Document:

<PAGE>

                                                                  EXECUTION COPY

                     MERRILL LYNCH MORTGAGE INVESTORS, INC.
                                    Depositor

                            LITTON LOAN SERVICING LP,
                                    Servicer

                                       and

                              JPMORGAN CHASE BANK,
                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT
                            Dated as of March 1, 2003

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

               SPECIALTY UNDERWRITING AND RESIDENTIALFINANCE TRUST
            MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2003-BC1

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                           PAGE
<S>                                                                                                        <C>
ARTICLE I      DEFINITIONS........................................................................           1

ARTICLE II     CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
               WARRANTIES.........................................................................          33

     SECTION 2.01.    Conveyance of Mortgage Loans................................................          33

     SECTION 2.02.    Acceptance by Trustee of the Mortgage Loans.................................          36

     SECTION 2.03.    Representations, Warranties and Covenants of the Depositor..................          37

     SECTION 2.04.    Representations and Warranties of the Servicer..............................          40

     SECTION 2.05.    Substitutions and Repurchases of Mortgage Loans which are not
                      "Qualified Mortgages".......................................................          42

     SECTION 2.06.    Authentication and Delivery of Certificates.................................          42

     SECTION 2.07.    REMIC Elections.............................................................          42

     SECTION 2.08.    Covenants of the Servicer...................................................          46

     SECTION 2.09.    [RESERVED]..................................................................          46

     SECTION 2.10.    [RESERVED]..................................................................          46

     SECTION 2.11.    Permitted Activities of the Trust...........................................          46

     SECTION 2.12.    Qualifying Special Purpose Entity...........................................          46

ARTICLE III    ADMINISTRATION AND SERVICING OF MORTGAGE LOANS....................................          46

     SECTION 3.01.    Servicer to Service Mortgage Loans..........................................          46

     SECTION 3.02.    Servicing and Subservicing; Enforcement of the Obligations of
                      Servicer....................................................................          47

     SECTION 3.03.    Rights of the Depositor and the Trustee in Respect of the
                      Servicer....................................................................          48

     SECTION 3.04.    Trustee to Act as Servicer..................................................          48

     SECTION 3.05.    Collection of Mortgage Loan Payments; Collection Account;
                      Certificate Account.........................................................          49

     SECTION 3.06.    Collection of Taxes, Assessments and Similar Items; Escrow
                      Accounts....................................................................          52

     SECTION 3.07.    Access to Certain Documentation and Information Regarding the
                      Mortgage Loans..............................................................          52

     SECTION 3.08.    Permitted Withdrawals from the Collection Account and
                      Certificate Account.........................................................          53

     SECTION 3.09.    [RESERVED]..................................................................          55

     SECTION 3.10.    Maintenance of Hazard Insurance.............................................          55

     SECTION 3.11.    Enforcement of Due-On-Sale Clauses; Assumption Agreements...................          55
</TABLE>

                                        i

<PAGE>

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                           PAGE
<S>                                                                                                        <C>
     SECTION 3.12.    Realization Upon Defaulted Mortgage Loans; Determination of
                      Excess Proceeds.............................................................          56

     SECTION 3.13.    Trustee to Cooperate; Release of Mortgage Files.............................          58

     SECTION 3.14.    Documents, Records and Funds in Possession of Servicer to be
                      Held for the Trustee........................................................          60

     SECTION 3.15.    Servicing Compensation......................................................          60

     SECTION 3.16.    Access to Certain Documentation.............................................          60

     SECTION 3.17.    Annual Statement as to Compliance...........................................          61

     SECTION 3.18.    Annual Independent Public Accountants' Servicing Statement;
                      Financial Statements........................................................          61

     SECTION 3.19.    Rights of the NIMs Insurer..................................................          61

     SECTION 3.20.    Periodic Filings............................................................          61

     SECTION 3.21.    Annual Certificate by Trustee...............................................          62

     SECTION 3.22.    Annual Certificate by Servicer..............................................          63

     SECTION 3.23.    Prepayment Penalty Reporting Requirements...................................          63

     SECTION 3.24.    Statements to Trustee.......................................................          64

     SECTION 3.25.    Indemnification.............................................................          64

     SECTION 3.26.    Nonsolicitation.............................................................          64

     SECTION 3.27.    Existing Servicing Agreement................................................          65

ARTICLE IV     DISTRIBUTIONS......................................................................          65

     SECTION 4.01.    Advances....................................................................          65

     SECTION 4.02.    Reduction of Servicing Compensation in Connection with
                      Prepayment Interest Shortfalls..............................................          66

     SECTION 4.03.    Distributions on the REMIC Interests........................................          66

     SECTION 4.04.    Distributions...............................................................          66

     SECTION 4.05.    Monthly Statements to Certificateholders....................................          69

ARTICLE V      THE CERTIFICATES...................................................................          72

     SECTION 5.01.    The Certificates............................................................          72

     SECTION 5.02.    Certificate Register; Registration of Transfer and Exchange of
                      Certificates................................................................          73

     SECTION 5.03.    Mutilated, Destroyed, Lost or Stolen Certificates...........................          77

     SECTION 5.04.    Persons Deemed Owners.......................................................          77

     SECTION 5.05.    Access to List of Certificateholders' Names and Addresses...................          77

     SECTION 5.06.    Book-Entry Certificates.....................................................          78
</TABLE>

                                       ii

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                           PAGE
<S>                                                                                                        <C>
     SECTION 5.07.    Notices to Depository.......................................................          78

     SECTION 5.08.    Definitive Certificates.....................................................          79

     SECTION 5.09.    Maintenance of Office or Agency.............................................          79

     SECTION 5.10.    [RESERVED]..................................................................          79

ARTICLE VI     THE DEPOSITOR AND THE SERVICER.....................................................          79

     SECTION 6.01.    Respective Liabilities of the Depositor and the Servicer....................          79

     SECTION 6.02.    Merger or Consolidation of the Depositor or the Servicer....................          80

     SECTION 6.03.    Limitation on Liability of the Depositor, the Servicer and Others...........          80

     SECTION 6.04.    Limitation on Resignation of Servicer.......................................          81

     SECTION 6.05.    Errors and Omissions Insurance; Fidelity Bonds..............................          81

ARTICLE VII    DEFAULT; TERMINATION OF SERVICER...................................................          81

     SECTION 7.01.    Events of Default...........................................................          81

     SECTION 7.02.    Trustee to Act; Appointment of Successor....................................          83

     SECTION 7.03.    Notification to Certificateholders..........................................          84

ARTICLE VIII   CONCERNING THE TRUSTEE.............................................................          84

     SECTION 8.01.    Duties of Trustee...........................................................          84

     SECTION 8.02.    Certain Matters Affecting the Trustee.......................................          85

     SECTION 8.03.    Trustee Not Liable for Mortgage Loans.......................................          86

     SECTION 8.04.    Trustee May Own Certificates................................................          86

     SECTION 8.05.    Trustee's Fees and Expenses.................................................          87

     SECTION 8.06.    Indemnification of Trustee..................................................          87

     SECTION 8.07.    Eligibility Requirements for Trustee........................................          88

     SECTION 8.08.    Resignation and Removal of Trustee..........................................          88

     SECTION 8.09.    Successor Trustee...........................................................          89

     SECTION 8.10.    Merger or Consolidation of Trustee..........................................          89

     SECTION 8.11.    Appointment of Co-Trustee or Separate Trustee...............................          89

     SECTION 8.12.    Tax Matters.................................................................          90

ARTICLE IX     TERMINATION........................................................................          92

     SECTION 9.01.    Termination upon Liquidation or Repurchase of all Mortgage
                      Loans.......................................................................          92

     SECTION 9.02.    Final Distribution on the Certificates......................................          93

     SECTION 9.03.    Additional Termination Requirements.........................................          94
</TABLE>

                                       iii

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                           PAGE
<S>                                                                                                        <C>
ARTICLE X      MISCELLANEOUS PROVISIONS...........................................................          95

     SECTION 10.01.   Amendment...................................................................          95

     SECTION 10.02.   Counterparts................................................................          96

     SECTION 10.03.   Governing Law...............................................................          96

     SECTION 10.04.   Intention of Parties........................................................          97

     SECTION 10.05.   Notices.....................................................................          97

     SECTION 10.06.   Severability of Provisions..................................................          98

     SECTION 10.07.   Assignment..................................................................          98

     SECTION 10.08.   Limitation on Rights of Certificateholders..................................          98

     SECTION 10.09.   Inspection and Audit Rights.................................................          99

     SECTION 10.10.   Certificates Nonassessable and Fully Paid...................................          99

     SECTION 10.11.   Third Party Rights..........................................................          99

     SECTION 10.12.   Additional Rights of the NIMs Insurer.......................................          99

     SECTION 10.13.   Credit Risk Manager.........................................................         100
</TABLE>

EXHIBIT A                  FORMS OF OFFERED CERTIFICATES

EXHIBIT B                  MORTGAGE LOAN SCHEDULE

EXHIBIT C                  [RESERVED]

EXHIBIT D                  FORM OF TRUSTEE CERTIFICATION

EXHIBIT E-1                FORM OF TRANSFEREE'S LETTER AND AFFIDAVIT

EXHIBIT E-2                FORM OF TRANSFEROR'S AFFIDAVIT

EXHIBIT F                  FORM OF TRANSFEROR CERTIFICATE

EXHIBIT G                  FORM OF INVESTMENT LETTER

EXHIBIT H                  FORM OF RULE 144A LETTER
EXHIBIT I                  REQUEST FOR RELEASE

EXHIBIT J                  [RESERVED]

EXHIBIT K                  FORM OF OFFICER'S CERTIFICATE OF TRUSTEE

EXHIBIT L                  FORM OF OFFICER'S CERTIFICATE OF SERVICER

EXHIBIT M                  FORM OF TRANSFEREE LETTER

EXHIBIT N                  FORM OF AUCTION PROCEDURES

                                       iv

<PAGE>

         POOLING AND SERVICING AGREEMENT, dated as of March 1, 2003, among
MERRILL LYNCH MORTGAGE INVESTORS, INC., a Delaware corporation, as depositor
(the "Depositor"), LITTON LOAN SERVICING LP, a Delaware limited partnership, as
servicer (the "Servicer") and JPMORGAN CHASE BANK, a New York banking
corporation, as trustee (the "Trustee").

         The Depositor is the owner of the Trust Fund that is hereby conveyed to
the Trustee in return for the Certificates. The Trust Fund for federal income
tax purposes will consist of (i) three real estate mortgage investment conduits,
(ii) the right to receive (x) proceeds from prepayment penalties on the Mortgage
Loans, (y) amounts paid by the Servicer or the Transferor in respect of
prepayment charges or waivers thereof pursuant to this Agreement and (z) amounts
received in respect of any indemnification paid as a result of a prepayment
charge being unenforceable in breach of the representations and warranties set
forth in the Sale Agreement and (iii) the grantor trusts described in Section
2.07 hereof. The Lower Tier REMIC will consist of all of the assets constituting
the Trust Fund (other than the assets described in clauses (ii) and (iii) above,
the Lower Tier REMIC Regular Interests and the Middle Tier REMIC Regular
Interests) and will be evidenced by the Lower Tier REMIC Regular Interests
(which will be uncertificated and will represent the "regular interests" in the
Lower Tier REMIC) and the Class LTR Interest as the single "residual interest"
in the Lower Tier REMIC. The Trustee will hold the Lower Tier REMIC Regular
Interests. The Middle Tier REMIC will consist of the Lower Tier REMIC Regular
Interests and will be evidenced by the Middle Tier REMIC Regular Interests
(which will represent the "regular interests" in the Middle Tier REMIC) and the
Class MTR Interest as the single "residual interest" in the Middle Tier REMIC.
The Trustee will hold the Middle Tier REMIC Regular Interests. The Upper Tier
REMIC will consist of the Middle Tier REMIC Regular Interests and will be
evidenced by the Upper Tier REMIC Regular Interests (which will represent the
"regular interests" in the Upper Tier REMIC) and the Residual Interest as the
single "residual interest" in the Upper Tier REMIC. The Class R Certificate will
represent beneficial ownership of the Class LTR Interest, the Class MTR Interest
and the Residual Interest. The "latest possible maturity date" for federal
income tax purposes of all interests created hereby will be the Latest Possible
Maturity Date.

         All covenants and agreements made by the Seller in the Sale Agreement
and by the Depositor and the Trustee herein with respect to the Mortgage Loans
and the other property constituting the Trust Fund are for the benefit of the
Holders from time to time of the Certificates and, to the extent provided
herein, the NIMs Insurer.

         In consideration of the mutual agreements herein contained, the
Depositor, the Servicer and the Trustee hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

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

         Accepted Servicing Practices: The Servicer's normal servicing
practices, which will conform to the mortgage servicing practices of prudent
mortgage lending institutions which service for their own account mortgage loans
of the same type as the Mortgages Loans in the jurisdictions in which the
related Mortgaged Properties are located.

         Accrual Period: With respect to the Certificates and any Distribution
Date, the period commencing on the immediately preceding Distribution Date (or,
in the case of the first Distribution Date, the Closing Date) and ending on the
day immediately preceding such Distribution Date. All calculations of interest
on the Certificates will be made on the basis of the actual number of days
elapsed in the related Accrual Period and a 360 day year.

<PAGE>

         Adjustable Rate Mortgage Loan: A Mortgage Loan identified in the
Mortgage Loan Schedule as having a Mortgage Rate which is adjustable.

         Adjustment Date: As to each Adjustable Rate Mortgage Loan, each date on
which the related Mortgage Rate is subject to adjustment, as provided in the
related Mortgage Note.

         Advance: The aggregate of the advances required to be made by the
Servicer with respect to any Distribution Date pursuant to Section 4.01, the
amount of any such advances being equal to the sum of the aggregate of payments
of principal and interest (net of the Servicing Fee Rate) on the Mortgage Loans
that were due during the applicable Due Period and not received as of the close
of business on the related Determination Date, less the aggregate amount of any
such Delinquent payments that the Servicer has determined would constitute a
Non-Recoverable Advance were an advance to be made with respect thereto;
provided, however, that with respect to any Mortgage Loan which has been
converted to an REO Property, the obligation to make advances shall only be to
payments of interest.

         Advance Facility: A financing or other facility as described in Section
10.14(a).

         Advance Facility Notice: As defined in Section 10.14(b).

         Advance Financing Person: As defined in Section 10.14(a).

         Advance Reimbursement Amounts: As defined in Section 10.14(a).

         Affiliate: With respect to any specified Person, any other Person
controlling, controlled by or under common control with such Person. For the
purposes of this definition, "control" means the power to direct the management
and policies of a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

         Aggregate Certificate Principal Balance: For any date of determination,
the sum of the Class A Certificate Principal Balance, the Class R Certificate
Principal Balance, the Class M-1 Certificate Principal Balance, the Class M-2
Certificate Principal Balance, Class B-1 Certificate Principal Balance and the
Class B-2 Certificate Principal Balance, in each case as of such date of
determination.

         Agreement: This Pooling and Servicing Agreement and any and all
amendments or supplements hereto made in accordance with the terms herein.

         Applied Realized Loss Amount: With respect to any Distribution Date,
the amount, if any, by which, the sum of (i) the Aggregate Certificate Principal
Balance and (ii) the Class C Certificate Principal Balance after distributions
of principal on such Distribution Date exceeds the aggregate Stated Principal
Balance of the Mortgage Loans as of such Distribution Date.

         Appraised Value: With respect to a Mortgage Loan the proceeds of which
were used to purchase the related Mortgaged Property, the "Appraised Value" of a
Mortgaged Property is the lesser of (1) the appraised value based on an
appraisal made for the Seller by an independent fee appraiser at the time of the
origination of the related Mortgage Loan, and (2) 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" is the appraised value of the Mortgaged Property based upon
the appraisal obtained at the time of refinancing.

         Assignment of Mortgage: An assignment of the Mortgage, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction where the related Mortgaged

                                       -2-

<PAGE>

Property is located to reflect of record the sale and assignment of the Mortgage
Loan to the Trustee, which assignment, notice of transfer or equivalent
instrument may, if permitted by law, be in the form of one or more blanket
assignments covering Mortgages secured by Mortgaged Properties located in the
same county.

         Available Funds Cap: As of any Distribution Date with respect to the
Certificates, a per annum rate equal to (1) 12 times the quotient of (i) the
total scheduled interest on the Mortgage Loans based on the Net Mortgage Rates
as of the related Due Date divided by (ii) the Aggregate Certificate Principal
Balance as of the first day of the applicable Accrual Period multiplied by 30
and divided by the actual number of days in the related Accrual Period less (2)
the Pass-Through Rate on the Class S Certificates on such Distribution Date.

         Balloon Loan: A Mortgage Loan having an original term to stated
maturity of approximately 15 years which provides for level monthly payments of
principal and interest based on a 30-year amortization schedule, with a balloon
payment of the remaining outstanding principal balance due on such Mortgage Loan
at its stated maturity.

         Book-Entry Certificates: Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a Person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.06). As of the Closing
Date, each of the Class A, Class M-1, Class M-2, Class B-1 and Class B-2
Certificates constitutes a Class of Book-Entry Certificates.

         Business Day: Any day other than (1) a Saturday or a Sunday, or (2) a
day on which banking institutions in the State of Texas, State of Delaware, and
in the City of New York, New York are authorized or obligated by law or
executive order to be closed.

         Certificate: Any one of the certificates of any Class executed by the
Trustee and authenticated by the Trustee in substantially the forms attached
hereto as Exhibits A.

         Certificate Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.05(f) in the name of the Trustee
for the benefit of the Certificateholders and designated "JPMorgan Chase Bank,
as trustee, in trust for registered holders of Specialty Underwriting and
Residential Finance Trust, Mortgage Loan Asset-Backed Certificates, Series
2003-BC1." Funds in the Certificate Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

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

         Certificate Principal Balance: As to any Certificate and as of any
Distribution Date, the Initial Certificate Principal Balance of such Certificate
less the sum of (1) all amounts distributed with respect to such Certificate in
reduction of the Certificate Principal Balance thereof on previous Distribution
Dates pursuant to Section 4.04, and (2) any Applied Realized Loss Amounts
allocated to such Certificate on previous Distribution Dates pursuant to Section
4.04(i). On each Distribution Date, after distributions and allocations of
Realized Losses have been made, a portion of the Class C Interest Carryforward
Amount will be added to the Class C Certificate Principal Balance so that the
Class C Certificate Principal Balance equals the Overcollateralization Amount.
No interest will accrue on such portion.

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

                                       -3-

<PAGE>

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

         Class: All Certificates bearing the same Class designation as set forth
in Section 5.01 hereof.

         Class A Certificate: Any Certificate designated as a "Class A
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class A Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class A Certificates.

         Class A Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A Pass-Through Rate on
the Class A Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the interest portion of any previous
distributions on such Class that is recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class A Certificates. For purposes of calculating
interest, principal distributions on a Distribution Date will be deemed to have
been made on the first day of the Accrual Period in which such Distribution Date
occurs.

         Class A Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class A Current Interest with respect to prior
Distribution Dates (excluding any Class A Interest Carryover Amount) over (B)
the amount actually distributed to the Class A Certificates with respect to
interest on such prior Distribution Dates and (2) interest on such excess (to
the extent permitted by applicable law) at the Class A Pass-Through Rate for the
related Accrual Period.

         Class A Interest Carryover Amount: As of any Distribution Date, the sum
of (1) if on such Distribution Date the Pass-Through Rate for the Class A
Certificates is based upon the Available Funds Cap, the excess of (A) the amount
of interest the Class A Certificates would otherwise be entitled to receive on
such Distribution Date had such rate been calculated as the sum of One-Month
LIBOR and the applicable Class A Margin for such Distribution Date, up to the
Weighted Maximum Rate Cap, over (B) the amount of interest payable on the Class
A Certificates at the Available Funds Cap, up to but not exceeding the Weighted
Maximum Rate Cap for such Distribution Date and (2) the Class A Interest
Carryover Amount for all previous Distribution Dates not previously paid
pursuant to Section 4.04(f)(v), together with interest thereon at a rate equal
to the sum of One-Month LIBOR and the applicable Class A Margin for such
Distribution Date.

         Class A Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.34% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.68% per annum.

                                       -4-

<PAGE>

         Class A Pass-Through Rate: For the first Distribution Date, 1.65% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class A Margin, (2) the Weighted Maximum Rate Cap and (3) the Available
Funds Cap for such Distribution Date.

         Class A Principal Distribution Amount: With respect to any Distribution
Date (1) prior to the Stepdown Date or any Distribution Date on which a Trigger
Event exists, 100% of the Principal Distribution Amount for such Distribution
Date and (2) on or after the Stepdown Date where a Trigger Event does not exist,
the excess of (A) the Class A Certificate Principal Balance immediately prior to
such Distribution Date over (B) the lesser of (i) 64.10% of the Stated Principal
Balances of the Mortgage Loans as of the end of the immediately preceding Due
Period and (ii) the excess of the Stated Principal Balances of the Mortgage
Loans as of the end of the immediately preceding Due Period over $1,220,000;
provided, however, that in no event will the Class A Principal Distribution
Amount with respect to any Distribution Date exceed the aggregate Certificate
Principal Balance of the Class A and Class R Certificates.

         Class B-1 Applied Realized Loss Amount: As of any Distribution Date,
the sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class B-1 Certificates.

         Class B-1 Certificate: Any Certificate designated as a "Class B-1
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class B-1 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class B-1
Certificates.

         Class B-1 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class B-1 Pass-Through Rate on
the Class B-1 Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the interest portion of any previous
distributions on such Class that is recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class B-1 Certificates. For purposes of
calculating interest, principal distributions on a Distribution Date will be
deemed to have been made on the first day of the Accrual Period in which such
Distribution Date occurs.

         Class B-1 Interest Carryforward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class B-1 Current Interest with respect to
prior Distribution Dates (excluding any Class B-1 Interest Carryover Amount)
over (B) the amount actually distributed to the Class B-1 Certificates with
respect to interest on such prior Distribution Dates and (2) interest on such
excess (to the extent permitted by applicable law) at the Class B-1 Pass-Through
Rate for the related Accrual Period.

         Class B-1 Interest Carryover Amount: As of any Distribution Date, the
sum of (1) if on such Distribution Date the Pass-Through Rate for the Class B-1
Certificates is based upon the Available Funds Cap, the excess of (A) the amount
of interest the Class B-1 Certificates would otherwise be entitled to receive on
such Distribution Date had such rate been calculated as the sum of One-Month
LIBOR and the applicable Class B-1 Margin for such Distribution Date, up to the
Weighted Maximum Rate Cap, over (B) the amount of interest payable on the Class
B-1 Certificates at the Available Funds Cap, up to but not exceeding the
Weighted Maximum Rate Cap for such Distribution Date and (2) the Class B-1
Interest Carryover Amount for all previous Distribution Dates not previously
paid pursuant to Section 4.04(f)(v), together with interest thereon at a rate
equal to the sum of One-Month LIBOR and the applicable Class B-1 Margin for such
Distribution Date.

                                       -5-

<PAGE>

         Class B-1 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 2.25% per annum and, as of any
Distribution Date after the Optional Termination Date, 3.375% per annum.

         Class B-1 Pass-Through Rate: For the first Distribution Date, 3.56% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class B-1 Margin, (2) the Weighted Maximum Rate Cap and (3) the
Available Funds Cap for such Distribution Date.

         Class B-1 Principal Distribution Amount: With respect to any
Distribution Date on or after the Stepdown Date, 100% of the Principal
Distribution Amount for such Distribution Date if the Class A Certificate
Principal Balance, the Class M-1 Certificate Principal Balance and Class M-2
Certificate Principal Balance have been reduced to zero and a Trigger Event
exists, or as long as a Trigger Event does not exist, the excess of (1) the sum
of (A) the Class A Certificate Principal Balance (after taking into account
distributions of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class M-1 Certificate Principal Balance (after taking into
account distributions of the Class M-1 Principal Distribution Amount on such
Distribution Date), (C) the Class M-2 Certificate Principal Balance (after
taking into account distributions of the Class M-2 Principal Distribution Amount
on such Distribution Date), and (D) the Class B-1 Certificate Principal Balance
immediately prior to such Distribution Date over (2) the lesser of (A) 93.60% of
the Stated Principal Balances of the Mortgage Loans as of the end of the
immediately preceding Due Period and (B) the excess of the Stated Principal
Balances of the Mortgage Loans as of the end of the immediately preceding Due
Period over $1,220,000. Notwithstanding the foregoing, (I) on any Distribution
Date prior to the Stepdown Date on which the Certificate Principal Balance of
each Class of Class A Certificates and the Class M Certificates has been reduced
to zero, the Class B-1 Principal Distribution Amount will equal the lesser of
(x) the outstanding Certificate Principal Balance of the Class B-1 Certificates
and (y) 100% of the Principal Distribution Amount remaining after any
distributions on such Class A and Class M Certificates and (II) in no event will
the Class B-1 Principal Distribution Amount with respect to any Distribution
Date exceed the Class B-1 Certificate Principal Balance.

         Class B-1 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class B-1 Applied Realized Loss Amount over (2) the sum of all
distributions in reduction of the Class B-1 Applied Realized Loss Amounts on all
previous Distribution Dates.

         Class B-2 Applied Realized Loss Amount: As of any Distribution Date,
the sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class B-2 Certificates.

         Class B-2 Certificate: Any Certificate designated as a "Class B-2
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class B-2 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class B-2
Certificates.

         Class B-2 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class B-2 Pass-Through Rate on
the Class B-2 Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the interest portion of any previous
distributions on such Class that is recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class B-2 Certificates. For purposes of
calculating interest, principal distributions on a Distribution Date will be
deemed to have been made on the first day of the Accrual Period in which such
Distribution Date occurs.

                                       -6-

<PAGE>

         Class B-2 Interest Carryforward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class B-2 Current Interest with respect to
prior Distribution Dates (excluding any Class B-2 Interest Carryover Amount)
over (B) the amount actually distributed to the Class B-2 Certificates with
respect to interest on such prior Distribution Dates and (2) interest on such
excess (to the extent permitted by applicable law) at the Class B-2 Pass-Through
Rate for the related Accrual Period.

         Class B-2 Interest Carryover Amount: As of any Distribution Date, the
sum of (1) if on such Distribution Date the Pass-Through Rate for the Class B-2
Certificates is based upon the Available Funds Cap, the excess of (A) the amount
of interest the Class B-2 Certificates would otherwise be entitled to receive on
such Distribution Date had such rate been calculated as the sum of One-Month
LIBOR and the applicable Class B-2 Margin for such Distribution Date, up to the
Weighted Maximum Rate Cap, over (B) the amount of interest payable on the Class
B-1 Certificates at the Available Funds Cap, up to but not exceeding the
Weighted Maximum Rate Cap for such Distribution Date and (2) the Class B-2
Interest Carryover Amount for all previous Distribution Dates not previously
paid pursuant to Section 4.04(f)(v), together with interest thereon at a rate
equal to the sum of One-Month LIBOR and the applicable Class B-2 Margin for such
Distribution Date.

         Class B-2 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 2.25% per annum and, as of any
Distribution Date after the Optional Termination Date, 3.375 per annum.

         Class B-2 Pass-Through Rate: For the first Distribution Date, 3.56% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class B-2 Margin, (2) the Weighted Maximum Rate Cap and (3) the
Available Funds Cap for such Distribution Date.

         Class B-2 Principal Distribution Amount: With respect to any
Distribution Date on or after the Stepdown Date, 100% of the Principal
Distribution Amount for such Distribution Date if the Class A Certificate
Principal Balance, the Class M-1 Certificate Principal Balance, the Class M-2
Certificate Principal Balance and the Class B-1 Certificate Principal Balance
have been reduced to zero and a Trigger Event exists, or as long as a Trigger
Event does not exist, the excess of (1) the sum of (A) the Class A Certificate
Principal Balance (after taking into account distributions of the Class A
Principal Distribution Amount on such Distribution Date), (B) the Class M-1
Certificate Principal Balance (after taking into account distributions of the
Class M-1 Principal Distribution Amount on such Distribution Date), (C) the
Class M-2 Certificate Principal Balance (after taking into account distributions
of the Class M-2 Principal Distribution Amount on such Distribution Date), (D)
the Class B-1 Certificate Principal Balance (after taking into account
distributions of the Class B-1 Principal Distribution Amount on such
Distribution Date) and (E) the Class B-2 Certificate Principal Balance
immediately prior to such Distribution Date over (2) the lesser of (A) 96.60% of
the Stated Principal Balances of the Mortgage Loans as of the end of the
immediately preceding Due Period and (B) the excess of the Stated Principal
Balances of the Mortgage Loans as of the end of the immediately preceding Due
Period over $1,220,000; the Class A Certificate Principal Balance, the Class M-1
Certificate Principal Balance, the Class M-2 Certificate Principal Balance and
the Class B-1 Certificate Principal Balance have been reduced to zero, the Class
B-2 Principal Distribution Amount for such Distribution Date will equal 100% of
the Principal Distribution Amount remaining after any distributions on such
Class A, Class M-1, Class M-2 and Class B-1 Certificates; and provided further,
however, that in no event will the Class B-2 Principal Distribution Amount with
respect to any Distribution Date exceed the Certificate Principal Balance of the
Class B-2 Certificates.

         Class B-2 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class B-2 Applied Realized Loss Amount over (2) the sum of all
distributions in reduction of the Class B-2 Applied Realized Loss Amounts on all
previous Distribution Dates.

                                       -7-

<PAGE>

         Class C Certificate: Any Certificate designated as a "Class C
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class C Applied Realized Loss Amount: As of any Distribution Date, the
sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class C Certificates.

         Class C Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class C Certificates.

         Class C Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class C Distributable Interest
Rate on a notional amount equal to the aggregate of the Principal Balance of the
Mortgage Loans outstanding as of the beginning of such Accrual Period (such
amount of interest representing 100 percent of the interest payments on the
Class MTC Interest), plus the interest portion of any previous distributions on
such Class that is recovered as a voidable preference by a trustee in
bankruptcy, less any Non-Supported Interest Shortfall allocated on such
Distribution Date to the Class C Certificates.

         Class C Distributable Interest Rate: The excess, if any, of (a) the
weighted average of the interest rates on the Lower Tier REMIC Regular Interests
over (b) two times the weighted average of the interest rates on the Lower Tier
REMIC Regular Interests (treating for purposes of this clause (b) the interest
rate on each of the Lower Tier REMIC Marker Classes as being capped at the
interest rate of the Corresponding Middle Tier Interest and treating the Class
LTX Interest as being capped at zero). The averages described in the preceding
sentence shall be weighted on the basis of the respective principal balances of
the Lower Tier REMIC Regular Interests immediately prior to any date of
determination.

         Class C Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class C Current Interest with respect to prior
Distribution Dates over (B) the amount actually distributed to the Class C
Certificates with respect to interest on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Net
Rate.

         Class C Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class C Applied Realized Loss Amount over (2) the sum of all
distributions in reduction of the Class C Applied Realized Loss Amount on all
previous Distribution Dates.

         Class LTA Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/2 of the initial
principal balance of its Corresponding Middle Tier Interests and an interest
rate equal to the Net Rate.

         Class LTB-1 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/2 of the initial
principal balance of its Corresponding Middle Tier Interest and an interest rate
equal to the Net Rate.

         Class LTB-2 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/2 of the initial
principal balance of its Corresponding Middle Tier Interest and an interest rate
equal to the Net Rate.

         Class LTM-1 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/2 of the initial
principal balance of its Corresponding Middle Tier Interest and an interest rate
equal to the Net Rate.

                                       -8-

<PAGE>

         Class LTM-2 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/2 of the initial
principal balance of its Corresponding Middle Tier Interest and an interest rate
equal to the Net Rate.

         Class LTR Interest: The sole class of "residual interest" in the Lower
Tier REMIC.

         Class LTX Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to the excess of (i) the
aggregate principal balances of the Mortgage Loans over (ii) the aggregate
principal balances of the Lower Tier REMIC Marker Classes and an interest rate
equal to the Net Rate.

         Class M-1 Applied Realized Loss Amount: As of any Distribution Date,
the sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class M-1 Certificates.

         Class M-1 Certificate: Any Certificate designated as a "Class M-1
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class M-1 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class M-1
Certificates.

         Class M-1 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-1 Pass-Through Rate on
the Class M-1 Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the interest portion of any previous
distributions on such Class that is recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class M-1 Certificates. For purposes of
calculating interest, principal distributions on a Distribution Date will be
deemed to have been made on the first day of the Accrual Period in which such
Distribution Date occurs.

         Class M-1 Interest Carryforward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class M-1 Current Interest with respect to
prior Distribution Dates (excluding any Class M-1 Interest Carryover Amount)
over (B) the amount actually distributed to the Class M-1 Certificates with
respect to interest on such prior Distribution Dates and (2) interest on such
excess (to the extent permitted by applicable law) at the Class M-1 Pass-Through
Rate for the related Accrual Period.

         Class M-1 Interest Carryover Amount: As of any Distribution Date, the
sum of (1) if on such Distribution Date the Pass-Through Rate for the Class M-1
Certificates is based upon the Available Funds Cap, the excess of (A) the amount
of interest the Class M-1 Certificates would otherwise be entitled to receive on
such Distribution Date had such rate been calculated as the sum of One-Month
LIBOR and the applicable Class M-1 Margin for such Distribution Date, up to the
Weighted Maximum Rate Cap, over (B) the amount of interest payable on the Class
M-1 Certificates at the Available Funds Cap, up to but not exceeding the
Weighted Maximum Rate Cap for such Distribution Date and (2) the Class M-1
Interest Carryover Amount for all previous Distribution Dates not previously
paid pursuant to Section 4.04(f)(v), together with interest thereon at a rate
equal to the sum of One-Month LIBOR and the applicable Class M-1 Margin for such
Distribution Date.

         Class M-1 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.80% per annum and, as of any
Distribution Date after the Optional Termination Date, 1.20% per annum.

                                       -9-

<PAGE>

         Class M-1 Pass-Through Rate: For the first Distribution Date, 2.11% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class M-1 Margin, (2) the Weighted Maximum Rate Cap and (3) the
Available Funds Cap for such Distribution Date.

         Class M-1 Principal Distribution Amount: With respect to any
Distribution Date on or after the Stepdown Date, 100% of the Principal
Distribution Amount for such Distribution Date if the Class A Certificate
Principal Balance has been reduced to zero and a Trigger Event exists, or as
long as a Trigger Event does not exist, the excess of (1) the sum of (A) the
Class A Certificate Principal Balance (after taking into account distributions
of the Class A Principal Distribution Amount on such Distribution Date) and (B)
the Class M-1 Certificate Principal Balance immediately prior to such
Distribution Date over (2) the lesser of (A) 77.10% of the Stated Principal
Balances of the Mortgage Loans as of the end of the immediately preceding Due
Period and (B) the excess of the Stated Principal Balances of the Mortgage
Loans as of the end of the immediately preceding Due Period over $1,220,000.
Notwithstanding the foregoing, (I) on any Distribution Date prior to the
Stepdown Date on which the Certificate Principal Balance of each Class of Class
A Certificates has been reduced to zero, the Class M-1 Principal Distribution
Amount will equal the lesser of (x) the outstanding Certificate Principal
Balance of the Class M-1 Certificates and (y) 100% of the Principal Distribution
Amount remaining after any distributions on such Class A Certificates and (II)
in no event will the Class M-1 Principal Distribution Amount with respect to any
Distribution Date exceed the Class M-1 Certificate Principal Balance.

         Class M-1 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-1 Applied Realized Loss Amount over (2) the sum of all
distributions in reduction of the Class M-1 Applied Realized Loss Amounts on all
previous Distribution Dates.

         Class M-2 Applied Realized Loss Amount: As of any Distribution Date,
the sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class M-2 Certificates.

         Class M-2 Certificate: Any Certificate designated as a "Class M-2
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class M-2 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class M-2
Certificates.

         Class M-2 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-2 Pass-Through Rate on
the Class M-2 Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the interest portion of any previous
distributions on such Class that is recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class M-2 Certificates. For purposes of
calculating interest, principal distributions on a Distribution Date will be
deemed to have been made on the first day of the Accrual Period in which such
Distribution Date occurs.

         Class M-2 Interest Carryforward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class M-2 Current Interest with respect to
prior Distribution Dates (excluding any Class M-2 Interest Carryover Amount)
over (B) the amount actually distributed to the Class M-2 Certificates with
respect to interest on such prior Distribution Dates and (2) interest on such
excess (to the extent permitted by applicable law) at the Class M-2 Pass-Through
Rate for the related Accrual Period.

         Class M-2 Interest Carryover Amount: As of any Distribution Date, the
sum of (1) if on such Distribution Date the Pass-Through Rate for the Class M-2
Certificates is based upon the Available Funds Cap, the excess of (A) the amount
of interest the Class M-2 Certificates would otherwise be entitled to

                                      -10-

<PAGE>

receive on such Distribution Date had such rate been calculated as the sum of
One-Month LIBOR and the applicable Class M-2 Margin for such Distribution Date,
up to the Weighted Maximum Rate Cap, over (B) the amount of interest payable on
the Class M-2 Certificates at the Available Funds Cap, up to but not exceeding
the Weighted Maximum Rate Cap for such Distribution Date and (2) the Class M-2
Interest Carryover Amount for all previous Distribution Dates not previously
paid pursuant to Section 4.04(f)(v), together with interest thereon at a rate
equal to the sum of One-Month LIBOR and the applicable Class M-2 Margin for such
Distribution Date.

         Class M-2 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 1.75% per annum and, as of any
Distribution Date after the Optional Termination Date, 2.625% per annum.

         Class M-2 Pass-Through Rate: For the first Distribution Date, 3.06% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class M-2 Margin, (2) the Weighted Maximum Rate Cap and (3) the
Available Funds Cap for such Distribution Date.

         Class M-2 Principal Distribution Amount: With respect to any
Distribution Date on or after the Stepdown Date, 100% of the Principal
Distribution Amount for such Distribution Date if the Class A Certificate
Principal Balance and the Class M-1 Certificate Principal Balance have been
reduced to zero and a Trigger Event exists, or as long as a Trigger Event does
not exist, the excess of (1) the sum of (A) the Class A Certificate Principal
Balance (after taking into account distributions of the Class A Principal
Distribution Amount on such Distribution Date), (B) the Class M-1 Certificate
Principal Balance (after taking into account distributions of the Class M-1
Principal Distribution Amount on such Distribution Date) and (C) the Class M-2
Certificate Principal Balance immediately prior to such Distribution Date over
(2) the lesser of (A) 87.60% of the Stated Principal Balances of the Mortgage
Loans as of the end of the immediately preceding Due Period and (B) the excess
of the Stated Principal Balances of the Mortgage Loans as of the end of the
immediately preceding Due Period over $1,220,000. Notwithstanding the foregoing,
(I) on any Distribution Date prior to the Stepdown Date on which the Certificate
Principal Balance of each Class of Class A Certificates and the Class M-1
Certificates has been reduced to zero, the Class M-2 Principal Distribution
Amount will equal the lesser of (x) the outstanding Certificate Principal
Balance of the Class M-2 Certificates and (y) 100% of the Principal Distribution
Amount remaining after any distributions on such Class A and Class M-1
Certificates and (II) in no event will the Class M-2 Principal Distribution
Amount with respect to any Distribution Date exceed the Class M-2 Certificate
Principal Balance.

         Class M-2 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-2 Applied Realized Loss Amount over (2) the sum of all
distributions in reduction of the Class M-2 Applied Realized Loss Amounts on all
previous Distribution Dates.

         Class MTA Interest: An uncertificated regular interest in the Middle
Tier REMIC with an initial principal balance equal to the initial principal
balance of the Related Certificates and bearing interest at the lesser of (i)
the greater of (x) One-Month LIBOR plus the Class A Margin and (y) 1.31% plus
the Class A Margin and (ii) the Net Rate. For the first Distribution Date, the
percentage described in clause (i) of the preceding sentence will equal 1.65%.

         Class MTB-1 Interest: An uncertificated regular interest in the Middle
Tier REMIC with an initial principal balance equal to the initial principal
balance of the Related Certificates and bearing interest at the lesser of (i)
the greater of (x) One-Month LIBOR plus the Class B-1 Margin and (y) 1.31% plus
the Class B-1 Margin and (ii) the Net Rate. For the first Distribution Date, the
percentage described in clause (i) of the preceding sentence will equal 3.56%.

                                      -11-

<PAGE>

         Class MTB-2 Interest: An uncertificated regular interest in the Middle
Tier REMIC with an initial principal balance equal to the initial principal
balance of the Related Certificates and bearing interest at the lesser of (i)
the greater of (x) One-Month LIBOR plus the Class B-2 Margin and (y) 1.31% plus
the Class B-2 Margin and (ii) the Net Rate. For the first Distribution Date, the
percentage described in clause (i) of the preceding sentence will equal 3.56%.

         Class MTC Interest: An uncertificated regular interest in the Middle
Tier REMIC with an initial principal balance equal to the excess of the
principal balance of the Mortgage Loans over the aggregate Certificate Principal
Balance of the Class A Certificates, Class B-1 Certificates, Class B-2
Certificates, Class M-1 Certificates, Class M-2 Certificates and Class R
Certificates and bearing interest on a notional amount equal to the aggregate of
the Principal Balances of the Mortgage Loans outstanding as of the beginning of
the related Accrual Period at a rate equal to the Class MTC Interest Rate.

         Class MTC Interest Rate: The excess, if any, of (a) the weighted
average of the interest rates on the Lower Tier REMIC Regular Interests over (b)
two times the weighted average of the interest rates on the Lower Tier REMIC
Regular Interests (treating for purposes of this clause (b) the interest rate on
each of the Lower Tier REMIC Marker Classes as being capped at the interest rate
on the Corresponding Middle Tier Interest and treating the Class LTX Interest as
being capped at zero. The averages described in the preceding sentence shall be
weighted on the basis of the respective principal balances of the Lower Tier
REMIC Regular Interests immediately prior to any date of determination.

         Class MTM-1 Interest: An uncertificated regular interest in the Middle
Tier REMIC with an initial principal balance equal to the initial principal
balance of the Related Certificates and bearing interest at the lesser of (i)
the greater of (x) One-Month LIBOR plus the Class M-1 Margin and (y) 1.31% plus
the Class M-1 Margin and (ii) the Net Rate. For the first Distribution Date, the
percentage described in clause (i) of the preceding sentence will equal 2.11%.

         Class MTM-2 Interest: An uncertificated regular interest in the Middle
Tier REMIC with an initial principal balance equal to the initial principal
balance of the Related Certificates and bearing interest at the lesser of (i)
the greater of (x) One-Month LIBOR plus the Class M-2 Margin and (y) 1.31% plus
the Class M-2 Margin and (ii) the Net Rate. For the first Distribution Date, the
percentage described in clause (i) of the preceding sentence will equal 3.06%.

         Class MTR Interest: The sole class of "residual interest" in the Middle
Tier REMIC, as described in the Preliminary Statement and Section 2.07.

         Class P Certificate: Any Certificate designated as a Class P
Certificate on the face thereof, executed by the Trustee and authenticated by
the Trustee in substantially the form set forth in Exhibit A, representing the
right to distributions as set forth herein.

         Class R Certificate: The Class R Certificate executed by the Trustee
and authenticated by the Trustee in substantially the form set forth in Exhibit
A.

         Class R Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class R Certificate.

         Class R Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class R Pass-Through Rate on
the Class R Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the interest portion of any previous
distributions on such Class that is recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class R Certificate. For purposes of calculating
interest,

                                      -12-

<PAGE>

principal distributions on a Distribution Date will be deemed to have been made
on the first day of the Accrual Period in which such Distribution Date occurs.

         Class R Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class R Current Interest with respect to prior
Distribution Dates (excluding any Class R Interest Carryover Amount) over (B)
the amount actually distributed to the Class R Certificate with respect to
interest on such prior Distribution Dates and (2) interest on such excess (to
the extent permitted by applicable law) at the Class R Pass-Through Rate for the
related Accrual Period.

         Class R Interest Carryover Amount: As of any Distribution Date, the sum
of (1) if on such Distribution Date the Pass-Through Rate for the Class R
Certificate is based upon the Available Funds Cap, the excess of (1) the amount
of interest the Class R Certificate would otherwise be entitled to receive on
such Distribution Date had such rate been calculated as the sum of One-Month
LIBOR and the applicable Class R Margin for such Distribution Date, up to the
Weighted Maximum Rate Cap, over (2) the amount of interest payable on the Class
R Certificate at the Available Funds Cap, up to but not exceeding the Weighted
Maximum Rate Cap for such Distribution Date and (2) the Class R Interest
Carryover Amount for all previous Distribution Dates not previously paid
pursuant to Section 4.04(f)(v), together with interest thereon at a rate equal
to the sum of One-Month LIBOR and the applicable Class R Margin for such
Distribution Date.

         Class R Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.34% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.68% per annum.

         Class R Pass-Through Rate: For the first Distribution Date, 1.65% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class R Margin, (2) the Weighted Maximum Rate Cap and (3) the Available
Funds Cap for such Distribution Date.

         Class S Certificate: Any Certificate designated as a "Class S
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class S Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class S Pass-Through Rate on
the Class S Notional Balance as of the first day of such Accrual Period (after
giving effect to all distributions of principal made or deemed to be made as of
such first day) plus the interest portion of any previous distributions on such
Class that is recovered as a voidable preference by a trustee in bankruptcy,
less any Non-Supported Interest Shortfall allocated on such Distribution Date to
the Class S Certificates. For purposes of calculating interest, principal
distributions on a Distribution Date will be deemed to have been made on the
first day of the Accrual Period in which such Distribution Date occurs.

         Class S Notional Amount: For any Distribution Date, the aggregate
Certificate Principal Balance of the Class A, Class M-1, Class M-2, Class B-1,
Class B-2 and Class R Certificates immediately prior to such Distribution Date.

         Class S Pass-Through Rate: As of any Distribution Date, the greater of
(1) 1.31% minus One-Month LIBOR and (2) 0.00%.

         Clean Up Call: The termination of the Trust Fund hereunder pursuant to
Section 9.01(a)(ii).

         Clean Up Call Amount: The amount received by the Trustee from the
Servicer in connection with a Clean Up Call pursuant to Section 9.01(a)(ii).

                                      -13-

<PAGE>

         Clean Up Call Date: The Distribution Date on which the aggregate Stated
Principal Balance of the Mortgage Loans is equal to or less than 7.5% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date.

         Clean Up Call Price: An amount equal to the sum of (a) the aggregate
Outstanding Principal Balance of the Certificates, plus accrued interest
thereon, (b) any unreimbursed out-of-pocket expenses owed to the Trustee and (c)
all interest accrued on, as well as amounts necessary to retire the principal
balance of, the notes guaranteed by the NIMs Insurer and any amounts owed to the
NIMs Insurer at the time the Clean Up Call is exercised.

         Closing Date: March 28, 2003.

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

         Collection Account: The separate Eligible Account created and initially
maintained by the Servicer pursuant to Section 3.05(b) in the name of the
Trustee for the benefit of the Certificateholders and designated "Litton Loan
Servicing LP, in trust for registered holders of Specialty Underwriting and
Residential Finance Trust, Mortgage Loan Asset-Backed Certificates, Series
2003-BC1". Funds in the Collection Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

         Combined Loan-to-Value Ratio: For any Mortgage Loan in a second lien
position, the fraction, expressed as a percentage, the numerator of which is the
sum of (1) the original principal balance of the related Mortgage Loan and (2)
any outstanding principal balances of Mortgage Loans the liens on which are
senior to the lien on such related Mortgage Loan (such sum calculated at the
date of origination of such related Mortgage Loan) and the denominator of which
is the lesser of (A) the Appraised Value of the related Mortgaged Property and
(B) the sales price of the related Mortgaged Property at time of origination.

         Compensating Interest: With respect to any Mortgage Loan and any
Distribution Date, an amount equal to the portion of any Prepayment Interest
Shortfalls required to be deposited in the Collection Account by the Servicer
pursuant to Section 4.02 hereof.

         Corresponding Middle Tier Interests: With respect to the Class LTA
Interest, the Class MTA Interest. With respect to the Class LTM-1 Interest, the
Class MTM-1 Interest. With respect to the Class LTM-2 Interest, the Class MTM-2
Interest. With respect to the Class LTB-1 Interest, the Class MTB-1 Interest.
With respect to the Class LTB-2 Interest, the Class MTB-2 Interest.

         Credit Risk Management Agreement: The Credit Risk Management Agreement
dated as of March 28, 2003 between the Depositor and the Credit Risk Manager.

         Credit Risk Manager: The Murrayhill Company, a Colorado corporation, or
its successor in interest.

         Credit Risk Manager Fee: The fee payable on each Distribution Date to
the Credit Risk Manager as compensation for all services rendered by it in
exercise and performance of any of the powers and duties of the Credit Risk
Manager under the Credit Risk Manager Agreement, which amount shall equal
one-twelfth of the product of (1) the Credit Risk Manager Fee Rate and (2) the
Stated Principal Balance of the Mortgage Loans as of the first day of the
related Due Period.

         Credit Risk Manager Fee Rate: 0.0150% per annum.

                                      -14-

<PAGE>

         Current Interest: Any of the Class A Current Interest, the Class R
Current Interest, the Class M-1 Current Interest, the Class M-2 Current
Interest, Class B-1 Current Interest, the Class B-2 Current Interest, the Class
C Current Interest and the Class S Current Interest.

         Cut-off Date: March 1, 2003.

         Cut-off Date Principal Balance: As to any Mortgage Loan, the unpaid
principal balance thereof as of the close of business on the calendar day
immediately preceding the Cut-off Date after application of all payments of
principal due on or prior to the Cut-off Date, whether or not received, and all
Principal Prepayments received prior to the Cut-off Date, but without giving
effect to any installments of principal received in respect of Due Dates on and
after the Cut-off Date.

         Definitive Certificates: As defined in Section 5.06.

         Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by a
Replacement Mortgage Loan.

         Delinquent: A Mortgage Loan is "delinquent" if any payment due thereon
is not made pursuant to the terms of such Mortgage Loan by the close of business
on the day such payment is scheduled to be due. A Mortgage Loan is "30 days
delinquent" if such payment has not been received by the close of business on
the corresponding day of the month immediately succeeding the month in which
such payment was due, or, if there is no such corresponding day (e.g., as when a
30-day month follows a 31-day month in which a payment was due on the 31st day
of such month), then on the last day of such immediately succeeding month.
Similarly for "60 days delinquent," "90 days delinquent" and so on.

         Denomination: With respect to each Certificate, the amount set forth on
the face thereof as the "Initial Principal Balance of this Certificate."

         Depositor: Merrill Lynch Mortgage Investors, Inc., a Delaware
corporation, or its successor in interest.

         Depository: The initial Depository shall be The Depository Trust
Company ("DTC"), the nominee of which is Cede & Co., or any other organization
registered as a "clearing agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended. The Depository shall initially be the
registered Holder of the Book-Entry Certificates. The Depository shall at all
times be a "clearing corporation" as defined in Section 8-102(3) of the Uniform
Commercial Code of the State of New York.

         Depository Agreement: With respect to Classes of Book-Entry
Certificates, the agreement between the Trustee and the initial Depository.

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

         Designated Transaction: For Certificates transferred on or after August
23, 2000, a transaction in which the assets underlying the Certificates consist
of single-family residential, multi-family residential, home equity,
manufactured housing and/or commercial mortgage obligations that are secured by
single-family residential, multi-family residential, commercial real property or
leasehold interests therein.

         Determination Date: With respect to any Distribution Date, the 15th day
of the month of such Distribution Date or, if such 15th day is not a Business
Day, the immediately preceding Business Day.

                                      -15-

<PAGE>

         Disqualified Organization: (1) the United States, any state or
political subdivision thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing, (2) any
organization (other than a cooperative described in Section 521 of the Code)
which is exempt from tax under Chapter 1 of Subtitle A of the Code unless such
organization is subject to the tax imposed by Section 511 of the Code and (3)
any organization described in Section 1381(a)(2)(C) of the Code.

         Distribution Date: The 25th day of each calendar month after the
initial issuance of the Certificates, or if such 25th day is not a Business Day,
the next succeeding Business Day, commencing in April 2003.

         Due Date: With respect to any Distribution Date and any Mortgage Loan,
the day during the related Due Period on which a Scheduled Payment is due.

         Due Period: With respect to any Distribution Date, the period beginning
on the second day of the calendar month preceding the calendar month in which
such Distribution Date occurs (or, in the case of the first Distribution Date,
beginning on the Cut-off Date) and ending on the first day of the month in which
such Distribution Date occurs.

         Eligible Account: An account that is (1) maintained with a depository
institution the long-term unsecured debt obligations of which are rated by each
Rating Agency in one of its two highest rating categories, or (2) maintained
with the corporate trust department of a bank which (A) has a rating of at least
Baa3 or P-3 by Moody's and (B) is either the Depositor or the corporate trust
department of a national bank or banking corporation which has a rating of at
least A-1 by S&P or F1 by Fitch, or (iii) an account or accounts the deposits in
which are fully insured by the FDIC, or (iv) an account or accounts, acceptable
to each Rating Agency without reduction or withdrawal of the rating of any Class
of Certificates, as evidenced in writing, by a depository institution in which
such accounts are insured by the FDIC (to the limit established by the FDIC),
the uninsured deposits in which accounts are otherwise secured such that, as
evidenced by an Opinion of Counsel delivered to and acceptable to the Trustee,
the NIMs Insurer and each Rating Agency, the Certificateholders have a claim
with respect to the funds in such account and a perfected first security
interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such account is
maintained, or (v) maintained at an eligible institution whose commercial paper,
short-term debt or other short-term deposits are rated at least A-1+ by S&P and
F-1+ by Fitch, or (vi) maintained with a federal or state chartered depository
institution the deposits in which are insured by the FDIC to the applicable
limits and the short-term unsecured debt obligations of which (or, in the case
of a depository institution that is a subsidiary of a holding company, the
short-term unsecured debt obligations of such holding company) are rated A-1 by
S&P or Fitch or Prime-1 by Moody's at the time any deposits are held on deposit
therein, or (vii) otherwise acceptable to each Rating Agency, as evidenced by a
letter from each Rating Agency to the Trustee and the NIMs Insurer.

         ERISA: The Employee Retirement Income Security Act of 1974, including
any successor or amendatory provisions.

         ERISA Restricted Certificate: The Class C, Class P and Class R
Certificate and any other Certificate, unless such other Certificate shall have
received a rating from a Rating Agency at the time of a transfer of such other
Certificate that is in one of the three (or in the case of Designated
Transactions, four) highest generic rating categories.

         Event of Default: As defined in Section 7.01 hereof.

