor Trustee.

               Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Master Servicer and to its predecessor
trustee 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 predecessor trustee shall after payment of its outstanding fees and
expenses, promptly deliver to the successor trustee all assets and records of
the Trust Fund held by it hereunder, and the Master Servicer and the predecessor
trustee shall execute and deliver all 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 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06.

               Upon acceptance of appointment by a successor trustee as provided
in this Section, the Master Servicer shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register. If the Master Servicer fails to mail such notice
within ten days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Master Servicer.

               SECTION 8.09.          Merger or Consolidation of Trustee.

               Any state bank or trust company or corporation or national
banking association into which the Trustee may be merged or converted or with
which it may be consolidated or any state bank or trust company or national
banking association resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any state bank or trust company or
corporation or national banking association succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor of
the Trustee hereunder, provided such state bank or trust company or corporation
or national banking association shall be eligible under the provisions of
Section 8.06 without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

               SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.

               Notwithstanding any other provisions hereof, 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

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the same 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, such title to the Trust Fund, or any part thereof, 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 so to do, or in case an
Event of Default shall have occurred and be continuing, the Trustee alone shall
have the power to make such appointment without the Master Servicer. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06 hereunder and no notice to
Holders of Certificates of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 8.08 hereof.

               In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee and required to be conferred or such
co-trustee shall be conferred or imposed upon and exercised or performed by the
Trustee and such separate trustee or co-trustee jointly, 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 Trust Fund or any portion thereof in any
such jurisdiction) shall be exercised and performed by such separate trustee or
co-trustee at the direction of the Trustee.

               Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, 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.

               Any separate trustee or co-trustee may, at any time, constitute
the Trustee, its agent or attorney-in-fact, with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

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                                   ARTICLE IX

                                   TERMINATION

               SECTION 9.01. Termination Upon Repurchase or Liquidation of All
                             Mortgage Loans or upon Purchase of Certificates.

        (a) Subject to Section 9.03, the respective obligations and
responsibilities of the Company, the Master Servicer and the Trustee created
hereby (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 8.05 and of the Master Servicer to provide for and the
Trustee to make payments to Certificateholders as hereafter set forth) shall
terminate upon payment to the Certificateholders of all amounts held by or on
behalf of the Trustee and required to be paid to them hereunder following the
earlier to occur of (i) the repurchase by the Holder of a 50.01% Percentage
Interest in the Class C Certificates (the "Majority Class C Certificateholders")
or its designee of all Mortgage Loans and each REO Property in respect thereof
remaining in the Trust Fund at a price equal to (a) 100% of the unpaid principal
balance of each Mortgage Loan (other than one as to which a REO Property was
acquired) on the day of repurchase together with accrued interest on such unpaid
principal balance at the Net Mortgage Rate to the first day of the month in
which the proceeds of such repurchase are to be distributed, plus (b) the
appraised value of any REO Property (but not more than the unpaid principal
balance of the related Mortgage Loan, together with accrued interest on that
balance at the Net Mortgage Rate to the first day of the month such repurchase
price is distributed), less the good faith estimate of the Majority Class C
Certificateholders of liquidation expenses to be incurred in connection with its
disposal thereof, such appraisal to be conducted by an appraiser mutually agreed
upon by the Majority Class C Certificateholders and the Trustee at the expense
of the Master Servicer, and (ii) the final payment or other liquidation (or any
Advance with respect thereto) of the last Mortgage Loan remaining in the Trust
Fund (or the disposition of all REO Property in respect thereof); provided,
however, that in no event shall the trust created hereby continue beyond the
earlier of (i) the Distribution Date occurring in May 2031 and (ii) the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St.
James, living on the date hereof, and provided further that the purchase price
set forth above shall be increased as is necessary, as determined by the
Majority Class C Certificateholders, to avoid disqualification of any of REMIC
1, REMIC 2 or REMIC 3 as a REMIC. In the case of any repurchase by the Majority
Class C Certificateholders pursuant to clause (i), shall exercise reasonable
efforts to cooperate fully with the Trustee in effecting such repurchase and the
transfer of the Mortgage Loans and related Mortgage Files and related records to
the Majority Class C Certificateholders.