                                      -16-

<PAGE>

         Excess Interest: On any Distribution Date, for the Class A
Certificates, Class R Certificate, Class M-1 Certificates, Class M-2
Certificates, Class B-1 Certificates and Class B-2 Certificates, the excess, if
any, of (1) the amount of interest such Class of Certificates is entitled to
receive on such Distribution Date at its Pass-Through Rate over (2) the amount
of interest such Class of Certificates would have been entitled to receive on
such Distribution Date had the Pass-Through Rate for such Class been the REMIC
Pass-Through Rate.

         Excess Proceeds: With respect to any Liquidated Loan, any Liquidation
Proceeds that are in excess of the sum of (1) the unpaid principal balance of
such Liquidated Loan as of the date of such liquidation plus (2) interest at the
Mortgage Rate from the Due Date as to which interest was last paid or advanced
to Certificateholders (and not reimbursed to the Servicer) up to the Due Date in
the month in which such Liquidation Proceeds are required to be distributed on
the unpaid principal balance of such Liquidated Loan outstanding during each Due
Period as to which such interest was not paid or advanced.

         Exchange Act: The Securities Exchange Act of 1934, as amended.

         Existing Servicing Agreement: The Sub-Servicing Agreement between
Merrill Lynch Mortgage Lending, Inc., as Owner and Litton Loan Servicing LP, as
Servicer, dated as of September 1, 2002, as at any time amended and in effect.

         Extra Principal Distribution Amount: With respect to any Distribution
Date, (1) prior to the Stepdown Date, the excess of (A) the sum of (i) the
Aggregate Certificate Principal Balance immediately preceding such Distribution
Date reduced by the Principal Funds with respect to such Distribution Date and
(ii) $4,146,000 over (B) the Pool Stated Principal Balance of the Mortgage Loans
as of such Distribution Date and (2) on and after the Stepdown Date, (A) the sum
of (i) the Aggregate Certificate Principal Balance immediately preceding such
Distribution Date, reduced by the Principal Funds with respect to such
Distribution Date and (ii) the greater of (a) 3.40% of the Pool Stated Principal
Balances of the Mortgage Loans and (b) $1,220,000 less (B) the Pool Stated
Principal Balance of the Mortgage Loans as of such Distribution Date; provided,
however, that if on any Distribution Date a Trigger Event is in effect, the
Extra Principal Distribution Amount will not be reduced to the applicable
percentage of the then-current Pool Stated Principal Balance of the Mortgage
Loans as of the Due Date immediately prior to the Trigger Event) until the next
Distribution Date on which the Trigger Event is not in effect.

         Fannie Mae: A federally chartered and privately owned corporation
organized and existing under the Federal National Mortgage Association Charter
Act, or any successor thereto.

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

         FIFO: As defined in Section 10.14(e).

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

         Fixed Rate Mortgage Loan: A Mortgage Loan identified in the Mortgage
Loan Schedule as having a Mortgage Rate which is fixed.

         Freddie Mac: A corporate instrumentality of the United States created
and existing under Title III of the Emergency Home Finance Act of 1970, as
amended, or any successor thereto.

         Grantor Trusts: The grantor trusts described in Section 2.07 hereof.

         Gross Margin: The percentage set forth in the related Mortgage Note for
each of the Adjustable Rate Mortgage Loans which is to be added to the
applicable index for use in determining the Mortgage

                                      -17-

<PAGE>

Rate on each Adjustment Date, and which is set forth in the Mortgage Loan
Schedule for each Adjustable Rate Mortgage Loan.

         Indenture: An indenture relating to the issuance of notes guaranteed by
the NIMs Insurer.

         Initial Adjustment Date: As to any Adjustable Rate Mortgage Loan, the
first Adjustment Date following the origination of such Mortgage Loan.

         Initial Certificate Principal Balance: With respect to any Certificate,
the Certificate Principal Balance of such Certificate or any predecessor
Certificate on the Closing Date as set forth in Section 5.01 hereof.

         Initial Mortgage Rate: As to each Mortgage Loan, the Mortgage Rate in
effect prior to the Initial Adjustment Date.

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

         Insurance Proceeds: Proceeds paid in respect of the Mortgage Loans
pursuant to any Insurance Policy or any other insurance policy covering a
Mortgage Loan, to the extent such proceeds are payable to the mortgagee under
the Mortgage, the Servicer or the trustee under the deed of trust and are not
applied to the restoration of the related Mortgaged Property or released to the
Mortgagor in accordance with the procedures that the Servicer would follow in
servicing mortgage loans held for its own account, in each case other than any
amount included in such Insurance Proceeds in respect of Insured Expenses.

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

         Interest Carryforward Amount: Any of the Class A Interest Carryforward
Amount, the Class R Interest Carryforward Amount, the Class M-1 Interest
Carryforward Amount, the Class M-2 Interest Carryforward Amount, the Class B-1
Interest Carryforward Amount or the Class B-2 Interest Carryforward Amount, as
the case may be.

         Interest Carryover Amount: Any of the Class A Interest Carryover
Amount, the Class R Interest Carryover Amount, the Class M-1 Interest Carryover
Amount, the Class M-2 Interest Carryover Amount, the Class B-1 Interest
Carryover Amount, the Class B-2 Interest Carryover Amount, as the case may be.

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

         Interest Funds: With respect to any Distribution Date, the sum, without
duplication, of (1) all scheduled interest due during the related Due Period and
received before the related Servicer Remittance Date or advanced on or before
the related Servicer Remittance Date less the Servicing Fee and the Credit Risk
Manager Fee, (2) all Advances relating to interest with respect to the Mortgage
Loans, (3) all Compensating Interest with respect to the Mortgage Loans, (4)
Liquidation Proceeds with respect to the Mortgage Loans (to the extent such
Liquidation Proceeds relate to interest) collected during the related Prepayment
Period, (5) proceeds of any purchase pursuant to Sections 2.02, 2.03 or 9.01 (to
the extent such proceeds relate to interest) and (6) prepayment penalties
received with respect to the Mortgage Loans during the related Prepayment
Period, less (A) all Non-Recoverable Advances relating to interest and (B) other
amounts reimbursable to the Servicer and the Trustee pursuant to this Agreement
and allocable to interest.

                                      -18-

<PAGE>

         Latest Possible Maturity Date: The first Distribution Date following
the third anniversary of the scheduled maturity date of the Mortgage Loan in the
Trust Fund having the latest scheduled maturity date as of the Cut-off Date.

         Lender: As defined in Section 10.14(a).

         LIBOR Business Day: Any day on which banks in the City of London,
England and New York City, U.S.A. are open and conducting transactions in
foreign currency and exchange.

         Liquidated Loan: With respect to any Distribution Date, a defaulted
Mortgage Loan that has been liquidated through deed-in-lieu of foreclosure,
foreclosure sale, trustee's sale or other realization as provided by applicable
law governing the real property subject to the related Mortgage and any security
agreements and as to which the Servicer has certified (in accordance with
Section 3.12) in the related Prepayment Period that it has received all amounts
it expects to receive in connection with such liquidation.

         Liquidation Proceeds: Amounts, including Insurance Proceeds, received
in connection with the partial or complete liquidation of Mortgage Loans,
whether through trustee's sale, foreclosure sale, sale by the Servicer pursuant
to this Agreement or otherwise or amounts received in connection with any
condemnation or partial release of a Mortgaged Property and any other proceeds
received in connection with an REO Property, less the sum of related
unreimbursed Advances, Servicing Fees, Servicing Advances and any other expenses
related to such Mortgage Loan.

         Loan-to-Value Ratio: With respect to any Mortgage Loan, the fraction,
expressed as a percentage, the numerator of which is the original principal
balance of the related Mortgage Loan and the denominator of which is the lesser
of (x) the Appraised Value of the related Mortgaged Property and (y) the sales
price of the related Mortgaged Property at the time of origination.

         Losses: Any losses, claims, damages, liabilities or expenses
collectively.

         Lower Tier REMIC: As described in the Preliminary Statement and Section
2.07.

         Lower Tier REMIC Interests: Each of the Class LTA Interest, the Class
LTM-1 Interest, the Class LTM-2 Interest, the Class LTB-1 Interest, the Class
LTB-2 Interest, the Class LTX Interest and the Class LTR Interest.

         Lower Tier REMIC Marker Classes: Each of the classes of Lower Tier
REMIC Regular Interests other than the Class LTX Interests.

         Lower Tier REMIC Regular Interests: Each of the Lower Tier REMIC
Interests other than the Class LTR Interest.

         Maximum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, the maximum rate of interest set forth as such in the related Mortgage
Note and with respect to each Fixed Rate Mortgage Loan, the rate of interest set
forth in the related Mortgage Note.

         MERS: Mortgage Electronic Registration Systems, Inc., a corporation
organized and existing under the laws of the State of Delaware, or any successor
thereto.

         MERS Loan: Any Mortgage Loan registered with MERS on the MERS System.

         MERS System: The system of recording transfers of mortgage
electronically maintained by MERS.

                                      -19-

<PAGE>

         Middle Tier REMIC: As described in the Preliminary Statement and
Section 2.07.

         Middle Tier REMIC Interests: Each of the Class MTA Interest, the Class
MTM-1 Interest, the Class MTM-2 Interest, the Class MTB-1 Interest, the Class
MTB-2 Interest, the Class MTC Interest and the Class MTR Interest.

         Middle Tier REMIC Regular Interests: Each of the Middle Tier REMIC
Interests other than the Class MTR Interest.

         MIN: The loan number for any MERS Loan.

         Minimum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, the minimum rate of interest set forth as such in the related Mortgage
Note.

         Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.05.

         Moody's: Moody's Investors Service, Inc. or its successor in interest.

         MOM Loan: Any Mortgage Loan as to which MERS is acting as mortgagee,
solely as nominee for the originator of such Mortgage Loan and its successors
and assigns.

         Mortgage: With respect to a Mortgage Loan, the mortgage, deed of trust
or other instrument creating a first lien or a first priority ownership interest
in an estate in fee simple in real property securing a Mortgage Note.

         Mortgage File: The mortgage documents listed in Section 2.01 hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.

         Mortgage Loans: Such of the mortgage loans transferred and assigned to
the Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund (including any REO Property), the mortgage loans so held
being identified in the Mortgage Loan Schedule, notwithstanding foreclosure or
other acquisition of title of the related Mortgaged Property. Any mortgage loan
that was intended by the parties hereto to be transferred to the Trust Fund as
indicated by such Mortgage Loan Schedule which is in fact not so transferred for
any reason shall continue to be a Mortgage Loan hereunder until the Purchase
Price with respect thereto has been paid to the Trust Fund.

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

         (i)      the loan number;

         (ii)     the unpaid principal balance of the Mortgage Loans;

         (iii)    the Initial Mortgage Rate;

         (iv)     the maturity date and the months remaining before maturity
                  date;

         (v)      the original principal balance;

                                      -20-

<PAGE>

         (vi)     the Cut-off Date Principal Balance;

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

         (viii)   the Loan-to-Value Ratio at origination with respect to a first
                  lien Mortgage Loan, or the Combined Loan-to-Value Ratio with
                  respect to a second lien Mortgage Loan;

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

         (x)      a code indicating the property type;

         (xi)     with respect to each Adjustable Rate Mortgage Loan;

                  (a)      the frequency of each Adjustment Date;

                  (b)      the next Adjustment Date;

                  (c)      the Maximum Mortgage Rate;

                  (d)      the Minimum Mortgage Rate;

                  (e)      the Mortgage Rate as of the Cut-off Date;

                  (f)      the related Periodic Rate Cap;

                  (g)      the Gross Margin;

         (xii)    location of the related Mortgaged Property;

         (xiii)   a code indicating whether a prepayment penalty is applicable
                  and, if so, the term of such prepayment penalty; and

         (xiv)    the Credit Score and date obtained.

         Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan
and all amendments, modifications and attachments thereto.

         Mortgage Pool: The aggregate of the Mortgage Loans identified in the
Mortgage Loan Schedule.

         Mortgage Rate: The annual rate of interest borne by a Mortgage Note
from time to time.

         Mortgaged Property: The underlying property securing a Mortgage Loan.

         Mortgagor: The obligor on a Mortgage Note.

         Net Mortgage Rate: As to each Mortgage Loan, and at any time, the per
annum rate equal to the then current Mortgage Rate less the sum of (1) the
Servicing Fee Rate and (2) the Credit Risk Manager Fee Rate.

         Net Rate: With respect to any Distribution Date, the weighted average
Net Mortgage Rate for Mortgage Loans calculated based on the Net Mortgage Rates
and the Stated Principal Balance of such Mortgage Loans as of the related Due
Period.

                                      -21-

<PAGE>

         NIM Notes: The notes to be issued pursuant to the Indenture.

         NIMs Insurer: Any of the one or more insurers that is guaranteeing
certain payments under any NIM Notes.

         NIMs Insurer Default: A default by each of the NIMs Insurers as such
default is defined in the Indenture.

         Non-Recoverable Advance: Any portion of an Advance previously made or
proposed to be made by the Servicer that, in the good faith judgment of the
Servicer, will not or, in the case of a current delinquency, would not, be
ultimately recoverable by the Servicer from the related Mortgagor, related
Liquidation Proceeds or otherwise with respect to the related Mortgage Loan.

         Non-Recoverable Servicing Advance: Any portion of a Servicing Advance
previously made or proposed to be made by the Servicer that, in the good faith
judgment of the Servicer, will not or, in the case of a current Servicing
Advance, would not, be ultimately recoverable by the Servicer from the related
Mortgagor, related Liquidation Proceeds or otherwise with respect to the related
Mortgage Loan.

         Non-Supported Interest Shortfall:  As defined in Section 4.02.

         Offered Certificates: The Class A, Class S, Class M-1, Class M-2, Class
B-1, Class B-2 and Class R Certificate.

         Officer's Certificate: A certificate (1) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a vice president (however
denominated), an Assistant Vice President, the Treasurer, the Secretary, or one
of the assistant treasurers or assistant secretaries of the Depositor, the
Servicer (or any other officer customarily performing functions similar to those
performed by any of the above designated officers and also to whom, with respect
to a particular matter, such matter is referred because of such officer's
knowledge of and familiarity with a particular subject) or (2), if provided for
in this Agreement, signed by a Servicing Officer, as the case may be, and
delivered to the Depositor, the Servicer or the Trustee, as the case may be, as
required by this Agreement.

         One-Month LIBOR: With respect to any Accrual Period, the rate
determined by the Trustee on the related Interest Determination Date on the
basis of (a) the offered rates for one-month United States dollar deposits, as
such rates appear on Telerate page 3750, as of 11:00 a.m. (London time) on such
Interest Determination Date or (b) if such rate does not appear on Telerate Page
3750 as of 11:00 a.m. (London time), the offered rates of the Reference Banks
for one-month United States dollar deposits, as such rates appear on the Reuters
Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest Determination
Date. If One-Month LIBOR is determined pursuant to clause (b) above, on each
Interest Determination Date, One-Month LIBOR for the related Accrual Period will
be established by the Trustee as follows:

                           (i)      If on such Interest Determination Date two
                                    or more Reference Banks provide such offered
                                    quotations, One-Month LIBOR for the related
                                    Accrual Period shall be the arithmetic mean
                                    of such offered quotations (rounded upwards
                                    if necessary to the nearest whole multiple
                                    of 0.03125%).

                           (ii)     If on such Interest Determination Date fewer
                                    than two Reference Banks provide such
                                    offered quotations, One-Month LIBOR for the
                                    related Accrual Period shall be the higher
                                    of (i) One-Month LIBOR as

                                      -22-

<PAGE>

                                    determined on the previous Interest
                                    Determination Date and (ii) the Reserve
                                    Interest Rate.

         Opinion of Counsel: A written opinion of counsel, who may be counsel
for the Depositor or the Servicer, reasonably acceptable to each addressee of
such opinion; provided, however, that with respect to Section 6.04 or 10.01, or
the interpretation or application of the REMIC Provisions, such counsel must (1)
in fact be independent of the Depositor and the Servicer, (2) not have any
direct financial interest in the Depositor or the Servicer or in any affiliate
of either, and (3) not be connected with the Depositor or the Servicer as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.

         Optional Termination: The termination of the Trust Fund hereunder
pursuant to Section 9.01(a)(i) hereof.

         Optional Termination Amount: The repurchase price received by the
Trustee in connection with any repurchase of all of the Mortgage Loans pursuant
to Section 9.01(a).

         Optional Termination Date: The Distribution Date on which the aggregate
Stated Principal Balance of the Mortgage Loans is equal to or less than 10% of
the aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off
Date.

         Optional Termination Price: (1) in the case of an Optional Termination
effected by the Trustee, as of any Distribution Date on or after the Optional
Termination Date, an amount equal to the sum of (A) aggregate Outstanding
Principal Balance of the Certificates, plus accrued interest thereon, (B) any
unreimbursed out-of-pocket costs and expenses owed to the Trustee (including any
costs and expenses incurred in connection with the Optional Termination) or the
Servicer and any unreimbursed Servicing Fees, Advances and Servicing Advances
and (C) all interest accrued on, as well as amounts necessary to retire the
principal balance of, the notes guaranteed by the NIMs Insurer and any and all
amounts owed to the NIMs Insurer at the time the option is exercised; (2) in the
case of an Optional Termination effected by the NIMs Insurer, an amount equal to
the greater of (A) aggregate Outstanding Principal Balance of the Offered
Certificates, plus accrued interest thereon, any unreimbursed out-of-pocket
costs and expenses owed to the Trustee or the Servicer and any unreimbursed
Servicing Fees, Advance and Servicing Advances and (B) 100% of the Stated
Principal Balance of each Mortgage Loan (other than in respect of REO Property),
accrued interest thereon at the applicable Mortgage Rate, the appraised value of
any REO Property (up to the Stated Principal Balance of the related Mortgage
Loan), such appraisal to be conducted by an appraiser mutually agreed upon by
the Depositor and the NIMs Insurer and any unreimbursed out-of-pocket costs and
expenses owed to the Servicer and the Trustee and any unreimbursed Servicing
Fees, Advance and Servicing Advances.

         OTS: The Office of Thrift Supervision.

         Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except: (1) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation; and (2) Certificates in exchange for
which or in lieu of which other Certificates have been executed by the Trustee
and delivered by the Trustee pursuant to this Agreement.

         Outstanding Mortgage Loan: As of any Distribution Date, a Mortgage Loan
with a Stated Principal Balance greater than zero that was not the subject of a
Principal Prepayment in full, and that did not become a Liquidated Loan, prior
to the end of the related Due Period.

                                      -23-

<PAGE>

         Overcollateralization Amount: As of any date of determination, the
excess of (1) the Stated Principal Balance of the Mortgage Loans over (2) the
Certificate Principal Balance of the Certificates (other than the Class P
Certificates and the Class C Certificates).

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

         Pass-Through Rate: With respect to the Class A Certificates, the Class
A Pass-Through Rate; with respect to the Class M-1 Certificates, the Class M-1
Pass-Through Rate; with respect to the Class M-2 Certificates, the Class M-2
Pass-Through Rate, with respect to the Class B-1 Certificates, the Class B-1
Pass-Through Rate; with respect to the Class B-2 Certificates, the Class B-2
Pass-Through Rate, with respect to the Class S Certificates, the Class S
Pass-Through Rate and with respect to the Class R Certificate, the Class R
Pass-Through Rate.

         Percentage Interest: With respect to:

                           (i)      any Class, the percentage interest in the
                                    undivided beneficial ownership interest
                                    evidenced by such Class which shall be equal
                                    to the Class Certificate Principal Balance
                                    of such Class divided by the Class Principal
                                    Balance of all Classes; and

                           (ii)     any Certificate, the Percentage Interest
                                    evidenced thereby of the related Class shall
                                    equal the percentage obtained by dividing
                                    the Denomination of such Certificate by the
                                    aggregate of the Denominations of all
                                    Certificates of such Class; except that in
                                    the case of any Class P Certificates, the
                                    Percentage Interest with respect to such
                                    Certificate shown on the face of such
                                    Certificate.

         Periodic Rate Cap: As to each Adjustable Rate Mortgage Loan and the
related Mortgage Note, the provision therein that limits permissible increases
and decreases in the Mortgage Rate on any Adjustment Date.

         Permitted Activities: The primary activities of the trust created
pursuant to this Agreement which shall be:

                           (i)      holding Mortgage Loans transferred from the
                                    Depositor and other assets of the Trust
                                    Fund, including any credit enhancement and
                                    passive derivative financial instruments
                                    that pertain to beneficial interests issued
                                    or sold to parties other than the Depositor,
                                    its Affiliates, or its agents;

                           (ii)     issuing Certificates and other interests in
                                    the assets of the Trust Fund;

                           (iii)    receiving collections on the Mortgage Loans
                                    and making payments on such Certificates and
                                    interests in accordance with the terms of
                                    this Agreement; and

                           (iv)     engaging in other activities that are
                                    necessary or incidental to accomplish these
                                    limited purposes, which activities cannot be
                                    contrary to the status of the Trust Fund as
                                    a qualified special purpose entity under
                                    existing accounting literature.

                                      -24-

<PAGE>

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

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

                           (ii)     general obligations of or obligations
                                    guaranteed by any state of the United States
                                    or the District of Columbia receiving the
                                    highest long-term debt rating of each Rating
                                    Agency rating the Certificates;

                           (iii)    commercial or finance company paper, other
                                    than commercial or finance company paper
                                    issued by the Depositor, the Trustee or any
                                    of its Affiliates, which is then receiving
                                    the highest commercial or finance company
                                    paper rating of each such Rating Agency;

                           (iv)     certificates of deposit, demand or time
                                    deposits, or bankers' acceptances (other
                                    than banker's acceptances issued by the
                                    Trustee or any of its Affiliates) issued by
                                    any depository institution or trust company
                                    incorporated under the laws of the United
                                    States or of any state thereof and subject
                                    to supervision and examination by federal
                                    and/or state banking authorities, provided
                                    that the commercial paper and/or long term
                                    unsecured debt obligations of such
                                    depository institution or trust company are
                                    then rated one of the two highest long-term
                                    and the highest short-term ratings of each
                                    such Rating Agency for such securities;

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

                           (vi)     guaranteed reinvestment agreements issued by
                                    any bank, insurance company or other
                                    corporation rated in the two highest
                                    long-term or the highest short-term ratings
                                    of each Rating Agency containing, at the
                                    time of the issuance of such agreements,
                                    such terms and conditions as will not result
                                    in the downgrading or withdrawal of the
                                    rating then assigned to the Certificates by
                                    any such Rating Agency as evidenced by a
                                    letter from each Rating Agency;

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

                           (viii)   securities (other than stripped bonds,
                                    stripped coupons or instruments sold at a
                                    purchase price in excess of 115% of the face
                                    amount thereof) bearing interest or sold at
                                    a discount issued by any corporation, other
                                    than the Trustee or any of its Affiliates,
                                    incorporated under the laws of the United
                                    States or any state thereof which, at the
                                    time of such investment, have one of the two
                                    highest long term ratings of each Rating
                                    Agency;

                           (ix)     interests in any money market fund
                                    (including those managed or advised by the
                                    Trustee or its affiliates) which at the date
                                    of acquisition of the interests in such fund
                                    and throughout the time such interests are
                                    held in

                                      -25-

<PAGE>

                                    such fund has the highest applicable long
                                    term rating by each such Rating Agency; and

                           (x)      short term investment funds sponsored by any
                                    trust company or national banking
                                    association incorporated under the laws of
                                    the United States or any state thereof,
                                    other than the Trustee or any of its
                                    Affiliates, which on the date of acquisition
                                    has been rated by each such Rating Agency in
                                    their respective highest applicable rating
                                    category;

provided, that no such instrument shall be a Permitted Investment if such
instrument (i) evidences the right to receive interest only payments with
respect to the obligations underlying such instrument, (ii) is purchased at a
premium or above par or (iii) is purchased at a deep discount; provided,
further, that no such instrument shall be a Permitted Investment (A) if such
instrument evidences principal and interest payments derived from obligations
underlying such instrument and the interest payments with respect to such
instrument provide a yield to maturity of greater than 120% of the yield to
maturity at par of such underlying obligations, or (B) if it may be redeemed at
a price below the purchase price (the foregoing clause (B) not to apply to
investments in units of money market funds pursuant to clause (ix) above); and
provided, further, (I) that no amount beneficially owned by any REMIC
(including, without limitation, any amounts collected by the Servicer but not
yet deposited in the Collection Account) may be invested in investments (other
than money market funds) treated as equity interests for Federal income tax
purposes, unless the Servicer and/or the Trustee, shall receive an Opinion of
Counsel acceptable to the Servicer and/or the Trustee, at the expense of the
party requesting that such investment be made, to the effect that such
investment will not adversely affect the status of the any REMIC provided for
herein as a REMIC under the Code or result in imposition of a tax on the Trust
Fund or any REMIC provided for herein and (II) any such investment must be a
"permitted investment" within the meaning of Section 860G(a)(5) of the Code.
Permitted Investments that are subject to prepayment or call may not be
purchased at a price in excess of par.

         Permitted Transferee: Any Person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in section 521 of the Code) that
is exempt from tax imposed by Chapter 1 of the Code (including the tax imposed
by section 511 of the Code on unrelated business taxable income) on any excess
inclusions (as defined in section 860E(c)(1) of the Code) with respect to a
Certificate, (iv) rural electric and telephone cooperatives described in section
1381(a)(2)(C) of the Code, and (v) a Person that is not a citizen or resident of
the United States, a corporation or partnership (or other 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 or an estate whose income from sources
without the United States is includable in gross income for United States
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States, 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 United States persons have authority to control all
substantial decisions of the trust, unless, in the case of this clause (v), such
Person has furnished the transferor, the Trustee with a duly completed Internal
Revenue Service Form W-8ECI or applicable successor form. The terms "United
States," "State" and "International Organization" shall have the meanings set
forth in section 7701 of the Code. A corporation will not be treated as an
instrumentality of the United States or of any State thereof for these purposes
if all of its activities are subject to tax and, with the exception of the
Federal Home Loan Mortgage Corporation, a majority of its board of directors is
not selected by such government unit.

                                      -26-

<PAGE>

         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.

         Pool Stated Principal Balance: As to any Distribution Date, the
aggregate of the Stated Principal Balances, as of such Distribution Date, of the
Mortgage Loans that were Outstanding Mortgage Loans as of such date.

         Prepayment Assumption: A rate of prepayment, as described in the
Prospectus Supplement in the definition of "Modeling Assumptions," relating to
the Certificates.

         Prepayment Interest Shortfall: With respect to any Distribution Date,
for each Mortgage Loan that was the subject of a partial Principal Prepayment or
a Principal Prepayment in full (other than a Principal Prepayment in full
resulting from the purchase of a Mortgage Loan pursuant to Section 2.02, 2.03 or
9.01 hereof), the amount, if any, by which (i) one month's interest at the
applicable Net Mortgage Rate on the Stated Principal Balance of such Mortgage
Loan as of the preceding Distribution Date or in the case of a partial Principal
Prepayment on the amount of such prepayment exceeds (ii) the amount of interest
paid or collected in connection with such Principal Prepayment.

         Prepayment Period: As to any Distribution Date, the period beginning
with the opening of business on the first day of the calendar month preceding
the month in which such Distribution Date occurs and ending on the close of
business on the last day of such month.

         Principal Distribution Amount: With respect to each Distribution Date,
the sum of (i) the Principal Funds for such Distribution Date and (ii) any Extra
Principal Distribution Amount for such Distribution Date.

         Principal Funds: With respect to the Mortgage Loans and any
Distribution Date, the sum, without duplication, of (1) the scheduled principal
due during the related Due Period and received before the related Servicer
Remittance Date or advanced on or before the related Servicer Remittance Date,
(2) prepayments collected in the related Prepayment Period, (3) the Stated
Principal Balance of each Mortgage Loan that was purchased by the Depositor or
the Servicer during the related Prepayment Period or, in the case of a purchase
pursuant to Section 9.01, on the Business Day prior to such Distribution Date,
(4) the amount, if any, by which the aggregate unpaid principal balance of any
Replacement Mortgage Loan is less than the aggregate unpaid principal of the
related Deleted Mortgage Loans delivered by the Seller in connection with a
substitution of a Mortgage Loan pursuant to Section 2.03(c), (5) all Liquidation
Proceeds collected during the related Prepayment Period (to the extent such
Liquidation Proceeds related to principal) and (6) all other collections and
recoveries in respect of principal during the related Prepayment Period less (A)
all Non-Recoverable Advances relating to principal with respect to the Mortgage
Loans and (B) other amounts reimbursable to the Servicer and the Trustee
pursuant to this Agreement and allocable to principal.

         Principal Prepayment: Any Mortgagor payment or other recovery of (or
proceeds with respect to) principal on a Mortgage Loan (including Mortgage Loans
purchased or repurchased under Sections 2.02, 2.03, 3.12 and 9.01 hereof) that
is received in advance of its scheduled Due Date and is not accompanied by an
amount as to interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment. Partial Principal
Prepayments shall be applied by the Servicer in accordance with the terms of the
related Mortgage Note.

         Prospectus Supplement: The Prospectus Supplement dated March 26, 2003
relating to the public offering of the Class A, Class S, Class M-1, Class M-2,
Class R, Class B-1 and Class B-2 Certificates.

                                      -27-

<PAGE>

         PUD: A Planned Unit Development.

         Purchase Price: With respect to any Mortgage Loan required to be
repurchased by the Seller or the applicable Transferor, pursuant to Section 2.02
or 2.03 hereof, or purchased by the Servicer pursuant to Section 3.12(c) hereof,
an amount equal to the sum of (i) 100% of the unpaid principal balance of the
Mortgage Loan as of the date of such purchase together with any unreimbursed
Servicing Advances and (ii) accrued interest thereon at the applicable Mortgage
Rate from (a) the date through which interest was last paid by the Mortgagor to
(b) the Due Date in the month in which the Purchase Price is to be distributed
to Certificateholders.

         Rating Agency: Any of Moody's and Fitch. If any such organization or
its successor is no longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization, or other comparable Person,
designated by the Depositor, notice of which designation shall be given to the
Trustee. References herein to a given rating category of a Rating Agency shall
mean such rating category without giving effect to any modifiers.

         Realized Loss: With respect to (1) a Liquidated Loan, the amount, if
any, by which the Stated Principal Balance and accrued interest thereon at the
Net Mortgage Rate exceeds the amount actually recovered by the Servicer with
respect thereto (net of reimbursement of Advances and Servicing Advances) at the
time such Mortgage Loan became a Liquidated Loan or (2) with respect to a
Mortgage Loan which is not a Liquidated Loan, any amount of principal that the
Mortgagor is no longer legally required to pay (except for the extinguishment of
debt that results from the exercise of remedies due to default by the
Mortgagor).

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

         Reference Banks: Barclays Bank PLC, JPMorgan Chase Bank, Citibank,
N.A., and NatWest, N.A.; provided that if any of the foregoing banks are not
suitable to serve as a Reference Bank, then any leading banks selected by the
Trustee with the consent of the NIMs Insurer which are engaged in transactions
in Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London, England and (ii) whose quotations
appear on the Reuters Screen LIBO Page on the relevant Interest Determination
Date.

         Regular Certificate: Any one of the Class A, Class S, Class M-1, Class
M-2, Class B-1 and Class B-2 Certificates.

         Related Certificates: With respect to the Class MTA Interest, the Class
A and Class R Certificates. With respect to the Class MTB-1 Interest, the Class
B-1 Certificates. With respect to the Class MTB-2 Interest, the Class B-2
Certificates. With respect to the Class MTM-1 Interest, the Class M-1
Certificates. With respect to the Class MTM-2 Interest, the Class M-2
Certificates.

         REMIC: A "real estate mortgage investment conduit" within the meaning
of section 860D of the Code. References herein to "the REMICs" or "a REMIC"
shall mean any of or, as the context requires, all of the Lower Tier REMIC, the
Middle Tier REMIC and the Upper Tier REMIC.

         REMIC Pass-Through Rate: The Pass-Through Rate for a Class of
Certificates calculated by replacing "Available Funds Cap" in such definition
with "Net Rate."

         REMIC Regular Interests: (i) the rights under each of the Certificates
(other than the Class P Certificates, the Class R Certificate and the Class C
Certificates) other than the rights in interest rate cap contracts described in
Section 2.07, and (ii) the Uncertificated Class C Interest.

                                      -28-

<PAGE>

         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 as well as provisions of applicable state laws.

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

         Replacement Mortgage Loan: A Mortgage Loan substituted by the Depositor
for a Deleted Mortgage Loan, which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit I (1)
have a Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
less than 90% of the Stated Principal Balance of the Deleted Mortgage Loan; (2)
with respect to any Fixed Rate Mortgage Loan, have a Mortgage Rate not less than
or no more than 1% per annum higher than the Mortgage Rate of the Deleted
Mortgage Loan and, with respect to any Adjustable Rate Mortgage Loan: (A) have a
Maximum Mortgage Rate no more than 1% per annum higher or lower than the Maximum
Mortgage Rate of the Deleted Mortgage Loan; (B) have a Minimum Mortgage Rate no
more than 1% per annum higher or lower than the Minimum Mortgage Rate of the
Deleted Mortgage Loan; (C) have the same index and Periodic Rate Cap as that of
the Deleted Mortgage Loan and a Gross Margin not more than 1% per annum higher
or lower than that of the Deleted Mortgage Loan; (D) not permit conversion of
the related Mortgage Rate to a fixed Mortgage Rate and (F) currently be accruing
interest at a rate not more than 1% per annum higher or lower than that of the
Deleted Mortgage Loan; (3) have a similar or higher FICO score or credit grade
than that of the Deleted Mortgage Loan; (4) have a Loan-to-Value Ratio (or
Combined Loan-to-Value Ratio, in the case of the Mortgage Loans in a second lien
position) no higher than that of the Deleted Mortgage Loan; (5) have a remaining
term to maturity no greater than (and not more than one year less than) that of
the Deleted Mortgage Loan; (6) provide for a prepayment charge on terms
substantially similar to those of the prepayment charge, if any, of the Deleted
Mortgage Loan; (7) have the same lien priority as the Deleted Mortgage Loan; (8)
constitute the same occupancy type as the Deleted Mortgage Loan; and (9) comply
with each representation and warranty set forth in Section 2.03 hereof.

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

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

         Required Loss Percentage: For any Distribution Date, the applicable
percentage for such Distribution Date set forth in the following table:

<TABLE>
<CAPTION>
<S>                                    <C>
DISTRIBUTION DATE OCCURRING IN         REQUIRED LOSS PERCENTAGE
------------------------------         ------------------------

April 2006 - March 2007                2.75% with respect to April 2006,
                                       plus an additional 1/12th of
                                       1.50% for each month thereafter

April 2007 - March 2008                4.25% with respect to April
                                       2007, plus an additional 1/12th
                                       of 1.25% for each month thereafter
</TABLE>

                                      -29-

<PAGE>

<TABLE>
<CAPTION>
<S>                                    <C>
April 2008 - March 2009                5.50% with respect to April 2008,
                                       plus an additional 1/12th of
                                       6.75% for each month thereafter

April 2009 and thereafter             6.25%
</TABLE>

         Required Percentage: As of any Distribution Date following a Stepdown
Date, the quotient of (1) the excess of (A) the Stated Principal Balances of the
Mortgage Loans as of such Distribution Date, over (B) the Certificate Principal
Balance of the most senior Class of Certificates outstanding, prior to giving
effect to distributions to be made on such Distribution Date and (2) the Stated
Principal Balance of the Mortgage Loans as of such Distribution Date.

         Reserve Interest Rate: With respect to any Interest Determination Date,
the rate per annum that the Trustee determines to be (1) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 0.03125%) of the
one-month United States dollar lending rates which New York City banks selected
by the Trustee are quoting on the relevant Interest Determination Date to the
principal London offices of leading banks in the London interbank market or (2)
in the event that the Trustee can determine no such arithmetic mean, the lowest
one-month United States dollar lending rate which New York City banks selected
by the Trustee are quoting on such Interest Determination Date to leading
European banks.

         Residual Interest: An interest in the Upper Tier REMIC that is entitled
to all distributions of principal and interest (attributable to an interest rate
on the Class R Certificate that does not exceed the Net Rate) on the Class R
Certificate and is entitled to all distributions on the Class R Certificate
other than distributions in respect of the Class LTR Interest and the Class MTR
Interest and distributions attributable to an interest rate on the Class R
Certificate that exceeds the Net Rate.

         Responsible Officer: When used with respect to the Trustee or Servicer,
any officer of the Trustee or Servicer with direct responsibility for the
administration of this Agreement and also means any other officer to whom, with
respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.

         Reuters Screen LIBO Page: The display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace such LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks.

         S&P: Standard & Poor's, A Division of The McGraw-Hill Companies, Inc.,
or its successor in interest.

         Sale Agreement: The Mortgage Loan Sale and Assignment Agreement dated
as of March 28, 2003 between the Depositor and the Seller.

         Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due
on any Due Date allocable to principal and/or interest on such Mortgage Loan.

         Section 302 Requirements: Any rules or regulations promulgated pursuant
to the Sarbanes-Oxley Act of 2002 (as such may be amended from time to time).

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

         Seller: Merrill Lynch Mortgage Lending, a Delaware corporation, or its
successor in interest.

                                      -30-

<PAGE>

         Servicer: Litton Loan Servicing LP, a Delaware limited partnership, or
its successor in interest.

         Servicer Advance Date: As to any Distribution Date, the related
Servicer Remittance Date.

         Servicer Remittance Date: With respect to any Distribution Date, the
18th day (or if such day is not a Business Day, the next succeeding Business
Day) of the month in which the related Distribution Date occurs.

         Servicer's Assignee: As defined in Section 10.14(a).

         Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Servicer of its
servicing obligations hereunder, including, but not limited to, the cost of (1)
the preservation, restoration and protection of a Mortgaged Property, including
without limitation advances in respect of real estate taxes and assessments, (2)
any collection, enforcement or judicial proceedings, including without
limitation foreclosures, collections and liquidations, (3) the conservation,
management, sale and liquidation of any REO Property and (4) compliance with the
obligations under Section 3.10.

         Servicing Fee: As to each Mortgage Loan and any Distribution Date, an
amount equal to one month's interest at the Servicing Fee Rate on the Stated
Principal Balance of such Mortgage Loan as of the preceding Distribution Date
or, in the event of any payment of interest that accompanies a Principal
Prepayment in full made by the Mortgagor, interest at the Servicing Fee Rate on
the Stated Principal Balance of such Mortgage Loan as of the preceding
Distribution Date for the period covered by such payment of interest.

         Servicing Fee Rate: 0.5000% per annum.

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

         Servicing Rights Pledgee: One or more lenders, selected by the
Servicer, to which the Servicer will pledge and assign all of its right, title
and interest in, to and under this Agreement, including Wachovia Bank, National
Association as the representative of certain lenders.

         Servicing Transfer Costs: In the event that the Servicer does not
reimburse the Trustee under the this Agreement, all costs associated with the
transfer of servicing from the predecessor Servicer, including, without
limitation, any costs or expenses associated with the termination of the
predecessor Servicer, the appointment of a successor servicer, the complete
transfer of all servicing data and the completion, correction or manipulation of
such servicing data as may be required by the Trustee or any successor servicer
to correct any errors or insufficiencies in the servicing data or otherwise to
enable the Trustee or successor servicer to service the Mortgage Loans property
and effectively.

         SFAS 140: Statement of Financial Accounting Standard No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities dated September 2000, published by the Financial Accounting
Standards Board of the Financial Accounting Foundation. .

         SPV: As defined in Section 10.14(a).

         Startup Date: As defined in Section 2.07 hereof.

                                      -31-

<PAGE>

         Stated Principal Balance: With respect to any Mortgage Loan or related
REO Property (1) as of the Cut-off Date, the Cut-off Date Principal Balance
thereof, and (2) as of any Distribution Date, such Cut-off Date Principal
Balance, minus the sum of (A) the principal portion of the Scheduled Payments
(x) due with respect to such Mortgage Loan during each Due Period ending prior
to such Distribution Date and (y) that were received by the Servicer as of the
close of business on the Determination Date related to such Distribution Date or
with respect to which Advances were made on the Servicer Advance Date prior to
such Distribution Date and (B) all Principal Prepayments with respect to such
Mortgage Loan received on or prior to the last day of the related Prepayment
Period, and all Liquidation Proceeds to the extent applied by the Servicer as
recoveries of principal in accordance with Section 3.12 with respect to such
Mortgage Loan, that were received by the Servicer as of the close of business on
the last day of the related Due Period. Notwithstanding the foregoing, the
Stated Principal Balance of a Liquidated Loan shall be deemed to be zero.

         Stepdown Date: The later to occur of (1) the Distribution Date in April
2006 or (2) the first Distribution Date on which (A) the Class A Certificate
Principal Balance (reduced by the Principal Funds with respect to such
Distribution Date) is less than or equal to (B) 64.10% of the Stated Principal
Balances of the Mortgage Loans as of such Distribution Date.

         Subordinated Certificates: The Class M-1, Class M-2, Class B-1 and
Class B-2 Certificates.

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

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

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

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

         Trigger Event: With respect to the Certificates after the Stepdown
Date, a Distribution Date on which (1) the quotient of (A) the aggregate Stated
Principal Balance of all Mortgage Loans that are 60 or more days Delinquent
(including, for the purposes of this calculation, Mortgage Loans in foreclosure
and REO Properties) measured on a rolling three month basis and (B) the Stated
Principal Balance of the Mortgage Loans as of the last day of the preceding
calendar month equals or exceeds the product of (i) 40.00% and (ii) Required
Percentage or (2) the quotient (expressed as a percentage) of (A) the aggregate
Realized Losses incurred from the Cut-off Date through the last day of the
calendar month preceding such Distribution Date and (B) the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date exceeds the Required Loss
Percentage.

         Trust Fund: The corpus of the trust (the "Specialty Underwriting and
Residential Finance Trust, Series 2003-BC1") created hereunder consisting of (i)
the Mortgage Loans and all interest and principal received on or with respect
thereto on and after the Cut-off Date to the extent not applied in computing the
Cut-off Date Principal Balance thereof, exclusive of interest not required to be
deposited in the Collection Account; (ii) the Collection Account and the
Certificate Account and all amounts deposited therein pursuant to the applicable
provisions of this Agreement; (iii) property that secured a Mortgage Loan and
has been acquired by foreclosure, deed in lieu of foreclosure or otherwise; (iv)
the mortgagee's rights under the Insurance Policies with respect to the Mortgage
Loans; and (v) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or other liquid property.

         Trustee: JPMorgan Chase Bank, a New York banking corporation, not in
its individual capacity, but solely in its capacity as trustee for the benefit
of the Certificateholders under this Agreement, and any

                                      -32-

<PAGE>

successor thereto, and any corporation or national banking association resulting
from or surviving any consolidation or merger to which it or its successors may
be a party and any successor trustee as may from time to time be serving as
successor trustee hereunder.

         Uncertificated Class C Interest: An uncertificated interest having (i)
the same rights to payments as the Class C Certificates and (ii) the rights to
the payments treated as distributed to the Class C Certificates under Section
2.07(d), provided, however, that such interest shall have no obligation to make
any payments treated as paid by the Class C Certificates pursuant to interest
rate cap agreements under Section 2.07(d).

         USAP Report: A report in compliance with the Uniform Single Attestation
Program for Mortgage Bankers delivered in accordance with Section 3.18.

         Voting Rights: The portion of the voting rights of all the Certificates
that is allocated to any of the Certificates for purposes of the voting
provisions hereunder. Voting Rights allocated to each Class of Certificates
shall be allocated 95% to the Offered Certificates, 5% to the Class C and Class
P Certificates, with the allocation among the Offered Certificates to be in
proportion to the Class Certificate Principal Balance of each Class relative to
the Class Certificate Principal Balance of all other Classes. Voting Rights will
be allocated among the Certificates of each such Class in accordance with their
respective Percentage Interests.

         Weighted Maximum Rate Cap: As of any Distribution Date, a rate equal to
(i) the weighted average of the Maximum Mortgage Rates on the Mortgage Loans
(calculated based upon the Stated Principal Balance of such Mortgage Loans as of
the preceding Distribution Date) on such Distribution Date minus (ii) the
Servicing Fee Rate and the Credit Risk Manager Fee Rate.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

         SECTION 2.01. Conveyance of Mortgage Loans

         The Depositor, concurrently with the execution and delivery hereof,
does hereby sell, transfer, assign, set over and convey to the Trustee without
recourse all the right, title and interest of the Depositor in and to the assets
of the Trust Fund. Such assignment includes all interest and principal received
on or with respect to the Mortgage Loans on or after the Cut-off Date (other
than Scheduled Payments due on the Mortgage Loans on or before the Cut-off
Date).

         In connection with such assignment, the Depositor does hereby deliver
to, and deposit with, the Trustee the following documents or instruments with
respect to each Mortgage Loan so assigned:

                  (A)      The Original Mortgage Note endorsed, "Pay to the
         order of JPMorgan Chase Bank, as trustee - SURF 2003-BC1, without
         recourse" together with all riders thereto. The Mortgage Note shall
         include all intervening endorsements showing a complete chain of the
         title from the originator to the Transferor.

                  (B)      Except as provided below and for each Mortgage Loan
         that is not a MERS Loan, the original recorded Mortgage together with
         all riders thereto, with evidence of recording thereon, or, if the
         original Mortgage has not yet been returned from the recording office,
         a copy of the original Mortgage together with all riders thereto
         certified by the Transferor to be true copy of the original of the
         Mortgage that has been delivered for recording in the appropriate
         recording

                                      -33-

<PAGE>

         office of the jurisdiction in which the Mortgaged Property is located
         and in the case of each MERS Loan, the original Mortgage together with
         all riders thereto, noting the presence of the MIN of the Loan and
         either language indicating that the Mortgage Loan is a MOM Loan or if
         the Mortgage Loan was not a MOM Loan at origination, the original
         Mortgage and the assignment thereof to MERS, with evidence of recording
         indicated thereon, or a copy of the Mortgage certified by the public
         recording office in which such Mortgage has been recorded.

                  (C)      In the case of each Mortgage Loan that is not a MERS
         Loan, the original Assignment of each Mortgage, to "JPMorgan Chase
         Bank, as trustee - SURF-BC1."

                  (D)      The original policy of title insurance (or a
         preliminary title report, commitment or binder if the original title
         insurance policy has not been received from the title insurance
         company).

                  (E)      Originals of any intervening assignments of the
         Mortgage, with evidence of recording thereon or, if the original
         intervening assignment has not yet been returned from the recording
         office, a copy of such assignment certified to be a true copy of the
         original of the assignment which has been sent for recording in the
         appropriate jurisdiction in which the Mortgaged Property is located.

                  (F)      Originals of all assumption and modification
         agreements, if any.

         If in connection with any Mortgage Loan, the Depositor cannot deliver
the Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, with evidence of recording thereon, if
applicable, concurrently with the execution and delivery of this Agreement
solely because of a delay caused by the public recording office where such
Mortgage, Assignments of Mortgage or assumption, consolidation or modification,
as the case may be, has been delivered for recordation, the Depositor shall
deliver or cause to be delivered to the Trustee written notice stating that such
Mortgage or assumption, consolidation or modification, as the case may be, has
been delivered to the appropriate public recording office for recordation.
Thereafter, the Depositor shall deliver or cause to be delivered to the Trustee
such Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, with evidence of recording indicated thereon,
if applicable, upon receipt thereof from the public recording office. To the
extent any required endorsement is not contained on a Mortgage Note or an
Assignment of Mortgage, the Depositor shall make or cause such endorsement to be
made.

         With respect to any Mortgage Loan, none of the Depositor, the Servicer
or the Trustee shall be obligated to cause to be recorded the Assignment of
Mortgage referred to in this Section 2.01. In the event that an Assignment of
Mortgage is not recorded, the Servicer shall have no liability for its failure
to receive and act on notices related to such Assignment of Mortgage.

         The ownership of each Mortgage Note, the Mortgage and the contents of
the related Mortgage File is vested in the Trustee. Neither the Depositor nor
the Servicer shall take any action inconsistent with such ownership and shall
not claim any ownership interest therein. The Depositor and the Servicer shall
respond to any third party inquiries with respect to ownership of the Mortgage
Loans by stating that such ownership is held by the Trustee on behalf of the
Certificateholders. Mortgage documents relating to the Mortgage Loans not
delivered to the Trustee are and shall be held in trust by the Servicer, for the
benefit of the Trustee as the owner thereof, and the Servicer's possession of
the contents of each Mortgage File so retained is for the sole purpose of
servicing the related Mortgage Loan, and such retention and possession by the
Servicer is in a custodial capacity only. The Depositor agrees to take no action
inconsistent with the Trustee's ownership of the Mortgage Loans, to promptly
indicate to all

                                      -34-

<PAGE>

inquiring parties that the Mortgage Loans have been sold and to claim no
ownership interest in the Mortgage Loans.

         It is the intention of this Agreement that the conveyance of the
Depositor's right, title and interest in and to the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan. If a conveyance
of Mortgage Loans from the Seller to the Depositor is characterized as a pledge
and not a sale, then the Depositor shall be deemed to have transferred to the
Trustee all of the Depositor's right, title and interest in, to and under the
obligations of the Seller deemed to be secured by said pledge; and it is the
intention of this Agreement that the Depositor shall also be deemed to have
granted to the Trustee a first priority security interest in all of the
Depositor's right, title, and interest in, to and under the obligations of the
Seller to the Depositor deemed to be secured by said pledge and that the Trustee
shall be deemed to be an independent custodian for purposes of perfection of the
security interest granted to the Depositor. If the conveyance of the Mortgage
Loans from the Depositor to the Trustee is characterized as a pledge, it is the
intention of this Agreement that this Agreement shall constitute a security
agreement under applicable law, and that the Depositor shall be deemed to have
granted to the Trustee a first priority security interest in all of the
Depositor's right, title and interest in, to and under the Mortgage Loans, all
payments of principal of or interest on such Mortgage Loans, all other rights
relating to and payments made in respect of the Trust Fund, and all proceeds of
any thereof. If the trust created by this Agreement terminates prior to the
satisfaction of the claims of any Person in any Certificates, the security
interest created hereby shall continue in full force and effect and the Trustee
shall be deemed to be the collateral agent for the benefit of such Person.

         In addition to the conveyance made in the first paragraph of this
Section 2.01, the Depositor does hereby convey, assign and set over to the
Trustee for the benefit of the Certificateholders its rights and interests under
the Sale Agreement, including the Depositor's right, title and interest in the
representations and warranties contained in the Sale Agreement and the benefit
of the repurchase obligations and the obligation of the Seller contained in the
Sale Agreement to take, at the request of the Depositor or the Trustee, all
action on its part which is reasonably necessary to ensure the enforceability of
a Mortgage Loan. The Trustee hereby accepts such assignment, and shall be
entitled to exercise all rights of the Depositor under the Sale Agreement as if,
for such purpose, it were the Depositor. The foregoing sale, transfer,
assignment, set-over, deposit and conveyance does not and is not intended to
result in creation or assumption by the Trustee of any obligation of the
Depositor, the Seller, or any other Person in connection with the Mortgage Loans
or any other agreement or instrument relating thereto.

         SECTION 2.02. Acceptance by Trustee of the Mortgage Loans.

         Except as set forth in the Exception Report delivered contemporaneously
herewith (the "Exception Report"), the Trustee acknowledges receipt of the
Mortgage Note for each Mortgage Loan and delivery of a Mortgage File (but does
not acknowledge receipt of all documents required to be included in such
Mortgage File) with respect to each Mortgage Loan and declares that it holds and
will hold such documents and any other documents constituting a part of the
Mortgage Files delivered to it in trust for the use and benefit of all present
and future Certificateholders. The Depositor will cause the Seller to repurchase
any Mortgage Loan to which a material exception was taken in the Exception
Report unless such exception is cured to the satisfaction of the Trustee within
45 Business Days of the Closing Date.

         The Trustee agrees, for the benefit of Certificateholders and the NIMs
Insurer, to review each Mortgage File delivered to it within 60 days after the
Closing Date to ascertain and to certify, within 70 days of the Closing Date, to
the NIMs Insurer, the Depositor and the Servicer that all documents required by
Section 2.01 have been executed and received, and that such documents relate to
the Mortgage Loans identified in Exhibit B that have been conveyed to it. If the
Trustee finds any document or documents

                                      -35-

<PAGE>

constituting a part of a Mortgage File to be missing or defective (that is,
mutilated, damaged, defaced or unexecuted) in any material respect, the Trustee
shall promptly (and in any event within no more than five Business Days) after
such finding so notify the Servicer, the Seller, the Depositor and the NIMs
Insurer. In addition, the Trustee shall also notify the Servicer, the Seller,
the Depositor and the NIMs Insurer, if the original Mortgage with evidence of
recording thereon with respect to a Mortgage Loan is not received within 70 days
of the Closing Date; if it has not been received because of a delay caused by
the public recording office where such Mortgage has been delivered for
recordation, the Depositor shall deliver or cause to be delivered to the Trustee
written notice stating that such Mortgage has been delivered to the appropriate
public recording officer for recordation and thereafter the Depositor shall
deliver or cause to be delivered such Mortgage with evidence of recording
thereon upon receipt thereof from the public recording office. The Trustee shall
request that the Seller correct or cure such omission, defect or other
irregularity, or substitute a Mortgage Loan pursuant to the provisions of
Section 2.03(c), within 90 days from the date the Seller was notified of such
omission or defect and, if the Seller does not correct or cure such omission or
defect within such period, that the Seller purchase such Mortgage Loan from the
Trust Fund within 90 days from the date the Trustee notified the Seller of such
omission, defect or other irregularity at the Purchase Price of such Mortgage
Loan. The Purchase Price for any Mortgage Loan purchased pursuant to this
Section 2.02 shall be paid to the Servicer and deposited by the Servicer in the
Collection Account promptly upon receipt, and, upon receipt by the Trustee of
written notification of such deposit signed by a Servicing Officer, the Trustee,
upon receipt of a Request for Release, shall promptly release to the Seller the
related Mortgage File and the Trustee shall execute and deliver such instruments
of transfer or assignment, without recourse, representation or warranty, as
shall be necessary to vest in the Seller or its designee, as the case may be,
any Mortgage Loan released pursuant hereto, and the Trustee shall have no
further responsibility with regard to such Mortgage Loan. It is understood and
agreed that the obligation of the Seller to purchase, cure or substitute any
Mortgage Loan as to which a material defect in or omission of a constituent
document exists shall constitute the sole remedy respecting such defect or
omission available to the Trustee on behalf of Certificateholders and the NIMs
Insurer. The preceding sentence shall not, however, limit any remedies available
to the Certificateholders, the Depositor, the Trustee or the NIMs Insurer
pursuant to the Sale Agreement. The Trustee shall be under no duty or obligation
to inspect, review and examine such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable, recordable or
appropriate to the represented purpose, or that they have actually been
recorded, or that they are other than what they purport to be on their face. The
Trustee shall keep confidential the name of each Mortgagor and the Trustee shall
not solicit any such Mortgagor for the purpose of refinancing the related
Mortgage Loan. It is understood and agreed that all rights and benefits relating
to the solicitation of any Mortgagors and the attendant rights, title and
interest in and to the list of Mortgagors and data relating to their Mortgages
shall be retained by the Servicer.

         Within 70 days of the Closing Date, the Trustee shall deliver to the
Depositor, the Servicer and the NIMs Insurer the Trustee's Certification,
substantially in the form of Exhibit D attached hereto, evidencing the
completeness of the Mortgage Files, with any exceptions noted thereto.

         SECTION 2.03. Representations, Warranties and Covenants of the
Depositor.

         (a) The Depositor hereby represents and warrants to the Servicer, the
Trustee and the NIMs Insurer as follows, as of the date hereof:

                  (i)      The Depositor is duly organized and is validly
         existing as a corporation in good standing under the laws of the State
         of Delaware and has full power and authority (corporate and other)
         necessary to own or hold its properties and to conduct its business as
         now conducted by it and to enter into and perform its obligations under
         this Agreement and the Sale Agreement.

                                      -36-

<PAGE>

                  (ii)     The Depositor has the full corporate power and
         authority to execute, deliver and perform, and to enter into and
         consummate the transactions contemplated by, this Agreement and the
         Sale Agreement and has duly authorized, by all necessary corporate
         action on its part, the execution, delivery and performance of this
         Agreement and the Sale Agreement; and this Agreement and the Sale
         Agreement, assuming the due authorization, execution and delivery
         hereof by the other parties hereto, constitutes a legal, valid and
         binding obligation of the Depositor, enforceable against the Depositor
         in accordance with its terms, subject, as to enforceability, to (i)
         bankruptcy, insolvency, reorganization, moratorium and other similar
         laws affecting creditors' rights generally and (ii) general principles
         of equity, regardless of whether enforcement is sought in a proceeding
         in equity or at law.

                  (iii)    The execution and delivery of this Agreement and the
         Sale Agreement by the Depositor, the consummation of the transactions
         contemplated by this Agreement and the Sale Agreement, and the
         fulfillment of or compliance with the terms hereof are in the ordinary
         course of business of the Depositor and will not (A) result in a
         material breach of any term or provision of the charter or by-laws of
         the Depositor or (B) materially conflict with, result in a violation or
         acceleration of, or result in a material default under, the terms of
         any other material agreement or instrument to which the Depositor is a
         party or by which it may be bound or (C) constitute a material
         violation of any statute, order or regulation applicable to the
         Depositor of any court, regulatory body, administrative agency or
         governmental body having jurisdiction over the Depositor; and the
         Depositor is not in breach or violation of any material indenture or
         other material agreement or instrument, or in violation of any statute,
         order or regulation of any court, regulatory body, administrative
         agency or governmental body having jurisdiction over it which breach or
         violation may materially impair the Depositor's ability to perform or
         meet any of its obligations under this Agreement.

                  (iv)     No litigation is pending, or, to the best of the
         Depositor's knowledge, threatened, against the Depositor that would
         materially and adversely affect the execution, delivery or
         enforceability of this Agreement and the Sale Agreement or the ability
         of the Depositor to perform its obligations under this Agreement and
         the Sale Agreement in accordance with the terms hereof.

                  (v)      No consent, approval, authorization or order of any
         court or governmental agency or body is required for the execution,
         delivery and performance by the Depositor of, or compliance by the
         Depositor with, this Agreement and the Sale Agreement or the
         consummation of the transactions contemplated hereby, or if any such
         consent, approval, authorization or order is required, the Depositor
         has obtained the same. The Depositor hereby represents and warrants to
         the Trustee with respect to each Mortgage Loan as of the Closing Date,
         and following the transfer of the Mortgage Loans to it by the Seller,
         the Depositor had good title to the Mortgage Loans and the Mortgage
         Notes were subject to no offsets, claims, liens, mortgage, pledge,
         charge, security interest, defenses or counterclaims.

         (b) To the extent that any fact, condition or event with respect to a
Mortgage Loan constitutes a breach of a representation or warranty of the Seller
under the Sale Agreement, the only right or remedy of the Trustee, the NIMs
Insurer or of any Certificateholder shall be the Trustee's right to enforce the
obligations of the Seller under any applicable representation or warranty made
by it. The Trustee acknowledges that the Depositor shall have no obligation or
liability with respect to any breach of any representation or warranty with
respect to the Mortgage Loans (except as set forth in Section 2.03(a)(v)) under
any circumstances.

                                      -37-

<PAGE>

         (c) Upon discovery by any of the Depositor, the Servicer, the NIMs
Insurer, or the Trustee of a breach of any of representations and warranties set
forth in the Sale Agreement that adversely and materially affects the value of
the related Mortgage Loan, prepayment charges or the interests of the
Certificateholders, the party discovering such breach shall give prompt written
notice to the other parties. Within 90 days of the discovery of a breach of any
representation or warranty given to the Trustee by the Depositor, the Seller and
assigned to the Trustee, the Depositor, or the Seller shall either (a) cure such
breach in all material respects, (b) repurchase such Mortgage Loan or any
property acquired in respect thereof from the Trustee at the Purchase Price or
(c) within the two year period following the Closing Date, substitute a
Replacement Mortgage Loan for the affected Mortgage Loan. In the event of
discovery of a breach of any representation and warranty of the Seller or the
Depositor, the Trustee shall enforce its rights under the Sale Agreement or
thereunder for the benefit of Certificateholders and the NIMs Insurer. If a
breach of the representations and warranties set forth in the Sale Agreement
hereof exists solely due to the unenforceability of a prepayment charge, the
Trustee shall notify the NIMs Insurer thereof and not seek to enforce the
repurchase remedy provided for herein unless directed in writing to do so by the
NIMs Insurer. In the event of a breach of the representations and warranties
with respect to the Mortgage Loans set forth in a Sale Agreement, the Trustee
shall at the request of the NIMs Insurer enforce the right of the Trust Fund and
the NIMs Insurer to be indemnified for such breach of representation and
warranty. In the event that such breach relates solely to the unenforceability
of a prepayment charge, amounts received in respect of such indemnity up to the
amount of such prepayment charge shall be distributed pursuant to Section
4.04(b)(i)(B). As provided in the Sale Agreement, if the Seller substitutes for
a Mortgage Loan for which there is a breach of any representations and
warranties which adversely and materially affects the value of such Mortgage
Loan and such substitute mortgage loan is not a Replacement Mortgage Loan, under
the terms of the Sale Agreement, the Seller will, in exchange for such
substitute Mortgage Loan, (i) provide the applicable Purchase Price for the
affected Mortgage Loan or (ii) within two years of the Closing Date, substitute
such affected Mortgage Loan with a Replacement Mortgage Loan. Any such
substitution shall not be effected prior to the additional delivery to the
Trustee of a Request for Release substantially in the form of Exhibit I and
shall not be effected unless it is within two years of the Startup Date. As
provided in the Sale Agreement, the Seller indemnifies and holds the Trust Fund,
the Trustee, the Depositor, the NIMs Insurer, the Servicer and each
Certificateholder harmless against any and all taxes, claims, losses, penalties,
fines, forfeitures, reasonable legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trust Fund, the Trustee, the Depositor,
the NIMs Insurer, the Servicer and any Certificateholder may sustain in
connection with any actions of the Seller relating to a repurchase of a Mortgage
Loan other than in compliance with the terms of this Section 2.03 and the Sale
Agreement, to the extent that any such action causes (i) any federal or state
tax to be imposed on the Trust Fund or any REMIC provided for herein, 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 860(d)(1) of the Code, or (ii) any REMIC created hereunder to fail
to qualify as a REMIC at any time that any Certificate is outstanding.

         With respect to any Mortgage Loan repurchased by the Depositor pursuant
to this Agreement or by the Seller pursuant to the Sale Agreement, the principal
portion of the funds received by the Servicer in respect of such repurchase of a
Mortgage Loan will be considered a Principal Prepayment and shall be deposited
by the Servicer in the Certificate Account pursuant to Section 3.05. The
Trustee, upon receipt of the full amount of the Purchase Price for a Deleted
Mortgage Loan, or upon receipt of the Mortgage File for a Replacement Mortgage
Loan substituted for a Deleted Mortgage Loan, shall release or cause to be
released and reassign to the Depositor or the Seller, as applicable, the related
Mortgage File for the Deleted Mortgage Loan and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse,
representation or warranty, as shall be necessary to vest in such party or its
designee or assignee title to any Deleted Mortgage Loan released pursuant
hereto, free and clear of all security interests, liens and other encumbrances
created by this Agreement, which instruments shall be

                                      -38-

<PAGE>

prepared by the Trustee, and the Trustee shall not have any further
responsibility with respect to the Mortgage File relating to such Deleted
Mortgage Loan.

         With respect to each Replacement Mortgage Loan to be delivered to the
Trustee pursuant to the terms of this Article II in exchange for a Deleted
Mortgage Loan: (i) the Depositor or the Seller, as applicable, must deliver to
the Trustee the Mortgage File for the Replacement Mortgage Loan containing the
documents set forth in Section 2.01 along with a written certification
certifying as to the delivery of such Mortgage File and containing the granting
language set forth in the first sentence of Section 2.01; and (ii) the Depositor
will be deemed to have made, with respect to such Replacement Mortgage Loan,
each of the representations and warranties made by it with respect to the
related Deleted Mortgage Loan. The Trustee shall review the Mortgage File with
respect to each Replacement Mortgage Loan and certify to the NIMs Insurer and
the Depositor that all documents required by Section 2.01 have been executed and
received.

         For any month in which the Seller substitutes one or more Replacement
Mortgage Loans for one or more Deleted Mortgage Loans, the Seller will determine
the amount (if any) by which the aggregate principal balance of all such
Replacement Mortgage Loans as of the date of substitution and the aggregate
prepayment penalties with respect to such Replacement Mortgage Loans is less
than the aggregate Stated Principal Balance (after application of the principal
portion of the Scheduled Payment due in the month of substitution) and aggregate
prepayment penalties of all such Deleted Mortgage Loans. An amount equal to the
aggregate of the deficiencies described in the preceding sentence (such amount,
the "Substitution Adjustment Amount") shall be delivered by the Seller to the
Servicer for deposit into the Collection Account on the Determination Date for
the Distribution Date relating to the Prepayment Period during which the related
Mortgage Loan became required to be purchased or replaced hereunder.

         Notwithstanding any other provision of this Agreement, the right to
substitute Mortgage Loans pursuant to this Article II shall be subject to the
additional limitations that no substitution of a Replacement Mortgage Loan for a
Deleted Mortgage Loan shall be made unless the Trustee and the NIMs Insurer have
received an Opinion of Counsel addressed to the Trustee and the NIMs Insurer (at
the expense of the party seeking to make the substitution) that, under current
law, such substitution will not (A) affect adversely the status of any REMIC
established hereunder as a REMIC, or of the related "regular interests" as
"regular interests" in any such REMIC, or (B) cause any such REMIC to engage in
a "prohibited transaction" or prohibited contribution pursuant to the REMIC
Provisions.

         The Seller shall give or cause to be given written notice to the
Certificateholders and the NIMS Insurer that such substitution has taken place,
shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted
Mortgage Loan from the terms of this Agreement and the substitution of the
Replacement Mortgage Loan or Replacement Mortgage Loans and shall deliver a copy
of such amended Mortgage Loan Schedule to the NIMS Insurer and the Trustee. Upon
such substitution by the Seller, such Replacement Mortgage Loan or Replacement
Mortgage Loans shall constitute part of the Mortgage Pool and shall be subject
in all respects to the terms of this Agreement and the Sale Agreement, including
all applicable representations and warranties thereof included in the Sale
Agreement as of the date of substitution.

         In addition, the Seller shall obtain at its own expense and deliver to
the Trustee and the NIMS Insurer an Opinion of Counsel addressed to the Trustee
and the NIMs Insurer to the effect that such substitution will not (a) cause any
federal tax to be imposed on the Trust Fund or any REMIC provided for herein,
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) adversely affect
the status of any REMIC provided for herein as a REMIC. If any such

                                      -39-

<PAGE>

Opinion of Counsel can not be delivered, then such substitution may only be
effected at such time as the required Opinion of Counsel can be given.

         (d) It is understood and agreed that the representations, warranties
and indemnification (i) set forth in Section 2.03 and (ii) of the Seller and the
Depositor set forth in the Sale Agreement and assigned to the Trustee by the
Depositor hereunder shall each survive delivery of the Mortgage Files and the
Assignment of Mortgage of each Mortgage Loan to the Trustee and shall continue
throughout the term of this Agreement.

         SECTION 2.04. Representations and Warranties of the Servicer.

         The Servicer hereby represents and warrants to the Depositor and the
Trustee as follows, as of the date hereof:

                  (i)      The Servicer is a duly formed limited partnership and
         is validly existing and in good standing under the laws of the state of
         its incorporation and is duly authorized and qualified to transact any
         and all business contemplated by this Agreement to be conducted by the
         Servicer in any state in which a Mortgaged Property is located or is
         otherwise not required under applicable law to effect such
         qualification and, in any event, is in compliance with the doing
         business laws of any such state, to the extent necessary to ensure its
         ability to enforce each Mortgage Loan, to service the Mortgage Loans in
         accordance with the terms of this Agreement and to perform any of its
         other obligations under this Agreement in accordance with the terms
         hereof.

                  (ii)     The Servicer has the power and authority to service
         each Mortgage Loan, and to execute, deliver and perform, and to enter
         into and consummate the transactions contemplated by this Agreement and
         has duly authorized by all necessary corporate action on the part of
         the Servicer the execution, delivery and performance of this Agreement;
         and this Agreement, assuming the due authorization, execution and
         delivery hereof by the other parties hereto, constitutes a legal, valid
         and binding obligation of the Servicer, enforceable against the
         Servicer in accordance with its terms, except that (a) the
         enforceability hereof may be limited by bankruptcy, insolvency,
         moratorium, receivership and other similar laws relating to creditors'
         rights generally and (b) the remedy of specific performance and
         injunctive and other forms of equitable relief may be subject to
         equitable defenses and to the discretion of the court before which any
         proceeding therefor may be brought.

                  (iii)    The execution and delivery of this Agreement by the
         Servicer, the servicing of the Mortgage Loans under this Agreement, the
         consummation of any other of the transactions contemplated by this
         Agreement, and the fulfillment of or compliance with the terms hereof
         are in the ordinary course of business of the Servicer and will not (A)
         result in a material breach of any term or provision of the charter or
         by-laws of the Servicer or (B) materially conflict with, result in a
         material breach, violation or acceleration of, or result in a material
         default under, the terms of any other material agreement or instrument
         to which the Servicer is a party or by which it may be bound, or (C)
         constitute a material violation of any statute, order or regulation
         applicable to the Servicer of any court, regulatory body,
         administrative agency or governmental body having jurisdiction over the
         Servicer; and the Servicer is not in breach or violation of any
         material indenture or other material agreement or instrument, or in
         violation of any statute, order or regulation of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over it which breach or violation may materially impair the Servicer's
         ability to perform or meet any of its obligations under this Agreement.

                                      -40-

<PAGE>

                  (iv)     The Servicer is an approved servicer of mortgage
         loans for Fannie Mae and is an approved seller of seasoned mortgage
         loans and servicer of all types of mortgage loans for Freddie Mac.

                  (v)      No litigation is pending or, to the best of the
         Servicer's knowledge, threatened, against the Servicer that would
         materially and adversely affect the execution, delivery or
         enforceability of this Agreement or the ability of the Servicer to
         service the Mortgage Loans or to perform any of its other obligations
         under this Agreement in accordance with the terms hereof.

                  (vi)     No consent, approval, authorization or order of any
         court or governmental agency or body is required for the execution,
         delivery and performance by the Servicer of, or compliance by the
         Servicer with, this Agreement or the consummation of the transactions
         contemplated hereby, or if any such consent, approval, authorization or
         order is required, the Servicer has obtained the same.

                  (vii)    The Servicer has fully furnished and will fully
         furnish (for the period it serviced the Mortgage Loans), in accordance
         with the Fair Credit Reporting Act and its implementing regulations,
         accurate and complete information (e.g., favorable and unfavorable) on
         its borrower credit files to Equifax, Experian and Trans Union Credit
         Information Company on a monthly basis.

         SECTION 2.05. Substitutions and Repurchases of Mortgage Loans which
are not "Qualified Mortgages".

         Upon discovery by the Depositor, the Servicer or the Trustee that any
Mortgage Loan does not constitute a "qualified mortgage" within the meaning of
section 860G(a)(3) of the Code, the party discovering such fact shall promptly
(and in any event within 5 Business Days of discovery) give written notice
thereof to the other parties. In connection therewith, the Depositor shall, at
the Depositor's option, either (i) substitute, if the conditions in Section
2.03(c) with respect to substitutions are satisfied, a Replacement Mortgage Loan
for the affected Mortgage Loan, or (ii) repurchase the affected Mortgage Loan
within 90 days of such discovery in the same manner as it would a Mortgage Loan
for a breach of representation or warranty contained in Section 2.03. The
Trustee shall reconvey to the Depositor the Mortgage Loan to be released
pursuant hereto in the same manner, and on the same terms and conditions, as it
would a Mortgage Loan repurchased for breach of a representation or warranty
contained in Section 2.03.

         SECTION 2.06. Authentication and Delivery of Certificates.

         The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, the Trustee has caused
to be authenticated and delivered to or upon the order of the Depositor, in
exchange for the Mortgage Loans, Certificates duly authenticated by the Trustee
in authorized denominations evidencing ownership of the entire Trust Fund. The
Trustee agrees to hold the Trust Fund and exercise the rights referred to above
for the benefit of all present and future Holders of the Certificates and to
perform its duties set forth in this Agreement in accordance with the provisions
hereof.

         SECTION 2.07. REMIC Elections.

         (a) The Depositor hereby instructs and authorizes the Trustee to make
an appropriate election to treat each of the Upper Tier REMIC, the Middle Tier
REMIC and the Lower Tier REMIC as a REMIC. The Trustee shall sign the returns
providing for such elections and such other tax or information returns which are
required to be signed by the Trustee under applicable law. This Agreement shall
be construed

                                      -41-

<PAGE>

so as to carry out the intention of the parties that each of the Upper Tier
REMIC, the Middle Tier REMIC and the Lower Tier REMIC be treated as a REMIC at
all times prior to the date on which the Trust Fund is terminated.

         (b) The Preliminary Statement sets forth the designations and "latest
possible maturity date" for federal income tax purposes of all interests created
hereby. The "Startup Date" for purposes of the REMIC Provisions shall be the
Closing Date. Each REMIC's fiscal year shall be the calendar year.

         The Lower Tier REMIC shall consist of all of the assets of the Trust
Fund (other than (i) any proceeds of prepayment penalties, (ii) amounts paid by
the Servicer or the Transferor in respect of prepayment charges or waivers
thereof pursuant to this Agreement, (iii) amounts received in respect of any
indemnification paid as a result of a prepayment charge being unenforceable in
breach of the representations and warranties set forth in the Sale Agreement,
(iv) the interests issued by the Lower Tier REMIC and the Middle Tier REMIC, and
(v) the grantor trusts described in this Section 2.07. The Lower Tier REMIC
shall issue the Class LTA Interest, Class LTB-1 Interest, Class LTB-2 Interest,
Class LTM-1 Interest, Class LTM-2 Interest and Class LTX Interest which shall be
designated as regular interests of such REMIC and shall issue the Class LTR
Interest that shall be designated as the sole class of residual interest in the
Lower Tier REMIC. Each of the Lower Tier REMIC Regular Interests shall have the
characteristics set forth in its definition.

         The assets of the Middle Tier REMIC shall be the Lower Tier REMIC
Regular Interests. The Middle Tier REMIC Regular Interests shall be designated
as the regular interests in the Middle Tier REMIC and the Class MTR Interest
shall be designated as the sole class of residual interests in the Middle Tier
REMIC. Each of the Middle Tier REMIC Regular Interests shall have the
characteristics set forth in its definition.

         The assets of the Upper Tier REMIC shall be the Middle Tier REMIC
Regular Interests. The REMIC Regular Interests shall be designated as the
regular interests in the Upper Tier REMIC and the Residual Interest shall be
designated as the sole class of residual interest in the Upper Tier REMIC. For
federal income tax purposes, the Pass-Through Rate on each REMIC Regular
Interest and on the sole class of residual interest in the Upper Tier REMIC
shall be subject to a cap equal to the Net Rate.

         The beneficial ownership of the Class LTR Interest, the Class MTR
Interest and the Residual Interest shall be represented by the Class R
Certificate. The Class LTR Interest shall not have a principal balance or bear
interest. The Class MTR Interest shall not have a principal balance or bear
interest.

         (c) The "tax matters person" with respect to each REMIC for purposes of
the REMIC Provisions shall be the beneficial owner of the Class R Certificate;
provided, however, that the Holder of a Class R Certificate, by its acceptance
thereof, irrevocably appoints the Trustee as its agent and attorney-in-fact to
act as "tax matters person" with respect to each REMIC for purposes of the REMIC
Provisions. If there is more than one beneficial owner of the Class R
Certificate, the "tax matters person" shall be the Person with the greatest
percentage interest in the Class R Certificate and, if there is more than one
such Person, shall be determined under Treasury regulation Section 1.860F-4(d)
and Treasury regulation Section 301.6231(a)(7)-1.

         (d) It is intended that the rights of the Class A Certificates, Class R
Certificate, Class M-1 Certificates, Class M-2 Certificates, Class B-1
Certificates and Class B-2 Certificates to receive payments in respect of Excess
Interest, including all payments in respect of Interest Carryover Amounts, shall
be treated as a right in interest rate cap contracts written by the Class C
Certificateholders in favor of the holders of the Class A Certificates, Class R
Certificate, Class M-1 Certificates, Class M-2 Certificates, Class B-1
Certificates and Class B-2 Certificates, and such shall be accounted for as
property held separate and apart from the regular interests in the Upper Tier
REMIC held by the holders of the Class A

                                      -42-

<PAGE>

Certificates, M-1 Certificates, Class M-2 Certificates, Class B-1 Certificates
and Class B-2 Certificates and the residual interest in the Upper Tier REMIC
held by the holder of the Class R Certificate. This provision is intended to
satisfy the requirements of Treasury Regulations Section 1.860G-2(i) for the
treatment of property rights coupled with REMIC interests to be separately
respected and shall be interpreted consistently with such regulation. On each
Distribution Date, to the extent that any of the Class A Certificates, Class R
Certificate, M-1 Certificates, Class M-2 Certificates, Class B-1 Certificates
and Class B-2 Certificates receive payments of Excess Interest, such amounts,
will be treated as distributed by the Upper-Tier REMIC to the Class C
Certificates pro rata in payment of the amounts specified in Section 4.04(g) and
then paid to the relevant Class of Certificates pursuant to the related interest
cap agreement.

         (e) The parties intend that the portion of the Trust Fund consisting of
the Uncertificated Class C Interest, and the obligation of the holders of the
Class C Certificates to pay amounts of Excess Interest and in respect of
Interest Carryover Amounts to the holders of the Class A Certificates, Class R
Certificate, Class M-1 Certificates, Class M-2 Certificates, Class B-1
Certificates and Class B-2 Certificates shall be treated as a "grantor trust"
under the Code, and the provisions hereof shall be interpreted consistently with
this intention. In furtherance of such intention, the Trustee shall (i) furnish
or cause to be furnished to the holders of the Class C Certificates information
regarding their allocable share, if any, of the income with respect to such
grantor trust, (ii) file or cause to be filed with the Internal Revenue Service
Form 1041 (together with any necessary attachments) and such other forms as may
be applicable and (iii) comply with such information reporting obligations with
respect to payments from such grantor trust to the holders of Class A
Certificates, Class R Certificate, Class M-1 Certificates, Class M-2
Certificates, Class B-1 Certificates, Class B-2 and Class C Certificates as may
be applicable under the Code.

         (f) The parties intend that the portion of the Trust Fund consisting of
the right to receive proceeds from prepayment penalties collected on the
Mortgage Loans, amounts paid by the Servicer or Transferor in respect of
prepayment charges pursuant to this Agreement and amounts received with respect
to any amounts in respect of any indemnification paid as a result of a
prepayment charge being unenforceable in breach of the representations and
warranties set forth in the Sale Agreement shall be treated as a "grantor trust"
under the Code, and the provisions hereof shall be interpreted consistently with
this intention. In furtherance of such intention, the Trustee shall (i) furnish
or cause to be furnished to the holders of the Class P Certificates information
regarding their allocable share of the income with respect to such grantor trust
and (ii) file or cause to be filed with the Internal Revenue Service Form 1041
(together with any necessary attachments) and such other forms as may be
applicable.

         (g) The parties intend that the portion of the Trust Fund consisting of
the Class R Certificate and the right of the Class C Certificates to receive the
amounts described in the last paragraph of Section 9.01 hereof shall be treated
as a "grantor trust" under the Code and the provisions hereof shall be
interpreted consistent with this intention. In furtherance of this intention,
the Trustee shall (i) furnish or cause to be furnished to the holders of the
Class R Certificate and the Class C Certificates information regarding their
allocable share of the income with respect to such grantor trust, (ii) file or
cause to be filed with the Internal Revenue Service Form 1041 (together with any
necessary attachments) and such other forms as may be applicable and (iii)
comply with such information reporting obligations with respect to payments from
such grantor trust as may be applicable under the Code.

         All payments of principal and interest at the Net Mortgage Rate on each
of the Mortgage Loans (other than prepayment penalties, amounts paid by the
Servicer in respect of prepayment charges pursuant to this Agreement and amounts
received with respect to any amounts in respect of any indemnification paid by
the Servicer as a result of a prepayment charge being unenforceable in breach of
the representations and warranties set forth in the Sale Agreement) received
from the Mortgage Loans shall

                                      -43-

<PAGE>

be paid to the Lower Tier REMIC Regular Interests until the principal balance of
all such interests have been reduced to zero and any losses allocated to such
interests have been reimbursed. Any excess amounts shall be distributed to the
Class LTR Interest. On each Distribution Date, an amount equal to 50% of the
increase in the Overcollateralization Amount shall be payable as a reduction of
the principal amounts of the Lower Tier REMIC Marker Classes (with such amount
allocated among the Lower Tier REMIC Marker Classes so that each Lower Tier
REMIC Marker Class will have its principal reduced by an amount equal to 50% of
any increase in the Overcollateralization Amount that results in a reduction in
the principal balance of its Corresponding Middle Tier REMIC Interests) and will
be accrued and added to the principal balance of the Class LTX Interest. All
payments of scheduled principal and prepayments of principal on the Mortgage
Loans shall be allocated 50% to the Class LTX Interest and 50% to the Lower Tier
REMIC Marker Classes (with principal payments allocated to each of the Lower
Tier REMIC Marker Classes in an amount equal to 50% of the principal amounts
distributed to the Corresponding Middle Tier Interests in reduction of their
principal amounts). Notwithstanding the preceding sentence, an amount equal to
the principal payments that result in a reduction in the Overcollateralization
Amount shall be treated as payable entirely to the Class LTX Interest. Realized
Losses shall be applied to the Lower Tier REMIC Marker Classes and the Class LTX
Interest so that after all distributions have been made on each Distribution
Date (i) the principal balance of each of the Lower Tier REMIC Marker Classes is
equal to 50% of the principal balance of the Corresponding Middle Tier Interests
and (ii) the principal balance of the Class LTX Interest is equal to the sum of
(x) 50% of the aggregate Stated Principal Balance of the Mortgage Loans and (y)
50% of the Overcollateralization Amount. Each Lower Tier REMIC Marker Class
shall be entitled to receive an amount equal to 50% of all amounts distributed
to the Corresponding Middle Tier Interest in respect of unreimbursed amounts of
Realized Losses. The Class LTX Interest shall be entitled to receive all other
amounts distributed to the Certificates in respect of unreimbursed amounts of
Realized Losses.

         All payments of scheduled principal and prepayments on the Mortgage
Loans, and Realized Losses on the Mortgage Loans, shall be allocated among the
Middle Tier REMIC Regular Interests in the same manner as such payments or
Realized Losses are allocated to the Related Certificates (treating the Class S
Certificates as Related Certificates with respect to each of the Class MTA,
Class MTM-1, Class MTM-2, Class MTB-1 and Class MTB-2 Interests in proportion to
their respective principal balances and treating the Class C Certificate as a
Related Certificate with respect to the Class MTC Interest). Each Middle Tier
REMIC Regular Interest shall be entitled to receive all amounts distributed to
the Certificates in respect of unreimbursed amounts of Realized Losses (treating
the Class S Certificates as Related Certificates with respect to each of the
Class MTA, Class MTM-1, Class MTM-2, Class MTB-1 and Class MTB-2 Interests in
proportion to their respective principal balances and treating the Class C
Certificate as a Related Certificate with respect to the Class MTC Interest).

         In the event that any REMIC provided for herein fails to qualify as a
REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a
result of a prohibited transaction or prohibited contribution under the REMIC
Provisions due to the negligent performance by the Servicer of its duties and
obligations set forth herein, the Servicer shall indemnify the NIMS Insurer, the
Trustee and the Trust Fund against any and all Losses resulting from such
negligence; provided, however, that the Servicer shall not be liable for any
such Losses attributable to the action or inaction of the Trustee, the Depositor
or the Holder of such Class R Certificate, as applicable, nor for any such
Losses resulting from misinformation provided by the Holder of such Class R
Certificate on which the Servicer has relied. The foregoing shall not be deemed
to limit or restrict the rights and remedies of the Holder of such Class R
Certificate now or hereafter existing at law or in equity. Notwithstanding the
foregoing, however, in no event shall the Servicer have any liability (1) for
any action or omission that is taken in accordance with and in compliance with
the express terms of, or which is expressly permitted by the terms of, this
Agreement, (2) for any Losses other than arising out of a negligent performance
by the Servicer of its

                                      -44-

<PAGE>

duties and obligations set forth herein, and (3) for any special or
consequential damages to Certificateholders (in addition to payment of principal
and interest on the Certificates).

         In the event that any REMIC provided for herein fails to qualify as a
REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a
result of a prohibited transaction or prohibited contribution under the REMIC
Provisions due to the negligent performance by the Trustee of its duties and
obligations set forth herein, the Trustee shall indemnify the NIMS Insurer and
the Trust Fund against any and all Losses resulting from such negligence;
provided, however, that the Trustee shall not be liable for any such Losses
attributable to the action or inaction of the Servicer, the Depositor or the
Holder of such Class R Certificate, as applicable, nor for any such Losses
resulting from misinformation provided by the Holder of such Class R Certificate
on which the Trustee has relied. The foregoing shall not be deemed to limit or
restrict the rights and remedies of the Holder of such Class R Certificate now
or hereafter existing at law or in equity. Notwithstanding the foregoing,
however, in no event shall the Trustee have any liability (1) for any action or
omission that is taken in accordance with and in compliance with the express
terms of, or which is expressly permitted by the terms of, this Agreement, (2)
for any Losses other than arising out of a negligent performance by the Trustee
of its duties and obligations set forth herein, and (3) for any special or
consequential damages to Certificateholders (in addition to payment of principal
and interest on the Certificates).

         SECTION 2.08. Covenants of the Servicer.

         The Servicer hereby covenants to each of the other parties to this
Agreement as follows:

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

         (b) no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Depositor, the Trustee
or the NIMs Insurer, any affiliate of the Depositor, the Trustee or the NIMs
Insurer and prepared by the Servicer pursuant to this Agreement will be
inaccurate in any material respect, provided, however, that the Servicer shall
not be responsible for inaccurate information provided to it by third parties.

         SECTION 2.09. [RESERVED]

         SECTION 2.10. [RESERVED]

         SECTION 2.11. Permitted Activities of the Trust. The Trust is created
for the object and purpose of engaging in the Permitted Activities. In
furtherance of the foregoing, the Trustee is hereby authorized and directed to
execute and deliver on behalf of the Trust, and to perform the duties and
obligations of the Trustee under, an insurance and indemnity agreement with a
NIMs Insurer and any other agreement or instrument related thereto, in each case
in such form as the Depositor shall direct or shall approve, the execution and
delivery of any such agreement by the Depositor to be conclusive evidence of its
approval thereof.

         SECTION 2.12. Qualifying Special Purpose Entity. For purposes of SFAS
140, the parties hereto intend that the Trust Fund shall be treated as a
"qualifying special purpose entity" as such term is used in SFAS 140 and any
successor rule thereto and its power and authority as stated in Section 2.11 of
this Agreement shall be limited in accordance with paragraph 35 of SFAS 140.

                                      -45-

<PAGE>

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         SECTION 3.01. Servicer to Service Mortgage Loans.

                  For and on behalf of the Certificateholders, the Servicer
shall service and administer the Mortgage Loans in accordance with Accepted
Servicing Practices. In connection with such servicing and administration, the
Servicer shall have full power and authority, acting alone and/or through
subservicers as provided in Section 3.02 hereof, to do or cause to be done any
and all things that it may deem necessary or desirable in connection with such
servicing and administration, including but not limited to, the power and
authority, subject to the terms hereof (i) to execute and deliver, on behalf of
the Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds and (iv) subject to Section 3.12(a), to
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing any Mortgage Loan; provided that, subject to Section 6.03, the
Servicer shall not take any action that is inconsistent with or prejudices the
interests of the Trust Fund or the Certificateholders in any Mortgage Loan
serviced by it under this Agreement or the rights and interests of the other
parties to this Agreement except as otherwise required by this Agreement or by
law. The Servicer shall represent and protect the interest of the Trust Fund in
the same manner as it currently protects its own interest in mortgage loans in
its own portfolio in any claim, proceeding or litigation regarding a Mortgage
Loan and shall not make or permit any modification, waiver or amendment of any
term of any Mortgage Loan which would cause any of the REMICs provided for
herein to fail to qualify as a REMIC or result in the imposition of any tax
under Section 860G(a) or 860G(d) of the Code, but in any case not in any manner
that is a lesser standard than that provided in the first sentence of this
Section 3.01. Without limiting the generality of the foregoing, the Servicer, in
its own name or in the name of the Depositor and the Trustee, is hereby
authorized and empowered by the Depositor and the Trustee, when the Servicer
believes it appropriate in its reasonable judgment, to execute and deliver, on
behalf of the Trustee, the Depositor, the Certificateholders or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect to the
Mortgage Loans, and with respect to the Mortgaged Properties held for the
benefit of the Certificateholders. The Servicer shall prepare and deliver to the
Depositor and/or the Trustee such documents requiring execution and delivery by
any or all of them as are necessary or appropriate to enable the Servicer to
service and administer the Mortgage Loans, including without limitation, any
powers of attorney. Upon receipt of such documents, the Depositor and/or the
Trustee shall execute such documents and deliver them to the Servicer.

         In accordance with the standards of the preceding paragraph, the
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the 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 3.06, and further as
provided in Section 3.08. To the extent that a Mortgage does not provide for
escrow payments, (i) the Servicer shall determine whether any such payments are
made by the Mortgagor in a manner and at a time that is necessary to avoid the
loss of the Mortgaged Property due to a tax sale or the foreclosure as a result
of a tax lien and (ii) ensure that all insurance required to be maintained on
the Mortgaged Property pursuant to this Agreement is maintained. If any such
payment has not been made and the Servicer receives notice of a tax lien with
respect to the Mortgage Loan being imposed, the Servicer will, promptly and to
the extent required to avoid loss of the Mortgaged Property, advance or cause to
be advanced funds necessary to discharge such lien on the Mortgaged Property.
All costs incurred by the Servicer, if any, in effecting the timely

                                      -46-

<PAGE>

payments of taxes and assessments on the Mortgaged Properties and related
insurance premiums shall not, for the purpose of calculating monthly
distributions to the Certificateholders, be added to the Stated Principal
Balance under the related Mortgage Loans, notwithstanding that the terms of such
Mortgage Loans so permit.

         The Servicer shall deliver a list of Servicing Officers to the Trustee
by the Closing Date.

         The Servicer will transmit full-file credit reporting data for each
Mortgage Loan pursuant to Fannie Mae Guide Announcement 97-02 and that for each
Mortgage Loan, the Servicer agrees that it shall report one of the following
statuses each month as follows: current, delinquent (30-, 60-, 90-days, etc.),
foreclosed or charged-off.

         SECTION 3.02. Servicing and Subservicing; Enforcement of the
Obligations of Servicer.

         (a) The Servicer may arrange for the subservicing of any Mortgage Loan
by a subservicer, which may be an affiliate (each, a "subservicer") pursuant to
a subservicing agreement (each, a "Subservicing Agreement"); provided, however,
that (i) such subservicing arrangement and the terms of the related subservicing
agreement must provide for the servicing of such Mortgage Loans in a manner
consistent with the servicing arrangements contemplated hereunder, (ii) that
such agreement would not result in a withdrawal or downgrading by any Rating
Agency of the ratings of any Certificates or any of the NIM Notes evidenced by a
letter to that effect delivered by each Rating Agency to the Depositor and the
NIMs Insurer and (iii) the NIMs Insurer shall have consented to such
subservicing agreement. Notwithstanding the provisions of any subservicing
agreement, any of the provisions of this Agreement relating to agreements or
arrangements between the Servicer and a subservicer or reference to actions
taken through a subservicer or otherwise, the Servicer shall remain obligated
and liable to the Depositor, the Trustee and the Certificateholders for the
servicing and administration of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such subservicing agreements or arrangements or by virtue of
indemnification from the subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. Every subservicing agreement entered into by the Servicer
shall contain a provision giving any successor servicer the option to terminate
such agreement with the consent of the NIMs Insurer in the event a successor
servicer is appointed. All actions of the each subservicer performed pursuant to
the related subservicing agreement shall be performed as an agent of the
Servicer with the same force and effect as if performed directly by the
Servicer. The Servicer shall deliver to the NIMs Insurer and the Trustee copies
of all subservicing agreements.

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

         SECTION 3.03. Rights of the Depositor and the Trustee in Respect of the
Servicer.

         Neither the Trustee nor the Depositor shall have any responsibility or
liability for any action or failure to act by the Servicer, and neither of them
is obligated to supervise the performance of the Servicer hereunder or
otherwise.

         SECTION 3.04. Trustee to Act as Servicer.

         In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of an Event of Default), the Trustee or
its designee shall, within a period of time not to exceed ninety (90) days from
the date of notice of termination or resignation, thereupon assume all of the
rights and obligations of the Servicer hereunder arising thereafter (except that
the Trustee shall not be (i) liable

                                      -47-

<PAGE>

for losses of the Servicer pursuant to Section 3.10 hereof or any acts or
omissions of such predecessor Servicer hereunder, (ii) obligated to make
Advances or Servicing Advances if it is prohibited from doing so by applicable
law, (iii) obligated to effectuate repurchases or substitutions of Mortgage
Loans hereunder, including pursuant to Section 2.02 or 2.03 hereof, (iv)
responsible for any expenses of the Servicer pursuant to Section 2.03 or (v)
deemed to have made any representations and warranties hereunder, including
pursuant to Section 2.04 or the first paragraph of Section 6.02 hereof;
provided, however that the Trustee (subject to clause (ii) above) or its
designee, in its capacity as the successor servicer, shall immediately assume
the terminated or resigning Servicer's obligation to make Advances and Servicing
Advances. No such termination shall affect any obligation of the Servicer to pay
amounts owed under this Agreement and to perform its duties under this Agreement
until its successor assumes all of its rights and obligations hereunder. If the
Servicer shall for any reason no longer be the Servicer (including by reason of
any Event of Default), the Trustee (or any other successor servicer) may, at its
option, succeed to any rights and obligations of the Servicer under any
subservicing agreement in accordance with the terms thereof; provided, however,
that the Trustee (or any other successor servicer) shall not incur any liability
or have any obligations in its capacity as servicer under a subservicing
agreement arising prior to the date of such succession unless it expressly
elects to assume such obligations of the Servicer thereunder; and the Servicer
shall not thereby be relieved of any liability or obligations under the
subservicing agreement arising prior to the date of such succession. To the
extent any costs or expenses, including without limitation Servicing Transfer
Costs incurred by the Trustee in connection with this Section 3.04 are not paid
by the Servicer pursuant to this Agreement within 30 days of the date of the
Trustee's invoice therefor, such amounts shall be payable out of the Certificate
Account; provided that the terminated Servicer shall reimburse the Trust Fund
for any such expense incurred by the Trust Fund upon receipt of a reasonably
detailed invoice evidencing such expenses. If the Trustee is unwilling or unable
to act as servicer, or if the NIMs Insurer so directs the Trustee, the Trustee
shall seek to appoint a successor servicer that is eligible in accordance with
the criteria specified this Agreement and reasonably acceptable to the NIMs
Insurer.

         The Servicer shall, upon request of the Trustee, but at the expense of
the Servicer, deliver to the assuming party all documents and records relating
to each subservicing agreement and the Mortgage Loans then being serviced and
otherwise use its best efforts to effect the orderly and efficient transfer of
the subservicing agreement to the assuming party.

         In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of any Event of Default),
notwithstanding anything to the contrary above, the Trustee and the Depositor
hereby agree that within 10 Business Days or delivery to the Trustee by the
Servicing Rights Pledgee of a letter signed by the Servicer whereby the Servicer
shall resign as Servicer under this Agreement, the Servicing Rights Pledgee or
its designee shall be appointed as successor servicer (provided that at the time
of such appointment the Servicing Rights Pledgee or such designee meets the
requirements of a successor servicer set forth above) and the Servicing Rights
Pledgee agrees to be subject to the terms of this Agreement.

         SECTION 3.05. Collection of Mortgage Loan Payments; Collection Account;
Certificate Account.

         (a) The Servicer shall make reasonable efforts in accordance with
Accepted Servicing Practices to collect all payments called for under the terms
and provisions of the Mortgage Loans to the extent such procedures shall be
consistent with this Agreement and the terms and provisions of any related
Required Insurance Policy. Consistent with the foregoing, the Servicer may in
its discretion (i) waive any late payment charge or, if applicable, any penalty
interest, or (ii) extend the due dates for payments due on a Mortgage Note for a
period not greater than 180 days; provided, however, that any extension pursuant
to clause (ii) above shall not affect the amortization schedule of any Mortgage
Loan for purposes of any

                                      -48-

<PAGE>

computation hereunder, except as provided below; provided, further, that the
NIMs Insurer's prior written consent shall be required for any modification,
waiver or amendment since the Cut-off Date if the aggregate number of
outstanding Mortgage Loans which have been modified, waived or amended exceeds
5% of the number of Mortgage Loans as of the Cut-Off Date. In the event of any
such arrangement pursuant to clause (ii) above, subject to Section 4.01, the
Servicer shall make any Advances on the related Mortgage Loan during the
scheduled period in accordance with the amortization schedule of such Mortgage
Loan without modification thereof by reason of such arrangements.
Notwithstanding the foregoing, in the event that any Mortgage Loan is in default
or, in the judgment of the Servicer, such default is reasonably foreseeable, the
Servicer, consistent with the standards set forth in Section 3.01, may also
waive, modify or vary any term of such Mortgage Loan (including modifications
that would change the Mortgage Rate, forgive the payment of principal or
interest or extend the final maturity date of such Mortgage Loan), accept
payment from the related Mortgagor of an amount less than the Stated Principal
Balance in final satisfaction of such Mortgage Loan, or consent to the
postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor (any and all such waivers, modifications, variances,
forgiveness of principal or interest, postponements, or indulgences collectively
referred to herein as "forbearance"), provided, however, that in no event shall
the Servicer grant any such forbearance (other than as permitted by the second
sentence of this Section) with respect to any one Mortgage Loan more than once
in any 12 month period or more than three times over the life of such Mortgage
Loan, and provided, further, that in determining which course of action
permitted by this sentence it shall pursue, the Servicer shall adhere to the
standards of Section 3.01. The Servicer's analysis supporting any forbearance
and the conclusion that any forbearance meets the standards of Section 3.01
shall be reflected in writing in the Mortgage File.

         (b) The Servicer will not waive any prepayment penalty or portion
thereof unless, (i) the enforceability thereof shall have been limited by
bankruptcy, insolvency, moratorium, receivership and other similar laws relating
to creditors' rights generally or is otherwise prohibited by law, or (ii) the
collectability thereof shall have been limited due to acceleration in connection
with a foreclosure or other involuntary payment, or (iii) the prepayment of the
Mortgage Loan is made in connection with the voluntary sale of the related
Mortgaged Property, or (iv) in the Servicer's reasonable judgment as described
in Section 3.01 hereof, (x) such waiver relates to a default or a reasonably
foreseeable default, (y) such waiver would maximize recovery of total proceeds
taking into account the value of such prepayment penalty and related Mortgage
Loan and (z) doing so is standard and customary in servicing similar Mortgage
Loans (including any waiver of a prepayment penalty in connection with a
refinancing of a Mortgage Loan that is related to a default or a reasonably
foreseeable default). Except as provided in the preceding sentence, in no event
will the Servicer waive a prepayment penalty in connection with a refinancing of
a Mortgage Loan that is not related to a default or a reasonably foreseeable
default. If the Servicer waives or does not collect all or a portion of a
prepayment penalty relating to a Principal Prepayment in full or in part due to
any action or omission of the Servicer, other than as provided above, the
Servicer shall deposit the amount of such prepayment penalty (or such portion
thereof as had been waived for deposit) into the Collection Account for
distribution in accordance with the terms of this Agreement.

         (c) The Servicer shall not be required to institute or join in
litigation with respect to collection of any payment (whether under a Mortgage,
Mortgage Note or otherwise or against any public or governmental authority with
respect to a taking or condemnation) if it reasonably believes that enforcing
the provision of the Mortgage or other instrument pursuant to which such payment
is required is prohibited by applicable law.

                                      -49-

<PAGE>

         (d) The Servicer shall establish and initially maintain, on behalf of
the Certificateholders, the Collection Account. The Servicer shall deposit into
the Collection Account daily, within two Business Days of receipt thereof, in
immediately available funds, the following payments and collections received or
made by it on and after the Cut-Off Date with respect to the Mortgage Loans:

                  (i)      all payments on account of principal, including
         Principal Prepayments, on the Mortgage Loans, other than principal due
         on the Mortgage Loans on or prior to the Cut-off Date;

                  (ii)     all payments on account of interest on the Mortgage
         Loans net of the related Servicing Fee permitted under Section 3.15,
         other than interest due on the Mortgage Loans on or prior to the
         Cut-off Date;

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

                  (iv)     all Compensating Interest;

                  (v)      any amount required to be deposited by the Servicer
         pursuant to Section 3.05(g) in connection with any losses on Permitted
         Investments;

                  (vi)     any amounts required to be deposited by the Servicer
         pursuant to Section 3.10 hereof;

                  (vii)    the Purchase Price and any Substitution Adjustment
         Amount;

                  (viii)   all Advances made by the Servicer pursuant to Section
         4.01;

                  (ix)     all prepayment penalties; and

                  (x)      any other amounts required to be deposited hereunder.

         The foregoing requirements for remittance by the Servicer into the
Collection Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, late payment charges,
insufficient funds charges and payments in the nature of assumption fees (i.e.
fees related to the assumption of a Mortgage Loan upon the purchase of the
related Mortgaged Property) and other similar ancillary fees (other than
prepayment penalties) if collected, need not be remitted by the Servicer. In the
event that the Servicer shall remit any amount not required to be remitted and
not otherwise subject to withdrawal pursuant to Section 3.08 hereof, it may at
any time withdraw or direct the Trustee, or such other institution maintaining
the Collection Account, to withdraw such amount from the Collection Account, any
provision herein to the contrary notwithstanding. The Servicer shall maintain
adequate records with respect to all withdrawals made pursuant to this Section.
All funds deposited in the Collection Account shall be held in trust for the
Certificateholders until withdrawn in accordance with Section 3.08. In no event
shall the Trustee incur liability for withdrawals from the Collection Account at
the direction of the Servicer.

         The Servicer shall give notice to the NIMs Insurer and the Trustee of
the location of the Collection Account maintained by it when established and
prior to any change thereof. Not later than twenty days after each Distribution
Date, the Servicer shall forward to the NIMS Insurer and, upon request, to the
Trustee and the Depositor the most current available bank statement for the
Collection Account. Copies of such statement shall be provided by the Trustee to
any Certificateholder and to any

                                      -50-

<PAGE>

Person identified to the Trustee as a prospective transferee of a Certificate,
upon request at the expense of the requesting party, provided such statement is
delivered by the Servicer to the Trustee.

         (e) [RESERVED].

         (f) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Certificate Account. The Trustee shall, promptly upon
receipt, deposit or cause to be deposited in the Certificate Account and retain
therein the following:

                  (i)      the aggregate amount withdrawn by the Servicer from
         the Collection Account and required to be deposited in the Certificate
         Account;

                  (ii)     any amount required to be deposited by the Trustee
         pursuant to Section 3.05(g) in connection with any losses on Permitted
         Investments; and

                  (iii)    the Optional Termination Amount or Clean Up Call
         Amount payable pursuant to Section 9.01.

         Any amounts received by the Trustee prior to 3:00 p.m. New York City
time (or such earlier deadline for investment in the Permitted Investments
designated by the Trustee) which are required to be deposited in the Certificate
Account by the Servicer shall be invested in Permitted Investments on the
Business Day on which they were received. The foregoing requirements for
remittance by the Servicer and deposit by the Servicer into the Certificate
Account shall be exclusive. In the event that the Servicer shall remit any
amount not required to be remitted and not otherwise subject to withdrawal
pursuant to Section 3.08 hereof, it may at any time withdraw such amount from
the Certificate Account, any provision herein to the contrary notwithstanding.
All funds deposited in the Certificate Account shall be held by the Trustee in
trust for the Certificateholders until disbursed in accordance with this
Agreement or withdrawn in accordance with Section 3.08. In no event shall the
Trustee incur liability for withdrawals from the Certificate Account at the
direction of the Servicer. The Trustee shall give notice to the NIMs Insurer and
the Servicer of the location of the Certificate Account maintained by it when
established and prior to any change thereof.

         (g) Each institution that maintains the Collection Account or the
Certificate Account shall invest the funds in each such account, as directed by
the Servicer or the Trustee, as applicable, in writing, in Permitted
Investments, which shall mature not later than (i) in the case of the Collection
Account the Business Day preceding the related Servicer Remittance Date (except
that if such Permitted Investment is an obligation of the institution that
maintains such Collection Account or is otherwise immediately available, then
such Permitted Investment shall mature not later than the Servicer Remittance
Date) and (ii) in the case of the Certificate Account, the Business Day
immediately preceding the first Distribution Date that follows the date of such
investment (except that if such Permitted Investment is an obligation of the
institution that maintains such Certificate Account or is otherwise immediately
available, then such Permitted Investment shall mature not later than such
Distribution Date) and, in each case, shall not be sold or disposed of prior to
its maturity. All such Permitted Investments shall be made in the name of the
Servicer or the Trustee, as applicable, for the benefit of the
Certificateholders. All income and gain net of any losses realized from amounts
on deposit in the Collection Account shall be for the benefit of the Servicer as
servicing compensation and shall be remitted to it monthly as provided herein.
The amount of any losses incurred in the Collection Account in respect of any
such investments shall be deposited by the Servicer in the Collection Account
out of the Servicer's own funds immediately as realized. All income and gain net
of any losses realized from amounts on deposit in the Certificate Account shall
be for the benefit of the Trustee and shall be remitted to or withdrawn by it
monthly as provided herein. The amount of any losses incurred in the Certificate
Account in respect of any such investments shall be

                                      -51-

<PAGE>

deposited by the Trustee, in the Certificate Account out of the Trustee's own
funds immediately as realized.

         SECTION 3.06. Collection of Taxes, Assessments and Similar Items;
Escrow Accounts.

         To the extent required by the related Mortgage Note, the Servicer shall
establish and maintain one or more accounts (each, an "Escrow Account") and
deposit and retain therein all collections from the Mortgagors (or advances by
the Servicer) for the payment of taxes, assessments, hazard insurance premiums
or comparable items for the account of the Mortgagors. Nothing herein shall
require the Servicer to compel a Mortgagor to establish an Escrow Account in
violation of applicable law.

         Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Servicer out of related collections for any payments made pursuant to
Sections 3.01 hereof (with respect to taxes and assessments and insurance
premiums) and 3.10 hereof (with respect to hazard insurance), to refund to any
Mortgagors any sums as may be determined to be overages, to pay interest, if
required by law or the terms of the related Mortgage or Mortgage Note, to
Mortgagors on balances in the Escrow Account or to clear and terminate the
Escrow Account at the termination of this Agreement in accordance with Section
9.01 hereof. The Escrow Accounts shall not be a part of the Trust Fund.

         SECTION 3.07. Access to Certain Documentation and Information Regarding
the Mortgage Loans.

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

         SECTION 3.08. Permitted Withdrawals from the Collection Account and
Certificate Account.

         (a) The Servicer may from time to time, make withdrawals from the
Collection Account for the following purposes:

                  (i)      to pay to the Servicer (to the extent not previously
         paid to or withheld by the Servicer), as servicing compensation in
         accordance with Section 3.15, that portion of any payment of interest
         that equals the Servicing Fee for the period with respect to which such
         interest payment was made, and, as additional servicing compensation,
         those other amounts set forth in Section 3.15;

                  (ii)     to reimburse the Servicer for Advances made by it
         with respect to the Mortgage Loans, such right of reimbursement
         pursuant to this subclause (ii) being limited to amounts received on
         particular Mortgage Loan(s) (including, for this purpose, Liquidation
         Proceeds) that represent late recoveries of payments of principal
         and/or interest on such particular Mortgage Loan(s) in respect of which
         any such Advance was made;

                  (iii)    to reimburse the Servicer for any Non-Recoverable
         Advance previously made and, to the extent that such Non-Recoverable
         Servicing Advances would constitute "unanticipated

                                      -52-

<PAGE>

         expenses" within the meaning of Treasury Regulation Section
         1.860G-1(b)(3)(ii) if paid by one of the REMICs provided for herein,
         any Non-Recoverable Servicing Advance;

                  (iv)     to pay to the Servicer earnings on or investment
         income with respect to funds in or credited to the Collection Account;

                  (v)      to reimburse the Servicer from Insurance Proceeds for
         Insured Expenses covered by the related Insurance Policy;

                  (vi)     pay the Servicer any unpaid Servicing Fees and to
         reimburse it for any unreimbursed Servicing Advances, the Servicer's
         right to reimbursement of Servicing Advances pursuant to this subclause
         (vi) with respect to any Mortgage Loan being limited to amounts
         received on particular Mortgage Loan(s)(including, for this purpose,
         Liquidation Proceeds and purchase and repurchase proceeds) that
         represent late recoveries of the payments for which such advances were
         made pursuant to Section 3.01 or Section 3.06;

                  (vii)    to pay to the Depositor or the Servicer, as
         applicable, with respect to each Mortgage Loan or property acquired in
         respect thereof that has been purchased pursuant to Section 2.02, 2.03
         or 3.12, all amounts received thereon and not taken into account in
         determining the related Stated Principal Balance of such repurchased
         Mortgage Loan;

                  (viii)   to reimburse the Servicer or the Depositor for
         expenses incurred by any of them in connection with the Mortgage Loans
         or Certificates and reimbursable pursuant to Section 3.25 or Section
         6.03 hereof;

                  (ix)     to reimburse the Trustee for enforcement expenses
         reasonably incurred in respect of a breach of defect giving rise to the
         purchase obligation in Section 2.03 that were incurred in the Purchase
         Price of the Mortgage Loans including any expenses arising out of the
         enforcement of the purchase obligation; provided that any such expenses
         will be reimbursable under this subclause (ix) only to the that such
         expenses would constitute "unanticipated expenses" within the meaning
         of Treasury Regulation Section 1.860G-1(b)(3)(ii) if paid by one of the
         REMICs provided for herein;

                  (x)      to withdraw pursuant to Section 3.05 any amount
         deposited in the Collection Account and not required to be deposited
         therein; and

                  (xi)     to clear and terminate the Collection Account upon
         termination of this Agreement pursuant to Section 9.01 hereof.