               The right of the Majority Class C Certificateholders or its
designee to repurchase all Mortgage Loans pursuant to (i) above shall be
conditioned upon the aggregate Stated Principal Balance of such Mortgage Loans
at the time of any such repurchase aggregating an amount equal to or less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date. If such right is exercised, the Majority Class C
Certificateholders upon such repurchase shall provide to the Trustee, notice of
such exercise prior to the Determination Date in the month preceding the month
of purchase and the certification required by Section 3.16.

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               Written notice of any termination, specifying the Distribution
Date upon which the Certificateholders may surrender their Certificates to the
Trustee for payment of the final distribution and cancellation, shall be given
promptly by the Trustee by letter to the Certificateholders mailed (a) in the
event such notice is given in connection with the Majority Class C
Certificateholder's election to repurchase, not earlier than the 15th day and
not later than the 25th day of the month next preceding the month of such final
distribution or (b) otherwise during the month of such final distribution on or
before the Determination Date in such month, in each case specifying (i) the
Distribution Date upon which final payment of the Certificates will be made upon
presentation and surrender of Certificates at the office of the Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office of the Trustee therein specified. In the event such notice is given in
connection with the Majority Class C Certificateholder or its designee's
election to repurchase, the Majority Class C Certificateholder or its designee
shall deliver to the Trustee for deposit in the Certificate Account on the
Business Day immediately preceding the Distribution Date specified in such
notice an amount equal to the above-described repurchase price payable out of
its own funds. Upon presentation and surrender of the Certificates by the
Certificateholders, the Trustee shall first, pay itself the Trustee's Fees for
such Distribution Date and any other amounts owing to the Trustee under this
Agreement, and second, distribute to the Certificateholders (i) the amount
otherwise distributable on such Distribution Date, if not in connection with the
Majority Class C Certificateholder's election to repurchase, or (ii) if the
Majority Class C Certificateholder elected to so repurchase, an amount
determined as follows: with respect to each Regular Certificate (other than the
Class A-IO Certificates), the outstanding Certificate Principal Balance thereof,
plus with respect to each Regular Certificate (other than the Class P
Certificates), one month's interest thereon at the applicable Pass- Through Rate
and any Unpaid Interest Shortfall Amount, plus with respect to each Mezzanine
Certificate, any unpaid Allocated Realized Loss Amount; and with respect to the
Class R Certificates, the Percentage Interest evidenced thereby multiplied by
the difference, if any, between the above described repurchase price and the
aggregate amount to be distributed to the Holders of the Regular Certificates,
subject to the priorities set forth in Section 4.01. Notwithstanding the
foregoing, by acceptance of the Class R Certificates, the Holders of the Class R
Certificates agree, in connection with any termination hereunder, to assign and
transfer any amounts received in respect of such termination to the Holders of
the Class C Certificates and to pay any such amounts to the Holders of the Class
C Certificates. Upon certification to the Trustee by a Servicing Officer,
following such final deposit, the Trustee shall promptly release the Mortgage
Files as directed by the Majority Class C Certificateholder for the remaining
Mortgage Loans, and the Trustee shall execute all assignments, endorsements and
other instruments required by the Majority Class C Certificateholder as being
necessary to effectuate such transfer.

               In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned notice, the Trustee shall give a second 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 of the Certificates shall not have been
surrendered for cancellation, the Trustee shall take reasonable steps as
directed by the Company in writing, or appoint an agent to take

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reasonable 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 subject hereto. If within nine months after
the second notice all the Certificates shall not have been surrendered for
cancellation, the Class R Certificateholders shall be entitled to all unclaimed
funds and other assets which remain subject hereto.

               SECTION 9.02.          Termination of REMIC 2 and REMIC 3.

               REMIC 2 shall be terminated on the earlier of the Final
Distribution Date and the date on which it is deemed to receive the last deemed
distributions on the REMIC 1 Regular Interests and the last distribution due on
the REMIC 2 Regular Interests and the Class R Certificates (in respect of the
Class R-2 Interest) is made. REMIC 3 shall be terminated on the earlier of the
Final Distribution Date and the date on which it is deemed to receive the last
deemed distributions on the REMIC 2 Regular Interests and the last distribution
due on the Regular Certificates and the Class R Certificates (in respect of the
Class R-3 Interest) is made.