         In addition, no later than 3:00 p.m. Eastern Time on the Servicer
Remittance Date, the Servicer shall cause to be withdrawn from the Collection
Account the Interest Funds and the Principal Funds, to the extent on deposit,
and such amount shall be deposited in the Certificate Account; provided, however
if the Trustee does not receive such Interest Funds and Principal Funds by 4:00
p.m. Eastern Time, such Interest Funds and Principal Funds shall be deposited in
the Certificate Account on the next Business Day.

         The Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Collection Account.

         The Servicer shall provide written notification to the Trustee and the
NIMs Insurer on or prior to the next succeeding Servicer Remittance Date upon
making any withdrawals from the Collection Account pursuant to subclauses (iii)
and (viii) above.

                                      -53-

<PAGE>

         In the event of any failure by the Servicer to remit to the Trustee for
deposit into the Certificate Account any amounts (including any P&I Advance)
required to be so remitted by the Servicer on the Servicer Remittance Date, the
Servicer shall pay to the Trustee, for its own account, interest on such amounts
at the "prime rate" (as specified in the New York edition of the Wall Street
Journal) until such failure is remedied.

         (b) The Trustee shall withdraw funds from the Certificate Account for
distribution to the Certificateholders in the manner specified in this Agreement
(and to withhold from the amounts so withdrawn, the amount of any taxes that it
is authorized to retain pursuant to this Agreement). In addition, the Trustee
may from time to time make withdrawals from the Certificate Account for the
following purposes:

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

                  (ii)     to pay the Trustee any indemnification amounts owed
         it and to clear and terminate the Certificate Account upon termination
         of the Agreement pursuant to Section 9.01 hereof;

                  (iii)    to reimburse the Trustee for expenses incurred by the
         Trustee and reimbursable pursuant to Section 8.06 hereof;

                  (iv)     to pay to the Trustee earnings on or investment
         income with respect to funds in or credited to the Certificate Account;
         and

                  (v)      to pay to the Credit Risk Manager, the Credit Risk
         Manager Fee.

         SECTION 3.09. [RESERVED].

         SECTION 3.10. Maintenance of Hazard Insurance.

         The Servicer shall cause to be maintained, for each Mortgage Loan,
hazard insurance with extended coverage in an amount that is at least equal to
the lesser of (i) the replacement value of the improvements that are part of
such Mortgaged Property and (ii) the greater of (a) the outstanding principal
balance of the Mortgage Loan and (b) an amount such that the proceeds of such
policy shall be sufficient to prevent the related Mortgagor and/or mortgagee
from becoming a co-insurer. Each such policy of standard hazard insurance shall
contain, or have an accompanying endorsement that contains, a standard mortgagee
clause. The Servicer shall also cause flood insurance to be maintained on
property acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan, to the extent required under the standards described below.
Pursuant to Section 3.05 hereof, any amounts collected by the Servicer under any
such policies (other than the 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 Servicer's normal servicing procedures)
shall be deposited in the Collection Account. Any cost incurred by the Servicer
in maintaining any such insurance shall not, for the purpose of calculating
monthly distributions to the Certificateholders or remittances to the Trustee
for their benefit, be added to the principal balance of the Mortgage Loan,
notwithstanding that the terms of the Mortgage Loan so permit. Such costs shall
be recoverable by the Servicer out of late payments by the related Mortgagor or
out of Liquidation Proceeds to the extent and as otherwise permitted by Section
3.08 hereof. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property acquired
in respect of a Mortgage other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the time of
origination of the Mortgage Loan in a federally designated

                                      -54-

<PAGE>

special flood hazard area and such area is participating in the national flood
insurance program, the Servicer shall cause flood insurance to be maintained
with respect to such Mortgage Loan. Such flood insurance shall be in an amount
equal to the lesser of (i) the original principal balance of the related
Mortgage Loan, (ii) the replacement value of the improvements that are part of
such Mortgaged Property, or (iii) the maximum amount of such insurance available
for the related Mortgaged Property under the Flood Disaster Protection Act of
1973, as amended.

         In the event that the Servicer shall obtain and maintain a blanket
policy insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first sentence of this Section 3.10, it being understood and agreed that such
policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of this Section 3.10, and there shall have
been a loss that would have been covered by such policy, deposit in the
Collection Account the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as servicer
of the Mortgage Loans, the Servicer agrees to present, on behalf of itself, the
Depositor and the Trustee for the benefit of the Certificateholders, claims
under any such blanket policy.

         SECTION 3.11. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.

         (a) Except as otherwise provided in this Section 3.11(a), when any
property subject to a Mortgage has been or is about to be conveyed by the
Mortgagor, the Servicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted under applicable law and governmental
regulations, but only to the extent that such enforcement will not adversely
affect or jeopardize coverage under any Required Insurance Policy.
Notwithstanding the foregoing, the Servicer is not required to exercise such
rights with respect to a Mortgage Loan if the Person to whom the related
Mortgaged Property has been conveyed or is proposed to be conveyed satisfies the
terms and conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a condition to
such transfer. In the event that the Servicer is prohibited by law from
enforcing any such due-on-sale clause, or if coverage under any Required
Insurance Policy would be adversely affected, or if nonenforcement is otherwise
permitted hereunder, the Servicer is authorized, subject to Section 3.11(b), to
take or enter into an assumption and modification agreement from or with the
Person to whom such property has been or is about to be conveyed, pursuant to
which such Person becomes liable under the Mortgage Note and, unless prohibited
by applicable state law, the Mortgagor remains liable thereon, provided that the
Mortgage Loan shall continue to be covered (if so covered before the Servicer
enters such agreement) by the applicable Required Insurance Policies. The
Servicer, subject to Section 3.11(b), is also authorized with the prior approval
of the insurers under any Required Insurance Policies to enter into a
substitution of liability agreement with such Person, pursuant to which the
original Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the Mortgage Note. Notwithstanding the
foregoing, the Servicer shall not be deemed to be in default under this Section
3.11(a) by reason of any transfer or assumption that the Servicer reasonably
believes it is restricted by law from preventing.

         (b) Subject to the Servicer's duty to enforce any due-on-sale clause to
the extent set forth in Section 3.11(a) hereof, in any case in which a Mortgaged
Property has been conveyed to a Person by a Mortgagor, and such Person is to
enter into an assumption agreement or modification agreement or supplement to
the Mortgage Note or Mortgage that requires the signature of the Trustee, or if
an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the Mortgage Loan, the Servicer shall prepare and
deliver or cause to be prepared and delivered to the Trustee

                                      -55-

<PAGE>

for signature and shall direct, in writing, the Trustee to execute the
assumption agreement with the Person to whom the Mortgaged Property is to be
conveyed and such modification agreement or supplement to the Mortgage Note or
Mortgage or other instruments as are reasonable or necessary to carry out the
terms of the Mortgage Note or Mortgage or otherwise to comply with any
applicable laws regarding assumptions or the transfer of the Mortgaged Property
to such Person. In connection with any such assumption, no material term of the
Mortgage Note (including, but not limited to, the Mortgage Rate, the amount of
the Scheduled Payment, the Maximum Rate, the Minimum Rate, the Gross Margin, the
Periodic Rate Cap, the Adjustment Date, any prepayment penalty and any other
term affecting the amount or timing of payment on the Mortgage Loan) may be
changed. The Servicer shall notify the Trustee and the NIMs Insurer that any
such substitution or assumption agreement has been completed by forwarding to
the Trustee (with a copy to the NIMs Insurer) the original of such substitution
or assumption agreement, which in the case of the original shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. Any fee collected by the Servicer for entering into
an assumption or substitution of liability agreement will be retained by the
Servicer as additional servicing compensation.

         SECTION 3.12. Realization Upon Defaulted Mortgage Loans; Determination
of Excess Proceeds.

         (a) The Servicer shall use reasonable efforts consistent with the
servicing standard set forth in Section 3.01 to foreclose upon or otherwise
comparably convert the ownership of properties securing such of the Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of Delinquent payments. In connection
with such foreclosure or other conversion, the Servicer shall follow such
practices and procedures as it shall deem necessary or advisable and as shall be
normal and usual in its general mortgage servicing activities and the
requirements of the insurer under any Required Insurance Policy; provided,
however, that the Servicer shall not be required to expend its own funds in
connection with the restoration of any property that shall have suffered damage
due to an uninsured cause unless it shall determine (i) that such restoration
increase the proceeds of liquidation of the Mortgage Loan after reimbursement to
itself of such expenses and (ii) that such expenses will be recoverable to it
through Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Collection Account pursuant to Section 3.08
hereof). The Servicer shall be responsible for all other costs and expenses
incurred by it in any such proceedings; provided, however, that it shall be
entitled to reimbursement thereof from the proceeds of liquidation of the
related Mortgaged Property, as contemplated in Section 3.08 hereof. If the
Servicer has knowledge that a Mortgaged Property that the Servicer is
contemplating acquiring in foreclosure or by deed-in-lieu of foreclosure is
located within a one-mile radius of any site with environmental or hazardous
waste risks known to the Servicer, the Servicer will, prior to acquiring the
Mortgaged Property, consider such risks and only take action in accordance with
Accepted Servicing Practices.

         With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trustee or its nominee. Pursuant to its efforts to
sell such REO Property, the Servicer shall either itself or through an agent
selected by the Servicer protect and conserve such REO Property in the same
manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Certificateholders, rent the same, or any part thereof, as the
Servicer deems to be in the best interest of the Servicer and the
Certificateholders for the period prior to the sale of such REO Property. The
Servicer or an affiliate may receive usual and customary real estate referral
fees for real estate brokers in connection with the listing and disposition of
REO Property. The Servicer shall prepare a statement with respect to each REO
Property that has been rented showing the aggregate rental income received and
all expenses incurred in connection with the management and maintenance of such
REO Property at such times as is necessary to enable the Servicer to comply with
the reporting requirements of the REMIC Provisions. The net monthly rental
income, if

                                      -56-

<PAGE>

any, from such REO Property shall be deposited in the Collection Account no
later than the close of business on each Determination Date. The Servicer shall
perform the tax reporting and withholding related to foreclosures, abandonments
and cancellation of indebtedness income as specified by Sections 1445, 6050J and
6050P of the Code by preparing and filing such tax and information returns, as
may be required.

         In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Servicer shall dispose of such Mortgaged Property prior to
the expiration of three years from the end of the year of its acquisition by the
Trust Fund or, at the expense of the Trust Fund, request more than 60 days prior
to the day on which such three-year period would otherwise expire, an extension
of the three-year grace period unless the Trustee and the NIMs Insurer shall
have been supplied with an Opinion of Counsel addressed to the Trustee and the
NIMs Insurer (such Opinion of Counsel not to be an expense of the Trustee or the
NIMs Insurer) to the effect that the holding by the Trust Fund of such Mortgaged
Property subsequent to such three-year period will not result in the imposition
of taxes on "prohibited transactions" of the Trust Fund or any of the REMICs
provided for herein as defined in section 860F of the Code or cause any of the
REMICs provided for herein to fail to qualify as a REMIC at any time that any
Certificates are outstanding, in which case the Trust Fund may continue to hold
such Mortgaged Property (subject to any conditions contained in such Opinion of
Counsel). Notwithstanding any other provision of this Agreement, no Mortgaged
Property acquired by the Trust Fund shall be rented (or allowed to continue to
be rented) or otherwise used for the production of income by or on behalf of the
Trust Fund in such a manner or pursuant to any terms that would (i) cause such
Mortgaged Property to fail to qualify as "foreclosure property" within the
meaning of section 860G(a)(8) of the Code or (ii) subject the Trust Fund or any
REMIC provided for herein to the imposition of any federal, state or local
income taxes on the income earned from such Mortgaged Property under section
860G(c) of the Code or otherwise, unless the Servicer or the Depositor has
agreed to indemnify and hold harmless the Trust Fund with respect to the
imposition of any such taxes.

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

         The Liquidation Proceeds from any liquidation of a Mortgage Loan, net
of any payment to the Servicer as provided above, shall be deposited in the
Collection Account on the next succeeding Determination Date following receipt
thereof for distribution on the related Distribution Date.

         The proceeds of any Liquidated Loan, as well as any recovery resulting
from a partial collection of Liquidation Proceeds or any income from an REO
Property, will be applied in the following order of priority: first, to
reimburse the Servicer for any related unreimbursed Servicing Advances and
Servicing Fees, pursuant to Section 3.08(a)(vi) or this Section 3.12; second, to
reimburse the Servicer for any

                                      -57-

<PAGE>

unreimbursed Advances, pursuant to Section 3.08(a)(ii) or this Section 3.12;
third, to any prepayment penalties and then to accrued and unpaid interest (to
the extent no Advance has been made for such amount) on the Mortgage Loan or
related REO Property, at the Net Mortgage Rate to the Due Date occurring in the
month in which such amounts are required to be distributed; and fourth, as a
recovery of principal of the Mortgage Loan.

         (b) On each Determination Date, the Servicer shall determine the
respective aggregate amounts of Excess Proceeds, if any, that occurred in the
related Prepayment Period.

         (c) The Servicer, in its sole discretion, shall have the right to elect
(by written notice sent to the Trustee) to purchase for its own account from the
Trust Fund any Mortgage Loan that is 91 days or more Delinquent at a price equal
to the Purchase Price. The Purchase Price for any Mortgage Loan purchased
hereunder shall be delivered to the Trustee for deposit in the Collection
Account and the Trustee, upon receipt of such deposit and a Request for Release
from the Depositor in the form of Exhibit I hereto, shall release or cause to be
released to the Servicer the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment prepared by the Servicer, in each
case without recourse, representation or warranty, as shall be necessary to vest
in the Servicer any Mortgage Loan released pursuant hereto and the Servicer
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The Servicer shall
thereupon own such Mortgage Loan, and all security and documents, free of any
further obligation to the Trustee or the Certificateholders with respect
thereto.

         SECTION 3.13. Trustee to Cooperate; Release of Mortgage Files.

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

         Each Request for Release may be delivered to the Trustee or its
designee (i) via mail or courier, (ii) via facsimile or (iii) by such other
means, including, without limitation, electronic or computer readable medium, as
the Servicer and the Trustee or its designee shall mutually agree. The Trustee
or its designee shall promptly release the related Mortgage File(s) within five
(5) Business Days of receipt of a properly completed Request for Release
pursuant to clauses (i), (ii) or (iii) above. Receipt of a properly

                                      -58-

<PAGE>

completed Request for Release shall be authorization to the Trustee or its
designee to release such Mortgage Files, provided the Trustee or its designee
has determined that such Request for Release has been executed, with respect to
clauses (i) or (ii) above, or approved, with respect to clause (iii) above, by
an authorized Servicing Officer of the Servicer, and so long as the Trustee or
its designee complies with its duties and obligations under the agreement. If
the Trustee or its designee is unable to release the Mortgage Files within the
period previously specified, the Trustee or its designee shall immediately
notify the Servicer indicating the reason for such delay. If the Servicer is
required to pay penalties or damages due to the Trustee or its designee's
negligent failure to release the related Mortgage File or the Trustee or its
designee's negligent failure to execute and release documents in a timely
manner, the Trustee or its designee, shall be liable for such penalties or
damages directly caused by it and shall have no liability for penalties or
damages attributable to the Servicer's actions or inactions.

         If the Servicer at any time seeks to initiate a foreclosure proceeding
in respect of any Mortgaged Property as authorized by this Agreement, the
Servicer shall deliver or cause to be delivered to the Trustee or its designee,
for signature, as appropriate, any court pleadings, requests for trustee's sale
or other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity. Notwithstanding the foregoing, the Servicer shall cause
possession of any Mortgage File or of the documents therein that shall have been
released by the Trustee or its designee to be returned to the Trustee promptly
after possession thereof shall have been released by the Trustee or its designee
unless (i) the Mortgage Loan has been liquidated and the Liquidation Proceeds
relating to the Mortgage Loan have been deposited in the Collection Account, and
the Servicer shall have delivered to the Trustee or its designee a Request for
Release in the form of Exhibit I or (ii) the Mortgage File or document shall
have 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 and the
Servicer shall have delivered to the Trustee or its designee an Officer's
Certificate of a Servicing Officer certifying as to the name and address of the
Person to which the Mortgage File or the documents therein were delivered and
the purpose or purposes of such delivery.

         SECTION 3.14. Documents, Records and Funds in Possession of Servicer to
be Held for the Trustee.

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

         SECTION 3.15. Servicing Compensation.

         As compensation for its activities hereunder, the Servicer shall be
entitled to retain or withdraw from the Collection Account out of each payment
of interest on a Mortgage Loan included in the Trust

                                      -59-

<PAGE>

Fund an amount equal to interest at the applicable Servicing Fee Rate on the
Stated Principal Balance of the related Mortgage Loan as of the immediately
preceding Distribution Date.

         Additional servicing compensation in the form of any Excess Proceeds,
late payment fees, assumption fees (i.e. fees related to the assumption of a
Mortgage Loan upon the purchase of the related Mortgaged Property) and similar
fees payable by the Mortgagor, and all income and gain net of any losses
realized from Permitted Investments in the Collection Account shall be retained
by the Servicer to the extent not required to be deposited in the Collection
Account pursuant to Sections 3.05, or 3.12(a) hereof. The Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including payment of any premiums for hazard insurance, as
required by Section 3.10 hereof and maintenance of the other forms of insurance
coverage required by Section 3.10 hereof) and shall not be entitled to
reimbursement therefor except as specifically provided in Sections 3.08 and 3.12
hereof.

         SECTION 3.16. Access to Certain Documentation.

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

         SECTION 3.17. Annual Statement as to Compliance.

         Pursuant to this Agreement, the Servicer shall deliver to the
Depositor, the Trustee and the NIMs Insurer on or before February 28 beginning
in 2004 or such other date that the Depositor gives the Servicer at least 30
days prior notice of in order to remain in compliance with the Section 302
Requirements, an Officer's Certificate stating, as to each signatory thereof,
that (i) a review of the activities of the Servicer during the preceding
calendar year and of performance under this Agreement has been made under such
officer's supervision, and (ii) to the best of such officers' knowledge, based
on such review, the Servicer has fulfilled all of its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof. The Trustee shall forward a copy of
each such statement received by it to each Rating Agency. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon written
request at the Certificateholder's expense, provided such statement has been
delivered by the Servicer to the Trustee.

         SECTION 3.18. Annual Independent Public Accountants' Servicing
Statement; Financial Statements.

         On or before March 15 of each year, beginning in 2004 or such other
date in order to remain in compliance with the Section 302 Requirements, the
Servicer at its expense shall cause a nationally recognized firm of independent
public accountants (who may also render other services to the Servicer or any
Affiliate thereof) that is a member of the American Institute of Certified
Public Accountants to furnish a USAP Report to the Trustee, the NIMs Insurer and
the Depositor. Copies of the USAP Report shall be provided by the Trustee to any
Certificateholder upon request at the Certificateholder's expense, provided such
report has been delivered by the Servicer to the Trustee. In addition, at the
NIMs Insurer's

                                      -60-

<PAGE>

written request, the Servicer shall deliver copies of evidence of the Servicer's
fidelity bond or errors and omissions insurance coverage to the NIMs Insurer.

         SECTION 3.19. Rights of the NIMs Insurer. Each of the rights of the
NIMs Insurer set forth in this agreement shall exist so long as the notes issued
pursuant to the Indenture remain outstanding or the NIMs Insurer is owed amounts
in respect of its guarantee of payment on such notes.

         SECTION 3.20. Periodic Filings.

         (a) Promptly upon receipt of any report of the independent public
accountants required pursuant to Section 3.18, the Trustee shall review such
report. As part of the Form 10-K required to be filed pursuant to the terms of
this Agreement, the Trustee shall include such accountants report as well as the
Officer's Certificate delivered by the Servicer pursuant to Section 3.17
relating to the Servicer's performance of its obligations under this Agreement
and any significant deficiencies relating to the Servicer's compliance set forth
in the report of the Servicer's certified independent accountants described
above.

         (b) The Trustee shall prepare for filing, and execute (other than the
Form 10-Ks and the Certification), on behalf of the Trust Fund, and file with
the Securities and Exchange Commission, (i) within 15 days after each
Distribution Date in each month, each Monthly Statement on Form 8-K under the
Exchange Act executed by the Trustee, (ii) on or before March 31 of each year
beginning in 2004 or such other date in order to remain in compliance with the
Section 302 Requirements, a Form 10-K under the Exchange Act executed by the
Depositor, including any certification (the "Certification") required by the
Section 302 Requirements, and (iii) any and all reports, statements and
information respecting the Trust Fund and/or the Certificates required to be
filed on behalf of the Trust Fund under the Exchange Act executed by the
Trustee. The Certification shall be executed by a senior officer of the
Depositor. Upon such filing with the Securities and Exchange Commission, the
Trustee shall promptly deliver to the Depositor a copy of any such executed
report, statement or information. Prior to making any such filings and
certifications, the Trustee shall comply with the provisions set forth in this
Section. If permitted by applicable law and unless the Depositor otherwise
directs, the Trustee shall file a Form 15 under the Exchange Act on or before
January 30,2004 or as soon as it is able to do so pursuant to applicable law.
The Depositor hereby grants to the Trustee a limited power of attorney to
execute (other than the Form 10-Ks and the Certification) and file each such
document on behalf of the Depositor. Such power of attorney shall continue until
either the earlier of (i) receipt by the Trustee from the Depositor of written
termination of such power of attorney and (ii) the termination of the Trust
Fund. The Depositor agrees to promptly furnish to the Trustee, from time to time
upon request, such further information, reports, and financial statements within
its control related to this Agreement and the Mortgage Loans as the Trustee
reasonably deems appropriate to prepare and file all necessary reports with the
Commission. The Trustee shall have no responsibility to file any items other
than those specified in this section.

         (c) [RESERVED].

         (d) The obligations set forth in paragraphs (a) through (c) of this
Section shall only apply with respect to periods for which the Trustee is
obligated to file Form 8-Ks and 10-Ks pursuant to paragraph (b) of this Section.
In the event a Form 15 is properly filed pursuant to paragraph (b) of this
Section, there shall be no further obligations under paragraphs (a) through (c)
of this Section commencing with the fiscal year in which the Form 15 is filed
(other than the obligations in paragraphs (a) and (b) of this Section to be
performed in such fiscal year that relate back to the prior fiscal year).

                                      -61-

<PAGE>

         SECTION 3.21. Annual Certificate by Trustee

         (a) Within 15 days prior to the date on which a Form 10-K is to be
filed with a Certification by the Depositor, an officer of the Trustee shall
execute and deliver an Officer's Certificate, signed by a Responsible Officer of
the Trustee or any officer to whom that officer reports, to the Depositor for
the benefit of such Depositor and its officers, directors and affiliates,
certifying as to the matters described in the Officer's Certificate attached
hereto as Exhibit K.

         (b) The Trustee shall indemnify and hold harmless the Depositor and its
officers, directors, agents and affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments and other costs and expenses arising out of or based upon a breach by
the Trustee or any of its officers, directors, agents or affiliates of its
obligations under this Section 3.21 any material misstatement or omission in the
Officer's Certificate required under this Section or the negligence, bad faith
or willful misconduct of the Trustee in connection therewith. If the
indemnification provided for herein is unavailable or insufficient to hold
harmless the Depositor, then the Trustee agrees that it shall contribute to the
amount paid or payable by the Depositor as a result of the losses, claims,
damages or liabilities of the Depositor in such proportion as is appropriate to
reflect the relative fault of the Trustee on the one had and the Depositor on
the other in connection with a breach of the Trustee's obligations under this
Section 3.21, any material misstatement or omission in the Officer's Certificate
required under this Section or the Trustee's negligence, bad faith or willful
misconduct in connection therewith.

         SECTION 3.22. Annual Certificate by Servicer

         (a) By February 28 beginning in 2004 or such other date specified in a
written notice within 15 days prior to the date on which a Form 8-K is required
to be filed with a Certification by the Depositor, the Servicer shall execute
and deliver an Officer's Certificate in the form of Exhibit L attached hereto,
signed by the senior officer in charge of servicing of the Servicer or any
officer to whom that officer reports, to the Trustee, the NIMs Insurer and
Depositor for the benefit of the Trustee and Depositor and their respective
officers, directors and affiliates, certifying as to the following matters:

                  (i)      The Servicer has reviewed the information required to
         be delivered to the Trustee pursuant to the Pooling and Servicing
         Agreement (the "Servicing Information").

                  (ii)     Based on the Servicer's knowledge, the information in
         the Annual Statement of Compliance, and all servicing reports,
         officer's certificates and other information relating to the servicing
         of the Mortgage Loans submitted to the Trustee by the Servicer taken as
         a whole, does not contain any untrue statement of a material fact or
         omit to state a material fact necessary to make any such reports,
         certificates or other information, in light of the circumstances under
         which such statements were made, not misleading as of the last day of
         the period covered by the Annual Statement of Compliance;

                  (iii)    Based on the Servicer's knowledge, the Servicing
         Information required to be provided to the Trustee by the Servicer
         under this Agreement has been provided to the Trustee; and

                  (iv)     Based upon the review required under this Agreement,
         and except as disclosed in the Annual Statement of Compliance, the
         Annual Independent Certified Public Accountant's Servicing Report and
         all servicing reports, officer's certificates and other information
         relating to the servicing of the Mortgage Loans submitted to the
         Trustee by the Servicer, the Servicer has, as of the last day of the
         period covered by the Annual Statement of Compliance fulfilled its
         obligations under this Agreement.

                                      -62-

<PAGE>
         (b) The Servicer shall indemnify and hold harmless the Depositor and
their respective officers, directors, agents and affiliates from and against any
losses, damages, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments and other costs and expenses arising out of or based
upon (i) a breach by the Servicer or any of its officers, directors, agents or
affiliates of its obligations under this Section 3.22, (ii) any allegation that
the Officer's Certificate required under this Section contains or contain a
misstatement of a material fact or omits or omitted to state a material fact
necessary to make the statement made, in light of the circumstances under which
such statements were made, not misleading or (iii) the negligence, bad faith or
willful misconduct of the Servicer in connection therewith. If the
indemnification provided for herein is unavailable or insufficient to hold
harmless the Depositor, then the Servicer agrees that it shall contribute to the
amount paid or payable by the Trustee and the Depositor as a result of the
losses, claims, damages or liabilities of the Depositor in such proportion as is
appropriate to reflect the relative fault of the Depositor on the one hand and
the Servicer on the other in connection with a breach of the Servicer's
obligations under this Section 3.22, any alleged material misstatement or
omission in the Officer's Certificate required under this Section or the
Servicer's negligence, bad faith or willful misconduct in connection therewith.

         SECTION 3.23. Prepayment Penalty Reporting Requirements.

         (a) Promptly after each Distribution Date, the Servicer shall provide
to the Depositor and the NIMs Insurer the following information with regard to
each Mortgage Loan that has prepaid during the related Prepayment Period:

                  (i)      loan number;

                  (ii)     current Mortgage Rate;

                  (iii)    current principal balance;

                  (iv)     original principal balance;

                  (v)      prepayment penalty amount due;

                  (vi)     prepayment penalty amount collected

                  (vii)    reason why full prepayment penalty amount was not
         collected, if applicable.

         SECTION 3.24. Statements to Trustee. Not later than the tenth calendar
day of each month, the Servicer shall furnish to the Trustee and the NIMs
Insurer an electronic file providing loan level accounting data for the period
ending on the last Business Day of the preceding month in the format mutually
agreed upon between the Servicer and the Trustee, including but not limited to
information described in Section 4.05(a).

         SECTION 3.25. Indemnification.

                                      -63-

<PAGE>

         The Servicer shall indemnify the Seller, the Trust Fund, Trustee, the
Depositor and the NIMs Insurer and hold each of them harmless against any and
all claims, losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgements, and any other costs, fees
and expenses that any of such parties may sustain in any way related to the
failure of the Servicer to perform its duties and service the Mortgage Loans in
compliance with the terms of this Agreement. The Servicer immediately shall
notify the Seller, the Trustee, the Depositor and the NIMs Insurer or any other
relevant party if a claim is made by a third party with respect to this
Agreement or the Mortgage Loans, assume (with the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld or delayed)
the defense of any such claim and pay all expenses in connection therewith,
including counsel fees, and promptly pay, discharge and satisfy any judgement or
decree which may be entered against it or any of such parties in respect of such
claim. The Servicer shall follow any written instructions received from the
Trustee and the NIMs Insurer in connection with such claim. The Servicer shall
provide the Trustee, the Depositor and the NIMs Insurer with a written report of
all expenses and advances incurred by the Servicer pursuant to this Section
3.25, and the Servicer from the assets of the Trust Fund in the Collection
Account promptly shall reimburse itself for all amounts advanced by it pursuant
to the preceding sentence except when the claim in any way relates to the
failure of the Servicer to service and administer the Mortgage Loans in material
compliance with the terms of this Agreement or the gross negligence, bad faith
or willful misconduct of the Servicer. The provisions of this paragraph shall
survive the termination of this Agreement and the payment of the outstanding
Certificates.

         SECTION 3.26. Nonsolicitation.

         For as long as the Servicer services the Mortgage Loans, the Servicer
covenants that it will not, and that it will ensure that its affiliates and
agents, will not, directly solicit or provide information for any other party to
solicit for prepayment or refinancing of any of the Mortgage Loans by the
related Mortgagors. It is understood that the promotions undertaken by the
Servicer which are directed to the general public at large, or certain segments
thereof, shall not constitute solicitation as that term is used in this Section
3.26.

         SECTION 3.27. Existing Servicing Agreement.

         The Servicer acknowledges the transfer on the Closing Date of the
servicing of the Mortgage Loans from the Existing Servicing Agreement to this
Pooling and Servicing Agreement pursuant to Section 10.01 of the Existing
Servicing Agreement.

                                   ARTICLE IV

                                  DISTRIBUTIONS

         SECTION 4.01. Advances.

                                      -64-

<PAGE>

         Subject to the conditions of this Article IV, the Servicer, as required
below, shall make an Advance and deposit such Advance in the Collection Account.
Each such Advance shall be remitted to the Collection Account no later than 1:00
p.m. Eastern Standard time on the Servicer Advance Date in immediately available
funds. The Servicer shall be obligated to make any such Advance only to the
extent that such advance would not be a Non-Recoverable Advance. If the Servicer
shall have determined that it has made a Non-Recoverable Advance or that a
proposed Advance or a lesser portion of such Advance would constitute a
Non-Recoverable Advance, the Servicer shall deliver (i) to the Trustee for the
benefit of the Certificateholders funds constituting the remaining portion of
such Advance, if applicable, and (ii) to the Depositor, the NIMs Insurer, each
Rating Agency and the Trustee an Officer's Certificate setting forth the basis
for such determination. The Servicer may, in its sole discretion, make an
Advance with respect to the principal portion of the final Scheduled Payment on
a Balloon Loan, but the Servicer is under no obligation to do so; provided,
however, that nothing in this sentence shall affect the Servicer's obligation
under this Section 4.01 to Advance the interest portion of the final Scheduled
Payment with respect to a Balloon Loan as if such Balloon Loan were a fully
amortizing Mortgage Loan. If a Mortgagor does not pay its final Scheduled
Payment on a Balloon Loan when due, the Servicer shall Advance (unless it
determines in its good faith judgment that such amounts would constitute a
Non-Recoverable Advance) a full month of interest (net of the Servicing Fee) on
the Stated Principal Balance thereof each month until its Stated Principal
Balance is reduced to zero.

         In lieu of making all or a portion of such Advance from its own funds,
the Servicer may (i) cause to be made an appropriate entry in its records
relating to the Collection Account that any amount held for future distribution
has been used by the Servicer in discharge of its obligation to make any such
Advance and (ii) transfer such funds from the Collection Account to the
Certificate Account. In addition, the Servicer shall have the right to reimburse
itself for any such Advance from amounts held from time to time in the
Collection Account to the extent such amounts are not then required to be
distributed. Any funds so applied and transferred pursuant to the previous two
sentences shall be replaced by the Servicer by deposit in the Collection Account
no later than the close of business on the Servicer Advance Date on which such
funds are required to be distributed pursuant to this Agreement. The Servicer
shall be entitled to be reimbursed from the Collection Account for all Advances
of its own funds made pursuant to this Section as provided in Section 3.08. The
obligation to make Advances with respect to any Mortgage Loan shall continue
until such Mortgage Loan is paid in full or the related Mortgaged Property or
related REO Property has been liquidated or until the purchase or repurchase
thereof (or substitution therefor) from the Trust Fund pursuant to any
applicable provision of this Agreement, except as otherwise provided in this
Section 4.01.

         SECTION 4.02. Reduction of Servicing Compensation in Connection with
Prepayment Interest Shortfalls.

         In the event that any Mortgage Loan is the subject of a Prepayment
Interest Shortfall, the Servicer shall, from amounts in respect of the Servicing
Fee for such Distribution Date, deposit into the Collection Account, as a
reduction of the Servicing Fee for such Distribution Date, no later than the
Servicer Advance Date immediately preceding such Distribution Date, an amount up
to the Prepayment Interest Shortfall; provided that the amount so deposited with
respect to any Distribution Date shall be limited to the product of (x)
one-twelfth of 0.30% and (y) the aggregate Stated Principal Balance of the
Mortgage Loans. In case of such deposit, the Servicer shall not be entitled to
any recovery or reimbursement from the Depositor, the Trustee, the Trust Fund or
the Certificateholders. With respect to any Distribution Date, to the extent
that the Prepayment Interest Shortfall exceeds Compensating Interest (such
excess, a "Non-Supported Interest Shortfall"), such Non-Supported Interest
Shortfall shall reduce the Current Interest with respect to each Class of
Certificates, pro rata based upon the amount of interest each such Class would
otherwise be entitled to receive on such Distribution Date.

                                      -65-

<PAGE>

         SECTION 4.03. Distributions on the REMIC Interests.

         On each Distribution Date, amounts on deposit in the Certificate
Account shall be treated for federal income tax purposes as applied to
distributions on the interests in both the Lower Tier REMIC and the Middle Tier
REMIC in an amount sufficient to make the distributions on the respective
Certificates on such Distribution Date in accordance with the provisions of
Section 4.04.

         SECTION 4.04. Distributions.

         (a) [RESERVED].

         (b) On each Distribution Date, the Trustee shall make the following
distributions from the Certificate Account of an amount equal to the Interest
Funds in the following order of priority:

                  (i)      to the Class P Certificates, an amount equal to any
         prepayment penalties collected on the Mortgage Loans and any amounts
         paid by the Transferor (A) in respect of prepayment charges pursuant to
         this Agreement or (B) any amounts received in respect of any
         indemnification paid by the Servicer as a result of a prepayment charge
         being unenforceable in breach of the representations and warranties set
         forth in the Sale Agreement received during the related Prepayment
         Period;

                  (ii)     to each Class of the Class R Certificate, Class A
         Certificates and Class S Certificates, the Current Interest and any
         Interest Carryforward Amount with respect to such Class; provided,
         however, if such amount is not sufficient to make a full distribution
         of the Current Interest and any Interest Carryforward Amount with
         respect to all the Class of R Certificate, Class A Certificates and
         Class S Certificates, such amount will be distributed pro rata among
         each Class of the Class of R Certificate, Class A Certificates and
         Class S Certificates based on the ratio of (x) the Current Interest and
         Interest Carryforward Amount for each Class of the Class of R
         Certificate, Class A Certificates and Class S Certificates to (y) the
         total amount of Current Interest and any Interest Carryforward Amount
         for the Class of R Certificate, Class A Certificates and Class S
         Certificates;

                  (iii)    to the Class M-1 Certificates, the Class M-1 Current
         Interest and any Class M-1 Interest Carryforward Amount;

                  (iv)     to the Class M-2 Certificates, the Class M-2 Current
         Interest and any Class M-2 Interest Carryforward Amount;

                  (v)      to the Class B-1 Certificates, the Class B-1 Current
         Interest and any Class B-1 Interest Carryforward Amount;

                  (vi)     to the Class B-2 Certificates, the Class B-2 Current
         Interest and any Class B-2 Interest Carryforward Amount; and

                  (vii)    any remainder pursuant to Section 4.04(f) hereof.

         (c) All amounts representing prepayment charges in respect of the
Mortgage Loans, and amounts paid by the Servicer in respect of prepayment
charges pursuant to this Agreement will be distributed by the Trustee to the
Holders of the Class P Certificates pursuant to Section 4.04(b).

         (d) On each Distribution Date, the Trustee shall make the following
distributions from the Certificate Account of an amount equal to the Principal
Distribution Amount in the following order of

                                      -66-

<PAGE>

priority, and each such distribution shall be made only after all distributions
pursuant to Section 4.04(b) above shall have been made until such amount shall
have been fully distributed for such Distribution Date:

                  (i)      (A) to the Class R Certificate and the Class A
         Certificates, sequentially, the Class A Principal Distribution Amount,
         until the Certificate Principal Balances thereof have been reduced to
         zero;

                  (ii)     to the Class M-1 Certificates, the Class M-1
         Principal Distribution Amount;

                  (iii)    to the Class M-2 Certificates, the Class M-2
         Principal Distribution Amount;

                  (iv)     to the Class B-1 Certificates, the Class B-1
         Principal Distribution Amount;

                  (v)      to the Class B-2 Certificates, the Class B-2
         Principal Distribution Amount; and

                  (vi)     any remainder pursuant to Section 4.04(f) hereof.

         (e) [RESERVED].

         (f) On each Distribution Date, the Trustee shall make the following
distributions up to the following amounts from the Certificate Account of the
remainders pursuant to Section 4.04(b)(vii) and (d)(vi) hereof and, to the
extent required to make the distributions set forth below in clauses (i) through
(iv) of this Section 4.04(f), and each such distribution shall be made only
after all distributions pursuant to Sections 4.04(b) and (d) above shall have
been made until such remainders shall have been fully distributed for such
Distribution Date:

                  (i)      for distribution as part of the Principal
         Distribution Amount, the Extra Principal Distribution Amount;

                  (ii)     to the Class M-1 Certificates, the Class M-1 Unpaid
         Realized Loss Amount;

                  (iii)    to the Class M-2 Certificates, the Class M-2 Unpaid
         Realized Loss Amount;

                  (iv)     to the Class B-1 Certificates, the Class B-1 Unpaid
         Realized Loss Amount;

                  (v)      to the Class B-2 Certificates, the Class B-2 Unpaid
         Realized Loss Amount;

                  (vi)     to the extent required to make the allocations set
         forth below, in the following order of priority (however, that to the
         extent the amounts to be allocated pursuant to clauses (A) and (B) are
         insufficient to make all payments of Current Interest and Interest
         Carryforward Amounts for such Class A Certificates and the Class R
         Certificate, the distributions made pursuant to clauses (A) and (B)
         shall be made on a pro rata basis and not sequentially):

                           (A)      to the Class A Certificates, the Class A
                                    Current Interest and the Class A Interest
                                    Carryforward Amount, and to the Class R
                                    Certificate, the Class R Current Interest
                                    and the Class R Interest Carryforward
                                    Amount;

                           (B)      to the Class M-1 Certificates, the Class M-1
                                    Current Interest, the Class M-1 Interest
                                    Carryforward Amount;

                           (C)      to the Class M-2 Certificates, the Class M-2
                                    Current Interest, the Class M-2 Interest
                                    Carryforward Amount;

                                      -67-

<PAGE>

                           (D)      to the Class B-1 Certificates, the Class B-1
                                    Current Interest, the Class B-1 Interest
                                    Carryforward Amount; and

                           (E)      to the Class B-2 Certificates, the Class B-2
                                    Current Interest, the Class B-2 Interest
                                    Carryforward Amount;

                  (vii)    the remainder pursuant to Section 4.04(g) hereof.

         (g) on each Distribution Date, the Trustee shall allocate the
remainders pursuant to Section 4.01(f)(vii) as follows:

                  (i)      to the Class C Certificates in the following order of
         priority, (I) the Class C Current Interest, (II) the Class C Interest
         Carryforward Amount, (III) as principal on the Class C Certificate
         until the Certificate Principal Balance of the Class C Certificates has
         been reduced to zero and (IV) the Class C Unpaid Realized Loss Amount;
         and

                  (ii)     the remainder pursuant to Section 4.04(h) hereof.

         (h) On each Distribution Date, the Trustee shall allocate the remainder
pursuant to Section 4.04(g)(ii) hereof, (i) to the Trustee to reimburse amounts
or pay indemnification amounts owing to the Trustee from the Trust Fund pursuant
to Section 8.06 to the extent such amounts shall have exceeded the cap set forth
in Section 8.06(c), and (ii) thereafter, to the Class R Certificate and such
distributions shall be made only after all preceding distributions shall have
been made until such remainder shall have been fully distributed.

         (i) On each Distribution Date, after giving effect to distributions on
such Distribution Date, the Trustee shall allocate the Applied Realized Loss
Amount for the Certificates to reduce the Certificate Principal Balances of the
Class C and Subordinated Certificates in the following order of priority:

                  (i)      to the Class C Certificates until the Class C
         Certificate Principal Balance is reduced to zero;

                  (ii)     to the Class B-2 Certificates until the Class B-2
         Certificate Principal Balance is reduced to zero;

                  (iii)    to the Class B-1 Certificates until the Class B-1
         Certificate Principal Balance is reduced to zero

                  (iv)     to the Class M-2 Certificates until the Class M-2
         Certificate Principal Balance is reduced to zero; and

                  (v)      to the Class M-1 Certificates until the Class M-1
         Certificate Principal Balance is reduced to zero.

         (j) Subject to Section 9.02 hereof respecting the final distribution,
on each Distribution Date the Trustee shall make distributions to each
Certificateholder of record on the preceding Record Date either by wire transfer
in immediately available funds to the account of such holder at a bank or other
entity having appropriate facilities therefor, if such Holder has so notified
the Trustee at least five (5) Business Days prior to the related Record Date or,
if not, by check mailed by first class mail to such Certificateholder at the
address of such holder appearing in the Certificate Register. Notwithstanding
the foregoing, but subject to Section 9.02 hereof respecting the final
distribution, distributions with respect to Certificates registered in the name
of a Depository shall be made to such Depository in immediately available funds.

                                      -68-

<PAGE>

         In accordance with this Agreement, the Servicer shall prepare and
deliver a report (the "Remittance Report") to the Trustee and the NIMs Insurer
in the form of a computer readable magnetic tape (or by such other means as the
Servicer, the Trustee and the NIMs Insurer may agree from time to time)
containing such data and information such as to permit the Trustee to prepare
the Monthly Statement to Certificateholders and make the required distributions
for the related Distribution Date.

         The Trustee shall promptly notify the NIMs Insurer of any proceeding or
the institution of any action, of which a Responsible Officer of the Trustee has
actual knowledge, seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership or similar law (a "Preference
Claim") of any distribution made with respect to the Class C Certificates or the
Class P Certificates. Each Holder of the Class C Certificates or the Class P
Certificates, by its purchase of such Certificates and the Trustee hereby agree
that the NIMs Insurer may at any time during the continuation of any proceeding
relating to a Preference Claim direct all matters relating to such Preference
Claim, including, without limitation, (i) the direction of any appeal of any
order relating to such Preference Claim and (ii) the posting of any surety,
supersedes or performance bond pending any such appeal. In addition and without
limitation of the foregoing, the NIMs Insurer shall be subrogated to the rights
of the Trustee and each Holder of the Class C Certificates and the Class P
Certificates in the conduct of any such Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such Preference Claim;
provided, however, that the NIMs Insurer will not have any rights with respect
to any Preference Claim set forth in this paragraph unless the indenture trustee
with respect to the NIM Notes or the holder of any NIMs Notes has been required
to relinquish a distribution made on the Class C Certificates, the Class P
Certificates or the NIM Notes, as applicable, and the NIMs Insurer made a
payment in respect of such relinquished amount.

         SECTION 4.05. Monthly Statements to Certificateholders.

         (a) Not later than each Distribution Date based on information provided
by the Servicer, the Trustee shall prepare and make available on its website
located at www.jpmorgan.com/absmbs to each Holder of a Class of Certificates of
the Trust Fund, the Servicer, the NIMs Insurer, the Rating Agencies and the
Depositor a statement setting forth for the Certificates:

                  (i)      the amount of the related distribution to Holders of
         each Class allocable to principal, separately identifying (A) the
         aggregate amount of any Principal Prepayments included therein, (B) the
         aggregate of all scheduled payments of principal included therein, (C)
         the Extra Principal Distribution Amount, if any, and (D) the aggregate
         amount of prepayment penalties, if any;

                  (ii)     the amount of such distribution to Holders of each
         Class allocable to interest, together with any Non-Supported Interest
         Shortfalls allocated to each Class;

                  (iii)    any Interest Carryforward Amount for each Class of
         the Offered Certificates;

                  (iv)     the Class Certificate Principal Balance of each Class
         after giving effect (i) to all distributions allocable to principal on
         such Distribution Date and (ii) the allocation of any Applied Realized
         Loss Amounts for such Distribution Date;

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

                  (vi)     the related amount of the Servicing Fee paid to or
         retained by the Servicer;

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

                                      -69-

<PAGE>

                  (viii)   the amount of Advances included in the distribution
         on such Distribution Date;

                  (ix)     the cumulative amount of (A) Realized Losses and (B)
         Applied Realized Loss Amounts to date;

                  (x)      the amount of (A) Realized Losses and (B) Applied
         Realized Loss Amounts with respect to such Distribution Date;

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

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

                  (xiii)   the total number and principal balance of any REO
         Properties as of the close of business on the last day of the calendar
         month preceding such Distribution Date;

                  (xiv)    the aggregate Stated Principal Balance of all
         Liquidated Loans as of the preceding Distribution Date;

                  (xv)     whether a Trigger Event has occurred;

                  (xvi)    with respect to each Class of Certificates, any
         Interest Carryforward Amount with respect to such Distribution Date for
         each such Class, any Interest Carryforward Amount paid for each such
         Class and any remaining Interest Carryforward Amount for each such
         Class;

                  (xvii)   with respect to each Class Certificates any Interest
         Carryover Amount with respect to such Distribution Date for each such
         Class, any Interest Carryover Amount paid for each such Class and any
         remaining Interest Carryover Amount for each such Class;

                  (xviii)  the number and Stated Principal Balance (as of the
         preceding Distribution Date) of any Mortgage Loans which were purchased
         or repurchased during the preceding Due Period and since the Cut-off
         Date;

                  (xix)    the number of Mortgage Loans for which prepayment
         penalties were received during the related Prepayment Period and, for
         each such Mortgage Loan, the amount of prepayment penalties received
         during the related Prepayment Period and in the aggregate of such
         amounts for all such Mortgage Loans since the Cut-off Date;

                  (xx)     the related amount of the Credit Risk Manager Fee
         paid to the Credit Risk Manager;

                  (xxi)    the amount and purpose of any withdrawal from the
         Collection Account pursuant to Section 3.08(a)(iv); and

                  (xxii)   the amount of any payments to each Class of
         Certificates that are treated as payments received in respect of a
         REMIC Regular Interest and the amount of any payments to

                                      -70-

<PAGE>

         each Class of Certificates that are not treated as payments received in
         respect of a REMIC Regular Interest.

         (b) The Servicer shall deliver to the NIMs Insurer a copy of any report
delivered by the Servicer to the Trustee.

         (c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall cause to be furnished to the NIMs Insurer and each
Person who at any time during the calendar year was a Certificateholder, a
statement containing the information set forth in clauses (a)(i) and (a)(ii) of
this Section 4.02 aggregated for such calendar year or applicable portion
thereof during which such Person was a Certificateholder. Such obligation of the
Trustee shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.

         (d) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Class R Certificate and the NIMs Insurer the Form
1066 and each Form 1066Q and shall respond promptly to written requests made not
more frequently than quarterly by any Holder of Class R Certificate with respect
to the following matters:

                  (i)      The original projected principal and interest cash
         flows on the Closing Date on each Class of regular and residual
         interests created hereunder and on the Mortgage Loans, based on the
         Prepayment Assumption;

                  (ii)     The projected remaining principal and interest cash
         flows as of the end of any calendar quarter with respect to each Class
         of regular and residual interests created hereunder and the Mortgage
         Loans, based on the Prepayment Assumption;

                  (iii)    The Prepayment Assumption and any interest rate
         assumptions used in determining the projected principal and interest
         cash flows described above;

                  (iv)     The original issue discount (or, in the case of the
         Mortgage Loans, market discount) or premium accrued or amortized
         through the end of such calendar quarter with respect to each Class of
         regular or residual interests created hereunder and to the Mortgage
         Loans, together with each constant yield to maturity used in computing
         the same;

                  (v)      The treatment of losses realized with respect to the
         Mortgage Loans or the regular interests created hereunder, including
         the timing and amount of any cancellation of indebtedness income of the
         REMICs with respect to such regular interests or bad debt deductions
         claimed with respect to the Mortgage Loans;

                  (vi)     The amount and timing of any non-interest expenses of
         the REMICs; and

                  (vii)    Any taxes (including penalties and interest) imposed
         on the REMICs, including, without limitation, taxes on "prohibited
         transactions," "contributions" or "net income from foreclosure
         property" or state or local income or franchise taxes.

         The information pursuant to clauses (i), (ii), (iii) and (iv) above
shall be provided by the Depositor pursuant to Section 8.12.

                                      -71-

<PAGE>

                                   ARTICLE V

                                THE CERTIFICATES

         SECTION 5.01. The Certificates.

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

<TABLE>
<CAPTION>
                                                           Original Certificate
                   Minimum        Integral Multiples in    Principal Balance or
Class            Denomination      Excess of Minimum         Notional Balance
-----           ----------------   --------------------    ---------------------
<S>            <C>                <C>                     <C>
A              $      25,000.00        $   1.00            $   204,350,000.00
S              $   1,000,000.00        $   1.00            $   244,000,000.00(1)
M-1            $      25,000.00        $   1.00            $    15,860,000.00
M-2            $      25,000.00        $   1.00            $    12,810,000.00
B-1            $      25,000.00        $   1.00            $     7,320,000.00
B-2            $      25,000.00        $   1.00            $     3,660,000.00
C                            (2)             (2)           $             0.68
R              $         100.00           N/A              $           100.00
P                            (3)             (3)                           (3)
</TABLE>

-------------------
(1)      The Class S Certificates are interest-only certificates; they will not
         be entitled to payments of principal; and they will accrue interest on
         the Class S Notional Balance.

(2)      The Class C Certificates shall not have a minimum dollar denominations
         as the Certificate Principal Balances shall vary over time as described
         herein.

(3)      The Class P Certificates shall not have minimum dollar denominations or
         Certificate Principal Balances and shall be issued in a minimum
         percentage interest of 25%.

         The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trust Fund, notwithstanding that such individuals or any of them have ceased
to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of such authentication and
delivery. 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 set forth as attached
hereto executed by the Trustee by manual signature, and such certificate of
authentication upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication. On
the Closing Date, the Trustee shall authenticate the Certificates to be issued
at the written direction of the Depositor, or any Affiliate thereof.

                                      -72-

<PAGE>

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

         (a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.09 hereof, a Certificate Register for the Trust
Fund in which, subject to the provisions of subsections (b) and (c) below and to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of Transfers and exchanges of Certificates
as herein provided. Upon surrender for registration of Transfer of any
Certificate, the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and of like aggregate Percentage Interest.

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

         No service charge to the Certificateholders shall be made for any
registration of Transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any Transfer or exchange of Certificates may be required. All
Certificates surrendered for registration of Transfer or exchange shall be
canceled and subsequently destroyed by a Trustee in accordance with such
Trustee's customary procedures.

         (b) No Transfer of a Class C or Class P Certificate shall be made
unless such Transfer is made pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws or is exempt
from the registration requirements under the Securities Act and such state
securities laws. In the event that a Transfer is to be made in reliance upon an
exemption from the Securities Act and such laws, in order to assure compliance
with the Securities Act and such laws, the Certificateholder desiring to effect
such Transfer and such Certificateholder's prospective transferee shall (except
with respect to the initial transfer of a Class C or Class P Certificate by
Merrill Lynch & Co.) each certify to each Trustee in writing the facts
surrounding the Transfer in substantially the forms set forth in Exhibit F (the
"Transferor Certificate") and (i) deliver a letter in substantially the form of
either Exhibit G (the "Investment Letter") or Exhibit H (the "Rule 144A Letter")
or (ii) there shall be delivered to each Trustee an Opinion of Counsel addressed
to the Trustee that such Transfer may be made pursuant to an exemption from the
Securities Act, which Opinion of Counsel shall not be an expense of the
Depositor or the Trustee. The Depositor shall provide to any Holder of a Class C
or Class P Certificate and any prospective transferee designated by any such
Holder, information regarding the related Certificates and the Mortgage Loans
and such other information as shall be necessary to satisfy the condition to
eligibility set forth in Rule 144A(d)(4) for Transfer of any such Certificate
without registration thereof under the Securities Act pursuant to the
registration exemption provided by Rule 144A. The Trustee shall cooperate with
the Depositor in providing the Rule 144A information referenced in the preceding
sentence, including providing to the Depositor such information in the
possession of the Trustee regarding the Certificates, the Mortgage Loans and
other matters regarding the Trust Fund as the Depositor shall reasonably request
to meet its obligation under the preceding sentence. Each Holder of a Class C or
Class P Certificate desiring to effect such Transfer shall, and does hereby
agree to, indemnify the Depositor and the Trustee against any liability that may
result if the Transfer is not so exempt or is not made in accordance with such
federal and state laws.

                                      -73-

<PAGE>

         No Transfer of an ERISA Restricted Certificate shall be made unless the
Trustee shall have received either (i) a representation from the transferee of
such Certificate acceptable to and in form and substance satisfactory to the
Trustee and the NIMs Insurer, to the effect that such transferee is not an
employee benefit plan subject to Title I of ERISA or a plan subject to Section
4975 of the Code or a plan subject to any applicable Federal, state or local law
materially similar to the foregoing provisions of ERISA and the Code ("Similar
Law"), or a Person acting on behalf of any such plan or using the assets of any
such plan, (ii) except in the case of a Class R Certificate which may not be
transferred to a transferee that does not provide the representation described
in clause (i), if, a representation that the transferee is an insurance company
that is purchasing such Certificate with funds contained in an "insurance
company general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) ("PTCE
95-60")) and that the purchase and holding of such Certificate is covered under
Sections I and III of PTCE 95-60, or (iii) in the case of any such ERISA
Restricted Certificate, other than a Class R Certificate, presented for
registration in the name of an employee benefit plan subject to ERISA, a plan
subject to Section 4975 of the Code, or a plan subject to Similar Law (or
comparable provisions of any subsequent enactments), or a trustee of any such
plan or any other person acting on behalf of any such plan, an Opinion of
Counsel satisfactory to the Trustee and the NIMs Insurer to the effect that the
purchase and holding of such ERISA Restricted Certificate will not result in a
prohibited transaction under ERISA or the Code or Similar Law and will not
subject the NIMs Insurer or the Trustee to any obligation in addition to those
expressly undertaken in this Agreement, which Opinion of Counsel shall not be an
expense of the NIMs Insurer or the Trustee. For purposes of clause (i) of the
preceding sentence, such representation shall be deemed to have been made to the
Trustee by the transferee's acceptance of an ERISA Restricted Certificate (or
the acceptance by a Certificate Owner of the beneficial interest in any Class of
ERISA Restricted Certificates) unless the Trustee shall have received from the
transferee an alternative representation acceptable in form and substance to the
Trustee. Notwithstanding anything else to the contrary herein, any purported
transfer of an ERISA Restricted Certificate to or on behalf of an employee
benefit plan subject to Title I of ERISA, a plan subject to Section 4975 of the
Code, or a plan subject to Similar Law without the delivery to the Trustee and
the NIMs Insurer of an Opinion of Counsel satisfactory to the Trustee and the
NIMs Insurer as described above shall be void and of no effect. The Trustee
shall be under no liability to any Person for any registration of transfer of
any ERISA Restricted Certificate that is in fact not permitted by this Section
5.02(b) or for making any payments due on such Certificate to the Holder thereof
or taking any other action with respect to such Holder under the provisions of
this Agreement so long as the transfer was registered by the Trustee in
accordance with the foregoing requirements. The Trustee shall be entitled, but
not obligated, to recover from any Holder of any ERISA Restricted Certificate
that was in fact an employee benefit plan subject to Title I of ERISA, a plan
subject to Section 4975 of the Code, or a plan subject to Similar Law or a
Person acting on behalf of any such plan at the time it became a Holder or, at
such subsequent time as it became such a plan or Person acting on behalf of such
a plan, all payments made on such ERISA Restricted Certificate at and after
either such time. Any such payments so recovered by the Trustee shall be paid
and delivered by the Trustee to the last preceding Holder of such Certificate
that is not such a plan or Person acting on behalf of a plan.

         No Transfer of a Class C Certificate may be made to a person that is
either (i) not a "United States person" (as defined for purposes of Section 7701
of the Code) or (ii) a Disqualified Organization or a Person acquiring such
Certificate on behalf (as a broker, agent, nominee or otherwise) of a
Disqualified Organization. The Trustee shall not register any Transfer of a
Class C Certificate unless the Trustee shall have been furnished with a
Transferee Letter or a letter from the initial Holder of the Class C
Certificates in the form attached as Exhibit M. Any Transfer of a Class C
Certificate in violation of the provisions of this Section 5.02(b) shall be
absolutely null and void and shall absolutely have no rights in the purported
Transferee.

                                      -74-

<PAGE>

         (c) 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
the rights of each Person acquiring any Ownership Interest in a Class R
Certificate are expressly subject to the following provisions:

                  (i)      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.

                  (ii)     No Ownership Interest in a Class R Certificate may be
         purchased, transferred or sold, directly or indirectly, except in
         accordance with the provisions hereof. No Ownership Interest in a Class
         R Certificate may be registered on the Closing Date or thereafter
         transferred, and the Trustee shall not register the Transfer of any
         Class R Certificate unless, in addition to the certificates required to
         be delivered to the Trustee under subparagraph (b) above, the Trustee
         shall have been furnished with an affidavit (a "Transfer Affidavit") of
         the initial owner or the proposed transferee in the form attached
         hereto as Exhibit E-1 and an affidavit of the proposed transferor in
         the form attached hereto as Exhibit E-2. In the absence of a contrary
         instruction from the transferor of a Class R Certificate, declaration
         (11) in Appendix A of the Transfer Affidavit may be left blank. If the
         transferor requests by written notice to the Trustee prior to the date
         of the proposed transfer that one of the two other forms of declaration
         (11) in Appendix A of the Transfer Affidavit be used, then the
         requirements of this Section 5.02(c)(ii) shall not have been satisfied
         unless the Transfer Affidavit includes such other form of declaration.

                  (iii)    Each Person holding or acquiring any Ownership
         Interest in a Class R Certificate shall agree (A) to obtain a Transfer
         Affidavit from any other Person to whom such Person attempts to
         Transfer its Ownership Interest in a Class R Certificate, (B) to obtain
         a Transfer Affidavit from any Person for whom such Person is acting as
         nominee, trustee or agent in connection with any Transfer of a Class R
         Certificate and (C) not to Transfer its Ownership Interest in a Class R
         Certificate or to cause the Transfer of an Ownership Interest in a
         Class R Certificate to any other Person if it has actual knowledge that
         such Person is not a Permitted Transferee. Further, no transfer, sale
         or other disposition of any Ownership Interest in a Class R Certificate
         may be made to a person who is not a U.S. Person (within the meaning of
         section 7701 of the Code) unless such person furnishes the transferor
         and the Trustee with a duly completed and effective Internal Revenue
         Service Form W-8ECI (or any successor thereto) and the Trustee consents
         to such transfer, sale or other disposition in writing.

                  (iv)     Any attempted or purported Transfer of any Ownership
         Interest in a Class R Certificate in violation of the provisions of
         this Section 5.02(c) shall be absolutely null and void and shall vest
         no rights in the purported Transferee. If any purported transferee
         shall become a Holder of a Class R Certificate in violation of the
         provisions of this Section 5.02(c), then the last preceding Permitted
         Transferee shall be restored to all rights as Holder thereof
         retroactive to the date of registration of Transfer of such Class R
         Certificate. 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 Section 5.02(b) and this Section 5.02(c) or for making
         any payments due on such Certificate to the Holder thereof or taking
         any other action with respect to such Holder under the provisions of
         this Agreement so long as the Transfer was registered after receipt of
         the related Transfer Affidavit. The Trustee shall be entitled but not
         obligated to recover from any Holder of a Class R Certificate that was
         in fact not a Permitted Transferee at the time it became a Holder or,
         at such subsequent time as it became other than a Permitted Transferee,
         all payments made on such Class R Certificate at and after either such
         time. Any such payments so recovered by the Trustee shall

                                      -75-

<PAGE>

         be paid and delivered by the Trustee to the last preceding Permitted
         Transferee of such Certificate.

                  (v)      At the option of the Holder of the Class R
         Certificate, the Class LTR Interest, the Class MTR Interest and the
         residual interest in the Upper Tier REMIC may be severed and
         represented by separate certificates; provided, however, that such
         separate certification may not occur until the NIMs Insurer and the
         Trustee receive an Opinion of Counsel addressed to the Trustee to the
         effect that separate certification in the form and manner proposed
         would not result in the imposition of federal tax upon the Trust Fund
         or any of the REMICs provided for herein or cause any of the REMICs
         provided for herein to fail to qualify as a REMIC; and provided
         further, that the provisions of Sections 5.02(b) and (c) will apply to
         each such separate certificate as if the separate certificate were a
         Class R Certificate. If, as evidenced by an Opinion of Counsel, it is
         necessary to preserve the REMIC status of any of the REMICs provided
         for herein, the Class LTR Interest, the Class MTR Interest and the
         residual interest in the Upper Tier REMIC shall be severed and
         represented by separate Certificates.

         The restrictions on Transfers of a Class R Certificate set forth in
this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Class R Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee and the NIMs Insurer of an Opinion of
Counsel addressed to the Trustee, which Opinion of Counsel shall not be an
expense of the Trustee or the Depositor, to the effect that the elimination of
such restrictions will not cause any of the REMICs provided for herein to fail
to qualify as a REMIC at any time that the Certificates are outstanding or
result in the imposition of any tax on the Trust Fund, any REMIC provided for
herein, a Certificateholder or another Person. Each Person holding or acquiring
any Ownership Interest in a Class R Certificate hereby consents to any amendment
of this Agreement that, based on an Opinion of Counsel addressed to and
furnished to the Trustee, is reasonably necessary (a) to ensure that the record
ownership of, or any beneficial interest in, a Class R Certificate is not
transferred, directly or indirectly, to a Person that is not a Permitted
Transferee and (b) to provide for a means to compel the Transfer of a Class R
Certificate that is held by a Person that is not a Permitted Transferee to a
Holder that is a Permitted Transferee.

         (d) The transferor of the Class R Certificate shall notify the Trustee
in writing upon the transfer of the Class R Certificate.

         (e) The preparation and delivery of all certificates, opinions and
other writings referred to above in this Section 5.02 shall not be an expense of
the Trust Fund, the Depositor or the Trustee.

         SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.

         If (a) any mutilated Certificate is surrendered to the Trustee or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and of the ownership thereof and (b) there is delivered to
the Trustee and the NIMs Insurer such security or indemnity as may be required
by them to save each of them harmless, then, in the absence of notice to the
Trustee that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like Class, tenor and Percentage Interest. In connection with the issuance of
any new Certificate under this Section 5.03, the Trustee may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith. Any replacement Certificate issued
pursuant to this Section 5.03 shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time. All
Certificates surrendered to the Trustee under the terms of this Section 5.03
shall be canceled and destroyed by the Trustee in accordance with its standard
procedures without liability on its part.

                                      -76-

<PAGE>

         SECTION 5.04. Persons Deemed Owners.

         The NIMs Insurer, the Trustee and any agent of the NIMs Insurer or the
Trustee may treat the Person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving distributions as provided
in this Agreement and for all other purposes whatsoever, and neither the NIMs
Insurer nor the Trustee, nor any agent of the NIMs Insurer or the Trustee shall
be affected by any notice to the contrary.

         SECTION 5.05. Access to List of Certificateholders' Names and
Addresses.

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication that such Certificateholders propose to transmit or if the NIMs
Insurer or the Depositor shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the NIMs Insurer, the Depositor or such Certificateholders
at such recipients' expense the most recent list of the Certificateholders of
the Trust Fund held by the Trustee, if any. The Depositor and every
Certificateholder, by receiving and holding a Certificate, agree that the
Trustee shall not be held accountable by reason of the disclosure of any such
information as to the list of the Certificateholders hereunder, regardless of
the source from which such information was derived.

         SECTION 5.06. Book-Entry Certificates.

         The Regular Certificates, upon original issuance, shall be issued in
the form of one or more typewritten Certificates representing the Book-Entry
Certificates, to be delivered to the Depository by or on behalf of the
Depositor. The Book-Entry Certificates shall initially be registered on the
Certificate Register in the name of the Depository or its nominee, and no
Certificate Owner of a Book-Entry Certificate will receive a definitive
certificate representing such Certificate Owner's interest in such Certificates,
except as provided in Section 5.08. Unless and until definitive, fully
registered Certificates ("Definitive Certificates") have been issued to the
Certificate Owners of the Book-Entry Certificates pursuant to Section 5.08:

         (a) the provisions of this Section shall be in full force and effect;

         (b) the Depositor, the Trustee and the NIMs Insurer may deal with the
Depository and the Depository Participants for all purposes (including the
making of distributions) as the authorized representative of the respective
Certificate Owners of the Book-Entry Certificates;

         (c) registration of the Book-Entry Certificates may not be transferred
by the Trustee except to another Depository;

         (d) the rights of the respective Certificate Owners of the Book-Entry
Certificates shall be exercised only through the Depository and the Depository
Participants and shall be limited to those established by law and agreements
between the Owners of the Book-Entry Certificates and the Depository and/or the
Depository Participants. Pursuant to the Depository Agreement, unless and until
Definitive Certificates are issued pursuant to Section 5.08, the Depository will
make book-entry transfers among the Depository Participants and receive and
transmit distributions of principal and interest on the related Certificates to
such Depository Participants;

         (e) the Depository may collect its usual and customary fees, charges
and expenses from its Depository Participants;

                                      -77-

<PAGE>

         (f) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants; and

         (g) to the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control.

         For purposes of any provision of this Agreement requiring or permitting
actions with the consent of, or at the direction of, Certificateholders
evidencing a specified percentage of the aggregate unpaid principal amount of
any Class of Certificates, such direction or consent may be given by Certificate
Owners (acting through the Depository and the Depository Participants) owning
Book-Entry Certificates evidencing the requisite percentage of principal amount
of such Class of Certificates.

         SECTION 5.07. Notices to Depository.

         Whenever any notice or other communication is required to be given to
Certificateholders of the Class with respect to which Book-Entry Certificates
have been issued, unless and until Definitive Certificates shall have been
issued to the related Certificate Owners and the Trustee shall give all such
notices and communications to the Depository.

         SECTION 5.08. Definitive Certificates.

         If, after Book-Entry Certificates have been issued with respect to any
Certificates, (a) the Depository or the Depositor advises the Trustee that the
Depository is no longer willing, qualified or able to discharge properly its
responsibilities under the Depository Agreement with respect to such
Certificates and the Depositor is unable to locate a qualified successor, (b)
the Depositor, at its sole option, advises the Trustee that it elects to
terminate the book-entry system with respect to such Certificates through the
Depository or (c) after the occurrence and continuation of an Event of Default,
Certificate Owners of such Book-Entry Certificates having not less than 51% of
the Voting Rights evidenced by any Class of Book-Entry Certificates advise the
Trustee and the Depository in writing through the Depository Participants that
the continuation of a book-entry system with respect to Certificates of such
Class through the Depository (or its successor) is no longer in the best
interests of the Certificate Owners of such Class, then the Trustee shall notify
all Certificate Owners of such Book-Entry Certificates and the NIMs Insurer,
through the Depository, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners of such Class
requesting the same. The Depositor shall provide the Trustee with an adequate
inventory of certificates to facilitate the issuance and transfer of Definitive
Certificates. Upon surrender to the Trustee of any such Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall authenticate and deliver such Definitive
Certificates. Neither the Depositor nor the Trustee shall be liable for any
delay in delivery of such instructions and each may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of such
Definitive Certificates, all references herein to obligations imposed upon or to
be performed by the Depository shall be deemed to be imposed upon and performed
by the Trustee, to the extent applicable with respect to such Definitive
Certificates and the Trustee shall recognize the Holders of such Definitive
Certificates as Certificateholders hereunder.

         SECTION 5.09. Maintenance of Office or Agency.

         The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange. The Trustee initially designates its
office at 2001 Bryan Street, 8th Floor, Dallas, Texas 75201, Attention:
Institutional Trust Services/Transfer Department as offices for such purposes.
The Trustee will give prompt written notice to the Certificateholders of any
change in such location of any such office or agency.

                                      -78-

<PAGE>

                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

         SECTION 6.01. Respective Liabilities of the Depositor and the Servicer.

         The Depositor and the Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by them herein.

         SECTION 6.02. Merger or Consolidation of the Depositor or the Servicer.

         Except as provided in the next paragraph, the Depositor and the
Servicer will each keep in full effect its existence, rights and franchises as a
corporation or banking association under the laws of the United States or under
the laws of one of the States thereof and will each obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its respective duties under this Agreement.

         Any Person into which the Depositor or Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or Servicer shall be a party, or any Person succeeding to the
business of the Depositor or Servicer, shall be the successor of the Depositor
or 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 (except for the execution of an
assumption agreement where such succession is not effected by operation of law);
provided, however, that the successor or surviving Person to a Servicer shall be
qualified to sell mortgage loans to, and to service mortgage loans on behalf of,
Fannie Mae or Freddie Mac.

         SECTION 6.03. Limitation on Liability of the Depositor, the Servicer
and Others.

         None of the Depositor, the Servicer nor any of the directors, officers,
employees or agents of the Depositor or the 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 Depositor, the Servicer or any such Person against any
breach of representations or warranties made by it herein or protect the
Depositor, the Servicer or any such Person from any liability that would
otherwise be imposed by reasons of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties hereunder. The Depositor, the Servicer and any director, officer,
employee or agent of the Depositor or the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Servicer and any
director, officer, employee or agent of the Depositor or the Servicer shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense, incurred in connection with the performance of their duties under this
agreement or incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Certificates, other than any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. None of the Depositor nor the Servicer shall
be under any obligation to appear in, prosecute or defend any legal action that
is not incidental to its respective duties hereunder and that in its opinion may
involve it in any expense or liability; provided, however, that any of the
Depositor or the Servicer may, in its discretion undertake any such action that
it may deem necessary or desirable in respect of this Agreement and the rights
and duties of the parties hereto and interests of the Servicer and the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be, expenses, costs and

                                      -79-

<PAGE>

liabilities of the Trust Fund, and the Depositor and the Servicer shall be
entitled to be reimbursed therefor out of the Collection Account as provided by
Section 3.08 hereof.

         SECTION 6.04. Limitation on Resignation of Servicer.

         The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee and the NIMs Insurer. No such resignation shall
become effective until the Trustee or a successor servicer reasonably acceptable
to the Trustee and the NIMs Insurer is appointed and has assumed the Servicer's
responsibilities, duties, liabilities and obligations hereunder. Any such
resignation shall not relieve the Servicer of any of the obligations specified
in Section 7.01 and 7.02 as obligations that survive the resignation or
termination of the Servicer.

         The Trustee and the Depositor hereby specifically (i) consent to the
pledge and assignment by the Servicer of all the Servicer's right, title and
interest in, to and under this Agreement to the Servicing Rights Pledgee, for
the benefit of certain lenders, and (ii) provided that no Event of Default
exists, agree that upon delivery to the Trustee by the Servicing Rights Pledgee
of a letter signed by the Servicer whereby the Servicer shall resign as Servicer
under this Agreement, the Trustee shall appoint the Servicing Rights Pledgee or
its designee as successor servicer but only if such successor servicer meets the
requirements of a successor servicer under this Agreement and agrees to be
subject to the terms of this Agreement. If, pursuant to any provision hereof,
the duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.

         SECTION 6.05. Errors and Omissions Insurance; Fidelity Bonds.

         The Servicer shall, for so long as it acts as servicer under this
Agreement, obtain and maintain in force (a) a policy or policies of insurance
covering errors and omissions in the performance of its obligations as servicer
hereunder, and (b) a fidelity bond in respect of its officers, employees and
agents. Each such policy or policies and bond shall, together, comply with the
requirements from time to time of Fannie Mae or Freddie Mac for Persons
performing servicing for mortgage loans purchased by Fannie Mae or Freddie Mac.
The Servicer shall provide the Trustee and the NIMs Insurer, upon request, with
copies of such policies and fidelity bond or a certification from the insurance
provider evidencing such policies and fidelity bond. In the event that any such
policy or bond ceases to be in effect, the Servicer shall use its reasonable
best efforts to obtain a comparable replacement policy or bond from an insurer
or issuer meeting the requirements set forth above as of the date of such
replacement. Any such policy or fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Trustee and the NIMs
Insurer.

                                  ARTICLE VII

                        DEFAULT; TERMINATION OF SERVICER

         SECTION 7.01. Events of Default.

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

                  (i)      any failure by the Servicer to make any Advance to
         deposit in the Collection Account or the Certificate Account or remit
         to the Trustee any payment (excluding a payment required to be made
         under Section 4.01 hereof) required to be made under the terms of this
         Agreement, which failure shall continue unremedied for three calendar
         days and, with respect to a

                                      -80-

<PAGE>

         payment required to be made under Section 4.01 hereof, for one calendar
         day, after the date on which written notice of such failure shall have
         been given to the Servicer by the Trustee or the Depositor, or to the
         Trustee and the Servicer by the NIMs Insurer or the Holders of
         Certificates evidencing not less than 25% of the Voting Rights
         evidenced by the Certificates; or

                  (ii)     any failure by the Servicer to observe or perform in
         any material respect any other of the covenants or agreements on the
         part of the Servicer contained in this Agreement or any representation
         or warranty shall prove to be untrue, which failure or breach shall
         continue unremedied for a period of 60 days after the date on which
         written notice of such failure shall have been given to the Servicer by
         the Trustee or the Depositor, or to the Trustee by the NIMs Insurer or
         the Holders of Certificates evidencing not less than 25% of the Voting
         Rights evidenced by the Certificates; or

                  (iii)    a decree or order of a court or agency or supervisory
         authority having jurisdiction for the appointment of a 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
         Servicer and such decree or order shall have remained in force
         undischarged or unstayed for a period of 60 consecutive days; or

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

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

         If an Event of Default shall occur with respect to the Servicer, then,
and in each and every such case, so long as such Event of Default shall not have
been remedied within the applicable grace period, or solely with respect to
clause (i) above by 5:00 p.m. on the Servicer Remittance Date, the Trustee may
(with the written consent of the NIMs Insurer, except after a NIMs Insurer
Default), or at the direction of the NIMs Insurer or the Holders of Certificates
evidencing not less than 25% of the Voting Rights evidenced by the Certificates
(with the written consent of the NIMs Insurer, except after a NIMs Insurer
Default), shall, by notice in writing to the Servicer (with a copy to each
Rating Agency), terminate all of the rights and obligations of the Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
other than its rights as a Certificateholder hereunder. On or after the receipt
by the Servicer of such written notice, all authority and power of the Servicer
hereunder, whether with respect to the Mortgage Loans or otherwise, shall pass
to and be vested in the Trustee. To the extent the Event of Default resulted
from the failure of the Servicer to make a required Advance, the Trustee shall
thereupon make any Advance described in Section 4.01 hereof subject to Section
3.04 hereof. The Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. Unless expressly
provided in such written notice, no such termination shall affect any obligation
of the Servicer to pay amounts owed pursuant to Article VIII. The Servicer
agrees to cooperate with the Trustee in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to the Trustee of all cash amounts which shall at the time be
credited to the Collection Account, or thereafter be received with respect to
the Mortgage Loans. The Servicer and the Trustee shall promptly notify the
Rating Agencies of the occurrence of an Event of Default or an event

                                      -81-

<PAGE>

that, with notice, passage of time, other action or any combination of the
foregoing would be an Event of Default, such notice to be provided in any event
within two Business Days of such occurrence.

         Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a Scheduled Payment on a Mortgage Loan that was due prior to the notice
terminating the Servicer's rights and obligations as Servicer hereunder and
received after such notice, that portion thereof to which the Servicer would
have been entitled pursuant to Sections 3.08(a)(i) through (viii), and any other
amounts payable to the Servicer hereunder the entitlement to which arose prior
to the termination of its activities hereunder. Notwithstanding anything herein
to the contrary, upon termination of the Servicer hereunder, any liabilities of
the Servicer which accrued prior to such termination shall survive such
termination.

         SECTION 7.02. Trustee to Act; Appointment of Successor.

         On and after the time the Servicer receives a notice of termination
pursuant to Section 7.01 hereof, the Trustee shall, to the extent provided in
Section 3.04, be the successor to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof and applicable law
including the obligation to make advances pursuant to Section 4.01. As
compensation therefor, subject to the last paragraph of Section 7.01, the
Trustee shall be entitled to all compensation and reimbursement for costs and
expenses that the Servicer would have been entitled to hereunder if the Servicer
had continued to act hereunder. Notwithstanding the foregoing, if the Trustee
has become the successor to the Servicer in accordance with Section 7.01 hereof,
the Trustee may, if it shall be unwilling to so act, or shall, if it is
prohibited by applicable law from making Advances pursuant to Section 4.01
hereof or if it is otherwise unable to so act, appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution the appointment of which successor shall be approved by the NIMs
Insurer and which does not adversely affect the then current rating of the
Certificates by each Rating Agency as the successor to the Servicer hereunder in
the assumption of all or any part of the responsibilities, duties or liabilities
of the Servicer hereunder. Any successor Servicer shall be an institution that
is acceptable to the NIMs Insurer and is a Fannie Mae and Freddie Mac approved
seller/servicer in good standing, that has a net worth of at least $15,000,000,
and that is willing to service the Mortgage Loans and executes and delivers to
the Depositor and the Trustee an agreement accepting such delegation and
assignment, that contains an assumption by such Person of the rights, powers,
duties, responsibilities, obligations and liabilities of the Servicer (other
than liabilities of the Servicer under Section 6.03 hereof incurred prior to
termination of the Servicer under Section 7.01), with like effect as if
originally named as a party to this Agreement; and provided further that each
Rating Agency acknowledges that its rating of the Certificates in effect
immediately prior to such assignment and delegation will not be qualified or
reduced as a result of such assignment and delegation. No appointment of a
successor to the Servicer hereunder shall be effective until the Trustee and the
NIMs Insurer shall have consented thereto, prior written consent of the NIMs
Insurer is obtained and written notice of such proposed appointment shall have
been provided by the Trustee to each Certificateholder. The Trustee shall not
resign as servicer until a successor servicer has been appointed and has
accepted such appointment. Pending appointment of a successor to the Servicer
hereunder, the Trustee, unless the Trustee is prohibited by law from so acting,
shall, subject to Section 3.04 hereof, act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Trustee may
make such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted the Servicer hereunder.
The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. Neither the
Trustee nor any other successor servicer shall be deemed to be in default
hereunder by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof or any failure to perform, or any
delay

                                      -82-

<PAGE>

in performing, any duties or responsibilities hereunder, in either case caused
by the failure of the Servicer to deliver or provide, or any delay in delivering
or providing, any cash, information, documents or records to it.

         Any successor to the Servicer as servicer shall give notice to the
Mortgagors of such change of servicer and shall, during the term of its service
as servicer maintain in force the policy or policies that the Servicer is
required to maintain pursuant to Section 6.05.

         SECTION 7.03. Notification to Certificateholders.

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

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

                                  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 of all Events of Default that may have occurred, shall undertake to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs. In case an Event of Default or other default by the
Servicer or the Depositor hereunder shall occur and be continuing, the Trustee,
shall, at the direction of the majority of the Certificateholders or the NIMS
Insurer, or may, proceed to protect and enforce its rights and the rights of the
Certificateholders or the NIMS Insurer under this Agreement by a suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable or other remedy, as the Trustee, being advised by
counsel, and subject to the foregoing, shall deem most effectual to protect and
enforce any of the rights of the Trustee, the NIMS Insurer and the
Certificateholders.

         The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they conform on their
face, to the requirements of this Agreement. If any such instrument is found not
to conform, on its face, to the requirements of this Agreement in a material
manner, the Trustee shall notify the person providing such Agreement of such
non-conformance, and if the instrument is not corrected to the Trustee's
satisfaction, the Trustee will provide notice thereof to the NIMs Insurer and
the Certificateholders and take such further action as directed by the NIMs
Insurer and the Certificateholders.

         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 misconduct, its negligent failure to perform its obligations
in compliance with this Agreement, or any liability that would be imposed by
reason of its willful misfeasance or bad faith; provided, however, that:

                                      -83-

<PAGE>

                  (i)      prior to the occurrence of an Event of Default, and
         after the curing of all such Events of Default that 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, individually or as Trustee, except for the performance of such
         duties and obligations as are specifically set forth in this Agreement,
         no implied covenants or obligations shall be read into this Agreement
         against the Trustee and the Trustee may conclusively rely, as to the
         truth of the statements and the correctness of the opinions expressed
         therein, upon any certificates or opinions furnished to the Trustee and
         conforming to the requirements of this Agreement that it reasonably
         believed in good faith to be genuine and to have been duly executed by
         the proper authorities respecting any matters arising hereunder;

                  (ii)     the Trustee shall not be liable, individually or as
         Trustee, for an error of judgment made in good faith by a Responsible
         Officer or Responsible Officers of the Trustee, unless the Trustee was
         negligent or acted in bad faith or with willful misfeasance;

                  (iii)    the Trustee shall not be liable, individually or as
         Trustee, with respect to any action taken, suffered or omitted to be
         taken by it in good faith in accordance with the direction of the NIMs
         Insurer or the Holders of each Class of Certificates evidencing not
         less than 25% of the Voting Rights of such Class 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; and

                  (iv)     except as otherwise expressly provided in this
         Agreement, if any default occurs in the making of a payment due under
         any Permitted Investment, or if a default occurs in any other
         performance required under any Permitted Investment, the Trustee may
         and, subject to Section 8.01 and Section 8.02, upon the request of the
         NIMs Insurer or the Holders of the Certificates representing more than
         50% of the Voting Rights allocated to any Class of Certificates, shall
         take such action as may be appropriate to enforce such payment or
         performance, including the institution and prosecution of appropriate
         proceedings.

         The Trustee shall have no duty hereunder with respect to any complaint,
claim, demand, notice or other document it may receive or which may be alleged
to have been delivered to or served upon it by the parties as a consequence of
the assignment of any Mortgage Loan hereunder; provided, however, that the
Trustee shall promptly remit to the Servicer upon receipt any such complaint,
claim, demand, notice or other document (i) which is delivered to the Trustee,
(ii) of which a Responsible Officer has actual knowledge and (iii) which
contains information sufficient to permit the Trustee to make a determination
that the real property to which such document related to is a Mortgaged
Property.

         SECTION 8.02. Certain Matters Affecting the Trustee.

         (a) Except as otherwise provided in Section 8.01:

                  (i)      the Trustee may request and rely upon and shall be
         protected in acting or refraining from acting upon any resolution,
         Officer's Certificate, certificate of auditors or any other
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, appraisal, bond or other paper or document believed by
         it to be genuine and to have been signed or presented by the proper
         party or parties;

                  (ii)     the Trustee may consult with counsel of its choice
         and any advice or Opinion of Counsel shall be full and complete
         authorization and protection in respect of any action taken or suffered
         or omitted by it hereunder in good faith and in accordance with such
         advice or Opinion of Counsel;

                                       84

<PAGE>

                  (iii)    the Trustee shall not be liable, individually or as
         Trustee, for any action taken, suffered or omitted by it in good faith
         and believed by it to be authorized or within the discretion or rights
         or powers conferred upon it by this Agreement;

                  (iv)     prior to the occurrence of an Event of Default
         hereunder and after the curing of all Events of Default that 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 so to do
         by the NIMs Insurer or the Holders of each Class of Certificates
         evidencing not less than 25% of the Voting Rights of such Class;

                  (v)      the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents, accountants or attorneys;

                  (vi)     the Trustee shall not be required to expend its own
         funds or otherwise incur any financial liability in the performance of
         any of its duties hereunder if it shall have reasonable grounds for
         believing that repayment of such funds or adequate indemnity against
         such liability is not assured to it;

                  (vii)    the Trustee shall not be liable, individually or as
         Trustee, for any loss on any investment of funds pursuant to this
         Agreement (other than as issuer of the investment security);

                  (viii)   the Trustee shall not be deemed to have knowledge of
         an Event of Default until a Responsible Officer of the Trustee shall
         have received written notice thereof;

                  (ix)     the Trustee shall be under no obligation to exercise
         any of the trusts or powers vested in it by this Agreement or to make
         any investigation of matters arising hereunder or to institute, conduct
         or defend any litigation hereunder or in relation hereto at the
         request, order or direction of any of the NIMs Insurer or the
         Certificateholders, pursuant to the provisions of this Agreement,
         unless the NIMs Insurer or such Certificateholders shall have offered
         to the Trustee reasonable security or indemnity against the costs,
         expenses and liabilities that may be incurred therein or thereby; and

                  (x)      if requested by the Servicer, the Trustee may appoint
         the Servicer as the trustee's attorney-in-fact in order to carry out
         and perform certain activities that are necessary or appropriate for
         the servicing and administration of the Mortgage Loans pursuant to this
         Agreement. Such appointment shall be evidenced by a power of attorney
         in such form as may be agreed to by the Trustee and the Servicer. The
         Trustee shall have no liability for any action or inaction of the
         Servicer in connection with such power of attorney and the Trustee
         shall be indemnified by the Servicer for all liabilities, costs and
         expenses incurred by the Trustee in connection with the Servicer's use
         or misuse of such powers of attorney.

         (b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by the Trustee without
the possession of any of the Certificates, or the production thereof at the
trial or other proceeding relating thereto, and any such suit, action or
proceeding instituted by the Trustee shall be brought in its name for the
benefit of all the Holders of the Certificates, subject to the provisions of
this Agreement.

         SECTION 8.03. Trustee Not Liable for Mortgage Loans.

         The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no

                                      -85-

<PAGE>

representations as to the validity or sufficiency of this Agreement, of any
Mortgage Loan, of any guarantee of a NIMs Insurer or related document other than
with respect to the Trustee's execution and authentication of the Certificates .
The Trustee shall not be accountable for the use or application by the Depositor
or the Servicer of any funds paid to the Depositor or the Servicer in respect of
the Mortgage Loans or deposited in or withdrawn from the Collection Account or
Certificate Account by the Depositor or the Servicer.

         SECTION 8.04. Trustee May Own Certificates.

         The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.

         SECTION 8.05. Trustee's Fees.

         The Trustee shall be entitled to earnings on or investment income with
         respect to funds in or credited to the Certificate Account.

         SECTION 8.06. Indemnification of Trustee; Expenses.

         (a) The Trustee and its respective directors, officers, employees and
agents shall be entitled to indemnification from the Trust Fund for any loss,
liability or expense incurred in connection with any legal proceeding or
incurred without negligence or willful misconduct on their part, arising out of,
or in connection with, the acceptance or administration of the trusts created
hereunder or in connection with the performance of their duties hereunder,
including any applicable fees and expenses payable hereunder and the costs and
expenses of defending themselves against any claim in connection with the
exercise or performance of any of their powers or duties hereunder, provided
that:

                  (i)      with respect to any such claim, the Trustee shall
         have given the Depositor and the Holders written notice thereof
         promptly after the Trustee shall have knowledge thereof; provided that
         failure to so notify shall not relieve the Trust Fund of the obligation
         to indemnify the Trustee; however, any reasonable delay by the Trustee
         to provide written notice to the Depositor and the Holders promptly
         after the Trustee shall have obtained knowledge of a claim shall not
         relieve the Trust Fund of the obligation to indemnify the Trustee under
         this Section 8.06;

                  (ii)     while maintaining control over its own defense, the
         Trustee shall cooperate and consult fully with the Depositor in
         preparing such defense;

                  (iii)    notwithstanding anything to the contrary in this
         Section 8.06, the Trust Fund shall not be liable for settlement of any
         such claim by the Trustee entered into without the prior consent of the
         Depositor, which consent shall not be unreasonably withheld; and

                  (iv)     any such loss, liability or expense to be indemnified
         by the Trust Fund must constitute an "unanticipated expense" of the
         Trust Fund within the meaning of Treasury Regulations Section
         1.860G-1(b)(3)(ii).

         The provisions of this Section 8.06 shall survive any termination of
this Agreement and the resignation or removal of the Trustee and shall be
construed to include, but not be limited to any loss, liability or expense under
any environmental law.

         (b) The Trustee shall be entitled to all reasonable expenses,
disbursements and advancements incurred or made by the Trustee in accordance
with this Agreement (including fees and expenses of its counsel and all persons
not regularly in its employment), except any such expenses, disbursements and
advancements that either (i) arise from its negligence, bad faith or willful
misconduct or (ii) do not

                                      -86-

<PAGE>

constitute "unanticipated expenses" within the meaning of Treasury Regulations
Section 1.860G-1(b)(3)(ii).

         (c) The Trustee's right to indemnification and reimbursement shall be
subject to a cap of $300,000, excluding any Servicing Transfer Costs and any
auction expenses incurred by the Trustee in connection with Section 9.01(a)(i),
in the aggregate in any calendar year; provided, however, that such cap shall
apply only if NIM Notes have been issued and are outstanding and shall cease to
apply after the date on which any NIM Notes are paid in full and all amounts
which the NIMs Insurer is entitled to be paid or reimbursed shall have been paid
or reimbursed. Any amounts not in excess of this cap may be withdrawn by the
Trustee from the Certificate Account at any time.

         SECTION 8.07. Eligibility Requirements for Trustee.

         The Trustee hereunder shall, at all times, be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust powers
having a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by federal or state authority and with a credit
rating that would not cause any of the Rating Agencies to reduce their
respective ratings of any Class of Certificates below the ratings issued on the
Closing Date (or having provided such security from time to time as is
sufficient to avoid such reduction) and reasonably acceptable to the NIMs
Insurer. If such corporation or association publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 8.07
the combined capital and surplus of such corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 8.07, the Trustee
shall resign immediately in the manner and with the effect specified in Section
8.08 hereof. The corporation or national banking association serving as Trustee
may have normal banking and trust relationships with the Depositor and the NIMs
Insurer and their respective Affiliates; provided, however, that such
corporation cannot be an Affiliate of the Servicer other than the Trustee in its
role as successor to the Servicer.

         SECTION 8.08. Resignation and Removal of Trustee.

         The Trustee may at any time resign and be discharged from the trusts
hereby created by (1) giving written notice of resignation to the Depositor and
the NIMs Insurer and by mailing notice of resignation by first class mail,
postage prepaid, to the Certificateholders at their addresses appearing on the
Certificate Register and each Rating Agency, not less than 60 days before the
date specified in such notice when, subject to Section 8.09, such resignation is
to take effect, and (2) acceptance of appointment by a successor trustee
acceptable to the NIMs Insurer in accordance with Section 8.09 and meeting the
qualifications set forth in Section 8.07. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice or resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.

         If at any time (i) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.07 hereof and shall fail to resign after
written request thereto by the Depositor or the NIMs Insurer, (ii) the Trustee
shall become incapable of acting, or shall be adjudged as bankrupt or insolvent,
or a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or
(iii)(A) a tax is imposed with respect to the Trust Fund by any state in which
the Trustee or the Trust Fund is located, (B) the imposition of such tax would
be avoided by the appointment of a different trustee and (C) the Trustee fails
to indemnify the Trust Fund against such tax, then the Depositor or the NIMs
Insurer may remove the Trustee and the Depositor with the consent of the NIMs
Insurer shall promptly appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument

                                      -87-

<PAGE>

shall be delivered to the Trustee, one copy of which shall be delivered to the
Servicer and one copy of which shall be delivered to the successor trustee.

         The Holders evidencing at least 51% of the Voting Rights of all Classes
of Certificates, with the consent of the NIMs Insurer, or the NIMs Insurer upon
failure of the Trustee to perform its obligations hereunder may at any time
remove the Trustee and the Depositor shall appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized (or by the NIMs Insurer), one complete
set of which instruments shall be delivered by the successor Trustee to the
Servicer, one complete set to the Trustee so removed and one complete set to the
successor so appointed. Notice of any removal of the Trustee shall be given to
the NIMs Insurer and each Rating Agency by the Successor Trustee.

         Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.08 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.09 hereof.

         SECTION 8.09. Successor Trustee.

         Any successor trustee appointed as provided in Section 8.08 hereof
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee, the NIMs Insurer and the Servicer an instrument accepting such
appointment hereunder and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as trustee herein.

         No successor trustee shall accept appointment as provided in this
Section 8.09 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.07 hereof and its appointment
shall not adversely affect the then current rating of the Certificates.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.09, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice within 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 Depositor.

         SECTION 8.10. Merger or Consolidation of Trustee.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be eligible under the provisions of Section
8.07 hereof without the execution or filing of any paper or further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding (except for the execution of an assumption agreement where such
succession is not effected by operation of law).

         SECTION 8.11. Appointment of Co-Trustee or Separate Trustee.

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Servicer and the Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee and the NIMs Insurer to act as co-trustee or
co-trustees jointly with the Trustee, or separate

                                      -88-

<PAGE>

trustee or separate trustees, of all or any part of the Trust Fund, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust Fund or any part thereof, whichever
is applicable, and, subject to the other provisions of this Section 8.11, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. Any such co-trustee or separate trustee
shall be subject to the written approval of the Servicer and the NIMs Insurer.
The Trustee shall not be liable for the actions of any co-trustee appointed at
the request of the Trustee provided that such co-trustee has been appointed with
due care. If the Servicer and the NIMs Insurer shall not have joined in such
appointment within 15 days after the receipt by it of a request to do so, or in
the case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 8.07 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 8.09.

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

                  (i)      All rights, powers, duties and obligations conferred
         or imposed upon the Trustee, except for the obligation of the Trustee
         under this Agreement to advance funds on behalf of the Servicer, shall
         be conferred or imposed upon and exercised or performed by the Trustee
         and such separate trustee or co-trustee jointly (it being understood
         that such separate trustee or co-trustee is not authorized to act
         separately without the Trustee joining in such act), except to the
         extent that under any law of any jurisdiction in which any particular
         act or acts are to be performed (whether as Trustee hereunder or as
         successor to the Servicer hereunder), the Trustee shall be incompetent
         or unqualified to perform such act or acts, in which event such rights,
         powers, duties and obligations (including the holding of title to the
         Trust Fund or any portion thereof in any such jurisdiction) shall be
         exercised and performed singly by such separate trustee or co-trustee,
         but solely at the direction of the Trustee;

                  (ii)     No trustee hereunder shall be held personally liable
         by reason of any act or omission of any other trustee hereunder; and

                  (iii)    The Trustee with the consent of the NIMs Insurer may
         at any time accept the resignation of or remove any separate trustee or
         co-trustee.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the 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 and a copy thereof given to the
Servicer, the NIMs Insurer and the Depositor.

          Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful 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.

                                      -89-

<PAGE>

         SECTION 8.12. Tax Matters.

         (a) It is intended that each of the REMICs provided for herein shall
constitute, and that the affairs of the Trust Fund shall be conducted so as to
allow each such REMIC to qualify as, a "real estate mortgage investment conduit"
as defined in and in accordance with the REMIC Provisions. It is also intended
that each of the grantor trusts provided for in Section 2.07 hereof shall
constitute, and that the affairs of Trust Fund shall be conducted so as to allow
each such grantor trust to qualify as, a grantor trust under the provisions of
Subpart E, Part I of Subchapter J of the Code. In furtherance of such intention,
the Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of each of the REMICs provided for
herein and that in such capacity it shall: (a) prepare and file, or cause to be
prepared and filed, in a timely manner, a U.S. Real Estate Mortgage Investment
Conduit Income Tax Return (Form 1066 or any successor form adopted by the
Internal Revenue Service) and prepare and file or cause to be prepared and filed
with the Internal Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with respect to each of
the REMICs and grantor trusts provided for herein, containing such information
and at the times and in the manner as may be required by the Code or state or
local tax laws, regulations, or rules, and furnish or cause to be furnished to
Certificateholders the schedules, statements or information at such times and in
such manner as may be required thereby; (b) within thirty days of the Closing
Date, furnish or cause to be furnished to the Internal Revenue Service, on Forms
8811 or as otherwise may be required by the Code, the name, title, address, and
telephone number of the person that the holders of the Certificates may contact
for tax information relating thereto, together with such additional information
as may be required by such Form, and update such information at the time or
times in the manner required by the Code for each of the REMICs provided for
herein; (c) make or cause to be made elections, on behalf of each of the REMICs
provided for herein to be treated as a REMIC on the federal tax return of such
REMICs for their first taxable years (and, if necessary, under applicable state
law); (d) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders and to the Internal Revenue Service and, if necessary, state
tax authorities, all information returns and reports as and when required to be
provided to them in accordance with the REMIC Provisions or other applicable tax
law, including without limitation, the calculation of any original issue
discount using the Prepayment Assumption; (e) provide information necessary for
the computation of tax imposed on the transfer of a Class R Certificate to a
Person that is not a Permitted Transferee, or an agent (including a broker,
nominee or other middleman) of a Person that is not a Permitted Transferee, or a
pass-through entity in which a Person that is not a Permitted Transferee is the
record holder of an interest (the reasonable cost of computing and furnishing
such information may be charged to the Person liable for such tax); (f) to the
extent that they are under its control conduct the affairs of each of the REMICs
and grantor trusts provided for herein at all times that any Certificates are
outstanding so as to maintain the status of each of the REMICs provided for
herein as a REMIC under the REMIC Provisions and the status of each of the
grantor trusts provided for herein as a grantor trust under Subpart E, Part I of
Subchapter J of the Code; (g) not knowingly or intentionally take any action or
omit to take any action that would cause the termination of the REMIC status of
any of the REMICs provided for herein or result in the imposition of tax upon
any such REMIC; (h) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the grantor trust status
under Subpart E, Part I of Subchapter J of the Code of any of the grantor trusts
provided for herein or result in the imposition of tax upon any such grantor
trust; (i) pay, from the sources specified in the last paragraph of this Section
8.12, the amount of any federal, state and local taxes, including prohibited
transaction taxes as described below, imposed on each of the REMICs provided for
herein prior to the termination of the Trust Fund when and as the same shall be
due and payable (but such obligation shall not prevent the Trustee or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Trustee from withholding payment of such tax, if permitted
by law, pending the outcome of such proceedings); (j) sign or cause to be signed
federal, state or local income tax or information returns; (k) maintain records
relating to each of the REMICs provided for herein, including but not limited to
the income, expenses, assets and liabilities of each of the REMICs provided for
herein,

                                      -90-

<PAGE>

and the fair market value and adjusted basis of the Trust Fund property
determined at such intervals as may be required by the Code, as may be necessary
to prepare the foregoing returns, schedules, statements or information; and (l)
as and when necessary and appropriate, represent each of the REMICs and grantor
trusts provided for herein in any administrative or judicial proceedings
relating to an examination or audit by any governmental taxing authority,
request an administrative adjustment as to any taxable year of any of the REMICs
provided for herein, enter into settlement agreements with any governmental
taxing agency, extend any statute of limitations relating to any tax item of any
of the REMICs provided for herein, and otherwise act on behalf of each of the
REMICs provided for herein in relation to any tax matter involving any of such
REMICs or any controversy involving the Trust Fund.

         In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within 10 days after the Closing Date all information or data that the Trustee
requests in writing and determines to be relevant for tax purposes to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, request in order to
enable the Trustee to perform its duties as set forth herein. The Depositor
hereby agrees to indemnify the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.

         In the event that any tax is imposed on "prohibited transactions" of
any of the REMICs provided for herein as defined in Section 860F(a)(2) of the
Code, on the "net income from foreclosure property" of any of such REMICs as
defined in Section 860G(c) of the Code, on any contribution to the Trust Fund
after the Startup Day pursuant to Section 860G(d) of the Code, or any other tax
is imposed, if not paid as otherwise provided for herein, such tax shall be paid
by (i) the Trustee, if any such other tax arises out of or results from a breach
by the Trustee of any of its obligations under this Agreement or as a result of
the location of the Trustee, (ii) any party hereto (other than the Trustee) to
the extent any such other tax arises out of or results from a breach by such
other party of any of its obligations under this Agreement or as a result of the
location of such other party or (iii) in all other cases, or in the event that
any liable party here fails to honor its obligations under the preceding clauses
(i) or (ii), any such tax will be paid first with amounts otherwise to be
distributed to the Class R Certificateholders (pro rata) pursuant to Section
4.04, and second with amounts otherwise to be distributed to all other
Certificateholders in the following order of priority: first, to the Class C
Certificates (pro rata), second to the Class B-2 Certificates (pro rata), third,
to the Class B-1 Certificates (pro rata), fourth to the Class M-2 Certificates
(pro rata), fifth, to the Class M-1 Certificates (pro rata) and sixth to the
Class A Certificates and Class R Certificate (pro rata). Notwithstanding
anything to the contrary contained herein, to the extent that such tax is
payable by the Class R Certificate, the Trustee is hereby authorized pursuant to
such instruction to retain on any Distribution Date, from the Holders of the
Class R Certificate (and, if necessary, from the Holders of all other
Certificates in the priority specified in the preceding sentence), funds
otherwise distributable to such Holders in an amount sufficient to pay such tax.
The Trustee agrees to promptly notify in writing the party liable for any such
tax of the amount thereof and the due date for the payment thereof.

         (b) Each of the Depositor and the Trustee agrees not to knowingly or
intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of any of the REMICs provided for herein or
result in the imposition of a tax upon any of the REMICs provided for herein.

                                      -91-

<PAGE>

                                   ARTICLE IX

                                   TERMINATION

         SECTION 9.01. Termination upon Liquidation or Repurchase of all
Mortgage Loans.

         (a) Subject to Section 9.03, the obligations and responsibilities of
the Depositor, the Servicer and the Trustee created hereby with respect to the
Trust Fund shall terminate upon the earliest of (i) the exercise by the Trustee
or the NIMs Insurer of an Optional Termination, (ii) the exercise by the
Servicer of Clean Up Call on or after the Clean Up Call Date and (iii) the later
of (x) the maturity or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan remaining in the Trust Fund and the disposition of all
REO Property and (y) the distribution to Certificateholders of all amounts
required to be distributed to them pursuant to this Agreement, as applicable. In
no event shall the trusts created hereby continue beyond the earlier of (i) 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's, living on the date hereof and (ii) the Latest Possible Maturity Date.

         (b) Any termination pursuant to Section 9.01(a)(i) shall be effected by
the auction by the Trustee of all of the Mortgage Loans and REO Properties via a
solicitation of bids in accordance with the auction procedures set forth in
Exhibit N. The Trustee shall accept the highest such bid, provided that such bid
equals or exceeds the amount described in clause (1) of the definition of
"Optional Termination Price." If the Trustee elects not to exercise its right to
effect an Optional Termination, the NIMs Insurer may, at its option, terminate
the Trust Fund by purchasing all of the Mortgage Loans and REO Properties at the
price equal to the amount described in clause (2) of the definition of "Optional
Termination Price." Notwithstanding anything to the contrary herein, the
Optional Termination Amount received by the Trustee or paid by the NIMs Insurer
shall be deposited by the Trustee directly into the Certificate Account
immediately upon Optional Termination. Any Optional Termination Amount to be
paid by the NIMs Insurer may be paid by the NIMs Insurer to the Trustee for
deposit into the Certificate Account.

         (c) If the Trustee receives a bid meeting the conditions specified in
Section 9.01(b) then the Trustee's written acceptance of such bid shall
constitute a plan of complete liquidation within the meaning of Section 860F of
the Code, and the Trustee shall release to the winning bidder, upon payment of
the bid purchase price, the Mortgage Files pertaining to the Mortgage Loans
being purchased and take such other actions as the winning bidder may reasonably
request to effect the transfer of the Mortgage Loans to the winning bidder.

         In connection with any such purchase pursuant to the preceding
paragraph, the Servicer shall deposit in the Certificate Account all amounts
then on deposit in the Collection Account (less amounts permitted to be
withdrawn by the Servicer pursuant to Section 3.08), which deposit shall be
deemed to have occurred immediately preceding such purchase.

         Any purchase shall be accomplished by deposit into the Certificate
Account the amount described in clause (1) of the definition of "Optional
Termination Price" and only following the delivery of an Opinion of Counsel in
form and substance acceptable to the Trustee that such termination is a
"Qualified Liquidation" under Section 860F of the Code.

         (d) The right of the Trustee or the NIMs Insurer to effect an Optional
Termination pursuant to clause (a)(i) above shall be conditioned upon the
aggregate Stated Principal Balance of the Mortgage Loans, at the time of any
such repurchase, aggregating ten (10) percent or less of the Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date.

                                      -92-

<PAGE>

         (e) In the event that neither the Trustee nor the NIMs Insurer effects
an Optional Termination, the Servicer may terminate the Trust Fund by purchasing
all the Mortgage Loans, and REO Properties at a price equal to the Clean Up Call
Price on any Distribution Date on or after the Clean Up Call Date, by exercising
a Clean Up Call.

         (f) The Class R Certificateholder hereby assigns to the Class C
Certificateholders that portion of any amount received by the Class R
Certificate upon an Optional Termination or Clean Up Call of the trust created
hereunder that is attributable to clause (1)(C) of the definition of Optional
Termination Price or clause (c) of the definition of Clean Up Call Price and
required to cover what would otherwise be a shortfall in the amounts described
in clause (1)(C) of the definition of Optional Termination Price or clause (c)
of the definition of Clean Up Call Price.

         SECTION 9.02. Final Distribution on the Certificates.

         If on any Determination Date, (i) the Trustee determines that there are
no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the Collection Account, the Trustee shall send a final
distribution notice promptly to each Certificateholder and the NIMs Insurer or
(ii) the Trustee determines that a Class of Certificates shall be retired after
a final distribution on such Class, the Trustee shall notify the
Certificateholders within seven (7) Business Days after such Determination Date
that the final distribution in retirement of such Class of Certificates is
scheduled to be made on the immediately following Distribution Date. Any final
distribution made pursuant to the immediately preceding sentence will be made
only upon presentation and surrender of the Certificates at the office of the
Trustee specified in such notice. If the Trustee or the NIMs Insurer elects to
terminate the Trust Fund pursuant to Section 9.01(a)(i), or if the Servicer
conducts a Clean Up Call and terminates the Trust Fund pursuant to Section
9.01(a)(ii) at least 10 days prior to the date notice is to be mailed to the
affected Certificateholders, the Trustee shall notify the Depositor and the
Servicer of the date such electing party intends to terminate the Trust Fund and
of the applicable repurchase price of the Mortgage Loans and REO Properties.

         Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders mailed not earlier than the 10th
day and no later than the 15th day of the month immediately preceding the month
of such final distribution. Any such notice shall specify (a) the Distribution
Date upon which final distribution on the Certificates will be made upon
presentation and surrender of Certificates at the office therein designated, (b)
the location of the office or agency at which such presentation and surrender
must be made, and (c) that the Record Date otherwise applicable to such
Distribution Date is not applicable, distributions being made only upon
presentation and surrender of the Certificates at the office therein specified.
The Trustee will give such notice to the NIMs Insurer and each Rating Agency at
the time such notice is given to Certificateholders.