               SECTION 9.03.          Additional Termination Requirements.

               (a) In the event the Majority Class C Certificateholder
repurchases the Mortgage Loans as provided in Section 9.01, the Trust Fund shall
be terminated in accordance with the following additional requirements, unless
the Majority Class C Certificateholder, at its own expense, obtains for the
Trustee an Opinion of Counsel to the effect that the failure of the Trust Fund
to comply with the requirements of this Section 9.03 will not (i) result in the
imposition on the Trust of taxes on "prohibited transactions," as described in
Section 860F of the Code, or (ii) cause either REMIC 1, REMIC 2 or REMIC 3 to
fail to qualify as a REMIC at any time that any Certificate is outstanding:

               (i) The Trustee shall establish a 90-day liquidation period for
        REMIC 1, REMIC 2 and REMIC 3, as the case may be, and specify the first
        day of such period in a statement attached to the Trust Fund's final Tax
        Return pursuant to Treasury regulations Section 1.860F-1. The Trustee
        also shall satisfy all of the requirements of a qualified liquidation
        for REMIC 1, REMIC 2 and REMIC 3, as the case may be, under Section 860F
        of the Code and regulations thereunder; and

               (ii) The Majority Class C Certificateholder shall notify the
        Trustee at the commencement of such 90-day liquidation period and, at or
        prior to the time of making of the final payment on the Certificates,
        the Trustee shall sell or otherwise dispose of all of the remaining
        assets of the Trust Fund in accordance with the terms hereof.

        (b) Each Holder of a Certificate and the Trustee hereby irrevocably
approves and appoints the Master Servicer as its attorney-in-fact to adopt a
plan of complete liquidation for REMIC 1, REMIC 2 and REMIC 3 at the expense of
the Trust Fund in accordance with the terms and conditions of this Agreement.

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                                    ARTICLE X

                                REMIC PROVISIONS

               SECTION 10.01.         REMIC Administration.

        (a) The Trustee shall make an election to treat the Trust Fund as three
REMICs under the Code and, if necessary, under applicable state law. Each such
election will be made on Form 1066 or other appropriate federal tax or
information return (including Form 8811) or any appropriate state return for the
taxable year ending on the last day of the calendar year in which the
Certificates are issued. For the purposes of the REMIC elections in respect of
the Trust Fund, (i) the Class R-1 Interest will constitute the sole class of
"residual interest" in REMIC 1, (ii) the Class R-2 Interest will constitute the
sole class of "residual interest" in REMIC 2, and (iii) the Class R-3 Interest
will constitute the sole class of "residual interest" in REMIC 3, and the
Regular Certificates shall be designated as the "regular interests" in REMIC 3.
The Master Servicer and the Trustee shall not permit the creation of any
"interests" (within the meaning of Section 860G of the Code) in REMIC 1, REMIC 2
or REMIC 3 other than the REMIC 1 Regular Interests and the Class R-1 Interest
(in the case of REMIC 1), the REMIC 2 Regular Interests and the Class R-2
Interest (in the case of REMIC 2), and the Regular Certificates and the Class
R-3 Interest (in the case of REMIC 3). The Trustee will apply for an Employee
Identification Number from the IRS via form SS-4 or any other acceptable method
for each of REMIC 1, REMIC 2 and REMIC 3.

        (b) The Closing Date is hereby designated as the "startup day" of the
Trust Fund within the meaning of Section 860G(a)(9) of the Code.

        (c) The Trustee shall pay out of its own funds, without any right of
reimbursement, any and all expenses relating to any tax audit of the REMICs
(including, but not limited to, any professional fees or any administrative or
judicial proceedings with respect to the REMICs that involve the Internal
Revenue Service or state tax authorities), other than the expense of obtaining
any tax related Opinion of Counsel except as specified herein. The Trustee, as
agent for the REMICs' tax matters person, shall (i) act on behalf of the REMICs
in relation to any tax matter or controversy involving the Trust Fund and (ii)
represent the Trust Fund in any administrative or judicial proceeding relating
to an examination or audit by any governmental taxing authority with respect
thereto. By their acceptance thereof, the holder of the largest Percentage
Interest of the Class R Certificates hereby agrees to irrevocably appoint the
Trustee or an Affiliate as its agent to perform all of the duties of the tax
matters person for the REMICs.

               (d) The Trustee shall prepare, sign and file all of the Tax
Returns (including Form 8811, which must be filed within 30 days of the Closing
Date) in respect of the REMICs created hereunder. The expenses of preparing and
filing such returns shall be borne by the Trustee without any right of
reimbursement therefor. The Master Servicer shall provide on a timely basis to
the Trustee or its designee such information with respect to the assets of the
REMICs as is in its possession and reasonably required by the Trustee to enable
it to perform its obligations under this Article X.

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               (e) The Trustee shall perform on behalf of the REMICs all
reporting and other tax compliance duties that are the responsibility of the
REMICs under the Code, the REMIC Provisions or other compliance guidance issued
by the Internal Revenue Service or any state or local taxing authority. Among
its other duties, as required by the Code, the REMIC Provisions or other such
compliance guidance, the Trustee shall provide (i) to any Transferor of a Class
R Certificate such information as is necessary for the application of any tax
relating to the transfer of a Class R Certificate to any Person who is not a
Permitted Transferee, (ii) to the Certificateholders such information or reports
as are required by the Code or the REMIC Provisions including reports relating
to interest, original issue discount and market discount or premium (using the
Prepayment Assumption as required) and (iii) to the Internal Revenue Service the
name, title, address and telephone number of the person who will serve as the
representative of the REMICs. The Master Servicer shall provide on a timely
basis to the Trustee such information with respect to the assets of the REMICs,
including, without limitation, the Mortgage Loans, as is in its possession and
reasonably required by the Trustee to enable it to perform its obligations under
this subsection. In addition, the Company 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 reasonably determines to be relevant for tax purposes as
to the valuations and issue prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flow of
the Certificates.

               (f) The Trustee shall take such action and shall cause the REMICs
created hereunder to take such action as shall be necessary to create or
maintain the status thereof as REMICs under the REMIC Provisions (and the Master
Servicer shall assist it, to the extent reasonably requested by it). The Trustee
shall not take any action, cause the Trust Fund to take any action or fail to
take (or fail to cause to be taken) any action that, under the REMIC Provisions,
if taken or not taken, as the case may be, could (i) endanger the status of the
REMIC 1, REMIC 2 or REMIC 3 as REMICs or (ii) result in the imposition of a tax
upon the REMICs (including but not limited to the tax on prohibited transactions
as defined in Section 860F(a)(2) of the Code and the tax on contributions to a
REMIC set forth in Section 860G(d) of the Code) (either such event, an "Adverse
REMIC Event") unless the Trustee has received an Opinion of Counsel, addressed
to the Trustee (at the expense of the party seeking to take such action but in
no event at the expense of the Trustee) to the effect that the contemplated
action will not, with respect to the REMICs created hereunder, endanger such
status or result in the imposition of such a tax, nor shall the Master Servicer
take or fail to take any action (whether or not authorized hereunder) as to
which the Trustee has advised it in writing that it has received an Opinion of
Counsel to the effect that an Adverse REMIC Event could occur with respect to
such action. In addition, prior to taking any action with respect to the REMICs
or the assets of the REMICs, or causing the REMICs to take any action, which is
not contemplated under the terms of this Agreement, the Master Servicer will
consult with the Trustee or its designee, in writing, with respect to whether
such action could cause an Adverse REMIC Event to occur with respect to the
Trust Fund, and the Master Servicer shall not take any such action or cause the
Trust Fund to take any such action as to which the Trustee has advised it in
writing that an Adverse REMIC Event could occur. The Trustee may consult with
counsel to make such written advice, and the cost of same shall be borne by the
party seeking to take the action not permitted by this Agreement, but in no
event shall such cost be an expense of the Trustee. At all times as may be
required by the Code, the Trustee will ensure that substantially all of the
assets

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of the REMICs created hereunder will consist of "qualified mortgages" as defined
in Section 860G(a)(3) of the Code and "permitted investments" as defined in
Section 860G(a)(5) of the Code.