         In the event such notice is given, the Servicer shall cause all funds
in the Collection Account to be deposited in the Certificate Account on the
Business Day prior to the applicable Distribution Date in an amount equal to the
final distribution in respect of the Certificates. Upon such final deposit with
respect to the Trust Fund and the receipt by the Trustee of a Request for
Release therefor, the Trustee shall promptly release to the Trustee or the NIMs
Insurer, as applicable, the Mortgage Files for the Mortgage Loans.

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to Certificateholders of each Class the amounts
allocable to such Certificates held in the Certificate Account in the order and
priority set forth in Section 4.04 hereof on the final Distribution Date and in
proportion to their respective Percentage Interests.

                                      -93-

<PAGE>

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Class R Certificateholders
shall be entitled to all unclaimed funds and other assets of the Trust Fund that
remain subject hereto. Upon payment to the Class R Certificateholders of such
funds and assets, the Trustee shall have no further duties or obligations with
respect thereto.

         SECTION 9.03. Additional Termination Requirements.

         (a) In the event the Trustee or the NIMs Insurer exercises its option
to effect an Optional Termination or the Servicer conducts a Clean Up Call as
provided in Section 9.01, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel addressed to the Trustee, at the expense of the Trust Fund
or the NIMs Insurer, as applicable, 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 of taxes on "prohibited transactions" of any of the REMICs
provided for herein as defined in section 860F of the Code, or (ii) cause any of
the REMICs provided for herein to fail to qualify as a REMIC at any time that
any Certificates are outstanding:

                  (i)      The Depositor shall establish a 90-day liquidation
         period and notify the Trustee thereof, which shall in turn specify the
         first day of such period in a statement attached to the final tax
         returns of each of the REMICs provided for herein pursuant to Treasury
         Regulation Section 1.860F-1. The Depositor shall satisfy all the
         requirements of a qualified liquidation under Section 860F of the Code
         and any regulations thereunder, as evidenced by an Opinion of Counsel
         obtained at the expense of the Trust Fund or the NIMs Insurer, as
         applicable;

                  (ii)     During such 90-day liquidation period, and at or
         prior to the time of making the final payment on the Certificates, the
         Depositor as agent of the Trustee shall sell all of the assets of the
         Trust Fund for cash; and

                  (iii)    At the time of the making of the final payment on the
         Certificates, the Trustee shall distribute or credit, or cause to be
         distributed or credited, to the Class R Certificateholders all cash on
         hand (other than cash retained to meet outstanding claims known to the
         Trustee), and the Trust Fund shall terminate at that time, whereupon
         the Trustee shall have no further duties or obligations with respect to
         sums distributed or credited to the Class R Certificateholders.

         (b) By their acceptance of the Certificates, the Holders thereof hereby
authorize the Depositor to specify the 90-day liquidation period for the Trust
Fund, which authorization shall be binding upon all successor
Certificateholders.

         (c) The Trustee as agent for each REMIC hereby agrees to adopt and sign
a plan of complete liquidation prepared and delivered to it by the Depositor
upon the written request of the Depositor, and the receipt of Opinion of Counsel
referred to in Section 9.03(a)(i) and to take such other action in connection
therewith as may be reasonably requested by the Depositor.

                                      -94-

<PAGE>

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

         SECTION 10.01. Amendment.

         This Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee, with the consent of the NIMs Insurer and without the
consent of any of the Certificateholders to,

                  (i)      To cure any ambiguity or correct any mistake,

                  (ii)     To correct, modify or supplement any provision
         therein which may be inconsistent with any other provision herein,

                  (iii)    To add any other provisions with respect to matters
         or questions arising under this Agreement, or

                  (iv)     To modify, alter, amend, add to or rescind any of the
         terms or provisions contained in this Agreement, provided, however,
         that, in the case of clauses (iii) and (iv), such amendment will not,
         as evidenced by an Opinion of Counsel addressed to the Trustee to such
         effect, adversely effect in any material respect the interests of any
         Holder; provided, further, however, that such amendment will be deemed
         to not adversely affect in any material respect the interest of any
         Holder if the Person requesting such amendment obtains a letter from
         each Rating Agency stating that such amendment will not result in a
         reduction or withdrawal of its rating of any Class of the Certificates,
         it being understood and agreed that any such letter in and of itself
         will not represent a determination as to the materiality of any such
         amendment and will represent a determination only as to the credit
         issues affecting any such rating.

         Notwithstanding the foregoing, without the consent of the
Certificateholders, the Depositor, the Servicer and the Trustee may at any time
and from time to time amend this Agreement to modify, eliminate or add to any of
its provisions to such extent as shall be necessary or appropriate to maintain
the qualification of any of the REMICs provided for herein as REMICs under the
Code or to avoid or minimize the risk of the imposition of any tax on the Trust
Fund or any of the REMICs provided for herein pursuant to the Code that would be
a claim against the Trust Fund at any time prior to the final redemption of the
Certificates, provided that the Trustee and the NIMs Insurer have been provided
an Opinion of Counsel addressed to the Trustee, which opinion shall be an
expense of the party requesting such amendment but in any case shall not be an
expense of the Trustee, to the effect that such action is necessary or
appropriate to maintain such qualification or to avoid or minimize the risk of
the imposition of such a tax.

         This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Trustee and the Holders of the Certificates affected thereby
evidencing not less than 66 2/3% of the Voting Rights, with the consent of the
NIMs Insurer, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments required to be distributed on any Certificate without the consent
of the Holder of such Certificate, (ii) adversely affect in any material respect
the interests of the Holders of any Class of Certificates in a manner other than
as described in (i), without the consent of the Holders of Certificates of such
Class evidencing 66 2/3% or more of the Voting Rights of such Class or (iii)
reduce the aforesaid percentages of Certificates the Holders of which are
required to consent to any such amendment without the consent of the Holders of
all such Certificates then outstanding.

                                      -95-

<PAGE>

         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 addressed to the Trustee, which opinion shall be
an expense of the party requesting such amendment but in any case shall not be
an expense of the Trustee, to the effect that such amendment is permitted
hereunder and will not cause the imposition of any tax on the Trust Fund, any of
the REMICs provided for herein or the Certificateholders or cause any of the
REMICs provided for herein to fail to qualify as a REMIC at any time that any
Certificates are outstanding. A copy of such Opinion of Counsel shall be
provided to the NIMs Insurer.

         Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee or upon the written
request of the Trustee to the Servicer, the Servicer shall furnish written
notification of the substance of such amendment to each Certificateholder, the
NIMs Insurer and each Rating Agency.

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

         Nothing in this Agreement shall require the Trustee or the Servicer to
enter into an amendment without receiving an Opinion of Counsel, satisfactory to
the Trustee or the Servicer that (i) such amendment is permitted and is not
prohibited by this Agreement and that all requirements for amending this
Agreement have been complied with; and (ii) either (A) the amendment does not
adversely affect in any material respect the interests of any Certificateholder
or (B) the conclusion set forth in the immediately preceding clause (A) is not
required to be reached pursuant to this Section 10.01.

         The Trustee may, but shall not be obligated to, enter into any
supplement, modification or waiver which affects its rights, duties or
obligations hereunder.

         SECTION 10.02. Counterparts.

         This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.

         SECTION 10.03. Governing Law.

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.

         SECTION 10.04. Intention of Parties.

         It is the express intent of the parties hereto that the conveyance of
the Mortgage Notes, Mortgages, assignments of Mortgages, title insurance
policies and any modifications, extensions and/or assumption agreements and
private mortgage insurance policies relating to the Mortgage Loans by the
Depositor to the Trustee be, and be construed as, an absolute sale thereof to
the Trustee. It is, further, not the intention of the parties that such
conveyance be deemed a pledge thereof by the Depositor to the

                                      -96-

<PAGE>

Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Depositor, or if for any other
reason this Agreement is held or deemed to create a security interest in such
assets, then (i) this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code of the State of New York and
(ii) the conveyance provided for in this Agreement shall be deemed to be an
assignment and a grant by the Depositor to the Trustee, for the benefit of the
Certificateholders, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.

         The Depositor for the benefit of the Certificateholders shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
assets of the Trust Fund, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of the Agreement. The Depositor shall
arrange for filing any Uniform Commercial Code continuation statements in
connection with any security interest granted or assigned to the Trustee for the
benefit of the Certificateholders.

         SECTION 10.05. Notices.

         (a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency and the NIMs Insurer with respect to each of the following
of which a Responsible Officer of the Trustee has actual knowledge:

                  (i)      Any material change or amendment to this Agreement;

                  (ii)     The occurrence of any Event of Default that has not
         been cured;

                  (iii)    The resignation or termination of the Trustee or the
         Servicer and the appointment of any successor;

                  (iv)     The repurchase or substitution of Mortgage Loans
         pursuant to Sections 2.02, 2.03 and 3.12;

                  (v)      The final payment to Certificateholders; and

                  (vi)     Any change in the location of the Certificate Account
         or the Certificate Account.

         The Trustee shall promptly furnish or make available to each Rating
Agency copies of the following:

                  (i)      Each report to Certificateholders described in
         Section 4.05;

                  (ii)     Each annual statement as to compliance described in
         Section 3.17; and

                  (iii)    Each annual independent public accountants' servicing
         report described in Section 3.18.

         (b) All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case of
the Depositor, Merrill Lynch Mortgage Investors, Inc. 250 Vesey Street, 4 World
Financial Center, 10th Floor, New York, New York 10080, Attention: Asset-Backed
Finance; (b) in the case of the Trustee, JPMorgan Chase Bank, 4 New York Plaza,
6th Floor, New York, New York 10004, Attention: Institutional Trust
Services/Structured Finance Services, SURF Series 2003-BC1; (c) in the case of
the Rating Agencies, (i) Fitch, Inc. 1 State Street Plaza, New York, New York
10004, (ii) Moody's, 99 Church Street, New York, New York 10007; (d) in the case
of

                                      -97-

<PAGE>

NIMs Insurer, an address to be specified; (e) in the case of the Credit Risk
Manager, The Murrayhill Company, 1670 Broadway, Suite 3450, Denver, Colorado
80202; (f) in the case of the Servicer, Litton Loan Servicing LP, 4282 Loop
Central Drive, Houston, Texas 77018-2226, Attention: Larry Litton, Sr.; and in
the case of any of the foregoing persons, such other addresses as may hereafter
be furnished by any such persons to the other parties to this Agreement. Notices
to Certificateholders shall be deemed given when mailed, first class postage
prepaid, to their respective addresses appearing in the Certificate Register.

         SECTION 10.06. Severability of Provisions.

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

         SECTION 10.07. Assignment.

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

         SECTION 10.08. Limitation on Rights of Certificateholders.

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's
legal representative or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a petition or winding up of the Trust
Fund, or otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as hereinbefore provided,
the Holders of Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates and/or the NIMs
Insurer, or to obtain or seek to obtain priority over or preference to any other
such Holder and/or the NIMs Insurer or to enforce any right under this
Agreement, except in the manner herein provided and for the common benefit of
all Certificateholders. For the protection and

                                      -98-

<PAGE>

enforcement of the provisions of this Section 10.08, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.

         SECTION 10.09. Inspection and Audit Rights.

          The Servicer agrees that, on reasonable prior notice, it will permit
any representative of the NIMs Insurer, the Depositor or the Trustee during the
Servicer's normal business hours, to examine all the books of account, records,
reports and other papers of the Servicer relating to the Mortgage Loans, to make
copies and extracts therefrom, to cause such books to be audited by independent
certified public accountants selected by the NIMs Insurer, Depositor or the
Trustee and to discuss its affairs, finances and accounts relating to the
Mortgage Loans with its officers, employees, agents, counsel and independent
public accountants (and by this provision the Servicer hereby authorizes such
accountants to discuss with such representative such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense incident to the exercise by the NIMs
Insurer, Depositor or the Trustee of any right under this Section 10.09 shall be
borne by the party requesting such inspection; all other such expenses shall be
borne by the Servicer.

         SECTION 10.10. Certificates Nonassessable and Fully Paid.

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

         SECTION 10.11. Third Party Rights.

         The NIMs Insurer shall be deemed a third-party beneficiary of this
Agreement to the same extent as if it were a party hereto, and shall have the
right to enforce the provisions of this Agreement.

         SECTION 10.12. Additional Rights of the NIMs Insurer.

         (a) Each party to this Agreement, any agent thereof and any successor
thereto shall furnish to the NIMs Insurer a copy of any notice, direction,
demand, opinion, schedule, list, certificate, report, statement, filing,
information, data or other communication provided by it or on its behalf to any
other Person pursuant to this Agreement at the same time, in the same form and
in the same manner as such communication is so provided and shall address or
cause such communication to be addressed to the NIMs Insurer in addition to any
other addressee thereof. The Servicer shall cause the NIMs Insurer to be an
addressee of any report furnished pursuant to this Agreement.

         (b) Wherever in this Agreement there shall be a requirement that there
be no downgrade, reduction, withdrawal or qualification of or other effect on
the rating of any Class of Certificates by any Rating Agency as of any date,
there also shall be deemed to be a requirement that there be no such effect on
any class of notes issued pursuant to the Indenture and guaranteed by the NIMs
Insurer as of such date. In addition, unless there exists a continuance of any
failure by the NIMs Insurer to make a required payment under the policy insuring
the NIM Notes (such event, a "NIMs Insurer Default"), wherever in this Agreement
there shall be a requirement that any Person or any communication, object or
other matter be acceptable or satisfactory to or otherwise receive the consent
or other approval of any other Person (whether as a condition to the eligibility
of such Person to act in any capacity, as a condition to any circumstance or
state of affairs related to such matter, or otherwise), there also shall be
deemed to be a requirement that such Person or matter be approved in writing by
the NIMs Insurer, which approval shall not be unreasonably withheld or delayed.

                                      -99-

<PAGE>

         SECTION 10.13. Credit Risk Manager

         (a) For and on behalf of the Depositor, the Credit Risk Manager will
provide reports and recommendations concerning certain delinquent and defaulted
Mortgage Loans, and as to the collection of any prepayment charges with respect
to the Mortgage Loans. Upon request, the Depositor shall forward copies of such
reports to the Trustee and the NIMs Insurer. Such reports and recommendations
will be based upon information provided to the Credit Risk Manager pursuant to
the Credit Risk Management Agreement, and the Credit Risk Manager shall look
solely to the Depositor for all information and data (including loss and
delinquency information and data) relating to the servicing of the Mortgage
Loans. Upon any termination of the Credit Risk Manager or the appointment of a
successor Credit Risk Manager, the Depositor shall give written notice thereof
to the Servicer, the Trustee, and each Rating Agency. Notwithstanding the
foregoing, the termination of the Credit Risk Manager pursuant to this Section
shall not become effective until the appointment of a successor Credit Risk
Manager.

         (b) Neither the Credit Risk Manager, nor any of its directors,
officers, employees, or agents shall be under any liability to the Trustee, the
Certificateholders, or the Depositor for any action taken or for refraining from
the taking of any action made in good faith pursuant to this Agreement, in
reliance upon information provided by the Depositor under the Credit Risk
Management Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Credit Risk Manager or any such person against
liability that would otherwise be imposed by reason of willful malfeasance or
bad faith in its performance of its duties. The Credit Risk Manager and any
director, officer, employee, or agent of the Credit Risk Manager 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, and may rely
in good faith upon the accuracy of information furnished by the Depositor
pursuant to the Credit Risk Management Agreement in the performance of its
duties thereunder and hereunder.

         (c) The Credit Risk Manager may be removed as Credit Risk Manager by
Certificateholders holding not less than 66 2/3% of the Voting Rights in the
Trust, in the exercise of its or their sole discretion. The Certificateholders
shall provide written notice of the Credit Risk Manager's removal to the
Trustee. Upon receipt of such notice, the Trustee shall provide written notice
to the Credit Risk Manager of its removal, which shall be effective upon receipt
of such notice by the Credit Risk Manager.

         (d) The Servicer agrees to provide to the Depositor all information
relating to delinquent and defaulted Mortgage Loans and prepayment charges with
respect to the Mortgage Loans reasonably requested by the Depositor.

         (e) The Servicer agrees to provide the Depositor with all information
in relation to the Mortgage Loans that is reasonably requested by the Depositor,
which information shall include, but not be limited to, monthly data on each
Mortgage Loan in the Trust, information on prepayment charges with respect to
the Mortgage Loans, and copies of realized loss certificates or any such
itemization regarding each Liquidated Loan for the applicable Due Period.

         (f) The Servicer shall permit the Credit Risk Manager to conduct an
on-site review and evaluation of the Servicer's operations, as they relate to
the Mortgage Loans, no more than annually, unless circumstances warrant special
review. Circumstances warranting special review shall include, but not be
limited to, a request by the Depositor that a review be conducted. The review
and evaluation will be conducted upon at least thirty (30) days prior written
notice, except in the case of special review, to the Servicer by the Credit Risk
Manger, and shall be conducted at the Credit Risk Manager's expense.

                                     -100-

<PAGE>

         SECTION 10.14. Assignment; Sales; Advance Facilities.

         (a) The Servicer is hereby authorized to enter into a financing or
other facility (any such arrangement, an "Advance Facility"), the documentation
for which complies with Section 10.14(e) below, under which (1) the Servicer
assigns or pledges its rights under this Agreement to be reimbursed for any or
all Advances and/or Servicing Advances to (i) a Person, which may be a
special-purpose bankruptcy-remote entity (an "SPV"), (ii) a Person, which may
simultaneously assign or pledge such rights to an SPV or (iii) a lender (a
"Lender"), which, in the case of any Person or SPV of the type described in
either the preceding clauses (i) or (ii), may directly or through other
assignees and/or pledgees, assign or pledge such rights to a Person, which may
include a trustee acting on behalf of holders of debt instruments (any such
Person or any such Lender, an "Advance Financing Person"), and/or (2) an Advance
Financing Person agrees to fund all the Advances and/or Servicing Advances
required to be made by the Servicer pursuant to this Agreement. No consent of
the Trustee, Certificateholders or any other party shall be required before the
Servicer may enter into an Advance Facility nor shall the Trustee or the
Certificateholders be a third party beneficiary of any obligation of an Advance
Financing Person to the Servicer. Notwithstanding the existence of any Advance
Facility under which an Advance Financing Person agrees to fund Advances and/or
Servicing Advances, (A) the Servicer (i) shall remain obligated pursuant to this
Agreement to make Advances and/or Servicing Advances pursuant to and as required
by this Agreement and (ii) shall not be relieved of such obligations by virtue
of such Advance Facility (B) neither the Advance Financing Person nor any
Servicer's Assignee (as hereinafter defined) shall have any right to proceed
against or otherwise contact any Mortgagor for the purpose of collecting any
payment that may be due with respect to any related Mortgage Loan or enforcing
any covenant of such Mortgagor under the related Mortgage Loan documents.

         (b) If the Servicer enters into an Advance Facility, the Servicer and
the related Advance Financing Person shall deliver to the Trustee at the address
set forth in Section 10.05 hereof a written notice (an "Advance Facility
Notice"), stating (a) the identity of the Advance Financing Person and (b) the
identity of the Person (the "Servicer's Assignee") that will, subject to
Section 10.14(c) hereof, have the right to receive amounts available from the
Collection Account pursuant to Section 3.08(a) hereof to reimburse previously
unreimbursed Advances and/or Servicing Advances ("Advance Reimbursement
Amounts"). Advance Reimbursement Amounts (i) shall consist solely of amounts in
respect of Advances and/or Servicing Advances for which the Servicer would be
permitted to reimburse itself in accordance with Section 3.08 hereof, assuming
the Servicer had made the related Advance(s) and/or Servicing Advance(s) and
(ii) shall not consist of amounts payable to a successor Servicer in accordance
with Section 3.05 hereof to the extent permitted under Section 10.14(e) below.

         (c) Notwithstanding the existence of an Advance Facility, the Servicer,
on behalf of the Advance Facility Person, shall be entitled to receive
reimbursements of Advances and/or Servicing Advances in accordance with Section
4.01 hereof, which entitlement may be terminated by the Advance Financing Person
pursuant to a written notice to the Trustee in the manner set forth in Section
10.05 hereof. Upon receipt of such written notice, the Servicer shall no longer
be entitled to receive reimbursement for any Advance Reimbursement Amounts and
the Servicer's Assignee shall immediately have the right to receive from the
Collection Account all Advance Reimbursement Amounts. Notwithstanding the
foregoing, an Advance Financing Person shall only be entitled to reimbursement
of Advance Reimbursement Amounts hereunder pursuant to Section 4.01 of this
Agreement and shall not otherwise be entitled to receive amounts designated for
distribution to Certificateholders pursuant to Section 4.01 hereof. None of the
Trustee or the Certificateholders shall have any right to, or otherwise be
entitled to, receive any amounts which constitute Advance Reimbursement Amounts
designated for distribution to the Servicer pursuant to Section 4.01 hereof. An
Advance Facility may be terminated by the joint written direction of the
Servicer and the related Advance Financing Person. Written notice of such
termination shall be delivered to the Trustee in the manner set forth in Section
10.05 hereof. None of the Depositor or the Trustee shall, as a result of the
existence of any Advance Facility, have any additional duty or liability with
respect to the calculation or payment of any Advance Reimbursement Amount, nor,
as a result of the existence of any Advance Facility, shall the Depositor or the
Trustee have any additional responsibility to track or monitor the
administration of the Advance Facility or the payment of Advance Reimbursement
Amounts to the Servicer's Assignee. The Servicer shall indemnify the Depositor,
the Trustee, any successor servicer and the Trust Fund resulting from any claim
by the related Advancing Financing Person, except to the extent that such claim,
loss, liability or damage resulted from or arose out of negligence, recklessness
or willful misconduct on the part of the Depositor, the Trustee or any successor
servicer, or failure by the successor servicer or the Trustee to remit funds as
required by this Agreement or the commission of an act or omission to act by the
successor servicer or the Trustee, and the passage of any applicable cure or
grace period, such that an Event of Default under this Agreement occurs or such
entity is subject to termination for cause under this Agreement. The Servicer
shall maintain and provide to any successor servicer and, upon request, the
Trustee a detailed accounting on a loan-by-loan basis as to amounts advanced by,
pledged or assigned to, and reimbursed to any Advancing Financing Person. The
successor servicer shall be entitled to rely on any such information provided by
the predecessor servicer, and the successor servicer shall not be liable for any
errors in such information.

                                     -101-

<PAGE>

         (d) [RESERVED].

         (e) As between a predecessor Servicer and its Advance Financing Person,
on the one hand, and a successor Servicer and its Advance Financing Person if
any, on the other hand, Advance Reimbursement Amounts on a loan-by-loan basis
with respect to each Mortgage Loan as to which an Advance and/or Servicing
Advance shall have been made and be outstanding shall be allocated on a
"first-in, first out" basis. In the event the Servicer's Assignee shall have
received some or all of an Advance Reimbursement Amount related to Advances
and/or Servicing Advances that were made by a Person other than such predecessor
Servicer or its related Advance Financing Person in error, then such Servicer's
Assignee shall be required to remit any portion of such Advance Reimbursement
Amount to each Person entitled to such portion of such Advance Reimbursement
Amount. Without limiting the generality of the foregoing, the Servicer shall
remain entitled to be reimbursed by the Advance Financing Person for all
Advances and/or Servicing Advances funded by the Servicer to the extent the
related Advance Reimbursement Amounts have not been assigned or pledged to such
Advance Financing Person or Servicer's Assignee.

         (f) For purposes of any Officer's Certificate of the Servicer made
pursuant to Section 4.01, any Nonrecoverable Advance referred to therein may
have been made by such Servicer or any predecessor Servicer. In making its
determination that any Advance or Servicing Advance theretofore made has become
a Nonrecoverable Advance, the Servicer shall apply the same criteria in making
such determination regardless of whether such Advance or Servicing Advance shall
have been made by the Servicer or any predecessor Servicer.

         (g) Any amendment to this Section 10.14 or to any other provision of
this Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 10.14, including
amendments to add provisions relating to a successor servicer, may be entered
into by the Trustee, the Depositor and the Servicer without the consent of any
Certificateholder, provided such amendment complies with Section 10.01 hereof.
All reasonable costs and expenses (including attorneys' fees) of each party
hereto of any such amendment shall be borne solely by the Servicer. The parties
hereto hereby acknowledge and agree that: (a) the Advances and/or Servicing
Advances financed by and/or pledged to an Advance Financing Person under any
Advance Facility are obligations owed to the Servicer payable only from the cash
flows and proceeds received under this Agreement for reimbursement of Advances
and/or Servicing Advances only to the extent provided herein, and the Trustee
and the Trust are not, as a result of the existence of any Advance Facility,
obligated or liable to repay any Advances and/or Servicing Advances financed by
the Advance Financing Person; (b) the Servicer will be responsible for remitting
to the Advance Financing Person the applicable amounts collected by it as
reimbursement for Advances and/or Servicing Advances funded by the Advance
Financing Person, subject to the provisions of this Agreement; and (c) the
Trustee shall not have any responsibility to track or monitor the administration
of the financing arrangement between the Servicer and any Advance Financing
Person.

                                     -102-

<PAGE>

         IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.

                                      MERRILL LYNCH MORTGAGE INVESTORS, INC.,
                                          as Depositor

                                      By:_______________________________________
                                      Name: Matthew Whalen
                                      Title: President

                                      LITTON LOAN SERVICING LP,
                                          as Servicer

                                      By:_______________________________________
                                      Name: Janice McClure
                                      Title: Senior Vice President

                                      JPMORGAN CHASE BANK
                                          not in its individual capacity,
                                          but solely as Trustee

                                      By:_______________________________________
                                      Name: Rebekah Pappachen
                                      Title: Assistant Vice President

<PAGE>

Solely for purposes of Section 10.13,
accepted and agreed to by:

THE MURRAYHILL COMPANY

By:_______________________________________
   Name:
   Title:

<PAGE>

                                    EXHIBIT A

                          FORMS OF OFFERED CERTIFICATES

                             [INTENTIONALLY OMITTED]

                                       A-1

<PAGE>

                                    EXHIBIT B

                             MORTGAGE LOAN SCHEDULE

                             [INTENTIONALLY OMITTED]

                                      B-1-1

<PAGE>

                                    EXHIBIT C

                                   [RESERVED]

                                       C-1

<PAGE>

                                    EXHIBIT D

                          FORM OF TRUSTEE CERTIFICATION

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Radian Guaranty Inc.
1601 Market Street
Philadelphia, Pennsylvania 19103

Litton Loan Servicing LP
5373 W. Alabama
Suite 600
Houston, TX 77056

Re:      Pooling and Servicing Agreement dated as of March 1, 2003 among Merrill
         Lynch Mortgage Investors, Inc., as depositor, Litton Loan Servicing LP,
         as servicer and JPMorgan Chase Bank, as trustee, Specialty Underwriting
         and Residential Finance Trust, Mortgage Loan Asset-Backed Certificates,
         Series 2003-BC1

Ladies and Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that [,
except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in
the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has reviewed the Mortgage File and
the Mortgage Loan Schedule and has determined that:

         (i)      All documents in the Mortgage File required to be delivered to
the Trustee pursuant to Section 2.01 of the Pooling and Servicing Agreement are
in its possession;

         (ii)     In connection with each Mortgage Loan as to which documentary
evidence of recording was not received on the Closing Date, it has received
evidence of such recording; and

         (iii)    Such documents have been reviewed by it and such documents do
not contain any material omissions or defects within the meaning of Section 2.01
or 2.02.

         The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond confirming (i) that the Mortgage Loan
number and the name of the Mortgagor in each Mortgage File conform to the
respective Mortgage Loan number and name listed on the Mortgage Loan Schedule
and (ii) the existence in each Mortgage File of each of the documents listed in
subparagraphs

                                      D-1

<PAGE>

(i)(A) through (E), inclusive, of Section 2.01 in the Agreement and documents
listed in clause (F) to the extent the Trustee has received written notice of
the existence of such documents from the Depositor or the Seller. The Trustee
makes no representations or warranties as to the validity, legality,
recordability, sufficiency, recordability, enforceability or genuineness of any
of the documents contained in each Mortgage Loan or the collectibility,
insurability, effectiveness or suitability of any such Mortgage Loan.

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                          JPMORGAN CHASE BANK,
                                          as Trustee

                                          By: __________________________________
                                          Name: ________________________________
                                          Title: _______________________________

                                      D-2

<PAGE>

                                    EXHIBIT E

                           FORM OF TRANSFEREE'S LETTER
       SPECIALTY UNDERWRITING AND RESIDENTIAL FINANCE MORTGAGE LOAN ASSET-
                      BACKED CERTIFICATES, SERIES 2003-BC1

                                     [DATE]

JPMorgan Chase Bank
2001 Bryan Street
8th Floor
Dallas, Texas 75201

Attention:  Institutional Trust Services-Transfer Department - SURF 2003-BC1

Ladies and Gentlemen:

         We propose to purchase Specialty Underwriting and Residential Finance
Trust, Mortgage Loan Asset-Backed Certificates, Series 2003-BC1, Class R,
described in the Prospectus Supplement, dated March ___, 2003, and Prospectus,
dated January 29, 2003.

         1.       We certify that (a) we are not a disqualified organization and
(b) we are not purchasing such Class R Certificate on behalf of a disqualified
organization; for this purpose the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.

         2.       We certify that (a) we have historically paid our debts as
they became due, (b) we intend, and believe that we will be able, to continue to
pay our debts as they become due in the future, (c) we understand that, as
beneficial owner of the Class R Certificate, we may incur tax liabilities in
excess of any cash flows generated by the Class R Certificate, and (d) we intend
to pay any taxes associated with holding the Class R Certificate as they become
due and (e) we will not cause income from the Class R Certificate to be
attributable to a foreign permanent establishment or fixed base (within the
meaning of an applicable income tax treaty) of ours or another U.S. taxpayer.

         3.       We acknowledge that we will be the beneficial owner of the
Class R Certificate and:(1)
------------------------
         (1)      Check appropriate box if necessary fill in the name of the
                  Transferee's nominee.

<PAGE>

           ______   The Class R Certificate will be registered in our name.

           ______   The Class R Certificate will be held in the name of our
                    nominee, _________________, which is not a disqualified
                    organization.

         4.       We certify that we are not an employee benefit plan subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a plan within the meaning of Section 4975 of the Code or a plan
subject to federal, state or local law materially similar to the foregoing
provisions of ERISA and the Code (each, a "Plan"), and are not directly or
indirectly purchasing the Class R Certificate on behalf of, as investment
manager of, as named fiduciary of, as trustee of or with the assets of a Plan or
directly or indirectly purchasing the Class R Certificate with the assets of any
insurance company separate account or general account containing any "plan
assets" or of any Plan.

         5.       We certify that (i) we are a U.S. person or (ii) we will hold
the Class R Certificate in connection with the conduct of a trade or business
within the United States and have furnished the transferor, the Trustee and the
Trustee with a duly completed and effective Internal Revenue Service Form W-8ECI
or successor form at the time and in the manner required by the Code; for this
purpose the term "U.S. person" means a citizen or resident of the United States,
a corporation, or partnership (unless, in the case of a partnership, Treasury
regulations are adopted that provide otherwise) created or organized in or under
the laws of the United States, any State thereof or the District of Columbia,
including an entity treated as a corporation or partnership for federal income
tax purposes, an estate whose income is subject to United States federal income
tax regardless of the source of its income, 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 U.S. persons have the authority to control all
substantial decisions of the trust (or, to the extent provided in applicable
Treasury regulations, certain trusts in existence on August 20, 1996 which are
eligible to elect to be treated as U.S. Persons. We agree that any breach by us
of this certification shall render the transfer of any interest in the Class R
Certificate to us absolutely null and void and shall cause no rights in the
Class R Certificate to vest in us.

         6.       We agree that in the event that at some future time we wish to
transfer any interest in the Class R Certificate, we will transfer such interest
in the Class R Certificate only (a) to a transferee that (i) is not a
disqualified organization and is not purchasing such interest in the Class R
Certificate on behalf of a disqualified organization, (ii) is a U.S. person or
will hold the Class R Certificate in connection with the conduct of a trade or
business within the United States and will furnish us, the Trustee and the
Trustee with a duly completed and effective Internal Revenue Service Form W-8ECI
or successor form at the time and in the manner required by the Code and (iii)
has delivered to the Trustee and the Trustee a letter in the form of this letter
(including the affidavit appended hereto) and, we will provide the Trustee and
the Trustee a written statement substantially in the form of Exhibit E-2 to the
Agreement.

         7.       We hereby designate _______________________ as our fiduciary
to act as the tax matters person for each of the REMICs provided for in the
Agreement.

                                Very truly yours,

                                   [PURCHASER]

                                      E-2

<PAGE>

                                          By:___________________________________
                                             Name:
                                             Title:

Accepted as of __________ __, 200__

MERRILL LYNCH MORTGAGE INVESTORS, INC.

By:_____________________________
   Name:
   Title:

                                      E-3

<PAGE>

                                   APPENDIX A

                                     Affidavit pursuant to (i) Section
                                     860E(e)(4) of the Internal Revenue
                                     Code of 1986, as amended, and (ii)
                                     certain provisions of the Pooling and
                                     Servicing Agreement

Under penalties of perjury, the undersigned declares that the following is true:

(1)      He or she is an officer of _________________________ (the
         "Transferee"),

(2)      the Transferee's Employer Identification number is __________,

(3)      the Transferee is not a "disqualified organization" (as defined below),
         has no plan or intention of becoming a disqualified organization, and
         is not acquiring any of its interest in the Merrill Lynch Mortgage
         Investors Trust, Mortgage Loan Asset-Backed Certificates, Series
         2003-WMC1, Class R on behalf of a disqualified organization or any
         other entity,

(4)      unless Merrill Lynch Mortgage Investors, ("MLMI") has consented to the
         transfer to the Transferee by executing the form of Consent affixed as
         Appendix B to the Transferee's Letter to which this Certificate is
         affixed as Appendix A, the Transferee is a "U.S. person" (as defined
         below),

(5)      that no purpose of the transfer is to avoid or impede the assessment or
         collection of tax,

(6)      the Transferee has historically paid its debts as they became due,

(7)      the Transferee intends, and believes that it will be able, to continue
         to pay its debts as they become due in the future,

(8)      the Transferee understands that, as beneficial owner of the Class R
         Certificate, it may incur tax liabilities in excess of any cash flows
         generated by the Class R Certificate,

(9)      the Transferee intends to pay any taxes associated with holding the
         Class R Certificate as they become due,

(10)     the Transferee consents to any amendment of the Pooling and Servicing
         Agreement that shall be deemed necessary by MLMI (upon advice of
         counsel) to constitute a reasonable arrangement to ensure that the
         Class R Certificate will not be owned directly or indirectly by a
         disqualified organization, and

(11)     IF BRACKETED, THE FOLLOWING CERTIFICATIONS ARE INAPPLICABLE [the
         transfer is not a direct or indirect transfer of the Class R
         Certificate to a foreign permanent establishment or fixed base (within
         the meaning of an applicable income tax treaty) of the Transferee, and
         as to each of the residual interests represented by the Class R
         Certificate, the present value of the anticipated tax liabilities
         associated with holding such residual interest does not exceed the sum
         of:

                                      E-4

<PAGE>

         (A)      the present value of any consideration given to the Transferee
                  to acquire such residual interest;

         (B)      the present value of the expected future distributions on such
                  residual interest; and

         (C)      the present value of the anticipated tax savings associated
                  with holding such residual interest as the related REMIC
                  generates losses.

For purposes of this declaration, (i) the Transferee is assumed to pay tax at a
rate equal to the highest rate of tax specified in Section 11(b)(1) of the Code,
but the tax rate specified in Section 55(b)(1)(B) of the Code may be used in
lieu of the highest rate specified in Section 11(b)(1) of the Code if the
Transferee has been subject to the alternative minimum tax under Section 55 of
the Code in the preceding two years and will compute its taxable income in the
current taxable year using the alternative minimum tax rate, and (ii) present
values are computed using a discount rate equal to the Federal short-term rate
prescribed by Section 1274(d) of the Code for the month of the transfer and the
compounding period used by the Transferee;]

[(11)    (A)      at the time of the transfer, and at the close of each of the
                  Transferee's two fiscal years preceding the Transferee's
                  fiscal year of transfer, the Transferee's gross assets for
                  financial reporting purposes exceed $100 million and its net
                  assets for financial reporting purposes exceed $10 million;
                  and

         (B)      the Transferee is an eligible corporation as defined in
                  Treasury regulations Section 1.860E-1(c)(6)(i) and has agreed
                  in writing that any subsequent transfer of the Class R
                  Certificate will be to another eligible corporation in a
                  transaction that satisfies Treasury regulation Sections
                  1.860E-1(c)(4)(i), 1.860E-1(c)(4)(ii), 1.860E-1(c)(4)(iii) and
                  1.860E-1(c)(5) and such transfer will not be a direct or
                  indirect transfer to a foreign permanent establishment (within
                  the meaning of an applicable income tax treaty) of a domestic
                  corporation.

          For purposes of this declaration, the gross and net assets of the
          Transferee do not include any obligation of any related person as
          defined in Treasury regulation Section 1.860E-1(c)(6)(ii) or any other
          asset if a principal purpose for holding or acquiring the other asset
          is to permit the Transferee to make this declaration or to satisfy the
          requirements of Treasury regulation Section 1.860E-1(c)(5)(i).]

(12)     The Transferee will not cause income from the Class R Certificate to be
attributable to a foreign permanent establishment or fixed base (within the
meaning of an applicable income tax treaty) of the Transferee or another U.S.
taxpayer.

For purpose of this affidavit, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code and the term
"U.S. Person" means a citizen or resident of the United States, a corporation or
partnership (unless, in the case of a partnership, Treasury regulations are
adopted that provide otherwise) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia, including an
entity treated as a corporation or partnership for federal income tax purposes,
an estate whose income is subject to Unites States federal income tax regardless
of its source, or a trust if a court within the United States is able to
exercise primary

                                      E-5

<PAGE>

supervision over the administration of such trust, and one or more such U.S.
Persons have the authority to control all substantial decisions of such trust,
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996 which are eligible to elect to be treated as
U.S. Persons).

__________________________________

By: ______________________________
__________________________________

         Address of Investor for receipt of distribution:

         Address of Investor for receipt of tax information:

         (Corporate Seal)

         Attest:

__________________________________
__________________________________, Secretary

                                      E-6

<PAGE>

         Personally appeared before me the above-named ______________, known or
         proved to me to be the same person who executed the foregoing
         instrument and to be the _______ of the Investor, and acknowledged to
         me that he executed the same as his free act and deed and the free act
         and deed of the Investor.

         Subscribed and sworn before me this day of

                 , 200_.
__________________________
         Notary Public

         County of ____________________
         State of _____________________
         My commission expires the ________ day of ______________

                                             By:      __________________________
                                                      Name:   __________________
                                                      Title:  __________________

Dated: _____________

                                 E-7

<PAGE>

                                   EXHIBIT E-2

                         FORM OF TRANSFEROR'S AFFIDAVIT
 SPECIALTY UNDERWRITING AND RESIDENTIAL FINANCE MORTGAGE LOAN ASSET-
                      BACKED CERTIFICATES, SERIES 2003-BC1

                                     [DATE]

JPMorgan Chase Bank
2001 Bryan Street
8th Floor
Dallas, Texas 75201
Attention:  Institutional Trust Services-Transfer Department - SURF 2003-BC1

Re:      Specialty Underwriting and Residential Finance Trust Mortgage Loan
Asset-Backed Certificates, Series 2003-BC1

         _______________________ (the "Transferor") has reviewed the attached
affidavit of _____________________________ (the "Transferee"), and has no actual
knowledge that such affidavit is not true, and has no reason to believe that the
Transferee has the intention to impede the assessment or collection of any
federal, state or local taxes legally required to be paid with respect to the
Class R Certificate referred to in the attached affidavit. In addition, the
Transferor has conducted a reasonable investigation at the time of the transfer
and found that the Transferee had historically paid its debts as they came due
and found no significant evidence to indicate that the Transferee will not
continue to pay its debts as they become due.

                                                  Very truly yours,

                                                  ______________________________

                                                  Name:

                                                  Title:

                                      E-1

<PAGE>

                                    EXHIBIT F

                       FORM OF TRANSFEROR CERTIFICATE FOR
                        CLASS P AND CLASS C CERTIFICATES

JPMorgan Chase Bank
2001 Bryan Street
8th Floor
Dallas, Texas 75201
Attention:  Institutional Trust Services-Transfer Department - SURF 2003-BC1

RE:      Specialty Underwriting and Residential Finance Trust, Mortgage Loan
         Asset-Backed Certificates, Series 2003-BC1

Ladies and Gentlemen:

         In connection with our disposition of the Class [C or P] Certificate,
we certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being disposed
by us in a transaction that is exempt from the registration requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action that would result in, a violation of Section 5 of the Act and
(c) if we are disposing of a Class C Certificate, we have no knowledge the
Transferee is not a Permitted Transferee. All capitalized terms used herein but
not defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreement dated as of March 1, 2003, among Merrill Lynch Mortgage,
Inc., as depositor, Litton Loan Servicing LP, as servicer and JPMorgan Chase
Bank, as trustee.

                                                  Very truly yours,

                                                  ______________________________
                                                  Name of Transferor

                                                  By: __________________________
                                                  Name:
                                                  Title

                                 F-1

<PAGE>

                                    EXHIBIT G

                            FORM OF INVESTMENT LETTER
                              (ACCREDITED INVESTOR)

                                     [DATE]

JPMorgan Chase Bank
2001 Bryan Street
8th Floor
Dallas, Texas 75201
Attention:  Institutional Trust Services-Transfer Department - SURF 2003-BC1

Re:      Pooling and Servicing Agreement dated as of March 1, 2003 among Merrill
         Lynch Mortgage Investors, Inc., as depositor, Litton Loan Servicing LP
         as servicer and JPMorgan Chase Bank, as trustee, Specialty Underwriting
         and Residential Finance Trust, Mortgage Loan Asset-Backed Certificates,
         Series 2003-BC1 [CLASS C OR P]

Ladies and Gentlemen:

         ______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Mortgage Loan Asset-Backed Certificates, Series
2003-BC1, [CLASS C OR P] (the "Certificates"), issued pursuant to a Pooling and
Servicing Agreement, dated as of March 1, 2003 (the "Pooling and Servicing
Agreement"), among Merrill Lynch Mortgage Investors, Inc., as depositor (the
"Depositor"), Litton Loan Servicing LP, as servicer (the "Servicer") and
JPMorgan Chase Bank, as trustee (the "Trustee"). [THE PURCHASER INTENDS TO
REGISTER THE TRANSFERRED CERTIFICATE IN THE NAME OF ____________________, AS
NOMINEE FOR _________________.] All terms used and not otherwise defined herein
shall have the meanings set forth in the Pooling and Servicing Agreement.

         For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Purchaser certifies, represents and warrants
to, and covenants with, the Depositor and the Trustee that:

         1.       The Purchaser understands that (a) the Certificates have not
been registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends, to so
register or qualify the Certificates, (c) the Certificates cannot be resold
unless (i) they are registered and qualified under the Securities Act and the
applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.

         2.       The Certificates will bear a legend to the following effect:

         THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY ACT OF 1940, AS
         AMENDED (THE "1940 ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS,
         AND MAY NOT, DIRECTLY OR INDIRECTLY, BE SOLD OR OTHERWISE

                                       G-1

<PAGE>

         TRANSFERRED, OR OFFERED FOR SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT
         TO REGISTRATION UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE
         SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER
         PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT. NO
         TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL
         HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO THE SERVICER (A)
         AN INVESTMENT LETTER FROM THE PROSPECTIVE INVESTOR; AND (B)
         REPRESENTATIONS FROM THE TRANSFEROR REGARDING THE OFFERING AND SALE OF
         THE CERTIFICATES.

         NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL
         HAVE RECEIVED EITHER (I) A REPRESENTATION LETTER FROM THE TRANSFEREE OF
         THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT
         AN EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
         INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF
         THE CODE OR ANY APPLICABLE FEDERAL, STATE OR LOCAL LAW ("SIMILAR LAW")
         (EACH, A "PLAN") MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS OF
         ERISA AND THE CODE, AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY
         CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY
         OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE CASE OF AN
         INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS CONTAINING ANY
         "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR REGULATIONS SET FORTH
         IN 29 CFR Section 2510.3-101 TO EFFECT SUCH ACQUISITION OR (B) IF THE
         TRANSFEREE IS AN INSURANCE COMPANY, A REPRESENTATION LETTER THAT THE
         TRANSFEREE IS AN INSURANCE COMPANY THAT IS PURCHASING THE CERTIFICATE
         WITH FUNDS CONTAINED IN AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH
         TERM IS DEFINED IN SECTION V(E) OF PROHIBITED TRANSACTION CLASS
         EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND
         THE PURCHASE AND HOLDING OF THE CERTIFICATE IS COVERED UNDER SECTIONS I
         AND III OF PTCE 95-60, OR (II) AN OPINION OF COUNSEL TO THE EFFECT THAT
         THE PURCHASE AND HOLDING OF THE CERTIFICATE WILL NOT RESULT IN A
         PROHIBITED TRANSACTION UNDER ERISA, THE CODE OR SIMILAR LAW AND WILL
         NOT SUBJECT THE NIMS INSURER OR THE TRUSTEE TO ANY OBLIGATION IN
         ADDITION TO THOSE EXPRESSLY UNDERTAKEN IN THE POOLING AND SERVICING
         AGREEMENT, WHICH OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE NIMS
         INSURER OR THE TRUSTEE.

         3.       The Purchaser is acquiring the Transferred Certificates for
its own account [FOR INVESTMENT ONLY]**/ and not with a view to or for sale or
other transfer in connection with any distribution of the Transferred
Certificates in any manner that would violate the Securities Act or any
applicable state securities laws, subject, nevertheless, to the understanding
that disposition of the Purchaser's property shall at all times be and remain
within its control.

         4.       The Purchaser (a) is a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters, and in particular in such matters related to securities
similar to the Certificates, such that it is capable of evaluating the merits
and risks of investment in the Certificates, (b) is able to bear the economic
risks of such an investment and (c) is an "accredited investor" within the
meaning of Rule 501(a) promulgated pursuant to the Securities Act.

                                       G-2

<PAGE>

         5.       The Purchaser will not nor has it authorized nor will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification pursuant
thereto. Neither the Purchaser nor anyone acting on its behalf has offered the
Certificates for sale or made any general solicitation by means of general
advertising or in any other manner with respect to the Certificates. The
Purchaser will not sell or otherwise transfer any of the Certificates, except in
compliance with the provisions of the Pooling and Servicing Agreement.

--------------------
**/      Not required of a broker/dealer purchaser.

                                       G-3

<PAGE>

         6.       The Purchaser either (A) is not an employee benefit plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or a plan within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code") or a plan subject to federal state
or local law materially similar to the foregoing provisions of ERISA and the
Code ("Similar Law") (each, a "Plan"), and is not directly or indirectly
purchasing any Certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of or with assets of a Plan or directly or indirectly
purchasing any certificates with the assets of any insurance company separate
account containing any "plan assets" or of any Plan, (B) is an insurance company
that is purchasing the Certificate with funds contained in an "insurance company
general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12,
1995), and the purchase and holding of the Certificate is covered under Sections
I and III of PTCE 95-60, or (C) herewith delivers to the Trustee an Opinion of
Counsel satisfactory to the Trustee, and upon which the Trustee shall be
entitled to rely, to the effect that the purchase and holding of the Certificate
by the Purchaser will not result in a prohibited transaction under ERISA, the
Code or Similar Law and will not subject the NIMs Insurer or the Trustee to any
obligation in addition to those expressly undertaken in the Pooling and
Servicing Agreement, which Opinion of Counsel shall not be an expense of the
NIMs Insurer or the Trustee.

         7.       Prior to the sale or transfer by the Purchaser of any of the
Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit [H] to the Pooling and Servicing Agreement.

         8.       The Purchaser agrees to indemnify the Trustee, the Servicer
and the Depositor against any liability that may result from any
misrepresentation made herein.

                                                  Very truly yours,

                                                  [PURCHASER]

                                                  By:___________________________
                                                     Name:
                                                     Title:

                                       G-4

<PAGE>

                                    EXHIBIT H

                       FORM OF RULE 144A INVESTMENT LETTER
                         (QUALIFIED INSTITUTIONAL BUYER)

                                     [DATE]

JP Morgan Chase Bank
2001 Bryan Street
8th Floor
Dallas, Texas 75201
Attention:  Institutional Trust Services-Transfer Department - SURF 2003-BC1

Re:      Pooling and Servicing Agreement dated as of March 1, 2003 among Merrill
         Lynch Mortgage Investors, Inc., as depositor, Litton Loan Servicing LP,
         as servicer and JPMorgan Chase Bank, as trustee, Specialty Underwriting
         and Residential Finance Trust, Mortgage Loan Asset-Backed Certificates,
         Series 2003-BC1 [CLASS C OR P]

Ladies and Gentlemen:

         ______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Mortgage Loan Asset-Backed Certificates, Series
2003-BC1, [CLASS C OR P] (the "Certificates"), issued pursuant to a Pooling and
Servicing Agreement, dated as of March 1, 2003 (the "Pooling and Servicing
Agreement"), among Merrill Lynch Mortgage Investors, Inc., as depositor (the
"Depositor"), Litton Loan Servicing LP, as servicer (the "Servicer"), and
JPMorgan Chase Bank, as trustee (the "Trustee"). [THE PURCHASER INTENDS TO
REGISTER THE TRANSFERRED CERTIFICATE IN THE NAME OF ____________________, AS
NOMINEE FOR __________________.] All terms used and not otherwise defined herein
shall have the meanings set forth in the Pooling and Servicing Agreement.

         For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Purchaser certifies, represents and warrants
to, and covenants with, the Depositor and the Trustee that:

         In connection with our acquisition of the above Transferred
Certificates we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and are being transferred to us in a transaction that
is exempt from the registration requirements of the Act and any such laws, (b)
we have such knowledge and experience in financial and business matters that we
are capable of evaluating the merits and risks of investments in the
Certificates, (c) we have had the opportunity to ask questions of and receive
answers from the Depositor concerning the purchase of the Transferred
Certificates and all matters relating thereto or any additional information
deemed necessary to our decision to purchase the Transferred Certificates, (d)
we either (i) are not an employee benefit plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a plan
within the meaning of Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code") or a plan subject to federal, state or local law materially
similar to the foregoing provisions of ERISA and the Code ("Similar Law") (each,
a "Plan"), nor are we directly or

                                       H-1

<PAGE>

indirectly purchasing any Certificate on behalf of, as investment manager of, as
named fiduciary of, as trustee of or with assets of a Plan or directly or
indirectly purchasing any certificates with the assets of any insurance company
separate account containing any "plan assets" or of any Plan, (ii) are an
insurance company that is purchasing the Transferred Certificates with funds
contained in an "insurance company general account" (as such term is defined in
Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 60
Fed. Reg. 35925 (July 12, 1995), and the purchase and holding of the
Certificates is covered under Sections I and III of PTCE 95-60, or (iii)
herewith have delivered to the Trustee an Opinion of Counsel satisfactory to the
Trustee, and upon which the Trustee shall be entitled to rely, to the effect
that the purchase and holding of the Transferred Certificates by the Purchaser
will not result in a prohibited transaction under ERISA, the Code or Similar Law
and will not subject the NIMs Insurer or the Trustee to any obligation in
addition to those expressly undertaken in the Pooling and Servicing Agreement,
which Opinion of Counsel shall not be an expense of the NIMs Insurer or the
Trustee, (e) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificates, any
interest in the Certificates or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Securities Act or that would render
the disposition of the Certificates a violation of Section 5 of the Securities
Act or require registration pursuant thereto, nor will act, nor has authorized
or will authorize any person to act, in such manner with respect to the
Certificates, (f) we are a "qualified institutional buyer" as that term is
defined in Rule 144A under the Securities Act and have completed one of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2. We
are aware that the sale of the Transferred Certificates to us is being made in
reliance on Rule 144A. We are acquiring the Transferred Certificates for our own
account or for resale pursuant to Rule 144A and further understand that such
Certificates may be resold, pledged or transferred only (i) to a person
reasonably believed by us, based upon certifications of such purchaser or
information we have in our possession, to be a qualified institutional buyer
that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or transfer
is being made in reliance on Rule 144A, or (ii) pursuant to another exemption
from registration under the Securities Act.

         We agree to indemnify the Trustee, the Servicer and the Depositor
against any liability that may result from any misrepresentation made herein.

                                                  Very truly yours,

                                                  [PURCHASER]

                                                  By:___________________________
                                                     Name:
                                                     Title:

                                       H-2

<PAGE>

                                                                         ANNEX 1

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

          [FOR TRANSFEREES OTHER THAN REGISTERED INVESTMENT COMPANIES]

         The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

         1.       As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.

         2.       In connection with the purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $____________*/ in securities (except
for the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.

                  -        Corporation, etc. The Buyer is a corporation (other
                           than a bank, savings and loan association or similar
                           institution), Massachusetts or similar business
                           trust, partnership, or charitable organization
                           described in Section 501(c)(3) of the Internal
                           Revenue Code of 1986, as amended.

                  -        Bank. The Buyer (a) is a national bank or banking
                           institution organized under the laws of any State,
                           territory or the District of Columbia, the business
                           of which is substantially confined to banking and is
                           supervised by Federal, State or territorial banking
                           commission or similar official or is a foreign bank
                           or equivalent institution, and (b) has an audited net
                           worth of at least $25,000,000 as demonstrated in its
                           latest annual financial statements, a copy of which
                           is attached hereto.

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

*        Buyer must own and/or invest on a discretionary basis at least
         $100,000,000 in securities unless Buyer is a dealer, and, in that case,
         Buyer must own and/or invest on a discretionary basis at least
         $10,000,000 in securities.

                  -        Savings and Loan. The Buyer (a) is a savings and loan
                           association, building and loan association,
                           cooperative bank, homestead association or similar
                           institution, which is supervised and examined by a
                           State or Federal authority having supervision over
                           such institution or is a foreign savings and loan
                           association or equivalent institution and (b) has an
                           audited net worth of at least $25,000,000 as
                           demonstrated in its latest annual financial
                           statements, a copy of which is attached hereto.

                  -        Broker-dealer. The Buyer is a dealer registered
                           pursuant to Section 15 of the Securities Exchange Act
                           of 1934, as amended.

                  -        Insurance Company. The Buyer is an insurance company
                           whose primary and predominant business activity is
                           the writing of insurance or the reinsuring of risks

                                       H-3

<PAGE>

                           underwritten by insurance companies and which is
                           subject to supervision by the insurance commissioner
                           or a similar official or agency of the State,
                           territory or the District of Columbia.

                  -        State or Local Plan. The Buyer is a plan established
                           and maintained by a State, its political
                           subdivisions, or any agency or instrumentality of the
                           State or its political subdivisions, for the benefit
                           of its employees.