               (g) In the event that any tax is imposed on "prohibited
transactions" of the REMICs created hereunder as defined in Section 860F(a)(2)
of the Code, on the "net income from foreclosure property" of the REMICs as
defined in Section 860G(c) of the Code, on any contributions to the REMICs after
the Startup Day therefor pursuant to Section 860G(d) of the Code, or any other
tax is imposed by the Code or any applicable provisions of state or local tax
laws, such tax shall be charged (i) to the Trustee pursuant to Section 10.03
hereof, if such tax arises out of or results from a breach by the Trustee of any
of its obligations under this Article X, (ii) to the Master Servicer pursuant to
Section 10.03 hereof, if such tax arises out of or results from a breach by the
Master Servicer of any of its obligations under Article III or this Article X,
or otherwise, (iii) to the Master Servicer as provided in Section 3.05 and (iv)
against amounts on deposit in the Certificate Account and shall be paid by
withdrawal therefrom to the extent not required to be paid by the Master
Servicer or the Trustee pursuant to another provision of this Agreement.

               (h) On or before April 15 of each calendar year, commencing April
15, 2002, the Trustee shall deliver to the Master Servicer and the Rating Agency
a Certificate from a Responsible Officer of the Trustee stating the Trustee's
compliance with this Article X.

               (i) The Trustee shall, for federal income tax purposes, maintain
books and records with respect to the REMICs on a calendar year and on an
accrual basis.

               (j) Following the Startup Day, the Trustee shall not accept any
contributions of assets to the REMICs other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.04
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets in the REMICs will not cause the REMIC 1, REMIC 2 or
REMIC 3 to fail to qualify as REMICs at any time that any Certificates are
outstanding or subject either REMIC 1, REMIC 2 or REMIC 3 to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.

               (k) Neither the Trustee nor the Master Servicer shall enter into
any arrangement by which the REMICs will receive a fee or other compensation for
services nor permit the REMICs to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.

               SECTION 10.02.         Prohibited Transactions and Activities.

               None of the Company, the Master Servicer or the Trustee shall
sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of the Trust Fund, (iii) the
termination of REMIC 1, REMIC 2 or REMIC 3 pursuant to Article IX of this
Agreement, (iv) a substitution pursuant to Article II of this Agreement or (v) a
purchase of Mortgage Loans pursuant to Article II or III of this

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<PAGE>

Agreement), nor acquire any assets for the Trust Fund (other than REO Property
acquired in respect of a defaulted Mortgage Loan), nor sell or dispose of any
investments in the Custodial Account or the Certificate Account for gain, nor
accept any contributions to the REMICs after the Closing Date (other than a
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03),
unless it has received an Opinion of Counsel, addressed to the Trustee (at the
expense of the party seeking to cause such sale, disposition, substitution,
acquisition or contribution but in no event at the expense of the Trustee) that
such sale, disposition, substitution, acquisition or contribution will not (a)
affect adversely the status of REMIC 1, REMIC 2 or REMIC 3 as REMICs or (b)
cause the Trust Fund to be subject to a tax on "prohibited transactions" or
"contributions" pursuant to the REMIC Provisions.

               SECTION 10.03. Master Servicer and Trustee Indemnification.

               (a) The Trustee agrees to indemnify the Trust Fund, the Company,
and the Master Servicer for any taxes and costs including, without limitation,
any reasonable attorneys fees imposed on or incurred by the Trust Fund, the
Company or the Master Servicer, as a result of a breach of the Trustee's
covenants set forth in this Article X.

               (b) The Master Servicer agrees to indemnify the Trust Fund, the
Company and the Trustee for any taxes and costs including, without limitation,
any reasonable attorneys' fees imposed on or incurred by the Trust Fund, the
Company or the Trustee, as a result of a breach of the Master Servicer's
covenants set forth in Article III or this Article X, in each case with respect
to compliance with the REMIC Provisions.

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<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

               SECTION 11.01.         Amendment.

               This Agreement may be amended from time to time by the Company,
the Master Servicer and the Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions herein which may be defective or inconsistent with any other
provisions herein or to correct any error, (iii) to amend this Agreement in any
respect subject to the provisions in clauses (A) and (B) below, or (iv) if such
amendment, as evidenced by an Opinion of Counsel (provided by the Person
requesting such amendment) delivered to the Trustee, is reasonably necessary to
comply with any requirements imposed by the Code or any successor or amendatory
statute or any temporary or final regulation, revenue ruling, revenue procedure
or other written official announcement or interpretation relating to federal
income tax laws or any proposed such action which, if made effective, would
apply retroactively to the Trust Fund at least from the effective date of such
amendment; provided that such action (except any amendment described in (iv)
above) shall not adversely affect in any material respect the interests of any
Certificateholder (other than Certificateholders who shall consent to such
amendment), as evidenced by (A) an Opinion of Counsel (provided by the Person
requesting such amendment) delivered to the Trustee, and (B) a letter from each
Rating Agency, confirming that such amendment shall not cause it to lower its
rating on any of the Certificates.

               This Agreement may also be amended from time to time by the
Company, the Master Servicer and the Trustee and Holders of Certificates
entitled to at least 66-2/3% of the Voting Rights 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 received on Mortgage
Loans which are 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 at least 66-2/3% of the Voting Rights of
such Class, or (iii) reduce the aforesaid percentage of Certificates the Holders
of which are required to consent to any such amendment, without the consent of
the Holders of all Certificates then outstanding. Notwithstanding any other
provision of this Agreement, for purposes of the giving or withholding of
consents pursuant to this Section 11.01, Certificates registered in the name of
the Seller or the Master Servicer or any affiliate thereof shall be entitled to
Voting Rights with respect to matters described in (i), (ii) and (iii) of this
paragraph.

               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 (provided by the Person requesting
such amendment) to the effect that such amendment will not result in the
imposition of any tax on either REMIC 1, REMIC 2 or REMIC 3 pursuant to the

                                       126

<PAGE>

REMIC Provisions or cause either REMIC 1, REMIC 2 or REMIC 3 to fail to qualify
as a REMIC at any time that any Certificates are outstanding.

               Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment or a written statement describing the
amendment to each Certificateholder, with a copy to the Rating Agencies.

               It shall not be necessary for the consent of Certificateholders
under this Section 11.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.

               Prior to executing any amendment pursuant to this Section, the
Trustee shall be entitled to receive an Opinion of Counsel (provided by the
Person requesting such amendment) to the effect that such amendment is
authorized or permitted by this Agreement. The cost of any Opinion of Counsel
delivered pursuant to this Section 11.01 shall be an expense of the party
requesting such amendment, but in any case shall not be an expense of the
Trustee.

               The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.

               SECTION 11.02.         Recordation of Agreement; Counterparts.

               To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Company accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.

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

               SECTION 11.03. Limitation on Rights of Certificateholders.

               The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.

                                       127

<PAGE>

               No Certificateholder shall have any right to vote (except as
expressly provided for 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 of any
provision 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 notice of an Event of
Default, or of a default by the Seller or the Trustee in the performance of any
obligation hereunder, and of the continuance thereof, as hereinbefore provided,
and unless also the Holders of Certificates entitled to at least 51% of the
Voting Rights shall have made written request upon 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 is understood and intended, and expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue of any provision of this Agreement to affect, disturb or prejudice the
rights of the Holders of any other of such 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
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.

               SECTION 11.04.         Governing Law.

               This Agreement and the Certificates shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.

               SECTION 11.05.         Notices.