                  -        ERISA Plan. The Buyer is an employee benefit plan
                           subject to Title I of the Employee Retirement Income
                           Security Act of 1974, as amended.

                  -        Investment Advisor. The Buyer is an investment
                           advisor registered under the Investment Advisors Act
                           of 1940, as amended.

                  -        Small Business Investment Company. Buyer is a small
                           business investment company licensed by the U.S.
                           Small Business Administration under Section 301(c) or
                           (d) of the Small Business Investment Act of 1958, as
                           amended.

                  -        Business Development Company. Buyer is a business
                           development company as defined in Section 202(a)(22)
                           of the Investment Advisors Act of 1940, as amended.

         3.       The term "securities" as used for purposes of the calculation
of the dollar amount in paragraph 2 excludes: (i) securities of issuers that are
affiliated with the Buyer, (ii) securities that are part of an unsold allotment
to or subscription by the Buyer, if the Buyer is a dealer, (iii) securities
issued or guaranteed by the U.S. or any instrumentality thereof, (iv) bank
deposit notes and certificates of deposit, (v) loan participations, (vi)
repurchase agreements, (vii) securities owned but subject to a repurchase
agreement and (viii) currency, interest rate and commodity swaps.

         4.       For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.

         5.       The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

         6.       Until the date of purchase of the Rule 144A Securities, the
Buyer will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan as

                                       H-4

<PAGE>

provided above, the Buyer agrees that it will furnish to such parties updated
annual financial statements promptly after they become available.

                                                  By:___________________________
                                                     Name:
                                                     Title:

                                                     Date:______________________

                                       H-5

<PAGE>

                                                                         ANNEX 2

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [FOR TRANSFEREES THAT ARE REGISTERED INVESTMENT COMPANIES]

         The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

         1.       As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.

         2.       In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is
an investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

                  -        The Buyer owned $___________ in securities (other
                           than the excluded securities referred to below) as of
                           the end of the Buyer's most recent fiscal year (such
                           amount being calculated in accordance with Rule
                           144A).

                  -        The Buyer is part of a Family of Investment Companies
                           which owned in the aggregate $__________ in
                           securities (other than the excluded securities
                           referred to below) as of the end of the Buyer's most
                           recent fiscal year (such amount being calculated in
                           accordance with Rule 144A).

         3.       The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

         4.       The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,
(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.

         5.       The Buyer is familiar with Rule 144A and understands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.

                                       H-6

<PAGE>

         6.       Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.

                                                  By:___________________________
                                                     Name:
                                                     Title:

                                                  IF AN ADVISER:

                                                  ______________________________
                                                  Print Name of Buyer

                                                  Date:_________________________

                                       H-7

<PAGE>

                                    EXHIBIT I

                        REQUEST FOR RELEASE OF DOCUMENTS

To:      JPMorgan Chase Bank
         2001 Bryan Street
         8th Floor
         Dallas, Texas 75201
         Attention: Institutional Trust Services-Transfer Department -
         SURF 2003-BC1

Re:      Pooling and Servicing Agreement dated as of March 1, 2003 among Merrill
         Lynch Mortgage Investors, Inc., as depositor, Litton Loan Servicing LP,
         as servicer and JPMorgan Chase Bank, as trustee, Specialty Underwriting
         and Residential Finance Trust, Mortgage Loan Asset-Backed Certificates,
         Series 2003-BC1

         In connection with the administration of the Mortgage Loans held by
you, as Trustee, pursuant to the above-captioned Pooling and Servicing
Agreement, we request the release, and hereby acknowledge receipt, of the
Mortgage File for the Mortgage Loan described below, for the reason indicated.

Mortgage Loan Number:

Mortgagor Name, Address & Zip Code:

Reason for Requesting Documents (check one):

-        1.       Mortgage Paid in Full

-        2.       Foreclosure

-        3.       Substitution

-        4.       Other Liquidation (Repurchases, etc.)

-        5.       Nonliquidation           Reason: _____________________________

Address to which the Trustee should deliver the Mortgage File:

                                           By:__________________________________
                                                      (authorized signer)

                                           Address:_____________________________

                                           Date:________________________________

                                       I-1

<PAGE>

If box 1 or 2 above is checked, and if all or part of the Mortgage File was
previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to the
above specified Mortgage Loan.

If box 3, 4, 5 or 6 above is checked, upon our return of all of the above
documents to you as Trustee, please acknowledge your receipt by signing in the
space indicated below, and returning this form.

Trustee

JPMorgan Chase Bank

Please acknowledge the execution of the above request by your signature and date
below:

_________________________________          _____________________________________
Signature                                  Date

Documents returned to Trustee:

_________________________________          _____________________________________
Trustee                                    Date

                                       I-2

<PAGE>

                                    EXHIBIT K

                        OFFICER'S CERTIFICATE OF TRUSTEE

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Re:      Pooling and Servicing Agreement (the "Agreement") dated as of March 1,
         2003 among Merrill Lynch Mortgage Investors, Inc., as depositor, Litton
         Loan Servicing LP, as servicer and JPMorgan Chase Bank, as trustee,
         Specialty Underwriting and Residential Finance Trust, Mortgage Loan
         Asset-Backed Certificates, Series 2003-BC1

The Trustee hereby certifies to the Depositor, and its officers, directors and
affiliates, and with the knowledge and intent that they will rely upon this
certification, that:

1.       The Trustee has reviewed the Monthly Statements delivered pursuant to
         the Agreement since the last Officer's Certificate executed pursuant to
         Section 4.02 of the Agreement [or in the case of the first
         certification, since the Cut-off Date] (the "Trustee Information");

2.       Based on the Trustee's knowledge, the information in the Monthly
         Statement, taken as a whole, does not contain any untrue statement of a
         material fact or omit to state a material fact required by the
         Agreement to be included therein and necessary to make the statements
         made, in light of the circumstances under which such statements were
         made, not misleading as of the date hereof; and

3.       Based on the Trustee's knowledge, the Monthly Statements required to be
         prepared by the Trustee under the Agreement has been prepared and
         provided in accordance with the Agreement.

Date:

                                           JPMorgan Chase Bank, as Trustee

                                           By:    ______________________________

                                           Name:  ______________________________

                                           Title: ______________________________

                                       K-1

<PAGE>

                                    EXHIBIT L

                        OFFICER'S CERTIFICATE OF SERVICER

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

JPMorgan Chase Bank
2001 Bryan Street
8th Floor
Dallas, Texas 75201
Attention:  Institutional Trust Services-Transfer Department - SURF 2003-BC1

Re:      Specialty Underwriting and Residential Finance Trust, Mortgage Loan
         Asset-Backed Certificates, Series 2003-BC1

Reference is made to the Pooling and Servicing Agreement, dated as of March 1,
2003 (the "Agreement"), by and among Merrill Lynch Mortgage Investors, Inc., as
depositor, Litton Loan Servicing LP, as servicer (the "Servicer") and JPMorgan
Chase Bank, as trustee. The Servicer hereby certifies to the Trustee and the
Depositor, and its officers, directors and affiliates, and with the knowledge
and intent that they will rely upon this certification, that:

1.       The Servicer has reviewed the information required to be delivered to
         the Trustee pursuant to the Servicing Agreement (the "Servicing
         Information").

2.       Based on the Servicer's knowledge, the information in the Annual
         Statement of Compliance, and all servicing reports, officer's
         certificates and other information relating to the servicing of the
         Mortgage Loans submitted to the Trustee by the Servicer taken as a
         whole, does not contain any untrue statement of a material fact or omit
         to state a material fact necessary to make the statements made, in
         light of the circumstances under which such statements were made, not
         misleading as of the last day of the period covered by the Annual
         Statement of Compliance;

3.       Based on the Servicer's knowledge, the Servicing Information required
         to be provided to the Trustee by the Servicer under this Agreement has
         been provided to the Trustee; and

                                       L-1

<PAGE>
 4.      Based upon the review required under this Agreement, and except as
         disclosed in the Annual Statement of Compliance, the Annual Independent
         Certified Public Accountant's Servicing Report and all servicing
         reports, officer's certificates and other information relating to the
         servicing of the Mortgage Loans submitted to the Trustee by the
         Servicer, the Servicer has, as of the last day of the period covered by
         the Annual Statement of Compliance fulfilled its obligations under this
         Agreement.

Date:

                                           Litton Loan Servicing LP, as Servicer

                                           By:    ______________________________

                                           Name:  ______________________________

                                           Title: ______________________________

                                       L-2

<PAGE>

                                    EXHIBIT M

                               TRANSFEREE'S LETTER

JPMorgan Chase Bank
4 New York Plaza
6th Floor
New York, NY 10004
Attention:  Institutional Trust Services/Structured Finance Services

Re: Specialty Underwriting and Residential Finance Trust, Mortgage Loan
Asset-Backed Certificates, Series 2003-BC1: Class C Certificates

[if provided by Transferee:

         The undersigned represents to the Trustee that (i) it is a United
States person (as such term is defined for purposes of Section 7701 of the
Code), (ii) it is not a Disqualified Organization, (iii) it is not acquiring an
interest in a Class C Certificate on behalf of a Person that is (x) not a United
States person (as defined for purposes of Section 7701 of the Code) or (y) a
Disqualified Organization and (iv) it will not Transfer an interest in a Class C
Certificate to any Person unless such Person provides it and the Trustee with a
Transferee Letter in the form of this letter.]

[if provided by the Transferor:

         The undersigned represents to the Trustee that (i) the transferee of
the Class C Certificate (the "Transferee") is not treated for federal income tax
purposes as an entity separate from [Transferor's name] (the "Transferor"), the
transferor of such Class C Certificate, (ii) the Transferor will not, so long as
the Transferee holds the Class C Certificate, permit the Transferee to be
treated for federal income tax purposes as an entity separate from the
Transferor (other than in connection with a transaction as to which the
requirements of clause (iii) below are complied with) without first obtaining
from the Transferee, for the benefit of the Trustee as Trustee of the Specialty
Underwriting and Residential Finance Trust, Series 2003-BC1, a Transferee Letter
in the form set forth above and (iii) the Transferor will not, so long as the
Transferee holds the Class C Certificate, transfer all of the equity ownership
interests in the Transferee (as determined for federal income tax purposes) to
another Person unless such Person provides it and the Trustee with a Transferee
Letter in the form set forth above (substituting references to "the
[Transferee's name]" for references to "a Class C Certificate")].

                                           By:    ______________________________

                                           Name:  ______________________________

                                           Title: ______________________________

                                       M-1

<PAGE>

                                    EXHIBIT N

                               AUCTION PROCEDURES

         The following sets forth the auction procedures to be followed in
connection with Pooling and Servicing Agreement (the "Agreement") among Merrill
Lynch Mortgage Investors, Inc., JPMorgan Chase Bank, as trustee and Litton Loan
Servicing, LP, dated March 1, 2003. Capitalized terms used herein that are not
otherwise defined shall have the meanings described thereto in the Agreement.

1.       Upon notice to the Servicer by the Trustee the Servicer will initiate
         the general auction procedures consisting of the following: (i) prepare
         a general solicitation package along with a confidentiality agreement;
         (ii) derive a list of a minimum of three (3) bidders, each of whom
         shall be a nationally recognized participant in mortgage finance, (iii)
         initiate contact with all bidders, (iv) send a confidentiality
         agreement to all bidders, and (v) upon receipt of a signed
         confidentiality agreement, send bid solicitation package to all
         bidders.

2.       The general solicitation package will include (i) the Agreement; (ii) a
         copy of all monthly trustee reports or electronic access thereto; (iii)
         a form of a Mortgage Loan Purchase Agreement acceptable to the Trustee
         and Servicer (the Mortgage Loans and other property included in the
         Trust Fund will be offered and sold on an "as is, where is basis,
         without any representation or warranty, expressed or implied, of any
         kind and without recourse to, or guaranty by, the Trustee); (iv) a
         description of the minimum price as set forth in the Agreement; (v) a
         formal bidsheet as determined by the Trustee and Servicer; (vi) a
         detailed timetable (which shall include, but not be limited to, the
         provisions and dates ____ preliminary bids, due diligence and final
         bids); and (vii) a data tape of the Mortgage Loans as of the related
         Remittance Period reflecting substantially the same data attributes
         used in the Prospectus Supplement dated March 26, 2003.

3.       A detailed timetable will be determined approximately ten (10) days
         prior to each auction sale and shall be determined by the Servicer with
         the consent of the Trustee, which consent shall not be unreasonably
         withheld, within reasonable market conditions at the time of the
         auction sale.

4.       All bids will be submitted directly to the Trustee. Upon acceptance of
         a bid which meets or exceeds the conditions set forth in Section 9.01,
         the Trustee will distribute the proceeds from the auction to the
         holders of the Certificates on the next succeeding Distribution Date as
         set forth in the Agreement. In the event the Trustee receives two (2)
         or more bids from bidders above the Minimum Price and at equal bids (a
         "Tie Event"), the Trustee shall notify such bidders to resubmit a bid
         to break the Tie Event.

5.       Upon determination that the minimum price was not met, the Trustee
         shall cancel such auction sale and notify the Servicer, Depositor and
         NIMs Insurer immediately.

                                       N-1<PAGE>
                                                                  EXHIBIT 10(cc)

================================================================================

                     LINE OF CREDIT AND TERM LOAN AGREEMENT

                                      DATED

                                DECEMBER 23, 2002

                                     BETWEEN

                              RIVIERA TOOL COMPANY

                                       AND

                                  COMERICA BANK

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<Table>
<S>      <C>                                                                                                    <C>
1.       DEFINITIONS............................................................................................1

         1.1      Defined Terms.................................................................................1

         1.2      Other Definitions; Rules of Construction......................................................7

2.       COMMITMENT, INTEREST AND FEES..........................................................................8

         2.1      Loans.........................................................................................8

         2.2      Letters of Credit.............................................................................8

         2.3      Requests for Loans............................................................................9

         2.4      Notes.........................................................................................9

         2.5      Payments......................................................................................9

         2.6      Interest......................................................................................10

         2.7      Maximum Rate..................................................................................10

         2.8      Fees and Reimbursements.......................................................................10

         2.9      Basis of Computation..........................................................................10

         2.10     Basis of Payments.............................................................................10

         2.11     Receipt of Payments...........................................................................10

         2.12     Default Interest..............................................................................11

         2.13     Conversion and Renewal of Loans...............................................................11

         2.14     Use of Proceeds...............................................................................11

         2.15     Letter of Credit Fees.........................................................................11

3.       SPECIAL PROVISIONS FOR EURODOLLAR-BASED LOANS..........................................................11

         3.1      Reimbursement of Prepayment Costs.............................................................11

         3.2      Eurodollar Lending Offices....................................................................11

         3.3      Circumstances Affecting Eurodollar-based Availability.........................................11

         3.4      Laws Affecting Eurodollar-based Loan Availability.............................................11

         3.5      Increased Costs...............................................................................12

4.       CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK............................................................12

         4.1      Documents Executed and Filed..................................................................12

         4.2      Certified Resolutions.........................................................................13

         4.3      Certified Articles............................................................................13

         4.4      Certified Bylaws..............................................................................13

         4.5      Certificate of Good Standing..................................................................13

         4.6      Certificate of Incumbency.....................................................................13

         4.7      UCC Lien Search...............................................................................13

         4.8      Casualty Insurance............................................................................13

         4.9      Opinions of Counsel...........................................................................13
</Table>

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<Table>
<S>      <C>                                                                                                    <C>
         4.10     No Material Adverse Change; No Default........................................................13

         4.11     Other Documents and Instruments...............................................................13

         4.12     Approval of Bank Counsel......................................................................13

         4.13     Payment of Indebtedness.......................................................................13

         4.14     Pre-funding Audit.............................................................................14

5.       WARRANTIES AND REPRESENTATIONS.........................................................................14

         5.1      Corporate Existence and Power.................................................................14

         5.2      Authorization and Approvals...................................................................14

         5.3      Valid and Binding Agreement...................................................................14

         5.4      Actions, Suits or Proceedings.................................................................14

         5.5      No Liens, Pledges, Mortgage or Security Interests.............................................14

         5.6      Accounting Principles.........................................................................14

         5.7      Financial Condition...........................................................................15

         5.8      Taxes.........................................................................................15

         5.9      Compliance with Laws..........................................................................15

         5.10     Indebtedness..................................................................................15

         5.11     Margin Stock..................................................................................15

         5.12     Pension Funding...............................................................................15

         5.13     Misrepresentation.............................................................................15

         5.14     Subsidiaries..................................................................................15

         5.15     Hazardous Materials Warranties, Representations and Covenants.................................15

6.       AFFIRMATIVE COVENANTS..................................................................................17

         6.1      Financial and Other Information...............................................................17

         6.2      Books and Records; Other Information As Requested; Inspections................................19

         6.3      Compliance with Borrowing Formulas............................................................19

         6.4      Insurance.....................................................................................19

         6.5      Taxes.........................................................................................20

         6.6      Maintain Organization and Business............................................................20

         6.7      ERISA.........................................................................................20

         6.8      End of Fiscal Years; Fiscal Quarters..........................................................20

         6.9      Autocharge Agreements.........................................................................20

         6.11     Life Insurance................................................................................20

7.       NEGATIVE COVENANTS.....................................................................................20

         7.1      Dividends.....................................................................................21

         7.2      Stock Acquisition.............................................................................21
</Table>

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<Table>
<S>      <C>                                                                                                    <C>
         7.3      Liens and Encumbrances........................................................................21

         7.4      Indebtedness..................................................................................21

         7.5      Extension of Credit...........................................................................21

         7.6      Guarantee Obligations.........................................................................21

         7.7      Subordination of Receivables..................................................................21

         7.8      Property Transfer, Merger or Lease-Back.......................................................21

         7.9      Pension Plan..................................................................................21

         7.10     Margin Stock..................................................................................21

         7.11     Financial Covenants...........................................................................22

         7.12     Acquire Fixed Assets..........................................................................22

8.       EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS..............................................22

         8.1      Events of Default.............................................................................22

         8.2      Acceleration of Indebtedness, Remedies........................................................23

         8.3      Application of Proceeds.......................................................................23

         8.4      Cumulative Remedies...........................................................................24

9.       MISCELLANEOUS..........................................................................................24

         9.1      Independent Rights............................................................................24

         9.2      Covenant Independence.........................................................................24

         9.3      Waivers and Amendments........................................................................24

         9.4      Governing Law.................................................................................24

         9.5      Survival of Warranties, Etc...................................................................24

         9.6      Costs and Expenses............................................................................24

         9.7      Payments on Saturdays, Etc....................................................................25

         9.8      Binding Effect................................................................................25

         9.9      Maintenance of Records........................................................................25

         9.10     Notices.......................................................................................25

         9.11     Counterparts..................................................................................25

         9.12     Headings......................................................................................25

         9.13     Waiver of Jury Trial..........................................................................25
</Table>

<PAGE>

                     LINE OF CREDIT AND TERM LOAN AGREEMENT

THIS LINE OF CREDIT AND TERM LOAN AGREEMENT made as of the 23rd day of December,
2002, by and between RIVIERA TOOL COMPANY, a Michigan corporation ("Borrower"),
and COMERICA BANK, a Michigan banking corporation ("Bank").

                                   WITNESSETH:

WHEREAS, the Borrower has requested Bank to make certain loans and extensions of
credit to Borrower; and WHEREAS, the Bank is willing to do so subject to the
terms and conditions set forth in this Agreement; NOW, THEREFORE, Borrower and
Bank agree:

1.       DEFINITIONS

         1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following respective meanings:

"Accounts," "Chattel Paper," "Documents," "Equipment," "Fixtures," "General
Intangibles," "Goods," "Instruments" and "Inventory" shall have the meanings
assigned to them in the UCC on the date of this Agreement.

    "Accounts Receivable" shall mean and include all Accounts, Chattel Paper and
General Intangibles (including, but not limited to tax refunds, trade names,
trade styles and goodwill, trade marks, copyrights and patents, and applications
therefor, trade and proprietary secrets, formulae, designs, blueprints and
plans, customer lists, literary rights, licenses and permits, receivables,
insurance proceeds, beneficial interests in trusts and minute books and other
books and records) evidencing any obligation to the Borrower for payment for
goods sold, licensed or leased or services rendered, now owned or hereafter
acquired by Borrower.

    "Affiliate" shall mean, when used with respect to any person, any other
person which, directly or indirectly, controls or is controlled by or is under
common control with such person. For purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.

    "Agreement" shall mean this Agreement as amended from time to time in
accordance with the terms hereof.

    "Applicable Interest Period" shall mean, with respect to any Eurodollar
Loan, the Eurodollar Interest Period selected by the Borrower in any Request for
Loan.

    "Applicable Interest Rate" shall mean the Eurodollar-based Rate or the
Prime-based Rate as selected by the Borrower from time to time or as otherwise
determined in accordance with the terms and conditions of this Agreement.

    "Applicable Lending Office" shall mean, with respect to any Loan made by the
Bank or with respect to the Bank's Commitment, the office of the Bank or of any
Affiliate of the Bank selected by the Bank as an Applicable Lending Office for a
particular type of Loan by the Bank.

    "Applicable Margin" shall mean that number of percentage points to be taken
into account in computing the interest rate that accrues on the Loans which
shall be either the Eurodollar Margin or the Prime Margin. "Applicable Rate"
shall mean, subject to the Default Rate, either the Prime-based Rate or the
Eurodollar-based Rate as elected by Borrower, or as otherwise determined herein.

"Bank" shall mean Comerica Bank, a Michigan banking corporation.

"Bankruptcy Code" shall mean Title 11 of the United States Code, as amended, or
any successor act or code. "Borrowing Base Report" shall mean a report showing
Borrower's calculation of the Formula Amount, certified to Bank by an authorized
officer of Borrower, in form satisfactory to the Bank.

                                       1
<PAGE>

"Business Day" shall mean any day on which commercial banks are open for
domestic and international business in Detroit, Michigan and, when used in
reference to any Eurodollar Loan, also a day on which dealings are made in
deposits in the interbank market in the London interbank market.

"Collateral" shall mean all property of Borrower now or hereafter in the
possession of the Bank or any Affiliate of the Bank (or as to which the Bank or
any Affiliate of the Bank now or hereafter controls possession by documents or
otherwise), all amounts in all deposit or other accounts (including without
limit an account evidenced by a certificate of deposit) of Borrower now or
hereafter with the Bank or any Affiliate of the Bank and all of Borrower's
Accounts, Chattel Paper, Documents, Equipment, Fixtures, General Intangibles,
Goods, Instruments and Inventory, wherever located and whether now owned or
hereafter acquired, together with all replacements of any of the foregoing,
substitutions therefor, accessions thereto, and all proceeds and products of all
the foregoing, and all additional property (real or personal) of Borrower which
is now or hereafter subject to a security interest, mortgage, deed of trust,
lien, claim or other encumbrance granted by Borrower to, or in favor of, the
Bank.

"Collateral Assignment of Life Insurance" shall mean a Collateral Assignment of
Life Insurance pursuant to which the Borrower assigns to the Bank not less than
$2,500,000 of insurance on the life of Kenneth K. Rieth, together with any cash
value accumulated under such policy of life insurance related thereto, which
such assignment shall be in form and content satisfactory to the Bank.

"Collateral Documents" shall mean the Security Agreement, the Collateral
Assignment of Life Insurance, the Financing Statements, the Guaranties and such
other documents executed and delivered to the Bank pursuant to this Agreement
granting the Bank a security interest in, mortgage on or lien upon the
Collateral.

"Commitments" shall mean the Line of Credit Commitment and the Term Loan
Commitment.

"Compliance Certificate" shall mean a certificate in the form attached as
Exhibit "A" hereto executed by an authorized officer of Borrower and delivered
to Bank pursuant to Section 6.1(k) hereof.

"Debt" shall mean, as of any applicable date of determination, all funded
indebtedness of a person, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, joint or several, all determined in accordance
with GAAP.

"Debt Service Coverage Ratio" shall mean, as of any applicable date of
determination, the ratio of Borrower's (i) net income (excluding depreciation
and amortization expense) all determined in accordance with GAAP for the rolling
twelve-month period ending as of the date of such determination, to (ii) the sum
of its current maturities on Debt and interest expense, during the period of
determination, all determined in accordance with GAAP. The Debt Service Coverage
Ratio shall be determined monthly on a rolling twelve (12) month basis.

"Debt-to-Worth Ratio" shall mean, as of any applicable time of determination,
the ratio of (a) Borrower's total Debt, excluding Subordinated Debt, at such
time, to (b) Borrower's Tangible Effective Net Worth at such time.

"Default" shall mean a condition or event which, with the giving of notice or
the passage of time, or both, would become an Event of Default.

"Default Rate" shall have the meaning assigned to it in Section 2.12.

"Documents" shall mean this Agreement, the Notes, the Guaranties, the
Subordination Agreements, the Security Agreement, the Collateral Assignment of
Life Insurance, the Financing Statements and all other documents, agreements and
instruments delivered to Bank pursuant to this Agreement or any of the
foregoing.

"Dollars" and the sign "$" shall mean lawful money of the United States of
America.

"Effective Date" shall mean the effective date specified in the introductory
paragraph of this Agreement.

                                       2
<PAGE>

"Eligible Account" shall mean an Account Receivable (net of any offset to which
it is subject) arising in the ordinary course of Borrower's business which meets
each of the following requirements:

         (a) it is not owing more than one hundred twenty (120) days after the
date of the original invoice or other writing evidencing such Account
Receivable;

         (b) it arises from the sale or lease of goods and such goods have been
shipped or delivered to the account debtor; or it arises from services rendered
and such services have been performed;

         (c) it is evidenced by an invoice, dated not later than the date of
shipment or performance, rendered to such account debtor, or some other evidence
of billing acceptable to Bank;

         (d) it is not evidenced by any note, trade acceptance, draft or other
negotiable instrument or by any chattel paper, unless such note or other
document or instrument previously has been endorsed and delivered to Bank;

         (e) it is a valid, legally enforceable obligation of the account debtor
thereunder, and is not subject to any offset, counterclaim or other defense on
the part of such account debtor or to any claim on the part of such account
debtor denying liability thereunder in whole or in part;

         (f) it is not subject to any sale of accounts, any rights of offset,
assignment, lien or security interest whatsoever other than to Bank;

         (g) it is not owing by an Affiliate of Borrower, nor by any account
debtor, other than BMW AG ("BMW") or an Affiliate of BMW, which: (i) does not
maintain its chief executive office in the United States of America, (ii) is not
organized under the laws of the United States of America, or any state thereof,
or (iii) is the government of any foreign country or sovereign state, or of any
state, province, municipality or other instrumentality thereof;

         (h) it is not an account owing by the United States of America or any
state or political subdivision thereof, or by any department, agency, public
body corporate or other instrumentality of any of the foregoing, unless all
necessary steps are taken to comply with the Federal Assignment of Claims Act of
1940, as amended, or with any comparable state law, if applicable, and all other
necessary steps are taken to perfect Bank's security interest in such account;

         (i) it is not owing by an account debtor for which the Borrower has
received a notice of: (i) the death of the account debtor or any partner of the
account debtor, (ii) the dissolution, liquidation, termination of existence,
insolvency or business failure of the account debtor, (iii) the appointment of a
receiver for any part of the property of the account debtor, or (iv) an
assignment for the benefit of creditors, the filing of a petition under or the
commencement of any proceeding under, the Bankruptcy Code by or against the
account debtor;

         (j) it is not an account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales, for progress
billings, payable at a future date in accordance with its terms, subject to a
retainage or holdback by the account debtor or insured by a surety company.

An Account Receivable which is at any time an Eligible Account, but which
subsequently fails to meet any of the foregoing requirements, shall forthwith
cease to be an Eligible Account.

"Eligible Inventory" shall mean all of the Inventory of the Borrower which is in
good and merchantable condition, is not obsolete or discontinued, and which
would properly be classified as "work-in-process" or "unbilled contracts in
process" under GAAP, excluding:

         (a) consigned goods and inventory located outside the United States of
America;

         (b) inventory covered by or subject to a seller's right to repurchase,
or any consensual or nonconsensual lien or security interest (including without
limitation purchase money security interests) other than (i) the liens in favor
of Bank and (ii) liens securing the Subordinated Debt; or

         (c) inventory delivered to a customer, unless such inventory is subject
to Borrower's perfected first priority security or title retention interest,
and, at Bank's request, Borrower provides evidence satisfactory to the Bank of
the same.

Inventory shall be valued on a "percent complete" basis determined in accordance
with GAAP, and Inventory which is at any time Eligible Inventory, but which
subsequently fails to meet any of the foregoing requirements, shall forthwith
cease to be Eligible Inventory.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974 as
amended, or any successor act or code.

"ERISA Affiliate" shall mean, with respect to any person, any trade or business
(whether or not incorporated) which, together with such person or any Subsidiary
of such person, would be treated as a single employer under Section 414 of the
Code.

                                       3
<PAGE>

"Eurodollar-based Loan" shall mean any Loan or advance bearing interest at the
Eurodollar-based Rate.

"Eurodollar-based Rate" shall mean a per annum interest rate equal to the
Eurodollar Margin, plus the quotient of:

         (a) the per annum interest rate at which the Eurodollar Lending Office
offers deposits in Dollars to prime banks in the eurocurrency market in an
amount comparable to the relevant Eurodollar-based Loan and for a period equal
to the relevant Interest Period at approximately 11:00 a.m. Detroit time two (2)
Business Days prior to the first day of such Interest Period; divided by,

         (b) a percentage (expressed as a decimal) equal to one hundred percent
(100%) minus that percentage which is in effect on the date for an advance of a
Eurodollar-based Loan, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirements for a member bank of the Federal Reserve System with deposits
exceeding five billion dollars in respect of "Eurodollar Liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar-based Loans is determined or
any category of extensions of credit or other assets which includes loans by a
non-United States Eurodollar Lending Office of such a bank to United States
residents).

"Eurodollar Lending Office" shall mean such branch of Bank, domestic or foreign,
as it may hereafter designate as its Eurodollar Lending Office.

"Eurodollar Margin" shall mean, in respect of any Eurodollar-based Loan made and
outstanding hereunder, three and three-quarters percent (3-3/4%) per annum. The
foregoing shall, in each case, be subject to the accrual of interest at the
applicable Default Rate, as herein provided.

"Event of Default" shall mean any of those conditions or events listed in
Section 8.1 of this Agreement.

"Fifth Third Subordination Documents" shall mean an Intercreditor Agreement,
Subordinated Loan Agreement and Subordinated Unsecured Note, all in form and
content satisfactory to the Bank making all present and future indebtedness of
the Borrower to Fifth Third Bank subordinate to the Indebtedness, together with
agreements, documents, instruments or notes evidencing or otherwise related
thereto, all of which shall be in form and content satisfactory to the Bank.

"Financial Statements" shall mean all those balance sheets, earnings statements
and other financial data (whether of Borrower, a Guarantor or otherwise) which
have been furnished to the Bank for the purposes of, or in connection with, this
Agreement and the transactions contemplated hereby, including without limit
balance sheets, statements of income, retained earnings and cash flow, and all
footnotes.

"Financing Statements" shall mean UCC financing statements describing the Bank
as secured party and covering the Collateral and otherwise in such form, for
filing in such jurisdictions and with such filing offices, as the Bank shall
reasonably deem necessary or advisable.

"Formula Amount" shall mean, as of the date of any determination thereof, the
sum of (a) eighty percent (80%) of the Eligible Accounts, plus (b) eighty
percent (80%) of Progress Payment Receivables, plus (c) eighty percent (80%) of
Retention Receivables, plus (d) the lesser of (i) fifty percent (50%) of
Eligible Inventory, or (ii) $2,150,000, less (e) Special Tool Builder Payables.

"GAAP" shall mean as of any applicable date of determination, generally accepted
accounting principles consistently applied in the United States.

"Guarantors" shall mean John C. Kennedy, Kenneth K. Rieth and Michael J.
Jandernoa.

"Guaranty" shall mean the Guaranty of the Guarantors, whereby the Guarantors
jointly and severally guaranty the obligations of Borrower under this Agreement,
limited as set forth therein, the Documents and the Notes, in form satisfactory
to Bank.

                                       4
<PAGE>

"Indebtedness" shall mean all loans, advances, indebtedness, obligations and
liabilities of the Borrower to the Bank under the Notes, this Agreement and the
Documents, together with all other indebtedness, obligations and liabilities
whatsoever of the Borrower to the Bank, whether matured or unmatured, liquidated
or unliquidated, direct or indirect, absolute or contingent, joint or several,
due or to become due, now existing or hereafter arising.

"Interest Period" shall mean for any component of a Loan made as a
Eurodollar-based Loan, an interest period of one (1), two (2), three (3) or six
(6) months as selected by Borrower, provided however, that:

         (a) any Interest Period which would otherwise end on a day which is not
a Business Day shall be extended to the next succeeding Business Day unless the
next succeeding Business Day falls in another calendar month, in which case,
such Interest Period shall end on the immediately preceding Business Day;

         (b) when an Interest Period for a Eurodollar-based Loan begins on a day
which has no numerically corresponding day in another calendar month during
which such Interest Period is to end, it shall end on the last Business Day of
such other calendar month; and

         (c) no Interest Period for any portion of any Loan shall extend beyond
the Maturity Date or Termination Date, as applicable, for such Loan.

"L/C Drafts" means a draft drawn on the Bank pursuant to a Letter of Credit.

"Legal Rate" shall mean the maximum interest rate permitted to be paid by
Borrower or received by the Bank with respect to the Indebtedness under
applicable law.

    "Letter of Credit" shall mean a standby Letter of Credit having a stated
expiry date or a date upon which the draft must be reimbursed not later than
[twelve months] after the date of issuance and not later than the fifth Business
Day before the Termination Date, issued by the Bank, for the account of the
Borrower under an application and related documentation acceptable to the Bank
requiring, among other things, immediate reimbursement by the Borrower to the
Bank in respect of all drafts or other demand for payment honored thereunder and
all expenses paid or incurred by the Bank relative thereto.

         "Letter of Credit Amount" means One Million Dollars ($1,000,000) which
shall be a part of and not in addition to the Line of Credit Commitment.

"Letter of Credit Commitment" means the commitment of the Bank to issue Letters
of Credit on behalf of Borrower pursuant to Section 2.2 hereof.

"Letter of Credit Obligations" means at any time an amount equal to the sum of
(a) the aggregate outstanding face amount of all Letters of Credit plus (b) the
aggregate outstanding face amount of all accepted but unpaid L/C Drafts.

"Letter of Credit Documents" shall mean any application, Letter of Credit, or
other document prepared for the purposes of applying for or issuing a Letter of
Credit.

"Line of Credit" or "Line of Credit Loan" shall mean any Loans advanced upon the
request of Borrower pursuant to Section 2.1(a) hereof.

"Line of Credit Commitment" shall mean Seven Million Five Hundred Thousand
Dollars ($7,500,000). Within the Line of Credit Commitment the Bank has agreed
to issue Letters of Credit in an aggregate stated amount outstanding not to
exceed the Letter of Credit Amount.

"Line of Credit Maximum" shall mean, as of any date, the lesser of: (a) the Line
of Credit Commitment, or (b) the Formula Amount.

"Line of Credit Note" shall mean the Note in the form of Exhibit "B" hereto
evidencing the Line of Credit.

"Loan" shall mean, individually and/or collectively as the context may require,
the loans evidenced by the Notes described in Section 2 of this Agreement.

"Maturity Date" shall mean, in the case of the Term Loan, December 1, 2003.

                                       5
<PAGE>

"Net Income" shall mean, with respect to any period of calculation hereof,
Borrower's net income for such period determined in accordance with GAAP.

"Note or Notes" shall mean all promissory notes executed, delivered and/or
required in accordance with the terms of this Agreement with respect to the
Indebtedness.

"PBGC" shall mean the Pension Benefit Guaranty Corporation or any person
succeeding to the present powers and functions of the Pension Benefit Guaranty
Corporation.

"Permitted Liens" shall mean:

         (a) Liens and encumbrances in favor of the Bank;

         (b) Liens for taxes, assessments or other governmental charges incurred
in the ordinary course of business and for which no interest, late charge or
penalty is attaching or which is being contested in good faith by appropriate
proceedings and, if requested by the Bank, bonded in an amount and manner
satisfactory to the Bank;

         (c) Liens, not delinquent, created by statute in connection with
worker's compensation, unemployment insurance, social security and similar
statutory obligations;

         (d) Liens of mechanics, materialmen, carriers, warehousemen or other
like statutory or common law liens securing obligations incurred in good faith
in the ordinary course of business that are not yet due and payable;

         (e) Encumbrances consisting of existing or future zoning restrictions,
existing recorded rights-of-way, existing recorded easements, existing recorded
private restrictions or existing or future public restrictions on the use of
real property, none of which materially impairs the use of such property in the
operation of the business for which it is used and none of which is violated in
any material respect by any existing or proposed structure or land; and

         (f) Purchase money security interests, leases or any title retention
interest granted or retained in connection with the purchase or leasing of
equipment or fixtures by the Borrower, in an aggregate amount not to exceed
$100,000 in any given fiscal year.

"Person" or "person" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated association, joint stock company,
government, municipality, political subdivision or agency, or other entity.

"Prime-based Loan" shall mean any Loan or advance bearing interest at the
Prime-based Rate.

"Prime-based Rate" shall mean the Prime Rate in effect from time to time plus
the Applicable Margin.

"Prime Margin" shall mean, (a) in respect of any Line of Credit Loan that bears
interest at the Prime-based Rate, one percent (1%) per annum, and (b) in respect
to the Term Loan, one and one-quarter percent (1-1/4%) per annum. The foregoing
shall, in each case, be subject to the accrual of interest at the applicable
Default Rate, as herein provided.

"Prime Rate" shall mean that annual rate of interest designated by the Bank as
its prime rate, which rate may not be the lowest rate of interest charged by the
Bank to any of its customers, and which rate is changed by the Bank from time to
time.

"Progress Payment Account Receivable" shall mean an Account Receivable which
satisfies the conditions for being an Eligible Account, except that the
reference in subparagraph (a) of the definition thereof to one hundred twenty
(120) days shall for the purposes hereof be thirty (30) days and subparagraph
(j) thereof shall be of no effect, and which such Account Receivable is owed by
an account debtor pursuant to a purchase order or other written agreement
satisfactory to the Bank, providing for the payment of progress payments by such
account debtor to the Borrower and the Inventory relating to such Progress
Payment Account Receivable is not otherwise reported on a Borrowing Base
Certificate as a part of Eligible Inventory.

"Reimbursement Obligations" shall have the meaning assigned to it in Section
2.2.

"Request for Loan" shall mean a request for loan delivered by Borrower to Bank
in a form or pursuant to an agreement satisfactory to the Bank.

                                       6
<PAGE>

"Retention Receivable" shall mean an Account Receivable which constitutes
retention billing and otherwise satisfies the conditions for being an Eligible
Account, except that the reference in subparagraph (a) of the definition thereof
to one hundred twenty (120) days shall for purposes hereof be one hundred eighty
(180) days, and which such Account Receivable is owed by either Oxford
Automotive, Inc. or Drive Automotive Industries of America, Inc. in connection
with goods or services provided under the "Mercedes 251 Program," as such
program is commonly known.

"Security Agreement" shall mean a Security Agreement by the Borrower pursuant to
which the Borrower grants to the Bank a first priority security interest in all
of its Accounts, Chattel Paper, Documents, Equipment, Fixtures, General
Intangibles, Goods, Instruments and Inventory, Machinery and Equipment owned by
it, wherever located and whether now owned or hereafter acquired, together with
all replacements thereof, substitutions therefor, accessions thereto and all
proceeds and products of all the foregoing.

"Special Tool Builder Payables" shall mean accounts payable of the Borrower owed
to a "Special Tool Builder," as such term is defined in Act No. 481 of the
Michigan Public Acts of 2002, as such Act may be amended from time to time.

"Subordinated Debt" shall mean indebtedness of the Borrower to third parties
which has been subordinated to the Indebtedness pursuant to a subordination
agreement in form and content satisfactory to the Bank.

"Subordination Agreement" shall mean an agreement in form and content
satisfactory to Bank, pursuant to which the repayment of Subordinated Debt, and
the priority of any liens on Collateral securing the Subordinated Debt, is
subordinated to the prior payment of the Indebtedness to Bank, on terms and
conditions satisfactory to Bank.

"Subsidiary" shall mean any corporation (whether now existing or hereafter
organized or acquired) in which more than fifty percent (50%) of the outstanding
securities having ordinary voting power for the election of directors, as of any
applicable date of determination, shall be owned directly, or indirectly through
one or more subsidiaries, by the Borrower.

"Tangible Effective Net Worth" shall mean Tangible Net Worth plus Subordinated
Debt.

"Tangible Net Worth" shall mean as of the date of any determination, the sum of:
(a) the excess of: (i) the book value of the assets (net of depreciation and
amortization) of Borrower (other than patents, patent rights, trademarks, trade
names, copy rights, franchises, licenses, goodwill and similar general
intangible assets as determined by the Bank), over (ii) all Debt of Borrower.

"Term Loan" shall mean the Loan to be advanced to Borrower pursuant to Section
2.1(b) hereof.

"Term Loan Commitment" shall mean Two Million Dollars ($2,000,000).

"Term Note" shall mean the Note in the form of Exhibit "C" hereto evidencing the
Term Loan.

"Termination Date" shall mean the earlier to occur of the date on which the Line
of Credit Commitment is terminated pursuant to Section 8.2 or December 1, 2003.

"UCC" shall mean Public Act 174 of 1962 of the State of Michigan, as amended.

"Unfunded Benefit Liabilities" shall mean, with respect to any Plan as of any
date, the amount of the unfunded benefit liabilities determined in accordance
with Section 4001(a)(18) or ERISA.

1.2 Other Definitions; Rules of Construction. As used herein, the terms "Bank"
and "Borrower" shall have the respective meanings ascribed thereto in the
introductory paragraph of this Agreement. The terms defined in Section 1.1,
shall include both the singular and the plural forms thereof and shall be
construed accordingly. All computations required hereunder and all financial
terms used herein shall be made or construed in accordance with generally
accepted accounting principles unless such principles are inconsistent with the
express requirements of this

                                       7
<PAGE>

Agreement. Use of the terms, "herein", "hereof", and "hereunder" shall be deemed
references to this Agreement in its entirety and not to the Section or clause in
which such term appears. References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Agreement unless otherwise
specifically provided.

2. COMMITMENT, INTEREST AND FEES

         2.1 Loans. Subject to the terms and conditions of this Agreement,
Borrower may request, and upon such request the Bank shall make Loans to
Borrower, as follows:

                  (a) in the case of the Line of Credit, such amounts as are
requested by Borrower from time to time not to exceed, in aggregate amount at
any time outstanding, the Line of Credit Maximum; and

                  (b) in the case of the Term Loan, in an advance on the date
hereof, not to exceed the Term Loan Commitment.

         2.2 Letters of Credit.

                  (a) Issuance of Letters of Credit. Upon receipt of duly
executed applications therefor and such other documents, instructions and
agreements as Bank may require, and subject to the provisions of Agreement, Bank
shall issue Letters of Credit for the account of Borrower on terms satisfactory
to Bank; provided, however, that no Letter of Credit shall be issued by Bank if
on the date of issuance, before or after taking such Letter of Credit into
account, (i) the aggregate of all Line of Credit Loan(s) plus the Letter of
Credit Obligations outstanding at such time would exceed the Line of Credit
Maximum, or (ii) the aggregate outstanding amount of the Letter of Credit
Obligations would exceed One Million Dollars ($1,000,000); and provided,
further, that all Letters of Credit shall be canceled or replaced at the
termination of this Agreement.

                  (b) Reimbursement. Borrower agrees to reimburse the Bank, on
demand by the Bank, for each payment made by the Bank under or pursuant to any
Letter of Credit or L/C Draft ("Reimbursement Obligation"). If Borrower at any
time fails to repay such Reimbursement Obligation pursuant to this Section
2.2(b), Borrower shall be deemed to have elected to borrow a Line of Credit Loan
from the Bank, as of the date of the advance giving rise to the Reimbursement
Obligation, consisting of a Prime-based Loan equal in amount to the amount of
the unpaid Reimbursement Obligation, the proceeds of which borrowing shall be
used to repay such Reimbursement Obligation. For purposes of this Agreement,
Reimbursement Obligations shall be deemed to be Line of Credit Loans from, and
as of, the date such Reimbursement Obligation arises, regardless of when the
Bank actually funds the Reimbursement Obligation.

                  (c) Nature of Reimbursement Obligation. Borrower's
Reimbursement Obligation shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which Borrower may have or have had against the Bank or the beneficiary of such
Letter of Credit, including any defense based upon the occurrence of any Default
or Event of Default, any draft, demand, certificate or other document proving to
be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged, the failure of any disbursement to conform to the terms of the
applicable Letter of Credit or any non-application or misapplication by the
beneficiary under such Letter of Credit of the proceeds of such disbursement, or
the legality, validity, form, regularity or enforceability of such Letter of
Credit. Borrower shall assume all risks of the acts, omissions or misuse of each
Letter of Credit by the beneficiary thereof.

                  (d) Exculpation. The Bank shall not be responsible for (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter
of Credit issued by it or any document submitted by any party in connection with
the application for and issuance of such Letter of Credit, even if it should in
fact prove to be in any or all respect invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights of benefits
thereunder or proceeds thereof, which may prove to be invalid or ineffective for
any reason; (iii) the failure of the beneficiary under any Letter of Credit to
comply fully with conditions required in order to demand payment under such
Letter of Credit, provided, however, that in the case of any payment by Bank

                                       8
<PAGE>

under any Letter of Credit, Bank has not acted with gross negligence or willful
misconduct in determining that the demand for payment under such Letter of
Credit complies on its face with any applicable requirements for a demand for
payment thereunder; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or (v) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a disbursement under any such Letter
of Credit. Any action taken or omitted to be taken by the Bank in good faith and
without gross negligence shall be binding upon Borrower and shall not put the
Bank under any resulting liability to Borrower.

         2.3 Requests for Loans. Borrower may request a Loan (or the renewal or
conversion of any outstanding portion of any Loan with another type of
Applicable Rate) by delivery or facsimile to Bank of a Request for Loan, or by
other agreement with the Bank, subject to the following:

                  (a) each such Request for Loan shall indicate the Loan to
which it relates and shall set forth all other information required on the
Request for Loan form;

                  (b) each such Request for Loan (other than the advances
requested concurrently herewith) shall be delivered to Bank by 11:00 a.m.
(Detroit time) two (2) Business Days prior to the proposed date of Loan, except
in the case of a Prime-based Loan, for which the Request for Loan must be
delivered by 11:00 a.m. (Detroit time) on such proposed date;

                  (c) in the case of a Request for Loan selecting the
Eurodollar-based Rate as the Applicable Rate for all or any portion of a Loan,
(i) the principal amount thereof shall be not less than Five Hundred Thousand
Dollars ($500,000) or a greater integral multiple of One Hundred Thousand
Dollars ($100,000) and (ii) upon the making thereof, not more than three (3)
Eurodollar-based Loans shall be in effect;

                  (d) a Request for Loan, once delivered to Bank, shall not be
revocable;

                  (e) each Request for Loan shall constitute a certification by
Borrower as of the date thereof that all of the conditions set forth in Article
4 hereof remain satisfied as of the date of such request and as of the date such
Loan is requested to be made;

                  (f) with respect to any Request for Loan relating to the Line
of Credit Loan, upon the making of the advance requested by such Request for
Loan, the indebtedness outstanding under the Line of Credit shall not exceed the
Line of Credit Maximum.

         2.4 Notes. The Line of Credit shall be evidenced by the Line of Credit
Note in the form attached as Exhibit "B" hereto executed by Borrower and the
Term Loan shall be evidenced by the Term Note in the form of Exhibit "C" hereto
executed by Borrower.

         2.5 Payments.

                  (a) Subject to mandatory prepayments required under Section
6.3 hereof, the outstanding principal balance under the Line of Credit Note (and
all then accrued and unpaid interest thereon) shall be due and payable to the
Bank on the Termination Date.

                  (b) The principal balance under the Term Note shall be payable
in monthly principal installments, in the amount of Thirty-three Thousand Three
Hundred Thirty-three and 34/100 Dollars ($33,333.34) plus accrued interest,
which shall be due and payable on the first Business Day of each and every
month, commencing on February 1, 2003 and continuing thereafter on the first
Business Day of each month thereafter until the Maturity Date, when the entire
principal balance plus accrued and unpaid interest shall be due and payable.

                  (c) The Loans may be prepaid in whole or part in Borrower's
discretion without penalty or premium, provided, however, if the portion of the
Loan so prepaid is subject to a Eurodollar-based Rate, Borrower shall pay to
Bank such additional amounts, if any, as are required in connection therewith
pursuant to Section 3.1

                                       9
<PAGE>

hereof. Amounts repaid or prepaid on the Line of Credit Note shall be available
for readvance subject to the terms hereof. Amounts repaid or prepaid on the Term
Loan hereunder shall not be available for readvance.

         2.6 Interest. Interest on the Loans shall accrue at the Applicable
Interest Rate from time to time in effect for the respective Loans and, in the
calculation thereof, changes in the Applicable Interest Rate resulting from
changes in the Prime Rate and/or the Eurodollar-based Rate shall be given effect
on the effective date of such change in the Prime Rate or the Eurodollar-based
Rate. Interest on each Prime-based Loan shall be paid on the first Business Day
of each month while such Prime-based Loan is outstanding and on the date of any
conversion thereof to a Eurodollar-based Loan. Interest on each Eurodollar-based
Loan shall be paid on the last day of the Interest Period applicable thereto
during the Advance Period.

         2.7 Maximum Rate. At no time shall the rate of interest payable on any
Loan be deemed to exceed the Legal Rate. In the event any interest is charged or
received by the Bank in excess of the Legal Rate, the Borrower acknowledge that
any such excess interest shall be the result of an accidental and bona fide
error, and such excess shall first be applied to reduce the principal then
unpaid hereunder (in inverse order of their maturities if principal amounts are
due in installments); second, applied to reduce any obligation for other
Indebtedness of the Borrower (or either of them) to the Bank; and third, any
remaining excess returned to the Borrower.

         2.8 Fees and Reimbursements. Simultaneously with the execution of this
Agreement, Borrower shall:

                  (a) pay to Bank a closing fee in the amount of Sixty-Five
Thousand Dollars ($65,000) (being the difference between the loan fee of $75,000
and the $10,000 previously paid), which fee shall be deemed fully earned upon
such closing and shall not be refundable under any circumstance; and

                  (b) pay to the Bank an unused facility fee for the period from
the date of this Agreement to and including the Termination Date equal to
one-quarter of one percent (1/4%) per annum on the average daily excess of the
Line of Credit Commitment over the aggregate unpaid principal balance of the
Line of Credit Loan. Such facility fee shall be payable in arrears on the first
Business Day of each April, July, October and January, beginning April 1, 2003,
and on the Termination Date, for the periods ending on such date.

                  (c) reimburse Bank for the amount of the expenses (including
without limit reasonable attorneys' fees for outside counsel, and disbursements)
incurred by the Bank in connection with the preparation and closing of this
Agreement and related instruments and/or making of advances hereunder.

         2.9 Basis of Computation. The amount of all interest and fees hereunder
shall be computed for the actual number of days elapsed on the basis of a year
consisting of three hundred sixty (360) days.

         2.10 Basis of Payments. All sums payable by Borrower to the Bank under
this Agreement or the other documents contemplated hereby shall be paid directly
to the Bank at its office set forth in Section 9.10 hereof (or such other office
of Bank as Bank may hereafter direct) in immediately available United States
funds, without set off, deduction or counterclaim. In its sole discretion, the
Bank may charge any and all deposit or other accounts (including without limit
an account evidenced by a certificate of deposit) of Borrower with the Bank for
all or a part of any Indebtedness then due, provided, however, that this
authorization shall not affect the Borrower's obligation to pay, when due, any
Indebtedness whether or not account balances are sufficient to pay amounts due.

         2.11 Receipt of Payments. Any payment of the Indebtedness made by mail
will be deemed tendered and received only upon actual receipt by the Bank at the
address designated for such payment, whether or not the Bank has authorized
payment by mail or any other manner, and shall not be deemed to have been made
in a timely manner unless received on the date due for such payment, time being
of the essence. Borrower expressly assume all risks of loss or liability
resulting from non-delivery or delay of delivery of any item of payment
transmitted by mail or in any other manner. Acceptance by the Bank of any
payment in an amount less than the amount then due shall be deemed an acceptance
on account only.

                                       10
<PAGE>

         2.12 Default Interest. Notwithstanding anything herein to the contrary,
subject to Section 2.6 above, in the event of the occurrence of and so long as
an Event of Default shall exist, all principal outstanding under the Notes shall
bear interest, payable on demand, from the date of such Event of Default at a
rate per annum equal to three percent (3%) above the Applicable Rates (the
"Default Rate").

         2.13 Conversion and Renewal of Loans. Providing that no Event of
Default shall have occurred and be continuing, Borrower may elect to renew or
convert the Applicable Interest Rate applicable to the Line of Credit Loans from
the Prime-based Rate to the Eurodollar-based Rate or from the Eurodollar-based
Rate to the Prime-based Rate; provided that a Request for Loan requesting such
renewal or conversion in compliance with Section 2.2 hereof is delivered to Bank
in conformity with the requirements of such Section.

If with respect to any Eurodollar-based Loan outstanding at any time, the Bank
does not receive notice of the election three (3) or more Business Days prior to
the last day of the Interest Period therefor, Borrower shall be deemed to have
elected to convert such Eurodollar-based Loan at the end of the then current
Interest Period to a Prime-based Loan.

         2.14 Use of Proceeds. Proceeds of the initial advance of the Term Loan
shall be used to refinance existing indebtedness with Fifth Third Bank. Proceeds
of the Line of Credit Loan shall be available to refinance existing indebtedness
with Fifth Third Bank and for the Borrower's working capital purposes.

         2.15 Letter of Credit Fees. On or before each date of issuance,
extension or renewal of any Letter of Credit, the Borrower agrees to pay to the
Bank such customary fees, charges and expenses of the Bank in respect of the
issuance, negotiation, acceptance, amendment, transfer and payment of such
Letter of Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.

3. SPECIAL PROVISIONS FOR EURODOLLAR-BASED LOANS

         3.1 Reimbursement of Prepayment Costs. As to any Eurodollar-based Loan,
if any prepayment thereof shall occur on any day other than the last day of an
Interest Period (whether pursuant to this Article, or by acceleration, or
otherwise), or if an Applicable Rate shall be changed during any Interest Period
for a Eurodollar-based Loan pursuant to this Article, or if Borrower shall fail
to borrow any such advance on the date requested therefor, Borrower agrees to
reimburse Bank on demand for any costs incurred by Bank as a result of the
timing thereof including but not limited to any net costs incurred in
liquidating or employing deposits from third parties, upon Bank's delivery to
Borrower of a certificate setting forth in reasonable detail the basis for
determining such costs, which certificate shall be conclusively presumed correct
save for manifest error.