               All demands, notices and direction hereunder shall be in writing
and shall be deemed effective upon receipt when delivered to (a) in the case of
the Company, Impac Funding, 1401 Dove Street, Newport Beach, California 92660,
Attention: General Counsel, or such other address as may hereafter be furnished
to the other parties hereto in writing; (b) in the case of Impac Funding, 1401
Dove Avenue, Newport Beach, California 92660, Attention: General Counsel, or
such other address as may hereafter be furnished to the other parties hereto in
writing; (c) in the case of the Trustee, to its Corporate Trust Office, or such
other address as may hereafter be furnished to the other parties hereto in
writing; or (d) in the case of the Rating Agencies, Standard & Poor's, 55 Water
Street, 41st

                                       128

<PAGE>

Floor, New York, NY 10041 Attention: Residential Mortgage Surveillance Group;
Fitch, Fitch, Inc., One State Street, 30th Floor, New York, New York 10004,
Attention: Mortgage Backed Securities Department, Impac 2001-4; and Moody's,
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.

               SECTION 11.06.         Severability of Provisions.

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

               SECTION 11.07.         Successors and Assigns.

               The provisions of this Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the parties hereto,
and all such provisions shall inure to the benefit of the Trustee and the
Certificateholders.

               SECTION 11.08.         Article and Section Headings.

               The article and section headings herein are for convenience of
reference only, and shall not limit or otherwise affect the meaning hereof.

               SECTION 11.09.         Notice to Rating Agencies.

               The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency referred to below with respect to each of the following of
which it has actual knowledge:
<TABLE>
<CAPTION>

<S>            <C>
               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;

               4.  The repurchase or substitution of Mortgage Loans pursuant to Section 2.03;

               5.  The final payment to Certificateholders; and

               6.  Any change in the location of the Custodial Account or the Certificate Account.
</TABLE>

                                       129

<PAGE>

               In addition, the Trustee shall promptly furnish to the Rating
Agency copies of each report to Certificateholders described in Section 4.02;
and the Master Servicer shall promptly furnish to the Rating Agency copies of
each annual independent public accountants' servicing report received as
described in Section 3.20.

               Any such notice pursuant to this Section 11.09 shall be in
writing and shall be deemed to have been duly given if personally delivered or
mailed by first class mail, postage prepaid, or by express delivery service to
(i) in the case of Standard & Poor's, 55 Water Street, 41st Floor, New York, New
York 10041, (ii) in the case of Moody's, ABS Monitoring Department, 99 Church
Street, New York, New York 10007, and (iii) in the case of Fitch, One State
Street Plaza, 30th Floor, New York, New York 10004, or, in each case, such other
address as any such Rating Agency may designate in writing to the parties
thereto.

                                       130

<PAGE>

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

                                  IMPAC SECURED ASSETS CORP.,
                                          Company

                                  By:
                                     -----------------------------------
                                  Name:        Richard J. Johnson
                                  Title:        Chief Financial Officer

                                  IMPAC FUNDING CORPORATION,
                                          Master Servicer

                                  By:
                                     -----------------------------------
                                  Name:        Lisa A. Duehring
                                  Title:        Senior Vice President

                                  BANKERS TRUST COMPANY OF
                                  CALIFORNIA, N.A.,
                                          as Trustee

                                  By:
                                     ------------------------------------
                                  Name:      James F. Noriega
                                  Title:       Associate

<PAGE>

STATE OF CALIFORNIA                   )
                                      )  ss.:
COUNTY OF ORANGE                      )

               On the 30th day of May, 2001 before me, a notary public in and
for said State, personally appeared Richard J. Johnson, known to me to be the
Chief Financial Officer of Impac Secured Assets Corp., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

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

[Notarial Seal]

<PAGE>

STATE OF CALIFORNIA                   )
                                      )  ss.:
COUNTY OF ORANGE                      )

               On the 30th day of May, 2001, before me, a notary public in and
for said State, personally appeared Lisa A. Duehring, known to me to be a Senior
Vice President of Impac Funding Corporation, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

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

[Notarial Seal]

<PAGE>

STATE OF CALIFORNIA                   )
                                      )  ss.:
COUNTY OF ORANGE                      )

               On the 30th day of May, 2001, before me, a notary public in and
for said State, personally appeared James F. Noriega, known to me to be an
Associate of Bankers Trust Company of California, N.A., the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

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

[Notarial Seal]

<PAGE>

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