         3.2 Eurodollar Lending Offices. For any Loan for which the Applicable
Rate is the Eurodollar-based Rate, if Bank shall designate a Eurodollar Lending
Office which maintains books separate from those of the rest of the Bank, Bank
shall have the option of maintaining and carrying the relevant Loan on the books
of such office.

         3.3 Circumstances Affecting Eurodollar-based Availability. If with
respect to any Interest Period for a Eurodollar-based Loan, Bank determines
that, by reason of circumstances affecting the foreign exchange and interbank
markets generally, deposits in eurodollars in the applicable amounts are not
being offered to Bank for such Interest Period, then Bank shall forthwith give
notice thereof to Borrower. Thereafter, the obligation of Bank to make
Eurodollar-based Loans for such Interest Periods, and the right of Borrower to
convert an advance to or refund an advance as a Eurodollar-based Loan for such
Interest Period shall be suspended until the Bank notifies Borrower that such
circumstance no longer exists.

         3.4 Laws Affecting Eurodollar-based Loan Availability. If, after the
date hereof, the introduction of, or any change in, any applicable law, rule or
regulation or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by Bank (or its Eurodollar Lending Offices) with any
request or directive (whether or not having the force of law) of any such
authority, shall make it unlawful or impossible for Bank (or its Eurodollar
Lending Office) to honor its obligations hereunder to make or maintain any Loan
or advance with interest at the Eurodollar-based Rate, Bank shall forthwith give
notice thereof to Borrower. Thereafter: (a) the obligations of Bank to make
Eurodollar-based Loans and the

                                       11
<PAGE>

right of Borrower to convert an advance or refund an advance as a
Eurodollar-based Loan shall be suspended; and (b) if Bank may not lawfully
continue to maintain a Eurodollar-based Loan to the end of the then current
Interest Period, the Prime-based Rate shall be the Applicable Rate for
Eurodollar-based Loans for the remainder of such Interest Period.

         3.5 Increased Costs. In the event that any change after the date hereof
in applicable law, treaty or governmental regulation, or in the interpretation
or application thereof, or compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other authority:

                  (a) shall subject Bank (or its Eurodollar Lending Office) to
any tax, duty or other charge with respect to any Loan or any Note or shall
change the basis of taxation of payments to Bank (or its Eurodollar Lending
Office) of the principal of or interest on any Loan or any Note or any other
amounts due under this Agreement (except for changes in the rate of tax on the
overall net income or gross receipts of any of the Bank or its Eurodollar
Lending Office imposed by the jurisdiction in which Bank's principal executive
office or Eurodollar Lending Office is located); or

                  (b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System but excluding with respect to any Eurodollar-based Loan
any such requirement included in an applicable Eurodollar Reserve Requirement),
risk-based capital requirement, liquidity ratio or special deposit, or similar
requirement against assets of, deposits with or for the account of, or credit
extended by Bank (or its Eurodollar Lending Office) or shall impose on any of
the Bank (or its Eurodollar Lending Office) or the foreign exchange and
interbank markets or other condition affecting any Loan or any of the Notes or
any commitment of Bank under this Agreement;

                  (c) and the result of any of the foregoing is to increase the
costs to the Bank, by an amount deemed by Bank to be material, of making,
renewing or maintaining any part of the Loans or its commitments hereunder or to
reduce the amount or rate of return on any sum received or receivable by, or the
rate of return on the capital of, the Bank under this Agreement, or under the
Notes, then Bank shall promptly notify Borrower of such fact and demand
compensation therefor and, Borrower hereby agree to pay Bank such additional
amount or amounts as will compensate Bank for such increased costs or reduced
return within thirty (30) days of such notice. A certificate of Bank demanding
such compensation setting forth in reasonable detail the basis for determining
such additional amount or amounts necessary to compensate shall be conclusively
presumed to be correct save for manifest error. 3. CONDITIONS PRECEDENT TO
OBLIGATIONS OF BANK

4. The obligations of the Bank under this Agreement are subject to the
satisfaction of each of the following conditions:

         4.1 Documents Executed and Filed. The Borrower shall have executed (or
caused to be executed) and delivered to the Bank and, as appropriate, there
shall have been filed or recorded with such filing or recording offices as the
Bank shall deem appropriate, the following:

                  (a) The Notes;

                  (b) The Guaranty Agreements;

                  (c) The Fifth Third Subordination Documents;

                  (d) The Security Agreement;

                  (e) The Collateral Assignment of Life Insurance;

                  (f) The Financing Statements; and

                                       12
<PAGE>

                  (g) Such other and further documents required by Bank which
shall evidence, govern, secure and otherwise be entered into in connection with
the Loan.

         4.2 Certified Resolutions. The Borrower shall have furnished to the
Bank copies of resolutions of its Board of Directors authorizing the execution,
delivery and performance of this Agreement, the borrowing hereunder, the Notes
and the other Documents to which it is party, which shall have been certified by
officers of the Borrower as being complete, accurate and in effect.

         4.3 Certified Articles. The Borrower shall have furnished to the Bank
copies of its Articles of Incorporation, including all amendments thereto and
restatements thereof, and all other charter documents of the Borrower, all of
which shall have been certified by the jurisdiction of organization of the
respective parties thereto.

         4.4 Certified Bylaws. The Borrower shall have furnished to the Bank
copies of its Bylaws, including all amendments thereto and restatements thereof,
which shall have been certified by the Secretary or Assistant Secretary of the
Borrower, as being complete, accurate and in effect.

         4.5 Certificate of Good Standing. The Borrower shall have furnished to
the Bank Certificates of Good Standing with respect to its state of
incorporation or organization and with respect to each State in which Collateral
is located.

         4.6 Certificate of Incumbency. The Borrower shall have furnished to the
Bank certificates of the Secretary or Assistant Secretary of it, as to the
incumbency and signatures of the officers of the Borrower signing this
Agreement, the Notes and the other Documents, as the case may be.

         4.7 UCC Lien Search. The Bank shall have received UCC record and copy
searches, evidencing the appropriate filing and recording of the Financing
Statements and disclosing no notice of any liens or encumbrances filed against
any of the Collateral other than the Financing Statements and the Permitted
Liens.

         4.8 Casualty Insurance. The Borrower shall have furnished to the Bank,
in form, content and amounts and with companies satisfactory to the Bank,
casualty insurance policies with loss payable clauses in favor of the Bank,
relating to the assets and properties (including, but not limited to, the
Collateral) of the Borrower.

         4.9 Opinions of Counsel. The Borrower shall have furnished Bank
opinions of counsel to the Borrower, dated the date hereof, in form reasonably
satisfactory to the Bank.

         4.10 No Material Adverse Change; No Default. No Default or Event of
Default shall have occurred and be continuing and there shall have been no
material adverse change in the condition (financial or otherwise), properties,
business, results or operations of Borrower since the date of the Financial
Statements last delivered to the Bank prior to closing.

         4.11 Other Documents and Instruments. Bank shall have received such
other instruments and documents as Bank may reasonably request in connection
with the making of the Loans hereunder, and all such instruments and documents
shall be satisfactory in form and substance to the Bank.

         4.12 Approval of Bank Counsel. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been satisfactory to and approved by legal counsel for the Bank, and said
counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as they shall have
reasonably requested.

         4.13 Payment of Indebtedness. The Borrower shall have reduced
indebtedness of the Borrower to Fifth Third Bank to an amount not to exceed
$1,600,000, which such remaining indebtedness shall be subject to the Fifth
Third Subordination Documents, and Fifth Third Bank shall have delivered to the
Bank evidence, in form and

                                       13
<PAGE>

content satisfactory to the Bank, of the termination of all security interests
and other liens and encumbrances of Fifth Third Bank upon the assets of the
Borrower.

         4.14 Pre-funding Audit. The Bank shall have received the satisfactory
results of an audit of Borrower's Accounts Receivable and Inventory to be
performed by an independent auditor satisfactory to Bank which shall include,
without limitation, confirmation of Borrower's progress payment agreements with
Oxford Automotive, Inc. and Drive Automotive Industries of America, Inc. under
terms and conditions satisfactory to Bank.

5. WARRANTIES AND REPRESENTATIONS

On a continuing basis from the date of this Agreement until the Indebtedness is
paid in full and Borrower has performed all of their other obligations
hereunder, Borrower represents and warrants that:

         5.1 Corporate Existence and Power. (a) Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdictions of incorporation; (b) has the power and authority to own its
properties and assets and to carry out its business as now being conducted and
is qualified to do business and in good standing in every jurisdiction wherein
such qualification is necessary, (c) has the power and authority to execute,
deliver and perform this Agreement, to borrow money in accordance with its
terms, to execute, deliver and perform the Notes and other Documents to which it
is party and to grant to the Bank liens and security interests in the Collateral
as hereby contemplated and to do any and all other things required of it
hereunder and (d) each of the Guarantors has the power and authority to execute,
deliver and perform the Documents to which it is a party.

         5.2 Authorization and Approvals. The execution, delivery and
performance of this Agreement, the borrowings hereunder and the execution,
delivery and performance of the Notes and the other Documents: (a) have been
duly authorized by all requisite corporate action of the Borrower, (b) except
for UCC filings, do not require registration with or consent or approval of, or
other action by, any federal, state or other governmental authority or
regulatory body, (c) will not, to Borrower's knowledge, materially violate any
provision of law, any order of any court or other agency of government, the
Articles of Incorporation or Bylaws of the Borrower, any provision of any
indenture, note, agreement or other instrument to which the Borrower is a party,
or by which any of its properties or assets are bound, (d) will not be in
conflict with, result in a breach of or constitute (with or without notice or
passage of time) a default under any such indenture, note, agreement or other
instrument, and (e) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of the Borrower, other than in favor of the Bank and as contemplated
hereby.

         5.3 Valid and Binding Agreement. This Agreement and the Documents to
which Borrower is a party, will be, when delivered, valid and binding
obligations of the Borrower in accordance with their respective terms except to
the extent enforceability thereof may be limited under applicable bankruptcy,
moratorium, insolvency or similar laws and by equitable principles relating to
enforceability, good faith and fair dealing.

         5.4 Actions, Suits or Proceedings. There are no actions, suits or
proceedings, at law or in equity, and no proceedings before any arbitrator or by
or before any governmental commission, board, bureau, or other administrative
agency, pending, or, to the best knowledge of the Borrower, threatened against
or affecting Borrower or any properties or rights of the Borrower, which, if
adversely determined, could materially impair the right to carry on its business
substantially as now conducted or could have a material adverse effect upon its
financial conditions.

         5.5 No Liens, Pledges, Mortgage or Security Interests. Except for
Permitted Liens none of the assets or properties of the Borrower, including
without limit the Collateral, are subject to any mortgage, pledge, lien,
security interest or other encumbrances of any kind or character other than in
favor of Bank.

         5.6 Accounting Principles. Except with respect to Guarantors, all
consolidated and consolidating balance sheets, earnings statements and other
financial data furnished to the Bank for the purposes of, or in connection with,
this Agreement and the transactions contemplated by this Agreement, have been
prepared in accordance with GAAP (except as disclosed therein), and do or will
fairly present the financial condition of the Borrower, as of the dates, subject
only to normal year-end adjustments and the omission of footnotes with respect
to interim statements, and the results of its operations for the periods, for
which the same are furnished to the Bank.

                                       14
<PAGE>

Without limiting the generality of the foregoing, the Financial Statements have
been prepared in accordance with GAAP (except as disclosed therein) and fairly
present the financial condition of the Borrower as of the dates, subject only to
normal year-end adjustments and the omission of footnotes with respect to
interim statements, and the results of its operations for the fiscal periods,
for which the same are furnished to the Bank. The Borrower has no material
contingent obligations, liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against in, the
Financial Statements.

         5.7 Financial Condition. The Borrower is solvent, able to pay its debts
as they mature, has capital sufficient to carry on its business and has assets
the fair market value of which exceeds its liabilities, and Borrower will not be
rendered insolvent, under-capitalized or unable to pay maturing debts by the
execution or performance of this Agreement or the other documents contemplated
hereby. There has been no material adverse change in the business, properties or
condition (financial or otherwise) of Borrower since the date of the latest of
the Financial Statements.

         5.8 Taxes. The Borrower has filed by the due date therefor all federal,
state and local tax returns and other reports it is required by law to file, has
paid or caused to be paid all taxes, assessments and other governmental charges
that are shown to be due and payable under such returns, and has made adequate
provision for the payment of such taxes, assessments or other governmental
charges which have accrued but are not yet payable. The Borrower has no
knowledge of any deficiency or assessment in connection with any taxes,
assessments or other governmental charges not adequately disclosed in the
Financial Statements.

         5.9 Compliance with Laws. The Borrower has complied with all applicable
laws, to the extent that failure to comply would materially interfere with the
conduct of the business of Borrower.

         5.10 Indebtedness. The Borrower has no indebtedness for money borrowed
or any direct or indirect obligations under any leases, save and except as set
forth on Schedule 5.10 attached hereto, (whether or not required to be
capitalized under GAAP) or any agreements of guarantee or surety except for the
endorsement of negotiable instruments by the Borrowers in the ordinary course of
business for deposit or collection.

         5.11 Margin Stock. Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any Loan hereunder will be used, directly or indirectly, to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.

         5.12 Pension Funding. Borrower has not incurred any accumulated funding
deficiency within the meaning of ERISA or incurred any liability to the PBGC in
connection with any employee benefit plan established or maintained by Borrower
and no reportable event or prohibited transaction, as defined in ERISA, has
occurred with respect to such plans.

         5.13 Misrepresentation. No warranty or representation by Borrower
contained herein or in any certificate or other document furnished by Borrower
pursuant hereto contains any untrue statement of material fact or omits to state
a material fact necessary to make such warranty or representation not misleading
in light of the circumstances under which it was made. There is no fact which
the Borrower has not disclosed to the Bank in writing which materially and
adversely affects nor, so far as the Borrower can now foresee, is likely to
prove to affect materially and adversely the business, operations, properties,
prospects, profits or condition (financial or otherwise) of Borrower or the
ability of Borrower to perform this Agreement.

         5.14 Subsidiaries. Borrower has no Subsidiaries.

         5.15 Hazardous Materials Warranties, Representations and Covenants.

                  (a) The Borrower is not a party to any litigation or
administrative proceeding, nor so far as is known by Borrower, is any litigation
or administrative proceeding threatened against it, which in either case (a)

                                       15
<PAGE>

asserts or alleges that the Borrower violated any federal, state or local laws,
ordinances, statutes, rules, regulations or judgments governing the use,
storage, transportation, or disposal of Hazardous Materials, as defined below
("Environmental Laws"), (b) asserts or alleges that the Borrower is required to
clean up, remove, or take remedial or other response action due to the disposal,
depositing discharge, leaking or other release of any Hazardous Materials, (c)
asserts or alleges that the Borrower is required to pay all or a portion of the
cost of any past, present, or future clean up, removal or remedial or other
response action which arises out of or is related to the disposal, depositing,
discharge, leaking or other release of any Hazardous Material by any one of
them.

                  (b) To the best knowledge of Borrower, there are no conditions
existing currently or likely to exist during the term of this Agreement which
would subject the Borrower to damages, penalties, injunctive relief or clean up
costs under any Environmental Laws or which require or are likely to require
clean up, removal, remedial action or other response pursuant to Environmental
Laws by the Borrower.

                  (c) The Borrower is not subject to any judgment, decree, order
or citation related to or arising under the Environmental Laws and Borrowers
have not received any notice ("Environmental Complaint") of any violations of
Environmental Laws (and, within five days of receipt of any Environmental
Complaint Borrower shall deliver to the Bank a copy thereof), and to the best of
Borrower's knowledge, there have been no actions commenced or threatened by any
party for noncompliance with any Environmental Laws.

                  (d) The Borrower has all permits, licenses, approvals and
other authorizations required under the Environmental Laws that are necessary to
their respective businesses.

                  (e) Borrower covenants and agrees that it shall not use,
introduce or maintain Hazardous Materials in any premises which they may from
time to time occupy other than in strict accordance and compliance with
Environmental Laws.

                  (f) Borrower agrees that it shall promptly notify Bank in
writing as soon as Borrower becomes aware of any condition or circumstance which
makes the environmental warranties, representations and covenants contained
herein incomplete or inaccurate in any material respect as of any date.

                  (g) In the event of any condition or circumstance that makes
any environmental representation, warranty or covenant incomplete or inaccurate
in any material respect as of any date, Borrower shall, at the request of Bank,
at the sole expense of Borrower, retain an environmental consultant acceptable
to Bank, to conduct a thorough and complete environmental assessment in respect
of any environmental concerns of Bank arising from that changed condition or
circumstance. A copy of said assessment will be addressed to Bank and promptly
delivered to Bank upon completion.

                  (h) In the event of a violation of Environmental Laws, whether
discovered pursuant to an environmental consultant's assessment or otherwise,
Borrower covenants and agrees to complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions necessary to clean up
and remove all contaminating Hazardous Materials on or affecting premises or
property occupied or used by the Borrower, whether caused by the Borrower or a
third party, in accordance with Environmental Laws to the satisfaction of Bank,
and in accordance with the directives of all federal, state, and local
governmental authorities.

                  (i) At any time the Borrower, directly or indirectly through
any professional consultant or other representative, determines to undertake an
environmental audit, assessment or investigation, Borrower shall promptly
provide Bank with written notice of the initiation of the environmental
audit/assessment, fully describing the purpose and intended scope of the said
audit/assessment. Upon receipt, Borrower shall promptly provide Bank with copies
of all final findings and conclusions of any such environmental investigation.
Preliminary findings and conclusions shall be provided if final reports have not
been completed and delivered to Bank within sixty days following completion of
the preliminary findings and conclusions.

                  (j) Borrower agrees to indemnify, save and hold Bank and any
of its past, present and future officers, directors, shareholders, employees,
representatives and consultants harmless from any and all loss, damages,

                                       16
<PAGE>

suits, penalties, costs, liabilities and expenses (including, but not limited to
reasonable investigation, environmental audit(s), and legal expenses), arising
out of any claim, loss or damages of any property, injuries to or death of
persons, contamination of or adverse effects on the environment, or any
violation of any Environmental Laws, caused by or in any way related to the real
property of the Borrower, or due to any acts of the Borrower or its officers,
directors, shareholders, employees, consultants and/or representatives;
provided, however, that the foregoing indemnifications shall not be applicable
when arising from events or conditions occurring while the Bank is in sole
possession (subject to the rights of any creditors of the Borrower) of the real
property of the Borrower. In no event shall Borrower be liable hereunder for any
loss, damages, suits, penalties, costs, liabilities or expenses to the extent
arising from the willful misconduct or gross negligence of Bank or its agents or
employees. It is expressly agreed and understood by Borrower that the
indemnifications granted herein are intended to protect Bank, its past, present
and future officers, directors, shareholders, employees, consultants and
representatives from any claims that may arise by reason of any security
interest, liens and/or mortgages granted to Bank, or under any other document or
agreement given to secure repayment of the Indebtedness, whether or not such
claims arise before or after Bank has foreclosed upon and/or otherwise becomes
the owner of any such property, real or personal. All obligations of indemnity
as provided hereunder shall be supported and secured by any Documents executed
by Borrower in favor of Bank. The indemnifications contained herein extend to
shareholders of Bank only as such, and nothing contained herein shall be
construed to prevent Borrower from asserting any claim whatsoever against any
party or entity that occasions any adverse environmental effects or any
violation of any Environmental Laws upon or in any way related to the real
property of Borrowers, whether or not such party or entity is a shareholder of
Bank.

                  (k) In the event any mortgage or deed of trust securing the
Indebtedness is foreclosed or the Borrower tenders a deed in lieu of
foreclosure, the Borrower shall deliver the premises to the Bank free of any and
all Hazardous Materials to the extent necessary so that the condition of the
premises shall not be a violation of any Environmental Laws.

                  (l) The provisions of this section shall be in addition to any
and all other obligations and liabilities Borrower may have to the Bank at
common law or pursuant to any other agreement and shall survive (i) the
repayment of the Indebtedness and (ii) the satisfaction of all of the other
obligations of the Borrower hereunder and under the other Documents.

                  (m) "Hazardous Materials" includes, without limitation, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.) and
in the regulations adopted and publications promulgated pursuant thereto, or any
other federal, state or local governmental law, ordinance, rule, or regulation.

6. AFFIRMATIVE COVENANTS

On a continuing basis from the date of this Agreement until the Indebtedness is
paid in full and Borrower has performed all of its other obligations hereunder,
the Borrower covenants and agrees (and to cause each Guarantor) to:

         6.1 Financial and Other Information.

                  (a) Annual Financial Reports of Borrower. Furnish to Bank, as
soon as available and in any event within ninety (90) days after the close of
each fiscal year of Borrower, balance sheet and statements of operations,
stockholders equity and cash flows for such fiscal year, setting forth
comparative figures for the preceding fiscal year, and such other comments and
financial details as are usually prepared by independent certified public
accountants of recognized national standing, and shall contain unqualified
opinion as to the fairness of the statements therein contained.

                  (b) Guarantor Financial Reports. On or before April 15 of each
year, a personal financial statement of Kenneth K. Rieth in form and detail
satisfactory to the Bank.

                                       17
<PAGE>

                  (c) Monthly Financial Statements. Furnish to the Bank not
later than thirty (30) days after the end of each month, financial statements
containing the balance sheet of the Borrower as of the end of such month, the
related statements of operations, of stockholders' equity and of cash flows of
the Borrower for such month and for the elapsed portion of the fiscal year up to
the end of such month, and in each case setting forth comparative figures for
the related periods in the prior fiscal year, subject to normal year-end audit
adjustment. The statements shall be in such detail as the Bank may reasonably
require, and the accuracy of the statements shall be certified by the chief
executive or financial officer of the Borrower.

                  (d) Accounts Receivable and Accounts Payable Reports. Furnish
to Bank not later than twenty (20) days after and as of the end of each month,
agings of Borrower's Accounts Receivable and identifying thereon each of the
Accounts Receivable that is not an Eligible Account and reports on Borrower's
accounts payable, all in form and detail satisfactory to Bank. Any such
schedule, certificate or report shall be executed by a duly authorized officer
of Borrower's and shall be in such form, content and detail as Bank may specify.

                  (e) Borrowing Base Report. Furnish to the Bank:

                      (i) Weekly by Friday of each week a Borrowing Base Report
           as of the end of the preceding week, executed by the chief executive
           or chief financial officer of the Borrower, confirming that the
           aggregate unpaid principal amount of all Line of Credit Loans plus
           all Letter of Credit Obligations does not exceed the lesser of the
           Line of Credit Commitment or the Line of Credit Maximum as then in
           effect (or, if such is not the case, accompanied by a prepayment of
           the Line of Credit Loans in accordance with Section 6.3 of this
           Agreement).

                      (ii) Within 30 days after the end of each month, a
           Borrowing Base Report as of the end of such month, executed by the
           chief executive or chief financial officer of the Borrower,
           confirming that the aggregate unpaid principal amount of all Line of
           Credit Loans plus all Letter of Credit Obligations does not exceed
           the lesser of the Line of Credit Commitment or the Line of Credit
           Maximum as then in effect (or, if such is not the case, accompanied
           by a prepayment of the Line of Credit Loans in accordance with
           Section 6.3 of this Agreement).

                      (iii) Within 90 days after the end of each fiscal year of
           the Borrower, a Borrowing Base Report as of the end of such fiscal
           year, confirming that the aggregate unpaid principal amount of all
           Line of Credit Loans does not exceed the lesser of the Line of Credit
           Commitment plus all Letter of Credit Obligations or the Line of
           Credit Maximum as then in effect (or, if such is not the case,
           accompanied by a prepayment of the Line of Credit Loans in accordance
           with Section 6.3 of this Agreement).

                  (f) Job Summary Report. Furnish to Bank not later than thirty
(30) days after and as of the end of each of Borrower's fiscal quarters, a
schedule of Borrower's jobs identifying each such job together with a job
summary report and such other information as the Bank may require, all in form
and detail satisfactory to Bank. Any such schedule, certificate or report shall
be executed by a duly authorized officer of Borrower's and shall be in such
form, content and detail as Bank may specify.

                  (g) Percent Complete Schedule. Furnish to Bank not later than
thirty (30) days after and as of the end of each month, a percentage of
completion schedule together with such other information as the Bank may
require, all in form and detail satisfactory to Bank. Any such schedule,
certificate or report shall be executed by a duly authorized officer of
Borrower's and shall be in such form, content and detail as Bank may specify.

                  (h) Reconciliation of Percent Complete Schedule. Furnish to
Bank not later the thirty (30) days after the end of each of Borrower's fiscal
quarters, a reconciliation of Borrower's percent of completion schedule
delivered to Bank pursuant to Section 6.1(g) above as of the end of such fiscal
quarter, in such form and detail as the Bank may require.

                  (i) Annual Projections. On or before August 31 of each year,
financial projections of the Borrower for the following fiscal year, in such
form and detail as the Bank may require.

                                       18
<PAGE>

                  (j) Adverse Events. Promptly inform the Bank of the occurrence
of any Event of Default, or of any other occurrence which has or could
reasonably be expected to have a materially adverse effect upon Borrower's
business, properties, or financial condition or upon the Borrower's ability to
comply with their respective obligations under the Documents.

                  (k) Compliance Certificate. Together with the delivery of the
financial reports required by Section 6.1(a) and (c), a Compliance Certificate
(with such supporting information as Bank shall require), executed by authorized
officers of Borrower, certifying that, as of the date thereof, no Event of
Default exists and calculating the financial covenants set forth in Section 7.11
hereof.

                  (l) Shareholder Reports. Promptly furnish to the Bank upon
becoming available a copy of all financial statements, reports, notices, proxy
statements and other communications sent by the Borrower or any of its
subsidiaries (if any) as to their stockholders, and all regular and periodic
reports filed by the Borrower or any of its subsidiaries with any securities
exchange, the Securities and Exchange Commission, the Corporations and
Securities Bureau of the Department of Commerce of the State of Michigan or any
governmental authorities succeeding to any or all of the functions of said
Commission or Bureau.

                  (m) Management Letters. Furnish to the Bank, promptly upon
receipt thereof, copies of all management letters and other reports of substance
submitted to the Borrower or any of its subsidiaries (if any) by independent
certified public accountants in connection with any annual or interim audit of
the books of the Borrower or any of its subsidiaries.

                  (n) Other Information. Furnish to the Bank such other
information respecting the business, properties, operations or conditions of the
Borrower as the Bank from time to time requests.

           6.2 Books and Records; Other Information As Requested; Inspections.
Keep true books of records and accounts of all their business transactions in
accordance with GAAP and shall permit, Bank and any agent of Bank to visit and
inspect properties or assets of the Borrower and to examine the books of account
of the Borrower and to discuss the affairs, finances and accounts of the
Borrower with their officers and independent accountants, all at such times and
intervals as the Bank may reasonably request, including, without limitation
audits of Inventory and Accounts Receivable to be performed at Borrower's
expense, with such frequency as is determined by Bank. Further, Borrower shall
promptly furnish to the Bank such other information regarding the operations,
business affairs and financial condition of the Borrower and its subsidiaries as
the Bank may reasonably request from time to time.

           6.3 Compliance with Borrowing Formulas. In the event that, at any
time the aggregate principal amount outstanding under the Line of Credit plus
all Letter of Credit Obligations exceeds the Line of Credit Maximum, immediately
pay to Bank for application against the Line of Credit, an amount sufficient to
eliminate such excess.

           6.4 Insurance. Keep its insurable properties (including but not
limited to the Collateral) adequately insured and maintain (a) insurance against
fire and other risks customarily insured against under an "all-risk" policy and
such additional risks customarily insured against by companies engaged in the
same or a similar business to that of the Borrower, (b) necessary worker's
compensation insurance, (c) public liability and product liability insurance,
and (d) such other insurance as may be required by law or as may be reasonably
required in writing by the Bank, all of which insurance shall be in such
amounts, containing such terms, in such form, for such purposes, prepaid for
such time period, and written by such companies as shall be reasonably
satisfactory to the Bank. All such policies shall contain a provision whereby
they may not be canceled or amended except upon thirty (30) days' prior written
notice to the Bank. The Borrower will promptly deliver to the Bank, at the
Bank's request, evidence satisfactory to the Bank that such insurance has been
so procured and, with respect to casualty insurance, naming Bank as additional
insured. If the Borrower fails to maintain satisfactory insurance as herein
provided, the Bank shall have the option to do so, and the Borrower agrees to
repay the Bank upon demand, with interest at the Default Rate from time to time
in effect for the Line of Credit Note, all amounts so expended by the Bank. The
Borrower hereby appoints the Bank or any employee or agent of the Bank as the
Borrower's attorney-in-fact, which appointment is coupled with an interest

                                       19
<PAGE>

and irrevocable, and authorizes the Bank or any employee or agent of the Bank,
on behalf of the Borrower, to adjust and compromise any loss to Collateral under
said insurance; provided, however, that so long as no Default or Event of
Default is existing the Bank shall confer with Borrower with respect to any such
adjustment or compromise.

           6.5 Taxes. Pay promptly and within the time that they can be paid
without late charge, penalty or interest all taxes, assessments and similar
imposts and charges of every kind and nature lawfully levied, assessed or
imposed upon the Borrower, and its property, except to the extent being
contested in good faith and, if requested by the Bank, bonded in an amount and
manner satisfactory to the Bank. If the Borrower shall fail to pay such taxes
and assessments within the time they can be paid without penalty, late charge or
interest, the Bank shall have the option to do so, and the Borrower agrees to
repay the Bank upon demand, with interest at the Default Rate from time to time
in effect under the Line of Credit Note, all amounts so expended by the Bank.

           6.6 Maintain Organization and Business. Do or cause to be done all
things necessary to preserve and keep in full force and effect the Borrower's
existences and franchises and comply with all applicable laws, continue to
conduct and operate its businesses substantially as conducted and operated
during the present and preceding calendar year, at all times maintain, preserve
and protect all franchises and trade names and property and keep the same in
good repair, working order and condition, and from time to time make, or cause
to be made, all needed and proper repairs, renewals, replacements, betterments
and improvements thereto so that the business carried on in connection therewith
may be properly conducted at all times.

           6.7 ERISA. (a) At all times meet the minimum funding requirements of
ERISA with respect to employee benefit plans subject to ERISA, (b) promptly
after Borrower knows or has reason to know (i) of the occurrence of any event,
which would constitute a reportable event or prohibited transaction under ERISA,
or (ii) that the PBGC or Borrower has instituted or will institute proceedings
to terminate an employee pension plan, deliver to the Bank a certificate of the
chief financial officers of Borrower setting forth details as to such event or
proceedings and the action which Borrower proposes to take with respect thereto,
together with a copy of any notice of such event which may be required to be
filed with the PBGC, and (c) furnish to the Bank (or cause the plan
administrator to furnish to the Bank) a copy of the annual return (including all
schedules and attachments) for each plan covered by ERISA, and filed with the
Internal Revenue Service by Borrower not later than ten (10) days after such
report has been so filed.

           6.8 End of Fiscal Years; Fiscal Quarters. Borrower will have its
fiscal years end on August 31, and the first three fiscal quarters of each
fiscal year end on each of the last day of each November, February and May of
each year.

           6.9 Autocharge Agreements. Borrower shall maintain with Bank,
accounts sufficient for and standard autocharge agreements related thereto for
the purpose of, allowing Bank to collect payments of principal, interests and
fees from time to time owing hereunder by withdrawal from such account or
accounts. To the extent such autocharge agreements are at any time not in
effect, this Agreement shall constitute Borrower's separate and irrevocable
authorization and direction to Bank to, at any time any payment of interest,
principal, fees or other amounts hereunder shall fall due, withdraw amounts
sufficient to pay such obligations from such account or accounts maintained by
Borrower with Bank, and to apply the proceeds of such withdrawals toward
satisfaction of such obligations.

           6.10 Deposit Accounts. Borrower shall maintain its primary deposit
accounts with the Bank.

           6.11 Life Insurance. Maintain insurance on the life of Kenneth K.
Rieth in an amount not less than Two Million Five Hundred Thousand Dollars
($2,500,000) which shall be assigned to Bank pursuant to the Collateral
Assignment of Life Insurance.

7. NEGATIVE COVENANTS

On a continuing basis from the date of this Agreement until the Indebtedness is
paid in full and the Borrower has performed all of its other obligations
hereunder the Borrower covenants and agrees that it will not, without the Bank's
prior written consent:

                                       20
<PAGE>

           7.1 Dividends. Declare or pay distributions, dividends (whether by
reduction of capital or otherwise) to any shareholders other than shares of its
capital stock.

           7.2 Stock Acquisition. Purchase, redeem, retire or otherwise acquire
any of the shares of its capital stock, or make any commitment to do so.

           7.3 Liens and Encumbrances. Create, incur, assume or suffer to exist
any mortgage, pledge, encumbrance, security interest, lien or charge of any kind
upon any of their property or assets (including without limit any charge upon
property purchased or acquired under a conditional sales or other title
retaining agreement or lease required to be capitalized under GAAP) whether now
owned or hereafter acquired, other than Permitted Liens.

           7.4 Indebtedness. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
or liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any other
indebtedness whatsoever, except for:

                  (a) the Indebtedness;

                  (b) Subordinated Debt;

                  (c) trade indebtedness incurred and paid in the ordinary
course of business.

           7.5 Extension of Credit. Make loans, advances or extensions of credit
to any Person except sales on open account and otherwise in the ordinary course
of business.

           7.6 Guarantee Obligations. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other Person through the furnishing
of goods, supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other Person, or otherwise,
except for the endorsement of negotiable instruments by Borrower in the ordinary
course of business for deposit for collection.

           7.7 Subordination of Receivables. Subordinate any indebtedness due
from a Person to indebtedness of other creditors of such Person.

           7.8 Property Transfer, Merger or Lease-Back. (a) Sell, lease,
transfer or otherwise dispose of properties and assets, having an aggregate book
value of more than Fifty Thousand Dollars ($50,000) in any fiscal year (whether
in one transaction or in a series of transactions) except as to the sale of
inventory in the ordinary course of business; (b) change names, consolidate with
or merge into any other corporation, permit another corporation to merge into
it, acquire all or substantially all the properties or assets of any other
Person, enter into any reorganization or recapitalization or reclassify its
capital stock; or (c) enter into any sale-leaseback transaction.

           7.9 Pension Plan. (a) Allow any fact, condition or event to occur or
exist with respect to any employee pension or profit sharing plans established
or maintained by it which might constitute grounds for termination of any such
plan or for the court appointment of a trustee to administer any such plan, or
(b) permit any such plan to be the subject of termination proceedings (whether
voluntary or involuntary) from which termination proceedings there may result a
liability of Borrower to the PBGC which, in the opinion of the Bank, will have a
materially adverse effect upon the operations, business, property, assets,
financial condition or credit of Borrower.

           7.10 Margin Stock. Apply any of the proceeds of any Loan to the
purchase or carrying of any "margin stock" within the meaning of Regulation C of
the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.

                                       21
<PAGE>

           7.11 Financial Covenants. Permit:

                  (a) The Debt Service Coverage Ratio to be less than 3.50 to
1.00 as of the end of each month, commencing on (and including) August 31, 2003,
and at all times thereafter.

                  (b) Its Tangible Effective Net Worth, to be less than the
following described amounts as of the following described dates:

                      (i)    From the date of this Agreement until February 27,
                             2003: $13,000,000;

                      (ii)   From February 28, 2003 until May 29, 2003:
                             $13,250,000;

                      (iii)  From May 30, 2003 until August 30, 2003:
                             $14,000,000;

                      (iv)   From August 31, 2003 and at all times thereafter:
                             $14,500,000.

                  (c) The Debt to Worth Ratio to be greater than 1.00 to 1.00 at
any time.

           7.12 Acquire Fixed Assets. Acquire or expend for fixed or capital
assets, whether by lease, purchase or otherwise in amounts that exceed in the
aggregate Three Hundred Thousand Dollars ($300,000) during Borrower's fiscal
year ending August 31, 2003, or Five Hundred Thousand Dollars ($500,000) during
any of Borrower's fiscal years thereafter.

8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS

           8.1 Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:

                  (a) Failure to Pay Monies Due. If the Borrower or any
Guarantor shall fail to pay any principal or interest under any Note or other
Indebtedness when due, by maturity, acceleration or otherwise, or fails to pay
any Indebtedness owing on a demand basis upon demand.

                  (b) Misrepresentation. If any warranty or representation in
connection with or contained in this Agreement or any Document, or if any
financial data or other information now or hereafter furnished to the Bank by or
on behalf of the Borrower, shall prove to be false or misleading in any material
respect.

                  (c) Noncompliance with Bank Agreement. If Borrower or any
Guarantor shall fail to perform in the time and manner required any of its
obligations or covenants under, or shall fail to comply with any of the
provisions of, this Agreement or any other Document.

                  (d) Other Defaults. If Borrower or any Guarantor shall default
in the payment when due of any of its borrowed money indebtedness (other than to
the Bank), or in the observance or performance of any term, covenant or
condition in any agreement or instrument evidencing, securing or relating to
such indebtedness, and such default be continued for a period sufficient to
permit acceleration of the indebtedness, irrespective of whether any such
default shall be forgiven or waived or there has been acceleration by the holder
thereof.

                  (e) Judgments. If there shall be rendered against Borrower or
any Guarantor one or more judgments or decrees involving an aggregate liability
of Twenty Five Thousand Dollars ($25,000) or more, which has or have become
non-appealable and shall remain undischarged, unsatisfied by insurance and
unstayed for more than thirty (30) days, whether or not consecutive, or if a
writ of attachment or garnishment against the property of either Borrower shall
be issued and levied in an action claiming Twenty Five Thousand Dollars
($25,000) or more and not released or appealed and bonded in an amount and
manner satisfactory to the Bank within thirty (30) days after such issuance and
levy.

                                       22
<PAGE>

                  (f) Business Suspension Bankruptcy Etc. If Borrower or any
Guarantor shall voluntarily suspend transaction of its business, or if Borrower
or any Guarantor shall generally not pay its debts as they mature or shall make
a general assignment for the benefit of creditors, or proceedings in bankruptcy,
or for reorganization or liquidation of Borrower or any Guarantor under the
Bankruptcy Code or under any other, state federal or other applicable law for
the relief of debtors shall be commenced by Borrower or any Guarantor, or shall
be commenced against Borrower or any Guarantor and shall not be discharged
within forty-five (45) days of commencement, or a receiver, trustee or custodian
shall be appointed for Borrower or any Guarantor or for any substantial portion
of their respective properties or assets.

                  (g) Change of Management. If the individual who is the
President of Borrower, at the date of this Agreement, shall no longer remain in
office, whether by death, resignation, or otherwise, and any such change of
control or office holder may adversely affect, in the sole judgment of Bank, the
ability of Borrower to carry on its business as conducted before such change.

                  (h) Inadequate Funding or Termination of Employee Benefit
Plan. If Borrower shall fail to meet its minimum funding requirements under
ERISA with respect to any employee benefit plan established or maintained by it,
or if any such plan shall be subject of termination proceedings (whether
voluntary or involuntary) and there shall result from such termination
proceedings a liability of a Borrower to the PBGC.

                  (i) Occurrence of Certain Reportable Events. If there shall
occur, with respect to any pension plan maintained by Borrower any reportable
event (within the meaning of Section 4043(b) of ERISA) which the Bank shall
determine constitutes a ground for the termination of such plan, and if such
event continues for thirty (30) days after the Bank gives written notice to
Borrower.

                  (j) Repudiation of Documents. If Borrower or a Guarantor
repudiates, contests, revokes or purports to revoke any of its obligations to
Bank, or any rights or remedies of Bank, under Documents to which it is a party.

                  (k) Termination of Guaranty. If Bank shall receive from any
Guarantor a notice of termination of his Guaranty.

           8.2 Acceleration of Indebtedness, Remedies. Upon the occurrence of an
Event of Default (automatically and without notice or demand in the case of an
Event of Default described in clause (f) of Section 8.1 above, and at Bank's
option in each other case), all Indebtedness shall be due and payable in full
immediately without presentation, demand, protest, notice of dishonor or other
further notice of any kind, all of which are hereby expressly waived, and Bank's
commitment to make Loans shall terminate. Unless all of the Indebtedness is then
immediately fully paid, the Bank shall have and may exercise any one or more of
the rights and remedies set forth in the Documents and/or for which provision is
made for a secured party under the UCC, or for which provision is provided by
law or in equity, including, without limitation, the right to take possession
and sell, lease or otherwise dispose of any or all of the Collateral and to set
off against the Indebtedness any amount owing by the Bank to Borrower and/or any
property of Borrower in possession of the Bank. The Borrower agrees, upon
request of the Bank, to assemble the Collateral and make it available to the
Bank at any place designated by the Bank.

           8.3 Application of Proceeds. All of the Indebtedness shall constitute
one loan secured by the Bank's security interest in the Collateral and by all
other security interests, mortgages, liens, claims, and encumbrances now and
from time to time hereafter granted from Borrower to the Bank. Upon the
occurrence of an Event of Default, the Bank may in its sole discretion apply the
Collateral to any portion of the Indebtedness. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Bank, first upon all expenses authorized by the UCC or otherwise in
connection with the sale and all reasonable attorneys' fees and legal expenses
incurred by the Bank, the balance of the proceeds of such sale or other
disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to other Indebtedness and the surplus, if any,
shall be paid over to Borrower or to such other Person or Persons as may be
entitled thereto under applicable law. The Borrower shall remain liable for any
deficiency, which the Borrower shall pay to the Bank immediately upon demand.

                                       23
<PAGE>

           8.4 Cumulative Remedies. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as provided by
law, in equity or by any Document. Nothing herein contained is intended, nor
shall it be construed, to preclude the Bank from pursuing any other remedy for
the recovery of any other sum to which the Bank may be or become entitled for
the breach of this Agreement by the Borrower.

9. MISCELLANEOUS

           9.1 Independent Rights. No single or partial exercise of any right,
power or privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.

           9.2 Covenant Independence. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and an exception or illegality
in one covenant shall not create an exception or illegality another covenant.

           9.3 Waivers and Amendments. Except as may be expressly stated to the
contrary in a writing signed and delivered to Borrower by an officer of Bank, no
forbearance on the part of the Bank in enforcing any of its rights under this
Agreement or any other Document, nor any renewal, extension or rearrangement of
any payment or covenant to be made or performed by Borrower hereunder, shall
constitute a waiver of any of the terms of this Agreement or of any such right.
No Event of Default shall be waived by the Bank except in a writing signed and
delivered by an officer of the Bank, and no waiver of any other Event of Default
shall operate as a waiver of any other Event of Default or of the same Event of
Default on a future occasion. No other amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or any Note or other
Documents shall be effective unless the same shall be in writing and signed and
delivered by an officer of the Bank.

           9.4 Governing Law. This Agreement, and each and every term and
provision hereof, shall be governed by and construed in accordance with the
internal law of the State of Michigan. If any provisions of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provisions had never been
contained herein.

           9.5 Survival of Warranties, Etc. All of the Borrower's covenants,
agreements, representations and warranties made in connection with this
Agreement and any document contemplated hereby shall survive the borrowing and
the delivery of the Notes and shall be deemed to have been relied upon by the
Bank, notwithstanding any investigation heretofore or hereafter made by the
Bank. All statements contained in any certificate or other document delivered to
the Bank at any time by or on behalf of the Borrower pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower in connection with this
Agreement.

           9.6 Costs and Expenses. The Borrower agrees that to reimburse the
Bank, upon demand, for all costs and expenses incurred by the Bank in connection
with (i) collecting or attempting to collect the Indebtedness or any part
thereof, (ii) maintaining or defending the Bank's security interests or liens
(or the priority thereof), (iii) the enforcement of the Bank's rights or
remedies under this Agreement or the other documents contemplated hereby, (iv)
the preparation or making of any amendments, modifications, waivers or consents
with respect to this Agreement or the other documents contemplated hereby,
and/or (v) any other matters or proceedings arising out of or in connection with
any lending arrangement between the Bank and the Borrower, which costs and
expenses include without limit payments made by the Bank for taxes, insurance,
assessments, or other costs or expenses which the Borrower is required to pay
under this Agreement or the other documents contemplated hereby, expenses
related to the examination of the Collateral, audit expenses, court costs and
reasonable attorneys' fees (whether in-house or outside counsel is used, whether
legal assistants are used, and whether such costs are incurred in formal or
informal collection actions, federal bankruptcy proceedings, probate
proceedings, on appeal or otherwise), and all other costs and expenses of the
Bank incurred in connection with any of the foregoing.

                                       24
<PAGE>

           9.7 Payments on Saturdays, Etc. Whenever any payment to be made
hereunder shall be stated to be due on a Saturday, Sunday or any other day which
is not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension, if any, shall be included in computing interest in
connection with such payment.

           9.8 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns, provided, however, that the Borrower may not assign or transfer any
rights or obligations hereunder without the prior written consent of the Bank.

           9.9 Maintenance of Records. The Borrower will keep all of its records
concerning its business operations and accounting at their principal places of
business. The Borrower will give the Bank prompt written notice of any change in
their principal places of business, or in the location of their records.

           9.10 Notices. All notices and communications provided for herein or
in any Document contemplated hereby or required by law to be given shall be in
writing (unless expressly provided to the contrary) and, if personally
delivered, effective when delivered at the address below or, in the case of
mailing, effective two (2) days after sending by first class mail, postage
prepaid, addressed as follows:

                  If to the Borrower:   Riviera Tool Company
                                        5460 Executive Parkway, S.E.
                                        Grand Rapids, Michigan 49512
                                        Attention: Kenneth K. Rieth

                  If to the Bank:       Comerica Bank
                                        1000 Campau Square Plaza
                                        99 Monroe Avenue, N.W.
                                        Grand Rapids, Michigan 49503
                                        Attention:  Thomas J. Stritzinger

or to such other address as a party shall have designated to the other in
writing in accordance with this section. The giving of at least five (5) days
notice before the Bank shall take any action described in any notice shall
conclusively be deemed reasonable for all purposes, provided, that this shall
not be deemed to require the Bank to give five day notice or any notice if not
specifically required in this Agreement.

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

           9.12 Headings. Article and section headings in this Agreement are
included for the convenience of reference only and shall not constitute a part
of this Agreement for any purpose.

           9.13 WAIVER OF JURY TRIAL. BORROWER AND BANK ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED AND,
AFTER CONSULTING WITH THEIR RESPECTIVE COUNSEL, KNOWINGLY AND VOLUNTARILY AND
FOR THEIR MUTUAL BENEFIT IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY AND ALL ACTIONS OR PROCEEDINGS AT ANY TIME IN WHICH BORROWER AND
THE BANK ARE PARTIES ARISING OUT OF THIS AGREEMENT OR THE OTHER DOCUMENTS.

IN WITNESS WHEREOF, the Borrower and the Bank have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.

                                                RIVIERA TOOL COMPANY

                                                By: /s/ Peter C. Canepa
                                                   -----------------------------
                                                        Peter C. Canepa

                                                Its: Chief Financial Officer

                                                COMERICA BANK

                                                By: /s/ Thomas J. Stritzinger
                                                   -----------------------------
                                                        Thomas J. Stritzinger

                                                Its: Vice President

                                       25
<PAGE>

                                   EXHIBIT "A"

                             COMPLIANCE CERTIFICATE

The undersigned hereby certifies to COMERICA BANK ("Bank") pursuant to Section
7.11 of that certain Line of Credit and Term Loan Agreement ("Agreement") dated
as of _____________________, 2002 between the undersigned ("Company") and Bank,
that as of ____________________, _____ [insert relevant date]:

                  (a) the Debt Service Coverage Ratio as of the end of the month
ended ________________ was ____________:1;

                  (b) the Tangible Effective Net Worth as of the end of the
month ended ______________ was $_______________;

                  (c) the Debt to Tangible Effective Net Worth as of the end of
the month ended ______________ was ______ : 1;

                  (d) no Event of Default has occurred and continues to exist;
and

                  (e) with respect to clauses (a) through (d) above, our
computations thereof, and the financial statements used in preparation of such
computations, are delivered to Bank contemporaneously herewith pursuant to
Section 6.1 of the Agreement;

Capitalized terms used herein and not defined to the contrary have the meanings
given them in the Agreement.

                                                RIVIERA TOOL COMPANY

                                                By:
                                                   -----------------------------
                                                Its:
                                                    ----------------------------

                                       26
<PAGE>

                                   EXHIBIT "B"

                               LINE OF CREDIT NOTE

$7,500,000                                                Grand Rapids, Michigan
                                                               December 23, 2002

FOR VALUE RECEIVED, on or before the Termination Date, RIVIERA TOOL COMPANY, a
Michigan corporation ("Company"), promises to pay to the order of COMERICA BANK,
a Michigan banking corporation (herein called "Bank") at its Main Office at 500
Woodward Avenue, Detroit, Michigan, in lawful money of the United States of
America, the indebtedness or so much of the sum of SEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($7,500,000) as may from time to time have been advanced and
then be outstanding hereunder pursuant to the Line of Credit and Term Loan
Agreement of even date herewith, made by and between Company and Bank (herein
called "Agreement"), together with interest thereon as hereinafter set forth.

Capitalized terms used herein and not defined to the contrary have meanings
given them in the Agreement.

Interest on the unpaid balance of Loans from time to time outstanding, shall be
payable to the extent then accrued, at the Applicable Interest Rate determined
under, as and when provided in the Agreement. Interest shall be computed on the
basis of a 360 day year and assessed for the actual number of days elapsed, and
in such computation effect shall be given to any change in the Prime-based Rate
or the Applicable Margin on the date of any change in the Prime Rate or
Applicable Margin.

From and after the occurrence of any Event of Default, the indebtedness
outstanding hereunder shall bear interest as provided in Section 2.12 of the
Agreement, which interest shall be payable on demand.

This Note is a note under which advances, repayments and re-advances may be made
from time to time, subject to the terms and conditions of the Agreement. This
Note evidences borrowing under, is subject to, may be prepaid in accordance
with, and may be matured under the terms of the Agreement, to which reference is
hereby made. This Note is secured by the Collateral described in the Agreement,
to which reference is made for, among other things, the conditions under which
this Note may be accelerated.

The undersigned and all accommodation parties, guarantors and indorsers (i)
waive presentment, demand, protest and notice of dishonor, (ii) agree that no
extension or indulgence to the undersigned or release or non-enforcement of any
security, whether with or without notice, shall affect the obligations of any
accommodation party, guarantor or indorser, and (iii) agree to reimburse the
holder of this Note for any and all costs and expenses incurred in collecting or
attempting to collect any and all principal and interest under this Note
(including, but not limited to, court costs and reasonable attorney fees,
whether such costs and expenses are incurred in formal or informal collection
actions, federal bankruptcy proceedings, appellate proceedings, probate
proceedings, or otherwise). Any transferees of, or endorser, guarantor or surety
paying this Note in full shall succeed to all rights of Bank, and Bank shall be
under no further responsibility for the exercise thereof or the loan evidenced
hereby. Nothing herein shall limit any right granted Bank by other instrument or
by law.

COMPANY AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED, AND, AFTER CONSULTING WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL
BENEFIT, WAIVE ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED HERETO.

All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.

                                                RIVIERA TOOL COMPANY

                                                By:  /s/ Peter C. Canepa
                                                     ---------------------------

                                                Its: Chief Financial Officer
                                                     ---------------------------

                                       27
<PAGE>

                                                                OCTOBER __, 2002

                                   EXHIBIT "C"

                                    TERM NOTE

$2,000,000                                                Grand Rapids, Michigan
                                                               December 23, 2002

FOR VALUE RECEIVED, on or before the Maturity Date, the undersigned promises to
pay to the order of COMERICA BANK (the "Bank") at Detroit, Michigan, the
principal sum of TWO MILLION DOLLARS ($2,000,000) or so much of such sum as has
been advanced in accordance with the terms of that certain Line of Credit and
Term Loan Agreement between the undersigned and Bank of even date (the
"Agreement"), in installments equal to Thirty-three Thousand Three Hundred
Thirty-three and 34/100 Dollars ($33,333.34) plus accrued interest at the
Applicable Interest Rate, which shall be payable in accordance with the terms of
the Agreement, until the Maturity Date, when the then outstanding principal
balance hereunder, and all then accrued and unpaid interest thereon, shall be
due and payable.

The unpaid principal amount of this Note shall bear interest at the Applicable
Rates from time to time in effect pursuant to the Agreement, which interest
shall be payable as and when provided in the Agreement, provided, however, that
in the event and so long as an Event of Default shall exist, or in the event
that the indebtedness hereunder shall be accelerated as the result of an Event
of Default, interest shall accrue (subject to limitations thereon specifically
described in the Agreement) at the per annum rate equal to the default rate
described in Section 2.12 of the Agreement and shall be payable on demand.

Capitalized terms used herein and not defined to the contrary have the meanings
given them in the Agreement.

Any mandatory or voluntary prepayments of principal of this Note will be applied
to principal installments under this Note in the inverse order of their
maturity. Together with any such prepayment the undersigned shall also pay to
Bank the Prepayment Amount or additional compensation therefor if required
pursuant to the terms of the Agreement.

This Note is secured by the Collateral described in the Agreement, to which
reference is made for, among other things, the conditions under which this Note
may be accelerated.

The undersigned and all accommodation parties, guarantors and indorsers (i)
waive presentment, demand, protest and notice of dishonor, (ii) agree that no
extension or indulgence to the undersigned or release or non-enforcement of any
security, whether with or without notice, shall affect the obligations of any
accommodation party, guarantor or indorser, and (iii) agree to reimburse the
holder of this Note for any and all costs and expenses incurred in collecting or
attempting to collect any and all principal and interest under this Note
(including, but not limited to, court costs and reasonable attorney fees,
whether such costs and expenses are incurred in formal or informal collection
actions, federal bankruptcy proceedings, appellate proceedings, probate
proceedings, or otherwise).

THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED, AND, AFTER CONSULTING WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL
BENEFIT, WAIVE ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED HERETO.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

                                                RIVIERA TOOL COMPANY

                                                By:  /s/ Peter C. Canepa
                                                     ---------------------------
                                                Its: Chief Financial Officer
                                                     ---------------------------

                                       28
<PAGE>

                                  SCHEDULE 5.10

                                  INDEBTEDNESS

                                       29

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00050-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00050-of-00352.parquet"}]]